Identify oversold ETFs: Use technical analysis tools like Relative Strength Index (RSI), Moving Average Convergence Divergence (MACD) or Bollinger Bands to identify ETFs that have experienced a significant decline in price and are considered oversold.

Evaluate the ETF: Once you have identified oversold ETFs, evaluate their fundamentals, such as the underlying holdings, expense ratio, liquidity, and trading volume. This will help you determine whether the ETF is worth investing in.

Set an entry point: Once you have identified the ETF that you want to invest in, set an entry point at a price level that you are comfortable with. This will help you avoid buying the ETF at a higher price than you had intended.

Monitor the ETF: After investing in the ETF, monitor its performance closely. If the ETF continues to decline, consider setting a stop loss order to limit your losses. Conversely, if the ETF begins to rebound, consider taking profits or setting a trailing stop to capture the gains.

YOLOD – AdvisorShares Pure Cannabis ETF: This ETF seeks to provide exposure to companies in the cannabis industry. The investment strategy of YOLOD is to invest in companies that are involved in various aspects of the cannabis industry, including cultivation, distribution, and research.

BBCD – Virtus LifeSci Biotech Clinical Trials ETF: This ETF focuses on companies that are involved in the development of new drugs and therapies. The investment strategy of BBCD is to invest in companies that are conducting clinical trials for new drugs, as well as those that have received FDA approval for new treatments.

KBWBD – Invesco KBW Bank ETF: This ETF provides exposure to banks and financial institutions in the US. The investment strategy of KBWBD is to invest in companies that are engaged in commercial banking, investment banking, and other financial services.

JETSD – U.S. Global Jets ETF: This ETF invests in companies in the global airline industry. The investment strategy of JETSD is to invest in airlines, airplane manufacturers, and other companies that are involved in the airline industry.

IWND – iShares Russell 2000 Value ETF: This ETF provides exposure to small-cap companies in the US that are considered undervalued by the market. The investment strategy of IWND is to invest in companies that have low price-to-book ratios, low price-to-earnings ratios, and high dividend yields.

Silicon Valley Bank, a California-based lender that specialized in financing tech startups, recently collapsed after experiencing major losses related to bad loans. While investigations into the cause of the bank’s failure are ongoing, some experts argue that it was due, at least in part, to a failure of regulation and supervision. The Dodd-Frank Act, passed in 2010, had increased the regulation of banks, particularly those deemed “systemically important,” which included Silicon Valley Bank. However, in 2018, Congress passed a law that rolled back some of these regulations for smaller and mid-tier banks. Critics argue that these deregulations contributed to Silicon Valley Bank’s collapse. While some Democrats have defended the 2018 law, others, including Sen. Elizabeth Warren and Sen. Bernie Sanders, have said the law’s softening of regulations contributed to the bank’s demise. President Joe Biden has vowed to strengthen banking rules to prevent similar failures in the future. The Justice Department, Securities and Exchange Commission, and Federal Reserve Board are all investigating the bank’s collapse.

The fed somewhat caused this crisis by being late to raise rates and then raising them at a historic rate over such a short period of time. Many believe that Silicon Valley Bank is the sounding the alarm bell that a recession is inevitable.

What is a recession?
A recession is a significant and widespread decline in economic activity over a sustained period of time. It is characterized by a reduction in the production of goods and services, a decrease in employment, and a decline in consumer and business spending.

Recessions are typically measured by a decrease in a country’s gross domestic product (GDP), which is the total value of goods and services produced within a country’s borders. A recession is generally defined as two consecutive quarters of negative GDP growth.

Recessions are often caused by a variety of factors, including a decrease in consumer confidence, a decline in business investment, a decrease in international trade, and financial crises.

During a recession, individuals and businesses may experience financial hardship, including job losses, reduced income, and decreased profits. The government may respond to a recession by implementing monetary and fiscal policies, such as lowering interest rates or increasing government spending, in an attempt to stimulate economic growth.

Recessions can have a significant impact on society, as they can lead to increased poverty, inequality, and social unrest. Therefore, understanding and mitigating the effects of recessions is an important goal for policymakers and economists alike.

What’s the best way the Fed can assist during a recession?
One of the primary tools of the Fed is to adjust interest rates. During a recession, the Fed can lower interest rates to encourage borrowing and spending, which can stimulate economic growth.

What’s the best way to invest when interest rates are getting cut? Buy ETFs that hold long term bonds?
When interest rates are cut, the prices of existing bonds typically rise. This is because the interest rate on existing bonds becomes more attractive relative to new bonds issued with lower interest rates. As a result, investors are willing to pay more for existing bonds with higher interest rates.

Here are a few bond ETFs that may perform well when interest rates are cut:

iShares 20+ Year Treasury Bond ETF (TLT): This ETF holds U.S. Treasury bonds with maturities of 20 years or more and can benefit from lower interest rates.

Vanguard Long-Term Bond ETF (BLV): This ETF holds investment-grade U.S. bonds with maturities of 10 years or more and can benefit from lower interest rates.

iShares 10-20 Year Treasury Bond ETF (TLH): This ETF holds U.S. Treasury bonds with maturities of 10 to 20 years and can also benefit from lower interest rates.

iShares Core U.S. Aggregate Bond ETF (AGG): This ETF holds a broad range of investment-grade U.S. bonds with maturities of less than 30 years and can benefit from lower interest rates.

With the recent bank crisis, you have heard the term contagion a great deal. The Contagion being referenced, refers to the spread of an economic or financial crisis from one market or region to others, leading to a domino effect and causing widespread disruptions in the economy. It can occur in many forms, including the transmission of financial instability, economic shocks, or systemic risks from one country or sector to another. While this is definitely a known occurrence there is a different kind of contagion going on right now. That is the contagion of stocks that are grouped together in a thematic ETF in this case bank stocks, that are being indiscriminately sold because an ETF may have exposure to one bank for example Silicon Valley Bank.

What is an ETF
An ETF (Exchange-Traded Fund) is a type of investment fund that trades on a stock exchange like a stock. An ETF holds a basket of underlying assets such as stocks, bonds, commodities, or currencies, and aims to track the performance of a particular index, sector, or asset class. ETFs can be bought and sold throughout the trading day at market-determined prices, making them highly liquid and flexible.

ETFs offer several benefits to investors. They provide instant diversification by investing in a broad range of assets, reducing the risk associated with investing in a single stock. ETFs typically have lower expense ratios than actively managed mutual funds, making them a cost-effective option for investors seeking to track a particular market or index. Additionally, ETFs can be traded like stocks, allowing investors to buy and sell them throughout the trading day at market-determined prices.

What is the ETF Creation/Redemption Process
The creation and redemption process of an ETF (Exchange-Traded Fund) is the mechanism by which new shares of the fund are created or existing shares are redeemed. This process allows the ETF to maintain its target investment objective and keep its share price in line with the underlying assets it tracks.

The creation process involves an authorized participant (AP), typically a large institutional investor, working with the ETF issuer to assemble a basket of securities that closely matches the ETF’s underlying index. The AP then delivers this basket of securities to the ETF issuer in exchange for newly created ETF shares. These shares can then be sold on the secondary market to individual investors.

The redemption process is the opposite. An AP returns a basket of ETF shares to the issuer in exchange for the underlying securities. This process is used when an AP wants to exit its position in the ETF or when the ETF issuer needs to reduce the size of the fund.

Now, the creation and redemption process can lead to indiscriminate selling because APs may need to acquire or dispose of large blocks of securities to create or redeem ETF shares. This can have a significant impact on the price of those securities, especially if they are relatively illiquid.

For example, if an AP needs to acquire a large block of shares in a particular stock to create ETF shares, it may bid up the price of that stock, potentially causing it to become overvalued. Conversely, if an AP needs to sell a large block of shares to redeem ETF shares, it may drive down the price of that stock, potentially causing it to become undervalued.

In extreme cases, this can lead to a feedback loop where the creation and redemption process itself causes the underlying securities to deviate significantly from their intrinsic value. This can create opportunities for arbitrageurs to profit by buying or selling the underlying securities when their price deviates too far from their true value.

ETF Redemptions have hurt Bank Stocks
The SPY (SPDR S&P 500 ETF) is an exchange-traded fund that seeks to track the performance of the S&P 500 Index, which is a market-cap weighted index of 500 large-cap U.S. companies. While not a bank specific ETF this fund is so massive it can send shockwaves. Over the last month it has seen Redemptions of 10 Billion. When Silicon Valley Bank was trading, this fund held the most shares of the bank with 621K shares.

The XLF is an exchange-traded fund (ETF) that seeks to track the performance of the financial sector of the S&P 500 Index. The XLF is managed by State Street Global Advisors and holds a portfolio of stocks in the financial industry, including banks, insurance companies, real estate firms, and other financial services companies. Over the past month this fund has seen 1.5 Billion in Redemptions.

Some of the Top Holdings of the XLF The chart below shows that these companies are all down on the month anywhere from 5-25%. While there is some disparity in the highs and lows, the Corollary ETF Effect is at work here, and most are trading in symmetry.
Berkshire Hathaway Inc Class B
JPMorgan Chase & Co
Bank of America Corp
Wells Fargo & Co
S&P Global Inc
Morgan Stanley
The Goldman Sachs Group Inc
BlackRock Inc
American Express Co
Charles Schwab Corp

Catching a falling Knife or this run is Overdone
The KRE is an exchange-traded fund (ETF) that seeks to track the performance of the S&P Regional Banks Select Industry Index. The fund is managed by State Street Global Advisors and holds a portfolio of stocks of regional banks in the United States.

On March 15 the Federal Reserve announced a new lending program, the Bank Term Funding Program. Seen as a backstop for the Banks, the program aims to stabilize the financial system by swapping bonds owned by banks for cash, which will be collateral for Fed loans of up to a year. The new program positively impacted the KRE which saw its largest single day of creations or inflows in 10 years at over 1.1 Billion. Two of the top 10 Holdings in KRE are Silicon Valley Bank and First Republic Bank. This is a short term positive for banks and a sign that investors are feeling the bank run is overdone.

ETF’s a Huge Factor on Market Moves
ETFs have become a significant driver of stock market behavior, and they can contribute to indiscriminate selling in times of market stress. When investors sell ETFs, the underlying assets must be sold to raise the cash necessary to pay off the investors, which can lead to indiscriminate selling of those assets.

Furthermore, ETFs have become increasingly popular with investors over the years, and as their popularity has grown, so has their influence on the stock market. In some cases, ETFs may account for a significant portion of trading volume in certain stocks, which can lead to increased volatility and heightened sensitivity to market movements.

The pandemic has had a significant impact on US downtowns, with occupancy rates in office buildings dropping from 95% to 47%. The resulting reduction in foot traffic and public transit use has caused many downtowns to feel like ghost towns. While the demand for housing in cities has increased, the conversion of empty offices into apartments and condos has been sluggish. The declining economic activity in urban cores and lower tax bases could mean fewer jobs and reduced government services, perpetuating a vicious cycle that leads to more decline, crime, and lower quality of life.

The increased use of remote work has also led to increased cancellations of office leases, which has cratered the office real-estate market. Across the country, public-transportation ridership remains stuck at about 70% of prepandemic levels. The decline in foot traffic has also led to deteriorating business corridors, and cities are starting to feel the pinch of reduced tax revenue and sales receipts for small businesses.

The impact of the pandemic on downtowns is still playing out, but it is clear that an office-centric downtown is soon to be a thing of the past. Without more-robust policies to address failing downtowns, cities are going to start hurting. It remains to be seen what empty skyscrapers will become, but the death of great American downtowns is an unmistakable shift in the country’s largest cities.

While some companies have started to force workers back into the office, even in cities where more workers have returned, like Austin or Dallas, occupancy rates are still only 60% of what they were before the pandemic. In New York, about 50% of workers are back in the office.

With occupancy rates high, commercial real estate could be in trouble, here are some ETFs that short the commercial real estate market.

ProShares Short Real Estate ETF (REK):
The ProShares Short Real Estate ETF (REK) is an exchange-traded fund that seeks to provide investors with inverse exposure to the Dow Jones U.S. Real Estate Index. The fund aims to provide daily returns that are the inverse of the index’s daily returns, so if the index falls, the fund should rise in value.
Top Holdings
Prologis Inc.
American Tower Corp.-Class A
Equinix Inc.
Crown Castle Inc.
Public Storage

ProShares UltraShort Real Estate ETF (SRS):
The ProShares UltraShort Real Estate ETF (SRS) is an exchange-traded fund that seeks to provide investors with 2x inverse exposure to the Dow Jones U.S. Real Estate Index. The fund aims to provide daily returns that are twice the inverse of the index’s daily returns, so if the index falls by 1%, the fund should rise by 2%.
Top Holdings
Prologis Inc.
American Tower Corp.-Class A
Equinix Inc.
Crown Castle Inc.
Public Storage

Direxion Daily Real Estate Bear 3x ETF (DRV):
The Direxion Daily Real Estate Bear 3x ETF (DRV) is an exchange-traded fund that seeks to provide investors with 3x inverse exposure to the MSCI US REIT Index. The fund aims to provide daily returns that are three times the inverse of the index’s daily returns, so if the index falls by 1%, the fund should rise by 3%.
Top Holdings
Prologis REIT
American Tower – Class A REIT
Equinix Inc Common Stock REIT
Crown Castle International
Public Storage REIT

Net interest margin (NIM) is a measure of profitability used to evaluate how much money a financial institution makes from the difference between the interest income it earns on its assets and the interest it pays out to its lenders (such as depositors and bondholders) for its liabilities. In other words, it represents the difference between the interest income earned by a bank or other financial institution and the interest paid out to depositors and other lenders as a percentage of its earning assets, such as loans and securities. A higher net interest margin indicates that the bank or financial institution is earning more income from its assets relative to the interest paid out on its liabilities and is generally considered a positive indicator of financial health and profitability.

Reasons for the demise of Silicon Valley Bank
Net Interest Margin Decreased – SVB was invested in long terms bonds at lower interest rates, much of that money was invested when bond yields were 4%+ lower. On Wednesday, March 8, SVB’s parent company, SVB Financial Group, said it would undertake a $2.25 billion share sale after selling $21 billion of securities from its portfolio at a nearly $2 billion loss.
Deposit Outflows – With Interest Rates rising quickly, SVB could not pay competitive interest rates on depository accounts. With current bond yields at near 5% for short term bonds, deposits flowed out of the bank and into short term treasuries.
IPO Market Dead – Silicon Valley Bank provides financial services to a variety of clients, but it primarily focuses on technology and life science companies, venture capitalists, and private equity firms. The IPO market has been dead for the past 16-18 Months and Silicon Valley usually participates in these IPO’s with warrants and deposits.
Tight Knit Family – SVB customers were a tight knit family many were connected via the startup world, when word spread within Silicon Valley that the bank was having troubles, a run on the bank occurred and deposits flowed out at an alarming rate. VCs such as Peter Thiel and Union Square Ventures reportedly started to tell their companies to pull their money out of the bank while they could.

ETF Exposure of Silicon Valley Bank – With SVB included in as many as 200 ETF’s there have been a host of redemptions in bank ETFs like the XLF over the past month. What is an ETF Redemption or Creation?

An ETF redemption or creation refers to the process by which new shares of an ETF are issued or redeemed in response to demand from investors.

In the creation process, an authorized participant (AP), typically a large financial institution, delivers a basket of underlying securities to the ETF issuer in exchange for newly created ETF shares. The AP then sells these shares to individual investors on a stock exchange.

In the redemption process, an AP returns a basket of underlying securities to the ETF issuer in exchange for ETF shares. The AP can then sell these securities in the market, thereby realizing a profit.

This process helps to ensure that the price of an ETF remains closely tied to the value of the underlying assets. When there is high demand for an ETF, the ETF issuer can create new shares to meet that demand, and when demand is low, the ETF issuer can redeem shares to reduce the supply. This helps to keep the ETF price in line with the value of the underlying assets.

SPDR S&P Regional Banking (KRE) is an ETF that tracks the performance of the S&P Regional Banks Select Industry Index, which includes regional banks from the United States. As of the latest available data, Silicon Valley Bank (SVB) was listed as the second largest holding of KRE, making up 2.34% of the ETF’s portfolio. Other top holdings in KRE include Western Alliance Bancorp and East West Bancorp.

The year-to-date performance of KRE as of March 11, 2023, was -9.74%, with a 1-month return of -17.23%. The expense ratio of KRE is 0.35%.

SVB Financial Group (SIVB) is a holding in SPDR S&P Bank ETF (KBE) with a weight of 1.70% as of the last update. KBE is an exchange-traded fund that seeks to track the performance of the S&P Banks Select Industry Index, which is a subset of the S&P Total Market Index that includes banking companies listed on US exchanges. The ETF invests in large, mid, and small-cap banks, with a focus on regional banks. The top holdings of KBE include Jackson Financial Inc, Voya Financial Inc, and SVB Financial Group. The performance of KBE is affected by a wide range of factors that impact the banking industry as a whole, such as changes in interest rates, regulatory environment, and economic conditions.

As of the most recent data available, Silicon Valley Bank was a 1.26% holding in the Invesco KBW Bank ETF (KBWB). The top 5 holdings of Invesco KBW Bank ETF (KBWB) are: Citigroup Inc. (C) – 9.12%, JPMorgan Chase & Co. (JPM) – 8.57%, Wells Fargo & Co. (WFC) – 7.80%, Bank of America Corp. (BAC) – 7.49%, U.S. Bancorp (USB) – 5.39%

The March Madness basketball tournament is an annual event held in the United States each spring. It involves the top 68 college basketball teams from around the country, competing in a single-elimination tournament to determine the national champion. The tournament is organized by the National Collegiate Athletic Association (NCAA) and is widely considered one of the biggest and most exciting events in college sports. The tournament typically lasts for three weeks and involves a series of games played across the country, culminating in the Final Four, where the last four remaining teams compete in the national semifinals and finals to determine the champion.

While there are no guarantees in the stock market, some companies that may benefit from the March Madness tournament include:

• DraftKings Inc. (DKNG): As a leading provider of online sports betting and daily fantasy sports, DraftKings could see increased activity during the tournament. DraftKings is currently #2 in US Market Share for online Sports Betting.
• FanDuel Group (FLTR-LN): FanDuel is currently #1 in US Market Share for online Sports Betting. Similar to DraftKings, FanDuel is a popular provider of online sports betting and daily fantasy sports that could benefit from increased activity during the tournament. You can access FanDuel via its parent listing FLTR LN, the company is exploring a US spinoff listing for FanDuel in 2023.
• MGM Resorts International (MGM): MGM Resorts owns several casinos and sportsbooks in the U.S. and could see increased revenue from sports betting activity during the tournament.
• Caesars Entertainment, Inc. (CZR): As another major casino and sportsbook operator, Caesars Entertainment could also benefit from increased sports betting activity during the tournament.
• Buffalo Wild Wings (BWLD): As a popular sports bar and restaurant chain, Buffalo Wild Wings could see increased foot traffic during the tournament as fans gather to watch games.
• Coca-Cola Company (KO): As a major sponsor of the NCAA tournament, Coca-Cola could benefit from increased visibility and brand recognition during the event.
• Nike Inc. (NKE): As a major sponsor of several college basketball teams, Nike could benefit from increased visibility and brand recognition during the tournament.

Want to diversify from single stock risk? Here a few ETFs with large holdings in the above companies:

• iBET Sports Betting and Gaming ETF (IBET): This fund is involved in everything sports betting and gaming putting its top holdings in companies such as FanDuel parent, Flutter Entertainment as well as DraftKings, MGM Resorts, and Churchill Downs Inc. Year to date the iBET ETF is up nearly 14%. Last year March Madness served as a catalyst for the fund as this stock appreciated 6-7% in March 2022.
• iShares U.S. Consumer Services ETF (IYC): This ETF invests in U.S. companies that provide consumer services, including Buffalo Wild Wings, Coca-Cola Company, and Nike Inc. YTD the fund is up 10.38%.
• Fidelity MSCI Consumer Discretionary Index ETF (FDIS): This index is designed to measure the performance of large, mid, and small-cap companies in the consumer discretionary sector in the United States. This ETF tracks the performance of companies like Nike Inc. and Buffalo Wild Wings.