In February we warned Trends Journal subscribers to prepare for “March Economic and Equity Market Madness.” We also provided proactive measures to consider taking.
As we exit March, the “Equity and Economic Madness” that have been exemplified by bank failures in the U.S. and EU are just the beginning. The worst is yet to come.
Yet, the crooks and lie-in-your-face money junkies in charge will do all they can to keep propping up their economic Tower of Babel.
Welcome to the in-your-face con-game brought to you by the Bankster Bandits who are nothing more than a money junky crime syndicate. By their deeds you shall know them. They enrich “The Too Big To Fail” while the plantation workers of Slavelandia shrink from what used to be called “middle class” to broke and busted.
Need more proof? How about Washington and the Federal Reserve bailing out their billionaire and multi-millionaires club members whose deposits were not insured by the FDIC when the Silicon Valley bank busted?
Indeed, 88 percent of deposits were uninsured.
But for the plantation workers of Slavelandia paying off credit card debt with Bankster Bandit interest rates triple what the Mafia used to charge, can’t afford rent and have miserable jobs with wretched wages working for the mega-chains—or losing everything because they were laid off—there are no “bailouts.”
The Trends Journal was the first to forecast the “Panic of ’08”… we took out the domain name in 2007. As the Great Recession set in, the Bankster Bandits flooded the economic system and equity markets with ultra-cheap money when the “Panic” hit in ’08 until they began sharply raising interest rates in March of 2022.
Yes, a cheap money scheme: When the “Panic” hit, making up a new game that was never played before, the Fed slashed rates to zero and for several years they just gently kept raising them. And when they did raise them last March—the first hike in more than three years—they pumped them up only 25 basis points, bringing the rate into a range of 0.25 percent to 0.5 percent.
Plain and simple: When the cheap money dried up, so did the equity markets and the economy. Making a bad situation worse, beyond the money pumping scheme, when politicians launched the COVID War, to fight it, they flooded the economy with “free” money and zero interest policy. As a result, the economy that should have crashed flourished with a housing boom, strong consumer spending and record breaking equity market boom.
Now, the bet on The Street is that interest rates in the U.S. and around the world are near their peak. According to CME Group, the U.S. will hold interest rates where they are, start lowering them in July and bring them down one percent by year’s end. However there is still doubt as to whether the U.K. with its soaring inflation, and the European Central Bank which came late into the interest rate hikes, will continue to raise rates in May. In either case, the artificial economic boom is headed toward bust.
Today, BlackRock, which manages about $10 trillion in investment money, noted the reality of the rising interest rate: “Recession.” And they are betting against the tide saying that the Feds will push interest rates higher.
In its weekly note to clients, BlackRock wrote that “We don’t see rate cuts this year – that’s the old playbook when central banks would rush to rescue the economy as recession hit. Now they’re causing the recession to fight sticky inflation and that makes rate cuts unlikely, in our view.”
“Now they’re causing the recession,” got it!
Yes, recession is ahead and it is not “stagflation” that the markets are warning but rather “Dragflation.” The economy won’t “stagnate” as inflation rises… it will drag down.
Guessing Game, Guess What!
BlackRock went on to note that “We think the Fed could only deliver the rate cuts priced in by markets if a more serious credit crunch took hold and caused an even deeper recession than we expect.”
Again, there is near total agreement that a recession will hit, but the question remains how steep will it be?
What is important to note is that while we had forecast Dragflation when the Fed began to raise interest rates last March… now it is a “given.” The only question is, how bad will it be and what new schemes will the Banksters come up with to artificially prop up equities and economies… as they have a long track record of doing.
Putting her mouth where the money is, Christine Lagarde, the head of the European Central Bank, said last week that “While the European banking sector is resilient, with strong capital and liquidity positions, in view of recent financial market volatility we are ready to act.”
Yes, “ready to act.” Play any comedic and/or criminal role necessary to keep pumping up the banking system that is going bust.
Spewing out bullshit about “strong capital and liquidity positions,” Lagarde failed to mention that according to the ECB, Over the past five months depositors have withdrawn £214 billion from Eurozone banks while household deposits fell £20.6 billion … the largest amount since they started collecting data back in 2003.
And as for recession, total lending in Eurozone banks fell for the third straight month in February. Therefore, the higher interest rates go, the less lending and the deeper the economy falls into recession.
TREND FORECAST: Making a bad situation worse, the higher interest rates rise, the more money will be pulled out of banks and equities. Indeed, Bond yields rose today as the rate on the 2-year U.S. Treasury note climbed back above 4 percent.
And on a much higher note that will bring down the banking and equity markets and help ignite the economic meltdown—as we have been warning, but silenced by the mainstream media—is our forecast of an Office Building Bust. According to Goldman Sachs, some 80 percent of commercial property bank loans are with regional banks.
And just like the Silicon Valley Bank that gobbled up U.S. Treasury Bonds, mortgage-backed securities and other “safe” assets, with interest rates now way higher than when they bought them, the market value of what the banks own are far below their book value. Therefore, when borrowers start defaulting on their commercial office building loans, and with less deposits going into banks, the banks won’t have the money to cover their losses or meet depositor demands.
LAST WEEK: STOCKS EASE PAST THE BANKING CRISIS
U.S. equity markets see-sawed through the week but ended in positive territory after concerns about the banking industry’s stability ebbed and traders stored their money in safe-haven stocks such as consumer staples, health care, and utilities.
“Things are starting to follow the recession playbook,” Schroders strategist Bill Callahan said to The Wall Street Journal.
For the week, the Dow Jones Industrial Average added 1.2 percent, the NASDAQ 1.7 percent, and the Standard & Poor’s 500 index 1.4 percent.
Financial stocks were mixed. JPMorgan lost 1.5 percent Friday; Morgan Stanley’s share price was down by 2.2 percent. KeyCorp, which had seen its stock price hurt by the bank industry’s troubles, jumped up 5.2 percent.
Deutsche Bank’s share price lost 8.5 percent as investors looked for the next bank that might show weakness.
“There’s a contingent of fear,” Louis Navellier of money manager Navellier & Associates told the WSJ. “Today it’s Deutsche Bank.”
Players also are trying to figure out “to what extent concerns around the banking system bleed to even further credit-condition tightening,” strategist Michael Bell at JPMorgan Asset Management, noted in a WSJ interview.
In the trend toward safety, investors moved into treasury securities. The yield on 10-year treasury notes fell from 3.406 percent Thursday to 3.379 percent Friday. Yields fall as investors bid securities prices higher.
Gold’s spot price broke briefly up through $2,000 Friday as fears over the banking industry lingered. It marked a 1-percent gain through the five-day trading week to $1,994.45 at 5 p.m. U.S. EDT on 24 March.
Gold futures traded around $2,000, near their highest point in almost three years.
Oil prices edged up but crude is still hovering near its lowest prices in almost two years. Brent crude rose 4.1 percent through the week and traded at $74.99 at 5 p.m. U.S. EDT on 24 March. West Texas Intermediate oil gained 4.4 percent to $69.18.
Bitcoin ticked up 0.2 percent on the week, reaching $27,861.60 at 5 p.m. U.S. EDT on 24 March.
Overseas markets began to follow U.S. markets out of the banking sector’s turmoil.
The London FTSE moved up 1.0 percent. The trans-European Stoxx index added 1.2 percent.
Japan’s Nikkei crept up 0.6 percent and the South Korean KOSPI gained 1.0 percent.
The Hang Seng index in Hong Kong grew by 2.9 percent. On the Chinese mainland, the CSI Composite rose 1.6 percent and the SSE Composite took on another 0.4 percent.
EQUITY MARKETS SAIL THROUGH BANKING WOES WITH LITTLE DAMAGE
The Standard & Poor’s 500 index had slipped only 0.7 percent this month as of 24 March, despite a brief tumult after Silicon Valley and Signature banks’ collapse.
Volatility indicators have settled and are predicting no major disturbances ahead.
The Cboe VIX volatility index jumped to 31 when the banks crashed but had settled back to 20.60 on 27 March, in line with its historical average.
“There’s definitely a high level of uncertainty but it was impressive how well the overall market held up,” Alex Kosoglyadov, Nomura’s chief of equity derivatives, told the Financial Times.
Traders who were prone to caution had already shed their stocks during the bear market that began last fall, well before this month’s banking crisis, Brett Nelson, analyst at Goldman Sachs Asset Management, said to the FT.
“This bank crisis began with the market already in a double-digit drawdown,” he added. “People are already at a base level of equity exposure.”
In contrast, many treasury bond traders had bet on rising interest rates. After the two banks crumbled, suddenly no one was certain whether the U.S. Federal Reserve would continue to push rates higher.
Investors holding treasury securities ran for the exits, with many moving their money back to safe-haven stocks, putting a stronger floor under equity markets.
YESTERDAY: DOW HIGHER AS WALL STREET GAMBLERS BRUSH OFF BANK CRISIS
The Dow Jones Industrial Average gained 194.55 points yesterday, or 0.6 percent, to end the session at 32,432.08. The S&P 500 was up 0.2 percent to 3,977.53 and the Nasdaq Composite was down 0.5 percent to close at 11,768.84.
The market is still trying to get past the recent failures of Silicon Valley Bank and Signature, while Credit Suisse was purchased by competitor UBS to halt the contagion. The Senate Banking Committee plans to hold a hearing on SVB’s bust on Tuesday.
Michael Barr, the Federal Reserve vice chair of supervision, presented the issue as a one-off, not an industry-wide crisis, Yahoo Finance, which received a draft of his statement, reported.
“To begin, SVB’s failure is a textbook case of mismanagement. The bank had a concentrated business model, serving the technology and venture capital sector,” he is expected to say.
Brian Levitt, global market strategist at Invesco, told CNBC that the market sentiment is “improving as policymakers take steps to alleviate the recent challenges.”
“An extension of the liquidity facility that had been set up by the Federal Reserve meaningfully eases prior concerns that a series of bank runs could be in the offing,” Levitt said.
The benchmark 10-year U.S. Treasury yield was at 3.527 percent, which was down from Friday’s level at 3.777 percent.
Russ Mould, an AJ Bell analyst, told Shares Magazine UK, “Many investors still don’t want to touch the banking sector for fears there is more distress to come. Yet for every bleak situation there is always someone who sees an opportunity to make money, hence why we’re seeing a rise in the share price of many European banks today.”
Elsewhere, the FTSE 100 index closed up 66.32 points, 0.9 percent, to 7,471.77 and the STOXX Europe 600 Index ended the day 1.05 percent higher at 444.72. In Asia, Hong Kong’s Hang Seng fell 1.67 percent and China’s Shanghai Composite was down 0.44 percent to close at 3,251.4. The Shenzhen Component rose 0.12 percent to close at 11,647.93. South Korea’s Kospi fell 0.24 percent to close at 2,409.22. Japan’s Nikkei 225 gained 0.33 percent to end at 27,476.87.
TREND FORECAST: Again, the more the Fed tapers and the higher interest rates go, the deeper the economy and overvalued stocks will fall… especially the ones that have been propped up high but keep losing money.
Despite the slightly rosier outlook, the fundamentals show trouble ahead. In Europe, banks cut their lending to eurozone businesses by 3 billion euros in February. Lack of funding means a slowdown, which will add to recessionary pressures.
OIL: Brent crude was trading up 4.21 percent, or $3.16, to $78.15 per barrel. West Texas Intermediate was trading up 5.30 percent, or $3.67, to $72.93 per barrel.
Prices were buoyed by optimism that a massive banking crisis was averted. OilPrice.com reported that Iraq’s move to close off a pipeline from Iraqi Kurdistan to Turkey, which will result in 400,000 bpd off the market, did not have a material impact on prices.
Oil prices have been in a recent decline due to additional financial fears due to banking issues in the West.
TRENDPOST: There’s no end in sight for the war in Ukraine and the Middle East is a tinderbox. Oil prices remain our wildcard because there are so many global uncertainties.
GOLD: The precious metal lost some steam on Monday as banking fears seemed to subside (for now) as spot gold fell 1.02 percent to $1,957.1274 per ounce and U.S. gold futures were 1.5 percent lower at $1,953.80.
TREND FORECAST: We maintain our forecast for strong gold prices which will go much higher when the Federal Reserve stops raising interest rates and then begins to lower them. As rates decline, so will the U.S. dollar, and the weaker the dollar gets, the higher gold prices will rise.
And as we have been reporting, the dollar is on its deathbed and will dramatically decline over years.
BITCOIN: The world’s most popular crypto currency was trading below $27,000 yesterday after recent momentum after a high-profile lawsuit was filed against Binance and its founder Changpeng Zhao.
Coin Desk reported that the suit stems from allegations that he knowingly offered unregistered crypto derivatives products in the U.S.
Cryptos have been on the rise in recent weeks despite interest rate hikes and the banking crisis, giving new confidence to investors.
Bitcoin was down about 3 percent to $26,955.61.
TRENDPOST: Crypto traders have been trying to get back their sea legs after the spectacular fall of FTX. We have long noted that government regulation will bring crypto prices lower. The U.S. Commodity Futures Trading Commission claimed Binance created a system to hide its true reach and operations.
“Binance’s reliance on a maze of corporate entities to operate the Binance platform is deliberate; it is designed to obscure the ownership, control, and location of the Binance platform,” the filing said, according to CoinDesk. The statement read, “Zhao answers to no one but himself.”
Now he has to answer to the government.
TODAY: DOW DOWN SLIGHTLY AS INVESTORS GET ATTRACTED BY HIGHER BOND YIELDS
The Dow Jones Industrial Average fell 37.83, or 0.12 percent, to 32,394.25 and the benchmark S&P 500 was also down 6.26, or 0.16 percent to 3,971.27. The Nasdaq Composite was down 52.76, or 0.45 percent, to 11,716.08.
Stocks faced additional pressure after bond yields rose—including the 2-year Treasury note increasing beyond 4 percent.
High interest rates have hurt home sales and home prices saw their seventh-straight month of declines in January. The Consumer Confidence Index exceeded estimates and rose 104.2, which was still down from last month’s 102.9 reading.
Elsewhere, London’s FTSE was up 12.48, or 0.17 percent, to 7,484.25 and the STOXX600 was down 0.27, or 0.06 percent, to 444.45. Japan’s Nikkei was up 41.38, or 0.15 percent, 27,518.25 and the Hang Seng rose 216.96, 1.11 percent, to 19,784.65. South Korea’s Kospi was up 25.72, 1.07 percent, to 2,434.94. China’s Shanghai Composite was down 6.02, or 0.19 percent, to 3,245.38 and the Shenzhen Component Index was down 83.49, or 0.72 percent, to 11,564.45.
TRENDPOST: Again, the Bigs always get Bigger.
The Wall Street Journal reported about the “The FDIC’s Sweetheart Bank Deal for SVB.”
First Citizens, the North Carolina bank, will acquire SVB and the “FDIC will finance the deal with a five-year $35 billion loan plus a $70 billion line of credit to cover potential deposit flight. This is a government match made in heaven.”
The paper continued, “The losers in this sweetheart deal will be other banks (and their customers) that will have to pick up the estimated $20 billion cost to replenish the deposit insurance fund.”
OIL: Brent crude futures gained 62 cents, or 0.79 percent, to $78.74 a barrel. West Texas Intermediate U.S. crude was up $0.56, or 0.77 percent, at $73.37.
Reuters noted that the decision to force Iraq to stop 450,000 barrels per day of oil exports through Turkey forced prices higher. The report said Barclays estimates that a protracted outage could tack on $3 a barrel upside to the bank’s $92 a barrel Brent price forecast for the year.
GOLD: A weaker dollar sent gold prices higher and the precious metal was up $21.20 an ounce, or 1.09 percent, to $1,974.90 as of 4:03 p.m. ET.
TREND FORECAST: Gold went up because the dollar went down. We have noted that the world’s best safe-haven asset should be trading much higher given the financial instability in the world and risk of recession. But the Bankster Gangsters continue to artificially prop up the equities market that should be tanking considering the tightening up of cheap money, the looming Office Building Bust, and Dragflation: negative growth and rising inflation.
Again, the deeper the dollar falls the higher gold prices will rise. And when the Fed “officially” announces that they will stop raising interest rates the dollar will begin its dive.
BITCOIN: The world’s most famous crypto jumped $300.60, or 1.11 percent, to $27,442.90 as of 4 p.m. ET.
The crypto seems to be gaining momentum apart from tech stock gyrations, which is building confidence in the sector.
TRENDPOST: There is a sense of optimism in the crypto community and industry insiders talking about bitcoin reaching $100,000 for the first time.
“I think bitcoin probably breaks all-time highs this year,” Marshall Beard, the chief strategy officer at Gemini, told CNBC. He said he found $100,000 an “interesting number.”
The report noted that bitcoin would need to jump about 270 percent to reach the new highs. There’s even an online bet that bitcoin will hit $1 million in 90 days.
As we have noted, crypto traders have a renewed confidence after its performance amid the recent banking crisis. Bitcoin hodlers say its strength through the crisis showed there’s an alternative to banks to safely store money. One industry insider told the outlet: “I think the rally is explicable by saying, people have got freaked out by the banking system by the collapses.”
The argument is that bitcoin could be a digital safe-haven investment and something akin to “digital gold” amid hyperinflation and the value of the U.S. dollar weakens.
And as with gold, we maintain our forecast that the weaker the dollar gets, the higher bitcoin will rise.