Listen to this. You've got the co-founder of Home Depot chiming in on this banking crisis. That's how bad this is getting. He's saying maybe the American people will finally wake up and understand that we're living in very tough times.

In fact, that a recession may have already started. Who knows, He says. He goes on to say quote: These banks are badly run because everybody is focused on diversity of the woke issues and not concentrating on one The one thing they should, which is shareholder returns and protecting their shareholders and their employees. Instead, they're more concerned about social policies and they think that these banks are basically badly run.

Yikes. This is a rebuke from the co-founder of Home Depot Mr Marcus Slamming the banking crisis. We've got a lot to talk about with the banking crisis. Remember, we've got those coupon codes linked down below for the programs on building your wealth and I'll be in the Silicon Valley area today.

So DM me on Twitter or Instagram if you want to share your story as a VC or a founder of a startup. So yesterday, the Federal Reserved you learned and issued what was essentially a de facto 100 bailout of FDIC even though that's not technically the way it works because we have a new Btfp facility. Yes, it literally sounds like or seems like it would stand for by the effing pivot facility. It has its own particular name that's not the actual name, but we'll just pretend it is because it's funny.

But anyway, that's the Federal Reserves a program for providing 25 billion dollars of a Federal Reserve backed liquidity to make sure that Banks can go to the discount window at the New York Fed and basically hand them toxic assets and the Federal Reserve Apparently without discounting, those toxic assets will give them money. Make no mistake, that is a bailout now. Joe Biden will be speaking and talking about how don't worry, your money is safe with the banks we have backstopped all Reserves at Banks all deposits are safe. You don't need to go close your bank account at your local Regional Bank or your credit union.

Fear not, because look, we are protecting all depositors. Don't worry that three banks have just collapsed in a span of five measly days. Don't worry, everything is fine and I hate to say it. but when people tell you everything is fine during a banking crisis I hate to say it.

but sometimes I think thou protests are too much and I think that's the same thing that's happened with happening with First Republic First Republic yesterday. Let everyone know. Don't worry, we have 70 billion dollars in liquidity. We're fine to cover deposits.

There's stock this morning promptly down over 60 percent after all Silvergate closed on Wednesday Silicon Valley Bank went into FDIC receivership on Friday and it's being liquidated. No buyers showed up. So on Sunday the Federal Reserve had to come out and you turn to bail out a bank and I understand they're they. They do not want you to think this is a bailout.

I Make no mistake, it's a bailout. Uh, and then at the same moment Signature Bank collapses That's a real estate lender who focused on Wealthy clients but made a failed crypto bet and now the government has taken control of that bank as well. That's three Banks down in five days. But don't worry, the FED says everything is okay.

there's nothing to worry about here. I Don't know folks to me. I Think there's a lot to worry about and that kind of worry is what you're seeing show up in the market. The market does not seem to believe the Federal Reserve when they say this isn't a taxpayer-funded bailout.

After all, the FED is trying to clarify that this is just a loan to Banks And if there are any losses, don't worry. the other banks will just pay a special FDIC fee to cover those losses. I don't know about you, but that sounds a little bit like banking socialism to me. Oh, One Bank failed.

We'll just make everyone else pay their fair share of that bank making risky moves. and I think Jeffrey Gonlock who's a pretty Big Bear right now makes the best argument. He says quote. So if I have this right, the Federal Reserve will make loans on some of the collateral at a par valuation that is worth 40 percent less.

Yikes. Let me simplify that so you could see what the FED is basically doing as Jeffrey explains it here. And then you tell me if you think this is a bailout or not because the government does not want you to believe this is a bailout if a bank goes to the Fed. So here's the bank and here's the Fed and we'll call this the discount window right here.

And here's the banker. and the banker says, hey, I've got this uh note right here. Uh, the note says it's worth ten dollars or it will say it's a hundred dollars. The note says it's worth a hundred dollars.

Don't mind the fact that it's actually lost about sixty dollars of its value. Uh, in in market value. So don't mind the fact that this is technically only worth forty dollars. Don't mind that at all.

Uh, will you take this toxic asset in exchange for a hundred dollars in cash? And the Federal Reserve is saying yeah? Yep Looks good to me. Here's a hundred dollars. You're good. We'll take your toxic asset really only worth forty dollars, But we'll tell the American people it's a one for one transaction because we don't want the American people thinking we're bailing out Silicon Valley That'd be crazy.

We don't want that at all. now. Then some people say oh, but Kevin This is a facility that's set up 25 to 100 billion dollars of money back during 2008 and they've set this facility aside for emergencies in the future. Well, all you have to do is go to the left leaning Washington Post to realize who actually backstops that facility.

Ah, it's the American Taxpayer. So anybody who tells you no, this is not a bailout. The shareholders and the bondholders are getting effed, so they're getting punished. We're not bailing anyone out.

Yeah, you are. you're bailing out the depositors. Now of course, we don't want to see people dead laid off. we don't want to see businesses go bankrupt.

But let's be clear. the bank was known for giving risky loans and not asking that many questions. They had a white glove service for giving you mortgages if you were the founder of a startup, even if you didn't really have any income for your business. In other words, it was sort of the qualification metric of you're a startup and you're losing money.

Here's a loan. Sounds like a great way to benefit as a depositor without taking any risk because the Federal Reserve basically just told the entire world there is no 250 000 FDIC insured limit. In fact, the limit is everything. We will make sure you don't lose a dime at the banks.

In other words, the 2018 Economic Growth Regulatory Relief in Consumer Protection Act which basically reduced the regulation on smaller Banks which meant they were not considered it too big to fail if they were under 250 billion dollars inside like Silverbank or the other bank. banks that have collapsed is actually false. That's just a farce. The Federal Reserve thinks everything is too big to fail and maybe that is a sign that things are actually a whole lot worse than they currently seem.

Consider the fact that the last time the Federal Reserve got out of bed on a Sunday to actually do something was during the Covid Pandemic where in March they u-turned on a Sunday and cut interest rates two percent on a Sunday. They couldn't even wait until Monday to do that. It's the same thing that happened yesterday, although of course the measure of it slightly different. one cutting rates, the other supporting a bank and basically bailing out Banks.

But the reality is the Fed woke up on a Sunday because this is a big issue. Now going back to some of the standards of 2018. Remember what 2018 did. It eliminated the vocal rule for small banks that basically was a rule that says small Banks aren't allowed to speculate on their Investments And guess what? The 2018 act got rid of that.

Silicon Valley Bank was one of the banks that was begging Congress to quote CEO quote here. Let workers save thousands of hours per year in stress tests and preparing resolution plans. We're just a lender. We're not a systemically important bank.

That's what they lobbied in 2018 to reduce regulation. And now, oh no. we're systemically important. Please taxpayers, bail us out.

You literally can't make this stuff up, but the government and Joe Biden do not want you to think this is a bailout. Whatever you say. Do Not call this a bailout. We're just backstopping depositors.

Nobody wants to see a deposit or lose money, right? Yeah, maybe they got benefits from banks in terms of easy Lending easy lines of credit for money losing businesses and basically White Glove services for their Founders But don't worry, we're just backstopping the banking system because we don't want contagion. It's so bad that according to a representative in our house of Congress he heard an individual in the Senate ask their committee this is all from Twitter Okay, this is Thomas Massive is the rep who's saying this. He says: quote a Democratic Senator literally asked whether there was a program in place on information to censor any social media information that could lead to a run on the banks. boy I got a big middle finger for you Mr Democratic Senator because the last thing we want is to be censoring Americans While lying to them about the fact that this is not available, you can look this up.

The Treasury Exchange Stabilization Fund ultimately backs the program that is known as the Btfp Bailout Facility. Yes, it's a stupid acronym, but the Treasury Exchange Stabilization Fund is backed by Guess Who you. And that's why we're starting to see markets freak out. Because wait a minute if we're being lied to about whether or not this is a bailout and the Federal Reserve is waking up on a Sunday to conduct this bailout.

Is it potentially possible that things are worse than they appear? And the answer is yes, You remember what the most painful part of the economic cycle is. It's not the inverting of the yield curve, folks. it is the steepening of the yield curve. If you look on screen now I Want you to see this yield curve plummeting now on the far right.

I'm going to show you what the yield curve between the two year and the 10-year is doing today? You ready for this? Look at that folks. That is a massive steepening of the yield curve. In other words, the 10-year treasure yield. The bond market is is is driving 10-year treasure yields down 12 basis points while driving the two-year treasury yield down over 28 basis points.

In other words, the spread. The difference between the two. The tenure is not falling as fast as the two years falling. The spread between the two is narrowing that shows up in a chart as a steeper yield curve.

Generally, it is the steepening of the yield curve that leads to the most pain in markets and leads the Federal Reserve to ultimately U-turn and bailout markets and turn the money printer on again to continue essentially their government-funded socialism. What do we have here? Goldman Sachs Financial Conditions index up. What do we have here European Bank Stocks all down we expect to see a lot of that in America as well. What else do we have? We have the five-year Break Even curve.

Five-year break-even curve. Rightfully so Plummeting because everybody's freaking out. Why is everyone freaking out? Well, because this is a big deal. A bank crisis in America is a form of a financial crisis and there's a reason why markets are basically pricing in that the Federal Reserve is going to start cutting rates again.

Look at this history. March 8th What Do you have? No rate Cuts until 2024.. you could see that by see the orange bars at the top. You really don't see an implied drop with certainty until approximately January of 2024.

You could potentially argue that's about December of 2023 right around there. That's fine. fair game. Before March 8th we definitely did not have a rate cut being priced in until about March of 2024, so you've seen the right rate.

Cuts Actually start getting priced in as soon as March 8th. What happened? Uh, and you could sort of look at this and say November 2023. potentially the first, bringing it down to about five six. A day later, we have November sitting around 5.4 A day later in the morning we have our first cut.

Uh, sitting over here as a height of about 5.25 price stand for what looks like August on March 10th. In the evening we have what looks like a 5.15 rate, a terminal rate, or sort of a moment rate. uh, rate at the moment with a rate cut priced in as soon as or what looks like early August but a lower level uh than we had earlier in the day. Then what we have the very next day on the 12th is a curve that shows an even larger drop at the beginning of August.

So in other words you could see this is becoming instead of a higher for longer curve which looks like this. see the Blue Line how it's elevated for longer, stretched out more. Look how It's Quickly starting to get pulled down on the right side. It's kind of like just look at the blue.

It's kind of like somebody tied a little anchor. Oopsies, That's a little messy. Uh, that's the back of the desk. It's kind of like somebody uh, pulled a little or tied a little uh, anchor to that blue line and then it just got joint down.

That's a little bit what it feels like right there. you're yanking down that right side of the curve. In other words, you're undoing higher for longer. And part of that is because markets are actually thinking oh good lord, there is a chance there is an actual real chance we might be breaking things.

And as Michael Burry suggests, uh oh, we are looking at a 2000 and 2008 financial crisis again. He says quote in 2000, 2008 and 2023 are all the same. People are full of hubris and greed and take stupid risks and fail. Money is then printed because it works so well.

Mike Wilson from Morgan Stanley tells us there are long and variable lags and guess what's starting to show up now? Long and variable lags. German Bond yields have fallen as rapidly today as they lasted a 1987 on. Black Monday This is a big deal, and the contagion of the Federal Reserve and FDIC and Treasury Department bailing out Silicon Valley Bank probably won't end the bank run even. Bill Ackman Who's been begging for a bailout from the government suggests yeah, other banks are probably still going to fail And so today.

I Wouldn't be surprised if the fears of a bank run continue. After all, a bank run generally isn't a logical process. A bank run is generally what happens when people make a relatively irrational decision of pulling all their cash out of a bank for fear that the bank is going to collapse. However, in defense of people taking money out of their Banks, it's worth considering the following: If you're at a let's just call it tier one: Bank A deposit is basically a deposit because we expect that if the Federal Reserve is willing to bail out a not too big to fail bank, then you could pretty much guarantee they will run the money printer as much as they need to to backstop your money in a tier one.

Bank Bank of America JPMorgan Wells Fargo City Goldman Sachs and so on. a top eight Bank Right after all, those are the banks that go through the most rigorous Federal Reserve stress tests and those are the ones that the Federal Reserve says we trust and regulate the most and we will do whatever we can to backstop them. That is now really considered a tier one style deposit. Like deposit actually equals deposit.

A tier 2 bank is sort of a question mark like okay, well at what point are we no longer too big to fail and maybe our deposits won't be risk risk-free at all banks in the future. And if there is a non-zero chance of my deposits being at risk at a smaller Bank why would I bank at a smaller? Bank Well, maybe you leave a few thousand bucks or whatever and you say, or a few hundred bucks. Whatever. and you keep a relationship.

but you park most of your money where maybe it won't be as exposed to pain. Who knows or potential pain there. Dare I say who knows. But the point of all of this is simply to say Hey Look, this is very clear.

it is a Federal Reserve bailout of depositors. It is something that is likely to cause a lot of volatility over the next few days. Again, we're seeing it in some of the bank stocks. All we have to do is look at the Community Banks like FRC The thing is down 65 At the time of this recording, Bank of America is down four percent City down 2.25 percent JPM down one percent.

The pain is here and it is likely to stay. In the meantime, bond yields are falling, which maybe that'll actually be good for Real Estate Because after all, lower 10-year treasury yields might mean that real estate assets uh, end up being able to get lower access to mortgage rates. Unless of course, the spread between a bond yields and a mortgage rates stays or increases. Should I say then it's possible mortgage rates could stabilize, but I wouldn't be surprised if they come down.

The real fear though again, is what happens in markets and what happens with the Federal Reserve Will the Federal Reserve go for 50, 25 or 0. I've previously been arguing that the Federal Reserve is more likely to go zero than they are 50 thanks to the events that unfolded last week Wednesday Thursday collapse of Silvergate, and of course the collapse of Silicon Valley Bank on Friday with the leading indicators of that on Thursday Well, sure enough now, markets are pricing in the highest likelihood of a 25 BP hike, a zero percent chance of a 50 BP hike, and now a chance of a zero percent hike. In other words, a Fed pause JP Morgan is calling for a 25 basis point hike. But what is Goldman Sachs saying? Goldman Sachs is saying Now's the Time to pause Goldman Sachs is officially calling for the Federal Reserve to pause.

Thanks to the uncertainty of this banking crisis where not straight up today we'll see what happens, but we expect a lot of volatility so that gets you caught up on what's going on with the banking crisis.