The Fed put is back, Uncle Jay Powell’s got your back. Every bank in the country, every deposit, is basically backed by the Fed, stabilizing the entire financial system. Is this just a band-aid to put on a bigger problem with the banking system? We’re going to talk about exactly where we see the banking system, and where we see the economy right now. Does this mean we’re going into recession or will the Fed start taking the foot off the pedal, stop raising interest rates and give us that soft landing we’ve been talking about?
On the Tipping Point, we will talk about reallocating your portfolio. Is it time to reevaluate your investment strategy?
100% of all deposits are covered.
The latest acronym is creating a moral hazard
The Fed is really good at creating new lending facilities. In 2008 we had all of these wonderful acronyms. Now we have the BTFP, the Bank Term Funding Program, which basically gives bankers carte blanche to mismanage your money.
”I think they should call it the Banking Asset Relief Fund or, BARF..
Chris Payne
Risk Management was lacking
These bankers, obviously Silicon Valley Bank, took too much risk. They were buying these longer-term bonds just to get a little more yield until everything blew up.
When interest rates go up, bond prices go down. It’s investing 101.
Banks should have cash on hand for any sort of cataclysmic event that can happen. But these banks were not thinking about that because it wasn’t their money.
”Seems like bankers make bad decisions and taxpayers bail them out.
Ryan Payne
The laziness of the American consumer might be the thing that saves us
It’s the inertia of many people who are too lazy to move their money from the bank. If everyone was really on the ball and said, “I’m going to get my money into a Treasury fund, get a better yield..” that would actually be a big problem for the banks. But most people aren’t paying attention to what’s going on with their bank balance sheet. The government keeps messaging that we’re everything’s covered, everything’s safe.
”Let's hope Americans do what they normally do. They just let their money sit and they don't pay attention to it.
Ryan Payne
The yield curve has been signaling
The yield curve inversion has been predicting a recession, which so far there’s no sign of. But every time there’s been an inversion of the yield curve, something breaks in the financial system. So it’s got a 100% track record. They just broke the banking system.
It also could be signaling that the Federal Reserve may pause the rate hikes. this might actually cool off the interest rate hikes that we’ve seen by the Fed. If that is the case, that might be the sign that finally, we’re starting to see inflation come down, We start easing financial conditions, and the labor market continues to remain tight, we might not see that recession.
”Every time there's a yield curve inversion, something breaks in the financial system..
Bob Payne
The Tipping Point
Time to reallocate your portfolio?
Payne Points:
Do you own individual stocks? It’s a risky strategy because anything can lose its value suddenly. You need a diversified portfolio as a hedge against any scenario.
Are you an undisciplined investor? Investing with your emotions and not buying when things are out of favor and taking profits when things are doing well. The average person is probably not equipped to have a cold eye and they need a “financial trainer”
The trend is your friend until it’s not. It’s so hard to anticipate a downturn in a specific sector. Markets can be treacherous and you can’t depend on something doing well just because it did well in the past.
”Governments and investors never learn..
Bob Payne
”Something can work for a long time before it breaks. Look at technology..
Ryan Payne
Hidden Facts of Finance
Many expected active funds to shine last year because it’s a very volatile year. But for the first for the 13th straight year, that didn’t happen. It was close. The S&P 500 index versus active managers known as the SPIVA report found that 51% of U.S. large-cap stock funds trailed the S&P 500 index.
One rattling aspect of Silicon Valley bank’s collapse was that many analysts didn’t see it coming. Of 22 analysts covering the company, the average price target was around $262, according to FactSet. The stock ended up closing down two Thursdays ago at $106 before regulators took the reins and basically shut the company down.
According to JP Morgan, while the S&P 500 index has returned a whopping 9.8% annually over the last 25 years, that performance drops to 5.8% if you just take out the best ten trading days over that time frame. And even crazier, that return drops to .8% if you take the best 30 days out of 25 years.
