Banks Bottomed?

2023年4月20日

Back in March, all we could read about was the "Banking Crisis" whether it was written by mainstream financial media or Bitcoin Maxi blogs. Truly, the great end of the US Dollar was upon us finally, right?

Well, like all panics, the fear abates and we can now see that said crisis amounted to only 3 banks failing for specific and now well understood reasons.

First, the trade.
I went with a bottom play "TS Recap" on the Daily of TFC (title picture). I am play the low from March 15th as the line in the sand and stop loss. It goes up from here or it doesn't and I'm out. Pretty straightforward.

There was a similar setup that is progressing a bit faster in BAC (Bank of America) but I preferred TFC for the dividend yield.


Now, Let's talk Asset Narratives
Asset narratives, both positive and negative, come around in different industries from year to year. Now in 2023 we have the "Banking Crisis" that has affected all non-too-big-to-fail banks. What is an "Asset Narrative? The most recent contrarian narrative trade comes to my mind... Energy of 2021.

Remember 2021? Electric Vehicles were all the rage, they were going to replace all gas powered vehicles in the very, very near future. The smartest of experts were all telling people to divest from anything oil related. Oil was going the way of the dinosaur! Dirty energy was the most hated asset class. Oil futures even dropped below $0. Oil was FREE it was so devalued! People were GIVING IT AWAY!

The comfortable trade of 2021 was to buy Electric Vehicle stocks and IPOs. It may have felt good at the time but does not feel good now to be a bagholder.

I gas-lighted myself (pun intended) thinking I was crazy to buy XOM (just read the post title below). My reasoning was sound: oil was still very much necessary to our economy. Oil companies were still in the business of producing it. They clearly had lots of value. Why were they so cheap? It seemed like an obvious trade but almost TOO obvious. It was very uncomfortable to take the trade.

Taking risk involves uncertainty and makes us uncomfortable. Early in my trading career I thought that one day I would become so accustomed to taking risk that I would be completely unaffected when putting on a trade. That never happened. Instead, I became comfortable with discomfort.

These kinds of narratives come around once a year and in hindsight seem obvious. So now is that narrative for 2023 banking? I think it is. There are a lot of intelligent, reasonable, and well articulated REASONS that banks should be marked down. But that's where real opportunity lies... where is it not apparent.