What Happens When the Snapback Breaks?

Grab Your Life Vest! [Morning Reckoning] March 28, 2023 [WEBSITE]( | [UNSUBSCRIBE]( What Happens When the Snapback Breaks? Baltimore, Maryland March 28, 2023 [Greg Guenthner] GREG GUENTHNER Good Morning Reader, The first quarter is almost in the books – and it looks nothing like the Great Tech Reset that shoved the stock market off a cliff in 2022. Bitcoin has exploded higher, posting new 9-month highs after breaking out above $25K. The Nasdaq 100 – the biggest, baddest tech names on the market – just hit new 7-month highs as household names such as Microsoft (MSFT) and Meta Platforms (META) continue to build on recent gains. Semiconductors are also proving the naysayers wrong. The VanEck Vectors Semiconductor ETF (SMH) has rallied more than 50% off its October lows – and it doesn’t have that much farther to travel before posting new 52-week highs. That’s a remarkable turn of events from one of last year’s worst performing sectors. It’s clear that the tech trade (and yes, I consider anything crypto-related a tech trade) has breathed life into the market during this first-quarter snapback. While the financial sector cratered during this little bank crisis we’ve enjoyed over the past few weeks, tech grabbed the torch and continued higher. Without any bank stocks weighing it down, the Nasdaq Composite has gained more than 3.7% during the month of March. The S&P 500 is up less than 1% on the month, while the Dow remains in the red. Evidence of this bifurcated market is easy to find. Even the market’s year-to-date gains are heavily clustered in tech. Stocks like Tesla (TSLA) and Nvidia (NVDA) are up 57% and 83%, respectively, while more than a handful of banks, energy stocks, and healthcare names are down double digits. We can’t complain too much about the market offering up the tech space as a place to hide from the bank drama that’s dominated the market landscape this month. But even short-term minded traders need to take a step back as the quarter ends this week. It’s time to ask some tough questions… For starters, can this period of tech outperformance continue? Or, will the market’s lagging sectors reel in high-flying tech as bank problems fade from the front page? Let’s dig in and see if we can find any clues… [[Urgent] Analyst Issues Rare “All-In” Buy Alert For $3 Stock]( [Click here to learn more]( [This m]( be the biggest miracle of modern medicine that you or I will ever witness…]( Breakthrough new research shows that one $3 company is on the verge of fixing one of the biggest health problems in America today. And no, I’m not talking about cancer, heart disease, Alzheimer’s or anything else you’d expect… The disease I’m talking about affects a staggering 58 million American adults, or about 1 in 4 adults in this country. [>> Click Here Right Away For Details On This Urgent Buy Alert <<]( [LEARN MORE]( Bizarro Market First, we need to reset our brains to December 2022. Tech stocks were plumbing new lows. Covid Bubble poster child Tesla Inc. (TSLA) saw its stock nearly cut in half over the course of about four weeks. Tech-growth was obliterated and many of these stocks were going out at or near their lows. Fear was palpable as the calendar flipped to 2023. That’s when the market flipped on its head… While industrials, metals, and value names were in focus late last year, tech snapbacks stole the show in January. No one was ready for it. The chase was on! Following a rocky February, semiconductors, the crypto-sphere, and mega-cap tech (consisting of most of the former FANG-plus complex) were once again attracting eager buyers. Against all odds, market leadership remained firmly in the tech sector as regional banks imploded. Except for one little problem… Many of the tech-growth leadership during the frothiest period of the Covid Bubble wasn’t keeping pace. [Urgent Notice From Paradigm CIO Zach Scheidt!]( [Click here to learn more]( Hi, Zach Scheidt here… I’m the Chief Income Officer at Paradigm Press. With inflation raging (and showing no signs of coming to an end any time soon), almost everyone in America is feeling the pain in a big way. Which is why, several months ago, I set out on a big mission… my goal was to create a [complete, step-by-step plan to surviving and beating inflation]( one that anyone could take advantage of. Today, after hundreds of hours of research, I’m revealing all of my findings. [Simply click here now to see how to survive America’s deadly inflation crisis](. [LEARN MORE]( Grab Your Life Vest Considering everything that’s happened so far this year, I think it’s safe to ask if Cathie Wood’s ARK Innovation Fund (ARKK) has sprung a major leak. Our favorite tech-growth proxy hasn’t played nice since the January snapback rally – despite continued outperformance from the greater tech sector. Yes, ARKK was one of the leaders of the January rally. It even managed to jump nearly 50% off its lows by early February. But it hasn’t been able to recapture that momentum following the February pullback. In fact, ARKK continues to pull back. The EFT failed to hold a brief breakout back above its 200-day moving average last week, retreating to its choppy trading range. [chart] Remember, semiconductors, big-tech, and crypto have all pushed to new year-to-date highs. ARKK has not. It remains dangerously close to slipping back into a bigger downtrend if it fails to push higher out of what has been an incredibly choppy March performance. Why does this matter? For starters, using ARKK as a “hype proxy” for the tech market could tell us if there’s ample risk appetite for the more speculative tech-growth names that have remained out of favor for the better part of the past two years. Since late 2021, none of ARKK’s rallies have produced a major change in trend. This attempt looks no different… not yet. Then, there’s the matter of ARKK’s biggest holdings. TSLA is the fund’s top dog, which hasn’t exactly had an amazing March despite a strong start to the year. But it’s ARKK’s other major holdings: ZM, SQ, U, TDOC, and others that remain stuck in their respective downtrends. Many of these stocks are still lingering near their lows. That’s where we’re finding trouble. Some of these stocks will eventually find a bottom and begin carving out bases. Others might get bought or go to zero. But we’re still early in this process. Despite the positive developments in the tech sector, many of these tech-growth ARKK components remain a complete mess. My concern here is whether a bigger breakdown in these names leads to corrective action that reverberates across the tech space – including the stocks that have contributed to a majority of the market’s gains so far this year. If it is time for yet another tech-growth gut check, investors should pay close attention. The outcome could have major implications for stocks as the second quarter quickly approaches. Let me know what you thought of today’s article… and if you want any more topics covered by emailing me [here](mailto:feedback@dailyreckoning.com). Best, [Greg Guenthner] Greg Guenthner Contributing Editor, Morning Reckoning feedback@dailyreckoning.com [Response Requested]( 1/1000th of an ounce of gold available As a Morning Reckoning reader, Jim Rickards is offering you 1/1000th of an ounce of gold when you upgrade your account. It will come in the form of a “Gold Back” - a new type of gold currency that’s starting to spread across America ([click here to view](. If you have not responded to Jim’s offer yet, and want to know how to claim yours… Please click the link below for details. [Click here to learn how to claim your new Gold Back Currency<]( Thanks! Amber Anderson Customer Service [LEARN MORE]( In Case You Missed It… Sean Ring, Editor A Rant and a RIP For My Old Bank [Sean Ring] SEAN RING Dear Reader, Good Thursday morning to you! I’ve been putting off writing about the demise of my old bank, Credit Suisse. I didn’t write about it in the Rude all week because I didn’t have the energy to do it justice. But since this Morning Reckoning gives me a bit more latitude, I’ll tackle the subject here. If you read the Rude, you know I spent over 11 years of my life over two stints working for Credit Suisse. And if you think that was a waste… I worked for Lehman Brothers for about 15 months before my first CS stint! I’ve worked in CS’s Eleven Madison Avenue office in NYC, its 1-5 Cabot Square office in London, and its swanky 87-88th floor office in the ICC in Hong Kong. In between my western and eastern stints, I got into financial training. It so happens I trained CS staff in Singapore, Hong Kong, Mumbai, Jaipur and Pune. So I know the bank rather well. And other than friends losing their jobs, I’m not sad it’s gone. In this piece, I’ll tell old stories, what CS’s problems really were and why banking regulation is ultimately useless. Now let me share some of the amazing things that happened while I worked for them. [Man Who Predicted Bitcoin Warns: “Don’t Buy Bitcoin!”]( [Click here to learn more]( James Altucher first predicted Bitcoin all the way back in 2013… And ever since, he’s been one of the biggest advocates for it. But now, he’s warning Americans that buying Bitcoin could be a big mistake… [Click here now to see why](. [LEARN MORE]( It Wasn’t All Bad I didn’t realize how much I wrote about the good times in the Rude. I’ll link all those articles. In short, my life never would’ve turned out this way without having worked at CS. After all, not many workplaces second you from New York to London… and many years later, from Singapore to Hong Kong. In New York, I never would’ve fallen in love with [our impossibly beautiful 20-year-old intern]( – hold your horses, I was only 23 – and dated her for two years. Our first date is one for the ages, as you may read later. While in London, Hung-Wah never would have driven me to Bruges for [Belgian waffles](. I had forgotten my old boss, Ed, happily paid my tuition (out of CS’s pockets) [for London Business School](. Thanks Ed! If I didn’t go to LBS, I never would’ve met Aussie Trav. That night we spent at the Duke of York pub in St. John’s Wood [listening to a drunken head of risk management]( informs this very piece. And I never would’ve got a bird’s eye view of the mortgage-backed securities debacle if I hadn’t met [my girlfriend, who worked for S&P]( and explained everything to me. Finally, I got to see the [great proprietary trading desk of Alan Howard, Chris Rokos]( et al, at work. They are still at it, at Alan’s Brevan Howard hedge fund and Chris’s family office. If you read those pieces, you’ll know me very well. Interestingly, the first column I ever wrote for the Rude, was titled “[Credit Suisse Hwangs Itself; UBS Loses High Ground, Suffers $774m Loss]( That explains quite a bit. And I’ll reference it here. [Urgent: Currency Wars Alert]( “Worst case scenario is almost inevitable” -Former Pentagon Insider Jim Rickards [Click here to learn more]( In my 2011 book, I warned that the U.S. was engaged in a currency war. And that these wars: “Degenerate into sequential bouts of inflation, recession, retaliation and actual violence as the scramble for resources leads to invasion and war. ” Now with Putin invading Ukraine…Rising tensions with China… Inflation, recession, and supply chain issues all hitting the U.S. economy at the same time. It seems as if some of my worst fears have finally come true. [That’s why I’ve recorded an urgent video message.]( To update you on exactly what you need to be doing to protect yourself. Because if history is any indicator, this will not end well. [Click here to view my urgent video message.]( [LEARN MORE]( Senior Leadership The problem was at the top of the house. In Zurich. Yes, Board-level idiocy. Sure, you had some dummies in Asia and the Americas. But the Swiss, themselves, were clueless as to how to run a global bulge bracket bank. (I hasten to remind you – the Swiss government bailed out UBS itself in 2008.) You’ll never see a more incompetent bunch of unjustifiably overconfident midwits in your lives. As a CS employee, I can’t tell you the number of times I asked, “Who’s stupid f*cking idea was this?” Most are already gone, thank the maker. As for the ones that remain, I hope each and every one of them gets fired. If they get to stay at the new UBS, it’s a crime. But really, hiring Tidjane Thiam was the pièce de résistance. Thiam was the CEO of the UK’s Prudential insurance company (not to be confused with The Rock in the US). Despite coming from two rich West African families, speaking fluent French, English and German, clutching an Insead MBA and being a former McKinsey consultant, Thiam is a doofus. [His ass should’ve been thrown out of Prudential]( for a botched takeover of AIG’s Asian life insurer AIA. But thanks to The Bernank’s helicopter money and the Bank of England trotting happily behind, sniffing Helicopter Ben’s ass, Prudential’s shares quadrupled under Thiam’s “leadership.” This fooled the dopey Credit Suisse board, featuring [“King of the Dipshits” Chairman Urs Rohner]( into thinking hiring a black insurance CEO would goose CS’s share price. And hire him they did. At his first press conference, when asked if it would be different running an investment bank rather than an insurance company, the new CEO – and old McKinsey hand – said no, it’s just about numbers. Soon after that presser, a Managing Director and I were walking up to the office. He looked at me and said, “I can’t believe Tidjane said that. Let’s see what the markets think.” Needless to say, the markets weren’t impressed. But the biggest mistake of Thiam’s reign was sidelining the sales and trading teams just as a new bull market began. It couldn’t have been a worse move. Thiam wanted to copy UBS to create a wealth management powerhouse – not a bad idea – but one of CS’s great strengths was its traders and salesmen. The investment bank thrived, mostly. The private bank did, too. But during Thiam’s reign, the S&P 500 climbed over 62%. While Goldman Sachs, Morgan Stanley, Citi, and Bank of America raked it in on their trading floors, Credit Suisse barely participated. This is Bastiat’s “Unseen” of why CS collapsed. UBS Takes Over I used to joke on LinkedIn, begging that UBS takeover CS to improve the look of my profile. I thought it should’ve happened years ago, but the argument was always, “To what end?” “Getting Credit Suisse’s Board away from the moving parts,” was a good enough answer for me. Because ultimately, the Archegos and Greensill disasters happened because the C-Suite overruled the people on the ground. Yes, risk managers told their bosses not to do these deals. But they were overruled because Thiam’s “entrepreneur’s bank” strategy of combining the private and investment banks colored their judgment. That is, Bill Hwang’s private money was in the private bank and his hedge fund money was in the investment bank. If CS pissed him off, they lost twice. So they treaded lightly. Far too lightly. Costing a combined $6.78 billion, those two scandals destroyed Credit Suisse’s already barely existing credibility. How CS lasted another two years is beyond me. A Bailout at What Cost? The Swiss National Bank (the Swiss central bank) backstopped UBS in a way US banks can only dream. From [The Wall Street Journal]( The complete write-down of Credit Suisse’s securities had been pushed for by UBS executives to reduce the burden the firm inherited by taking over its rival. Some investors were caught off-guard because Credit Suisse common shares were spared, with UBS paying $3.2 billion for them via its own stock, even as the AT1s were written down. While that upends the common order in an insolvency, there was a fierce debate over whether Credit Suisse AT1s in fact allowed such a move in their documentation. Finma, the Swiss financial regulator, said Sunday that Credit Suisse was experiencing a crisis of confidence and risked becoming illiquid, even if it remained solvent, and required the state-engineered deal to stay alive. The government provided a more than $9 billion backstop to UBS on potential losses. Sowing consternation among AT1 investors: Swiss authorities hastily passed a law last week that expedited the regulators’ ability to write down the riskier bonds to zero. I’m running out of road here, but luckily I explained the AT1 capital situation in today’s Rude Awakening. Just [click here]( and read it if you want to know more. I’ll leave you with these shocking tweets: [tweet] Credit: [@WallStreetSilv]( [tweet] Credit: [@KobeissiLetter]( As Thomas Sowell once said, “In every disaster throughout American history, there always seems to be a man from Harvard in the middle of it.” In this very Swiss disaster, in the middle of it was a guy from Insead. RIP, Credit Suisse. Say hi to Lehman for me! Let me know your thoughts by emailing me [here](mailto:feedback@dailyreckoning.com), I really enjoy reading them! All the best, [Sean Ring] Sean Ring Contributing Editor, The Morning Reckoning feedback@dailyreckoning.com Thank you for reading The Morning Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:dr@dailyreckoning.com) [Greg Guenthner] [Greg Guenthner, CMT,]( is chief strategist at Forge Research Group. He has spent the better part of the past two decades developing long-term and short-term strategies with a single goal in mind: to help everyday investors generate outstanding returns and control their financial futures. Greg’s charts, analysis, and insights have appeared in Marketwatch, Forbes, Yahoo Finance, and many other financial publications. [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2023 Paradigm Press, LLC. 808 Saint Paul Street, Baltimore MD 21202. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. To end your The Daily Reckoning e-mail subscription and associated external offers sent from The Daily Reckoning, feel free to [click here.]( Please note: the mailbox associated with this email address is not monitored, so do not reply to this message. We welcome comments or suggestions at feedback@dailyreckoning.com. This address is for feedback only. 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