As we have been forecasting, with interest rates rising, not only would depositors take their money out of banks and invest it money market funds and high-yielding Treasuries, but more importantly, the socioeconomic and geopolitical damage inflicted upon humanity by politicians who launched the COVID War, would also devastate much of the banking system.
- “SPECIAL REPORT: THE BANKSTER BUST. ‘DOT-COM THIS’” (14 Mar 2023)
- “ACCIDENTAL BANKING SYSTEM FAILURE? DON’T YOU BELIEVE IT.” (14 Mar 2023)
- “ECONOMIC UPDATE—MARKET OVERVIEW” (21 Mar 2023)
- “SPECIAL REPORT: THE BIG BANKSTER BUST CONTINUES” (21 Mar 2023)
- “SPECIAL UPDATE: THE BIG BANKSTER BUST” (28 Mar 2023)
- “AMERICAN CONFIDENCE IN BANKS TAKES HIT” (28 Mar 2023)
- “SPOTLIGHT: BIG BANKSTER BUST” (9 May 2023)
- “U.S. BANKING CRISIS: NOT OVER YET?” (9 May 2023)
From early March to early May of this year, Silicon Valley Bank, Signature Bank and then First Republic Bank registered the second, third, and fourth-largest bank failures in U.S. history. Indeed, our Trend Forecast on the banking crisis and that its ramifications would linger was completely ignored by the mainstream media. Those presstitutes followed the marching orders from JP Morgan’s Jamie Dimon who said the crisis was over. (See “ECONOMIC UPDATE—MARKET OVERVIEW” (2 May 2023) and “ECONOMIC UPDATE—MARKET OVERVIEW” (23 May 2023).
Among the main elements contributing to our forecast for continuing banking failures is our forecast of an Office Building and Commercial Real Estate Bust. And beyond the high office vacancy rates and record-low office occupancy rates that resulted from the lockdowns, the boost in e-commerce spending as work became remote has also hit the mall owners who will also be defaulting on their loans… many of which have floated much higher along with rising interest rates. The world of remote living is a reality and the cost to owners of commercial buildings and those who hold their mortgages will rack severe economic damage.
Indeed, some three-and-a-half years after the COVID War was launched, in July, 33 percent of American workers were going into the office just part time, according to Stanford University.
Putting yet more pressure on the banks are multi-family apartment owners whose delinquencies will rise along with the increase in borrowing costs, which have more than doubled from their COVID War lows. Indeed, according to CoStar, and reported by The Wall Street Journal, “Apartment-building values fell 14 percent for the year ending in June.” According to the Mortgage Bankers Association, in that sector alone there is some $1 trillion of outstanding mortgage debt, and Trepp states that it has to be paid off between now and 2027.
The Wall Street Journal went on to note that: “Further, apartment-building values are more vulnerable to higher rates than their commercial counterparts because they are closely tied to the price of 10-year Treasury notes, which plunged as rates rose,” said Chad Littell, CoStar’s national director of capital-markets analytics.
Even some veteran real-estate investors that weathered past storms look vulnerable. Veritas Investments, one of San Francisco’s largest landlords, defaulted on debt backing 95 rental buildings during the past year. It stands to lose more than one-third of its San Francisco portfolio as a result.
“The multifamily real-estate sector is facing many of the same financial challenges as have been reported on for other asset classes including office, retail and hotel-hospitality,” the company said earlier this year.
Worst is Yet to Come
As reported by Wall Street on Parade,
“Deposits at the 25-largest domestically-chartered U.S. commercial banks peaked at $11.680 trillion on April 13, 2022, according to the updated H.8 data maintained at the Federal Reserve Economic Database (FRED). As of the most current H.8 data for the week ending on Wednesday, July 26, 2023, deposits stood at $10.709 trillion at those 25 commercial banks, a dollar decline of $970 billion and a percentage decline of 8.3 percent.”
Equally noteworthy, the decline shows no signs of letting up. According to the FRED data, between July 5 and the most current reading on July 26, the 25 largest U.S. banks shed $174 billion in deposits.”
The banking crisis was exacerbated by the COVID War when governments pumped in countless trillions to fight it and central banks dramatically lowered interest rates to artificially pump up equities and economies with cheap money which elevated the phony spending spree.
Now, with reality hitting The Street, Moody’s lowered the credit ratings for 10 small U.S. banks and will also analyze the stability of six larger ones, thus raising more questions and fears of the health of the banking system.
As though it is a script from a sitcom, because that’s all the mainstream media is—a house of whores, Presstitutes who put out for their corporate pimps and government whoremasters—this is how CNBC reported the banking downgrades: Moody’s downgraded the credit rating on several regional banks, including M&T Bank and Pinnacle Financial, citing deposit risk, a potential recession and struggling commercial real estate portfolios. The credit agency also placed the Bank of N.Y. Mellon and State Street on review for a downgrade.”
“Deposit risk, potential recession and struggling commercial real estate portfolios”? What nice language. No Shit! The crisis has been building for all those who are not deaf, dumb and blind to see.
The higher interest rates have also hit consumers hard. Back in the day, they would blast the Mafia and others that loaned people money and charged 10 percent interest rates. Now that the Bankster Bandits have become “legit” by the politicians who they paid off with what imbecilic morons call “campaign contributions,” there are no interest rate limits.
As reported by Epoch Times, WalletHub notes that “the average interest rates for new offers—which are often offered at a discount compared to the standard rate—is 22.39 percent, a sharp increase from 18.89 percent one year ago.”
Amerika with credit card interest rates at 22.39 percent and in “normal” times nearly 19 percent, in front of everyone’s eyes for all to see, a money mob crime syndicate is running the nation… into ruin.
Yes! The New York Feds reported that in the second quarter of this year, credit card balances for the plantation workers of Slavelandia increased to a record $1.03 trillion. And according to WalletHub, the average household is burdened with over $10,000 in credit card debt, WalletHub estimates.
Epoch Times also notes that “A recent Northwestern Mutual study found Americans with debt on average owe more than $21,000 outside of mortgages, and the top source of that debt was credit card debt.”
TREND FORECAST: There are now increasing expectations that the Federal Reserve will keep interest rates in their current range. Should they do so, we forecast that the equity markets will decline in late September/October, there will be weak holiday sales and the nation will slip into recession in the coming months.
The interest rate wild card, of course, is will the Fed radically lower interest rates in the run up the race to the White House in 2024 to support Bidenomics?
LAST WEEK: CREDIT DOWNGRADE SINKS BONDS AND STOCKS
Last week, Fitch Ratings reduced the U.S.’s credit rating from AAA to AA+, spooking investors and sparking a selloff in stocks and bonds.
The downgrade sank bond prices and lofted their yields near their highest since November 2022, which lured money out of stocks to take advantage of bonds’ suddenly higher returns.
“This week’s wobble in the fixed-income market kind of woke everyone up,” Peter van Dooijeweert, head of multi-asset investments at Man Solutions, told The Wall Street Journal. “This isn’t a free lunch.”
Although stocks have vaulted higher this year and remain near their peaks, the sudden drop highlights investors’ lingering caution over the longer-term effects of the U.S. Federal Reserve’s 18-month campaign of higher interest rates, the WSJ said.
Stocks fell even though 79 percent of S&P companies reporting corporate earnings are besting analysts’ predictions and beating the 66-percent average that has pertained since 1994. However, expectations were low this quarter, the WSJ noted.
Stocks hit the hardest included big banks, major tech firms, and car makers.
For the week, the Dow Jones Industrial Average slipped 1.13 percent, the NASDAQ 3 percent, and the Standard & Poor’s 500 index 2.33 percent.
Treasury yields edged down on Friday but remained elevated. The benchmark 10-year treasury note returned 4.060 percent at last week’s market close. The two-year note, which is more sensitive to investors’ expectations around interest rates, slipped to 4.791 percent.
Analysts expect Fitch’s downgrade will not alter U.S. borrowing rates.
Gold’s continuous contract price twitched down less than 0.01 percent to trade at $1,942.88 at 5 p.m. U.S. EDT on 4 August.
Brent crude oil continued its rise, moving up 1.9 percent on the week to $86.15 at 5 p.m. U.S. EDT on 4 August. West Texas Intermediate, which benchmarks U.S. domestic prices, jumped 3.1 percent to $82.82. Saudi Arabia announced it will maintain its current production cuts into September and Russia said it will cut its output by 300,000 barrels a day next month. See “Oil Prices Climb as Inflation Slows and Supplies Tighten” in this issue.
Bitcoin barely budged, adding less than 0.01 percent through the week to price at $29,246.20 at 5 p.m. U.S. EDT on 4 August.
Abroad, the London FTSE 100 index dropped 1.7 percent. The pan-European Stoxx 600 lost 2.4 percent.
Japan’s Nikkei 225 shrank by 2.8 percent. The South Korean KOSPI moved down 1.0 percent.
The Hong Kong Hang Seng index slumped 3.4 percent. On mainland China, the CSI Composite ticked up less than 0.01 and the SSE Composite rose 0.03 percent, indicating a combination of hope and skepticism that Beijing would implement strong stimulus plans to revive the country’s economy.
YESTERDAY: STOCKS JUMP OVER 400 POINTS, SNAP LOSING STREAK
The Dow Jones Industrial Average jumped 407.51, or 1.16 percent, to 35,473.13, S&P 500 was up 40.41, or 0.90 percent, to 4,518.44. The tech-heavy NASDAQ gained 85.16, or 0.61 percent, to 13,994.40.
Investors will be watching Thursday’s U.S. consumer price report, which is expected to help guide future moves by the Federal Reserve. There seems to be some differing opinion between voting members in the bank.
John Williams, the New York Fed head, said he thinks interest rates could come down in early 2024. Michelle Bowman, a governor from the bank, said she expects “additional increases will likely be needed to lower inflation to the FOMC’s goal.”
The bet on the Street is that the July rate hike will be the bank’s last before 2024. Inflation reached 3 percent in June, which is higher than the central bank’s 2 percent target.
The stock increase made up for last week’s miss.
Chris Larkin, managing director, trading and investing at E*TRADE from Morgan Stanley, told investors he was surprised that stocks were down last week.
“Whether the current pullback morphs into something bigger in the near term could depend on this week’s inflation data, but traders may be keeping an especially close eye on tech,” Larkin said, according to Barron’s.
Elsewhere, London’s FTSE was down 9.88, or 0.13 percent, to 7,554.49, and the STOXX600 was up 0.40, or 0.09, to 459.68. In Asia, Japan’s Nikkei was up 61.81, or 0.19 percent, to 32,254.56, and South Korea’s Kospi was unchanged. Hong Kong’s Hang Seng was down 1.54, or 0.01, to 19,537.92. China’s Shanghai Composite was down 19.25, or 0.59 percent, to 3,268.83 and the Shenzhen Component was down 93.03, or 0.83 percent, to 11,145.03.
OIL: Brent crude was down 32 cents, or 0.37 percent, to $85.92 and West Texas Intermediate was up 53 cents, or 0.65 percent, to $82.47.
Reuters reported that oil analysts see the end of summer driving season on the horizon and still-sluggish demand from China.
“The summer driving season is winding down in the United States,” Robert Yawger, director of energy futures for Mizuho Securities USA, told the news agency. “If you don’t need as much gasoline, you don’t need as much oil.”
TRENDPOST: Oil prices would be much lower if not for the supply cuts from OPEC+ because the global economy is sputtering along due to inflationary headwinds and sanctions against Russia. It looks like Brent crude will hover between $82 and $90 per barrel for the rest of 2023, The Jerusalem Post reported, citing analysts. However, we maintain our forecast for oil prices to move closer to the $100 barrel range should the Ukraine War continue and tensions increase in the Middle East between the U.S. and Israel vs. Iran.
GOLD: The precious metal was down $4.40 an ounce, or 0.22 percent, to $1,971.70.
The dollar index was up against other world currencies, and a strong dollar tends to move gold prices lower because it is a more expensive investment for foreign buyers. Bond yields were also higher.
Mizuho Securities wrote that Fed rate hikes do not seem to be having the “effect on the economy or the labor market that policy makers have been anticipating,” MarketWatch reported. “After 525-550 basis points of rate hikes since March of last year, policy should already be dampening economic activity, especially after the regional bank failures between March and May.”
TRENDPOST: Gerald Celente has said that the U.S. dollar’s strength is based on interest-rate hikes by the Fed, and once these rate hikes stop and even come down, gold prices will increase.
BITCOIN: The world’s most popular digital currency was trading up $119.50, or 0.41 percent, to $29,159.50.
Traders are waiting to see the upcoming decision by the Securities and Exchange Commission on whether it will allow Cathie Wood’s ARK to form a bitcoin ETF. The decision is due on 13 August.
Ark/21 Shares, Bitwise Bitcoin, BlackRock Bitcoin ETF Trust, VanEck Bitcoin Trust, WisdomTree Bitcoin Trust, Valkyrie Bitcoin Fund, First Trust Galaxy Bitcoin, and Fidelity Wise Origin Bitcoin Trust have all applied for ETF approval.
TREND FORECAST: We expect the SEC to extend the deadline. If ARK gets the approval, expect the digital currency to jump because it would build confidence for investors.
TODAY: DOW FALLS AMID NEW CONCERNS ABOUT REGIONAL BANKS, FED
The Dow Jones Industrial Average was down 158.64, or 0.45 percent, today to close at 35,314.49 and the S&P was down 19.06, or 0.42 percent, to 4,499.38. The tech-heavy NASDAQ was down 110.07, or 0.79 percent, to 13,884.32.
Patrick Harker, the head of the Philadelphia Federal Reserve, said he believes the bank is in a position that it can be patient and “hold rates steady and let the monetary policy actions we have taken do their work.”
The overnight rates are in the 5.25 percent to 5.5 percent range, which is the highest in more than 22 years. He also said he does not believe there will be rate cuts any time soon.
“Should we be at that point where we can hold steady, we will need to be there for a while,” he said, according to CNBC. “The pandemic taught us to never say never, but I do not foresee any likely circumstance for an immediate easing of the policy rate.”
Elsewhere, London’s FTSE was down 27.07, or 0.36 percent, to 7,527.42 and the STOXX600 was down 1.08, or 0.23 percent, to 458.60. Asian stocks were mixed, with Japan’s Nikkei up 122.73, or 0.38 percent, to 32,377.29 and South Korea’s Kospi 6.73, or 0.26 percent, to 2,573.98. Hong Kong’s Hang Seng was down 353.75, or 1.81 percent, to 19,184.17. China’s Shanghai Component was down 8.21, or 0.25 percent, to 3,260.62 and the Shenzhen Component was down 46.58, or 0.42 percent, to 11,098.44.
TRENDPOST: It’s simple. There’s a reason you subscribe to The Trends Journal. We have said the banking crisis from March is not over, it has just begun. Moody’s today announced that it downgraded the credit rating of M&T Bank and Pinnacle Financial – two regional banks, CNBC reported. The ratings agency cited a potential recession and struggling commercial real estate portfolios.
We’ve only been saying that for months. But mainstream news outlets are afraid to have different opinions, so they march in lockstep. See this week’s ECONOMIC UPDATE, for more detailed trend analysis and trend forecasts.
OIL: Brent crude was up 69 cents a barrel, or 0.81 percent, to $86.03 and West Texas Intermediate was up 87 cents, or 1.06 percent, to $82.81.
The U.S. Energy Information Administration said today that it anticipates GDP growth to increase by 1.9 percent in 2023, which is higher than the previous forecast of 1.5 percent. Reuters reported that the EIA expects Brent prices to average $86 in the second half of 2023, which is also up about $7 from the previous forecast.
GOLD: The precious metal was down $10.60, or 54 cents, to $1,959.40.
Gold was down as the U.S. dollar gained strength after China’s July trade data came in lower than anticipated.
China saw a 14.5 percent year-on-year drop in exports and imports came in 12.4 percent lower year-on-year while economists anticipated a 5 percent decline.
Brad Bechtel, global head of foreign exchange at Jefferies, told Reuters, “There’s an element of risk aversion. Pretty clearly, the data overnight was not so good, with very sluggish export data across Asia.”
TREND FORECAST: Bechtel said the global economy is at a place “in the dollar smile where U.S. fundamentals are outperforming the rest of the world. And generally it’s an environment for the dollar to sustain its rally.”
Yes, a strong dollar generally means suppressed gold prices. However, when the global economy goes down, so too will the U.S. economy. As we continue to forecast, when the Federal lowers U.S. interest rates,, the dollar will go down and gold prices will rise. Gold is dollar based. Thus, the weaker the dollar, the cheaper gold prices will be for nation’s with stronger currencies.
BITCOIN: The world’s most popular crypto saw big gains as of 4:30 p.m. ET, and was trading up $791.90 to $29,971.90 a coin.
Charlie Shrem, who Forbes identified as a legendary bitcoin and crypto investor, said Bitcoin and Ethereum will skyrocket after PayPal announced it’d created its own stablecoin cryptocurrency.
“PayPal launching a stablecoin will skyrocket bitcoin to at least $250,000 faster than it was supposed to, and ethereum likely will 10x on a faster timetable,” Shrem posted to X. “Very exciting.”
The report noted that the combined bitcoin network would see a market capitalization of almost $5 trillion if that price is reached.
TREND FORECAST: The weaker the banking sector, the more people will look to alternatives such as precious metals and cryptocurrencies. And as we have noted for several months, bitcoin is still trading in a strong range, thus it has upside potential.