Big Banks Bail Out Little Banks, Fed Launches Stealth QE, ECB Hikes, Everything Rallies

Crazy day - we have the US Fed and US big banks behaving dovishly with continued easing and bailouts, while the European Central Bank raised its base interest rates by 0.50%. This is on the heals of the Swiss National Bank pledging undying support to Credit Suisse yesterday.

How did market participants react? By buying everything, especially tech and other “risk-on” assets.

WHAT WE OWN: $BTC, $ETH, $NVDA, $AAPL, $COIN, $XOM, $TSLA, $MSFT, $AMZN

Want our concise thesis on each asset? Refer a friend to The BRRR and we’ll send you the doc! Here’s how ⬇️

BIG BANKS DO SOME BAILING OF THEIR OWN

• 11 banks (including JP Morgan, Bank of America, and Citi) have agreed to deposit $30 billion in First Republic Bank to help stabilize the banking system. The stocks of regional banks initially fell but rose after the announcement of the deposit plan.

• The bank had been struggling due to the collapse of other banks and investors pulling out their money. The Federal Reserve, Treasury Department, Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency issued a joint statement expressing their appreciation for the support of the banks.

• First Republic typically caters to wealthy clients and had $212 billion in assets at the end of December 2020.

• All major indexes rallied on the news.

CNBC

BTFP (BUY THE F'ing PIVOT) LAUNCHES

• The BTFP is designed to help banks avoid being forced to sell their bond holdings at a loss. Initially launched as a $2 trillion program, it may grow larger.

• JPMorgan believes that usage of the BTFP could be rather high and could inject liquidity into the banking system, effectively serving as a new form of quantitative easing.

• As interest rates rise, more people are withdrawing their deposits from banks and converting them into government money market funds, causing the banking system to lose even more liquidity. This has forced the Fed to expand its balance sheet and increase the size of the BTFP.

  • The higher the Fed hikes, the greater the probability of continued deposit runs, the more the Fed's Stealth QE facility will be used to replenish reserves among small banks.

• The Federal Reserve's weekly update also revealed record borrowings from the Discount Window, a last-ditch liquidity facility. The Fed's balance sheet rose by $297 billion, the biggest jump since April 2020.

Zerohedge

ECB ZAGS WHILE EVERYONE ZIGS

• The European Central Bank (ECB) remained hawkish, raising interest rates by 0.5% to 2.0% today.

• ECB also announced it will reduce its balance sheet by €15bn per month starting from March 2023 until the end of Q2 2023

• ECB plans to raise rates "significantly" further to control inflation

• ECB expects inflation to remain above its 2% target until 2025

• The ECB sees a relatively short and shallow recession in the eurozone.

EVERYTHING RALLIES

• Despite good job numbers (which theoretically gives The Fed room to raise interest rates), and an aggressive ECB rate hike, markets rallied with the tech-heavy NASDAQ leading the way.

• FedEx rallied 15% after reporting strong earnings growth after hours

TWEET OF THE DAY

Entreprenuer/investor Balaji Srinivasan encourages everyone to buy bitcoin today. He points to an old Jack Dorsey tweet, where Jack warns hyperinflation is coming.

CHART OF THE DAY

The Fed’s emergency injection this week was LARGER than their emergency injection during the 2008 financial crisis. Just some food for thought.