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Aug 5 • 4 tweets • 1 min read
Post Covid Banks…even after Releasing Reserves in 2021…built in 2020 through the P&L… still have 2x the amount of Reserves in the most potentially Stressed part of their Book.. aka Cards than 4Q19.. & their Card Customers have $2T+ of XS Savings.. that they never had before,
I love $XLF coz I love #MarginForError Image
Truth be told we all suck at Economic Prognostications… u need #MarginForError for every investment.. & need to constantly ask yourself how badly will one get screwed if dead wrong.
Even if you don’t one should invest like one does imho.

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More from @gamesblazer06

PlungeProtectionTeam Profile picture
Aug 7
CLO Equity Distributions (even in 90s Long more painful Recession) can turn off in a Recession for a bit .. even a long one… trade down to 20c.. & then catch up for the majority of deals.. BBBs ok.. BBs are a tweener (No man’s land) & AAA are the best Risk Adjusted Sweet Spot.
CLO Equity is a Very Attractive Asset.. in a Rising Rate environment especially in Year 3 of a Recovery:

1) 10x Levered Collateral Debt Securities
that are top of Cap structure.. where Issuers seeing higher EBITDA Op Lev Trump Rates… expression of Econ Strength.
2) Rising Rates (Front End) doesn’t impact EBITDA early in Cycle.. coz most issuers tend to start swapping out Rates by buying Payers or Caps (4 non myopic issuers).. & match against LIBOR payable to Banks.. so lock in longer term funding coupons.. & start to de-leverage..
Read 10 tweets
PlungeProtectionTeam Profile picture
Jul 29
“European Banks Blow the Roof Off, For Now” - Bloomberg

The demise of European Banks on Russia in 1H22 was greatly Over-Exaggerated by Intelligentsia especially when citing FRA OIS gapping higher on Russia….spurious imho.. had nothing to do w Credit.
bloomberg.com/opinion/articl…
As mentioned back in March.. FRA OIS gapped up coz…2a7 Money Funds Shortened WAM to harvest & get ahead of a battery of Fed Rate Hikes. $EUFN
Look at the Credit Cost Guidance 4all European Banks for FY22…As good if not better than US…once u get past all Obligatory Recession Disclaimers.
$EUFN mostly out of Russia…u literally need a Magnifying glass to see the extrication in Earnings, Capital & Liquidity.
Read 4 tweets
PlungeProtectionTeam Profile picture
Jul 27
$CS reports a €1.7B Loss..Delta v Street mainly coz of Litigation, Restructuring & AllFunds equity.. but Wealth weaker given lower Market Levels & Client De-Leveraging but Gross Margins steady 83bps.. Investment Bank -40% YoY, FICC -28% YoY, Equity Flat YoY, Cap Mkts -96% YoY
Swiss Universal Bank Rev +3% YoY driven by higher NII.. Credit remains Solid w an Asset Light Biz w only a small CHF96MM provision…High Yield small US$245MM MTM loss with exposure down to $5.9B..Solid 13.5% CET1 Capital & 6.1% Leverage Ratio…Liquidity is Off Charts w 191% LCR.
$CS tangible equity up +CHF1.3B QoQ despite loss… Tangible Equity has gone up every quarter since Archegos as the Balance Sheet continues to De-Lever.. Asset Light w Swiss Resi LTVs only 45%.. Tangible Leverage down another 1.5 turns to 18.0x Ex DTAs in 2Q22.
$CS Image
Read 5 tweets
PlungeProtectionTeam Profile picture
May 2
S&P: April Manufacturing

“The rate of overall growth ‘Accelerated’ for the 3rd Month running & was the ‘Sharpest’ since last September.”

$XLF #Reflation
But 2s10s…
So let me see here…Consumer Spending + Manufacturing are Both “Sharply” “Accelerating”….. can someone explain what exactly is weak in the Real Economy? Oh right Powell jams us into Recession coz of Yesterday’s news priced in by 2s10s silly….”It will all end in tears.” Got it.
Read 4 tweets
PlungeProtectionTeam Profile picture
May 1
LOL
People are exhausted - perhaps even inflation by natural extension. TBD.
Any #RateOfChange YoY on Inflation is fighting tough comps for the next 12 months.

Sure, maybe it goes higher with near term inertia….over time that’s not Repeatable Risk Management imho.
$XLF #Reflation
Read 4 tweets
PlungeProtectionTeam Profile picture
Apr 30
Yes, Tech got absolutely smoked…

Value now dragged down with Russia… given 2s10s Recession False Flags..& too aggressive Market Rate Hike Expectations…but we’ll get through Vol.. & the Fed acted decisively on “Inflation Expectations” .. Crushed it like a bug.. 5Y5Y at 2.74%
I Stress out Banks 9 ways 2Sunday… I’m not stressed. Banks fundamentals getting stronger as we speak. They r printing Trading Revs/NII that more than fund AOCI burn..Regs now Understating Strength..Coz ~5 turns of tangible leverage & almost 2 turns of SLR r Cash Bound by LCR.
U don’t even have 2run a DCF/Residual Income model to tell u there’s tons of Buffer 4 Credit “Normalization” that’s gonna happen w CECL in 2H22…

Even quick look at Loan Loss Reserves tells u 4example $JPM has $20B in Reserves & $2B of NCOs

= 10x Coverage 👇
$XLF #Margin4Error Image
Read 4 tweets

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