Government Bailouts Here We Come!

March 13, 2023

* currencies & metals rally on Friday

* Will this Wednesday be the end of folding currency? 

Good Day… And a Marvelous Monday to you… Lots of sports for those of us that love sports to watch this past weekend… Tomorrow, Kathy is heading back home again, for a few days, so I’ll be all by myself until darling daughter Dawn and her family arrive Friday night… Thursday, I’ll be at the game by myself, so if you’re in the area, send me a note, I do have an extra ticket! HA! After a few hot days at the ballpark, the last two visits have been downright delightful! Especially, with a Cardinals win in each game! 3 of the Cardinals star players are away playing in the World Baseball Classic, so the young kids are getting their opportunity to shine… Grand Funk Railroad greets me this morning with their song: I’m Your Captain…

Well, Friday was something… Not only did the Gov’t try to pull the wool over our eyes once again with the Jobs Jamboree number, but the Gold traders said, “well, if you want to play that game, we’ll just go ahead and start marking up the price of Gold”… The dollar got sold to the tune of 5 index points in the BBDXY. The euro climbed back over the 1.06 handle, and sterling recovered over the 1.20 handle… Gold gained $37 on Friday, to end the week at $1,869.10… Silver gained 47-cents on Friday to end the week at $20.63…

The price of Oil was steady in the $76 handle, and bonds…  Well, bust my buttons! The 10-year Treasury lost 21 basis Points on Friday, to yield 3.70%…  You’ve got to be kidding me! Bonds do not move like that in huge chunks! But the 10-year did on Friday… The SVB bank failure is really pushing investors into safe haven investments, like Treasuries, and Gold…  One writer for Kitco, said that the sentiment toward Gold has changed and it could return to $1,900 this week!

Here’s what I believe we’re seeing right now… The SVB failure is going to cause a large number of over the FDIC limit, to pull their collective excesses from their bank, and invest them in short Term Treasuries, or Gold… I myself would opt for Gold… But then that’s just me… So, that’s the reason for the HUGE move in bonds & Gold on Friday…  And guess who touted SVB stock just weeks ago?   Well, you know who, so I won’t have to mention J.C.’s name…

I have more details on the SVB failure in the FWIW section today, so if you want to skip ahead, and read it now, feel free to do so, but make sure you circle back for the rest of the letter today!  But before I go on, my good friend, and former Big Boss, Frank Trotter, always on top of things as he is, sent me a PDF from JPM that dove deep into the SVB failure, and here’s a brief snippet: “The irony of SIVB is that most banks have historically failed due to credit risk issues. This is the first major one I recall where the primary issue was a duration mismatch between high quality assets and deposit liabilities. As shown below, being flooded with deposits from fast-money VC firms and other corporate accounts at a time of historically low interest rates might have been more of a curse than a blessing.”

Ahhh… another case of low interest rates being the bane of things…

But shoot Rudy, looky here! Now the FDIC has announced that they will make all deposits available to customers of the bank on Monday…  Here we go…   Oh, and the FDIC also announced the shuttering of another bank on Sunday… Signature Bank…  The FDIC said that by making all deposits available, they have relieved the tension that other banks around the country would have experienced otherwise…   I could be naïve and say that this will work… or… I could be jaded like I am, and say this is just bad money, going out to more bad money…   And that’s all I’ll say about that!

In the overnight markets last night… Well, the FDIC announcing that the depositors of SVB and Signature bank will be made whole, hasn’t stopped the selling of the dollar. The BBDXY has lost 4 more index points overnight, and starts the week at 1,249…   Gold is up $17 in the early trading this morning, and is climbing toward that $1,900 figure. Silver has added 20-cents this morning also.  The markets looked confused as to what to think… on one hand you have the 2nd largest bank failure, along with a crypto bank failure, which signifies that there’s something seriously wrong with the financial structure of the U.S., but on the other hand you have the fact that all depositors will be made whole, and no tax payer money was used to bail them out…  So… what do you think about all of this?

The government’s intervention here is to be thought of as something that was expected given their past history of bailing out whom they figure is worthy…  I was talking about something similar to all this to a financial person the other day, and told him that at Mark Twain Bank we used to do a Bank CD product that would go out and find the highest rate and place funds into that bank’s CDs… That was all good until there was problems in the U.S. and a slew of banks failed… That was when I had to go out to the banks and  obtain the FDIC claim papers and then deliver them to the clients, who then had to file them to get their principal back, which I was told would take months to recover, because of all the Gov’t red tape…

Where was the Gov’t bail outs then? Oh, that was a different time, Chuck… The Gov’t didn’t bail out anyone, if you failed, you failed, and then we stared over… But somewhere along the way, that all changed, and now we’re in the business of bailing out everyone!   I’m no fan of bailouts, in whatever shape or form they are made… I’m just saying…

The Ides of March… is forever associated with the assassination of Julius Caesar by senators hoping to preserve the Roman Republic. And why am I bringing this up today? Because, James Rickards, who along with me, have been warning people about the coming of digital currencies, says that March 15th will be the day that the Gov’t announces digital currencies… Thus the Ides Of March, the assassination of the folding currency…  Now, I don’t know if that’s really going to take place this week, but… it’s coming, and soon…  And then what will you do?

Remember that over two years ago, I told you, in the Pfennig, that this day was coming, and it would most likely be associated with defaults…   Silicon Valley Bank going under last week, could be the straw that breaks the folding currency’s back…

The best performer of last week was the Swiss franc… which has historically been a “safe haven” currency, when things look as tenuous as they do now, and has resumed that position apparently… The euro was also a safe haven currency only from being the offset currency to the dollar. I would watch for additional bank problems in the U.S. to confirm that the dollar is in trouble, and that the safe haven currencies are the way to combat that, other than Gold…

The U.S. Data Cupboard on Friday last week, saw the Gov’t try to pull the wool over our eyes once again, with a Jobs Jamboree print of 311,000 jobs created in Feb…  Ahem… Psst… I’ll let you in on a little secret that few people ever really look at… of that 311,000 jobs created, 176.000 of them were added to the surveys by the BLS, because 135,000 jobs created just doesn’t sound like a strong economy, now does it? And here’s another caveat that I figured out…  The Unemployment Rate rose…   yes, Feb’s level was 3.6%, VS 3.4% in Jan…  Now, here’s where the rubber meets the road, folks… The Gov’t wants you to believe that 311,000 jobs were created in Feb, but if that’s the case, then how could the Unemployment Rate rise?  Riddle me that Batman!

This week’s Data Cupboard has a few real economic data reports, but none today… starting tomorrow, we’ll begin to see the stupid CPI, then Retail Sales, and so on… So, it will be a busy week for the bean counters, but… will their data prints go unnoticed because of the Ides Of March?

To recap… The SVB failure last week,  is going to play BIG with investor sentiment, and Gold gained $37 on Friday last week, and the 10-year Treasury got bought hand over fist, as it lost 21 Basis Points of yield. (remember bonds price like this, as the yield goes down, the bond price goes up and vice versa)  James Rickards says that the Ides Of March will be memorable this week, as he believes that’s when the Gov’t will announce digital currencies…   Got Gold?

For What It’s Worth…  I talked briefly about this above this morning, but this story needs more attention than just a brief note!  This is going to be the first of many bank failures, I believe… So, where are you on the $250,000 FDIC limit? The Silicon Valley Bank (SVB) IS A BIG STORY folks, and you can read about it all here: “Expect Mass Layoffs…” – The Real-World Impact Of SVB’s Failure | ZeroHedge

Or, here’s your snippet: “For most people in America, the news that a ‘bank in Silicon Valley’ has failed will be forgotten quicker than a story about soaring shoplifting in their local supermarket.

It shouldn’t.

Reality is that the contagion of the shuttering of the 18th largest bank in the US are widespread.

SVB is in fact the second largest (by assets) bank failure in US history after WaMu.

First things first, there is a long line of depositors who are over the $250,000 FDIC insured limit (in fact only somewhere between 3 and 7% of total deposits are insured).

And, investors are out a lot…

Whenever a company stumbles, shareholder lawsuits become pretty common. As Bloomberg reports, already this morning, law firms including Faruqi & Faruqi LLP, Schall Law Firm, Pomerantz LLP and Girard Sharp LLP have put out press releases saying they’re looking into SVB and that investors who’ve suffered losses as the bank’s shares slumped can contact the firms’ attorneys.

Brad Hargreaves explains in a brief thread how SVB’s closure & receivership is going to have a massive impact on the tech ecosystem.

SVB was not just a dominant player in tech but were highly integrated in some nontraditional ways.”

Chuck again… I strongly suggest you click on the link above today, because to see the incomplete list of companies in SVB, it’ll shock you, and then make you wonder, what comes next?  And bank runs are going to become a real problem, folks…   Got Gold?

Market Prices 3/13/2023: American Style: A$ .6635, kiwi .6180, C$ .7250, euro 1.0670, sterling 1.2067, Swiss $1.0925, European Style: rand 18.2161, krone 10.6440, SEK 10.7152, forint 363.10, zloty 4.3997, koruna 22.2275, RUB 75.18, yen 135.40, sing 1.3475, HKD 7.8445, INR 82.76, China 6.8802, peso 18.76, BRL 5.2140, BBDXY 1,249.29, Dollar Index 104.29, Oil $75.50, 10-year 3.55%, Silver $20.83, Platinum $969.00, Palladium $1,401.00, Copper $3.96, and Gold… $1,886.54

That’s it for today… 3 games, 3 wins! Our expansion soccer team, STL City SC, has stared their season and existence, with 3 wings, being only the 2nd expansion team in the league, to start out 3-0! Team USA got the World Baseball Classic off on a good note, with a win Saturday night. Both games the soccer game, and the baseball game came on late Saturday night, and I fell asleep watching them!   Team USA followed Saturday night’s win with a loss to Mexico! Proving that you can’t win them all, even with an all-star lineup. Both my fave basketball teams lost in their respective conference tournaments on Saturday… The Mizzou Tigers will play in the NCAA Tournament, while the SLU Billikens will have to settle for an invitation from the NIT… Well, this is the last week before I head out on my annual spring vacation, so I have that going for me!  The Allman Brothers take us to the finish line today with their song: Blue Sky…   I hope you have a Marvelous Monday today, and please Be Good To Yourself!

Chuck Butler