Let Me Hold A Dollar

[The Daily Peel... ]() Mar 21, 2023 | Peel #423 Silver banana goes to... [Blendid. ](=) Market Snapshot Happy Tuesday, apes. And Happy Spring, Equinox. Pour one out for the bears out there because not even the “Bank Run of 2023”, as it’s now being dubbed, can stop this market. To be fair, tens of billions of dollars in assistance from governments around the world could be slightly bullish. Equities posted decent gains to start the week as breadth appears to have returned to markets, with over 86% of stocks green on the day. Materials led as commodities like natty gas and oil figured out they could go up again while the recent outperformance in gold moderated a bit. Treasuries might be the new schizophrenic in the market, however, as the 2-year-yield continues to flail about like a 2-year-old child, touching as low as 3.64% yet settling right around 4% on Monday. Let’s get into it. AI + Food = [image]( Tired of settling for stale, pre-packaged food that leaves you reaching for the Prozac and Pepto Bismol? Well, let me just say in advance: You’re Welcome. Look no further than Blendid - the revolution in fresh, customized food made-to-order, wherever and whenever you want it, and at a reasonable price. [Blendid’s]( state-of-the-art kiosks utilize the latest technology to create your perfect meal. We're currently in the market whipping up delicious smoothies at universities, retail stores, and hospitals across the country, but we'll eventually extend to salads, soups, bowls and more, so you can be sure that every meal is as unique and original as your portfolio. And the best part? Our autonomous operation keeps costs down, meaning you don't have to break the bank to enjoy a nutritious and delicious meal. Plus, with 24/7 operation, you can get your Blendid fix whenever and wherever you need it - so yes, even when you’re feeling the munchies on Friday night. Now…what are you waiting for? [Hurry up and join the food tech revolution by investing in the Blendid,](=) and taste the difference that fresh, customized food can make in your life. With Blendid, you'll never have to settle for bland and boring meals again. Banana Bits - Can’t decide if it’s just “up in the air” or has gone “up in smoke,” and apparently, [neither can Wall Street’s]( tip-top executives - Like when your preschool bullies would team up on you, [Xi and Putin](=) really are becoming BFFs - Double it and give it to the next person? No, Amazon says about its latest layoffs, we’ll [half it and give it to ourselves]() - The men and women of schools like FDU, Furman, and Ole Miss have ensured that exactly [0 perfect brackets remain]( in the wild world of March Madness after just 3-days of play (I mean, the odds of a perfect bracket sit at 1 in 9,223,372,036,854,775,808 or 9.2 quintillion, so…) Macro Monkey Says JPow Swaps Out the Dollar Despite the fact that the $10 bill you stuffed in your wallet last year is now worth approximately $9.40, everybody’s still feening for that good ol’ USD. As the banking crisis that began in the US and, much like McDonald’s and jorts, quickly spread to the rest of the world, big daddy JPow and his BFF Janet Yellen decided extra steps to stop the spread were necessary. On Sunday, JPow and JYell joined hands with Central Banks from Canada to Japan in an announcement detailing plans to increase dollar swap lines among the global network of central banks. Before we talk about implications, let’s see what the hell that means. In financial markets, swaps are commonly used products that generally allow two parties to exchange sets of cash flows, one tied to a fixed interest rate and the other tied to a floating rate. This is known as a “[plain vanilla swap]()” and (surprisingly) is about as simple as swaps get. Now, currency swaps, which is essentially what the Fed and other CBs are engaged in, get a little more hairy. Stay with me for this example: - The Bank of England decides they need to increase their access to US Dollars because their economy is coming under pressure - They don’t want to sell more pounds as this will risk devaluing the currency (because selling = more supply = decline in value) - So, they call JPow and ask for some of those sweet greenbacks. The Fed says, “F*ck it, why not? We could use some pounds.” - The Fed and the BOE will decide on an exchange rate (today, £1 = $1.23) and begin paying each other until the swap line expires or “matures” - For every £100mn given to JPow, he gives the BOE $123mn USD. Now, both Central Banks have easier access to each other’s currencies That’s about as ape-minded as you can make it, so if it’s still not clicking, it might be time to call in ChatGPT. In “normal” times, new swaps with new exchange rates are made between central banks just about every 7 days, which is their general maturity period, too. Basically, what JPow and JYell decided to do yesterday was decrease that to 1 day, increasing the frequency of maturities for these swap lines and thus increasing the liquidity of the US dollar among global markets. When you’re done scratching your head, just let me know because the two key takeaways here are: - The “Bank Run of 2023” has spread across the globe, and - The US Dollar still stands head, shoulders, knees, and toes above all other currencies in terms of safety, according to Mr. Currency Market Like treasuries, the USD is seen as a “flight to safety” asset. It is the global reserve currency, meaning that when two non-U.S. countries want to exchange goods or services but neither one wants to take the other’s currency, they’ll complete the exchange using US Dollars. It’s viewed as the safest of safe places to park any kind of value. Over the past few years, and as we discussed a few months ago, concerns have been growing over the USD’s staying power as the reserve currency. No, not because BTC was getting hot on its heels, but because the first ever “petroyuan” deal and other deviations away from USD occurred in rapid succession. But, when sh*t hits the fan, that’s when you find out what people really think. The fact that a now-international bank run with US origins is being treated with liquidity from the US currency is a clear seal of approval that there’s nothing else foreign bankers and investors would rather park their funds into amid times of trouble. And now, as SVB and Signature continue to dig deeper graves while UBS tries to save its homie (aka enemy) Credit Suisse, fears around the stability of banks have spread from San Fran to Tokyo. Naturally, as they do when things get weary, these Central Banks drastically ratcheted up the amount of dollars available to them. Now if only I could figure out how to do the same thing with my bank account… What's Ripe New York Community Bancorp ($NYCB) ↑ 31.65% ↑ - They say no good deed is truly just good. For New York Community Bank on Monday, this was proven true. - Shares in the lender poised to “acquire” Signature Bank boomed to start the week as analysts looked at the deal in the same way that Jim looked at Pam for the first 2 seasons of The Office. - They were in love at first sight, noting how, for example, NYCB will acquire Signature’s loan book at a 21% discount. They can thank the FDIC for pricing Signature’s assets at dirt-cheap levels designed to get this pile of trash in less moronic hands ASAP. - The acquisition is being done under NYCB’s Flagstar brand. This’ll take a while to complete, and nothing is certain until the FDIC officially takes the bank out of receivership, but for now, the market approves. PacWest Bancorp ($PACW) ↑ 10.78% ↑ - When you’re on your deathbed, even not dying is a damn good day. - That essentially sums up the massive uptick in Pacific Western Bank shares seen on Monday. After providing a liquidity update on Friday showing the firm had more cash on hand than total uninsured deposits, the market and customers alike seem to have calmed down a little bit. - Moreover, the bank’s equity tier 1 ratio of 10.61% has (allegedly) been unharmed and remains well above regulatory requirements. Both of these factors calmed market nerves and allowed Buffett-minded buyers to be greedy when others were terrified. What's Rotten First Republic ($FRC) ↓ 47.11% ↓ - $30bn in financing, guaranteed deposits, and shares still fell another f*ckin’ 50% on Monday. What the hell does Mr. Market want from First Republic?? - Clarity, answers, and some tiny semblance of legitimacy would be a start, I guess. Even with the news of a $30bn investment by some of the US’s largest banks, there are a whole lot of questions remaining at First Republic. - Investors have seen the Biden Admin’s willingness to let equity holders get wiped out in both Signature and SVB. That said, it shouldn’t be much of a surprise why everyone is dumping $FRC like there’s no tomorrow (because for the firm, there literally might not be). - What looked like $30bn of safety, solidity, and security at the start of last week is now much more opaque. The one thing Mr. Market hates more than missed earnings? That’s right, not knowing wtf is going on. Bed, Bath, and Beyond ($BBBY) ↓ 21.12% ↓ - Damn, with all these bank failures going on, we almost forgot about the most embarrassing company of all over the past few years: Bed, Bath, and Beyond. - So, shares in Bed, Bath, and Bankrupt plummeted another +20% to start the week. Given where shares were on Friday, I didn’t even realize falling this much was still possible. - Basically, Bed and Bath decided it would be a good idea to run a 1-for-5 reverse stock split. This is the opposite of what happened to your Tesla shares in recent years, meaning that for every 5 shares of $BBBY some moron holds right now, they will receive 1 share worth 5x as much. - This does absolutely nothing whatsoever to the operations of the company, but as shares have slipped below the $1 level key to the deal announced by Hudson Bay Capital, it doesn’t take a genius, or even an ape, to find out why they’re going with this game plan. Thought Banana Down and Dirty in Zurich Yesterday, we focused on the “why” behind the government-begged UBS acquisition of Credit Suisse. Now, let’s check out the why and, of course, the WTF. Founded in 1856 (we think), Credit Suisse has been a titan of Swiss, European, and recently, the global financial services market for 167 years. At its peak, the firm reached a market value of $90bn in May of 2007. Yesterday, this piece of sh*t was sold for about 3.61% of that, snatched up by rival UBS for ~$3.25bn. Seemingly perpetual [scandals](running from the Bulgarian cocaine trade to plain ol’ tax evasion all but eviscerated confidence in the bank, causing depositors and wealth management clients alike to flee in droves. Much of that flight of assets, sadly for them, went to CS’s older brother and archrival UBS. In terms of scandals, UBS is a lot more boring but certainly has no shortage. With its ~$60bn market cap, UBS scooped up Credit Suisse and all its toxicity, largely in a big favor to the Swiss government (and to once and for annihilate its primary competitor, of course). Now, everybody’s freaking out. The structure of this deal, primarily input by the Swiss government itself, has investors on edge. Most notably, some extremely low-tier bondholders (aka, holders of [AT1s]()) are big mad because they are getting their full positions wiped out. Meanwhile, equity holders (aka, those supposed to be the lowest tier owners) are getting 1 share of UBS stock for every 22.48 shares of CS they hold. As of yesterday, that’s about $0.82/sh. So, it’s not a whole lot, but it’s $0.82/sh more than AT1 bondholders are getting. To be frank and technical for a second, this was weird. In general, any and all creditors to a company are supposed to be paid before any and all common equity holders. That is not what is happening here, as the Swiss regulators are allowing UBS to wipe away that $17bn in AT1 obligations that otherwise would arrive on their books. Why? Well, we don’t really know yet, but probably some scumbag behavior, right? Essentially, it was just that bad. Regulators were desperate to make a deal, and fast, so they threw all kinds of laws to the side, including that of a shareholder vote, stirring up much controversy as well. CNBC is calling it “equal parts ‘shotgun wedding’ and arranged marriage,” but really, it was more like “do this or the European banking system collapses, along with maybe the globe.” For UBS, the $9bn in loss absorption as well as the $100bn liquidity line offered to them by the Swiss government appeared to give the bank enough confidence to pull the trigger. Now, the two banks will form an absolute unit based out of Zurich, totaling $5tn in invested assets. For Credit Suisse, it wasn’t just a nightmare scenario; it was the nightmare scenario. For UBS, $3.25bn isn’t all that much to take out its main rival. So, win-win, or…? The big question: What implications will this deal have for the future of wealth management? Did the Swiss government just rewrite the rules on capital stack seniority? How does a combined UBS-CS look in 5-10 years? Banana Brain Teaser Yesterday — Tim and Mel are long distance lovers. Tim has just purchased an engagement ring for Mel and wants to mail it to her. Unfortunately the only way to ensure the ring will be received is to place a lock on the package. Tim has locks and Mel has locks but neither have keys for each others locks. How can they ensure the ring isn't stolen? Tim places a lock on the package and sends it to Mel. Mel places one of her locks on the package and send it back to Tim. Tim removes his lock and sends the package back to Mel. Today — It’s 100 bananas off the [PE Master Package]( for the first 3 correct respondents. LFG! A claustrophobic lady gets on a train. The train enters a tunnel just as it is leaving the station. Where should she sit? Shoot us your guesses at [vyomesh@wallstreetoasis.com](mailto:vyomesh@wallstreetoasis.com?subject=Banana%20Brain%20Teaser) with the subject line “Banana Brain Teaser” or simply [click here to reply!](mailto:vyomesh@wallstreetoasis.com?subject=Banana%20Brain%20Teaser) Wise Investor Says “Central banks are like the Wizard of Oz, pulling levers and pushing buttons behind a curtain, hoping to influence the economy in ways that are difficult to predict.” — Howard Marks How would you rate today’s Peel? [All the bananas]( [Decent]() [Rotten AF](=) Happy Investing, Patrick & The Daily Peel Team Was this email forwarded to you? Sign up for the WSO Daily Peel [here](=). [ADVERTISE]( // [WSO ALPHA]() // [COURSES](=) // [LEGAL](=) Don't want The Daily Peel? [Unsubscribe here](=). The sponsored content in this newsletter was written and/or published as a collaboration between The Wall Street Oasis in-house sponsored content team and a financial partner of Wall Street Oasis. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. Wall Street Oasis may receive monetary compensation from the issuer, or its agency, for publicizing the offering of the issuer’s securities. This content is for informational purposes only and is not intended to be investing advice. This is a paid ad. Please see 17(b) disclosure linked in the campaign page for more information. Click to [Unsubscribe]( from ALL WSO content IB Oasis Corp. (aka "Wall Street Oasis") 20705 Saint Charles St Saratoga, California 95070 United States