Banks Cut more Than 60,000 Jobs During the Worst Year Since 2008 ✂️

🐺 Hi pack-mates,

This is Howling Markets, the air tower control of the markets’ airport regulating the flow of great financial news!

Today we will be covering:

• Case Study: Why Did Credit Suisse Fall? ⏬

• Banks Cut More Than 60,000 Jobs During the Worst Year Since 2008 ✂️

• Bitcoin Contracts Are Now Legal in Argentina! 🪙

• Equity and Debt Markets Daily Update ⚖️

• And more!

Market Watch 👀

Case Study: Why Did Credit Suisse Fall?

Credit Suisse was founded in 1856 and it was considered one of the 30 most influential banks in the world due to the fact that by the end of 2021 it managed close to $2 trillion in assets. Then, why did this giant fall?

Well, the answer lays in the fact that the majestic history of one of the most important credit institutions in the world turned very sour starting from 2020. As a matter of fact, in the last few years its story can be described as a sequence of scandals, changes in management and significant losses.

Everything started in 2020 when Credit Suisse was first investigated on two occasions: one related to corporate spying and another to poaching clients, causing the resignation of the CEO and the wealth management boss.

Consequently, in 2021 one of the most important Credit Suisse’s investment funds collapsed after the bank had failed to effectively manage risks. Once again, also in this occasion the CEO and the chief risk and compliance officer resigned.

During 2022 other unfavorable events occurred that led to other management changes and to a -75% decline in the stock price.

To boost investor confidence and raise funds to continue their operations, in 2023 Credit Suisse Unveiled a plan to raise $54 Billion. However, in mid-March 2023 the Swiss regulatory authority blocked such operation due to some legal barriers, triggering Credit Suisse’s bankruptcy.

To reduce as much as possible the spillover effect on the rest of the banking sector, the regulatory body immediately approved UBS’ acquisition of Credit Suisse without even requesting approval to either banks’ shareholders.

Banks Cut More than 60,000 Jobs During the Worst Year Since 2008

Among the optimism and all the great news surrounding the market, it is important to note another crucial aspect of 2023 involving the evolution of the banking sector.

At the beginning of the year many banks and other credit institutions started facing financial complications, including Silicon Valley Bank, Signature Bank and Credit Suisse, causing a lot of instability and fear in the banking industry.

According to a Financial Times’ study, the 20 largest banks in the world cut at least 61,905 jobs in 2023 and they are expecting this figure to continue growing in 2024.

Their statement is further proved by a comment made by Lee Thacker, owner of Silvermine Growth Partners, stating that “There is no stability, no investment, no growth in most banks — and there are likely to be more job cuts”.

On the other hand, it is worth mentioning that even if we are experiencing the largest Job cut in the banking sector since 2007-2008, the magnitude of the two phenomena is yet not close at all. During the Global Financial Crisis were slashed more than 140,000 jobs in this sector.

Do you believe that the current banking sector has the potential to critically worsen in 2024 or do you believe that now everything is relatively under control?

Today’s Howling Question

We have discussed how there is a lot of optimism in the market while the banking sector is trying to get a grip and keep move forward.

How do you think the stock market’s financial sector has been performing since the beginning of the year?

a)  -15%

b)  -7.5%

c)  0%

d)  +7.5%

e)  +15%

Try to answer the question by yourself, and then check the correct answer after the last interesting news!

Bitcoin Contracts Are Now Legal in Argentina!

Cryptocurrency’s applications have been very limited up to this point, especially for Bitcoin.

The majority of altcoins have been created with the intention of building a Web3 network and implementing AI, smart contacts, decentralized finance applications and many other very ambitious projects.

On the other hand, Bitcoin was created with the simple intent of being a transactions ledger and eventually becoming a recognized means of payment. But, due to the unregulated nature of this digital coin, it has mainly been used only as a speculative asset.

However, Argentina seems to have other plans! With the election of the new president Javier Milei, Argentina’s foreign minister has announced that Bitcoin can now be used for establishing legal contracts in the country.

This measure comes from the necessity of stabilizing the country’s economy and escaping from the fiat currencies suffocated by high inflation and economic instability.

The first question that jumps to my mind thinking about this situation concerns what will happen to the value of the country’s fiat currency and how will the country perform any monetary policy if the citizens will mostly use cryptocurrencies for their day-to-day life.

What do you think about this radical change? Will we see a similar behavior in other countries?

Equity and Debt Markets Update ⚖️

And now, our weekly markets update!

On Tuesday the stock market continued to push higher by +0.42% , breaching the top set on the 19^th of December before falling almost 1.5%.

However, as we have been mentioning in previous newsletters, the signs of weakness are starting to appear. Most notably, now the SPX is showing an RSI divergence, a powerful technical indicator that predicts strong reversals with a high probability.

An RSI divergence occurs when the price is making higher highs, but the RSI indicator is making lower highs, basically “calling the bluff” and stating that the price is going higher, but the strength of the move is decreasing!

Check it out on SPX’s chart!

In the debt market, the government yields very unconvincingly tried to push down “justifying” the stock market’s gains. However, the yield on the 10 year US government bonds only fell by -0.05%, keeping its upward potential fully intact.

Answer

The correct answer is d) 15%.

Despite the turmoil in the baking sector, it managed to perform quite well and to secure a solid YTD performance of around +15.2%, measured on Friday the 22^nd of December.

However, it is important to mention that it underperformed with respect to the entire market, which has returned almost 25% YTD.

If you are interested in the sector specific performance of the stock market at different time frames, check out Finviz’s group section.

Howl-Worthy Memes 😂

🐺 See you next time!

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