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Strategies & Market Trends : Technology Stocks & Market Talk With Don Wolanchuk
SOXL 53.91+8.6%Jan 9 4:00 PM EST
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To: SGJ who wrote (187307)3/10/2023 2:33:16 PM
From: Winfastorlose4 Recommendations

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This is from one of Zack's best analysts/trading advisors. He is pretty good, but he tends to get cautious at bottoms. He usually looks for rally confirmation before he reenters. But, he does let you know what the chatter is.



Whether or not there is real financial contagion risk for banks due to the collapsing deposits and shares of Silicon Valley Bank (SIVB), the market is playing it like "shoot first, and ask questions later." And the panic is likely to continue as SIVB is looking in the pre-market like it could get cut in half again today.

So we will sell our one financial stock today and cut the risk. Thankfully, Axis Capital (AXS) was down only 1% Thursday as many banks were down double-digits and even the KRE Regional Bank ETF tanked 8%. a huge one-day move for that index.

Pressure will weigh on the entire banking sector again today after SIVB had to sell a $21 billion bond portfolio at a fire-sale discount to shore up liquidity, and this spreads concerns that more banks could incur liquidity issues and even losses on their bond portfolios. SVB has $90 billion more it could be forced to sell to cover fleeing deposits.

This morning I just saw CNBC reporter Hugh Son talk about how he was on the phone all Thursday afternoon and evening talking to Valley insiders at VC firms and the mood is definitely one of moving money out of SIVB. Here were some key narratives from his and other CNBC reporting...

SVB, a VC funding star, spooked investors Wednesday night when they said they needed to raise over $2 billion in capital from the sale of stock. Then, SVB's CEO Greg Becker held a call with clients Thursday afternoon to calm their fears after a 60% tumble in the stock.

That news, coming on the heels of the collapse of crypto-focused Silvergate bank, sparked another wave of deposit withdrawals at SVB Thursday as VCs instructed their portfolio companies to move funds.

SVB customers said they didn’t gain confidence after Becker urged them to "stay calm," and the stock's collapse continued unabated, reaching -60% by end of trading.

It certainly didn't help that none other than VC war chief Peter Thiel of Founders Fund asked its companies to pull their funds from SVB, as reported by Bloomberg. This battle cry obviously spread fast in VC world and inspired other leaders to do likewise, causing a run on the bank and the stock.

“Falling VC funding activity and elevated cash burn are idiosyncratic pressures for SIVB’s clients, driving a decline in total client funds and on-balance-sheet deposits for SIVB,” wrote Morgan Stanley analysts. “That said, we have always believed that SIVB has more than enough liquidity to fund deposit outflows related to venture capital client cash burn.”

Okay. But that old belief means little now during a panic run on the bank -- they they started by doing an emergency capital raise.

Finally, to get an idea of just how panicked the hedge fund world is, billionaire Bill Ackman was prompted to publicly speculate that if private investors can’t help shore up confidence in the California lender, a government bailout could be next.

As I've been saying since I let go of short positions and just held at least 60% cash, it will take some type of unforeseen catalyst to tip stocks down the hill. This might be it. Let's see where the panic trail leads today.

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