Things weren’t supposed to move this quickly. Just hours after First Republic was dissected, two more major banks are in very serious trouble.
Are the dominoes going to start to fall more quickly than we were anticipating? After his bank gobbled up First Republic, Jamie Dimon told the world that “this part of the crisis is over”, and many in the corporate media believed him.
Unfortunately, Wall Street is not buying it.
On Tuesday, “fears around contagion in the regional banking sector” pushed stock prices significantly lower…
Stocks tumbled on Tuesday as traders’ fears around contagion in the regional banking sector returned ahead of the Federal Reserve’s rate decision.
The Dow Jones Industrial Average fell 367.17 points, or 1.08%, to end at 33,684.53. The S&P 500 slid 1.16% and closed at 4,119.58. The Nasdaq Composite dropped 1.08%, ending the session at 12,080.51. The three major averages fell for a second consecutive session.
Many regional banks got hit really hard, and that includes two institutions that analysts have already been watching very closely…
Regional bank stocks fell sharply Tuesday as the fallout from the third major bank failure this year continued to put pressure on the sector.
Shares of PacWest fell nearly 28% on Tuesday and was on track for its fourth-straight negative session. The stock was halted for volatility multiple times.
The California-based bank was not the only regional lender under pressure. Shares of Western Alliance dropped 15%.
If they have to halt trading for a particular stock several times in a single day, that is a really bad sign.
Like First Republic, PacWest and Western Alliance both experienced tremendous deposit outflows as a result of the bank runs that happened during the first quarter…
PacWest and Western Alliance were also among the financial institutions, along with First Republic, that came under intense scrutiny following the March 10 and March 12 failures of Silicon Valley Bank and Signature Bank.
Both lenders, like First Republic, lost a sizable amount of deposits during the first quarter as customers sought the perceived safety of larger banks or higher yields being offered by money market funds. PacWest, a lender based in Beverly Hills, Calif., lost 17% of its deposits and Phoenix-based Western Alliance lost 11%, while First Republic lost 41%.
Both institutions are now highly vulnerable, and as Dick Bove has aptly noted, those that have made massive amounts of money from recent bank failures are searching for their next victim…
“People made a huge amount of money,” he said. “Those people who have driven SVB out of business, who benefitted from the Signature failure, who benefitted from the First Republic slow die, they made a lot of money.
“They are looking around to find another target.”
Of course PacWest and Western Alliance are not the only potential targets.
In fact, one news source is claiming that “half of America’s bank are potentially insolvent” at this point.
We really are in the early stages of the next major financial crisis.
And could it be possible that even some of our largest financial institutions are starting to show signs of trouble?
Earlier today, I was quite alarmed to learn that Morgan Stanley is planning to eliminate approximately 3,000 jobs…
Morgan Stanley is preparing a fresh round of job cuts amid a renewed focus on expenses as recession fears delay a rebound in dealmaking.
Senior managers are discussing plans to eliminate about 3,000 jobs from the global workforce by the end of this quarter, according to people with knowledge of the matter. That would amount to roughly 5% of staff excluding financial advisers and personnel supporting them within the wealth management division.
The health of the banking industry is of great concern for all of us, because the banks are the core of our economic system.
Right now, banks are starting to get really tight with their lending, and so that is going to mean less money is available for consumers and businesses. At this stage, even the Washington Post is talking about how tight lending standards have become…
Janna Rodriguez has big goals for her home-based child-care center. She wants to grow Innovative Daycare to serve more low-income families in Freeport, N.Y., but first, she needs a bank to loan her between $2 million and $4 million to help her move into a larger space and expand her hours.
So far, she keeps hearing “no.” Midsize banks near her in Long Island don’t want to take bets on the child-care industry, which has been hit hard by the pandemic, Rodriguez said. She’s felt lenders pull back even more since the March shock to the banking system. If she can’t expand, she’ll have to consider shutting the business down because otherwise, she just can’t see getting by.
And this isn’t just happening in the United States.
According to Zero Hedge, global lending standards haven’t been this tight since the collapse of Lehman Brothers…
A composite measure of DM banks’ lending standards shows they are the tightest since 2009. Tighter credit conditions will be an impediment to central banks’ preference to keep rates “higher for longer.”
The ECB’s bank lending survey was released this morning, with banks further tightening their credit standards.
This has pushed an aggregate measure of bank-loan credit standards to levels not seen since the Lehman crisis.
When banks get into trouble, they don’t have an appetite for taking risks.
Sadly, it is likely that banks will be very hesitant to make loans for the foreseeable future. So this will greatly depress economic activity.
In such an environment, it would be absolutely insane to raise interest rates, but that is what officials at the Fed have decided to do anyway. What this means is that more dominoes will fall, and the crisis that we have entered will get a whole lot worse.
Let’s keep a close eye on PacWest and Western Alliance. But they won’t be the only institutions that struggle for survival in the days ahead.
There is blood in the water, and the sharks are circling.
Michael’s new book entitled “End Times” is now available in paperback and for the Kindle on Amazon.com, and you can check out his new Substack newsletter right here.
Article cross-posted from The Economic Collapse Blog.
Five Things New “Preppers” Forget When Getting Ready for Bad Times Ahead
The preparedness community is growing faster than it has in decades. Even during peak times such as Y2K, the economic downturn of 2008, and Covid, the vast majority of Americans made sure they had plenty of toilet paper but didn’t really stockpile anything else.
Things have changed. There’s a growing anxiety in this presidential election year that has prompted more Americans to get prepared for crazy events in the future. Some of it is being driven by fearmongers, but there are valid concerns with the economy, food supply, pharmaceuticals, the energy grid, and mass rioting that have pushed average Americans into “prepper” mode.
There are degrees of preparedness. One does not have to be a full-blown “doomsday prepper” living off-grid in a secure Montana bunker in order to be ahead of the curve. In many ways, preparedness isn’t about being able to perfectly handle every conceivable situation. It’s about being less dependent on government for as long as possible. Those who have proper “preps” will not be waiting for FEMA to distribute emergency supplies to the desperate masses.
Below are five things people new to preparedness (and sometimes even those with experience) often forget as they get ready. All five are common sense notions that do not rely on doomsday in order to be useful. It may be nice to own a tank during the apocalypse but there’s not much you can do with it until things get really crazy. The recommendations below can have places in the lives of average Americans whether doomsday comes or not.
Note: The information provided by this publication or any related communications is for informational purposes only and should not be considered as financial advice. We do not provide personalized investment, financial, or legal advice.
Secured Wealth
Whether in the bank or held in a retirement account, most Americans feel that their life’s savings is relatively secure. At least they did until the last couple of years when de-banking, geopolitical turmoil, and the threat of Central Bank Digital Currencies reared their ugly heads.
It behooves Americans to diversify their holdings. If there’s a triggering event or series of events that cripple the financial systems or devalue the U.S. Dollar, wealth can evaporate quickly. To hedge against potential turmoil, many Americans are looking in two directions: Crypto and physical precious metals.
There are huge advantages to cryptocurrencies, but there are also inherent risks because “virtual” money can become challenging to spend. Add in the push by central banks and governments to regulate or even replace cryptocurrencies with their own versions they control and the risks amplify. There’s nothing wrong with cryptocurrencies today but things can change rapidly.
As for physical precious metals, many Americans pay cash to keep plenty on hand in their safe. Rolling over or transferring retirement accounts into self-directed IRAs is also a popular option, but there are caveats. It can often take weeks or even months to get the gold and silver shipped if the owner chooses to close their account. This is why Genesis Gold Group stands out. Their relationship with the depositories allows for rapid closure and shipping, often in less than 10 days from the time the account holder makes their move. This can come in handy if things appear to be heading south.
Lots of Potable Water
One of the biggest shocks that hit new preppers is understanding how much potable water they need in order to survive. Experts claim one gallon of water per person per day is necessary. Even the most conservative estimates put it at over half-a-gallon. That means that for a family of four, they’ll need around 120 gallons of water to survive for a month if the taps turn off and the stores empty out.
Being near a fresh water source, whether it’s a river, lake, or well, is a best practice among experienced preppers. It’s necessary to have a water filter as well, even if the taps are still working. Many refuse to drink tap water even when there is no emergency. Berkey was our previous favorite but they’re under attack from regulators so the Alexapure systems are solid replacements.
For those in the city or away from fresh water sources, storage is the best option. This can be challenging because proper water storage containers take up a lot of room and are difficult to move if the need arises. For “bug in” situations, having a larger container that stores hundreds or even thousands of gallons is better than stacking 1-5 gallon containers. Unfortunately, they won’t be easily transportable and they can cost a lot to install.
Water is critical. If chaos erupts and water infrastructure is compromised, having a large backup supply can be lifesaving.
Pharmaceuticals and Medical Supplies
There are multiple threats specific to the medical supply chain. With Chinese and Indian imports accounting for over 90% of pharmaceutical ingredients in the United States, deteriorating relations could make it impossible to get the medicines and antibiotics many of us need.
Stocking up many prescription medications can be hard. Doctors generally do not like to prescribe large batches of drugs even if they are shelf-stable for extended periods of time. It is a best practice to ask your doctor if they can prescribe a larger amount. Today, some are sympathetic to concerns about pharmacies running out or becoming inaccessible. Tell them your concerns. It’s worth a shot. The worst they can do is say no.
If your doctor is unwilling to help you stock up on medicines, then Jase Medical is a good alternative. Through telehealth, they can prescribe daily meds or antibiotics that are shipped to your door. As proponents of medical freedom, they empathize with those who want to have enough medical supplies on hand in case things go wrong.
Energy Sources
The vast majority of Americans are locked into the grid. This has proven to be a massive liability when the grid goes down. Unfortunately, there are no inexpensive remedies.
Those living off-grid had to either spend a lot of money or effort (or both) to get their alternative energy sources like solar set up. For those who do not want to go so far, it’s still a best practice to have backup power sources. Diesel generators and portable solar panels are the two most popular, and while they’re not inexpensive they are not out of reach of most Americans who are concerned about being without power for extended periods of time.
Natural gas is another necessity for many, but that’s far more challenging to replace. Having alternatives for heating and cooking that can be powered if gas and electric grids go down is important. Have a backup for items that require power such as manual can openers. If you’re stuck eating canned foods for a while and all you have is an electric opener, you’ll have problems.
Don’t Forget the Protein
When most think about “prepping,” they think about their food supply. More Americans are turning to gardening and homesteading as ways to produce their own food. Others are working with local farmers and ranchers to purchase directly from the sources. This is a good idea whether doomsday comes or not, but it’s particularly important if the food supply chain is broken.
Most grocery stores have about one to two weeks worth of food, as do most American households. Grocers rely heavily on truckers to receive their ongoing shipments. In a crisis, the current process can fail. It behooves Americans for multiple reasons to localize their food purchases as much as possible.
Long-term storage is another popular option. Canned foods, MREs, and freeze dried meals are selling out quickly even as prices rise. But one component that is conspicuously absent in shelf-stable food is high-quality protein. Most survival food companies offer low quality “protein buckets” or cans of meat, but they are often barely edible.
Prepper All-Naturals offers premium cuts of steak that have been cooked sous vide and freeze dried to give them a 25-year shelf life. They offer Ribeye, NY Strip, and Tenderloin among others.
Having buckets of beans and rice is a good start, but keeping a solid supply of high-quality protein isn’t just healthier. It can help a family maintain normalcy through crises.
Prepare Without Fear
With all the challenges we face as Americans today, it can be emotionally draining. Citizens are scared and there’s nothing irrational about their concerns. Being prepared and making lifestyle changes to secure necessities can go a long way toward overcoming the fears that plague us. We should hope and pray for the best but prepare for the worst. And if the worst does come, then knowing we did what we could to be ready for it will help us face those challenges with confidence.
