By QTR: For the last year, among my friends, I’ve been saying about the market that something was “eventually going to break”. My readers over the last year won’t be surprised: they have heard me – and the content I aggregate – drone on and on about how, with rates as high as they are, it’s simply a mathematical impossibility for something not to break.
And with Silicon Valley Bank, that’s exactly what happened.
The firesale of their assets and the ensuing $1.8 billion loss they endured, which scared the market at the end of last week, was because the bank had bought treasuries when rates were low and now, with yields higher (meaning bond prices are falling), they were forced to take drastic action and absorb losses.
Already we are learning about companies that held assets at SVB. These companies will be forced to either raise the cash elsewhere or sell off assets themselves. As I noted on Friday, the bank run genie is officially out of the bottle.
The contagion has also spread to crypto, with “stablecoin” USDC collapsing, trading at about a 10% haircut as of Saturday morning. I’m guessing contagion throughout crypto is taking place behind the scenes as we speak.
We don’t know who or how, but there are definitely companies behind the scenes this weekend scrambling to shore up assets and liquidity. We may have a better picture of who is under pressure by Monday’s cash open. It may even take a couple days after that.
In the interim, markets next week eagerly await some idea of whether or not the Fed is prepared to ride to the rescue. With inflation still over 6% and Jerome Powell postured up as though the Central Bank would do anything to stop inflation, the Fed is now stuck between the rock and a hard place that many of us predicted would happen months ago. Heck, it was just 12 days ago that I wrote that the next bear market shoe was about to drop.
And while, economically, that has happened and is playing out behind the scenes, whether or not the fear translates over to equity markets remains to be seen – and it likely all depends on the Fed’s action, or lack thereof. I think it’s only a matter of time that stocks – priced still at about 18x declining earnings – take a major haircut. I wrote last week:
The market and the economy become two distinctly separate entities during a period of quantitative easing. When there’s free money flooding the market, the market does whatever it wants regardless of the underlying economy. During a period of tightening, like now, the opposite happens: the market becomes tethered again to the economy. This means an optimistic market can no longer be the tail that wags the economic dog. Instead, investors are being force-fed a reversion back to reality that they may not even have had time to stop and taste yet.
Recall, three weeks ago I also pointed out the fact that the bond market appears to be in the midst of a historic panic attack wherein, if historical norms are to be observed, it is signaling an imminent and intense recession that I believed will cause equity markets to plunge lower with it.
My market forecast for 2023 continues to see equity markets under pressure, as well as a whole host of potentially negative catalysts – many of which top market strategists and talking heads on financial television dared not talk about. At least, until we’ve witnessed a bank collapse. I believe the sectors and equities I am personally invested in for the year will give me an advantage versus just pouring money into index ETFs throughout the year, QTR reports
BANK RUNS BEGIN: Wealth Transfer Next
This in one of most in-depth, articulate, insightful, and revealing vids I have ever watched on the state of the Banks in the West, why they are collapsing, the Banksters behind them, the corrupt government sons of bitches and daughters of witches – both the Banksters & Politicians overall tactics, strategy, and last but not least what you can do to protect yourself.
It is worth watching and passing on to those you want wake up and inform what is coming….the greatest Wealth Transfer in history is almost upon us/U.S.!
With Silicon Valley Bank (SVB) failure and the FDIC taking it into receivership, as other major banks’ stocks drop amid reports of them selling off US Treasure holdings at a loss, ordinary bank depositors are left wondering whether they should flee to safety before things get a lot worse.
Risk analyst, former auditor, and founder of GoldSilverPros.com, Robert Kientz, returns to Liberty and Finance to explain what you need to know about this breaking crisis, and how it will play out both in the US and abroad, all with an eye to protecting your family’s financial future. Follow Robert at: GoldSilverPros.com.