SSLY - Edge Of The Edge

2023-03-22 04:22:00 ET

Summary

• The simplest thing that can be said about current financial market and banking conditions is this: the unwinding of this Fed-induced, yield-seeking speculative bubble is proceeding as one would expect, and it’s not over by a longshot.
• Silicon Valley Bank did not have enough liquidity to tolerate a bank run, and it did not have adequate solvency to qualify for emergency loans.
• In my view, one of the most constructive things the Fed could do would be to shrink its balance sheet as quickly as possible, by immediately rolling off securities as they mature - every single one.
• With regard to potential market losses over the completion of this market cycle, it’s notable that the trough of a market cycle typically brings expected S&P 500 total returns to the greater of 10% annually or 2% above Treasury bond yields.

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