WESTPOINT, Tenn., Thursday, March 16, 2023 — Thoughts about these bank runs keep piling in on me.
First, y’all ought to read Charles Kindeberger’s classic, Manias, Panics, & Crashes: A History of Financial Crises.
By Franklin Sanders / The Moneychanger Newsletter
In it you will find that one aspect of manias, panics, and crashes is contagion, not only domestically but overseas as well. Today the banking bubble nearly burst in Europe where Credit Suisse bank stock fell to about 2 Swiss francs. CS has been a dead man walking for a long time. Panic over CS and the banking system sent money scurrying and scuttling out of the euro today (chart). Euro lost a whopping 1.5% but that meant the US dollar Index gained a huge 1.01% or 104.9 basis points to end at 104.646.
Next, one remembers when one cudgels one’s brain that Bear Stearns, the dead swallow that dropped from the sky to begin the 2008 Great Financial Crisis, flopped down on March 16,2008. JP Morgan gobbled up the remains and the Fed and everyone else pretended the banking problem was fixed, until 15 September 2008 when Lehman Brothers filed bankruptcy.
The point, Moneychanger? That it took six months for the cancer to eat clean through the system and burst into the light, so don’t lay any big bets this problem now is fixed just because there are no lines outside Silicon Valley Bank and President Brandon has assured y’all that “Americans can be confident their banking system is safe.” The problems still is and always has been systemic and inherent in fractional reserve banking with central banks. They are the cancer in the economy.
Here’s a chart of gold, the US dollar index, and the S&P500 aligned to show you how markets reacted. In 2008 the dollar index rose in the September panic but lost all these gains by the end of 2009. Stocks tanked in September and never bottomed till March 2008. For the next three years silver and gold outperformed stocks. Gold and silver were sucked down in a spike with stocks, but rebounded after about 30 days and never looked back for three years. All this explains why it struck me so hard that gold rocketed $100 in three days on bank collapse news. It indicates that rather than fleeing to dollars, many, many more investors are fleeing to gold and abandoning banks and the dollar altogether.
Can’t guarantee that will continue but y’all observe that in the face of a meaty 1.01% dollar index rise today Gold gained $20.40 or 1.07% to $1,926.60. Who’s afraid of the big bad dollar, or interest rates?
Speaking of interest rates, they are sinking out of sight was investors flee into bonds for “safety”. They’ll find out later what my quotation marks mean. Remember that bond prices and interest rates (yields) operate like a seesaw, so bond prices rising automatically means interest rates falling. The 10 year T-note yield plunged today 4.01% to 3.492% after gapping down and slicing into its 200 DMA.
I am trying to impress on y’all that NONE of this is normal, this volatility and fear, and you will seldom see charts like these in a lifetime.
One bittersweet irony of all this is that economists and businessmen all brag that the “safest asset” available is government bonds. Well, they are, until they ain’t. Thus discovered to their dismay America’s failing banks last week when they went to sell assets to raise money, only to find their bonds’ value had been hollowed out by the Fed’s interest rate increases. It is ouroboros, the snake eating its own tail.
Poor Nice Government Men had another day of heavy lifting to keep stocks out of the sewer. Down at one point 726 points, the Dow ended down only 280.83 (0.87%) at 31,874.57. S&P500 lost 28.5 (82.3 at its max) to 3,891.93, 0.73% lower. Cascading.
90% silver bag of $1,000 at F$19,180
Gold had a massive range today, falling before the market opened to $1,898.50 then rising about noon. In the afternoon sellers (read: Nice Government Men) drove it down but it snapped back to end at $1,926.60. This is hardy, sinewy strength. Gold above $1,925 is in the sweet lane for a challenge to $1,975. I am saying, this rally has legs, do not wait to buy.
Silver fell today on Comex, but not until after it hit 2266.5¢ (basis May futures). At day’s end it had lost 15.5¢ (0.71%) to 2177.4¢. Silver’s weakness dragged the gold/silver ratio down to 88.4 oz of silver to one of gold, a 1.8% loss. Despite that, the ratio’s rise has been broken Look at that plain island reversal on the chart the little 4 day island up there separated from the rest of the trading by a gap up and a gap down. Ratio is cluing us that silver and gold will move higher, and johnny-quick-smart.
What happened to silver? Well, sometimes the Nice Government Men (NGM) sell silver to try to drag down gold. Didn’t work worth a hoot today, if they were. Silver chart shows you that silver jumped up and hit its head on the 50 Day Moving Average. Behold how dramatically the RSI and MACD have turned up. Go, silver, pull on those seven league boots, baby, and step out!
Already silver premiums are leaping. US 90% which a few days ago commanded a $2.50/oz premium now demands $5 or $5.40. Silver rounds are up 45¢, and deliveries are stretching out. Inventories have never had a chance to recover after 24 months of buying panic from January 2021 through December 2023, and another buy-in panic hits.
It’s always possible this rocket ride will halt, but as I said, I never saw gold behaving so savagely before in the face of stock market weakness and financial turmoil. It will drag silver along with it.
We handed the tsunami of phone calls better today, but it’s still overwhelming at Volunteer Precious Metals. Be patient, with us, please, cause we are being worked like rented mules. It may take a spell, but we will return your calls or die trying.
Posted by permission. DJT. This commentary is from the free daily commentary of Franklin Sanders at The Moneychanger Newsletter. If you received this email from someone and would like to signup for the daily commentary, please click this link and then signup on the right of the landing page.