DHUnplugged #646: COCO Bond Rug-Pull

No rest for bankers - weekend overload to quiet markets. COCO bond rug pull - billions lost The Fed in a no-win position this week. Rate decision meeting Wednesday. PLUS we are now on Spotify and Amazon Music/Podcasts! Click HERE for Show Notes and Links DHUnplugged is now streaming live - with listener chat. Click on link on the right sidebar. Love the Show? Then how about a Donation? Follow John C. Dvorak on Twitter Follow Andrew Horowitz on Twitter Warm Up - Full blown banking crisis - S&P P/E  still above 17+ - Fed has big decision tomorrow - Fed/Treasury dusting off financial crisis playbook - Bond yields move - largest since '87 --- Banks joining in the charade - $30 billion - Whatever you do - don't say bailout! Market Update - Banks failing - forced merger over weekend - Fire sale for deposits - big win for some banks - COCO / ATI Bond massacre - RUG PULL - Tech favored over most other sectors - Goldman says rates hikes over FED GAME - What will the do tomorrow? - ECB Playbook (raise like nothing happening) - Powell Playbook - raise 0.25% and keep pushing that the data is what they look at - try to save face... - Volker Playbook - ram it - Bernanke Playbook - zero or cut GAME ON - We are playing the real life Monopoly - Treasury Secretary Yellen says the govy could backstop more deposits if necessary to stop contagion - - Trillions in deposits  - how would that work? - - - Monopoly Rules: The Bank: The Bank newer "goes broke." If the Bank runs out of money, the Banker may issue as much more as needed by writing on any ordinary paper. ----- Why would Yellen need to say that ??? Asked on Twitter this week: Why do so many investors enjoy throwing hard earned money into dumpster fires? (Follow John at @therealdvorak and Andrew at @andrewhorowitz) Dust off the playbook - Plenty of financial crisis moves being made ---- Have I mentioned that this group of Fed leaders could be the worst in my lifetime? - $30 billion from consortium of banks into First Republic ---- NON insured accounts was the push --- NO WAY is this not backstopped by Fed/Treasury as a attempt to boost confidence. TOTAL BS ----- Meanwhile - investors are not impressed. (Stock down from $29 to $17 since announcement) ---- WAIT - NEWS BREAKING MONDAY - JPMorgan Chase's (JPM) Dimon is leading talks with bank executives of others banks about new FRC plans; deal could involve converting previously announced $30 bln in deposits into a capital infusion, according to WSJ ----- NO Correction out - that may bot be the way they want to go .... Just spitting at the wall with ideas it seems -- Meanwhile after 47% drop yesterday, FRC up 36% Tuesday (still down 90% from peak) Remarkable - Yields up from ZERO - Earnings down and falling - Global banking crisis - S&P 500 forward P/E at 17.9 - PEG at 1.8! Credit Suisse  COCO - UBS buys for pennies on the dollar - COCO bonds (Contingent Convertible bonds) - wiped out - $17 billion lost as regulators write down bonds to ZERO - COCOs - high-yield investments with a hand grenade attached (AKA ATI bonds) --- They’re essentially a cross between a bond and a stock that helps banks bolster capital to meet regulations designed to prevent failure. They’re contingent in the sense that their status can change if a bank’s capital levels fall below a specified level; they’re convertible because in many cases they can be turned into equity Forced Merger - Credit Suisse bought by UBS - In a package orchestrated by Swiss regulators on Sunday, UBS Group AG will pay 3 billion Swiss francs ($3.23 billion) for 167-year-old Credit Suisse Group AG  and assume up to $5.4 billion in losses. (80% discount) - The Swiss central bank said Sunday's deal includes 100 billion Swiss francs ($108 billion) in liquidity assistance for UBS and Credit Suisse. Fed Decision - Holding 2-day decision on rates today and tomorrow