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Former President Donald Trump called the Manhattan district attorney investigating him a ‘Racist in Reverse’ amid reports the former president could be arrested this week for alleged campaign finance violations.

Manhattan District Attorney Alvin Bragg’s office is reportedly preparing to issue an indictment for alleged hush-money payments that Trump made as a presidential candidate in 2016.

Trump called Bragg, the New York City borough’s first Black district attorney, a ‘Racist in Reverse’ on his Truth Social site Sunday, reiterating his claims of a conspiracy in the 2020 election, which he lost to Democrat Joe Biden.

‘Biden wants to pretend he has nothing to do with the Manhattan D.A.’s Assault on Democracy when, in fact, he has ‘stuffed’ the D.A.’s Office with Department of Injustice people, including one top DOJ operative from D.C. who is actually running the ‘Horseface’ Witch Hunt,’ Trump wrote.

‘Bragg is a (Soros) Racist in Reverse, who is taking his orders from D.C. I beat them TWICE, doing much better the second time, and despite their DISINFORMATION campaign, they don’t want to run against ‘TRUMP’ or my GREAT RECORD!’ he said.

‘When Alvin Bragg first attained office, he made it very clear that, like many other prosecutors, there was no case against Donald J. Trump,’ he wrote in a subsequent post. ‘Then the Biden Administration, the Democrats, and the Fake News Media began pushing him, and pushing him hard, and low [sic] and behold he said that there might just be a case after all. I knew what that meant — He was being pushed to do something that shouldn’t be done. He wasn’t willing to stand up to Soros and the Marxists that are destroying our Country!’

‘There was no ‘misdemeanor’ here either,’ he added. ‘There was no crime, period. All other of the many Democrat law enforcement officers that looked at it, took a pass. So did [former Manhattan DA] Cy Vance, and so did Bragg. But then, much latter (sic), he changed his mind. Gee, I wonder why? Prosecutorial Misconduct and Interference with an Election. Investigate the Investigators!’

Trump is facing criticism for calling on his supporters to protest on Saturday, claiming that ‘illegal leaks’ from the DA’s office had led him to believe he would be arrested Tuesday.

Bragg’s office will reportedly meet with law enforcement officials to discuss logistics for a potential indictment, which stems from a years-long investigation into Trump’s alleged hush-money scandal involving porn star Stormy Daniels.

In a post Saturday, Trump described Bragg as ‘corrupt’ and ‘highly political.’

‘PROTEST, TAKE OUR NATION BACK!’ he wrote.

The DA’s office declined to respond to Trump’s comments when reached by Fox News Digital on Sunday. 

Critics compared Trump’s call to action to the U.S. Capitol riot on Jan. 6, 2021, when a mob of his supporters stormed the Capitol building and temporarily halted the certification of President Biden’s election victory.

The DA’s office confirmed to Fox News Digital that Bragg sent a memo to employees on Saturday saying any attempts to intimidate his office would not be tolerated. His office has so far declined to confirm reports of a coming indictment.

National Security Council spokesman John Kirby said Sunday there are no indications the White House is preparing for violence related to Trump’s posts.

‘We’re always monitoring the situation here as best we can,’ Kirby told ‘Fox News Sunday.’

‘I’m not aware of any indications that we’re preparing for that kind of activity, specifically with respect to those comments,’ he said. ‘But obviously, we work hand in glove with local and state authorities all around the country, and we’ll continue to watch this as best we can.’

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Following former President Donald Trump’s claims that he is bracing for his arrest this week, Sen. Mark Kelly, D-Ariz., on Sunday said prosecutors must have a strong case to warrant the ‘unprecedented’ arrest of a former president.

Kelly addressed the situation on CNN’s ‘State of the Union,’ calling it ‘very important’ for Manhattan District Attorney Alvin Bragg to ‘thoroughly’ look into the case before charging Trump, adding that ‘nobody’s above the law’ in the U.S.

‘You know, I would hope that if they brought charges that they have a strong case, because this is, as you said, it’s unprecedented,’ the former astronaut said. ‘And, you know, there are certainly, you know, risks involved here. But again, nobody in our nation is or should be above the law.’

The Manhattan District Attorney’s Office is reportedly preparing to issue an indictment for alleged hush money payments that Trump made as a presidential candidate in 2016.

Trump claimed on his Truth Social site Saturday morning that he expected to be arrested on Tuesday, writing in part, ‘PROTEST, TAKE OUR NATION BACK!’ 

Local law enforcement officials are bracing for the public safety ramifications of an unprecedented prosecution of a former American president.

When asked whether law enforcement should be concerned that Trump’s remarks could spark deadly violence, Kelly said authorities should ‘pay attention’ to any protests that unfold.

‘But the president’s supporters, they have First Amendment rights and they should be able to exercise those peacefully,’ Kelly said. ‘I think it’s going to be important for law enforcement to pay attention to, you know, protests and make sure it doesn’t rise to the level of violence.’

In an internal email following Trump’s statements, Bragg said law enforcement would ensure that the 1,600 people who work in his office would remain safe, and that ‘any specific or credible threats’ would be investigated.

The Associated Press contributed to this report.

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Gov. Gavin Newsom on Sunday asked state lawmakers for a measure on the 2024 ballot to fund a major expansion of housing and treatment for residents suffering from mental illness and addiction. 

The governor was expected to elaborate on the details during a Sunday afternoon press conference in San Diego. It’s part of the Democratic governor’s broader goal to tackle the state’s deeply entrenched homelessness epidemic.  

The governor’s request asks for authorization funding to build residential facilities where over 10,000 people a year could live and be treated. 

Tent encampments have popped up on sidewalks and under freeway overpasses across California. People with clear mental health issues have become a familiar sight to residents. 

The initiative would be partially funded by general obligation bonds that would go toward the construction of ‘campus-style’ facilities along with smaller homes and long-term residential settings, Newsom’s office said.

State Sen. Susan Talamantes Eggman, D-Stockton, will introduce the measure, which would also earmark money to house more than 10,000 homeless veterans across the state, according to the statement.

The announcement from Newsom comes as the governor is wrapping up a four-day tour of the state, highlighting his major policy goals instead of a traditional State of the State address.

Last week, Newsom announced a plan to spend about $30 million to build 1,200 small homes across the state to help house homeless people. The homes can be assembled quickly and cost a fraction of what it takes to build permanent housing. Federal courts have ruled cities can’t clear homeless encampments if there are no shelter beds available. 

The governor’s plans are not without critics, however. California Assembly Republican Leader James Gallagher of Yuba City said any plan to address homelessness ought to begin with requiring that homeless people with mental illness and suffering from drug addiction get treatment. 

‘And after that, he should reduce the taxes, fees, and regulations that have made it nearly impossible for Californians to afford housing, electricity, and all other everyday costs,’ Gallagher said in a statement. 

The Associated Press contributed to this report. 

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A San Francisco district supervisor is calling for more policing in the crime-ridden city – despite advocating to defund the police in 2020.

Hillary Ronen, Democrat, represents District 9 on the San Francisco Board of Supervisors. During a Budget and Appropriations Committee meeting on Wednesday, she made an impassioned plea to add more officers to the Mission District, which she represents.

Ronen was attacking San Francisco’s police chief for spending a large amount of overtime on an anti-retail theft program instead of prioritizing police presence in her district. 

‘I’ve been begging this department to give the Mission what it deserves in terms of police presence all year long,’ Ronen said. ‘And I have been told time and time and time and time again there are no officers that we can send to Mission.’

‘It hurts. And I feel betrayed by the department. I feel betrayed by the mayor. I feel betrayed by the priorities of the city,’ the Democratic politician added. 

The speech contradicts her stance on policing in 2020. After the George Floyd protests, Ronen tweeted that she believed ‘strongly’ that San Francisco’s police force needed to be reduced.

‘I want to make it clear that I believe strongly in defunding the police and reducing the number of officers on our force,’ Ronen wrote. ‘For decades we’ve had an imbalance in our city’s budget, with hundreds of millions of dollars going to SFPD to have them do work they are not qualified to do.’

SAN FRANCISCO CRIMINAL JUSTICE SYSTEM ROCKED BY ‘EARTHQUAKE’ UNDER NEW DA, ACTIVIST SAYS 

In 2020, Mayor London Breed redirected $120 million from law enforcement to fund other city initiatives. Crime in San Francisco continued to worsen, with homicides increasing by 20% in 2020 compared to 2019. Homicides also increased 17% in 2021 compared to the previous year.

By December 2021, Breed made an emergency request to the Board of Supervisors to add more funds to the city’s police department.

The San Francisco Police Department has struggled with lack of staffing the past few years. In February, officers responded to a burglary over 15 hours after the 911 call was made.

‘While the SFPD is short-staffed and our response times have been negatively impacted as a result, a response time of over 12 hours for a call of this nature falls far short of the department’s and the public’s expectations,’ Officer Robert Rueca said. 

Fox News Digital has reached out to Ronen’s office for comment, but has not heard back.

Fox News’ Emma Colton contributed to this report.

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The liberal New York City prosecutor allegedly set to arrest former President Donald Trump has a history of facing accusations he’s soft on crime.

Manhattan District Attorney Alvin Bragg’s office may arrest Trump this week after a years-long investigation involving the ex-president’s alleged hush payments to porn star Stormy Daniels during his 2020 election campaign, Trump claims.

Bragg’s office has not confirmed nor denied plans to arrest Trump, who has called for his supporters to protest ahead of the alleged indictment.

‘NOW ILLEGAL LEAKS FROM A CORRUPT & HIGHLY POLITICAL MANHATTAN DISTRICT ATTORNEYS OFFICE, WHICH HAS ALLOWED NEW RECORDS TO BE SET IN VIOLENT CRIME & WHOSE LEADER IS FUNDED BY GEORGE SOROS, INDICATE THAT, WITH NO CRIME BEING ABLE TO BE PROVEN, & BASED ON AN OLD & FULLY DEBUNKED (BY NUMEROUS OTHER PROSECUTORS!) FAIRYTALE, THE FAR & AWAY LEADING REPUBLICAN CANDIDATE & FORMER PRESIDENT OF THE UNITED STATES OF AMERICA, WILL BE ARRESTED ON TUESDAY OF NEXT WEEK. PROTEST, TAKE OUR NATION BACK!’ Trump wrote on Truth Social this weekend. 

As Trump’s successful 2016 presidential run came to a close, Trump’s then-lawyer Michael Cohen sent $130,000 to Daniels to prevent her from disclosing her 2006 affair with Trump. Trump reimbursed Cohen through installments.

Bragg empaneled a grand jury over the matter, indicating he will soon decide whether or not to charge the former president.

But Bragg, who came into office as a reform-minded DA, has repeatedly been accused of letting murderers off the hook, including when the family of a slain New York man said he betrayed them by not prosecuting a nurse who was charged with fatally stabbing her estranged husband.

‘It is our position that you have prematurely substituted your version of events for the fact-finding functions of the jury and neither honored your promise to the court or to my family to seek even a measure of accountability,’ the brother of slain man James Murray, Steven Murray, wrote to Bragg in December.

James Murray was fatally stabbed by estranged wife Tracy McCarter in 2020, who said she killed her husband in self-defense and that he was an abusive alcoholic. McCarter was championed by domestic violence advocates, according to previous coverage from the New York Post, and Bragg received a donation from advocacy group Color of Change, which advocated for her release, during his run as DA.

He tweeted in support of McCarter’s release in the run-up to his election and ultimately secured his bid to drop murder charges against the woman, which the family of the slain man said was ‘100%’ motivated by the donation from Color of Change.

Similar cases have unfolded since his inauguration, including him getting ridiculed for cutting a sweetheart deal with a career criminal who went on to punch a woman randomly; his slap on the wrist for a man who viciously assaulted a 55-year-old nurse; and jailing, yet ultimately releasing, the bodega owner who killed an aggressive ex-convict who attacked him on murder charges.

In 2022, during Bragg’s first year as Manhattan’s top prosecutor, he downgraded more than half of felony cases to misdemeanors. He campaigned on criminal justice reform and sent a ‘Day One’ memo to staff upon taking office to downgrade certain felonies, such as armed robberies of commercial businesses. The move came at a time when crimes were up 27.6% in New York City, Fox News Digital previously reported.

Bragg declined to prosecute 35% more felony cases than in 2019.

Trump on Sunday went after Bragg for his financial support from liberal billionaire donors George Soros, who donated $1 million to the Color of Change political action committee, which funneled money to Bragg, the New York Post previously reported.

‘​​Bragg is a (Soros) Racist in Reverse, who is taking his orders from D.C. I beat them TWICE, doing much better the second time, and despite their DISINFORMATION campaign, they don’t want to run against ‘TRUMP’ or my GREAT RECORD!’ Trump wrote on Truth Social Sunday. 

Tom Anderson, the director of the Government Integrity Project at the National Legal and Policy Center in Virginia, previously told the outlet that Soros’ donations are a ‘shock and awe’ political maneuver.

‘George Soros has quietly orchestrated the dark money political equivalent of ‘shock and awe’ on local attorney races through the country, shattering records, flipping races and essentially making a mockery of our entire campaign finance system,’Anderson told the New York Post.

Bragg was elected in 2021 and became the first Black American to lead the powerful office. But since assuming office, he has also been hit with criticisms from other New York leaders, including NYPD Commissioner Keechant Sewell, who said she was ‘very concerned’ with his ‘Day One’ memo.

‘I am making my concerns known to the Manhattan District Attorney and hope to have frank and productive discussions to try and reach more common ground,’ Sewell wrote in a message to officers last year. ‘As police commissioner, your safety is my paramount concern. That is one reason I am seeking to have conversations with the district attorney to seek a better balance between officer safety, public safety and reform.’

Trump spokesperson Steven Cheung blasted the investigation into Trump as a ‘witch hunt’ and accused Bragg of being in the pocket of President Joe Biden and ‘radical Democrats.’

‘President Donald J. Trump is completely innocent, he did nothing wrong, and even the biggest, most Radical Left Democrats are making that clear,’ Cheung wrote in a statement.

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President Biden’s Twitter account posted a questionable statistic on Saturday about how much tax Americans billionaires pay.

‘Look, I think you should be able to be a billionaire if you can earn it, but just pay your fair share,’ Biden’s tweet read. ‘I think you ought to pay a minimum tax of 25%. It’s about basic fairness.’

The tweet included a graphic of a Biden quote that said: ‘You know the average tax billionaires pay? Three percent. No billionaire should be paying a lower tax than somebody working as a schoolteacher or a firefighter.’ 

But it is unclear where the 3% figure came from, and contradicts figures the White House has issued in the past. 

In February, White House issued a fact sheet called ‘The Biden Economic Plan Is Working,’ which calculated how much tax the U.S. could collect if it counted unrealized gains – a potential profit on an unsold asset – as income.

‘In a typical year, billionaires pay an average tax rate of just 8%,’ the fact sheet read. Factoring in unrealized gains is the reason for the lower statistic. 

‘Using the existing definition of taxable income, really rich people pay an average federal income tax rate in the mid-20s,’ Brookings Institution Tax Policy Center senior fellow Howard Gleckman told PolitiFact in July. ‘If you want to include unrealized gains in your denominator, as the White House does, the average rate would go way down.’

Another White House figure from 2021 gave an 8% figure rather than the 3% one Biden recently cited. 

‘The analysis from OMB and CEA economists estimates that the wealthiest 400 billionaire families in America paid an average of just 8.2 percent of their income – including income from their wealth that goes largely untaxed – in Federal individual income taxes between 2010 and 2018. That’s a lower rate than many ordinary Americans pay,’ the 2021 post read.

In response, Twitter CEO Elon Musk disputed Biden’s tax claim.

‘I paid 53% taxes on my Tesla stock options (40% Federal & 13% state), so I must be lifting the average!’ the South African entrepreneur wrote. ‘I also paid more income tax than anyone ever in the history of Earth for 2021 and will do that again in 2022.’

‘Would be curious to hear how these other ‘billionaires’ are so good at avoiding taxes!’ Musk added in another tweet, after asking Twitter’s Community Notes feature to fact-check the statement.

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UBS agreed to buy its embattled rival Credit Suisse for 3 billion Swiss francs ($3.2 billion) Sunday, with Swiss regulators playing a key part in the deal as governments looked to stem a contagion threatening the global banking system.

“With the takeover of Credit Suisse by UBS, a solution has been found to secure financial stability and protect the Swiss economy in this exceptional situation,” read a statement from the Swiss National Bank, which noted the central bank worked with the Swiss government and the Swiss Financial Market Supervisory Authority to bring about the combination of the country’s two largest banks.

Credit Suisse’s headquarters in Zurich on Sunday.Michael Buholzer / Keystone via AP

The terms of the deal will see Credit Suisse shareholders receive 1 UBS share for every 22.48 Credit Suisse shares they hold.

“This acquisition is attractive for UBS shareholders but, let us be clear, as far as Credit Suisse is concerned, this is an emergency rescue. We have structured a transaction which will preserve the value left in the business while limiting our downside exposure,” said UBS Chairman Colm Kelleher in a statement.

The combined bank will have $5 trillion of invested assets, according to UBS.

“We are committed to making this deal a great success. There are no options in this,” Kelleher said when asked during the press conference if the bank could back out of the deal. “This is absolutely essential to the financial structure of Switzerland and … to global finance.”

The Swiss National Bank pledged a loan of up to 100 billion Swiss francs ($108 billion) to support the takeover. The Swiss government also granted a guarantee to assume losses up to 9 billion Swiss francs from certain assets over a preset threshold “in order to reduce any risks for UBS,” said a separate government statement.

“This is a commercial solution and not a bailout,” said Karin Keller-Sutter, the Swiss finance minister, in a press conference Sunday.

The UBS deal was scrambled together before markets reopened for trading Monday after Credit Suisse shares logged their worst weekly decline since the onset of the coronavirus pandemic. The losses came despite a new loan of up to 50 billion Swiss francs ($54 billion) granted from the Swiss central bank last week, in an effort to halt the slide and restore confidence in the bank.

News of the deal was welcomed by Treasury Secretary Janet Yellen and Federal Reserve Chair Jerome Powell in a statement. “The capital and liquidity positions of the U.S. banking system are strong, and the U.S. financial system is resilient. We have been in close contact with our international counterparts to support their implementation,” they said.

Credit Suisse had already been battling a string of losses and scandals, and in the last two weeks, sentiment was rocked again as banks in the U.S. reeled from the collapse of Silicon Valley Bank and Signature Bank.

U.S. regulators’ backstop of uninsured deposits in the failed banks and the creation of a new funding facility for troubled financial institutions failed to stem the shock and is threatening to envelop more banks both in the U.S. and abroad.

Credit Suisse Chairman Axel Lehmann said in the press conference that the financial instability brought about by the collapsed U.S. regional banks hit the bank at the wrong time.

Despite regulators’ involvement in the pairing, the deal gives UBS autonomy to run the acquired assets as it sees fit, which could mean significant job cuts, sources told CNBC’s David Faber.

Credit Suisse’s scale and potential impact on the global economy is much greater than U.S. regional banks, which pressured Swiss regulators to find a way to bring the country’s two largest financial institutions together. Credit Suisse’s balance sheet is around twice the size of Lehman Brothers’ when it collapsed, at around 530 billion Swiss francs at the end of 2022. It is also far more globally interconnected, with multiple international subsidiaries — making an orderly management of Credit Suisse’s situation even more important.

Bringing the two rivals together was not without its struggles, but pressure to stave off a systemic crisis won out in the end. UBS initially offered to buy Credit Suisse for around $1 billion Sunday, according to multiple media reports. Credit Suisse reportedly balked at the offer, arguing it was too low and would hurt shareholders and employees, people with knowledge of the matter told Bloomberg. 

By Sunday afternoon, UBS was in talks to buy the bank for “substantially” more than 1 billion Swiss francs, sources told CNBC’s Faber. He said the price of the deal increased throughout the day’s negotiations. 

Credit Suisse lost around 38% of its deposits in the fourth quarter of 2022 and revealed in its delayed annual report early last week that outflows have still yet to reverse. It reported a full-year net loss of 7.3 billion Swiss francs for 2022 and expects a further “substantial” loss in 2023.

The bank had previously announced a massive strategic overhaul in a bid to address these chronic issues, with current CEO and Credit Suisse veteran Ulrich Koerner taking over in July.

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It’s going to be a nailbiter for the next few day. The situation for stocks seems to be getting worse by the day as the Federal Reserve and the FDIC scramble to “reassure” depositors that their money is safe, despite a growing list of banks joining the ranks of the insolvent and the potentially insolvent.

The longer Mr. Powell waits to restart QE, the worse things will get.

My stance on the market’s liquidity is well documented. Subscribers to my service have been prepared for a market decline. But there’s more to what’s happening on a macro level, which is worth considering.

With an upcoming FOMC meeting on 3/21/23, the uncertainty will rise. Let’s hope the Fed decides not to follow in the steps of the ECB, whose 50-basis point rate hike, rationale for the move, and the follow-up comments from ECB President Lagarde were stunning.

Unfortunately, according to CNBC, the Fed is poised to raise rates by 25 basis points. It’s hard to predict how that will play out, especially with what will likely be a very uncomfortable press conference to follow the announcement.

On the other hand, if more disasters unfold before the meeting, the Fed may be forced to change its plans.  

Stay tuned.

MELA Update: It’s the Stock Market that Drives the Economy

Familiar readers know about the M.E.L.A. system, a term that I coined a few years ago to describe the current relationship between the stock market and the economy. In a nutshell, where in the past the economy’s status influenced the action in the stock market, due to globalization and the decrease in manufacturing in the U.S., the stock market became the driver for the economy.

What that means is that bear markets in stocks are bad news for the economy. That’s because, when stocks fall, they lead to a decrease in value in 401 (k) plans, IRAs, trading accounts, and, more recently, in crypto accounts.

Those accounts are the backbone of the economy, as bankers use their values to make decisions about whether to approve a loan, such as a mortgage or a car loan. It’s also known as the wealth effect. When the value of these accounts falls, people are less likely to buy cars and houses, or to take expensive vacations. At the same time, the fall in value of these accounts leads to bankers being less willing to lend money to those who wish to make big purchases despite of the market conditions.

In other words, when the market falls, so does economic activity, because consumers don’t want to spend money in fear of the future and banks don’t want to lend money to people who’ve lost 20% of their retirement fund because of a bear market.

The bottom line is that the resumption of the bear market in stocks has all but confirmed a MELA recession. And I’m not alone in this thought. The bond market agrees.

Bond Yields Start a New Down Trend

The U.S. Ten Year note yield (TNX) yield has broken below 3.5%, a sign that bond traders are no longer fearing inflation as much as they are predicting a significant slowing in the U.S. economy. The decline accelerated on 3/17/23 after the release of the Leading Economic Indicators (LEI), which fell for the 11th straight month; led by a fall in consumer expectations.

The cause is the Fed’s rate hikes, which are crushing small and medium banks’ deposits and capital structures. In addition, higher rates are making the problems in the economy worse including: commercial real estate defaults, layoffs in the technology sector, the ongoing war in Ukraine, and now the specter of Medicare cuts.

Regular readers were advised of the possibility of this situation developing here and here.

Even more important will be the action in the homebuilder stocks, which, by and large, have been delivering reduced, but much better than expected, earnings and revenue results. The most recent results came from Lennar (LEN), whose $6.5 billion in revenues was above last year’s $6.2 billion for the same quarter. Earnings were $2.06 per share vs. $1.69 per share in the prior year. These are very current numbers and offer a picture of what’s happening in 2023 as the quarter ended in February.

Inside the report several metrics stood out:

Orders for new homes were above expectations;Order backlog exceeded analyst expectations;Average delivery price for new homes was above expectations;Financial services unit (company financed mortgages) revenue was higher than the prior year; andIncome from building multi-family homes has been rising.

The stock remains in a bullish uptrend, with Accumulation/Distribution (ADI) and On Balance Volume (OBV) rising as money moves into the shares.

LEN, in which I own shares, is one of several homebuilder stocks featured at Joe Duarte in the Money Options. Check them out with a free trial to my service here.

The Fed Needs to Act Quickly

All of which brings me to the fact that the Fed has been diddling around the edges as it focuses on the “banking crisis,” instead of on the effect its higher interest rate crusade has had on MELA. In other words, the Fed is missing the point. By focusing only on the banking issue, they are ignoring the rest of the economy, which is vulnerable to the events in banking but more vulnerable to the fall in stock prices.

If the stock market doesn’t recover, even if the banking sector holds up, there won’t be anyone to lend money to, as the most common wealth meters — 401 (k) plans, IRAS, and trading accounts — will have lost significant amounts of value. This, in turn, would make it difficult for banks to lend money to potential clients who would be seen as poor risks.

The market is sending a clear message to the Fed. Aside from falling bond yields, the Eurodollar Index (XED), which I use as measure of market liquidity, is on the rise. This means that the market is forecasting lower short-term rates from the Fed. I wish I was a fly on the wall at the Eckles building on Tuesday, March 21, 2023.

Incidentally, I recently posted a series of articles offering more details on how SIVB imploded, where the strength is in the market, thoughts on my shopping list and what may follow at my Buy me a Coffee page.

Slipping Further into Bear Market Territory

The technical environment for stocks completely reversed last week and got a bit worse on 3/17, as the New York Stock Exchange Advance Decline line (NYAD) broke below support at its 200-day moving average. If this is not corrected soon, we may look back at this moment as the resumption of the bear market.

Meanwhile, the S&P 500 (SPX) recently fall as low as 3815 or so and continues to straddle its 200-day moving average. On Balance Volume (OBV) for this index is very bearish now, signifying that sellers are in control.

For its part, the Nasdaq 100 Index (NDX) held up better than SPX as strength in the semiconductor stocks countered weakness in biotech and banking. This is a positive, for now.

The CBOE Volatility Index (VIX) is in an uptrend, which is bearish.

When VIX rises, stocks tend to fall, as rising put volume is a sign that market makers are selling stock index futures in order to hedge their put sales to the public. A fall in VIX is bullish, as it means less put option buying. It eventually leads to call buying, which causes market makers to hedge by buying stock index futures, raising the odds of higher stock prices.

The market’s liquidity is not out of the woods yet. The Eurodollar Index (XED) has found new support at 94.75, but has not moved back above 95, which would have been a very bullish development. Usually, a stable or rising XED is very bullish for stocks. On the other hand, in the current environment, it’s more of a sign that fear is rising and investors are raising cash.

You can learn more about how to gauge the market’s liquidity in this Your Daily Five video.

To get the latest up-to-date information on options trading, check out Options Trading for Dummies, now in its 4th Edition—Get Your Copy Now! Now also available in Audible audiobook format!

#1 New Release on Options Trading!

Good news! I’ve made my NYAD-Complexity – Chaos chart (featured on my YD5 videos) and a few other favorites public. You can find them here.

Joe Duarte

In The Money Options

Joe Duarte is a former money manager, an active trader, and a widely recognized independent stock market analyst since 1987. He is author of eight investment books, including the best-selling Trading Options for Dummies, rated a TOP Options Book for 2018 by Benzinga.com and now in its third edition, plus The Everything Investing in Your 20s and 30s Book and six other trading books.

The Everything Investing in Your 20s and 30s Book is available at Amazon and Barnes and Noble. It has also been recommended as a Washington Post Color of Money Book of the Month.

To receive Joe’s exclusive stock, option and ETF recommendations, in your mailbox every week visit https://joeduarteinthemoneyoptions.com/secure/order_email.asp.

The previous week remain a technically damaging one as the NIFTY violated a few important supports while closing on a negative note. The volatility too increased; this was though on the expected lines. The past five days also saw the global markets dealing with the collapse of SVB; the negative sentiment was seen across the globe in the equity markets. The trading range too remained wide; the NIFTY oscillated in a range of 679.75 points. In the end, despite the recovery seen on the last trading day, the headline index closed with a net loss of 312.85 points (1.80%) on a weekly basis.

From a technical perspective, some damage was inflicted on the charts. The daily charts saw the important 200-DMA level getting violated; this level presently stands at 17451. Besides this, NIFTY also violated the 50-Week MA which is at 17339. This makes the zone of 17340-17450 a strong resistance zone for the index. The NIFTY also went on to test the 100-Week MA which is placed at 17050. The previous week’s low of 16850-17050 makes an important support zone for the index. Regardless of the overhead resistance placed in the 17340-17450 zone, the markets will try to inch higher if the index can keep its head above the 16850-17000 levels.

The coming week is again likely to see a slightly tepid start. The levels of 17250 and 17350 are likely to act as potential resistance points. The supports come in at 16900 and 16710 levels. The trading range will continue to stay wider than usual.

The weekly RSI is 40.77; it has marked a new 14-period low which is bearish. It stays neutral and does not show any divergence against the price. The weekly MACD is bearish and remains below the signal line.

The pattern analysis of the weekly charts shows that the NIFTY has violated the falling trend line pattern support by slipping below it. This falling trend line begins from 18604 and joins the subsequent lower tops. However, though this trend line support stands violated, the index has defended the 100-Week MA. This is currently placed at 17050 and remains an important support for the market on a closing basis.

Overall, the markets are presently at a critical juncture. They are trapped in a narrow 300-400 points trading range. On one hand, it has dragged the supports lower to the 17350-17450 zone; on the other hand, it is just barely above the important support levels of 16850-17000. The coming week needs to be dealt with with a lot of caution; it would be crucial to see the behavior of the NIFTY vis-à-vis the zone of 16850-17000 levels as keeping head above this will be extremely important. It is recommended to continue keeping leveraged exposures at modest levels while approaching the markets on a highly selective and stock-specific note.

Sector Analysis for the coming week

In our look at Relative Rotation Graphs®, we compared various sectors against CNX500 (NIFTY 500 Index), which represents over 95% of the free float market cap of all the stocks listed

The analysis of Relative Rotation Graphs (RRG) does not show any major change in the sectoral setup in the markets. NIFTY IT, Auto, FMCG, Midcap 100, and PSE Indices stay inside the leading quadrant of the RRG. The Infrastructure index has also rolled inside the leading quadrant; these groups collectively are expected to relatively outperform the broader markets.

NIFTY PSU Bank, Banknifty, and Financial Services indices stay inside the weakening quadrant. They may struggle to keep up with their relative performance against the general markets.

Nifty Commodities, Metal, and the Services Sector Indices have entered the lagging quadrant. They may relatively underperform the broader NIFTY500 index. However, stock-specific shows cannot be ruled out in the metal pack given the behavior of the Dollar Index. Nifty Media and Energy indices also continue to languish inside the lagging quadrant.

Nifty Realty has rolled inside the improving quadrant while the consumption Index is also placed firmly in this quadrant. The Pharma Index is also inside the improving quadrant but it is seen paring its relative momentum against the broader markets.

Important Note: RRG™ charts show the relative strength and momentum of a group of stocks. In the above Chart, they show relative performance against NIFTY500 Index (Broader Markets) and should not be used directly as buy or sell signals.  

Milan Vaishnav, CMT, MSTA

Consulting Technical Analyst

www.EquityResearch.asia | www.ChartWizard.ae

The full picture of why Silicon Valley Bank failed so spectacularly and so fast has not yet come into focus. But uncommon lending practices at the cutting-edge lender contributed to its woes and raise questions about risk management by its executives and board, analysts said. These lending practices may also explain why there has been no merger of the institution with a healthier bank as typically occurs when the Federal Deposit Insurance Corp. steps in as it did with Silicon Valley Bank last week.

For example, of the roughly $74 billion in total loans Silicon Valley Bank held on its books at year-end, almost half — $34 billion — went to borrowers who used the money to buy or carry securities of their own, regulatory data shows. Other lenders make such loans but in far smaller amounts, filings show. 

For now, things have calmed down at the bank following an extraordinary move by the federal government to guarantee all its deposits, even those over the usual FDIC limit of $250,000. The institution continues to operate under new management and a new name — Silicon Valley Bridge Bank.   

Amid its collapse, the bank is being investigated by federal prosecutors and the Securities and Exchange Commission and investors are worried about the health of other U.S. and global banks. On Thursday, Treasury Secretary Janet Yellen testified before Congress about tumult in the nation’s banking system, promising to take “a careful look” at what happened at Silicon Valley Bank.

As 2022 came to a close, Silicon Valley Bank had $175 billion in deposits and roughly $74 billion in loans. While the bank made loans to homebuyers, commercial real estate borrowers and California winemakers, the 40-year old institution went all in on the burgeoning tech and startup company sector. Silicon Valley Bank was the first to create loan products for startup companies, according to its website.

This led to the unusual securities-related loans dominating Silicon Valley’s portfolio, said Bill Moreland, chief executive of BankRegData, a provider of bank regulatory statistics and analysis. 

While the precise details surrounding these loans are not specified, that’s a heavy concentration of risk among one borrower group. What’s more, instead of having easy-to-value assets like a home or commercial building backing these loans, they’re backed by unidentified securities which may also have declined in value as interest rates rose and the tech sector fell.

That these loans make up such a large proportion of the bank’s portfolio is notable, Moreland said, pointing to dubious risk management at the bank. The loans also may explain why Silicon Valley has not been acquired or merged with a healthier institution, he said.

“Typically, if you looked at a bank with a $74 billion loan book, other banks would be interested in buying that,” he said in an interview. “But when 46% of your loan book is to purchase and carry securities, a lot of banks would have to ask themselves ‘What is the value of those loans?’ ‘Is that an attractive asset?’”

Other banks make such loans, but in much smaller doses, regulatory documents show. J.P. Morgan Chase, for example, had $14 billion in these loans on its books at year-end, the next largest amount held by a bank, according to BankRegData. But with J.P. Morgan Chase’s $1.1 trillion in total loans, the securities-backed loans make up just 1.3% of its lending.

The loans are almost certainly a part of what Silicon Valley called its “Global Fund Banking” portfolio. According to the bank’s year-end financial statements, some 56% of its total loans fell into this bucket. Included were loans the bank made to private equity and venture capital firms to be repaid by investors in their funds when the firms request more capital from them.

Another type of loan the bank favored was known as venture debt, according to a white paper on its site. In it, the bank described how it made loans to startup companies of between 25% and 30% of the amount the companies had most recently raised in private transactions with investors. Unlike other business loans that are based on a company’s cash flow or assets, this kind of venture debt relies on a company’s ability to raise additional capital from investors later to repay the loans, the website says.

A problem with this kind of lending arises when a startup company cannot raise fresh capital from investors to repay the loans or can do so only at a lower valuation from previous money-raising rounds. In the startup world, this situation is known as the dreaded “down round” of financing, which requires a total valuation of a company at the new, lower level.

Since Silicon Valley Bank’s assets and deposits peaked in 2022, tech and startup valuations have fallen significantly; even well-financed mature technology companies are laying off thousands in staff as their fortunes flag. This scenario suggests problems with the bank’s venture debt business. 

A Silicon Valley spokeswoman declined to answer questions about the bank’s risk management, its concentrated loan portfolio or how its loans were valued as technology and startup companies’ operations declined in recent months.

One contributing factor in the bank’s collapse has affected other lenders as well: Rising interest rates generated paper losses on United States Treasury debt and mortgage-backed securities these institutions held as investments. When interest rates go up, newly issued debt securities carry higher yields than previously issued instruments, making the older securities less valuable. Indeed, the average yield on Silicon Valley’s debt securities portfolio was around 1.6% at year-end, the bank’s financial filings show. That’s roughly half the level such securities yield now.

When customers raced to withdraw their money from Silicon Valley Bank, it had to sell some of these securities, generating a $1.8 billion loss, it said.

Facing the flood of withdrawals from depositors brought another flaw in the bank’s operation to light, Moreland said. Silicon Valley Bank had an uncommonly small cash cushion — only $12 billion, or just 5% of its assets, regulatory filings show. Last Thursday alone, the bank fielded redemptions of more than $40 billion from depositors, California banking authorities said.

Other banks hold far bigger cash positions. At year-end, Citibank held almost 19% of its assets in cash.  

During better days at Silicon Valley Bank, its deposits were ballooning fast, maybe too fast to be managed appropriately, analysts said. A year ago, deposits peaked at $183 billion, up from $57 billion in 2020. When the bank collapsed, only 5.7% of its deposits were insured, the filings show, compared with 40% at J.P. Morgan Chase.  

Silicon Valley Bank’s securities filings tout its board’s oversight of risk in its operations, saying “risk management is carefully considered by the board in its oversight of the company’s strategy and business, including financial, reputational, regulatory, legal and compliance implications.”  

One member of the bank’s risk committee was Mary Miller, a former high-ranking Treasury department official under President Obama and a board member of Silicon Valley Bank since 2015. Miller now leads a committee of the bank’s directors fielding potential offers for its loans and weighing a restructuring of its business.  

The Silicon Valley Bank spokeswoman declined to make Miller available for an interview.  

“It was a party and the music kept playing and the money kept flowing,” Moreland said of Silicon Valley Bank. Then, all of a sudden, it stopped. 

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