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What’s in store? Answers to a reader’s financial questions and observations

Evans

Cryptos & CBDCs

If you look at the chart, BTC quickly went down under 20k initially with the bank news, as SIVB was affiliated with bitcoin. Yet in a matter of seven days it recovered to almost 28k with that stable coin bailout news, and as of today still on an uptrend with decent volume. It was on a small rally since January. It went from 16k in December to 24k in Feb, so that took about 30 days to gain around 10k on no hype or news.

Greg

Gold saw some strength here, but if it weren’t for the cryptos gold would be way over $2,000. In fact if cryptocurrencies never existed gold would be $3,000+.

The stable coins received a huge vote of confidence as the Fed and US Treasury bailed out USDC, rather than have the stable coin lose the $1.00 NAV due to an unprotected deposit.

If I were running stable coins, I would probably take my money and deposit it at Banks like JP Morgan or Goldman Sachs. I would play nice with regulators and they would allow me to make a lot of money as I would help support the price of Bitcoin and divert money from the precious metals.

We talk about a central bank digital currency, the Fed is not going to use a cryptocurrency type of regime like bitcoin. Rather it will be a digital currency in which it controls and operates. Concepts like FEDNow, Fed deposit guarantees, and a digitized currency would allow them to centrally manage it and forcibly govern its users.

Theoretically, Bitcoin is not centrally managed and these powers would not engineer a digitized currency that was not centrally managed.

Will CBDC be connected to BTC or can they coexist?

Greg

Yes, they can and will coexist. I am predicting that any nation-state digital currency won’t be like BTC, but rather will be a centrally managed behemoth, similar to a stablecoin that will vary in supply as needed, and that will be dispensed based on good behavior and social standing. Regardless, we are a few years away from anything substantial. It won’t happen before the force majeure of WWIII.

Banking stocks

As reminded in the podcast no collapse, just consolidations. With the billions of deposits and merge talks, do CS and FRC uptick next week? I would think banking stocks start to make a recovery, but anything can happen.

Greg

I wouldn’t buy any of the bank stocks in question, like FRC or CS, as the terms of any buyout or rescue usually means stockholders get the shaft. Their debt would be the most likely to see support, like CSs this weekend.

Centrally planned objectives

Chris you said it was already known by the FED what was going to happen, before it happened, and isn’t that always the case with these big events. Like clockwork they had all the bailout liquidity immediately ready to save the day. The headlines are mostly free from Covid and Ukraine stories, that is old news, they are intentionally moving the populace along to follow what appears to be a pre written script.

Greg

Indeed, these rescue and bailout packages were already in the can waiting for the opportunity. The Fed and UST know all about the ramifications of its fiscal and monetary policies, and are aware in real time of the unrealized losses generated on bank balance sheets. Moreover, SVB was a who’s who list of Democrat donors and supporters. What better way to benefit from and control a crisis than by causing it in the first place?

The coming asset inflation

This past week’s monetary injection is not going directly to the end user, but is staying primarily in the financial shell for now; which is similar to the pre-covid QE stimulus.

Contagion being their fear keyword and now we enter their financial vaccine cure phase. The bailout and merging news is starting to appear in the headlines, making the banking hype seem like everything is fine and okay as Yellen has just stated, so this means BTC and related stocks should slowly go back down. Or maybe this event will be a kickoff to an extended BTC rally, the exact opposite of the expected crypto winter that was being reported in December. Once again proving we should take the contra on the reported mainstream expectations.

Greg

For now, inflation is going to continue raging. However, the difference between the bailout money injections of the past week and the monetary and fiscal stimulus from covid is vast. This time around, the entities getting the cash are the large institutions.

These banks and institutions are now flush with this cash and will begin deploying it eventually. Rather than directly driving up the costs of living, this money will most likely effectively be sterilized to some extent, and these bailout recipients are going to go out and buy the assets. I suspect they’ll probably even continue buying rental properties as well as other income generating assets.

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13 thoughts on “What’s in store? Answers to a reader’s financial questions and observations”

  1. We know what’s coming. It’s out in the open. I hold no hope for any pushback. I observe the ease at which the adversary was able to coerce 180mm adult Americans into taking a DoD mRNA injection bioweapon and realize it’s just a quick matter of time.

    I observe it how easily our adversary was able to blow up our financial system, given the fake crisis of covid, and I know there’s no going back. It’s just a quick matter of time.

    I see it how quickly the adversary’s media were able to push and convince those of multiculturalism, even from within the Christian church, as being Godly. It’s just a quick matter of time now.

    I’m a long time student of behavioral economics and mass psychology; I suspect that the rapid psychological degradation of the population since early 2020 in aggregate will accelerate the economic and social collapses out to the force majeure. Russia and China are quickly being convinced that the United States will pose no bona fide threat and that America is just a paper tiger. It’s just a quick matter of time now.

    Later on this decade we’ll see Jacob’s trouble. No one in the church will be raptured out beforehand and many will be dead by then. It’s just a quick matter of time now.

      1. So many people I know are now having persistent health problems. They have had their lives forever altered over the past year or two.

        You know what it is. Only a fool would think otherwise.

        Since the injections were introduced All I have Heard on the MSM is that they are “safe and effective.”

        I know they’re not effective, so we know they’re not safe.

  2. China and Russia heads privately meet to discuss the timeline to World War 3
    ____________

    March 20, 2023 8:44 AM EDT Last Updated 19 min ago

    China’s Xi in Russia to meet Putin over Ukraine war

    •Visit follows Putin arrest warrant for war crimes
    •China and Russia both denounce international court ruling
    •China seeks to broker Ukraine peace, Kyiv wants Russia out
    •Fighting rages round Bakhmut in east Ukraine

    https://www.reuters.com/world/europe/putin-welcome-xi-moscow-under-shadow-ukraine-war-2023-03-20/

      2. What better way to control everything than by controlling the opposition. Putin still refers to “the party” in his dealings. Nothing ever changes. The Communist party, the second largest in Russia, has a tiny fraction of seats in the Duma and council. Maybe 15% & 3%, respectively. Just a phony opposition for the old folks to hang onto. They get the approval of Putin for everything.

  3. Fed and Global Central Banks Move to Boost Dollar Funding

    •Central banks will boost frequency of swap-line operations
    •They say step will help shield economies from funding strain

    https://www.bloomberg.com/news/articles/2023-03-19/fed-and-five-central-banks-announce-move-to-boost-dollar-funding

    The Federal Reserve and five other central banks announced coordinated action on Sunday to boost liquidity in US dollar swap arrangements, the latest effort by policymakers to ease growing strains in the global financial system.

    Central banks involved in the dollar swaps will “increase the frequency of 7-day maturity operations from weekly to daily,” the Fed said in a statement coordinated with the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank and the Swiss National Bank.

    The US central bank has typically provided access to such arrangements at times when there’s a squeeze on the availability of dollars. That can arise because banks outside the US typically have obligations that are denominated in greenbacks, and in times of financial strain have less access to dollar funding.

  4. Credit Suisse’s $17 Billion of Risky Bonds Are Now Worthless

    •UBS agreed to buy Credit Suisse in government-brokered deal
    •Government support will trigger ‘complete writedown’ of AT1s

    https://www.bloomberg.com/news/articles/2023-03-19/credit-suisse-s-17-billion-of-risky-bonds-are-now-worthless?

    (Bloomberg) -About 16 billion Swiss francs ($17.3 billion) of Credit Suisse Group AG bonds have become worthless after a takeover of the firm by rival UBS Group AG.

    The deal will trigger a “complete write-down” of the bank’s additional tier 1 bonds in order to increase core capital, Swiss financial regulator FINMA said in a statement on its website.

    The bond wipe out is the biggest loss yet for Europe’s $275 billion AT1 market, far eclipsing the approximately €1.35 billion loss suffered by junior bondholders of Spanish lender Banco Popular SA back in 2017, when it was absorbed by Banco Santander SA to avoid a collapse.

    AT1 bonds were introduced in Europe after the global financial crisis to serve as shock absorbers when banks start to fail. They are designed to impose permanent losses on bondholders or be converted into equity if a bank’s capital ratios fall below a predetermined level, effectively propping up its balance sheet and allowing it to stay in business.

    Investors had been concerned that a so-called bail-in would result in the AT1s being written down, while senior debt issued by the holding company, Credit Suisse Group, would be converted into equity for the bank.

    Credit Suisse Investors See Bail-In Risk for $82 Billion Bonds

    AT1 Bondholders

    Pacific Investment Management Co., Invesco Ltd. and BlueBay Funds Management Co. SA were among the many asset managers holding Credit Suisse AT1 notes, according to data compiled by Bloomberg. Their holdings may have changed or been sold entirely since their last regulatory filings.

    Pimco and BlueBay declined to comment when contacted by Bloomberg News on Friday, before the deal was announced. A spokeswoman for Invesco said that “due to portfolio disclosure policies, we wouldn’t disclose any current movements in portfolios but our investment teams are continuing to monitor developments and prudently managing our clients’ assets in light of current market conditions.”

    The bonds were by Friday already trading at levels usually reserved for companies about to go bust. A slice of the bank’s $1.65 billion note, issued less than a year ago, changed hands at about 35 cents on the dollar, according to trade reporting system Trace.

    Earlier on Sunday, pricing fluctuated as traders weighed two contrasting scenarios: either the regulator would nationalize part or the whole bank, possibly writing off Credit Suisse’s AT1 bonds entirely, or a UBS buyout with potentially no losses for bondholders.

    The broader market for those risky European bank bonds, also known as contingent convertibles or CoCos, has also tumbled in the past two weeks, with the average AT1 now indicated at a price of just 82% of face value, one of the steepest discounts on record.

  5. Unless I am reading this incorrectly, The Financial Times reports UBS is buying CS for 75% less than or about a quarter of Friday’s closing price. Shareholders don’t make out well under these scenarios.

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