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Monday, May 1, 2023

Third Bank In A Row To Fail; Good News? RE: First Republic Bank

 Third Bank In A Row To Fail; Good News?

That's a ridiculous headline, but this is the tale I watched CNBC try to spin this morning.

In fact this was the only story they covered on this mornings World Wide Exchange, when they normally run 5 headlines at the opening of the show, so they actually broke their regular programming in order to do damage control.  

Buy The News? 

Sure, there's a good chance that we get a little relief rally in the banking sector, but that may be short lived. I'm only seeing $JPM up 2.5%. The regional banks were up over 2% on Friday, along with everything else....   I think at some point we get a nice rally in the regional banks, but not right here. 

Also keep in mind that this is holiday trading in the UK, and Asia. This is another reason the short sellers were squeezed into the end of last week, and why that was so predictable. See where I made that call last Monday in a Look Ahead as Focus Turns to Tech Earnings

While it's true that The First Republic angst is now behind us, we are left with more questions than answers. 

1. Which bank will be the next to go belly up? 

2. Will anyone be willing to come to the rescue next time, and if not, why not?   

 Bank of America Corp. and US Bancorp were invited (to bid on First Republic) but decided against bidding, according to the people, who asked not to be identified discussing confidential talks. yahoo finance 

3. Will The Federal Reserve continue to raise interest rates, when the money supply is crashing, not to mention the fact that higher rates have contributed to the recent bank failures? 

US M2 Crashes in March, Ringing Deflationary Alarm Bells

Funny, the Chinese don't have a problem using the term "deflation", while the western lame steam media has invented a new term - one designed NOT to set off any alarm bells - opting for the term "dis-inflation". Look, these evil geniuses in the MSM may fool Joe six pack with cleverly disguised terminology, but they aren't fooling Wall Street for a minute!  

4. What's the fallout over these bank failures going to be? No doubt this is going to require stricter lending standards, and that means contraction, regardless of what The FOMC, and the ECB, decides to do this week.

I believe The Fed, and the lawmakers, have already proven they're not up to the job, as they begin finger pointing  

Here's my take on the situation 

Getting to the charts and the market action

I already stated on Friday, that I'm bearish, as we watched the powers that be squeeze the short sellers into another short squeeze Friday. 

We're seeing what looks like a continuing breakout, but I suspect this is just another fake out, like the one we saw on the 3M chart, back in Jan. 

$MMM 3M - compare this chart to what we're seeing on the Dow, and most other major indices. Same down-turned megaphone pattern, we've been watching for a while now.   

Another sector I'm watching is Gold, and Gold miners, which typically don't do well in a deflationary environment, but I see one name that looks like it's about to bounce out of the hole.

$AAL.L Anglo American 

Add that to the basket of stocks that I recommended last week. 

I may even create a page to keep track of these stocks, over the summer. 

Take Care, AA 

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