First Republic It’s small enough to fail, and the risk already looks priced in
FANGs eight companies — Apple Inc., Amazon.com Inc., Alphabet Inc., Meta, Microsoft Corp., Netflix Inc., Nvidia Corp. and Tesla Inc. — have accounted for all the S&P 500’s growth this year.
The other 492 stocks are down slightly
Credit Suisse Group AG, for all its difficulties in recent years, remains a far more important institution for the rest of the world than Lehman Brothers was back in 2008. And yet its forced fire sale to rival UBS Group AG seems to have satisfied everyone that the problem is over. UBS’s share price has wavered widely in the last month, but its direction is plainly upward
Across the system as a whole, deposits are declining, although the total cash piles being kept on deposit still appear to be larger than they would have been had they merely continued to grow in line with the pre-pandemic trend
That’s why the news that First Republic’s deposits were still falling was so serious when it was announced earlier this week.
Two-year bonds still yield much more than the 10-year Treasury:
One final problem is that investors, and not for the first time, are relying on an implicit government guarantee.
The decision last month to make the depositors of Silicon Valley Bank and Signature Bank whole, even though many had money far above the deposit insurance limit, set a precedent it will be difficult to escape.
SVB’s clients, it has been widely broadcast, tended to be wealthy entrepreneurs. If they’ve been rescued, it will be politically impossible not to extend the same courtesy to everyone else.
John Authers Bloomberg 28 april 2023
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