Fears Take Hold…

March 14, 2023

* currencies & metals rally on Monday

* Banks are sitting on a mountain of unrealized losses! 

Good Day… And a Tom Terrific Tuesday to you! Another beautiful day here yesterday… We got a brief bit of rain last night, and that’s the only rain we’ve seen in month! But cold front moved in, again… That means the highs for the next couple of days will be in the 70’s…  cold front, he he he…   Whenever there’s a cold front that come through, the ocean gets very angry… Our Blues had won 2 straight games, before falling on the ice again last night, and losing… It has been a lost season for the Blues this year… There’s always next year! I’m excited about the NCAA basketball tournament that will begin tonight with play-in games… My beloved Mizzou Tigers play on Thursday afternoon, while I’m at the baseball game. UGH! Brian Setzer and his orchestra greet me this morning with their version of the song: Sleepwalk…

Well, the fear that’s in the markets from consumers/ investors, has greatened… I really don’t know what else to call it, other than fear…  And when there’s fear, there’s a run to Gold… And that’s exactly what we saw yesterday… Gold gained $45.80 on the day, to end the day at $1,924.70, and Silver outperformed Gold on a percentage basis, gaining $1.28, to end the day at $21.90… The dollar got sold again yesterday, as it followed up the overnight selling. The BBDXY lost over 6 index points from Friday’s close yesterday, and looks to be in trouble right now… The euro climbed back over the 1.07 figure, and all the other currencies followed the Big Dog euro, as it chased the dollar down the street.   But what will the currencies be when they are compared to a digital currency?  Ahhh, that’s the $64 question, folks… Stay tuned, same bat time, same bat channel!

My longtime friend, and best selling author, Bill Bonner, has maintained that the Fed will continue to hike rates until they break something…  Well, did the breaking of two banks last week, equal a real breaking of something? I doubt it… But it could, be the reason the Gov’t decides to go to digital currency, and not wait any longer…  But I did read an article yesterday where the pundit said that these two bank failures will push the Fed to pivot and cut rates by 100 Basis Points!  Wow, now that was from left field!  But what would happen if the Fed/ Cabal/ Cartel did decide to pivot now, after telling everyone that would listen that they are in the rate hike business until inflation is back to 2%?   

It would mean that the Fed/ Cabal/ Cartel has decided to hell with all of us suffering from inflation! Changing horses in the middle of the stream is never a good idea, and changing their position in the fight against inflation now, would also be bad idea…  Now, I’m not one to think that people should suffer from a bank failure, but… All of us with deposits in the bank, no matter what bank it is, are adults, and we know that the limit for a join account is $250,000 , FDIC insurance…   Any amount over that figure, is each depositors risk… And when you put funds at risk, you could lose them…  So, for the Gov’t to step in and say that all depositors’ funds will be available to them, is NOT, what should be done here…

I won’t go on and on about the bank’s failure, the regulators’ failure, and the depositor’s failure, to monitor what the heck was going on with these two banks… But in the end, why does the Gov’t need to stop in and cover up all their sins?   

Bank stocks all over the world took a hit yesterday… Here’s Reuters with their call on this: “Shockwaves from the collapse of Silicon Valley Bank further pounded global bank stocks despite President Joe Biden’s efforts to reassure markets. Emergency U.S. measures to shore up banks by giving them access to additional funding failed to dispel investor worries.”

In the overnight markets last night…The selling of the dollar came to and end. Apparently, currency traders were satisfied with the drop in the dollar that was associated with the failure of 2 U.S. banks last week. The BBDXY gained 1 index point overnight, and Gold is seeing some selling in the early trading today. Gold is down $11 this morning, and Silver has lost 15-cents to start the day. I had a conversation with a guy on Saturday, and he asked me if I thought the dollar was trading where it should… And I emphatically said no! The dollar is overpriced, and has been for sometime now… He then wanted to know why I thought that, and I reeled off a list of things that would make you wonder if I sat up nights thinking of these things… But, as I explained to the man, just because I think that the dollar is overpriced, doesn’t mean a hill of beans to the markets, for they don’t see it that way…

The price of Oil keeps slipping by the day, with it trading with a $73 handle this morning… The Oil price is really playing heck with Petrol Currencies… The darling Mexican peso has lost its shine, with the weak Oil price, and the Norwegian krone is cheaper than the Swedish krona, and that’s a phenomenon that rarely occurs… The Russian ruble has lost its shine, and Canadian dollar/ loonie, can’t stop stepping on its own feet… 

Well, here’s where I draw the line of being believable or not… Remember when now Treasury Sec. Janet Yellen said that “the U.S. wouldn’t experience another financial crisis”?   Kind of reminded me of when then, Fed/ Cabal/ Cartel chairman, Ben Bernanke, said that there was no housing crisis in 2008?  These public figure heads are there to make sure that the regular folks, don’t panic and sell… When the fit hits the shan, later, they just go hide and you don’t hear from them again…  But the rot on the economy/ markets vine has been exposed, and everyone knows it, but they have forgotten that they were told there was no crisis… But I don’t forget these things… and I find it to be my job to remind everyone!

Well then, thank you Chuck! Wait! What? Don’t be thanking yourself you dolt! Well, my dad taught me long ago that if you don’t toot your own horn, who else is going to do it?  So there! And don’t be calling me a dolt!  Even if sometimes I write like one! HA!

Ok, back to being serious… The good folks at GATA sent me a note on SVB and other banks that took a snippet from, here it is: “Silicon Valley Bank’s collapse last week sent tingles of panic down investors’ spines as it highlighted a larger problem across the banking sector: The widening gap between the value large lenders place on the bonds they hold and what they’re actually worth on the market.

SVB’s downfall was tied, in part, to the plunge in the value of bonds it acquired during boom times, when it had a lot of customer deposits coming in and needed somewhere to park the cash.

But SVB isn’t the only institution with that issue. U.S. banks were sitting on $620 billion in unrealized losses (assets that have decreased in price but haven’t been sold yet) at the end of 2022, according to the FDIC.

What’s happening: Back when interest rates were near zero, U.S. banks scooped up lots of Treasuries and bonds. Now, as the Federal Reserve hikes rates to fight inflation, those bonds have declined in value.”

Chuck again… yes, these are “Unrealized losses”, and they don’t have to be taken… Unless, there’s a run on their deposits like SVB had… And once again, I don’t believe these two bank failures is enough to get the Fed Heads to pivot and reverse their rate hike agenda… So, in that case, interest rates will continue to rise, and thus worsen the unrealized losses of banks…  They’ve got that going for them, eh?

The U.S. Data Cupboard today has the stupid CPI report for Feb.  I really don’t get why the markets still look at the stupid CPI, for it doesn’t properly reflect what the real inflation rate is, and how could it, given all the hedonic adjustments that have been added to the stupid CPI calc over the years… And those hedonic adjustments just keep getting added, there was a change to CPI made just a month or so ago!  As I’ve talked about previously, several times, that is, John Williams at www.shadowstats.com does the calc the way it was done before Clinton and Greenspan began the spiral of hedonic adjustments to CPI, and his calc is the only inflation calc that counts in my book!

To recap… The dollar got sent to the woodshed yesterday, with Gold & Silver being the main beneficiaries of the failure of two U.S. Banks last week.  Chuck doesn’t believe that these two bank failures will be the end of this…  And investors are fearing that there will be more rot on the vine exposed, and therefore the safe haven investments of: Gold, Silver, Swiss francs, and Treasuries have been the end choices of investors… Bank stocks are taking a hit, and well they should!  There has to be many a bank that has the same makeup as SVB out there folks…  And the Unrealized losses of the Banks is going to get worse, as interest rates continue to climb… And the price of Oil keeps slipping, and that has really weighed heavily on the Petrol Currencies…

For What It’s Worth… This came to me from long time reader, Bob, who thought it might be important, and I agree! This is an article about the SVB failure, etc and it can be found here: Ellen Brown: The Looming Quadrillion Dollar Derivatives Tsunami  – scheerpost.com

Or, here’s your snippet: “A fuller report on the collapse of SVB will have to wait on developments that occur over the weekend and soon thereafter.

This column, meanwhile, focuses on derivatives and is a followup to my Feb. 23  column on the “bail in” provisions of the 2010 Dodd Frank Act, which eliminated taxpayer bailouts by requiring insolvent SIFIs to recapitalize themselves with the funds of their creditors. “Creditors” are defined to include depositors, but deposits under $250,000 are protected by FDIC insurance. However, the FDIC fund is sufficient to cover only about 2% of the $9.6 trillion in U.S. insured deposits. A nationwide crisis triggering bank runs across the country, as happened in the early 1930s, would wipe out the fund. Today, some financial pundits are predicting a crisis of that magnitude in the quadrillion dollar-plus derivatives market, due to rapidly rising interest rates. This column looks at how likely that is and what can be done either to prevent it or dodge out of the way.

“Financial Weapons of Mass Destruction”

In 2002, mega-investor Warren Buffett wrote that derivatives were “financial weapons of mass destruction.” At that time, their total “notional” value (the value of the underlying assets from which the “derivatives” were “derived”) was estimated at $56 trillion. Investopedia reported in May 2022 that the derivatives bubble had reached an estimated $600 trillion according to the Bank for International Settlements (BIS), and that the total is often estimated at over $1 quadrillion.  No one knows for sure, because most of the trades are done privately.

As of the third quarter of 2022, according to the “Quarterly Report on Bank Trading and Derivatives Activities” of the Office of the Comptroller of the Currency (the federal bank regulator),  a total of 1,211 insured U.S. national and state commercial banks and savings associations held derivatives, but 88.6% of these were concentrated in only four large banks: J.P. Morgan Chase ($54.3 trillion), Goldman Sachs ($51 trillion), Citibank ($46 trillion), Bank of America ($21.6 trillion), followed by Wells Fargo ($12.2 trillion).”

Chuck again… ahhh, those darn derivatives… I’ve been talking about them for years now, and this is coming to a big bottle neck, folks… With interest rates rising, these derivatives, have all accounted on them remaining low, things are sure to go bust… But when? Ahhh, that’s the $64 question… But in the meantime, Got Gold?

Market Prices 3/14/ 2023: American Style: A$ .6668, kiwi .6222, C$ .7291, euro 1.0714, sterling 1.2152, Swiss $1.0975, European Style: rand 18.2590, krone 10.6280, SEK 10.5863, forint 366.40, zloty 4.3731, koruna 22.2091, RUB 75.31, yen 134.40, sing 1.3461, HKD 7.8467, INR 82.49, China 6.8769, peso 18.85, BRL 5.2473, BBDXY 1,246.53, Dollar Index 103.78, Oil $73.20, 10-year 3.60%, Silver $21.68, Platinum $992.00, Palladium $1,468.00, Copper $3.92, and Gold… $1,903.54

That’s it for today… I had a long conversation with good friend Dennis Miller on the phone yesterday, we both were fired up about the SVB failure and the Gov’t’s intervention… If the NSA was listening, they got an earful of thoughts on how this bank failure could have been averted… Team USA took their loss to Mexico out on the Canada team last night, pounding them into submission with a 12-1 victory… These games come on so late for me, I fall asleep in the my chair watching them, and then I wake up and wonder where I am!  My beloved Cardinals get back on the field after a day off, yesterday, but they’ll be on the road until Thursday… Paul McCartney, takes us to the finish line today with his solo song: Every Night… I hope you have a Tom Terrific Tuesday today, and please Be Good To Yourself!

Chuck Butler