A surprising no-brainer if you can get it at a discount

Good morning! 👋

I told you yesterday that Credit Suisse was gonna be a problem (See #1) and it would appear that I was correct based on early market action.

Here’s my playbook.

Ratings agencies finally wake up—thanks for nothing, fellas!

Meanwhile, ratings agencies have apparently finally woken up and effectively downgraded the entire banking sector from “stable” to “negative.” (Read)

Ya think??!!

Moody’s specifically labelled First Republic Bank (FRC), Zions (ZION), Western Alliance (WAL), Comerica (CMA), UMB Financial (UMBF), and Intrust Financial “on review,” which is ratings-speak for risky investments by lenders. (Read)

Seems to me a much more descriptive term applies.

Crap.

MyPOV: Ratings have been a farce for a long time. I suspect ratings agencies smell lawsuits on the horizon, which is why the move strikes me as nothing but a thinly disguised attempt at spin control so they can say they were ahead of the next crisis.

Investing Takeaway: Banking should be boring, like watching paint dry or grass grow. There’s still only one bank I want to own because it’s a port in the storm. I hope I’m smart enough to buy more shares. Upgrade to Paid

I’m with Kevin

Normally, I don’t agree with anything that Shark Tank Star Kevin O’Leary has to say.

I do in this case, though.

O’Leary’s blistered the SVB bailout and has personally taken action to move his assets into five separate banks as a way to shed risk, according to a report from FBN. (Read)

I’m thinking along similar lines.

I urge anybody with deposits over $250k to immediately rethink their banking relationships and take action to disperse the accounts if needed to get under the FDIC’s $250,000 threshold.

A surprising no-brainer if you can get it at a discount

If you’re anything like my wife and me, you’ve noticed retailer after retailer struggle. Stores are empty, foot traffic is down. Many times, there are more employees than customers… at least when it comes to stuff humans need.

Pet stores, on the other hand, are crowded with smiling, happy people and their furry or feathered companions.

Try this on for size: I was surprised to learn recently that pet ownership is higher than it’s been in the past 35 years. And—get this—there hasn’t been a year-over-year decline in US pet-related expenditures in the past 25 years.

WOOF.

Might be worth a nibble, pun absolutely intended. 🐾

A LowBall Order at $5 would be a nice discount if the markets want to present that.

SVB—you can’t make this stuff up!

New day, new revelations.

The list so far:

1. SVB execs apparently sold $84 million in stock over the past 2 years before everything came unglued.
2. SVB employees received bonuses hours before regulators shuttered everything.
3. SVB’s Chief Administrative Officer Joseph Gentile was former CFO at Lehman Brothers.
4. SVB’s recently appointed chief risk officer, Kim Olson, worked at Deutsche Bank from 2007–2010 when it lied to investors about its mortgage-backed securities (the collapse of which led to the housing crisis)

Today, we learn that only ONE member of SVB’s board had investment banking experience. According to various reports, Tom King was appointed last September, having been executive director of Investment Banking at Barclays and having 35 years of investment banking experience.

The DOJ and SEC are reportedly both investigating.

OBA Investing Takeaway: SVB’s fallout will be felt for years—and not just in Silicon Valley either. I am optimistic that this may finally be a wakeup call for regulators, ratings agencies, the Fed, and even the Treasury Department... financial alchemy doesn’t cut it!

I am also hopeful that the SVB situation will cause a massive realignment in the IPO process and that the process of raising capital returns to real companies with real products in search of real capital... and that it will be used to grow the companies that make it to market. Not just enrich founders, lawyers, and investment bankers at the expense of the investing public.

Cover curse strikes again

Most investors have never heard of the “cover curse,” but they’d be wise to learn because behavioral finance is a super-important investing tool, IMHO.

It’s pretty simple to understand.

Once a trend is so clear that even journalists pick up on it, it’s already reached its peak.

Those of us who are of a certain vintage will remember the infamous Businessweek cover from August 13, 1979, proclaiming the “Death of Equities”… right before the beginning of the longest stock bull market in history.

There was also The Economist, which in 2011 ran a cover asking, “Is this really the end?” almost precisely when the world’s economy was beginning to recover in earnest from the Global Financial Crisis.

And of course, who could forget the April 2019 cover from Bloomberg Businessweek, which asked simply, “Is Inflation Dead?” We know how that story continues to play out.

Granted, the fourth image above is technically not a cover, but a list. Specifically, Forbes’ “America’s Best Banks,” and guess who was on it?

Yep.

SVB.

You can’t make this stuff up!!

Bottom Line

Pessimists play not to lose, which is why they have a hard time making money.

Optimists play to win, which is why many often do.

Let’s get out there and MAKE it a great day!

Keith 😊