Should we be worried?
Most people really shouldn't care
Most people have less than $250,000 in the bank so on the most part no one really cares what is going on in Washington or with the handling of and insuring of larger deposits.
Additionally, the large income stream from higher rates should really make the banks cash flow horses.
It really seems to me that this is a man-made problem and the powers that be are doing things that they normally do during crises, their agendas.
What I find funny about all this was that Silicon Valley Bank had so much uninsured money from people that most likely are crypto enthusiasts. Where is all their unparked cash in crypto? Weren’t they promoting it?
So I’m not worried. But should I be?
My inclination is to look at the better side of the picture which is why, while I was wildly bullish on commodities, I was completely surprised by the West’s and Russia’s response in Ukraine. I thought level-headedness would prevail and our global lifestyle will remain for many decades to come. I even thought the Russian bank Sberbank was a good investment.
So, even if I remain optimistic, I would like to think about some possible outcomes:
The agenda is to have banks be a place for lending along with commercial business while removing the images as “safe, conservative” and be known as risk taking endeavors that are not too big to fail.
All US citizens will be able to use the Federal Reserve directly to park their money and make transactions digitally (the repeated mention of Phone withdrawals is certainly a key concept here)
Rising rates will compete with Venture capital and High-Tech companies for speculative endeavors
By NOT backstopping banks is deflationary which is what the FED wants
Large investors will be forced to park money into stocks, money markets, and short term paper
The more concentrated the financial industry is the more control and oversight the Federal government will have
Private Equity reign is over
Globalization is over. Higher rates is necessary because the entire point of globalization is keep the input costs low. Commodities to labor - where we source our goods the price will go up; especially since many parts of the world is very labor friendly (even if the quality of the labor is not).
Higher rates do not mean bad times ahead. It does certainly mean a different perspective on everything.
Oddly, many stocks are yielding very large dividends. Or their preferreds are.
Even if it’s the end of banking, you don’t know that. So, for today, I would consider having:
Citigroup with a 5% dividend
and NY Community Bank (which is not a real good description of how broad their market penetration is) yielding about 7-8%
Have a great day and don’t let the clowns on TV talk you out of an investment. Everyone has an opinion, but very few know the details of what they are speaking about.
Regards,
PS. We adapt. And so will business.
