Category Banking

Mar 22 2023

The Banking & Debt Crisis Continues


Armstrong Economics Blog/Banking Crisis Re-Posted Mar 22, 2023 by Martin Armstrong

The banking crisis continues and it is impacting funds that have been buying bonds. Allianz, a subsidiary of Pimco, is writing off countless millions with Credit Suisse bonds. The banking crisis has been the result of artificially low-interest rates for far too long and banks were used to free money and buy long-term bonds all because they were making their money on the spread. Now that rates are rising, their risk management was effectively nonexistent, and thus the losses and widespread.

The Allianz subsidiary Pimco is one of the largest asset managers in the world. They have to now write off a loss in Credit Suisse bonds and it’s ain’t over yet as we head into April 10th.

Mar 20 2023

This Just In – Western Nation Central Banks Organize to Provide Daily Liquidity of Dollars in The Event of Contagion Bank Collapse


Posted originally on the CTH on March 19, 2023 | Sundance 

This is rather remarkable and tells us something about the current status of the “western” financial system.  The last sentence in today’s announcement from the FED is particularly laughable.   Check this out [Source]:

That last sentence is nonsense.   When was the last time the ‘central banks’ worried about the supply of credit to households and businesses?  Total and complete nonsense. What they are worried about is the need to have readily available dollars, faster, to backstop banks that are supposed to be holding deposits.

Nothing quite inspires ‘global banking confidence’ like the need to swap dollars rapidly, from country to country on a daily basis, because the amount of currency in bank, within any western nation, at any given time, might disappear.

Yesterday’s monologue from Neil Oliver, and the recent personal banking story that structures his comments, is standing as eerily prescient right now.  SEE BELOW:

https://youtube.com/watch?v=UcNl23qhB8A%3Ffeature%3Doembed

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“This just in.  Everything is fine… the liquidity of the Western banking system has never been stronger”… “Look over there folks, Trump indictment, nothing to see here folks… move along now”…

Mar 17 2023

The Old Guy in the Corner of the Room


Armstrong Economics Blog/Interest Rates Re-Posted Mar 17, 2023 by Martin Armstrong

COMMENT: Marty, I hate to tell you but the reason you saw this coming was that you are old – like me. LOL. Do you realize that the 2007-2008 crisis was 16 years ago! Time flies, my friend. Most traders at these banks are under 35. That means that they have never seen anything like this and could not smell, taste, or see it coming. When we were youngsters, the old guy in the corner of the room would always say this is like 1929. Remember him? We are that guy today. I will buy you a Dewars when I get to Florida. The good news is we won’t have to endure this insanity much longer.

Cheers

ND

REPLY: I guess you are right. There has been a  cycle of events like this for centuries. Perhaps it requires a new generation of traders every 16 years or so who think they know everything. When I was advising Temple University’s portfolio and Merrill was trying to sell them the “new way” to make money by buying the long-term, selling the short-term, leveraging that to the moon and the spread would enhance your yield, the way to increase the yield on your portfolio. The chairman of Temple told them if I approved it the University would consider the proposal. I told them interest rates would rise and they would blow up. These two young kids selling this leverage deal told the University I was “too old” back in the 90s because I did not know the “new way” to make money. The chairman was older than me. The University told them to take a hike. On December 6th, 1994, Orange County California became the largest municipality in U.S. history ever to file for bankruptcy for they tried the “new way” to make money and blew up. That was in the courts for some time.

These people NEVER seem to ever understand when the trend will change especially in interest rates. They also position themselves based upon opinion and consensus but the consensus MUST be wrong for that is what flips the trend back and forth. Only fools invest money based on opinion and the consensus view and are quickly separated from their money. Without that loss, they never learn how how markets work and those that blame others are hopeless perpetual losers for they never learn anything.

Even Ben Franklin said during the Financial Crisis: “In this world nothing can be certain, except death and taxes.” He uttered those words because of the financial panics. in his day. There was the Panic of 1791 which was followed by a massive real estate bubble that then burst during the next Panic of 1792.

The Bank of North America had been the creation of Robert Morris (1734-1806) who got caught up in the whole real estate bubble. Morris had financed the American Revolution. He was a major patriot. Nevertheless, his bank went bust in the first Financial Panic over interest rates back then and he ended up in debtor’s prison thanks to the Panic of 1792. This is one of my favorite relics of the era.

So banks have been failing over interest rate swings for hundreds of years. They don’t teach this risk management in university and the current risk models do little but snooze over the real risks for they ignore cycles. We NEVER learn from the past because people find history irrelevant or boring. You are right, we are the old guys in the corner of the room compelled to watch others repeat history over and over again.

Mar 17 2023

Financial Crisis of 2023


Armstrong Economics Blog/Banking Crisis Re-Posted Mar 17, 2023 by Martin Armstrong

QUESTION #1: Marty, I think your warning about the collapse of leadership in government and the private sector rings true as Ken Griffin, the founder of hedge fund Citadel, said the rescue of Silicon Valley Bank shows the U.S. economic system is “breaking down before our eyes” because they bailed out the depositors. Yet Carl Icahn seems to agree with your saying that the U.S. economy is at a breaking point because of inflation. He said, “every hegemony has been destroyed by inflation.”

Very few so-called billionaires seem to understand what’s at stake. It makes me think they were just lucky in how they made their money. After Griffin’s comment, I would not be inclined to invest in Citadel. Then a group of banks is talking about depositing $20 to $30 billion to save Republic bank.

Is there any hope for the future when leadership is absent in these times of chaos?

UT

QUESTION #2: Thanks for everything you do. At the WEC, you warned about banks and even the big funds. The turning point was at the end of January here in 2023. Is it possible that this financial crisis will be the major factor even overpowering war when the ECM comes into play by April 10th?

CW

ANSWER: Anyone who does not understand that inflation is a natural occurrence when you get into a war is clearly not a student of history and has no business being the CEO of even the head local dog-catcher. The Roman deity Janus, after whom January is named, was the two face entity who looked at the past and the future. The doors to his temple would be closed when there was peace. That symbolized that nothing was at risk of changing. However, in times of war,  they would leave the doors open to symbolize the uncertainty of war that the spirits could flow in and out.

Only today, do we seem to no longer respect that the cost of war is both lives lost and inflation for those who survive. This Ukrainian Proxy War serves no purpose. Winning or losing will have ZERO impact on our national security or the future of the people. This is simply a grudge match instigated by the Neocons who perpetually love war as long as someone else is dying for their personal goals. To them, it is nothing more than watching a war on CNN and cheering as if it were a football game.

I have said that this war will undermine the entire US economy and that is now manifesting in the Financial Crisis of 2023 which will be far worse than any of these people expect. The lack of experience and the stupidity of those who remark that capitalism is collapsing because they are honoring the depositors is absurd. A depositor has NO WAY of understanding the financial status of a bank until it is too late. They receive no warning and yet there are those who say they should suffer the losses because that is capitalism.

Sorry, but that has NOTHING to do with capitalism. It is no different than FRAUD soliciting money with a false pretense. Investing in a hedge fund like Citadel is different from a bank. Depositors in a hedge fund know they are investing their money and they are getting a piece of that return. That is capitalism. Someone who has a bank account where their social security check is automatically deposited took on no such risk. Sorry – that is different that a hedge fund that goes bust.

The problem we have is that the ECM turning point is April 10th. Yet it is also the Pi Target from the fall of the USSR and the birth of even Ukraine. We just had Poland losing their mind and sending jets to Ukraine. That makes Poland a viable target for war. Poland is irresponsible given the fact that the Ukrainians slaughtered over 300,000 of them and has refused to ever apologize for their WWII Nazi involvement.

We have a problem here with the Financial Crisis simultaneously with important cyclical targets regarding war. Any personal interpretation I can offer is just a personal opinion. Both trends are colliding into April and this may be a two-prong panic of unprecedented significance.

Mar 17 2023

Kevin O’Leary Discusses How Small and Regional Banks Will Disappear With New Biden/Yellen Policy…


Posted originally on the CTH on March 16, 2023 | Sundance

Small to medium sized banks along with credit unions are the best vehicle for Main Street USA small businesses.  Somehow in all the conversations about banking customers, this little factoid is seemingly, perhaps purposefully, overlooked.   WATCH:

Mar 16 2023

Swiss Central Bank Steps in to Backstop Credit Suisse Amid Financial Collapse – The Larger Geopolitical Dynamic is Clear


Posted originally on the CTH on March 16, 2023 

Before getting to the details of the Credit Suisse issue, it is worth taking a bigger geopolitical context to the dynamic.  The initial backstop sought by Credit Suisse was from the Saudi National Bank; however, SNB Chairman Ammar Abdul Wahed Al Khudairy refused more lending {LINK}.

This is where we need to keep the BRICS -vs- WEF dynamic in mind and consider that ideologically there is a conflict between the current agenda of the ‘western financial system’ (climate change) and the traditional energy developers.  This conflict has been playing out not only in the energy sector, but also the dynamic of support for Russia (an OPEC+ member) against the western sanction regime.  Ultimately supporting Russia’s battle against NATO encroachments.

Russia, Saudi Arabia and China are geopolitically aligned in interest against the western financial system.  As a consequence, when western banks find themselves in need of capital and cash, there is a layered geopolitical dynamic in the background to Saudi refusal that must be considered.

With multiple western banks now in trouble, Credit Suisse is also exposed, and, like U.S. Treasury/Fed intervention in America, the Swiss central bank has stepped in to backstop the looming collapse.

In the big picture we are seeing the ramifications of the ‘Build Back Better‘ agenda impacting the banking and finance sector which spearheaded it.  I am not seeing this discussed anywhere, as the western governments of the collapsing banks are being forced to intervene.

(Reuters) – Credit Suisse on Thursday said it was taking “decisive action” to strengthen its liquidity by borrowing up to $54 billion from the Swiss central bank after a slump in its shares intensified fears about a broader bank deposit crisis.

The Swiss bank’s problems have shifted the focus for investors and regulators from the United States to Europe, where Credit Suisse led a selloff in bank shares after its largest investor said it could not provide more financial assistance because of regulatory constraints.

Regulators in the private banking hub on Wednesday had sought to ease investor fears around Credit Suisse, which added to broader worries sparked by last week’s collapse of Silicon Valley Bank and Signature Bank, two U.S. mid-size firms.

Asian stocks had extended Wall Street’s tumble on Thursday and investors bought gold, bonds and the dollar, leaving markets on edge ahead of a European Central Bank meeting later in the day. The bank’s announcement in the early European morning helped trim some of those losses though trade was volatile. (read more)

Again, I go back to the geopolitical map.  The yellow nations with sanctions against Russia are also the yellow nations driving the ‘Build Back Better’ climate change energy policy.  The grey nations are not in alignment with either dynamic.  It is not a coincidence the banking issues are all within the yellow nations.

(Via Daily Mail) Wall Street’s main stock indexes opened lower on Wednesday, as turmoil at Credit Suisse renewed fears of a banking crisis and sent shares of major US banks lower.

At the opening bell, the Dow Jones Industrial Average fell 396 points, or 1.23 percent, while the S&P 500 opened 1.09 percent lower and the Nasdaq Composite dropped 1.20 percent.

Shares of First Republic, one of the regional banks swept up in contagion fears after the collapse of Silicon Valley Bank, dropped up to 11 percent after the bank’s bond rating was downgraded to junk status by S&P.

In Europe, shares of Credit Suisse plunged more than 25 percent, hitting a new record low for the second day in a row, after the Swiss bank’s largest investor said it could not provide more financial assistance to the lender.

The Big Four trillion-dollar US banks suffered in early trading after yesterday’s rally. Wells Fargo slid 3.9 percent, Citigroup dropped 4.3 percent, Bank of America was down 2.2 percent and JP Morgan saw a 3.5 percent dip.

After the collapse of SVB Financial and Signature Bank, emergency measures by US authorities had soothed some worries about the health of the other banks, helping regional lenders stage a rebound in Tuesday’s session.

However, regional banks were giving back their gains in early trading Wednesday, with shares of First Republic, PacWest and Western Alliance all down between 2.7 percent and 11 percent.

[…] Driving investor sentiment was turmoil at Credit Suisse, after its biggest shareholder – the Saudi National Bank – said that it would not inject more money into the ailing Swiss bank.

Saudi National Bank chairman Ammar Al Khudairy told Reuters: ‘We cannot [buy more shares] because we would go above 10 percent. It’s a regulatory issue.’

The Saudi bank holds a 9.88 percent stake in Credit Suisse, according to Refinitiv data. (read more)

Yellow Team -vs- Gray Team:  Remember, China just brokered a deal to lessen hostilities between Iran and Saudi Arabia. The fulcrum of that agreement was economics.

Meanwhile in North America, Mexican President Andres Manuel Lopez-Obrador has said he was not willing to join the energy suicide pact pushed by Joe Biden and Justin Trudeau…. A policy break in the trilateral relationship which suddenly, and not coincidentally, aligns with the timing to make Mexico a pariah to the U.S. vis-a-vis a renewed media push on the drug cartel narrative.

BIG PICTURE NOT BEING DISCUSSED – The western politicians followed the climate change instructions of the WEF multinational corporations and banks (Build Back Better) and post-pandemic immediately started reducing energy development.  The central bankers then began raising interest rates to shrink the economies of the same western nations to the scale of the now diminished energy production.

The raising of interest rates is now hitting the national and multinational banks impacted by government policy that was following WEF orders.  Now the western politicians are stepping in with the government controlled central banks to backstop the national banks and multinationals.  Can you see the dynamic?

Team yellow is suffering the consequences of their own ideological policy as enacted.  Team grey is not going to help team yellow get out of a crisis team yellow created, which was intended to hurt team grey.

…. And we continue watching.

Mar 14 2023

Kevin O’Leary Stuns CNN Panel Telling Them “Biden Just Nationalized U.S. Banking System”…


Posted originally on the CTH on March 13, 2023 | Sundance

The CNN panel was jaw-agape as Kevin O’Leary appeared earlier today to inform them the decision by Joe Biden to guarantee every deposit in U.S. regional banks is akin to “Joe Biden just nationalized the U.S. banking system.”

O’Leary is correct, and anyone who is holding assets like stocks or bonds in U.S. banks now needs to reconsider the disappeared line between government and the bank assets.  If the government can assume, control and backstop every single account balance within the bank, the government can assume and control all activity of the bank.  WATCH:

https://youtube.com/watch?v=0ns9d9b5V8Q%3Ffeature%3Doembed

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Downstream…. think about the consequences.  Remember the frozen bank accounts in Canada as a result of defining truck protest supporting Canadian citizens as domestic extremists?

Now think about the government no longer needing to ask the bank to take action, the govt has a regulatory ability to demand the bank to take action.  This takes “debanking” to an entire new level.  People are wondering why cryptocurrencies went up in value today.  There’s your answer.

Comrade citizens, at the end of this rainbow of bank nudges, we will find ourselves at the footsteps of a government controlled central bank digital currency.

Mar 13 2023

C-Level Executives Sold Shares Weeks Before SVB Failed


Armstrong Economics Blog/Corruption Re-Posted Mar 13, 2023 by Martin Armstrong

A bank failure of this proportion has not been seen since 2008 when Washington Mutual failed. The majority of deposits in Silicon Valley Bank (SVB) are uninsured, meaning the FDIC’s $250,000 protection does not apply. Uninsured depositors will be provided receivership certificates and should receive an advanced dividend this week. The FDIC must sell off the remaining assets of SVC to determine how much it can provide to those uninsured depositors. The FDIC is encouraging borrowers to continue paying their existing loans. The bank was said to host $209 billion in assets and $175.4 billion in deposits as of December 2022. Washington Mutual held around $307 billion in assets when it went down.

Tons of people and businesses will be completely screwed over. Who could have seen it coming? Silicon Valley Bank CEO, CFO, and CMO sold off millions in stock over the past two weeks. President and CEO Greg Becker sold 12,451 shares on February 27 for $3.6 million at $287.42 per share. Later that day, he purchased options for the same amount of shares at $105.18 a piece. He did the same thing in December 2021, as this is not an uncommon albeit unethical practice. Banks commonly trade against their own clients. Becker sold about $3.57 million worth of SVB stock over the past two weeks and is now making TV appearances saying he did not see this coming.

There were signs of trouble, but the talking heads said otherwise. Forbes even listed SVB Financial Group as #20 on its list of America’s Best Banks in an article published on February 14, 2023. Talking/screaming head Jim Cramer came out last month to say that SVB Financial would become one of the top performers on the S&P. This is why you cannot listen to information based on biased opinions. I hesitate to call this negligence technical analysis.

Companies are now at a complete loss, many cannot make payroll, and this situation will only worsen once the uninsured depositors realize their IOUs are worthless.