Time To Bet Against Bad Banks--Now That The Bank Term Funding Program Has Expired And Fed Rate Cuts Are On Hold
Portfolio Pulse from David Pinsen
The article discusses the strategy of betting against regional banks now that the Federal Reserve's Bank Term Funding Program (BTFP) has expired and rate cuts are delayed due to persistent inflation. The author previously made profits betting against Bank of Hawaii Corporation (BOH) and First Foundation, Inc. (FFWM), and added bearish positions on PacWest Bancorp (PACW) and Western Alliance Bancorporation (WAL). The strategy involves using a screening process to identify weak banks for potential shorting opportunities.
May 09, 2024 | 1:48 pm
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NEGATIVE IMPACT
Bank of Hawaii Corporation previously targeted for shorting, with the author achieving an 80% gain.
Given the historical success in shorting BOH and the current banking environment's challenges, BOH might face downward pressure, especially with the end of BTFP and delayed Fed rate cuts.
CONFIDENCE 90
IMPORTANCE 70
RELEVANCE 80
NEGATIVE IMPACT
First Foundation, Inc. was another bank the author bet against successfully, with a 200% gain.
FFWM's past performance under similar strategies and the current economic conditions suggest potential for further declines, making it a candidate for shorting.
CONFIDENCE 90
IMPORTANCE 70
RELEVANCE 80
NEGATIVE IMPACT
PacWest Bancorp, now Banc of California, was added to bearish positions after its crash, indicating potential continued vulnerability.
PACW's inclusion in bearish positions post-crash suggests it may still be at risk, especially in the current economic climate without BTFP support and delayed Fed rate cuts.
CONFIDENCE 85
IMPORTANCE 60
RELEVANCE 70
NEGATIVE IMPACT
Western Alliance Bancorporation was another bank the author added to bearish positions after its crash, highlighting potential for further downside.
WAL's past performance and the current banking sector's challenges may lead to further declines, making it a target for shorting in the current environment.
CONFIDENCE 85
IMPORTANCE 60
RELEVANCE 70