Regional Flight of capital Trade

 


Since the Silicon Valley Bank Collapse, I had predicted that a flight of capital would ensue among small & regional banks throughout the United States into larger too-big-to-fail banks. 

The banking sector is crumbling, reaching secular trend lows as investor sentiment decreases. 

The following chart represents the monthly chart of the Nasdaq Bank Index. Current prices are reaching the trend lows that were last seen during the 2020 covid crash and the 2008 banking meltdown. 


In other words, because some regional and other small banks are imploding, the whole banking sector is taking hits as the general investor pulls his capital out of banking stocks, including larger banks that might not be at risk of failure. 

Recently, the failure of smaller banks, such as Pacwest Bancorp and Western Alliance Bancorporation, which are the banking stocks that took the greatest hits in yesterday's trading sessions. 

The idea goes that these failing banks have insufficient levels of capital and operate in a regional geographical area that is quickly losing investor confidence and experiencing high volatility. 

The market, however, is overgeneralizing and underestimating the performance of larger banks that, despite being relatively well-capitalized are also taking a large hit as a result of the banking sector as a whole taking a bad reputation. 

TRADING IDEA:

SELL: Failing small & regional banks such as #PAC and #WEL (short-term trade) 
BUY: Large banks such as #JPM and #CITI as more people realize these stocks are undervalued due to a large, unrelated macroeconomic event of regional bank runs (medimu-term trade) 

NOT FINANCIAL ADVICE




Comments

Post a Comment

Popular posts from this blog

What the CFA Franc is about: A quick summary

The CFA Franc is the name of the currency used by the economies of 14 African countries. Derived from the French phrase "Communauté Financière Africaine" (African Financial Community), the CFA Franc is a currency system that has been influential in shaping the economies of several African countries. In this article, we will explore what the CFA Franc is, the countries that use it, and the benefits that France derives from its usage. What is the CFA Franc? The CFA Franc is a currency that is used by 14 countries in West and Central Africa. These countries include Benin, Burkina Faso, Guinea-Bissau, Ivory Coast, Mali, Niger, Senegal, Togo, Cameroon, Central African Republic, Chad, Republic of the Congo, Equatorial Guinea, and Gabon. The currency system was established in 1945, following the end of World War II, and has undergone various modifications over the years. CFA Franc 2 variants:  There are two variants of the CFA Franc: the West African CFA Franc (XOF) and the Central ...
Read more

Bitcoin Posts a Buy Signal

Image
 It has been some time since I have published an article. My excuse is that apart from US debt ceiling discussions, not much has happened with US equities & cryptos.      Nonetheless, upon looking a second time at the chart of Bitcoin, I have realized how a classical textbook bullish signal might have been posted on the charts.  In fact, Bitcoin has, since its recent highs, slowly corrected down to exactly touching the 200 SMMA and carefully getting rejected at that level.  Not only is that a classical bullish move, but the fact that Bitcoin's price increased much after getting supported by the line is a possible indication that Bitcoin might be set to possibly rivisit or break through the recent highs of $30'500.  What I also like about this chart is that Bitcoin's price denied a head-and-shoulders formation that had been forming since March. A second possible indication that price might have been able to hold strong downward pressure from increas...
Read more

Assessing the World Implications of Russia's Black Sea Grain Deal Withdrawal

Image
In recent times, Russia's decision to withdraw from the Black Sea Grain Deal has sent shockwaves through the global economy. As one of the world's largest grain exporters, any disruption in Russia's agricultural trade significantly impacts global food security, commodity prices, and geopolitical dynamics. In this article, we delve into the potential world implications of Russia's unexpected withdrawal from the Black Sea Grain Deal. The Black Sea Grain Deal: A Brief Overview The Black Sea Grain Deal was an agreement between Russia, Ukraine, and Kazakhstan that allowed these countries to jointly export grains from the Black Sea region, an area known for its abundant agricultural production. This pact enabled the three countries to coordinate shipments, stabilize prices, and capitalize on their collective strengths as key players in the global grain market. The Shocking Withdrawal In a surprising move, Russia announced its withdrawal from the Black Sea Grain Deal, citing n...
Read more