SVB is dead, long live SVB!

You can't get rid of skeletons so easily

Jpow: “Janet, we are running out of options here. We teased the monkeys on the QT roll-back, we gave them a dovish QRA, we are talking up rate cuts, what else can we do? Those Mag7 are about to crack!”

Tamagotchi Yellen: “Don’t worry. What we need is another banking crisis. Another SVB”

JPow: “How are we going to find another SVB???”

Tamagotchi Yellen: “Don’t worry. The new SVB is the old SVB”

<New York Community Bankcorp, NYCB, enters the room>

NYCB is down >40% today on slashing its dividend and reporting frankly shocking numbers. For those who don’t recall, NYCB was the “lucky” buyer of Signature bank (SBNY) and its $38bn of assets in 2022.

The stock is back does to where it came from, after doubling since the acquisition.

The detail on the miss is more interesting. On one hand, NYCB now qualifies as a larger Category IV bank and has to meet stricter capital requirements. As a result, it had to build capital and took a hit. Fine.

On the other hand though, its charge-offs increased from $24m to $185m due to 2 loans: one was a multi-family loan, the other was on office loan. Ooops.

Given I’m short a multi-family exposed company, my own bias would lead me to conclude: “It’s time for the skeletons to come out of the closet”.

I don’t think NYCB is another SVB for what it’s worth, I just think that loan quality could become an issue again.

From micro lets go to macro, as the effect was equally hilarious.

So we had a dovish QRA on Monday and the US 10 year dribbled down to 4%. And then we were given the QRA mix today, which was slightly more hawkish since Tamagotchi Yellen will issue >$1 trillion and coupons of >$400bn.

So I’m pretty sure some poor macro fund thought it was a great idea to short Duration on the print, only to then get steam-rolled by the “mini-SVB Banking Crisis” rally in the US10 year which got it below 4% in a jiffy!

I think this macro fund’s P&L must have felt like the train wreck below. We lost some good people today. RIP.

It’s like people seem to forget the unholy powers of Tamagotchi Yellen. She always has something up her sleeve to make you buy her bonds!

P.S. NFPs are on Friday. ADP was a miss today. So it will be quite interesting if everyone focused on the QRA and the Fed this week, only to get steamrolled by a weak ADP that causes a duration rally / equity sell-off!

Disclaimer:

This isn’t financial advice.

This is the trading blog of a shrub.

By now you should know: Don’t be Stupid.

Like, seriously … Don’t be stupid …