Centerfin Collective Weekly

Weekly Update March 8, 2024

Latest troubled bank gets $1bn investment, Nikkei crosses 40,000, Gold surges as central banks buy

Latest troubled bank to get $1bn investment

Beleaguered regional lender New York Community Bank (NYCB) is receiving a more than $1 billion equity investment. The majority of the investment, $450 million, is coming from former Treasury Secretary Steven Mnuchin’s firm, Liberty Strategic Capital. The remaining sum will come from Hudson Bay Capital, Reverence Capital Partners, Citadel Global Equities and others.  The bank’s stock plunged more than 40% earlier on Wednesday after The Wall Street Journal reported that the bank was seeking a major cash infusion. After the deal was announced, the stock shot up 31%, but those gains quickly leveled off.

  • NYCB is a regional bank which operates under the Flagstar Bank brand
  • They came into light after several large bank failures roughly 12 months ago, including Silicon Valley Bank (SVB) and Signature Bank
  • The FDIC took over both SVB and Signature
  • Shortly thereafter, the FDIC announced that they would sell some of Signature Bank’s deposits and assets to NYCB
  • Many of these assets were tied to the NY rent-stabilized market, which has been under pressure after a new law was passed in 2019
  • The acquisition also pushed NYCB to over $100bn of assets, tightening its regulatory requirements
  • Earlier this year, the bank announced earnings that included greater loan loss reserves than the market was expecting
  • This put pressure on the stock, culminating in the investment this week
  • Steve Mnuchin, Secretary of the Treasury during the Trump administration, led the investment
  • Mnuchin also led the take over the failed IndyMac during the Global Financial Crisis, renaming it OneWest and eventually selling it to CIT in 2015

Nikkei crosses 40,000

Japan’s Nikkei 225 index jumped above 40,000 points for the first time on Monday, extending a historic rally. The Nikkei index, which ended up 0.5% at 40,109.23 on Monday, has been on a tear for more than a year, driven by a combination of strong corporate earnings, a weaker yen that helps exporters, and an influx of foreign investors looking for an alternative to China’s depressed markets. The Nikkei has surged more than 20% this year, making it the best performer among major equity indexes in the world.

  • As we have written about before, Japan’s stock market recently regained its prior peak over 30 years ago
  • This week, the market continued to trade to all-time-highs and has been the best-performing major stock market in the world
  • The economy in Japan has been experiencing strong growth and the first inflationary pressure in many decades
  • Over these many decades, Japanese investors have sought yield and returns outside of their own country
  • It would be logical that capital is flowing back into Japanese markets in this environment, which could be a trend for the foreseeable future

Gold surges as Central Banks buy

Gold prices surged to a fresh record high on Friday as data showing a rise in the U.S. unemployment rate boosted expectations that the Federal Reserve could begin cutting interest rates soon. Spot gold rose 0.7% to $2,173.49 per ounce on Friday. The precious metal, which is often used as an inflation hedge, surged to all-time highs as the value of the US dollar continued to slide. The DXY (a broad index of the USD versus other currencies) slid below 103 for the first time since the end of last year.

  • Unlike Bitcoin, Gold ETFs have experienced outflows this year, so this does not explain the price action
  • Given gold is priced in US Dollars, it's notable that gold is spiking as the US dollar index has been sliding
  • Relatedly, and partially due to the US use of sanctions against countries, foreign governments have been big buyers of gold in recent years
  • This week, it was reported that China bought an additional 12 tons of gold in February, bringing its total to 2257 tons
  • This is the 16th consecutive growth for China’s Gold reserves
  • Additionally, Turkey and India have been large buyers of gold recently

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