May 28, 2024

Here are the latest news items and commentary on current economics news, market trends, stocks, investing opportunities, and the precious metals markets. In this column, JWR also covers hedges, derivatives, and various obscura. Most of these items are from JWR’s “tangibles heavy” contrarian perspective. Today, some more coverage of the ongoing banking crisis.

Precious Metals:

Posted back on March 16th: Gold sparkles in stormy week for markets.

Some Observations by JWR: The prices for precious metals have been quite solid, and are showing signs of starting a stair-stepping pattern. There is a whiff of bull market in the air. To illustrate, here are some gold and silver spot price updates since March 17th, 2023:

On the morning of Friday, March 17th, spot gold was at $1,975 USD per Troy ounce, and spot silver was at $22.57 USD per Troy ounce.

On the morning of Monday, March 20th, spot gold was at $1,991 USD per Troy ounce, and spot silver was at $22.78 USD per Troy ounce.

On the morning of Tuesday, March 21st, with some profit-taking, spot gold was at $1,970.70 USD per Troy ounce, and spot silver was at $22.68 USD per Troy ounce.

After a slight early-morning dip, on the afternoon of Wednesday, March 22nd, spot gold was at $1,976.40 USD per Troy ounce, and spot silver was at $23.16 USD per Troy ounce.

On the morning of Thursday, March 23rd, spot gold was at $1,995.10 USD per Troy ounce, and spot silver was at $23.39 USD per Troy ounce.

On the afternoon of Thursday, March 23rd, spot gold was at $2,004.50 USD per Troy ounce, and spot silver was at $23.36 USD per Troy ounce.

Note: I do expect to see some profit-taking by institutional investors today (Friday, March 24th), and possibly also on Monday.  But hang on, folks. This bull market is just getting started!

The silver-to-gold price ratio is now at a whopping 86.8-to-1.  So this is another good juncture to ratio trade out of your physical (or paper) gold, and into physical silver. Opportunity is knocking. – JWR

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At Gold-Eagle.com: Gold Forecast – Spreading Bank Failures Could Send Gold Soaring.

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Over at the Kitco editorials: Gold, silver rally amid less-hawkish Fed, weaker USDX.

Economy & Finance:

Central Banks Organize to Provide Daily Liquidity of Dollars In the Event of a World-Wide Bank Collapse. JWR’s Comments: Keep in mind that these are the same clowns-in-suits who keep repeating the mantra: “The banking system is sound.”  If everything with the banksters is oh-so-wonderfully solvent and all sunshine and lollipops, then why would they need such an extraordinary new pump mechanism to create gushers of liquidity by the mega-billions?

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Federal Reserve raises interest rates 0.25% to highest since 2007 amid bank crisis.

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Rich Dad, Poor Dad Author Has Chilling Bank Prediction: ‘I Called Lehman Brothers Years Ago And I Think The Next Bank To Go Is…’

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Jim Rickards: “This bail-in lasted exactly 48 hours… On Sunday night they flipped and did the biggest bailout in history. So they have no credibility.” Here is a link to the audio interview: Banks Panic-Borrow Record Amount From Fed, Deepening Liquidity Crisis — Jim Rickards (JWR Notes: The accompanying stock footage video is annoyingly distracting. I suggest that you just move it off-screen, as you listen.)

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Janet Yellen Just Poured Lighter Fluid On Every Small Bank In America (Video).

The Ongoing Banking Crisis

Reader E.F. wrote to ask: “What is really going on with this banking crisis? What are the most important things I need to do to be ready for a run on my own bank?”

JWR’s Reply: The financial contagion began in Switzerland with trouble at Credit Suisse. Then it spread to the United States with runs on Silicon Valley Bank, Silvergate Capital, and Signature Bank. And more recently, First Republic had its ratings cut.

For far too long, interest rates were kept artificially low. Then, when inflation spiked during the Covid pandemic, the Federal Reserve orchestrated a rise in interest rates. With the higher rates, U.S. Treasury paper began providing a much higher rate of return than bank deposits. For example, 30-year T-Bonds rose from 1.75% to more than 4% in just a year. So, naturally, millions of people began to pull their money out of banks and are buying government bonds. This particularly stressed regional banks. Seeing the banks runs, more and more depositors pulled their funds and transferred them to the giant “Too Big To Fail” banks.

To cover the withdrawals, small and mid-size banks have been forced to sell assets at a loss. This is creating a snowballing effect, where the flows of money are growing bigger, and more rapid.  We are now at great risk of a cascade of bank failures.

Meanwhile, the derivatives that banks buy to cover their risk called Credit Default Swaps (CDSes) have become very expensive. So there is now a new risk of a credit derivatives collapse. This could happen if CDS counterparties cease to exist.

In a nutshell, here is my advice:

1.) Keep your deposits below the $250,000 FDIC insurance threshold in any single institution. (Or $500,000 for a SIPC-insured brokerage account.)

2.) Have accounts in at least two and preferably three institutions, including one independent bank, and one credit union. Make sure that you are set up with online banking with all of your accounts, so you can rapidly transfer funds from one bank to another. Don’t hesitate to shift your funds if you get even just an inkling that one of your banks is in trouble.

3.) When choosing banks, look for ones with little or no derivatives exposure, as detailed in this list. (Take a close look at that list.) I’ve warned about a credit derivatives implosion for many years.

4.) Proceed with the assumption that the banking crisis is going to get a lot worse. You can ignore the many pronouncements that “The banking system is sound.”  The politicians are lying.  The FDIC’s pool of funds is tiny, compared to the amount of money on deposit. In the long run, it will be us, the American taxpayers that will foot the bill for any large bailout. If the FDIC fails in the midst of a bank panic, it may take many months before your FDIC insurance check arrives in the mail.

5.) In the event that the banking crisis worsens, we can expect to see a Federally-mandated Bank Holiday, where banks shut their doors, ATMs are shut down, and online banking is deactivated.

6.) Long term, we can expect to see both bank fees go up, and our taxes go up.  I also fully expect the Federal Reserve to give up on its inflation fight, most likely before October of 2023.  They will pivot back to a Loose Money policy. Therefore, high inflation will return, and become chronic. So we will also be robbed of our savings, by inflation. Misery will be heaped upon misery.

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A Fox News panel discussion: Kayleigh McEnany shows everyone the ‘crazy’ admission by Janet Yellen.

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Linked over at the Whatfinger.com news aggregation site: Big banks may get bigger as crisis swamps ‘too big to fail’ worries.

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At Zero Hedge: Stockman On Washington’s Panicked Bailout Of Bank Deposits… Here’s What Comes Next.

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Shark Tank’s Kevin O’Leary blasts SVB’s ‘idiot management’ and ‘negligent directors’ over collapse.

Commodities:

Forbes: Commodity Prices Are Leading Indicator Of Inflation’s Demise.

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Base metals rise as banking crisis woes ease; set for weekly losses.

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From OilPrice News: Russia Extends Black Sea Grain Deal.

Derivatives:

U.S. Banks’ CDS Prices Surge as Contagion Concern Widens.

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The Credit Suisse turmoil triggered a throwback to 2008.

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Reserve Bank of Australia: Developments in Foreign Exchange and Over-the-counter Derivatives Markets.

Forex & Cryptos:

When I last checked, the Turkish Lira (TRY) was still falling, versus the USD.

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And when I last checked, the Swiss Franc (CHF) was still gaining, versus the USD.

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At Currency Thoughts: A $30 Billion Rescue Package for First Republic Alleviates But Doesn’t End Investor Uneasiness about the Banking System.

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South Korean central bank eyeing jump in the won says will stabilize markets if necessary.

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CNBC: SEC proposes rules that would change which crypto firms can custody customer assets.

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Bitcoin Market Dominance Hits 9-Month High As Altcoins Turn Red.

Tangibles Investing:

From Fortune: A bifurcated housing market: Average Idaho homeowner sees equity decline by $21K while typical Florida homeowner gained $49K in 2022.

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U.S. Homebuyers Start To Regain Upper Hand in 2023.

Provisos:

SurvivalBlog and its Editors are not paid investment counselors or advisers. Please see our Provisos page for our detailed disclaimers.

News Tips:

Please send your economics and investing news tips to JWR. (Either via e-mail or via our Contact form.) These are often especially relevant because they come from folks who closely watch specific markets. If you spot any news that would be of interest to SurvivalBlog readers, then please send it in. News items from local news outlets that are missed by the news wire services are especially appreciated. Thanks!