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Kuby’s Commentary

A Tasty Turn

Apr 3, 2023

Volte Face

It was all good news for the equity markets starting with the FDIC backed acquisition of SVB by First Citizens Bancshares on Monday and ending with a tame inflation report on Friday. Every sector of the market rallied with advancing issues outnumbering declining issues by nearly seven to one. It was green across the screen with the S&P gaining 3.5%, the Nasdaq Composite adding 3.4%, and the Russell 2000 bouncing 3.9%. The Oil and Gas sector was the top performer with a 6.1% gain, as crude prices jumped 9.2% to $75.67 per barrel. The yield on the 10-year Treasury moved up 11 basis points from its recent 6-month low to 3.49%, while the inversion on the 10-2 spread widened to 58 basis points, suggesting an increased likelihood of a softer economy in the near-term.

We discussed the recent banking crisis with Professor Robert Z. Aliber, the co-author of the 8th edition of “Manias, Panics, and Crashes: A History of Financial Crises”. Whereas book sales will likely be bolstered by recent events, the Professor suggests, “Thus far, the banking crisis that began three weeks ago with the implosion of Silicon Valley Bank has been a wimp.” He further theorizes, “The trigger for the failure of the Silicon Valley Bank was the volte face of Jerome Powell, who provided the most abrupt and the largest reversal of monetary policy by a Fed Chairman in its history; the Fed was the villain and SVB the victim. The source of the SVB demise was its mismanagement of duration risk. SVB had doubled its assets in the past two years; the money inflow was much larger than the growth of its loans, and much of the excess was used to buy longer term U.S. Treasuries. Eighty or ninety percent of its deposits were larger than $250,000, the ceiling [for FDIC guarantees] on individual accounts. The owners of most of its deposits were its neighbors, a tweet by the ever-vocal Peter Thiel triggered a run that led to the outflow of $76 billion a day.”

For those who didn’t take Latin in high school, “volte face” means an act of turning around to face the opposite direction. The same Fed that stated in June 2021 that there would likely be no rate increases until 2024, then engaged in the most aggressive rate increase in history in 2022. Financial firms that structured their investment portfolios based on the guidance from the summer of 2021 suffered the consequences of the about face and were exposed as “swimming naked when the tide went out” in the parlance of Warren Buffett. Professor Aliber will be speaking at a luncheon in May in Chicago, please contact us if you are interested in attending.

Like the stock market, the NCAA basketball tournaments certainly provided a healthy dose of unpredictable March Madness. On the men’s side, one North Star research team member picked the Aztecs of SDSU to reach the Championship game, while the rest of our team saw their brackets blown up by all the upsets in the early rounds. The star of March Madness was clearly Iowa’s Caitlin Clark, who could provide a Magic Johnson or Michael Jordan boost to women’s basketball. Hats off to the entire LSU Tigers women’s basketball team and their coach Kim Mulkey for an amazing performance in winning the national championship.

Cuts and Cooling

Crude oil built on its price gains from the previous week Monday morning following the announcement over the weekend from eight OPEC+ producers that they were going to remove more than 1 million barrels per day from global oil markets. This move could have a myriad of serious geopolitical and economic consequences. We continue to recommend an allocation to gold and other natural resources producers as a hedge. In that regard, holdings of particular interest would be US Silica Holdings (SLCA), APA Corp (APA), Kinder Morgan Inc (KMI), Sprott Inc (SII), Newmont Corp (NEM), and Heritage-Crystal Clean Corp (HCCI).

Employment will be in focus, with the JOLTS (Job Openings and Labor Turnover Survey) on Tuesday, the National Employment Report on Wednesday, initial jobless claims on Thursday, and finally the release on Friday from the BLS of the jobs report for March. All of the reports are expected to paint a picture of a strong, but modestly cooling state of employment.

First quarter earnings season is on deck, with a consensus forecast for a decline of approximately 6.6% in S&P 500 profits, following a decline of just under 5% in the fourth quarter. Corporate earnings are expected to remain soft in the second quarter, but then to rebound handsomely in the back half of the year.

Banks will continue to be in focus, as there could still be additional skinny dippers out there who mismanaged their duration risks.

Stocks on the Move

+10.3% Paramount Global (PARA) operates as a multimedia company. The Company provides television and radio stations, produces, and syndicates television programs, broadcasting, publishes books, and online content, as well as provides outdoor advertising. Last week, Bank of America upgraded PARA to Buy from Neutral on the basis that “PARA has a unique collection of assets,” such as the BET and Showtime businesses.

+17.7% AstroNova Inc (ALOT) designs, develops, manufactures, and distributes a broad range of specialty printers and data acquisition and analysis systems, including both hardware and software. Its target markets are apparel, automotive, avionics, chemicals, computer peripherals, and communications. There was no significant company news last week. 

+12.5% Oil-Dri Corporation of America (ODC) develops, manufactures, and markets sorbent products to the grocery products industry, mass merchandisers, and pet specialty retail outlets. The Company’s cat litter products are marketed under the Cat’s Pride and Jonny Cat brands; additionally, ODC supplies coarse litter under the Fresh Step brand for Clorox. There was no significant company news last week.

+10.1% Evolution Petroleum Corporation (EPM) explores for and produces oil and gas. The Company focuses on acquiring established oil and gas fields and applying specialized technology to increase production rates. There was no significant company news last week.

The stocks mentioned above may be holdings in our mutual funds. For more information, please visit

The information provided in this commentary is not an offer to sell or the solicitation of an offer to purchase any security, product, or brokerage service. The information is not intended to be used as the basis for investment decisions, nor should the information be construed as advice designed to meet the particular needs of any investor. This commentary is presented to illustrate examples of the securities that North Star Investment Management Corporation and/or its affiliates (“North Star”) may have bought for client accounts and the diversity of markets in which North Star Investments may invest, and may not be representative of current or future investments. You should not assume that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this commentary will be profitable or will be equal to any corresponding performance levels that might be indicated. Past performance is no guarantee of future results. Investments in securities involve risks including the possible loss of the principal invested. North Star and others associated with it, including employees, may have positions in and effect transactions in securities of companies mentioned or indirectly referenced in this commentary. North Star may buy, sell or hold these securities in proprietary or client accounts. North Star will not be providing regular updates or advising you of any changes in the views expressed herein. Investors should consider their investment objectives, risk tolerance, and financial situation and needs before investing in any security. Tax considerations, commissions, fees and other costs should be carefully evaluated with one’s investment and/or tax advisors. Information provided is obtained from sources deemed to be reliable, but North Star cannot guarantee the accuracy or completeness of the information. This material may not be reproduced, distributed or transmitted to any other person in whole or in part without the prior written consent of North Star. A copy of North Star Investment Management Corporation’s Form ADV Brochure, Privacy Notice and Business Continuity Plan summary can be obtained by calling 312-580-0900.

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