Your Tiny Banks Don't Matter

JC Parets
May 4, 2023

Another day goes by and another bank that doesn't matter disappears.

This is a big deal.

In theory, investors should care about a handful of these regional banks no longer in existence.

But they don't.

In theory, there should be systemic implications to all of this, and the selling in little regional banks should spill into other, more important, parts of the market.

But it hasn't.

In theory, the inverted yield curve should precede a recession and all the money printing should ultimately cause a collapse.

But it hasn't.

And that's my point here.

At what point does anyone care?

I'm waiting for it myself.

For me, it's two things:

The Financials Sector Index breaking below last summer's lows, along with the Small-cap Russell2000 Index doing the same.

In that scenario, the market would finally be proving to us that it does, in fact, care.

We already discussed this yesterday.

But as another day goes by, and another tiny bank, that no one has ever heard of, disappears, stocks remain resiliant.

Let's remember that the S&P500 and Nasdaq100 both finished last week with their highest monthly closing prices in a year.

So when you take a step back and recognize what is ACTUALLY happening, vs what should happen in THEORY, you'll notice that stocks keep going up.

That's now back-to-back quarters of 7% gains for the S&P500. Historically we don't see back-to-back quarters of gains in bear markets, yet alone 3x the average quarterly returns consecutively.

Go see for yourself. It's just math.

So if no one cares about these tiny little banks going away, then why should I?

I'm busy buying the stocks that are going up.

A good example is in the Communications sector, which has been a monster this year, after 2 years of disastrous returns.

Google is front and center for me and we bought the December 120 Calls yesterday:

We have a nice little base going back to Q4 when interest rates started to fall.

Our trade in Facebook $META has turned out to be our best trade of the year, except for maybe that Tesla Long we put on in January.

Do you think Google can do the same?

It's the right space.

Enough investors are pessimistic about these tiny little banks going away.

Have they taken their eyes off the ball and are missing out on the companies actually winning in this environment?

That's our bet.

Check out all the trade details here.

We outline exactly how we want to take profits and, more importantly, how we want to manage risk.

Let me know what you think!

Filed Under: