Best Twitter threads of the day – October 3rd

Credit Suisse. Below I will summarize what has happened and what I think the implications are.

1/ Credit Suisse options price an explosive equity move over the next 3 months. Implied vol of 61 at decade highs imply moves 2x US financials. Bonds and CDS paint a similar story. pic.twitter.com/KoOCXpLpQW

— Alex Good (@goodalexander) October 3, 2022

2/ CDS are a bit hard to understand, so instead I'll focus on the bonds. The 2025 Credit Suisse bonds pictured below trade at 6.4%. Compare this, for example to Ukraine 2025 debt trading at 67%.

Talking about Ukrainian debt default makes sense. CS debt default – less so. pic.twitter.com/s8jyeV7nNy

— Alex Good (@goodalexander) October 3, 2022

3/ CS bonds are not pricing a pending credit event because as of the July Quarter, CS's CET1 capital adequacy was at 13.5% – within the bank's own target and well above the 8% intl regulatory requirement or the 10% Swiss hurdle.
In the pre 08' era, sub 5% CET1s were common. pic.twitter.com/Nk9jfO0VO6

— Alex Good (@goodalexander) October 3, 2022

4/ That said, Körner's Friday comments “No doubt there will be more noise in the markets and the press between now and the end of October. All I can tell you is to remain disciplined and stay as close as ever to your clients.” did not sound great for equity holders. For context –

— Alex Good (@goodalexander) October 3, 2022

5/ CS results have 4 levers. A] a Swiss bank and wealth arm serving rich folk. Doing great
B] an investment bank that's losing share with no prime brokerage due to Bill Hwang's blow up
C] big legal liability and fines from B
D] A flailing fund distribution suite, "AllFunds" pic.twitter.com/eetkvmESm2

— Alex Good (@goodalexander) October 3, 2022

6/ The drop in CS stock price has coincided with declining earnings expectations. In 2021 analysts forecast 2.00 a share of '23 eps and now only expect .64 (a 68% decline). CS price to book is similar to Deutsche Bank or 1/6 of JPM's, and 1/3 of HSBC's.
How did we get here? pic.twitter.com/1oZ2VVwB3O

— Alex Good (@goodalexander) October 3, 2022

7/ First – the Swiss bank benefits from higher CHF rates (est. +800M/year benefit to 2024 income). It saw +3.4CHF B of net inflows ytd even with 1.9CHF Billion of Russian outflows. The big growth area is China. CS reinvested pnl from higher rates in courting Chinese clients. pic.twitter.com/Zw1c9wm5Zu

— Alex Good (@goodalexander) October 3, 2022

8/ The Swiss bank has a bolted-on wealth manager. Asian clients did 3x the volume for CS as Americans did in the first half – hence their focus (but also now probably a risk). Bc markets tanked, wealth fees were down 74% year on year while transactions were only down 16%. pic.twitter.com/qoXIpbVB7X

— Alex Good (@goodalexander) October 3, 2022

9/ That nice $114m of PTI in 2Q from wealth mgmt was entirely eaten by a $245m blow up in the Lev Fin group in the ibank. That and a hard comp from derivs trading left markets revs down 96%. the $342m/quarter run rate in equities won't bounce bc it shut down hedge fund services pic.twitter.com/ToQyPoAuMX

— Alex Good (@goodalexander) October 3, 2022

10/ It's probably worth pointing out here that the equities group (Prime Services) that blew up CS to the tune of $5.5 billion (over 1/2 of the bank's current market cap) servicing Bill Hwang – is separate from the derivatives group the bank plans on spinning off in Late October pic.twitter.com/haaAqv0kgb

— Alex Good (@goodalexander) October 3, 2022

11/ There are 2 quite scary things about the outlook for CS ibank when you delve a bit. First: the -32% comp on Fixed Income pnl was due to slowing bond issuance. Citrix & other deal pulls are crushing issuance volumes with Sept's $75b of deals 50% below expects

— Alex Good (@goodalexander) October 3, 2022

12/ Second – when management talks about the "credit spread mark to market losses" of $245m they said "the majority of these losses are unrealized". And then they get a follow up question where it seems like the plan was to hope credit spreads narrow. That hasn't happened. pic.twitter.com/l7g2xsIL0f

— Alex Good (@goodalexander) October 3, 2022

13/ the FT reported that the bank's plan for dealing with the LevFin losses is to package them into some kind of "bad bank" separate from other assets in the investment bank and let investors bid on that separately, presumably at a steep discount. https://t.co/SSS5CDkIfs

— Alex Good (@goodalexander) October 3, 2022

14/ And the last time they talked about the LevFin losses, the Citrix deal hadn't even happened yet. CS was involved in a block sale for Citrix bonds which faltered leaving banks holding a $6.5 b bag they lost $600m on. And since then, the $4b Brightspeed deal has also died pic.twitter.com/56IiRQlTWM

— Alex Good (@goodalexander) October 3, 2022

15/ At this point it should probably be clear CS has a culture problem. Not to mention legal problems of $1b+ in 1H 2022.
Notably, the current lawsuit from a Georgian prime minister deal with inept / dishonest foreign wealth practices not trading. https://t.co/uqJomqpMOw

— Alex Good (@goodalexander) October 3, 2022

16/ The ex prime minister of Georgia, Ivanishvili, had a CS banker Patrice Lescaudron who lost his $, covered it up, got convicted of fraud in 2018, sent to jail, released then killed himself after being released in 2020. The NYT reported this is a pattern https://t.co/h4goO8vkVO

— Alex Good (@goodalexander) October 3, 2022

17/ The war on Ukraine & US sanctions will add scrutiny on 'cover banking operations' at CS. And doubling down on the Chinese market is likely quite risky. Due to collapsing foreign inflows, on Friday the Chinese regulator announced a crackdown on outflows https://t.co/RBwHIeSQi3

— Alex Good (@goodalexander) October 3, 2022

18/ That leaves a pretty nasty set up into the Q3 'plan announcement' later this month. The leveraged finance group probably lost even more $. And other banks won't have risk appetite for a structured products group given what's happening in mortgages/ other credit markets

— Alex Good (@goodalexander) October 3, 2022

19/ The giant legal liabilities management tries to avoid discussing are in fact a structural part of Credit Suisse's business model – and doubling down on Chinese wealth mgmt could anger both CCP officials as well as US regulators into an extremely sensitive time (Xi's 3rd term)

— Alex Good (@goodalexander) October 3, 2022

20/ am I jumping up and down to 'fade the CS panic'?
no
Is it Lehman?
no. Lehman was the cause, CS is a casualty
Could the stock go to zero bc of bond market liquidity issues compounding its asset sale plan?
yes – which is probably relevant to 'financial stability' narrative

— Alex Good (@goodalexander) October 3, 2022

Bull markets make you Rich,
Bear markets make you Wealthy.

Today, you'll learn 9 things to do now to maximize your chances of making life-changing wealth!

A thread 🧵 👇 pic.twitter.com/YGeTxtB7wL

— The Crypto Sapien (@thecryptosapien) October 2, 2022

1. Loss Harvesting

Literally free money:

Most jurisdictions, incl. US, allow for deducting your losses from your taxable income.

Sell your loser coins to realize the loss, then rebuy them immediately if thesis still holds: $1000s saved in 2 clicks!

Less Tax = More Dry Powder pic.twitter.com/sAKvDh3xcq

— The Crypto Sapien (@thecryptosapien) October 2, 2022

2. Stash Cash

If there is one chart to watch this year it's this one:

USD has been the only thing going up this year.

If you don't have a job, try and get one that pays the bills so you can think more clearly, unhindered by any scarcity mindset.

Dollar is king until Fed pivot https://t.co/DEk0OM5sGK

— The Crypto Sapien (@thecryptosapien) October 2, 2022

3. Research

This will give you more clarity on WHERE to pay attention.

A well-researched list of candidates for 100x is all you need.

As my friend @1_point_618 put it:

All you need is 20x twice to forever change your life. https://t.co/Pc37WN5AXa

— The Crypto Sapien (@thecryptosapien) October 2, 2022

4. Network

People, including founders, are less busy and have time for DMs and Q&A.

Crypto is a game of asymmetrical information.

The more networking you do the closer you get to the inner circle of many protocols = getting alpha much earlier than everyone else

Case in point: https://t.co/SX46YP3kDI

— The Crypto Sapien (@thecryptosapien) October 2, 2022

5. TA

Most people make money in bull markets without having any price action literacy.

Sad thing: they end up giving it all back!

TA gives you the WHEN to: invest, exit, or wait.

Learning TA now will sharpen your skills, especially in these complex range-bound environments https://t.co/cElMRMZ4zd

— The Crypto Sapien (@thecryptosapien) October 2, 2022

6. Build something

This ties into my previous point: The best way to be involved is to genuinely collaborate and offer value.

Sleazy boot-licking for the sake of it won't get you anywhere.

Instead, see where you can help: You don't need a 200 IQ@thedefiedge got you covered: https://t.co/WwAm0dcBgV

— The Crypto Sapien (@thecryptosapien) October 2, 2022

7. Use stuff, Hands on,

Fees are meager now: Take advantage!

Create a couple of hot wallets and put aside a few weekly dollars to beta test products/protocols.

Get your hands dirty: check out these degens to start:@BarryFried1@wallenby1@0xtypejohnny@Only1temmy pic.twitter.com/d18RUAdMVJ

— The Crypto Sapien (@thecryptosapien) October 2, 2022

8. Learn Twitter

Bear market = Fewer people on CT

This already filters out clout chasers.

Genuinely interested people are still here and active. Follow them, and remember them:@rektdiomedes@DeFiSurfer808@1_Point_618@thedefivillain@crypthoem put a terrific guide: https://t.co/Ea4F89s4Ge

— The Crypto Sapien (@thecryptosapien) October 2, 2022

9. Health

Humans are decision-making systems.

Your body and endocrine systems are pivotal to your decision-making:
Lose fat, build muscle, meditate for mental resilience and focus

Things move slower = time to cement healthy habits = clear sharp mind = best investment decisions

— The Crypto Sapien (@thecryptosapien) October 2, 2022