Bank Crisis

Is This Major Country About to Default?

Japan is showing us the endgame for central bank insanity.

Ever since the Great Financial Crisis, the Fed has been following Japan’s playbook for propping up a financial system. Indeed, everything the Fed has done, Japan originally nearly a decade earlier.

The Fed first cut interest rates to zero in 2008. Japan did that in 1999. 

Similarly, the Fed first introduced large-scale Quantitative Easing (QE) programs in 2008. Japan first did that in 2001. 

My point is that Japan is the grandfather for central bank insanity. Because of this, the current situation in that country bears watching as it shows us the endgame for what will eventually unfold in the US.

I’m talking about the collapse of a currency.

Japan’s currency, the Yen, started collapsed in 2002. Since that time, Japan’s central bank, the Bank of Japan or BoJ for short, has begun intervening to prop up the currency.

As you can see in the below chart, every single one of these interventions has failed. The Yen is now hanging on to the edge of a cliff by its fingernails. If this last line of support gives way, it could enter a free-fall.

Put simply, the third largest economy in the world is on the verge of an outright currency collapse.  And if you think this couldn’t happen in the U.S., you are mistaken. The Fed has already signaled that it will be inflating away the U.S. debt in the coming years.

This means the $USD slowly entering a death spiral… and inflation trades making fortunes.

There is a LOT of money to be made here… and if you’re looking for a means to to insure you profit from it, we recently published a Special Investment Report detailing three investments that will profit from the Fed’s inflationary mistakes. As I write this, all three of them are exploding higher.

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Graham Summers

Chief Market Strategist

Phoenix Capital Research, MBA

Posted by Phoenix Capital Research in Bank Crisis, Central Bank Insanity, Inflation

The Fed Has Created Another Bubble… Are You Prepared For When It Bursts?

By Graham Summers, MBA

Everything changed for the financial system in March 2023.

What happened then?

The Fed and the Treasury implemented a backdoor bailout of the banking system.

If you’ll recall, in late February/ early March 2023, a number of smaller/ regional banks failed in the U.S. While we say these banks were “small” in comparison to the mega banks like JP Morgan or Wells Fargo, the reality is that when Silicon Valley bank, Signature Bank, and First Republic bank failed, they represented three of the largest bank failures in U.S. history.

Why were these banks failing? 

Two reasons:

1) The banks were only paying 0.3% on deposits at a time when depositors could earn 4% or even 5% in a money market fund or short-term Treasuries. So people were pulling their money out of the banks in droves.

2) The banks were sitting on hundreds of billions of dollars’ worth of unrealized losses on their longer-duration assets (mid to long-term treasuries and loans) courtesy of inflation forcing these bonds to collapse.

Now, investor confidence is a strange thing. Both of the above issues were common knowledge as early as November 2022, but for whatever reason, investors chose to ignore them and give regional banks the benefit of the doubt until late February 2023,

Then Silicon Valley bank, Signature Bank, and First Republic failed, and investors began to panic, dumping regional bank shares. Banks’ share prices were falling 10%, 20% even 50% in a single day. And in early March 2023, it appeared as if the U.S. was mere days away from a full-scale banking crisis.

That’s when the Fed and the Treasury jumped in… 

The Treasury, acting with the Federal Deposit Insurance Corporation (FDIC) moved to assure depositors that their money was safe, offering to backstop ALL deposits above the usual $250,000 that is insured by the FDIC.

Simultaneously, the Fed pumped nearly $400 billion into the financial system in the span of three weeks.

The Fed also opened a backdoor bailout scheme to funnel nearly $100 billion to the banks.

And that’s when everything changed for the stock market. Stocks bottomed and haven’t looked back.

Below is a weekly chart for the S&P 500 year to date. Each of those candles represent the price action of a given week. White candles represent up weeks and black candles represent down weeks.

As you can see, the last major black candle occurred in late February/ early March 2023 during the regional banks’ issues. Since that time, the market has closed UP for 13 of the last 19 weeks. And of the six down weeks, only two were significant; the other four we all bought aggressively, with stocks reclaiming most of the initial losses by the time the week ended.

I’ve illustrated the two significant down weeks with blue circles in the chart below. Note that the other four down weeks were either down only slightly (purple circles) or saw the market ramp hard off the lows (red circles).

In the simplest of terms, everything changed for stocks in early March 2023. Since that time, the markets are back into “bubble mode” with everything soaring. Companies like Sirius XM Holdings have saw their share price DOUBLE in the span of a week. Meanwhile Carvana is up 700%! 

Bearing all of this in mind, smart investors are asking, “what’s next? Will the Fed continue to pump the markets into an even larger bubble, or is this whole mess going to come crashing down?”

I’ll detail my thoughts on this in tomorrow’s article. In the meantime, we recently outlined a unique “of the radar” investment that will could EXPLODE higher as due to the Fed’s money printing. We detail this investment in an investment report called  Billionaire’s “Green Gold.”

It details the actions of a family of billionaires who literally made their fortunes investing in inflationary assets. And they just became involved in a mid-cap company that has the potential to TRIPLE in value in the coming months.

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Posted by Phoenix Capital Research in Bank Crisis, Central Bank Insanity

How to Tell If Your Bank is in Trouble

By Graham Summers, MBA

Dear Investor,

You no doubt have some concerns about the bank at which you keep your deposits.

I mean, why wouldn’t you? Three of the largest bank failures in U.S. history have already taken place this year. And by the look of things, there are even more to come.

So today we’re going to do a quick break down of how to analyze a bank to see if it’s in trouble. This is NOT meant to be an exhaustive lesson on accounting, but simply a decent rule of thumb to help you figure out if a bank is in serious trouble as far as its bond portfolio is concerned.

As I’ve already outlined earlier this week, 2022 was the worst year on record for long-term Treasury bonds. This has been a huge problem for banks which own hundreds of billions, if not trillions of dollars’ worth of long-duration bonds and loans that move based on what happened with Treasuries. Unless the banks hedged this risk, they are likely sitting on substantial losses in their long-duration portfolios.

Now, by law, every bank has to report the losses or gains on many of the assets it owns. These are recorded as “unrealized” gains or losses in the case of the assets that the bank still owns/ has yet to sell.

See for yourself. 

Below is a screenshot from the income statement of a bank. As you can see, the total amount of unrealized losses ballooned in 2022, likely as a result of these assets dropping in value when the bond market collapsed. As of year-end 2022, this bank is sitting on $952 million worth of unrealized losses.

Now, that sounds like a lot of money in “unrealized losses,” but everything is relative. So to see if this is a major issue we need to assess that number against the bank’s shareholder equity (the stock owners).

In this particular instance, the bank in question has shareholder equity of $3.9 billion. So put another way, this bank is sitting on unrealized losses equal to 25% of shareholder equity. That’s a pretty big deal, which would suggest this bank could find itself in trouble.

All of this information can be found on the SEC’s website. Simply go there, type in the symbol for your bank, then go to its annual or quarterly financial statements (the 10-K or 10-Q). You can even do a “search” function in those files for the terms “unrealized losses” or “shareholder equity” to find the specific parts you need to see.

I hope this helps!

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Posted by Phoenix Capital Research in Bank Crisis