- Penciling in the NEXT crisis
- Jim Rickards’ spot-on “Biden Bucks” development
- Broadcasting fictions: “All in a day’s work”
- A market reminder from Alan Knuckman
- Dutch farmers upset the political establishment… SVB’s karma… A “wild-ass conspiracy theory”?… And more!
So… crisis averted? At least until the next one tomorrow?
After we went to virtual press yesterday, Credit Suisse secured a loan from Switzerland’s central bank worth up to $53.7 billion. And so this most zombified of zombie banks will continue to stalk the globe for a while longer.
Nor is there any new drama in the aftermath of Silicon Valley Bank’s blowup. No, the unintended consequences of offering an implicit backstop to every uninsured bank deposit are somewhere in the future.
Really, they can’t very well bail out tech companies like Roku (which held $487 million in cash at SVB) while leaving Farmer Bob high and dry in a future crisis, right? Or maybe they would. Fun times we live in.
With the crisis atmosphere abating for the moment, futures traders are once again anticipating a jump in short-term interest rates when the Federal Reserve meets next Wednesday.
Before SVB started circling the bowl last week, the betting in fed funds futures was for a jump of a half percentage point. Yesterday, the crisis atmosphere was so thick, the betting was on no increase at all.
This morning, we’re back to a 73% likelihood of a quarter-percentage-point jump — from 4.75% to 5%.
As we said Tuesday, the Fed’s in the worst of all worlds now — wrestling with a financial crisis before the inflation genie has been put back in the bottle. Everyone at the Eccles Building in Washington was hoping it wouldn’t come to this. (Of course, it’s their own damn fault, but we digress.)
We’ll have more to say tomorrow about the Fed’s conundrum and what it means going forward. But for the moment, we turn to follow-up coverage on two of Jim Rickards’ big themes of recent months…
Follow-up No. 1: As it turns out, Jim Rickards was spot-on when he anticipated a major announcement pertaining to Biden Bucks “on or about” March 15 — yesterday.
From a Fed press release dated yesterday: “The Federal Reserve announced that the FedNow Service will start operating in July and provided details on preparations for launch.”
We told you about FedNow last summer: It’s an important interim step on the way to a CBDC, a central bank digital currency. FedNow is touted as an instant payment service for banks and other financial institutions — allowing payments to clear immediately, rather than sitting in limbo in the middle of the night, or on weekends and holidays.
The announcement yesterday spells out a timeline — certifying participating institutions during April, dry runs of the system in June, launch in July: “Many early adopters have declared their intent to begin using the service in July, including a diverse mix of financial institutions of all sizes, the largest processors and the U.S. Treasury.”
It’s not a consumer-facing thing, not now. But make no mistake, Jim says in an email this morning: “It is the rollout of the new payment technology that will ultimately be the backbone of the CDBC system.”
Follow-up No. 2: The mainstream is making an especially lame attempt to push back against the powerful evidence that the U.S. government blew up the Nord Stream pipelines.
As you might know, Jim put his posterior on the line back on Jan. 13 when he declared, “President Joe Biden ordered the Nord Stream attack… and his mistake is about to plunge us all into hell.”
Then, 27 days later, on Feb. 9, the legendary investigative reporter Seymour Hersh laid out — in exhaustive detail — the Biden administration’s planning and operations to destroy the pipelines.
Yes, the government and the media — it’s nearly impossible to separate the two anymore — ignored the story at first. But on March 7, The New York Times ginned up an alternative explanation, attributed to (of course) anonymous U.S. officials: It was Ukrainian special forces, not connected to the Ukrainian government, who did it.
In contrast with the Hersh story, the NYT account was appallingly thin on detail: Nothing about the members of the group, who directed the group, who paid for the operation or even how these anonymous officials learned about it.
So what was the genesis of this story, really — and why did it take nearly a month to come out?
“Spreading lies is all in a day’s work for the CIA,” says Jim Rickards. “I know; I worked there for 10 years. The New York Times is an accomplice in spreading the lie once the CIA cooks up a story.
“The CIA was happy to remain silent, but once the Sy Hersh story got traction, they had to make up a counternarrative so the talking heads on MSNBC would have a ready-made rebuttal.
“Why implicate the Ukrainians? Because they’re U.S. vassals and won’t push back. If the CIA said Russia did it, Russia would push back with exposes of their own. By blaming Ukrainians, there’s no way to investigate independently and no risk of contradiction. It gets lost in the fog of war. Why suggest that the Ukrainian operatives were independent of the government? That gives Zelenskyy plausible deniability; he can say it wasn’t done by him or his government, but the story still hangs out there.
“It’s classic CIA disinformation and The New York Times played its part as the obedient megaphone. When you see how the intelligence community and media work together to spread lies, you can understand why intelligence work is referred to as a ‘wilderness of mirrors.’”
If you’re not yet a subscriber to Rickards’ Strategic Intelligence, you owe it to yourself to review Jim’s gutsy but accurate call. There are huge implications for the energy markets — and huge opportunities to play it in your portfolio. Take a look at this link.
To the markets today… where Paradigm trading authority Alan Knuckman would like to remind you the stock market sits more or less where it did this time a week ago — before the trouble started at SVB.
It’s true. At 3,935 as we write, the index is actually a bit better off than it was at last Thursday’s close. Yesterday, what looked like a wipeout amid the Credit Suisse sturm und drang turned out to be a very ordinary down day. Heck, the Nasdaq ended the day slightly in the green.
Alan made his case to Neil Cavuto on Fox News moments after the close: “Psychologically, people are very focused on this — but unfortunately, people mentally are always fighting the last war, the last battle.
“This is not 2008. Things are much, much different this time and we’ll have to ride this out and see where we are in the next couple of weeks. But for right now it’s one bank that got over their skis doing some things that they shouldn’t be doing and not doing the things they needed to do and it’s just it’s a confidence issue as well right now. So we’ll see where things go from here.”
Heck, Mr. Market is feeling positively giddy on the news of a rescue in the works for First Republic Bank — the feds and several of the big banks are trying to work something out.
That 3,935 reading on the S&P is a 1% gain on the day. The Nasdaq is up 1.75% to 11,632. The Dow is up a half percent, back above 32,000.
Bond yields are stabilizing, the 10-year Treasury note at 3.5% on the nose. Gold is steady at $1,910, silver has slipped to $21.53. Crude is flat at $67.72.
Economic numbers? They’re a mixed bag: Housing starts and permits came in way better than expected; falling mortgage rates tend to do that. Still, both figures are down meaningfully from the heady days of a year ago. Meanwhile, mid-Atlantic factory activity is looking punk with the Philadelphia Fed Manufacturing Index at minus 23.2; that’s seven straight months the number’s been in contraction territory below zero.
What we called “the most important story the mainstream is utterly ignoring” last summer… has just shaken Europe’s establishment to the core.
Massive protests broke out in the Netherlands last year. Farmers blocked supermarket distribution hubs in several cities; cops opened fire on them at least once.
The farmers were outraged by a government scheme that would force them to use less fertilizer and reduce their livestock herds. For the government to meet its nitrogen oxide targets, the country’s livestock population would have to be slashed by 30%.
Fast-forward to this week…
After provincial elections, the Farmer-Citizen Movement Party is poised to take 15 seats in the 75-seat Dutch Senate — the most of any party. “We won’t be ignored anymore,” says party leader Caroline van der Plas.
Still, Prime Minister Mark Rutte’s four-party coalition is holding on to 24 seats, with a Green-Labor alliance taking 15 more — which might well clear the way for government plans to buy out thousands of farms. We’ll stay on top of the story…
“It’s my opinion that the current banking crisis is a byproduct of ‘participation-trophy parenting’ where no matter how irresponsible or incompetent you are there are no repercussions,” a reader writes.
“And now it seems the government is adding fuel to that fire. This sort of behavior will persist until the entitled rich start feeling the pain. Silly Valley Bank should have been forced to fold under the existing FDIC rules. I thought oligarchs only existed in Russia!”
“So let me get this straight,” says another. “For the past 10(?) years the banks have been sinking their excess cash into Treasuries where they can earn easy money without risk, instead of loaning it into their communities to provide small businesses with the capital to conduct operations.
“But after about a year of interest rate increases by the Big Bank, all their bonds and bills paying a few percent are worth less, so much less that their solvency is questioned. Oh the irony! And the karma!”
“SVB is not a bank,” asserts a third. “Bring back Glass-Steagall and separate the traditional banks from the speculation houses. The only issue is that there would have to be a considerable time period to allow the system to settle.
“I have read dozens of articles regarding the current meltdown — it is disheartening to observe not one mention of Glass-Steagall. I guess I’m dreaming, as the most powerful of powerful lobbies, Wall Street, would never allow it. The corruption has gone too far. So we will continue to use the everyday person’s life savings to provide the money necessary for rank speculation.
“Let these institutions decide which they want to do — provide traditional banking services for the 95% of us, or provide legitimate venture capital and speculation opportunities to the gamblers. We need both. but they cannot continue to do both.”
The 5: We’ve mentioned it several times before, but the deregulation-minded Rep. Ron Paul voted in 1999 to keep Glass-Steagall in place. Repeal “bodes ill for the… future as far as limiting taxpayer liability is concerned,” he said.
“There seems to be the possibility of more to the Signature Bank story,” says our next mailbag entry.
“In every report I have read, the seizure of this bank has rated only a scant mention buried way down the page in a story focused upon SVB. And nary a mention of Signature halting withdrawals. No rationale for the seizure supplied.
“Yet Signature is the aggregated on- and off-ramp for the crypto ecosystem in the U.S. Sure, consumers work with the various exchanges, but it is Signature (overwhelmingly) behind the scenes that actually changes dollars to Bitcoin and vice versa.
“Now that the regulators own the assets and operations of Signature, they are presumably free to completely shut the crypto part of the business, thereby stranding the various consumer-facing crypto companies, strangling them for access to banking.
“Which may just be one more incentive (stick, not carrot) to raise the attractiveness of a CBDC in relation to cryptocurrencies.
“Plausible scenario, or wild-ass conspiracy theory? Not enough data to know. Why are the media outlets giving the rationale for seizure of Signature short shrift?”
The 5: Not implausible. According to Reuters, citing “people familiar with the matter,” the FDIC is taking bids from interested buyers on Signature (SVB, too) through tomorrow. “Any buyer of Signature must agree to give up all the crypto business at the bank, the two sources added.”
Not that crypto-heads are panicking today: Bitcoin is less than $150 below $25,000 and Ethereum sits at $1,664.
“Best laugh of the day,” a reader writes after Emily’s take in yesterday’s edition on the lawsuit over boneless wings or nuggets or whatever you want to call them. “Emily rocks!” says another.
Agreed — a necessary balm once or twice a week to offset your managing editor’s cynicism the rest of the time!
Best regards,
Dave Gonigam
The 5 Min. Forecast
