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Money Daily has been providing business and financial market news, views, and coverage on a nearly continuous basis since 2006. Complete archives are available at moneydaily.blogspot.com.
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Bailout Planet Responds to Credit Suisse, First Republic Bank with Massive Cash Injections Friday, March 17, 2023, 9:25 am ET Even the prospect of bank failures far and wide could not contain investor appetite for stocks this week. all of the major indices are solidly in the black through Thursday's close, a testament to the warped mindset in control of financial assets in the United States. Outdoing them all by a wide margin, the NASDAQ has produced gains every day this week and is up a remarkable 5.19% (578 points). By comparison, entering Friday, the Dow is up just 1.06%, the S&P 500 ahead by 2.56% and the NYSE Composite is down 0.42% (-63 points). This indicates nothing more than a lot of money still sloshing around the equity fountain even though two mid-sized banks outright failed, Credit Suisse had to be rescued (again) by the Swiss National Bank, and First Republic Bank is being bailed out by a consortium of banks, specifically, Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, Goldman Sachs, Morgan Stanley, BNY-Mellon, PNC Bank, State Street, Truist and U.S. Bank.
Bank of America, Citigroup, JPMorgan Chase and Wells Fargo announced today they are each making a $5 billion uninsured deposit into First Republic Bank. Goldman Sachs and Morgan Stanley are each making an uninsured deposit of $2.5 billion, and BNY-Mellon, PNC Bank, State Street, Truist and U.S. Bank are each making an uninsured deposit of $1 billion, for a total deposit from the eleven banks of $30 billion. Yeah, Skippy, the banking system is sound, just like Treasury Secretary Grandma Yellen told the Senate Banking Committee Thursday. Yellen did let slip that in the future (which could be as early as today, though probably not), not all deposits would be guaranteed and backed up by the Fed.
...Yellen was pressed if that meant all uninsured deposits were now guaranteed. Excuse the cynics who think Janet Yellen has about the same financial acumen as a dead slug and is roughly as honest as her boss, Brandon the Pooper. The idea that this gnome is head of the US Treasury should put fear into the heart of every American, prompting an even more serious run on the banks. Officials in Russia and China must laugh their collective rear ends off whenever she opens her aged yap. The US banking sector is a total clown show, the majority of banks needing bailouts or cash injections in order to just stay ahead of depositor withdrawals. The general public is not quite as stupid as the titans of finance would lead us to believe. With CDs, money markets and treasuries offering higher rates of return than the vast majority of banks, money has been flowing out of their vaults faster than an ant colony attacking a spilled bag of sugar. A more serious perspective comes from across the pond, in the form of goldmoney.com's resident genius, Alasdair Macleod's weekly essay, titled "Credit chaos." Macleod's key takeaway is that the Federal Reserve and their crony central bankers have pivoted, giving up on the fight against inflation in order to save their precious "markets." Having failed miserably in their attempt to rescue Western economies from the ravages of inflation, inflicting severe damage to banking interests in the process, they have moved decisively to protect themselves and their banking partners, in effect, destroying the purchasing power of the currencies. Proof of the wagon circling can be found in JP Morgan's assessment of the BTFP facility, created just days ago, wherein they believe lending by the Fed to distressed banks could exceed $2 trillion. Meanwhile, heading to the opening bell, futures are sliding. If anybody can make sense of this mess, good luck. For the rest of the world, buying gold and silver is probably the best practice, bracing for impact. Gold is soaring again this morning, up nearly $30, to $1,952.50.
At the Close, Thursday, March 16, 2023:
Thursday, March 16, 2023, 9:45 am ET
Editor's Note: Apologies for the fractured nature of today's post and it's late publication. Wednesday's events were of such a seminal, fluid, and fundamental nature that there was hardly time to gather relevant information and compress it into a tidy essay, though the essential points are being made, albeit a bit fuzzily at present. Wednesday's "Ides of March" stock slaughterhouse was years in the making. At the end of trading, Wall Street's algorithms had managed to breath life into an otherwise dead US market. European stocks didn't fare as well, the DAX, CAC 40, IBEX, and FTSE falling under severe pressure, all down more than two percent on the day, having closed prior to the announcement by the Swiss National Bank pledging as much as 50 billion francs (about $54 billion) and offering to repurchase debt from insolvent Credit Suisse. Without a doubt, what the SNB is about to embark upon is nothing other than a bailout and it's likely not the last. Being a SIFI (Systemically Important Financial Institution), Credit Suisse cannot be allowed to fail, as it's departure from the banking world would wreak havoc on what remains of Western economies. Propping it up with central bank currency exposes the larger problem: whatever currency is allowed to be printed at will is going to devalue enormously. Pity the citizens of Switzerland who will have to foot the bill, either through traditional increased taxation, but moreso by the hidden tax of inflation. They are not alone. Citizens of Europe, the United States, the Commonwealth, Japan and other Westernized nations will be negatively affected as well. Fiat currencies are soon to become as valueless as the mark in Weimar Germany, or the bolivar in Venezuela. Stock markets, having already devolved into rigged gambling houses, remain hopelessly overvalued. Drops in the prices of shares and the overlaid indices will take longer to unravel since central banks and their proxies are plugging holes and preventing deep, panicked declines. Gambling in the stock market these days can be compared to a race track operated by Franz Kafka, where the past performances are blurred, most incorrect, the horses are all fakes, the jockeys impersonators, and the races already decided well before the gates open. One might believe his or her money is on Secretariat in the Belmont Stakes when in fact wagers have been placed on a weary, three-legged nag, ridden by an apprentice, instructed to keep his steed in the rear of the pack. It's that bad, if not worse, and it's certainly no place to invest for a future retirement, down payment on a house, a college eduction or any other long-term goal. Nowhere was the panic more evident than on the Dow Jones Industrials, which fell by as much as 700 points before rallying on the Swiss save mid-afternoon. Regardless of the close, a mere 280 points, internal damage was extreme. On the NYSE, declines outnumbered advancing issues, 2,349-677. The NASDAQ registered 3,116 declines to 1,317 advances. Bear markets are alive and well, littering indices around the world with sell order slips. The carnage, while it may not appear obvious at any particular juncture, will continue. The Federal Reserve and their fellow central banks have no way out of an economic and currency crisis that is overwhelming the worn out floating currency system.
The Fed, banks, Bloomberg TV, and Wall Street types are always talking in billions. Apple a couple trillion, or Amazon, $40 billion here and there. OK, so how much is a billion dollars ($1,000,000,000)? If you spent $10,000 a day, it would take you 274 years to spend it all. That's more than three times the average life expectancy, so, if you started with a billion at 20 years of age and spent until you were 80 (60 years), you'd have to spend $45,662 a day to unload all of it. Could you do it? Seriously, it's not even one high-end sports car, like a Ferrari or Lambo a week. Over the course of 60 years, however, you could own (average price, $319,634) 3,128 of them and still have enough to fill the tanks on a few of them with fuel. If you manage to live past 80 you could, conceivably, sell them and get some dough, do whatever.
Credit where credit is due. The following was posted by the person or bot known as Virgil Krenshaw on ZeroHedge about half an hour after the closing bell, March 15, 2023:
This is the end, friends. Whether this week or not, soon enough everything you know will be gone. The fiat currency system is irredeemable and has run out of road. The only choice policymakers have now is whether it ends via default and depression or hyperinflation.
Consider the choice between gold and silver as far as the ratio is observed. Late on March 15 (the "ides"), silver was selling on the COMEX at $20.93 the troy ounce. At the very same instant, gold went for $1922.60, putting the silver:gold ratio at 91.86. Central banks keep gold on their balance sheets as a tier 1 asset, but hold no silver. None. Zero. Would it not be a shame for them should the silver:gold ratio return to its historical norm of 12:1 or 16:1? At the current price of gold, a single troy ounce of silver, at 12:1, would be $160.22. At 16:1, $120.16. For ordinary purposes, let's just assume an ounce of silver is worth one gram of gold. The calculus is thus: at 31.1034768 grams per troy ounce, makes silver $61.81302 per troy ounce. We'll take it. In other words, DO NOT SELL YOUR SILVER FOR ANYTHING LESS THAN ONE GRAM OF GOLD AT WHATEVER PRICE THAT IS. Do not trade your silver for gold unless your price is met. Do not buy any gold until silver comes into some equilibrium with gold at 12:1, 16:1, or even 31.1034768:1. Bottom line is that the world needs silver. Only central banks need gold, and well, they're on their own here. Humanity may have peaked somewhere around March 10, 1968, when Cream played Crossroads at Fillmore Auditorium and Winterland Ballroom, San Francisco, California.
Maybe the peak came a bit earlier, as displayed in high fashion by one Mr. Frank Sinatra (aka, Chairman of the Board) in this rendition of Cole Porter's I've Got You Under My Skin. The video below was recorded live in the Copa Room of the former Sands Hotel and Casino in Las Vegas in 1966 for the album, "Sinatra at the Sands," a live LP featuring Frank Sinatra, accompanied by Count Basie and his orchestra, conducted and arranged by Quincy Jones.
Whichever music appeals to one's particular taste, there's little doubt that both of these performances mark an era of human action possibly unsurpassed in world history. Despite US military adventurism in Vietnam, humanity was thriving. Industries were producing products that transformed how people lived, especially in the United States, which was at the peak of its post-war productivity. The single-earner household was the norm. Food was cheap and plentiful. Inflation was not an issue. Suburbs were growing across the country. Life was good, simple, and enjoyable. Those too young to have experienced the 1950s and 1960s do not understand how magnificent the world had become. Comparisons to the current environment are as starkly different as night and day. US equity markets are open and stocks are already losing ground, but that should be of little matter to anybody who's been paying attention, converting fiat into precious metals and/or investing in one's own business. Good luck (you'll need it).
At the Close, Wednesday, March 15, 2023:
Wednesday, March 15, 2023, 9:19 am ET
Many years later, around 1599, William Shakespeare memorialized the event in his classic play, Julius Ceasar, with the infamous line, "beware the Ides of March", spoken by the seer who likely had some inner knowledge of what was to unfold that fateful day. Caesar was murdered, marking the beginning of the end of the Roman Empire. Apparently, somebody deep within the bowels of the deep state has a sense of irony, or purpose, or evil because what will happen today, here in year 2023, will likely have long-lasting and significant impact on the direction of human events. This is speculation, of course, but it appears that the failures of Silicon Valley Bank and Signature Bank were part of a setup to create the Bank Term Funding Program (BTFP), initiated by the Federal Reserve under the auspices of the Treasury Department's FDIC. The facility allows troubled banks to borrow [PDF] from the Fed, pledging eligible securities (Treasuries, agency debt, MBS) for up to one year. The two failed banks (Signature, SVB) were - by most accounts - able to be salvaged, but needed to fail in order that the BTFP be birthed because it allows foreign banks to apply for relief, and that points directly to Credit Suisse, the second largest bank in Switzerland and the 17th largest in Europe, which has been failing ostensibly since 2008, but quite precipitously over the past five years. On Tuesday, news that auditors had discovered "material weaknesses" in their financial reporting sent shares of the bank to all=-time lows. Today, Wednesday morning, the bank's largest supporter, the Saudi National Bank, withdrew support, claiming regulatory issues preventing them from owning more than 10%. The Saudi bank took a 9.9% stake in Credit Suisse last year as part of a recapitalization effort. Evidently, that failed. Back in October of last year, Switzerland drew nearly $6.3 billion on their US$ swap lines. While there was no official announcement about what the money was to be used for, it was widely assumed that most of it was intended to shore up their embattled bank. With Credit Suisse a Tier 1 SIFI (Systemically Important Financial Institution), they cannot be allowed to fail. Thus, being the lender of last resort, the Federal Reserve will bail them out and keep the global financial system from crumbling into dust, as it eventually must. The destruction of fiat currencies globally is not a pipe dream, fantasy, or conspiracy theory. Currencies without the backing of gold, silver, or other commodity, have a mathematical certainty of failure. They always fail. Every time. The ongoing banking and economic crises persisting since 2008 are just more iterations of the ageless process. In the case of the US dollar and its allies in the euro, yen, franc, and pound, the inevitability of devaluation has been slowed by the financial authorities, otherwise known as central banks. Money Daily wishes to send its regards to these utter failures of financial governance and utility. The gates of hell welcome them. From this day forward, nothing you see or hear from government, banking, or the mainstream media is to be regarded as anything even remotely resembling the truth. Just as occurred with the GFC in 2008-09, the Fed's bailout of Credit Suisse will not likely be acknowledged until years in the future. Every penny withdrawn from a bank, out of US currency and into hard assets, be they gold, silver, machinery, equipment, land, tools, collectibles, art, antiques, et. al., strikes a blow for economic and political freedom. With US markets set to open in less than a half hour, stock futures are cratering. Dow futures, -629; NASDAQ, -200; S&P 500, -79. Here's Jim Morrison (RIP) and the Doors to sum it up:
At the Close, Tuesday, March 14, 2023:
Tuesday, March 14, 2023, 9:00 am ET If somebody who has proven to be a liar tells you something, do you believe them? Of course not. At least that would be the thinking of most rational people. So, when resident-in-thief Joe Brandon took to the airwaves at 9:00 am ET Monday morning to reassure the American public that the money on deposit at their favorite banks was "safe" it's likely that as many as half the US adult population didn't believe a word of it. Imagine maybe 80-100 million people thinking that they'd best remove as much of their cash from the banks as possible, or, at least take some of it out. That's not an exaggeration. As much as the intelligence of the American public is normally discredited - As H. L. Mencken so eloquently disparaged the "plain" people nearly 100 years ago - there still exists a lot of wiggle room to accommodate a great many people doing smart things, in this case, making bank withdrawals.
No one in this world, so far as I know -- and I have searched the records for years, and employed agents to help me -- has ever lost money by underestimating the intelligence of the great masses of the plain people. Nor has anyone ever lost public office thereby. The mistake that is made always runs the other way. Because the plain people are able to speak and understand, and even, in many cases, to read and write, it is assumed that they have ideas in their heads, and an appetite for more. This assumption is a folly. There's little doubt that a lot of money has been removed from the banking system nationwide in the past few days. That's a problem. A big problem, and it's far from being over and done with. While the majority of American people don't truly understand how the crooked financial system - created by bankers to enrich themselves and their fellow thieves - works, they have of late become accustomed to general dissembling by government officials, politicians, business leaders, and mainstream media. No doubt many of them took Brandon's preaching as another "Big Lie" and history, as it unfolds before us, will likely bear them out. After all, there was plenty of warning that something rotten was brewing in the banking system. No fewer than three banks had closed their doors from Wednesday through Sunday evening. Silvergate Bank voluntarily shut down, followed by the FDIC forcing Silicon Valley Bank to close, and then, Sunday, the FDIC took control of Signature Bank in New York. On Monday, trading in the following banks and financial institutions was halted for varying times:
While all of these dignified holders of other people's money kept their doors open, there's little doubt that despite the creation by the Federal Reserve and the US Treasury's FDIC of yet another bailout facility, this one designated as the Bank Term Funding Program, with the comically acronym, BTFP (Buy The F--king Propaganda), people are still going to take their money out of banks. The BTFP will be "offering loans of up to one year in length to banks, savings associations, credit unions, and other eligible depository institutions pledging U.S. Treasuries, agency debt and mortgage-backed securities [MBS], and other qualifying assets as collateral. These assets will be valued at par. The BTFP will be an additional source of liquidity against high-quality securities, eliminating an institution's need to quickly sell those securities in times of stress." Oddly enough, the Fed is willing to accept as collateral the very same securities that helped lead to the demise of Silicon Valley Bank and Signature Bank, both institutions. Now, the Fed will be backstopping banks that are holding upside-down treasuries, mortgage-backed securities (MBS) and similar paper by allowing them to borrow against these marked down securities. This is the very same Federal Reserve that already has piles of marked-down debt instruments from the last crisis in 2008-09 and over a decade of QE when interest rates were held down, the federal funds rate close to zero. The Fed has nearly nine trillion ($9,000,000,000,000) of dodgy "assets" on their burgeoning balance sheet. They're willing to add a few more just to keep some poorly-run banks open. Eventually, they'll have to lend to most of the banks worldwide, because, thanks to their steady rate hikes over the past year, most of the debt instruments held by banks are worth far less than their maturity value, or "par." Nevertheless, the Fed will loan money to these banks at par, taking the losses onto their own books. Loans via BTFP are to be up to a year in length, which, in the world of high finance, isn't a long time at all. Heck, the average car loan is now six or seven years. One year is nothing. The chances of these banks being able to pay back these loans in time are slim to none. There's a better chance they'll be shut down a year from now. This isn't hyperbole. Many people have taken to keeping just as much as they need to pay ordinary bills in checking accounts since the last financial crisis in 2008. People aren't necessarily as dum as they appear, especially when it comes to their "money" and how they spend it. They know the banks are thoroughly crooked and the moral hazard has trickled down from the high offices of the Fed's Eccles Building down to local branches of even the tiniest savings bank or credit union. It has to be this way because, in its bare essence, the monetary system of the United States and most of the rest of the world, relies upon not real money (gold, silver) but money substitutes, be they dollars, yen, euros, kronas, bhat, etc., and none of them have any intrinsic value. The cost to print a $100 bill is estimated at a mere 17 cents. The cost to conjure up billions of counterfeit dollars electronically by the push of a button is probably even less. Overnight (Monday into Tuesday), Moody's put six banks on downgrade watch. First Republic, Western Alliance, Wichita's INTRUST (37 branches), UMB (largest bank in Kansas City, ticker UMBF), Salt Lake City's Zions Bancorporation (ZION), and Comerica (CMA), based in Dallas, Texas. Despite the Fed's best efforts to keep them open, more banks will close in the weeks and months ahead. There's little doubt about that. The FDIC keeps track on their Failed Bank List. Scared money moves fast. Antecedent to the banking crisis, treasury notes and bonds were being bought at breakneck pace, sending one-year notes down 60 basis points to 4.30%, two-year notes were down 57 basis points (4.03%). Ten-year notes were yielding 3.55%, down from 4.08% on March 2nd. Money wasn't just leaving banks. It was also making a mad dash out of stocks and into fixed income. Elsewhere, gold gained 5.65% from early Thursday morning (March 9) to Monday night (March 13). Silver was even more explosive. From midnight Thursday through just before noon Monday, silver surged from $19.99 per troy ounce to $21.03, a gain of 10.21%. These gains came over the weekend, with the LBMA and COMEX shut down as usual, though online dealers, retail coin shops and eBay sellers reported brisk business, some commenting that Sunday was one of the busiest days they could recall. For today, the news media will attempt to distract attention from the obvious elephant in the room with the release of February's CPI reading. At 8:30 am ET, the BLS announced that the Consumer Price Index (CPI) increased 0.4% month-over-month and continued to decline on a yearly measure, down to 6.0% after registering 6.4% in January. While the inflation reading is welcome news, the issue now becomes what the Fed will do at next week's FOMC meeting, which concludes on Wednesday, March 22. Voting members were reportedly seeking to raise the federal funds target rate by either 25 or 50 basis points. Following the events of the past week and those still developing, the question is whether the Fed will raise the rate 25 basis points or not at all, pausing their hiking regime after 10 consecutive increases. With less than an hour to the opening bell in the US, equity futures are ripping higher. Dow futures: +163; NASDAQ: +62; S&P 500: +24.50. Maybe Mencken was right after all. Finally, here are the Clovers, circa 1954, way ahead of their time. Who knew?
At the Close, Monday, March 13, 2023:
Sunday, March 12, 2023, 3:03 pm ET Eventually, everybody knew that when the crisis circus pitched its tent, the banking system would be the main attraction, in the center ring, flanked by the US congress spinning plates on the left and the barking dogs of war and the MIC on the right. What sent markets into a tizzy on Thursday and Friday were two banks: Silvergate Capital Corp. (Silvergate Bank, SI) and SVB Financial Group (Silicon Valley Bank, SIVB), each with its own particular set of problems. Silvergate had too much money tied up in crypto investments; Silicon Valley Bank was upside down on investments including mortgage backed securities (MBS), commercial MBS, and a bucket of US treasuries. In both cases the issues were straightforward. Catering to fast money crypto startups and ponzi schemers like Sam Bankman-Fried was Silvergate's downfall. In SVB's case, making bad bets in the fac of the Fed's rate hikes was mostly an issue of cash and corporate management. While SVB's stock was halted on Friday, shares of other mid-sized U.S. banks added to recent, heavy losses. The S&P 500 regional banks index dropped 6%, bringing its loss this week to 20%, its worst week since 2009. U.S. banks have lost over $100 billion in stock market value Thursday and Friday, with European banks losing around another $50 billion in value, according to a Reuters calculation. Essentially, the world is at the very early stage of a banking crisis which will manifest itself as a liquidity crisis and eventually, a capital and currency crisis. US dollars, euros, yen, pounds, and Swiss francs have been on life support since 2008. Soon, the currencies upon which most of the planet's nations depend are headed for hospice, where they will die after a short time. Keep in mind that currencies of all nations - not just the major ones mentioned above - are fiat, with no backing other than "full faith and credit." The yuan, rouble, rupee, and all other central bank-issued currencies are about to go the way of the dodo bird. The change from fiat currency to gold-backed currency isn't going to happen overnight. It's likely to occur in fits and starts over the course of a few years. Make no mistake, banks will fail, taking businesses and individuals down with them, currencies will collapse and some governments (looking at you, EU) may disintegrate. It's just a matter of time and now is the time to take preparations seriously. Stocks Well, in the rare case that your retirement funds are still tied to minuscule fractional ownership of publicly-traded corporations, you're screwed. There's just no mistake about that. Stocks took a serious whacking in 2022 and are about to be decimated again. Bullish investment advisors will speak in terms of long term and diversification but never tell you about inflation and tax implications, risk of loss, regulatory constraints, reporting headaches and another crash like 2000 or 2008. They will tell you that in the long run, stocks are a great investment. Money managers, wealth managers, and investment advisors have one objective: to make a living without working. They play with client money, skimming fees off the top, win or lose, gain or loss. Most of them are retarded. Worse, people who have scads of cash entrust it to these modern-day highway robbers. This was the worst week for stocks since June of 2022. All of the major indices lost more than four percent. The NYSE Composite, the braodest measure of stock performance, was down a whopping 5.26%. As noted above, the banking sector took the brunt of the assault, but all sectors were down for the week. This was not an isolated event nor a bank run initiated by a Peter Thiel tweet. This is the tip of the spear of a systemic collapse. At the very least, SVB's wreckage was big enough to not easily be swept under the economic rug and there are more time-bombs out there just waiting for the fuse to be lit. Silicon Valley Bank's demise was the second-largest bank failure in US history. The biggest was the collapse of Washington Mutual in 2008, which was acquired (some say forced upon by the Federal Reserve) by JP Morgan Chase. SVB was the nation's 18th-largest bank by assets. Most of its depositors had funds in excess of the FDIC-insured $250,000 limit. Estimates are that 90-95% of deposits are uninsured and will have 50-75% of their funds available Monday morning. Included among the depositors are some of Silicon Valley's startups and more established firms, like Etsy and Roku. Since none of the bigger banks made efforts to acquire SVB, there are likely to be some haircuts and plain vanilla vaporization of capital. What better way to lower the money supply than take it from the people with the most overpriced assets. This is a very shrewd move by the Fed and the extremely underfunded FDIC because, at the bottom of this are derivative securities, mostly mortgage-backed (MBS) and commercial mortgage backed (CMBS), the same opaque securities that fomented the crash in 2008, with the added impetus of office, retail, and industrial spaces. It's "The Big Short" all over again, since nothing was done to correct the issues of the 2008-09 GFC, only to paper them over with the watered-down Dodd-Frank act. Many forget that Freddie Mac and Fannie Mae were never fixed, intead put under federal conservatorship, where they remain to this day. As it did in 2008, the US real estate market is about to collapse, but this time, both residential and commercial will implode at once. Signs have already begun to warn about this eventuality, and that's to say nothing of business and consumer debt, credit cards, student loans, personal loans, auto loans and leases. It's all coming down. While the contagion will ripple through the banking sector, it may be somewhat contained, for now, but as the crisis begins to be seen for what it is, panic will ensue, if not this week, but surely within weeks, not months. Some smaller banks were badly damaged. Among them Western Alliance Bancorporation (WAL), down 35% this week, First Republic Bank (FRC, -34%), PacWest Bancorp (PACW, -55%), Signature Bank (SBNY, -37%) were hard hit among other regional bank shares. Among larger entities, it would pay to keep an eye on the likes of Truist (TFC), which is down a third over the past year, Ally Financial (ALLY), -38% over one year, and Synchrony Financial (SFY), down 38% since August 2021. These have all the earmarks of sub-prime management and lending standards and lack of sufficient capital controls to weather a liquidity storm in the making. With the financial sector under siege, the rest of the corporates are due for a massive unwind. Last year's losses are about to be amplified. Zombie firms will be heading to Chapter 11 soon enough and many of the high-flying stocks in favor will suffer as well. Only the best-run companies with solid balance sheets will survive intact. Looking out over the rest of 2023 isn't a pleasant sight. The horizon is littered with potholes and pitfalls, all tied to debt, much of it MBS and upside-down treasury bets.
In light of recent and ongoing developments, here are a few phrases that may soon become unpopular: Treasury Yield Curve Rates
Treasuries took an about-face mid-week as equity investors fled to the relative safety of notes and bonds. While the end-of-week figures above don't completely capture the rush of buyers into treasuries and other fixed-income, they do indicate well enough the selling on the short end, particularly one to three-month maturities. Beginning with four-month bills, which were bought in earnest from Wednesday through Friday (-13 basis points), all longer-dated securities were driven higher (yields lower) by the equity exodus.
The following are yield drops from Wednesday through Friday, expessed in basis points: That is quite remarkable and underscores the level of fear in the economy and financial markets overall. Inversion remains alive and well, though the curve flattened out considerably over the course of the week, with 2s-10s rising from -107 to -90. The whole of it, 1-month out to 30-years is -111 basis points. Peak inversion has arrived. Recession will be undeniable within months. While banking issues are likely to run front and center in the coming week, the calendar offers two economic reports of note: February Consumer Price Index (CPI) on Tuesday and February retail sales, Wednesday.
WTI crude continues to stabilize in the middle of the 70s, closing out the week at $76.74 per barrel, down more than $3.00 from last week's price of $79.85. Trading in a range between $71 and $81 since mid-November, 2022, there seems to be no catalyst to move global prices in either direction. The Eastern trade is being amply supplied by Russia in the main and Mideast oil to a lesser degree, much of that still flowing to Europe and the Americas. Supply is nearing glut levels while demand wanes in the West. A break into the 60s may occur just as "driving season" begins, which is also the end of "heating season." The national average price of gas at the pump rose for the second straight week. Gasbuddy.com reports the national average at $3.43, up five cents from last week and 10 cents over the last two. The Southeast had the lowest prices overall, but it was Oklahoma taking the low price award, averaging $2.96 and the only state with a price under $3.00 Sunday morning. Mississippi is right at $3.00, followed by Louisiana ($3.04), Texas, Arkansas and Missouri ($3.06). California ($4.85), Nevada ($4.29), and Washington ($4.18) remained the only states averaging above $4.00. Illinois took the lead in the Northeast/Midwest, with the average up to $3.63, just ahead of Pennsylvania ($3.62) and Michigan ($3.52), blue states politically, overtaxed, socially.
This week: $20,977.30 Store of value? With banks and currencies in serial decline, the HODLERS may have a point, though there's more nonsense being thrown about crypto-land than factual, actionable news. Still, crypto assets are under the regulatory gun, usually not a positive.
Gold:Silver Ratio: 90.91; last week: 87.08
Gold price 02/10: $1,876.40
Silver price 02/10: $22.01 Precious metals were driven lower during the week, but got relief on the heels of the developing banking crisis. Gold was down as low as $1,813 early in the week, but began to move higher Wednesday. A major boost occurred on Friday with the closure of SVB. Silver, likewise was beaten down and rose, but to a lesser degree. As of late Thursday night, it was still trading at $19.98-20.09, but charged ahead through the US sessions. Still, silver's price relative to gold makes it a bargain with the silver:gold ratio above the magic 90 mark. This trend should continue apace, with more money flowing to gold as a safety play, making silver once again the bargain of the century. Both metals should appreciate against declining national fiat currencies. That is a given. The importance of their eventuality as money once again cannot be overstated. Here are the most recent prices for common one ounce gold and silver items sold on eBay (numismatics excluded, free shipping included):
The Single Ounce Silver Market Price Benchmark (SOSMPB) fell overall on the week, dropping to $34.71, a decline of 42 cents from the March 3rd level of $35.23.
The week just past was a warning shot over the bow of Keynesian economics and unsound money. All the government intervention, central bank malfeasance, floating currencies, mortgage-backed securities, derivatives, and debt piled upon debt are a rising stack of flammable assets about to be set aflame in a financial bonfire for the ages. Since Nixon formally ended the tenuous gold standard of the Bretton Woods era (1944-1971), currencies were valued against each other (floating) instead of backed by something tangible (ostensibly gold, and silver). In retrospect, the Bretton Woods experience only lasted 27 years, about the length of a generation, which, not by accident, happened to be the Baby Boomers. 52 years hence, those kids from the 50s and 60s are now retiring, retired or dead, their assets being spun down via inheritance, taxes, and inflation. In the end, with most of their earnings and assets tied to a currency that was as imaginary as unicorns, they will end up with little to nothing to show or to pass along to their children. This is not to say that many Baby Boomers aren't financially sound and well off. Many are, superficially, but, as the financial system upon which their wealth was numerated declines and dies, those assets will fall in value. And that's the crux of the matter, price versus value. People may own a home worth $400,000 today, as measured in highly-inflated imaginary prices which regard residential real estate as a financial asset, but in terms of value, it's a roof over ones head, a place of comfort and stability in the face of a world that's becoming more hostile and dangerous. Money, or more correctly, currency, is malleable, fungible, and fleeting. The value of hard assets, starting with the humble abode, properly appointed, is a cloth of another color, thus, a double-wide mobile home on a couple of acres with its own water supply and a backup power system may well have more value than a McMansion on a postage-stamp lot dependent on public utilities. The comparisons can be stark and tax implications also apply. The $400,000, 4100 square foot suburban house is generally taxed at a much higher rate than the $200,000 1800 square foot rural doublewide. Sure, the big house has advantages like granite counters, built-in appliances, and all the latest electronics, but, these are the essence of waste and mal-investment typical of credit bursts. As money (currency) dies down, there will be less emphasis on comfort and more on reliability and resilience. In essence, the ability to garden and grow at least some of one's own food is far mor valuable than the ability to shop at a grocery story with a debt or credit card, just like a reliable 20-year-old pick-up truck has more value than a brand new SUV. As the world winds down into what's likely to be depression levels of existence, what has value will matter greatly, and here is the pecking order of what matters most:
That's all you need to know moving forward. Will you be content to be reliant upon an aging infrastructure that hasn't been maintained well for 50 years or more, or will you endeavor to become more self-reliant? That's the value proposition for the current age, and, to varying degrees, all time.
At the Close, Friday, March 10, 2023:
For the Week:
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It is widely accepted that on March 15, 44 BC, Julius Caesar, Emperor of Rome, was assassinated, stabbed to death at a meeting of the Senate. As many as 60 conspirators, led by Marcus Junius Brutus and Gaius Cassius Longinus, were involved.
