patrick.net

cisTits says

We get years of cheap money and start to think cheap money is normal. We see the endlessly rising asset prices and believe we’re skilled investors

7 out of 8 years of the Obama admin was with a Fed Funds rate of 0.25% and an average annual inflation rate of about 1.5%.

I do not know of any other extended period where the Fed Funds rate that was less than the inflation rate.

I agree it is problematic, as they should have raised rates in 2012 as that was more than enough time for the economy to recover from the Great Recession.

Right now the Fed Funds rate is 5% and CPI (12 months) is 6%. The Fed should at least hold the Fed Funds rate steady and wait to see CPI to drop below 5% within the next 6 months.

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The big banks lost 90 billion the last week of March from depositor withdrawals. Loss of confidence is system-wide, and growing.

NuttBoxer says

The big banks lost 90 billion the last week of March from depositor withdrawals.

Some of that may be from putting the cash into the new high return CDs.

NuttBoxer says

The big banks lost 90 billion the last week of March from depositor withdrawals. Loss of confidence is system-wide, and growing.

Schwab is down about 47% from its all time high set in January 2022.

Looks like a good buy considering it was selling for around $50 back in early 2020.
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HeadSet says

NuttBoxer says

The big banks lost 90 billion the last week of March from depositor withdrawals.

Some of that may be from putting the cash into the new high return CDs.

But usually they would put it back in the same bank since they have an account, right? So they don't lose net deposits and technically lock said deposit in for longer over a checking or savings account. Or are people going broke? Or are they drawing down amounts above FDIC limits?

People are taking the money out of their near zero interest paying accounts and putting it into money market accounts. It is death by a thousand cuts for those institutions that loaded up on long term paper during Covid.

WookieMan says

But usually they would put it back in the same bank since they have an account, right?

Possibly, but many credit unions now offer 5% 1 year CDs. I just moved just moved quite a sum from a bank paying 3% to a credit union paying that 5%. I suspect others are moving money like that as well.

Patrick says

I think market discipline should be the supervisory process. No bailouts, ever. No FDIC. If you put money in a bank, you should be WARNED in big letters that you are making an unsecured loan to the bank. The bank officers and shareholders should all be personally legally liable for all the deposits.

Absolutely correct. It was this way at one time. TPTB just can't not control everything though.

WookieMan says

Or are they drawing down amounts above FDIC limits?

Had that same thought. But if the small banks where losing deposits initially, and now the big banks, where it is all going?

https://finance.yahoo.com/news/2-billion-loss-sweden-pension-094352977.html

$2 Billion Loss at Sweden’s Pension Fund Has Stocks Chief Put on Leave

Liselott Ledin, the equities chief responsible for making Alecta one of the largest shareholders in Silicon Valley Bank parent SVB Financial Group, Signature Bank and First Republic Bank, has been placed on leave, according to spokesperson Jacob Lapidus.

No other pension fund had bet on the three lenders to the extent that Alecta had. A spokesperson for the fund has since said it does not expect to recover any of its investments in SVB and Signature, and that Alecta has sold its First Republic holding at a loss.

zzyzzx says

$2 Billion Loss at Sweden’s Pension Fund Has Stocks Chief Put on Leave

Liselott Ledin, the equities chief responsible for making Alecta

1) All I see is white people. It gets a F grade for DEI. https://www.alecta.se/en/in-english/about-alecta/senior-management/

Maybe it over invested in U.S. woke companies like SVB to compensate for being a vanilla (all white management) firm.

2) So it provides pensions for private sector union members like their version of Teamsters, Iron Workers union, Electricians brotherhood, etc. ?

"At Alecta, we manage the occupational pensions of 2.6 million private individuals and 35,000 companies in Sweden. Our job is to maximise the value of occupational pensions for our corporate and private customers."

This is 2008 all over again. How many times will you let the same system fleece you before you realize it's a scam!?

https://markets.businessinsider.com/news/commodities/us-housing-market-unaffordable-mortgage-rates-home-prices-inventory-demand-2023-4

Housing is so unaffordable that banks are losing money for each mortgage they finance for the first time ever

NuttBoxer says

This is 2008 all over again. How many times will you let the same system fleece you before you realize it's a scam!?

As many as possible.

https://finance.yahoo.com/news/fed-failed-to-take-enough-forceful-action-with-svb-150558388.html

Fed 'failed to take enough forceful action' with SVB

So basically banking where all your friends and people in the same business bank is not very good idea, because it makes your situation less diversified overall.

https://www.leefang.com/p/diversity-activists-helped-first?publication_id=1239256&post_id=118594204&isFreemail=true

The simmering bank crisis has also cast new light on the role of diversity groups that work to mask corporate interests as they shape public policy.

The National Diversity Coalition in particular has a curious history of intervening on behalf of corporate interests while purporting to represent minority communities. The group touts itself as an "empowering voice for our nation's minority and low-income communities," in support of "African American, Asian, and Latino advocacy and civil organizations."

Yet the organization stands out for its role as a vehicle for corporate influence peddling under the banner of advancing racial diversity.

Indeed, the National Diversity Coalition has lent its moral veneer to controversial corporate stances on animal rights, the gig economy, clean energy, and antitrust policy. In 2021, the group lobbied against new animal welfare standards that mandate minimum space requirements for breeding pigs. The California law, the National Diversity Coalition claimed, would harm "Asian and Latino families who rely on pork as their primary source of protein."

In similar fashion, Bautista's group filed a brief to California state courts on behalf of Uber and Lyft in 2020. The National Diversity Coalition sought to overturn a ruling that would have allowed rideshare drivers to qualify for the state minimum wage and other standard labor protections, claiming such rules would somehow harm “workers of color.”

In 2019, the National Diversity Coalition lobbied regulators to approve the merger of T-Mobile and Sprint. The telecom merger, Bautista wrote in a letter to the Department of Justice Antitrust Division, "holds tremendous potential to greatly benefit people of color throughout California."

Bautista, who did not respond to requests for comment, has a remarkable knack for winning corporate board appointments to firms that benefit from her diversity-branded lobbying. She serves on the special advisory boards of First Republic Bank, T-Mobile and PG&E.

Glad I did not buy any shares even at $7. Saw that First Republic Bank got bought out. Seems like there is an effort to consolidate the mid level banks by being bought out by top tier banks.

This is like the defense industry in the 1990s such as all the defense companies merging, consolidating and getting bought out.

Look at how much of a buying spree Ken Kresa at Northrop was on during the mid to late 1990s.

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It's also like the consolidation in banks that happened in the 1930's, 1990's, and 2008. You can't introduce CDBC's without consolidating all the banks into the original NY cartel banks.

The wonders of central banking economies!

https://finance.yahoo.com/news/hsbc-gets-1-2bn-boost-060426672.html

Shares in US banks suspended as fresh crisis fears grip market

Shares in two regional US banks have been paused amid fresh concerns about the health of the financial sector in the wake of the rescue of First Republic.

PacWest Bancorp and Western Alliance Bancorp halted trading in their equities today after suffering share price falls of 24pc and 20pc respectively.

Another boutique bullshit bank. "Oh, they were so focused on customer care, made their clients feel sooo special and it made them soooo loyal to their special bank....". Right.

Wells Fargo has been kind of creepy for a while. I keep the account because it is a few decades old business account that costs nothing, as it has gone through several bank mergers from other banks from where it started, but they continue to honor it on mostly the original terms, which you can't get any more.

Every time I go into a branch, all of the suited minions remind me of arch vampires, examining and sniffing me. They have developed a very strange corporate culture.

https://www.cnbc.com/2023/05/02/pacwest-falls-30percent-as-regional-banks-stocks-slide-to-new-lows.html

More bad news for PacWest as the bank consolidation in preparation for the CDBC continues...

https://www.zerohedge.com/markets/pacwest-shares-crash-after-reporting-deposit-flight-accelerated-last-week

"“Almost half of the 4,800 banks in the US are nearly insolvent, as they have burned through their capital buffers, The Telegraph reported earlier this week, citing a group of banking experts. According to Professor Amit Seru, a banking expert at Stanford University, around half of US lenders are underwater. . . .Around 2,315 banks across the US are currently sitting on assets worth less than their liabilities, according to a Hoover Institution report by Professor Seru and a group of banking experts, as cited by the media. The market value of the loan portfolios of these lenders is reportedly $2 trillion lower than the stated book value.” From RT"

https://www.rt.com/business/575878-half-us-banks-insolvent/

NuttBoxer says

The market value of the loan portfolios of these lenders is reportedly $2 trillion lower than the stated book value.”

That $2T+ will show up in inflation sooner or later.

Yes, the Fed will just buy the crap loans with money they just printed, sticking all of us with the inflation bill every day.

The Fed should not exist.

Blue says

That $2T+ will show up in inflation sooner or later.

Sooner.

Yep, bankruptcy and a return to fiscal responsibility, or hyperinflation. There are no other options.

I hope that second outcome makes everyone here think long and hard about their assets that are worthless without the dollar.

Just because interest rates were extremely low during the last cycle, doesn't mean they can't go lower than that.

In Europe and Japan, you had negative interest rates. Yes, their populations put up with that nonsense.

There can be a huge amount of debt created if we allow negative interest rates.

Misc says

There can be a huge amount of debt created if we allow negative interest rates.

Negative interest rates can happen during deflation when no one wants to borrow because they will be paying back with more valuable dollars. Not likely to happen during inflationary times.

HeadSet says

Misc says

There can be a huge amount of debt created if we allow negative interest rates.

Negative interest rates can happen during deflation when no one wants to borrow because they will be paying back with more valuable dollars. Not likely to happen during inflationary times.

I'd say it's a function of a large amount of money circulating pared with risk aversion. When EU and US were heavily engaged in QE, negative rates happened ion the EU for some t-bills cause the banks were literally saying, please take our money and invest!

Misc says

Just because interest rates were extremely low during the last cycle, doesn't mean they can't go lower than that.

Then why have they gone higher? The Fed would have preferred they stayed low, makes inflation easier. Ahh, but free market says a correction must come, so it does. The control you speak of isn't possible.

mell says

negative rates happened ion the EU for some t-bills cause the banks were literally saying, please take our money and invest!

That was actually done by the ECB as a ploy to lower the value of the Euro.

Regional banks stocks were damaged the most by the Fed Funds rate rising from 0.25% to 5.5% and to the highest level in 22 years. Many had long term US Treasuries as assets which dropped in value. Perhaps they will rally in 2024 or 2025 just like beaten down healthcare and energy stocks.



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@ad Is that an image of market cap of all stocks? If so, holy shit - that means that something close to a third of the whole market is just a few big tech stocks.

Where did you get that image from?

Patrick says

Where did you get that image from?

That map is of the S&P500 market cap. It does give one pause when you see the entire energy sector is slightly smaller than Microsoft...
https://finviz.com/map.ashx

https://www.cnbc.com/2024/02/29/shares-of-nycb-fall-more-than-10percent-after-bank-discloses-internal-controls-issue-ceo-change.html

Shares of NYCB fall more than 20% after bank discloses ‘internal controls’ issue, CEO change