Morning News: April 3, 2023
Posted by Eddy Elfenbein on April 3rd, 2023 at 7:04 am

OPEC+ Makes Shock Million-Barrel Cut in New Inflation Risk

Solar and Wind Are Growing Faster Than Fledgling Nuclear and LNG Once Did

Japan Manufacturers’ Mood Sours on Global Slowdown, Service Sector Bounce Cushions Blow

World Bank Warns of Lost Decade for Global Economy

Swiss Prosecutors Probe Credit Suisse Deal, Job Cuts Seen

Banks Too Reluctant to Tap Cash Buffers in a Crisis, Bank of England Says

Bank Turmoil Collides With Tech Slump in Battered San Francisco

Morgan Stanley Strategist Says US Tech Stocks’ Rally Is Overdone

The ‘Hunt for Yield’: Another Evidence-Free Equity Narrative

UFC Parent Endeavor to Acquire WWE in $9.3 Billion Deal

Tesla Reports Uptick in Vehicle Deliveries After Price Cuts

McDonald’s Temporarily Shuts U.S. Offices as Chain Prepares for Layoff Notices

The Undercover Organizers Behind America’s Union Wins

Netflix’s Approach Shifts, Pushing Content That Can ‘Pop’

Norfolk Southern Derailment Spurs Questioning of Turnaround King’s Strategy

Meet the 18-Year-Old Who Wants to Be Disney’s Next CEO

EY Germany Handed Two-Year Ban After Wirecard Audit Failures

America Has Too Much Parking. Really.

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Morning News: March 31, 2023
Posted by Eddy Elfenbein on March 31st, 2023 at 7:01 am

Dogged Inflation Shades Rebound

Eurozone Core Inflation Hits Record High

2023 Has Been Bad for the Bears. Here are 5 Reasons Why It’s Going to Get Even Worse

The Fed Is Doing Too Much, All at Once

How Big Tech Camouflaged Wall Street’s Crisis in March

Has Bitcoin Benefited From the Banking Crisis? Not in the Way Its Fans Hoped.

Jamie Dimon Reprises 2008 Role as Rescuer of a Failing Bank

Massachusetts Regulator Probes First Republic Insiders’ Stock Sales

BofA Says Investors Poured $508 Billion Into Cash This Quarter

Flight to Money Funds Is Adding to the Strains on Small Banks

DeSantis’s Allies Discover Disney Evaded Florida’s Move to Rein It In

‘Hurry Up and Get It Done’: Norfolk Southern Set Railcar Safety Checks at One Minute

How Paris Kicked Out Cars

Bed Bath & Beyond Ends Hudson Bay Deal, Turns to Market for $300 Million to Avoid Bankruptcy

Jack Ma Engineered Alibaba’s Breakup From Overseas

Netflix Restructures Film Group as It Scales Back Movie Output

Tetris Movie Shows Apple’s Ambition to Crack the Hollywood Puzzle

How We Know the Super-Rich are Finally Clamping Down on Spending

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Morning News: March 30, 2023
Posted by Eddy Elfenbein on March 30th, 2023 at 7:04 am

The World’s Most Important Oil Price Is About to Change for Good

A $3 Trillion Threat to Global Financial Markets Looms in Japan

The Triumph of UBS Is Also the Humbling of Swiss Banking

Swiss Authorities Reveal Cost of Credit Suisse’s Liquidity Lifeline

The $59 Billion Swiss Franc Debt Sales Market Is Up for Grabs

Shorting Global Banks Fetches $14.3 Billion in Paper Profit in March

Janet Yellen to Say Bank Rules Might Have Become Too Loose

A Rapid-Finance World Must Ready for a Slow-Motion Banking Crisis

FDIC Considers Forcing Big Banks to Pay Up After $23 Billion Hit

Morgan Stanley Downgrades Charles Schwab for First Time, Slashes Target

Average Wall Street Bonus Plunges 26% to $176,700

Why Banks Are Waging a Digital-Wallet War With Apple

TikTok’s Owner Pushes a New App, While Under Washington’s Glare

Publishers Worry A.I. Chatbots Will Cut Readership

The Delusion at the Center of the A.I. Boom

F.D.A. Approves Narcan for Over-the-Counter Sales

The Class of 2023 Faces a Jittery Job Market: ‘The World Seems to Have Flipped on Its Head.’

It’s Schultz Not Starbucks That Seems to Be Lost

The Undoing of Guo Wengui, Billionaire Accused of Fraud on 2 Continents

Ramen for Breakfast? Cup Noodles’ New Flavor Tastes Like Egg, Sausage and Maple Syrup Pancakes

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Morning News: March 29, 2023
Posted by Eddy Elfenbein on March 29th, 2023 at 7:05 am

How Ukraine’s Battered Steel Industry Galvanized Its War Effort

U.S. Pushes for Business Investment in Africa to Counter China’s Reach

SVB Mess Festered Under Fed’s Bureaucracy and Feel-Good Culture

SVB’s Collapse Shows the World’s Favorite Safe Asset Isn’t Risk-Free

UBS Veteran Ermotti Returns to Lead Credit Suisse Takeover

US 30-Year Fixed Mortgage Rate Eases to Six-Week Low

SES, Intelsat Near Deal to Create $10 Billion Satellite Giant

Alibaba’s $32 Billion Day Signals Breakups for China Tech

Rift Between Gaming Giants Shows Toll of China’s Economic Crackdown

What’s Hot on TikTok? Defending Its C.E.O.

Nvidia’s Sizzling AI-Driven Rally Flashes a Warning

$335,000 Pay for ‘AI Whisperer’ Jobs Appears in Red-Hot Market

In Sudden Alarm, Tech Doyens Call for a Pause on ChatGPT

The Metaverse Is Quickly Turning Into the Meh-taverse

GameStop Decides It Likes Stores After All

Pepsi Unveils New Look First Refresh in 14 Years

Union Showdown: Starbucks’ Howard Schultz Faces Bernie Sanders in the Senate

He Wanted to Unclog Cities. Now He’s ‘Public Enemy No. 1.’

The Hidden Ecosystem of Free Vacation Stuff

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CWS Market Review – March 28, 2023
Posted by Eddy Elfenbein on March 28th, 2023 at 6:19 pm

(This is the free version of CWS Market Review. If you like what you see, then please sign up for the premium newsletter for $20 per month or $200 for the whole year. If you sign up today, you can see our two reports, “Your Handy Guide to Stock Orders” and “How Not to Get Screwed on Your Mortgage.”)

First Citizens Bank Wins the Bidding War for SVB

Two weeks ago, Silicon Valley Bank collapsed in less than 48 hours. The bank lost one-quarter of its deposits in one day. One of the mysteries of this episode is that no one came forward to buy the bank, or even parts of it. The FDIC had to extend the deadline for bids.

Why? How could the collapse happen so quickly yet the bidding on the remains take so long?

Perhaps the remains of SVB were uglier than we were told. Normally, the FDIC likes to sell off any troubled banks as soon as possible to reassure depositors. This time, it had been two weeks and there were still no buyers. There was a deadline, in fact an extended deadline, set for last Friday.

My hunch is that any potential bidder realized that they were in a strong position and could thus extract very lucrative incentives from the FDIC. After all, time was on the bidder’s side and the FDIC isn’t in the bank-running biz.

Then it happened. Just before we got to Friday’s deadline, we learned that Valley National Bancorp and First Citizens BancShares (FCNCA) had both submitted bids to the FDIC. Eventually, First Citizens won the deal, and—boy, oh boy—did they win concessions.

An Indirect Bailout

Let’s start with the price tag. First Citizens will take over $72 billion worth of SVB’s assets at a 23% discount. That works out to $16.5 billion, but that’s not all. The FDIC also said it will be part of a loss-sharing deal on the commercial loans that First Citizen is taking over. The deal is to last for eight years. The bank will also get a special credit line for “contingent liquidity purposes.”

As they say on late-night infomercials, “but wait, there’s more!” The FDIC is also giving First Citizens a $35 billion loan to help finance the deal. In exchange, the FDIC will get equity rights in the bank that could be worth up to $500 million.

If this lasted any longer, First Citizens probably could have gotten free Taylor Swift tickets thrown in. They got a sweet, sweet deal. But don’t just take my word for it: on Monday, shares of First Citizens jumped 53.7%. And yet, the FDIC still isn’t done yet with SVB. It’s currently holding about $90 billion of assets in receivership.

All told, the FDIC will take a hit of about $20 billion from SVB and another $2 billion from Signature Bank. That hole will be replenished by higher charges to member banks, which will ultimately be picked up by depositors. One benefit of the soaring share price is that the FDIC will make some money thanks to the equity rights I mentioned. The FDIC has two weeks to exercise those options.

The auction for SVB got a little complicated because most potential bidders were looking at First Republic as their preferred target. Recently, a group of big banks gave a First Republic a badly-needed cash injection, but that didn’t stem the tide.

With the First Republic deal lingering, that may have taken away more interest in SVB’s remains. There’s also the issue that I’ve mentioned before: once a banking panic starts, you never know where it will go next. Bank A can go under and then you suddenly learn that Bank B lent them tons of money and now Bank B is teetering. Then you learn that Bank C is exposed to Bank B. Once the panic gets going, even a well-run bank can be pulled under.

First Citizens Emerges a Big Winner

So who’s First Citizens? It’s a regional bank based in Raleigh, North Carolina. It’s not that big. Or I should say, it wasn’t that big, but it’s a lot bigger now.

First Citizens is an interesting bank because it enjoys snatching up banks from the FDIC. Since 2009, it’s bought more banks from the FDIC than anybody else.

The bank has over 550 branches, and thanks to this deal, First Citizens has joined the big leagues. Three years ago, First Citizens had assets of $42 billion. That will now increase to $219 billion.

One challenge for First Citizens is that banking for the high-tech community traditionally hasn’t been their main business. But First Citizens knows a lot about taking over troubled banks. Over the past few years, First Citizens has taken over Temecula Valley Bank, Venture Bank, Sun American Bank and United Western Bank in Colorado. It’s become adept at folding these troubled banks into its larger business.

From the WSJ:

The longer-term challenge for First Citizens will be running a bank that has dramatically transformed in a short period. The bank will need to hold on to the $56 billion of deposits left at SVB after the majority fled the bank during its meltdown and seizure by the FDIC. It will also have to manage a book of loans to venture-capital firms and startups, and persuade those companies to continue to do new business with the bank.

Executives will have to do that while still digesting another big deal. First Citizens’s $2.2 billion purchase of commercial lender CIT Group Inc. closed in January 2022. CIT owned the remnants of IndyMac Bank, one of the biggest banks to fail during the 2008 financial crisis.

First Citizens has long been controlled by the Holding family. Frank Holding, Jr. is the current Chairman and CEO. The bank has a special class of shares that gives family members 16 times the voting power of ordinary shares.

The line of credit that First Citizens is getting is highly unusual. The idea is that it will protect First Citizens against a mad flight of capital. Between the lines, this tells me how badly the FDIC wanted a deal. Bear in mind that the folks taking over Signature Bank aren’t getting this nice little present from the FDIC.

To its credit, the FDIC has gone out of its way to show the public that SVB is not getting bailed out. The shareholders certainly aren’t. But you could say that there’s an indirect bailout in play. Instead, it’s the new owners who are benefiting from the government’s largesse. I won’t be surprised to see more of these in the future.

Home Prices Are Falling

Earlier today, we got the latest Case-Shiller report on home prices, and housing seems to be the one area of the economy that’s been cured of inflation. Home prices have now fallen for seven months in a row.

Over the last 12 months, ending in January, home prices increased by just 3.8%. That’s down from the 12-month figure for December of 5.6%. According to the report, “All 20 cities reported lower prices in the year ending January 2023 versus the year ending December 2022.” The hottest housing markets are Miami, Tampa and Atlanta, and the coldest are San Francisco, Seattle and Portland.

It’s no secret what’s happening. Higher mortgage rates have made homebuying more expensive. As a result, many potential homebuyers have been driven from the market.

This is the odd part about the Federal Reserve’s interest rate policy. Higher rates don’t slow down the economy broadly. Instead, the housing market stands in between higher mortgage rates and the Fed’s goal of taming inflation. The Fed started hiking rates one year ago, and we still have inflation in the economy, yet housing is under pressure.

Housing analyst Bill McBride points out that with seasonal adjustment, San Francisco has fallen 13.2% from the peak in May 2022, and Seattle is down 11.4% from the peak.

During Covid, mortgage rates dropped to the floor. In November, the average yield on a 30-year fixed rate mortgage peaked at just over 7%. It’s come down some since then. In fact, lower mortgage rates probably saved today’s Case-Shiller report from being worse than it was.

The outlook for housing may change soon. The latest futures prices show that traders see the Fed pausing on interest rates for the next six months. I’ll caution you that these prices are merely guesses as to what the Fed will do. Actually, the next move traders expect is a Fed rate cut in September. If that’s true, it would very beneficial for stock prices.

The next event coming is this Thursday when the government will revise the Q4 GDP. According to the last report, the U.S. economy grew in real annualized terms of 2.7% for Q4. On Friday, we’ll get the latest numbers for personal income and consumption. The Fed prefers to use this data to measure inflation.

That’s all for now. I’ll have more for you in the next issue of CWS Market Review.

– Eddy

P.S. If you want more info on our ETF, you can check out the ETF’s website.

Morning News: March 28, 2023
Posted by Eddy Elfenbein on March 28th, 2023 at 7:03 am

After Doling Out Huge Loans, China Is Now Bailing Out Countries

China’s Cities Are Buried in Debt, but They Keep Shoveling It On

For Chip Makers, a Choice Between the U.S. and China Looms

U.S. and Japan Reach Deal on Battery Minerals

New Shell CEO Faces Big Dilemma: Should the Company Pump More Oil?

The Slow-Motion Tidal Wave Consuming Our Economy

Markets Are Wrong on US Rate-Cut Bets, BlackRock Says

Silicon Valley Bank’s Risks Went Deep. Congress Wants to Know Why.

For Battered U.S. Bank Shares, Earnings May Make or Break

Scion of $64 Billion Media Dynasty’s Firm Rides Out SVB Turmoil

Schwab’s $7 Trillion Empire Built on Low Rates Is Showing Cracks

Binance Woes Pile Up as Market Share Dives After Zero-Fees End

Alibaba Splits Into Six, Plans New IPOs in Historic Overhaul

Disney Eliminates Its Metaverse Division as Part of Company’s Layoffs Plan

Walgreens Quarterly Profit Beats Estimates on Strong Pharmacy Performance

Knowing Everyone’s Salaries Can Light a Fire Under Workers

Dollar General Is Deemed a ‘Severe Violator’ by the Labor Dept.

Adidas and Beyoncé to Part Ways After Ivy Park Sales Struggles

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Morning News: March 27, 2023
Posted by Eddy Elfenbein on March 27th, 2023 at 7:03 am

Meet the Xi Jinping Loyalist Now Overseeing China’s Economy

Jack Ma’s Retreat Undercuts China’s Pitch to Private Business

In Africa, Kamala Harris Looks to Deepen Relations Amid China’s Influence

As Banking Worries Swirl, Europe’s Policymakers Express Confidence, With Caution

Saudi National Bank Chair Resigns After Credit Suisse Remark

First Citizens Buys Silicon Valley Bank After Run on Lender

Banking Crisis Raises Concerns About Hidden Leverage in the System

Morgan Stanley Strategist Says Earnings Are Next Risk to Equities

Dear Volcker Happy Talkers, How’s the ‘Inflation’ Fight Going?

Volkswagen Says EU Accord on E-Fuels a Boon for Porsche’s 911

The Paper-Thin Steel Needed to Power Electric Cars Is in Short Supply

Pentagon Woos Silicon Valley to Join Ranks of Arms Makers

U.S. ‘Industrial Policy’ Returns With $53 Billion for Chip Manufacturing

The Lure of the ‘Made in America’ Sales Pitch

Why Chinese Apps Are the Favorites of Young Americans

Tech’s AI Armies Are Huge, Yet Struggling to Innovate

Uber Eats to Take Down Thousands of Virtual Brands to Declutter the App

People Bought Crocs During the Pandemic. They Haven’t Stopped

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Morning News: March 24, 2023
Posted by Eddy Elfenbein on March 24th, 2023 at 7:02 am

China’s Economic Lifeline to Russia Gives Beijing Upper Hand

Lawmakers Blast TikTok’s C.E.O. for App’s Ties to China, Escalating Tensions

Evergrande Strikes Deal for $19 Billion Bond Restructuring

Deutsche Bank Shares Plunge in Renewed Bout of Stress

The Curse of Credit Suisse Conjures a New Banking Reality

Banks Can’t Be Trusted. A ‘Golden Share’ Might Help

Yellen Says US Prepared to Take More Action to Keep Bank Deposits Safe

‘Bonkers’ Bond Trading May Be Sending a Grim Signal About the Economy

Accounting-Fraud Indicator Signals Coming Economic Trouble

The Fed Has Targeted 2% Inflation. Should It Aim Higher?

Volcker Slayed Inflation. Bernanke Saved the Banks. Can Powell Do Both?

Jack Dorsey’s Wealth Tumbles $526 Million After Hindenburg Short

Most Americans Doubt Their Children Will Be Better Off, WSJ-NORC Poll Finds

Faulty Credits Tarnish Billion-Dollar Carbon Offset Seller

Ford Says It Will Lose $3 Billion on EVs This Year as It Touts Startup Mentality

Accenture to Cut 19,000 Jobs as IT Spending Slows

Pandemic Pet Adoptions Propel Rise of a $500 Billion Global Market

Crypto Fugitive Do Kwon Charged With Fraud by US Prosecutors in New York

The Younger Brother Caught in the Middle of the FTX Investigation

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Morning News: March 23, 2023
Posted by Eddy Elfenbein on March 23rd, 2023 at 6:24 am

Consumers Foot the Bill for Traders ‘Manipulating’ UK Power Market

Bank of England to Weigh a Rate Increase After a Jump in Inflation

Swiss Central Bank Lifts Key Rate, Declares End to Bank Crisis

China’s Rise Relied on Ties to the West, Which Xi Is Now Loosening

China Is Starting to Act Like a Global Power

China Voices Strong Opposition to Any Forced Sale of TikTok

TikTok CEO Seeks to Convince Congress App Isn’t Security Threat

Double-Barreled Economic Threat Puts Congress on Edge

Fed Walks Tightrope Between Inflation, Bank Turmoil—but for How Long?

Powell’s Own Guide to Recessions Shows Rate Cuts Are Coming

Citi CEO Fraser Warns Mobile Money is ‘Game Changer’ for Bank Runs

Banks Are Risky. Silicon Valley Bank’s Risk Officer Was AWOL.

Wall Street Eases Hiring Freeze in Grab for Credit Suisse Talent

What Does ‘Made in America’ Mean? In Green Energy, Billions Hinge on the Answer

Twitter Isn’t Making Money. Here’s Why Musk Thinks It Could Soon

Is Working From Home Really Working?

GM to Stop Making Iconic Chevrolet Camaro Following Sales Slump

California Could Ban Skittles Due to Concerns Over Health Impacts

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Morning News: March 22, 2023
Posted by Eddy Elfenbein on March 22nd, 2023 at 7:03 am

Xi and Putin Bind China and Russia’s Economies Further, Despite War in Ukraine

U.K. Inflation Swings Upward, in a U-Turn

Lagarde Vows ‘Robust’ Policy With ECB Ready to Act as Needed

A New Chapter of Capitalism Emerges From the Banking Crisis

SVB-Fueled Turmoil Junks Lessons of the Global Financial Crisis

First Republic Rescue May Rely on US Backing to Reach a Deal

A Big Question for the Fed: What Went Wrong With Bank Oversight?

Fed Caught Between Inflation and Bank Crisis

Investors Trade Cautiously Ahead of Pivotal Fed Decision

JPMorgan Says Treasuries Coping Amid Worst Liquidity Since 2020

Bank Crisis Could Cast Pall Over Commercial Real Estate Market

30-Year Mortgage Rate Falls to a Five-Week Low

Willy Loman, And When It Is Never Too Late In The Job Market

TikTok CEO Shou Zi Chew Promises Firewall to Shield User Data

Pulling the Plug on TikTok Will Be Harder Than It Looks

Google Launches Bard AI Chatbot to Counter ChatGPT

White Claw Upended Beer. Now It’s Coming for Vodka

‘End of an Era’: Dodge Unveils Last Super-Fast Gasoline Muscle Car

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