The past week’s financial news has been mostly on the collapse of two regional banks in the USA and the affect it is having on the confidence in the USA and the Global financial system.
Both the Silicon Valley Bank in California and the Signature Bank in New York were highly leveraged to the technology and cryptocurrency startups, also known as “venture capital”, which is high risk lending.
When the regulators looked at the banks depositors and realized over 90% of deposits were not guaranteed under the US Federal Deposit Insurance Corporation (FDIC), (In Canada it is called Canada Deposit Insurance Corporation or CDIC) the President of the United States stated that no depositor would lose money and handed it over to the regulators who took the money, most, if not all of the reserves in the FDIC and made the depositors whole. UNBELIEVABLE! Not that I rejoice in people or small companies losing $100 million or more, which some would have but rather, what happens next time, and there will be a next time and probably many more “next times” and this pot has been drained by paying out to bail out irresponsible bankers and their clients.
I entitled this Double Bubble , Double Trouble as any of us that have been in the financial advisory business for more than 25 years remember well the stock market crashes of 2002 and 2008. In 2002 it was the technology crash and in 2008 it was the financial crisis. This time we have both, technology and financial and it should be worse, much worse than either of both of the previous crashes as the financial status of the world is many times poorer.
What is worse now?
1. This time we have inflation, 2002 and 2008 we did not.
2. This time we have enormous worldwide debt, last time we just started creating the debt that has accumulated for the past 22 years
3. This time we have a global contagion, it isn’t isolated to North America
4. This time we have all Western nations such as Canada, the USA, New Zealand, Australia, Britain, Japan and all of Western Europe with depreciating currencies due to obscene and massive over printing.
5. This time the interest rates increased by over 400% in one year, stressing borrowers both personal and corporate to the max and causing highly probable debts that will be in default in the next few months.
6. Maybe the most important is that the methods used by governments and the Central Banks to save the markets and keep them percolating through the past two crashes won’t work anymore. They have exhausted their borrowing to the point of no return and they’ve printed so much currency that it is losing its value.
And while this story plays out now, at this time before our eyes, it isn’t a surprise to many of us. Investment Advisors like myself have had an uneasy feeling about the financial engineering the markets have been under ever since 2008/09 and we have been waiting for the next shoe to drop since then. Oh we had some amazing years for returns to be certain but since 2020 everything was amplified and changed for good. Well, not for the good, actual changed for the worst. The market in 2020 crashed fast and for really no reason. This gave the Government the "permission" to create more debt and the Central Bankers to create more currency. Why they did it, if you ask them, was to protect the average person from the lockdowns by financial handouts.
But seriously, did the USA really need to increase their circulating currency from $4 trillion to $21 trillion in less than 2 years? That means that 80% of all US dollars out there today were created in the past 2 years.
Did the USA have to increase their National Debt from $12 Trillion to $31 Trillion from 2008 to the end of 2022? This isn’t fiscal management, it is insanity and the American taxpayer is the one holding the bag. (same goes for Canada, maybe slightly worse)
Global debt has grown from $180 Trillion in 2000 to well over $300 Trillion today. that is utterly gross, I have no other words...
So you have all these factors going on and yet the media is singing the same tune they did in 2008, that all is going to be okay. And they are wrong today just like they were wrong in 2008. And with all these factors we are headed for something we have not experienced before, ever, in the history of the world. We are heading for the greatest upheaval and change that we have ever experienced in modern times. Many call it the greatest transfer of wealth in the history of the world and it will be. When and how it unfolds isn’t clear, but unfold it will.
Here is how many see it playing out.
1. More and more countries ditch the US dollar for trade for political reasons and also due to the diminishing value of the USD.
2. Inflation remains a problem and even cutting interest rates doesn’t have a lasting impact on the economy, as it is too little too late.
3. More banks, both global and domestically shut down creating the stock markets to crash and a run on all banks for cash.
4. The Bigger Banks gobble up the small banks creating more control in the hands of the few.
5. Gold and Silver prices remain steady and should move up much higher as evidence grows that the US Gov’t or Central Bank are unable to fix their nation wide problem.
6. Other countries sell US bonds back to the US as well as selling European and Japanese bonds.
7. We have a war, an economic war and it is East vs West. The East is Russia, Saudi Arabia, China, Eastern European countries and many Asian countries. They want nothing to do with the woke policies of today’s western society and are fully aware of the fragility of the USD, not to mention they are tired of the pompous behavior of the woke liberal western leaders and governments. The East will create havoc and they are much stronger financially than the west is.
8. Governments globally default on interest payments putting their social programs and government defined benefit pension plans at risk. In fact all pension plans would be at risk if stocks and bonds lose massive value.
9. From here many say this is when the Central Banks create a new currency out of thin air. It will be a digital currency. A Central Bank Digital Currency, a CBDC.
So what can you do?
1. Make sure you have your money as safe as possible. Here is the CDIC guide. https://www.cdic.ca/your-coverage/protecting-your-deposit/ But remember, the CDIC is a government agency and they may not have the funds when the time comes but we have to put our trust somewhere.
2. If you have more than $100k as per the CDIC instructions then spread it out amongst banks and credit unions.
3. Another option is to buy treasury bills. I can help you with that, show you the ways to access them and what they are.
4. Reduce or completely eliminate stocks from your portfolio. Unless you have 7 years for them to recover as it did for those folks in 2008 that went through hell and back.
5. Everyone should physical gold and/or silver.
Most importantly, have an investment process, not an emotional response, and certainly not a Buy and Hold passive strategy. We can help on that as well.
To finish off, you are getting a chance here to rearrange your holdings before the roof falls in. I am not trying to spread fear and you need not fear if you are prepared. I never thought we’d have this window to prepare. I thought the whole thing would cascade down in a day and keep going until it dropped to a point no one could conceive. But it appears that the powers that be weren’t ready for this collapse and were caught off guard and all the scrambling they’ve been doing has only slowed the process and made them look foolish.
The Transfer of Wealth that is coming is something everyone can participate in. We may not have all the answers but we have an investment process and it is designed and tailor made for each of our clients. Our firm is called Preservation Capital Ltd as that is our number one goal. To preserve and protect the middle class from the financial devastation that destroyed the middle class in 1929 and threatens to today.
This could start this week and accelerate quickly or it could be delayed as it was in 2002 and 2008 by 30 to 60 days until so much bad news comes out that everything crumbles like the planned implosion of a skyscraper. Regardless, complacency isn’t an option and action is. This time we really do have Double the Trouble that has created a massive Bubble unlike anything before. Don't get caught.
If you want to book a time to talk then email me at firstname.lastname@example.org, call me at 306-343-7800 or private message me on Facebook messenger. Our website is www.preservation-capital.com
Yours in Faith, Family and Finance,