Stocks and Precious Metals Charts - Economic Donkeys

 

"To put it bluntly, this [Silicon Valley Bank] was a Wall Street IPO machine that enriched the investment banks on Wall Street by keeping the IPO pipeline moving; padded the bank accounts of the venture capital and private equity middlemen; and minted startup millionaires for ideas that often flamed out after the companies went public. These are the functions and risks taken by investment banks. Silicon Valley Bank – with this business model — should never have been allowed to hold a federally-insured banking charter and be backstopped by the U.S. taxpayer, who was on the hook for its incompetent bank management.

Wall Street On Parade, SVB Was an IPO Pipeline in Drag as a FDIC Bank, March 13, 2023

"The real problem with our financial system is that our economic and political system work together to encourage excessive risk, and this risk in turn leads to cycles of prosperity and collapse.  This policy of responding to the aftermath of bubbles, rather than addressing them before they get going, through tighter regulation, has become the mantra of most central banks. 

Each time banks fail, by bailing the system out again, we teach our finance sector a lesson: you can safely take too much risk because, when you lose, the taxpayer will pick up the bill.  Such a system is destined to fail, but the party can run for a long time."

Simon Johnson and Peter Boone, Economic Donkeys, 19 September 2009

"You should thank God for bank bailouts.  Now, if you talk about bailouts for everybody else, if you just start bailing out all the individuals instead of telling them to adapt, the culture dies.   There's danger in just shoveling out money to people who say, 'My life is a little harder than it used to be.'  At a certain place you've got to say to the people, 'Suck it in and cope, buddy.'"

Charlie Munger, September 2010

"It [inequality] is visible in the ever rising costs of healthcare and college, in the coronation of Wall Street, and the slow blighting of wherever it is that you happen to live. And you catch a glimpse of inequality every time you hear about someone that had to declare bankruptcy because a child got sick. Inequality is about the way in which speculators, and even criminals, get a helping hand from Uncle Sam, while the Vietnam Vet down the street from you loses his house."

Thomas Frank, Listen Liberal

"Moral hazard is the probability that a party insulated from risk will behave differently from the way they would behave if fully exposed to the risk. It also encourages the rise to power of the sociopath in the affected organizations.  Unfortunately there is a small but powerful oligopoly of privilege that is trying to project themselves onto the global stage while believing that they are immune to ordinary consequence, and have become addicted to the notion that 'others must pay' for their failures.  Moral hazard comes from rewarding bad behaviour in markets with wristslaps and bailouts.  It is a danger to the economy and to the public."

Jesse, Moral Hazard, 22 March 2008

A fresh run on some of the 'banks' and their subsequent failure had the risk markets reeling.

The government took extraordinary action to bail out wealthy depositors and tech startups over the weekend.

The President appeared before the market open with encouraging words, and to reassure the public that they would not be paying for the bailout this time:  at least not right away.

Does anyone really believe that the Big Banks will be eating their FDIC fees and not passing them along to the public?  

That the bailout of the wealthy and their tech toys scams are essential to the future of democracy?

Let's call it self-righteous pigman syndrome. 

 There was a remarkable plunge in short term Treasury yields as expectations of more draconian Fed rate increases fell off the table.

The provided some support for stocks which went on an intraday roller coaster ride.  Almost business as usual.

The Dollar took those yield drops on the chin.

As you might expect gold and silver rocketed higher in a genuine flight to safety.

Here we go again.

There is still plenty of time to machinegun the lifeboats as we have a quad option expiration on Friday, and a Comex metals option expiration next week.

We are the hollow men.  We learn nothing.

Have a pleasant evening.

'There is no saint without a past, no sinner without a future.' Augustine

 

"Today, if you hear His voice, harden not your hearts."

Hebrews 3:15

Tax collectors and sinners were all drawing near to listen to Jesus,
but the Pharisees and scribes began to complain, saying, “This man welcomes sinners and eats with them.”

So Jesus told those indignant listeners this parable:

“A man had two sons, and the younger son said to his father,
‘Father give me the share of your estate that should come to me.’
So the father divided the property between them.

After a few days, the younger son collected all his belongings
and set off to a distant country
where he squandered his inheritance on a life of dissipation.
When he had freely spent everything,
a severe famine struck that country,
and he found himself in dire need.

So he hired himself out to one of the local citizens
who sent him to his farm to tend the swine.
And he longed to eat his fill of the pods on which the swine fed,
but nobody gave him any.
Coming to his senses he thought,
‘How many of my father’s hired workers
have more than enough food to eat,
but here am I, dying from hunger.
I shall get up and go to my father and I shall say to him,
“Father, I have sinned against heaven and against you.
I no longer deserve to be called your son;
treat me as you would treat one of your hired workers.”’

So he got up and went back to his father.
While he was still a long way off,
his father caught sight of him, and was filled with compassion.
He ran to his son, embraced him and kissed him.

His son said to him,
‘Father, I have sinned against heaven and against you;
I no longer deserve to be called your son.’
But his father ordered his servants,
‘Quickly bring the finest robe and put it on him;
put a ring on his finger and sandals on his feet.
Take the fattened calf and slaughter it.
Then let us celebrate with a feast,
because this son of mine was dead, and has come to life again;
he was lost, and has been found.’

Then the celebration began.
Now the older son had been out in the field
and, on his way back, as he neared the house,
he heard the sound of music and dancing.
He called one of the servants and asked what this might mean.
The servant said to him,
‘Your brother has returned
and your father has slaughtered the fattened calf
because he has him back safe and sound.’

He became angry,
and when he refused to enter the house,
his father came out and pleaded with him.
He said to his father in reply,
‘Look, all these years I served you
and not once did I disobey your orders;
yet you never gave me even a young goat to feast on with my friends.
But when your son returns
who swallowed up your property with prostitutes,
for him you slaughter the fattened calf.’

He said to him,
‘My son, you are here with me always;
everything I have is yours.
But now we must celebrate and rejoice,
because your brother was dead and has come to life again;
he was lost and has been found.’”

Luke 1-2,11-32


"Almighty God lets the sinner go his own way, for He has given to man free-will, and does not want a forced obedience, but an obedience springing from love. In his forgetfulness of God, the sinner squanders his fortune, the natural and supernatural gifts which he has received, using his natural gifts, his health, his physical powers, and his reason, to offend God. He acts most unjustly and ungratefully towards his Creator and Benefactor, and loses the grace of God, merit, and the heirship to heaven.

The sinner, having forsaken the service of his God, falls under the dominance of Satan, and becomes the slave of his lowest passions, which are signified by the swine which the prodigal was forced to feed. But the more he obeys his passions, the more dissatisfied he becomes. No pleasure of the senses can give him happiness, and he feels an emptiness and spiritual hunger in his heart which he is powerless to satisfy. He knows no rest; he only knows that he is miserable, and hateful to himself...

Though the sinner has offended Him so grievously and so often, yet He does not reproach him, but forgives him everything, and restores him to his former rights and dignity of sonship. God alone can love in this way, and to us this sort of love is inconceivable. Our Lord portrays this narrow-mindedness of ours in the conclusion of the parable. The elder son cannot understand his father’s joy; he murmurs at it, and refuses to take part in it; and even professes to believe that his father prefers the returned prodigal to himself, the faithful, obedient and industrious son. By this behaviour of the elder son our Lord signifies the jealousy of the Pharisees, who considered themselves to be just, and murmured at the deep interest which Jesus took in sinners.

By the father’s answer in the parable our Lord shows how very unjustifiable any such jealousy would be. The just man ought to think of the great happiness which he has had of being always in the love and grace of God: and if he will try to realize what the infinite love of God is for every soul which He has made, he will rejoice with God as often as a soul which had been lost is found or saved. As the angels rejoice over the return of the prodigal, so ought we to rejoice over the conversion of sinners."

Frederick Justus Knecht


“The truth is that we were so spiritually and morally bankrupt that we could not even see some of those lines— we stepped over them blindly.   Other times we saw the lines alright, but we wanted to cross them.   

It wasn’t God who was dead.   We were."

Ray A. Practice These Principles


"It is very easy to get drunk with hate.  Hate is like the glass of whisky which is given to the soldiers before a bayonet charge.  Whisky stimulates but does not nourish.   Hate is not creative, only love is creative.  These sufferings will not cause us to crumble but will help us, more and more, to become stronger.   They are necessary—together with the sacrifices of others—so that the ones who come after us may be happy.”

Maximilian Kolbe


"Let all recognize My unfathomable mercy.  It is a sign for the end times.   Bring all devout and faithful souls, and immerse them in the ocean of My mercy.   Those who refuses to pass through the door of My mercy must pass through the door of My justice. "

Maria Faustyna Kowalska



We are in a time of a general madness, when lies are commonplace, and selfishness, jealousy, and anger torment the hearts of even those who would be faithful.  

We see many who become drunk with worldly success and concerns, anger and hate, and become like addicts seeking those who would supply their passions.  

As with all addictions, there is money and worldly power for those who cynically pander to them.

If you have not prayed in a long time, try to do so again, even if it is a little bit, every other day. 

And in your prayer, ask the Lord to show your sins to you, so that you might repent of them now, rather to suffer for them later, and seek his forgiveness.  And ask to sin no more. 

Do not become discouraged, because over time your prayers will be answered, as your heart grows in sincerity and opens up to accept His love and grace and His three great gifts: repentance, forgiveness, and thankfulness.

And the peace of the Lord, which surpasses all understanding, will guard your hearts and your minds.

Stocks and Precious Metals Charts - Bank Runs and Flight to Safety

 

"Gold is unique among assets, in that it is not issued by any government or central bank, which means that its value is not influenced by political decisions or the solvency of one institution or another."

Salvatore Rossi, Chief of the Central Bank of Italy, 30 Sept 2013

"SVB [Silicon Valley Bank] has a host of problems associated with its specialty: The startup scene that is now facing a mass-extinction event.  Other banks don’t have that kind of exposure to startups. 

What rattled folks today was that SVB lost $1.8 billion on the sale of $21 billion of “available-for-sale” securities.  It sold them because it needed to raise liquidity and to “reposition” its balance sheet. 

Its depositors are startups that once had a huge amount of cash on deposit at the bank that they’d obtained from venture capital investors. But those startups are burning cash like there is no tomorrow, and they aren’t getting new funding, and so they’re draining their deposits from the bank. And the bank has to fund those cash withdrawals." 

Wolf Richter, Between a Rock and a Hard Place as Banks Run Out Free Money, Mar 9, 2023

"It [Nixon closing the gold window on a Sunday evening in 1971] was one of the most dramatic economic events ever, a very big deal and I was at the epicentre of it on the floor of the New York Stock Exchange.  He [Nixon] was spinning political speak, but what he was saying was that the U.S. has defaulted on its debts. And it got me thinking about what money is. What are dollars if they are not tied to gold?

I saw how the government lied or certainly spun things in a certain way. I had all these philosophical questions, like ‘Whom do you believe?  What is actually truthfully going on?’  All of this pulled me into the global macro markets.  The currency markets would be important to me for the rest of my life."

Ray Dalio

"Gold has worked down from Alexander's time.  When something holds good for two thousand years I do not believe it can be so because of prejudice or mistaken theory."

Bernard Baruch

"Through the mills of God grind slowly,
   yet they grind exceeding small;
Though with patience He stands waiting,
   with exactness grinds He all."

Baron Friedrich von Logau, Sinngedichte

The equity markets got hit with a double barreled shot of risk reassessment this morning.

The Jobs Report came in smoking hot this morning, which shattered the fanciful notions of a Fed pivot, yada yada.

And the Silicon Valley Bank joined Silvergate and gave up the ghost, sending shock waves of contagion and suspicion through the banking sector.

Neither event ought to have been all that much of a surprise, but given the superficial and self-serving fluff that passes for analysis on the Street and financial media, it was.

And of course there is the ongoing backdrop of the slow crumbling of the crypto house of cards.

Gold caught a legitimate flight to safety after its recent pounding lower, and went out near the highs.

Silver also rallied but gave some of it back in sympathy with equities.

The Dollar gave back a little of its recent gains.

The VIX rocketed higher, but also fall back somewhat as happy thoughts were spread around.

Next week we will have the March option expiration quad witching event.

So more volatility is likely.

People are concerned that the regulators are asleep at the switch, having been plied with industry opiates and congressional laissez-faire ideology.

In summary, markets remain fragile and susceptible to shocks. 

It's not a matter of intelligence so much as of willfulness.

Have a pleasant weekend.