DBS, OCBC & UOB test supports? Bitcoin at $1m! UBS buys Credit Suisse! First Republic Bank downgraded to junk!

The headlines which grabbed my attention this morning were two.

First, that Credit Suisse would be purchased by its Swiss rival, UBS, for 3 billion Swiss Francs.

Second, that S&P downgraded First Republic Bank further into junk as the US$30 billion infusion by a consortium of largest U.S. banks was deemed insufficient.

It seems to me that the banking crisis is still an evolving story.

In Singapore, fundamentally, our local lenders are financially sound and the Monetary Authority of Singapore has issued statements to say that DBS, OCBC and UOB are well capitalized and have little exposure to Credit Suisse.

Although I believe that weakness in the stock prices of DBS, OCBC and UOB is an opportunity for long term investors to accumulate, I am going to keep some powder dry.

From a technical analyst's perspective, the downside risk is pretty real, and Mr. Market's negative sentiment towards the banking sector could see stock prices of DBS, OCBC and UOB testing their immediate supports.

This is because Mr. Market can be pretty irrational at times and has thrown the baby out with the bathwater many times before.

We could see supports breaking then.

During times like that, when buying opportunities with potentially better future returns present themselves, we would appreciate having a war chest ready.

OK, I will stop telling horror stories about banks for now and move on to something which might be a bit more cheerful for some people.

What is it?

A piece of news which didn't quite grab my attention but was at the back of my mind had to do with a cryptocurrency, Bitcoin.

What's cheerful about Bitcoin?

The ex-CTO of Coinbase, Balaji Srinivasan, predicts that Bitcoin will hit US$1 million per coin by the middle of June 2023!

What?

OMG!

You so stunned like vegetable?

You are not alone.

He says that there will be hyperinflation in the U.S.A. as the US$ will see its value, which has been declining, ultimately destroyed.

We are seeing challenges to the US$ in many countries as major economies like China and India have been getting their trading partners to use the Chinese Yuan and the Indian Rupee respectively as their currencies of choice.

The rapid hikes in interest rates in the U.S.A. also means that the country's debt servicing burden has risen dramatically.

The Fed has not been able to contribute to the government coffers because of this and instead the U.S. Treasury is being drained at a frightening pace.

The U.S.A. is, in fact, bankrupt.

To avoid a default, the U.S.A. has to take on even more debt which is why the debt ceiling has to be raised by Congress.

If it sounds like a PONZI scheme to you, it is because it sounds like a PONZI scheme.

Bitcoin's price is rocketing higher in response to this development, it seems.

The banking crisis has further accentuated a critical flaw of fiat currencies and how they can be produced at will by central banks.

This is a very scary situation and as long as the can continues to be kicked down the road, all seems OK but is it really OK?

This is one reason why I changed my opinion about Bitcoin sometime in the middle of last year.

I explained in a blog many months ago I chose to buy some Bitcoin over Ethereum because of Bitcoin's status as digital gold.

Like gold, Bitcoin's supply is limited.

I bought another small fraction of a Bitcoin when its price dropped to its long term support last year.

Yes, I hold some Bitcoin like I hold some physical gold.

Bitcoin and gold are currencies, and like all currencies, they can be traded.

However, my purpose is not to trade Bitcoin and gold.

I look at them as insurance against flawed fiat currencies. 

I believe in having insurance as I always have a crisis mentality.

Anyway, in case you missed those blogs or if you are interested in a refresher, they are linked in the references below.

We are living in very turbulent times and we can only do what we feel is right to have some peace of mind.

Recently published:
Building my investment in OCBC took many years!

Ticketing for "Evening with AK and friends 2023" is ongoing.

References:
1. Gold, silver and Bitcoin.
2. Bitcoin at long term support.