FYI - I am a turnaround specialist, which means I bring companies (approx $20-$500 MM Gross Sales Annually) back to life, reorg them, pull them out of Forebearance & Special Assets with the Banks, and then double them in size and sell them to Private Equity for 5X EBITDA...that background was to let you know that the banks have not called me nor referred any of their troubled clients to me in a couple of years now, (whereas they used to beg me to get their loans paid back!) and I have had to go seek out people who are being manipulated by Predatory Lending Practices, forced to pay hundreds of thousands of extra $ for CFO/CPA's to audit their books while paying 18% on their agreed to 4 to 7% LOC rate, trying to get them to shut down, and for some strange reason, all of the owners being targeted are conservatives...so, when the Fed says anything, even presents data on inflation, I have a hard time believing anything from them, as I have seen so many lies, even on the stand under oath by them...carry on!
Is there anything particular that happens in the banking sector in October? Im picking up lots of noise in various industries that seem to be pointing to something big happening by October.
With options, index options, and index futures contracts all expiring on that day, one possible scenario is a surge in liquidity demand (index contracts are typically settled in cash).
Depending on how trading goes right before that day, this could trigger a liquidity squeeze among various traders and brokerage firms, which can get ugly if that leads to massive margin calls. We saw a mild version of that last September when the Bank of England intervened in bond markets to prevent a slew of margin calls among the UK's pension funds.
Perhaps not coincidentally, the bond repricing and yield surge that triggered the BoE intervention began on September 16, 2022--which was also a triple witching hour date.
Important thing to remember about bonds and yields--price moves opposite yield. A yield surge is a drop in the price of a bond, and a yield drop is an increase in the price of a bond.
If the US experiences a version of the UK's BoE/Pension Plan crisis, it will involve a margin call at a major investment fund (retirement fund or hedge fund), which forces a firesale within the portfolio, dumping securities (treasuries and MBS) onto the market. Dumping anything on the market forces the price down--which forces yields up. This would in turn lower the value of the banks' own securities portfolios. If at the same time there is a run on deposits as major depositors chase interest rate returns by putting their idle cash in money market funds (which in turn tap the reverse repo market, which has a guaranteed return of....wait for it....the federal funds rate), this can potentially put a bank in the same liquidity squeeze Silicon Valley Bank felt in March, and which First Republic Bank felt in April.
To prevent a market meltdown and pension plans suffering a crippling loss of market capitalization, the BoE intervened to hold down the price of British gilts. If a similar scenario unfolded within the US markets, the Federal Reserve would feel compelled to take a similar step, which will invariably nationalize bank and hedge fund losses while privatizing their gains.
Will that happen come the witching hour? That I cannot say. But a triple witching hour can be a prime catalyst for financial instability.
FYI - I am a turnaround specialist, which means I bring companies (approx $20-$500 MM Gross Sales Annually) back to life, reorg them, pull them out of Forebearance & Special Assets with the Banks, and then double them in size and sell them to Private Equity for 5X EBITDA...that background was to let you know that the banks have not called me nor referred any of their troubled clients to me in a couple of years now, (whereas they used to beg me to get their loans paid back!) and I have had to go seek out people who are being manipulated by Predatory Lending Practices, forced to pay hundreds of thousands of extra $ for CFO/CPA's to audit their books while paying 18% on their agreed to 4 to 7% LOC rate, trying to get them to shut down, and for some strange reason, all of the owners being targeted are conservatives...so, when the Fed says anything, even presents data on inflation, I have a hard time believing anything from them, as I have seen so many lies, even on the stand under oath by them...carry on!
I would say brace for impact. 😐🤦♀️
Is there anything particular that happens in the banking sector in October? Im picking up lots of noise in various industries that seem to be pointing to something big happening by October.
Not in the banking sector per se, but the next triple witching hour in the stock market is September 15.
https://www.thestreet.com/dictionary/t/triple-witching
With options, index options, and index futures contracts all expiring on that day, one possible scenario is a surge in liquidity demand (index contracts are typically settled in cash).
Depending on how trading goes right before that day, this could trigger a liquidity squeeze among various traders and brokerage firms, which can get ugly if that leads to massive margin calls. We saw a mild version of that last September when the Bank of England intervened in bond markets to prevent a slew of margin calls among the UK's pension funds.
https://newsletter.allfactsmatter.us/p/the-breaking-begins-boe-intervention
Perhaps not coincidentally, the bond repricing and yield surge that triggered the BoE intervention began on September 16, 2022--which was also a triple witching hour date.
Important thing to remember about bonds and yields--price moves opposite yield. A yield surge is a drop in the price of a bond, and a yield drop is an increase in the price of a bond.
If the US experiences a version of the UK's BoE/Pension Plan crisis, it will involve a margin call at a major investment fund (retirement fund or hedge fund), which forces a firesale within the portfolio, dumping securities (treasuries and MBS) onto the market. Dumping anything on the market forces the price down--which forces yields up. This would in turn lower the value of the banks' own securities portfolios. If at the same time there is a run on deposits as major depositors chase interest rate returns by putting their idle cash in money market funds (which in turn tap the reverse repo market, which has a guaranteed return of....wait for it....the federal funds rate), this can potentially put a bank in the same liquidity squeeze Silicon Valley Bank felt in March, and which First Republic Bank felt in April.
To prevent a market meltdown and pension plans suffering a crippling loss of market capitalization, the BoE intervened to hold down the price of British gilts. If a similar scenario unfolded within the US markets, the Federal Reserve would feel compelled to take a similar step, which will invariably nationalize bank and hedge fund losses while privatizing their gains.
Will that happen come the witching hour? That I cannot say. But a triple witching hour can be a prime catalyst for financial instability.