Investing in the stock market - Discussion

[Elias Pettersson]

 

[nuckin_futz]

UBS is buying Credit Suisse in bid to halt banking crisis

London CNN  — 

Switzerland’s biggest bank, UBS, has agreed to buy its ailing rival Credit Suisse in an emergency rescue deal aimed at stemming financial market panic unleashed by the failure of two American banks earlier this month.

“UBS today announced the takeover of Credit Suisse,” the Swiss National Bank said in a statement. It said the rescue would “secure financial stability and protect the Swiss economy.”

UBS is paying 3 billion Swiss francs ($3.25 billion) for Credit Suisse, about 60% less than the bank was worth when markets closed on Friday. Credit Suisse shareholders will be largely wiped out, receiving the equivalent of just 0.76 Swiss francs in UBS shares for stock that was worth 1.86 Swiss francs on Friday.

Extraordinarily, the deal will not need the approval of shareholders after the Swiss government agreed to change the law to remove any uncertainty about the deal.

Credit Suisse (CS) had been losing the trust of investors and customers for years. In 2022, it recorded its worst loss since the global financial crisis. But confidence collapsed last week after it acknowledged “material weakness” in its bookkeeping and as the demise of Silicon Valley Bank and Signature Bank spread fear about weaker institutions at a time when soaring interest rates have undermined the value of some financial assets.

Shares in the 167-year-old bank fell 25% over the week, money poured from investment funds it manages and at one point account holders were withdrawing deposits of more than $10 billion per day, the Financial Times reported. An emergency loan of nearly $54 billion from the Swiss National Bank failed to stop the bleeding.

But it did “build a bridge” to the weekend, to allow the rescue to be pieced together, Swiss officials said Sunday night.

“This acquisition is attractive for UBS shareholders but, let us be clear, as far as Credit Suisse is concerned, this is an emergency rescue,” UBS chairman Colm Kelleher told reporters.

“It is absolutely essential to the financial structure of Switzerland and … to global finance,” he told reporters.

Desperate to prevent the meltdown spreading through the global financial system on Monday, Swiss authorities initiated the search for a private sector solution, with limited state support, while reportedly considering Plan B — a full or partial nationalization.

“Given recent extraordinary and unprecedented circumstances, the announced merger represents the best available outcome,” Credit Suisse chairman Axel Lehmann said in a statement.

“This has been an extremely challenging time for Credit Suisse and while the team has worked tirelessly to address many significant legacy issues and execute on its new strategy, we are forced to reach a solution today that provides a durable outcome.”

The emergency takeover was agreed to after a days of frantic negotiations involving financial regulators in Switzerland, the United States and United Kingdom. UBS (UBS) and Credit Suisse rank among the 30 most important banks in the global financial system, and together they have almost $1.7 trillion in assets.

Regulators applaud the takeover

Financial market regulators around the world cheered UBS’ action to take over Credit Suisse.

US authorities said they supported the action and worked closely with the Swiss central bank to assist the takeover.

“We welcome the announcements by the Swiss authorities today to support financial stability,” said US Treasury Secretary Janet Yellen and Federal Reserve Chair Jerome Powell, in a joint statement. “The capital and liquidity positions of the US. banking system are strong, and the US financial system is resilient.”

Christine Lagarde, President of the European Central Bank, said the banking sector remains resilient but the ECB stands at the ready to help banks maintain enough cash on hand to fund their operations if the need arises.

“I welcome the swift action and the decisions taken by the Swiss authorities,” Lagarde said. “They are instrumental for restoring orderly market conditions and ensuring financial stability.

The Bank of England said it welcomed the measures taken by the Swiss authorities “to support financial stability.”

“We have been engaging closely with international counterparts throughout the preparations for today’s announcements and will continue to support their implementation,” it said in a statement. “The UK banking system is well capitalized and funded, and remains safe and sound.”

How UBS and Credit Suisse will fit together

The global headquarters of UBS and Credit Suisse are just 300 yards apart in Zurich but the banks’ fortunes have been on very different paths recently. Shares of UBS have climbed 15% in the past two years, and it booked a profit of $7.6 billion in 2022. It had a stock market value of about $65 billion on Friday, according to Refinitiv.

Credit Suisse shares have lost 84% of their value over the same period, and last year it posted a loss of $7.9 billion. It was worth just $8 billion at the end of last week.

 

Dating back to 1856, Credit Suisse has its roots in the Schweizerische Kreditanstalt (SKA), which was set up to finance the expansion of the railroad network and industrialization of Switzerland.

In addition to being Switzerland’s second biggest bank, it looks after the wealth of many of the world’s richest people and offers global investment banking services. It had more than 50,000 employees at the end of 2022, 17,000 of those in Switzerland.

The Swiss National Bank said it would provide a loan of 100 billion Swiss francs ($108 billion) to UBS and Credit Suisse to boost liquidity.

UBS Chief Executive Ralph Hamers will be CEO of the combined bank, and Kelleher will serve as chairman.

The takeover will reinforce the position of UBS as the world’s leading wealth manager with $5 trillion of invested assets, and boost its ambition to grow in the Americas and Asia. UBS said it expects to generate cost savings of $8 billion per year by 2027. Credit Suisse’s investment bank is in the crosshairs.

“Let me be clear. UBS intends to downsize Credit Suisse’s investment banking business and align it with our conservative risk culture,” Kelleher said.

************************

That's quite a 'take under'. Obviously CS was about to collapse. Book value looks to be about $12 but who knows what they'll find when they turn the rocks over.

[TheRocket18]

Under the deal with UBS, some Credit Suisse bondholders are major losers. The Swiss regulator decided that Credit Suisse bonds with a notional value of $17 billion US ($25 billion Cdn) will be valued at zero, angering some

of the holders of the debt who thought they would be better

 

 

 

cbc.

 

ouch so 17 billion = 0.

no issues.

[Playoff Beered]

I think this was an attempt at humor, but if its real...

 

[I.Am.Ironman]

^^^Just missing "Account Manager - Lehman Brothers"

[Playoff Beered]

1 hour ago, I.Am.Ironman said:

^^^Just missing "Account Manager - Lehman Brothers"

Started as an intern at Enron.

Edited March 20, 2023 by Playoff Beered

[nuckin_futz]

WSJ: JPMorgan owned bags supposed to contain nickel but turned out to be full of stones

The Wall Street Journal with the story:

• JPMorgan Chase owned bags of material kept in a Dutch warehouse that were supposed to contain nickel but turned out to be full of stones, people familiar with the matter said.
• The London Metal Exchange said last week that sacks thought to hold 54 metric tons of nickel in an unnamed warehouse had failed to comply with its standards. The bags were in a shed in the Dutch port city of Rotterdam, The Wall Street Journal and other outlets reported. The problem: They contained stones instead.

 

Bet they'd love to get their .................

 

Edited March 20, 2023 by nuckin_futz

[Elias Pettersson]

UBS stock started to rally then had a selloff.  I wonder what happens tomorrow.  Did the big boys push the stock up on the news and then sell on the rally?

 

 

[AV's Coin]

 

[Warhippy]

How are people feeling about defensive EITs/ETFs?

[I.Am.Ironman]

22 hours ago, Warhippy said:

How are people feeling about defensive EITs/ETFs?

Defensive as in 'conservative' or defensive as in the Boeings, Raytheons, and Lockheed Martins of the world?

[Elias Pettersson]

 

[Elias Pettersson]

How much money will the Fed print to stop the collapse?  When will the hyperinflation kick in?  20% interest rates?  

 

 

[ronthecivil]

8 hours ago, Elias Pettersson said:

How much money will the Fed print to stop the collapse?  When will the hyperinflation kick in?  20% interest rates?  

 

 

The  banks aren't collapsing. Even if they had gone all in and just bought SVB for example, they would have been temporarily out of money, but they would have ended it better. It's not like banks are sitting on piles of toxic assets. It's just the market and the customers that are jittery.

[ronthecivil]

On 3/25/2023 at 1:20 PM, Warhippy said:

How are people feeling about defensive EITs/ETFs?

Like a banking ETF? Historically that is considered conservative lol!

 

Go for it at least your diversified. I haven't sold any bank stock.

 

[Warhippy]

5 minutes ago, ronthecivil said:

Like a banking ETF? Historically that is considered conservative lol!

 

Go for it at least your diversified. I haven't sold any bank stock.

 

No, like or similar to Canoe defensive international.  Have been looking at a few of those in terms of longer term with dividend returns under their umbrellas.

[ronthecivil]

3 hours ago, Warhippy said:

No, like or similar to Canoe defensive international.  Have been looking at a few of those in terms of longer term with dividend returns under their umbrellas.

Oh well if you just want to be boring, then just own the cheapest ETF for the S%P 500 for your RRSP, and in your TFSA do it for the TSX.

 

If it goes down buy more. If it goes up hurray! And keep on buying more....

 

Trying to time the market but shifting into the correct segment, or piling money into something like First Citizens bank because you think that it's going to be a winner long term (just like I thought would happen if the US Feds did it), or any sort of market segment, be it "safe" or "growth" is for super nerds that don't worry about making money (except for video game high score reasons).

 

So literally just own the whole market and don't worry about it. If you worry about it, then you should just own he whole market.

 

And no, that's not what I do, I am a cowboy and swings for the fences. And I promise  you, I strike out too, but it doesn't bother me. But even I wouldn't be piling money into say First Citizens because I like to invest, and my ideal holding period is forever, and so, I do kind of follow my own advice to a point.

[Warhippy]

14 minutes ago, ronthecivil said:

Oh well if you just want to be boring, then just own the cheapest ETF for the S%P 500 for your RRSP, and in your TFSA do it for the TSX.

 

If it goes down buy more. If it goes up hurray! And keep on buying more....

 

Trying to time the market but shifting into the correct segment, or piling money into something like First Citizens bank because you think that it's going to be a winner long term (just like I thought would happen if the US Feds did it), or any sort of market segment, be it "safe" or "growth" is for super nerds that don't worry about making money (except for video game high score reasons).

 

So literally just own the whole market and don't worry about it. If you worry about it, then you should just own he whole market.

 

And no, that's not what I do, I am a cowboy and swings for the fences. And I promise  you, I strike out too, but it doesn't bother me. But even I wouldn't be piling money into say First Citizens because I like to invest, and my ideal holding period is forever, and so, I do kind of follow my own advice to a point.

I have my degenerate gambling stocks.  But for pure safety I am looking towards something like "a defensive" for sheer ease of use and almost guaranteed income via dividends.  With 2 cars needing insurance every year, home insurance and property taxes.  We have or are looking to have enough invested in fairly safe institutional stocks that the dividend income pays for that through the year.

[ronthecivil]

2 hours ago, Warhippy said:

I have my degenerate gambling stocks.  But for pure safety I am looking towards something like "a defensive" for sheer ease of use and almost guaranteed income via dividends.  With 2 cars needing insurance every year, home insurance and property taxes.  We have or are looking to have enough invested in fairly safe institutional stocks that the dividend income pays for that through the year.

I mean there are GICs these days putting in north of 4% dividends. 

 

You can put money into CDZ which is the Ishares Canadian Dividend Aristocrats fund. I would say that's pretty defensive and contains pretty much everything boring I can think of.  That said it still has some risk within it but as soon as someone cuts their dividend, the first sign of trouble, they would be out the door I guess. Mer of 0.66% isn't terribad, the dividend yield of 4% is nice, and it's growth perspective is decent. You can get a basic index fund for less than 0.1% MER though. And while this will be relatively stable, it can still sink on a general market slump, and in a rising interest rate environment will not do as well as a general fund.

 

https://www.blackrock.com/ca/investors/en/products/239834/ishares-sptsx-canadian-dividend-aristocrats-index-fund

 

So for example, just a TSX fund, so apples to apples from blackrock, XIU, which owns the 60 biggest companies in Canada, and would thus share a LOT of similarity with the dividend one, would have an MER of 0.18% (rounding error level) and a dividend of 3.5%.

 

https://www.blackrock.com/ca/investors/en/products/239832/ishares-sptsx-60-index-etf

 

So the best recipe to risk is diversification, both of the above give you that, the latter with less cost.

 

Of course, then you just in Canada. So to fully diversify, just own the same deal, but in the S&P 500 down south.

 

So put your boring parts in that, and if you have a small portion for gambling degeneracy (I do that too but usually only a couple hundred bucks on penny stock x, only once have I hit, but it was for like 20x), then that's fine too.

[Elias Pettersson]