Is There a New Dotcom Bubble?

[Juan]

Also, if they do act dovish tomorrow, then stocks will pump massively which is also bad for inflation since rich people use their stocks as collateral to borrow money which increases inflation.

Woww. The US is such a casino economy. And there are all those HELOCs and everyone is indebted to the max. Haha.

It's like seeing Martin from The Simpsons invest. There you go Martin, invest in the futures market. And Martin gets rich in a dash.

And then he loses it all in like 1 second:

 

[Juan]

SVB didn't do anything out of the ordinary as far as banking goes.

SVB had like 4 times the amount of public debt that would be "healthy" and advisable as compared to the deposits they had.

Basically those chaps at SVB (who should end up in jail) put all the bank's money in US bonds and when depositors asked for a tiny fraction of their money back, the bank did not have liquidity and had to sell bonds at a huge loss to return the money to depositors.

I think primary school kids know more economics than those fools at SVB and CS.

 

[Ed209]

SVB had like 4 times the amount of public debt that would be "healthy" and advisable as compared to the deposits they had.

Basically those chaps at SVB (who should end up in jail) put all the bank's money in US bonds and when depositors asked for a tiny fraction of their money back, the bank did not have liquidity and had to sell bonds at a huge loss to return the money to depositors.

I think primary school kids know more economics than those fools at SVB and CS.

You are describing all banks here, and it's what I've been saying on repeat for the last 2 or 3 years (in regards to fractional reserve banking). Now you are seeing why I was so critical.

SVB were compliant with the regulatory requirements and technically did nothing wrong. That's what's laughable. They made all those reforms in 2008 and it made no difference. Janet Yellen said in 2017 that with the reforms, we'd never see another banking crisis again in our lifetime, and yet, here we are.

SVB had 7% of its assets in cash. The rest was in government bonds, the same as every other bank. The industry average for cash assets is just 10-13% (10-1 ratio). SVB had 55% of their assets in fixed-income bonds whereas the average is around 25%. They were still compliant with the laughable regulations, and many other outlier banks will have similar setups.

When people started withdrawing their money to cover other expenses (because of the rising interest rate), SVB was forced to sell $21b in bonds to meet their regulatory obligations. This resulted in a loss of around $1.8b. Because of this they tried to raise $2b in new capital and that's when the markets caught wind of it. This escalated into a bank run, even though they were technically solvent by the terms of the US's banking regulations. That's why I think the entire sector is nothing but a house of cards. In reality, all the banks are insolvent. If too many people attempted to withdraw their money, then the same scenario would occur for most banks.

The larger banks are protected by FDIC (backed by counterfeit money that doesn't exist, printed by the Fed).

The US government has a huge budget deficit each year, and it fills this shortfall by issuing debt in the form of bonds. These bonds get bought for the yield over different time frames, but what's crazy is that the debt never really gets paid because they constantly issue more and more of them. Then when the rates rise nobody wants the older ones, so they lose value and become worthless. All those earning a yield are then in a net negative position.

It will get to a point where nobody will want to buy their bonds anymore, and the national debt will become realised as it will have to be repaid via other means. Even if you took all the cash that's available in America and pooled it all together, you'd still be way short of paying off the national debt. That's how outrageously large it is.

A debt-to-GDP ratio of 134% is extremely unhealthy. Remember, it was a 100% less when Volcker was around.

 

[Lane]

The larger banks are protected by FDIC

Not really, as the coverage limit on insured deposits is the same in large banks as it is in small banks ($250,000). The reason big banks are perceived as a safer place to have uninsured deposits is primarily because they're perceived as "too big to fail", whereas smaller banks haven't been considered in that same category. Or at least weren't until this latest crisis. Now they're reconsidering. If a run on the banks started occurring at a rapid rate at smaller banks, the amounts would soon be even greater than that at a single large bank.

Janet Yellen said in 2017 that with the reforms, we'd never see another banking crisis again in our lifetime, and yet, here we are.

In all fairness to Janet Yellen, she probably didn't anticipate that many of those regulations would be rolled back for small to mid-term (regional) banks. They're now considering reinstating some of those regulations. The smaller banks want and need greater protections, but the price is going to be stricter (and more expensive) regulations.

The US government has a huge budget deficit each year, and it fills this shortfall by issuing debt in the form of bonds.

Democratic Presidential candidate Al Gore campaigned in 2000 on using budget surpluses back then to begin paying off the national debt, and set a time where it would be eliminated. George Bush campaigned on giving major tax cuts, primarily to the wealth and corporations, which ended up being enacted. Then came 9/11, and government spending exploded. And both parties have been on a wild spending spree since then. I agree, totally unsustainable. But most politicians continue to pretend it is.

 

[Ed209]

Not really, as the coverage limit on insured deposits is the same in large banks as it is in small banks ($250,000)

You're quoting the standard insurance for banks who are in the FDIC scheme (which was mentioned some posts back). However, since the collapse of SVB and Signature, the FDIC decided to insure people's entire deposits, no matter how much they held. This created a problem for smaller regional banks as many started to withdraw their money and began putting it into larger banks because of what happened. The board of the FDIC and the Fed can decide, based on a majority vote, whether to bail out a bank and/or its depositors for any amount they like. This creates a two-tier banking system (as I said in a previous post).

The reason that most of the liquidity is driving towards the biggest banks is because everyone knows that they'll be bailed out. It's not a question of whether they are too big to fail as we all know that's a myth. Lehman Brothers, and even Credit Suisse's recent bailout put paid to that.

Democratic Presidential candidate Al Gore campaigned in 2000 on using budget surpluses back then to begin paying off the national debt, and set a time where it would be eliminated

That was quite literally the only time there has been a budget surplus within the last 70 years. It lasted for 4 years. What good is that?

They need to start cutting their spend, but nobody will vote for that, and that's ultimately what motivates senators/governors and their policies. They need to get their heads out of the clouds, and this includes the general public who need to realise that a drop in living standards is inevitable and needed. We cannot live beyond our means at the rate we are currently going.

Look at the projection going forward (based on information from 2019):

This is from 2021:

 

[Lane]

However, since the collapse of SVB and Signature, the FDIC decided to insure people's entire deposits, no matter how much they held. This

Hi @Ed209 -- My understanding is the FDIC decided to cover all uninsured deposits for SVB and Signature customers, but not for any other bank. That's why there's been continued intense depositor scrutiny on small and regional banks. They know their uninsured deposits are still uninsured. No guarantees. These banks are however asking Congress to cover all uninsured deposits for at least two years, to remove the worries and concerns a lot of their depositors have.

They need to start cutting their spend, but nobody will vote for that, and that's ultimately what motivates senators/governors and their policies. They need to get their heads out of the clouds, and this includes the general public who need to realise that a drop in living standards is inevitable and needed. We

I fully agree on this. When I look at things from a "bigger picture", or perhaps spiritual viewpoint, it seems inescapable to me there's a "big lie" going on, being perpetrated by both major political parties. That (spiritual) lie being: "You can get something for nothing". That's never been the case, and never will be the case.

I heard a "joke" once about a king who wanted all the knowledge and wisdom of the ages written down and preserved. After a long period of time, his "wise men" came back and put all that wisdom into 7 volumes. The king said he wanted it distilled to perhaps one volume. They eventually, after a lot of culling, were able to do so.

Then the king wanted it distilled even further, to a chapter. And then to a page, and then to paragraph, and finally to a sentence. Of course this made life difficult for his "wise men". But they did as asked, and finally distilled all the knowledge and wisdom of the ages down to a single sentence. "There ain't no free lunch". The king was satisfied.

The big problem amongst much of the world's populace today is that they really don't believe this, or get it. They continually, under threat of not voting for a particular politician or party, demand they get something for nothing. Doesn't work, and so we have continuing national and global financial problems.

 

[Juan]

SVB were compliant with the regulatory requirements and technically did nothing wrong.

To be precise, they complied with what was left of the financial regulation, since Trump repealed part of the Dodd Frank in 2018. It is Trump's fault that these banks are collapsing. The Clown routinely told the FED what to do: printing more money and lowering interest rates... basically, giving away money.

Now we are reaping the fruits.

 

[Ed209]

Hi @Ed209 -- My understanding is the FDIC decided to cover all uninsured deposits for SVB and Signature customers, but not for any other bank.

Yea, that's exactly what I'm saying, Lane. Everyone is in the same $250k boat until it's a bank that presents a systemic risk. Then the FDIC and the Fed step in and bail them out for the entire amount. They should just let them fail. This triggered a wave of people to switch banks putting pressure on the regional ones. This is what I meant when I said the Fed just pick and choose who to save. There's nothing natural about this process, and it encourages bad risk management because people know they can get away with it.

There ain't no free lunch

The mantra I live by.

If we want to restore our economies, we need to become more productive, and less opulent when we can't afford it.

We have all become far too accustomed to living a life of luxury when our productivity doesn't back it up. We got used to having extremely cheap labour to make us things, and easy "fake" money that isn't backed by anything that's printed whenever it's needed, but never earned.

I always say it's like the first law of thermodynamics. Energy cannot be created nor destroyed; well neither can real money. If it's created out of nothing then it's at the expense of something else.

 

[Lane]

If it's created out of nothing then it's at the expense of something else.

Like cryptocurriences?

 

[Ed209]

Like cryptocurriences?

No, certain cryptocurrencies act like real money; how money used to be. That's why they're a much better way of transacting than the post-Nixon fiat currencies. You cannot just create new coins out of thin air as the central banks do. There are protocols which mean you cannot debase them and/or use them maliciously. They are cheaper to use, greener, and people can interact with their money on a much more meaningful level via DeFi. The banks take so much away from people without them even knowing it with hidden fees, etc.

I'm really surprised that so many people are still uneducated on the real benefits that cryptocurrencies can bring. Unfortunately, the propaganda from the central banks convinces most people to hate it without them ever actually knowing anything about it or without them ever using it. It's even funnier when the same people realise that the central banks are about to use the exact same technology, but will be taking all the good aspects away. So, what will be the difference then? It will still be crypto all but in name, but with a central entity controlling everything and gaining even more power while they're at it.

A truly decentralised currency has no overlords, and no one can manipulate it. It keeps its true value like the gold-backed coins of old.

 

[Ed209]

Capital One's credit default swaps have surged. It's not looking good for them, and they could be one of the next to fall. CDS were one of the primary indicators of there being trouble ahead in the 2008 financial crisis, and it was also a good indicator that Credit Suisse was in trouble.

They are also trying to sell a lot of their securities at a loss like SVB, Silvergate, and Credit Suisse did. This is a massive red flag, and it's why their CDS have gone up so much.

Looks like the Fed will be along soon with their BTFP program to artificially prop them up like the others. This really is a farce and people need to open their eyes. In the meantime, the SEC has gone after Coinbase! You couldn't make this shit up. They have already jumped through every regulatory hurdle and have done nothing wrong.

It is clear that they are intentionally going after crypto and regional banks. They don't want the competition and are acting illegally to try and eradicate them. It's shameless. The SEC have failed in their duty to put up the regulatory framework for crypto. Everyone has been waiting years for them to get their act together on the issue, but instead they have stalled and made the situation worse at every turn.

Then I see they have a new white paper out for their shoddy CBDC:

This tweet is exactly how I feel. They were complicit with FTX which led to people losing billions, and they decide to go after Coinbase after approving them? Wtf is going on?

Disgraceful!

What's the point in the SEC, honestly? They are so incompetent I don't even know where to begin. Where is the Bitcoin ETF? Multiple applications turned down without any legal basis (even though they already approved a futures ETF. Work that one out).

The world gets crazier by the day.

 

[Ed209]

The Fed's balance sheet, as of Wednesday, now shows that they have reversed two-thirds of the QT they did over the last year.

Looks like they've got some more propping up to do.

 

[Juan]

It's time to put some SV billionaires in jail:

Executive pay at SVB soared after big bet on riskier assets

Bonuses jumped when wager on long-dated bonds boosted lender's returns.

 

[Juan]

These guys specialise in shorting companies who are cooking their data or hiding something:

Hindenburg shorts Jack Dorsey's payments group Block

 

[Ed209]

It's time to put some SV billionaires in jail:

Executive pay at SVB soared after big bet on riskier assets

Bonuses jumped when wager on long-dated bonds boosted lender's returns.

There wouldn't be a jail big enough to house all the corrupt bankers, and yet, none of them ever see any prison time (or any punishment at all for that matter).

The 2008 financial crisis ruined a lot of people's lives, and those responsible continued on as if nothing had happened whilst the common working man/woman had all their tax money stolen to bail the system out. Then they went one step further and printed so much money via QE that they devalued everyone's savings. This is a tax on their incompetency. Why should regular folk have to suffer?

Now we have the same situation again.

This is normally a time when incompetent businesses go bankrupt, but not in the banking sector; they like to devalue everyone's savings instead to save these corrupt dinosaurs. Why do we allow it to keep happening, though?

 

[Lane]

There wouldn't be a jail big enough to house all the corrupt bankers, and yet, none of them ever see any prison time (or any punishment at all for that matter).

I seem to recall that hundreds of bankers got prosecuted by in the 1980s (with many going to jail) for their shenanigans during the Savings & Loan crisis. I was appalled that Obama's justice department never went after the crooks that caused the 2008 banking crisis, knowing that if there were no consequences, history would surely repeat itself. We're not at 2008 levels of crisis, but prosecution back then might have staved off much of what's transpired since, leading us to SVB's failure, and possibly more.

 

[Ed209]

Deutsche Bank is also looking ropey as their credit default swaps have also risen sharply. Their 5 year swaps are going parabolic.

 

[Ed209]

I seem to recall that hundreds of bankers got prosecuted by in the 1980s (with many going to jail) for their shenanigans during the Savings & Loan crisis

Good point, that's true. That crisis led to the failure of more than a thousand savings and loan associations in the States, and it cost taxpayers billions of dollars (again). That's another time the bankers screwed everyone over that I forgot about. How many more times are we going to allow these scandals to happen, and at our expense?

The head of a large bank could be exposed as a serial killer and they'd still probably just slap him on the wrist and say "you naughty boy, don't do that again."

They all protect each other and are in each other's pockets.

 

[Juan]

There wouldn't be a jail big enough to house all the corrupt bankers, and yet, none of them ever see any prison time (or any punishment at all for that matter).

The law was really efficient to jail Madoff, because he robbed the rich.

By the way, have you seen all the protests and demonstrations in France, against the pension reform?

They are literally burning Paris.

 

[Juan]

It seems there is gonna be a controlled blasting of the financial sector:

SEC raised concerns over hedge fund Rokos after losing bond bets

What will be the next bank to fall? Deutsche Bank?

 

[Ed209]

By the way, have you seen all the protests and demonstrations in France, against the pension reform?

They are literally burning Paris.

Yea, I've seen some of the footage. It's crazy what's going on over there. It's like something out of Les Miserables.

 

[Ed209]

Janet Yellen called an unscheduled meeting for top US financial regulators yesterday. I wonder what they discussed as it was closed to the public. Top secret stuff, lol.

 

[Juan]

Yea, I've seen some of the footage. It's crazy what's going on over there. It's like something out of Les Miserables.

The guillotine is missing for the moment. Although the time to behead presidents and central bankers is coming closer.

 

[Juan]

Banks under siege, by tax authorities. It's surprising those EU bureaucrats never chase Big Tech to pay taxes.

French prosecutors raid banks in tax fraud probe

 

[Juan]

I would not buy a Tesla car. The batteries are really polluting, so I do not see any improvement over the diesel and gasoline cars we have been using...

Global warming and climate change are excuses to use only at convenience. However, the US does not talk about climate change when Biden authorises oil drilling in Alaska. The setting of the drilling area and transporting the oil will pollute the same as several million cars. And that's just operating the facility. Ridiculous.

Tesla cars lose value faster than rival models after price cuts, data shows

 

[Ed209]

The UBS CEO has quit as it's likely he can see what's coming ahead: a real shitstorm.

The French authorities have also raided five major banks in a €100b fraud investigation. Their media reports that the banks were: HSBC, BNP Paribas, Exane (a subsidiary of BNP Societe Generale), and Natixis.

Credit stress is now starting to dominate with the interest rate at 5%. The Fed can backstop the liquidity of various banks and institutions, but it cannot backstop earnings recessions, house prices, and other real credit events. I'm not sure how much longer they can keep this going before they'll be forced to make cuts.

 

[Juan]

When Tesla owners look at the price tag they will have to pay to replace batteries and other components they will not be happy. And when they know how polluting batteries are, they won't be able to claim any ecological reasons to back electric vehicles.

Tesla's price war in China backfires as BYD sales surge

 

[Juan]

The French authorities have also raided five major banks in a €100b fraud investigation. Their media reports that the banks were: HSBC, BNP Paribas, Exane (a subsidiary of BNP Societe Generale), and Natixis.

There are German banks involved in this too, and these investigations (at least searching offices etc by teams of tax inspectors) started in January or before. They've been raiding offices for a few months, in several EU countries.

 

[Ed209]

The BRICS countries have stopped using the US dollar for trade and are using the Chinese Yuan instead, and just moments ago, Brazil also reached a deal with China to trade in their own currencies, ditching the dollar.

I said there would be a risk to the dollar's world reserve status if they continued on the same path. I will keep my crystal ball in close contact for further updates

 

[Juan]

The BRICS countries have stopped using the US dollar for trade and are using the Chinese Yuan instead, and just moments ago, Brazil also reached a deal with China to trade in their own currencies, ditching the dollar.

I think the yuan will have a greater role in world commerce, and the USD will start its decline.

Today it's the "Asian Davos" in Hainan, and European countries should seize this opportunity to foster trade with China, and to convince the Chinese to invest more in Europe.

I still think the EU made a big mistake when they banned Huawei from implementing its 5G networks in Europe.