A few days ago we pointed out that we might not believe in the good health of Credit Suisse, but we had to believe that the Swiss National Bank would do everything to restore the total credibility and financial stability of the institution, which is Switzerland’s second-largest bank.
The Swiss National Bank is ready to lend up to 50 billion francs, about $54 billion, to Credit Suisse if this is needed. The figure is not accidental. In fact, it is very evocative. It is the same amount that the Swiss National Bank shelled out to save UBS in 2008, in a very peculiar financial transaction that breathed life back into the country’s first bank, which was sickened by subprime securities and now moribund.
So, 1 to 1, ball in the middle, for the two Swiss institutions, both” too big to fail”: at the time it was estimated that UBS alone accounted for 14 percent of Swiss GDP. I should point out: I have no current data on this.
On the American front, the parade continued with First Republic Bank. Founded in 1985, it operates in the private and business segments, with a strong component in asset management as well. It is listed on the S&P500 and is widespread with branches in major U.S. states, including California, Florida, Washington and New York state.
From March 10 to March 15, the Bank was supported by the Federal Reserve with overnight loans at the friendly rate of 4.75 percent and amounts ranging from $20 billion to $109 billion.
On imaginable “mild” pressure from the Federal Reserve (in the end a more or less overt financier of the whole operation) the major American banks, including Bank of America, Wells Fargo (the one bailed out in 2008), JP Morgan Chase, Goldman Sachs, Citigroup and others took up a collection of $30 billion, depositing it with First Republic, with a commitment to keep the deposit for at least 120 days.
The amazing thing, but America is also this, the stock markets celebrated big time.
After an evidently subdued start to the day, with European stock exchanges resigned as they waited for an increasingly dull, lost, and uncredible “Madame Lagarde” to confirm the announced 0.50 percent euro rate hike, Wall Street was showing a show of strength.
The S&P500, which in the morning had touched with the June future the low at 3895, exactly on the trendline joining the lows of November 3 and December 22, during the U.S. session started upward to touch the old trendline coming from the October 13 low, which after having long acted as support now acts as dynamic resistance.
The high of the day was suggestive: 4000, for one more installment in the “we wanted to see it again” series, where the mean reversion of the S&P500 is always the protagonist. Closing at 3994.50.
Vix consistently down from the S&P500’s rise, with low around the 23 area, roughly the area of the previous day’s low.
This is a short-lived crisis, because it is a temporary crisis that postpones its deflation to a later date. Nevertheless, we believe that until the end of next week, the risk area is not yet archived. It follows to navigate on sight with great caution.
Oil has thudded to almost $65. Great buyback level for Trader President Biden , the U.S. is still grappling with replenishing the Pentagon’s depleted oil stockpile, made available to the market to calm its price in past months.
Such weakness in oil is not a good sign. We ascribe it among the risk elements that could accompany us for a few more days. If we see gold coming down as well, more than ever we keep the brakes on.
Bitcoin has restarted in a big way and anticipates a restart of the stock markets for a few weeks. It may well be that the restart has already begun: but an up-and-down merry-go-round with a few snags, some resounding news or resounding capitulation to make confusion, is not a climate in which you can relax.