Everything Is Sound
Everything is just fine. The banking system is sound. Janet Yellen, one of the three culprits along with Bernanke and to the biggest extent, Powell, says so. If the banking system is just fine:
How and why did a couple of biggies go under?
Why have just about all financial stocks, for lack of a better word, crashed in recent weeks? Emphasis is on the regionals.
After getting a $30 billion bail out by 11 large banks, why did First Republic Bank drop 33% the next day?
After getting a $54 billion bail out (not a typo), why has there been a rush and we mean rush to have Credit Suisse get bought in some way, shape or form by UBS this weekend before markets open on Monday? Oh yeah…with government guarantees…meaning tax payer guarantees.
Why are we being told that senior White House officials are talking with the great Warren Buffett?
Maybe our rusty abacus is not working but why are we hearing banks tapped the fed (the tax payer) in past days for a serious amount of cake?
Why are we hearing that the MBCA (Mid-size Bank Coalition of America) proposed to the FDIC (the tax payer) to insure all deposits for the next 2 years?
Why are there reports of even after getting a $30 billion bail out, First Republic Bank is trying to, in one form or another, be sold and quickly? This looks to be true for other banks.
Go look up BTFP. Why is there talk of up to $ 2 trillion of back up for the banks?
Sure! Everything is sound says Janet Yellen just like she told us inflation was transitory. On top of that, the president says any moves will not cost a tax payer a dime! Who is he trying to kid? Feel better now?
And now we wait with bated breath for the man who created all the massive distortions that caused this. Yes…playing God with the biggest market in the world will do that. You were warned! We have news for you. Just like he was blind and waaaaay behind inflation as the yield market skyrocketed, he is now waaaaay behind the other way as yields have plunged. He didn’t listen while they were on their way up. Will he listen as they are on their way down and in record fashion? Not sure it even matters if he raises a wee bit, does nothing or even decides to lower rates. Of course, markets will jump in the near term depending on what he does but real yields have already done the job. The 10 year sits at 3.395% while Mr. Powell sits at 4.5-4.75%. And why wait until Wednesday? Shouldn’t have he already showed his hand? A waiting game while people are worried about their deposits in banks? Sure!
We suspect if CS and FRC get sold with government (tax payer) guarantees, markets will be happy near term. If Warren gets involved, suspect that would add to some happiness. But then, who’s next? That’s quite a good question. As we enter this week, seems like desperation by the chieftains is at hand.
As we enter this week, pretty much the only game in town is the continued recent relative strength in bigger cap technology/semiconductors. You can also add a very strong move in gold and gold stocks but gold stocks continue to under-perform the metal badly. Most other areas of the market are now deeply stretched, extended and oversold and could randomly bounce at any time. The vicious drop has not been limited to financials but many other areas including energy, industrials, commodities…ok, just about everything.
No matter what, this will all end up on our backs…for the gargantuan mistakes they made. They used us in 08 to the tune of $800 billion with no return. That number looks to be a drop in the bucket compared to what comes down the pike.
KALTBAUM RANDOM FINANCIALS NOTES
Credit Suisse has a real market cap (the real world) of $5 billion but gets a $54 billion loan from their central bank. A company that should be out of business because of debt just got 10x their market cap IN MORE DEBT! Such a financial system!
Yellen is telling the senate banking committee today that the banking system is sound and deposits are safe at the same time banks are going under and the fed bails out every depositor in this country. Hope she can keep a straight face with this utter bs. And to be clear, when you back stop every deposit at every bank…IT IS A BAIL OUT. They are now in hope and prayer mode the runs stop. Remember, she is one of the 3 central bankers that caused all this. If things are sound, why the bail out and why are we hearing they are about to print $2 trillion more to back stop?
First Republic (FRC)…everything was alright when it popped up to $50 on Tuesday morning. It is down $9 this morning back down to $21 and change. As we have stated…DO NOT GET CUTE WITH THESE MOVES. Other REGIONALS down early.
THERE IS A NARROW LIST OF BIG CAP TECH GETTING THE MONEY FLOWS. We are open to all outcomes but this really reminds us of parking as so many areas have been crushed. META up more this morning with a rhyme and reason. Looks like US is going after the major competitor in Tik Tok. That does matter. When the big money is scared, it flows to the largest for liquidity purposes. We must also add the plunge in rates of help.
CRB INDEX at yearly lows. The economy.
OIL PRICES at yearly lows. The economy.
YIELDS along the curve have tanked. The economy.
It would be another mistake if Powell raised rates next go round. Would just tell us he remains blind. Would love to say it doesn’t matter what he does but right now, it will matter. He is way behind the market again…the real market.This would not be a good time for what he is famous for, another misstep. As we stated, the free market is again way ahead of him. He is again behind the free market…just the other way. If he raises rates with yields tanking, he would again not be listening to the markets. If he lowers rates, he would just again be playing catch-up. He was way behind when rates kept spiking because of the inflation he caused and had to play catch up by raising rates. Now, rates are tanking and they are way behind on the upside. They are at 4.5-4.75% while the 10 year is 3.421% as we write this. Continued gargantuan ineptitude and blindness by the most powerful person on earth. Still trying to figure out how he got there and how he had the ability to distort free markets so much…causing all this.
Remember, we warned you about all of Powell’s distortions way in advance and that those distortions would come back to bite everything. The free markets finally took over, unwinding all of his distortions. The free markets are now giving all his playing God with markets the big middle finger, only we are the victims.
