Imagine Being on This Ship
Some claim that time is nature's way of preventing everything from happening at once. Whoever "they" are, who is likely to be just one person these days, clearly hasn't tried living in the United States in 2023 because everything is occurring at once right now.
As I hope you know, I have been preaching for some time the need to be safe during the historic times in which we find ourselves.
The Federal Reserve To The Rescue!
At a time when the FED is raising rates to address inflation which the FED caused, this is the wrong message to be sending out. Investment markets have gotten so used to thinking the FED will bail out bad investments, they are now doing just that with bad banks.
As if the FED has not already done enough to our way of life, we now see it has reached a new low. In a statement from the FED Chairman, the Treasury Secretary Yellen, and FDIC Chairman Martin Gruenberg, we find the folowing:
“After receiving a recommendation from the boards of the FDIC and the Federal Reserve, and consulting with the President, Secretary Yellen approved actions enabling the FDIC to complete its resolution of Silicon Valley Bank, Santa Clara, California, in a manner that fully protects all depositors. Depositors will have access to all of their money starting Monday, March 13,” the statement said.
The Fed will pay for it at first. The Fed will print the needed funds to cover the deposits and give it to the FDIC (and the proceeds from asset sales will chip in to cover the losses). “No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.”
It's good to see that investors in collapsed banks won't receive a bailout. In terms of bailouts, it's comforting to see that at least it's not a bailout of investors in insolvent banks, as revolting as bailouts are. Instead, they get some harsh criticism, with investors and "certain debt holders," such as owners of preferred shares, presumably suffering a complete loss.
As I Have Been Pointing Out, ESG Investing Is Not Good
Led by BlackRock in the United States, many companies have bought their own tickets on the ESG train. ESG, which stands for environmental, social, and governance, is a different acronym for wokeness. ESG is an important topic since a large amount of economic research indicates that woke investments are poor investments.
Vivek Ramaswamy is a declared candidate for President in the Republican party. Ramaswamy, who told Breitbart News Washington Bureau Chief Matthew Boyle that the 2008 financial crisis informed much of his economic policy, rejected the idea of a taxpayer-funded bailout after customers withdrew $42 billion in a massive run this week.
“I want to be early because you’re gonna hear the calls for bailouts coming real soon here. I’m against a government bailout,” said the 37-year-old entrepreneur who has founded multiple biotech start-up companies worth multi-billion dollars. “And you know what, we don’t learn the lessons we should have learned, then you keep making the same mistakes all over again.”
“The Federal Reserve, for 15 years, has been raining money from on high like manna from heaven,” Ramaswamy told Boyle while speaking via phone before a live audience in southwest Ohio. “We’ve been skiing on artificial snow. Now the snow machine turns off, and within less than a year, you’re seeing the banks fail because they don’t know how to ski on anything other than artificial snow. I’m talking about money being pumped into the system.”
“Silicon Valley Bank is one of the biggest evangelists of DEI and ESG – environmental and social factors,” he said. “In fact, just January of last year, barely over a year ago… they made a $5 billion commitment to sustainable finance to actually make for what they call a climate-ready, healthier planet. Well, guess what? That $5 billion would have served their balance sheet – how about a healthier balance sheet instead? And that’s something that actually, it’s a lesson that everyone else ought to learn by example. The lesson they ought to learn is not when you waste your money and burn it in a financial trash fire that… the taxpayers of this country are there to save you. No! It actually ought to be a lesson for everybody else that a healthy balance sheet is the responsibility of a bank, not… what they call a healthy planet.” - Breitbart
Sounds like someone worth paying attention to in the Presidential race.
An Update on Inflation
During an interview aired on Friday’s edition of Bloomberg’s “Wall Street Week,” Harvard Professor, economist, Larry Summers argued that “we don’t have a lot of evidence of a basic downwards trend in inflation” and the Federal Reserve “has considerably more work to do.” And that there’s a likelihood the terminal rate will need to be near 6%.
He added, “I suspect that there’s a quite good chance that we’re going to need to get to a terminal rate near 6%. After all, we have inflation running at close to 5% and we have interest rates at about 5%. And so, interest rates and inflation in the same range doesn’t point to a lot of pressure to bring inflation down. So, I’m very much open to changing my mind, and I think confident pronouncements about these things are a mistake.”
For anything to become healthier, change is needed.
After the historic period of cheap money provided by the Federal Reserve, the time has come for a much needed adjustment back toward value investing.
