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31 Oct, 5 tweets, 2 min read
Central Clearing helps not hurts Banks.
It’s gonna help get back > 20%
ROTCEs…blunting GSIB Score requirements, giving path to further Buybacks within context of getting off the ZIRP Floor (NII 👆) while Inflation Rises. $XLF #Reflation

It all starts w tons of XS Capital.
Banks love $TLT Central Clearing & moving Volume from Triparty to Sponsored FICC that Nets.
$XLF #Reflation
In simple DuPont terms:

ROTCE = Net Income/Revenues x Revenues/Tangible Assets x Tangible Assets/Tangible Equity

Net Margin x Asset Turnover x Financial Leverage Force Multiplier

Last turn is a Turbo Charger (Now think Central Clearing of $TLT )

$XLF #Reflation
The next few years $XLF Buybacks are gonna be insane…
They tell me that $XLF at 1.8x Year 2/ Early Cycle TBV is Super Rich…..

We are getting off ZIRP w Inflation….

Are we sure about that? 👇
$XLF #Reflation Image

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More from @gamesblazer06

PlungeProtectionTeam Profile picture
2 Nov
What’s your Convexity Profile?

What do you make if right & IORB Hikes won’t blast the economy coz of Private Sector De-Leveraging.. & what’s your downside at ZIRP if wrong?
$XLF #Reflation
Let’s say PermaBears are right & we have ZIRP forever… Banks have the highest Capital levels in 30+ Years… & can easily payout 100% of earnings at 13% CET1…

Worse case ATM payout machines w 10% All In Yields… Sure beats buying a Massive 10 Year Govt Bubble at 70x P/E imho.
30% Divy… & 70% Buyback Ratios….in 5 Years…amount of Tangible Book Value Reduction… in a PermaBear ZIRP forever world…+ low credit costs…can easily get u to high Teen ROTCEs… & if we do get Inflation & Rate Hikes don’t Invert the Curve..ROTCEs are gonna Rip w TBVs👆 $XLF
Read 7 tweets
PlungeProtectionTeam Profile picture
26 Oct
Banks don’t really care about 5s30s
It’s really 10Y3M… coz most funding at Front End of the Curve… as well as loans are mostly Front End as well … other 25% is long end mainly coz of XS Cash gets reinvested at the long end 10-30years. Rule of thumb is 75% of $XLF NII is front end.. rest back end.
Belly useless.
Front End… LIBOR/Prime etc the most important… that stuff is all going up.
Read 5 tweets
PlungeProtectionTeam Profile picture
25 Oct
UK SONIA Curve Ripping Higher….

$HSBC +100bps = +$5.7B of Incremental NII that can absorb any tiny China losses in the future.

+$2.0B comes from UK alone… another $1.3B from Hong Kong HIBOR alone which is pegged to $DXY Fed Funds…
So if the Short Thesis is built around a $DXY Wrecking Ball.. perhaps we might be forgetting the additional Credit Loss Absorption power on Sheet in an environment where there is SRF, Fed RRP (could go back to Zero) and $DXY Swap lines as ubiquitous as telephone poles nowadays.
Stronger $DXY is good for $HSBC.
Read 4 tweets
PlungeProtectionTeam Profile picture
18 Jul
What an added Gift Biden + ESG + GreenBoondoggles (Solar + Wind) + #GreatReset are to $XOM Longs. 🙏

To the Average American consumer?
That’s a different story…. coz Faux Morality ain’t cheap.
This year in cash, next year in Nov ‘22.
Imho 2 ways to protect yourself from any self inflicted inflation idiocy is $XLE & $XLF
Read 4 tweets
PlungeProtectionTeam Profile picture
12 Jul
“When interpreting data on Reserves, it’s important to keep in mind the quantity of reserves in Banking System is determined almost entirely by the Central Bank’s actions.

An individual Bank can Reduce their Reserves by “Lending Them Out or Using them 2 Purchase other Assets.” Image
“But these actions Do Not Change the Level of Reserves in the Banking System.”

“The general idea should be clear: while an Individual Bank can reduce its level of reserves by “lending to firms or households, the same is not true of the Banking System as a Whole.”
“No matter how many times the Funds are lent out by the Banks or used to make Purchases -Total Reserves in the Banking System do not change.”

“In particular, one can’t infer from the high level of aggregate reserves that banks are hoarding funds rather than lending them out.”
Read 9 tweets
PlungeProtectionTeam Profile picture
18 Jun
The Fed intentionally raised IOER & RRP to start the process.. people clearly sold Bills 4 RRP.. lots of em why Curve flattened some..but GC < IOER & no stress anywhere… no $DXY shortages anywhere…I don’t think Sterilizing is a big deal in this context… but actually necessary.
Banks are encouraging this…not a surprise.. they have been firing Non Op Deposits since last November that don’t hold any LCR or RLAP credit. $JPM has a 160% OpCo LCR it’s way too high…There or others’ issue isn’t a future lack of liquidity… it’s a lack of Balance Sheet..
… imho there’s a big difference between both concepts.. there’s $7 Trillion of XS of Deposits over Loans which for the most part is HQLA. Loan/Deposit ratios is at 60% & 45-50% for GSIBs. They can’t contain any of this liquidity… more draining is great.
Read 7 tweets

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