Updated: Mar 16
by Robert Holman | The Defensive Advisor | www.defensiveadvisor.com
STOCK MARKET RATING … 4.0 (0-4 bearish, 5 neutral, 6-10 bullish). I do not see a financial crisis, but I think the market will trend down for a while.
Note: I revised the above paragraph on 3-16 at 12:15 Central time.
I believed that the CPI data would probably moderate (or cool-down) from the prior month, and that came to pass. Today’s report showed CPI inflation down significantly. Of course, the market reacted very favorably to the news, as they should have. Yet the bank situation still overhangs the markets.
Why? There are more banks with significant unrealized losses (approx. $600 billion) in long-term securities of all types, but currently there are no events that would trigger another liquidity crisis. If one does come it would be hard to guess where it would come from but see my last note in this section.
Elements of the US government bailout of SVB are inflationary in nature. On the other hand, numerous well-known investors interviewed on business news channels yesterday think that we just experienced a “massive deflationary shock” because of the credit tightening that is sure to come. Thus, the full repercussions (fallout, if you prefer) of what just happened in baking are unknown and unknowable at the present time.
The question is --- will the business community become worried that another bank has a significant financial problem? Currently, research firm Strategas has identified First Republic Bank (FRC) in San Francisco as elevated risk – it is on investor’s radar – yet after their stock fell 74% in the last week, the stock is up 17% today. Speculators or opportunistic investors?
The next shoe to fall might actually be in the commercial real estate industry, which is in a long-term downtrend because workers are not returning to offices in the post-Covid marketplace. And, that would affect FRC directly.
PORTFOLIOS … After reading this report, if you are unsure how to position your portfolio to take advantage of these conditions, call me to discuss your circumstances, I’ll do a complimentary portfolio evaluation, and I’ll explain what ought to be done to help your situation. If you want to get started right now, just click here and input your portfolio holdings and I’ll call you.
TO MY CLIENTS … THANK YOU FOR YOUR TRUST. We’ve had great success since we started this RIA in mid-2018 and are doing better than the market return since that time period.
Excelsior Divitiae. Learn from the Bible: Deuteronomy 10:14 and Psalm 24:1 (taken together), Genesis 12:2-3, Proverbs 15:22, 21:5, 22:3 and 27:12, Ecclesiastes 8:7, Joshua 1:9, Proverbs 3:5-6, Ephesians 1:17, Jeremiah 29:11, 1Chronicles 29:11-13, and 1 Chronicles 12:32. I recommend you read them in this order.
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