Hey, this is Tom Nash And unfortunately, this changes nothing. The Svb Silicon Valley Bank sailed to First Citizens Bank is absolutely non-issue It changes nothing. It doesn't solve anything for the banking crisis, and it doesn't solve anything long term for the US economy. We're still on the path to destruction here and I'm going to show you why now.

look Svb Silicon Valley Bank was the biggest bank to collapse since 2008. Since the Lehman Brothers FDIC took over today, we finally got word that they sold it to First Citizens another U.S bank and they did it at a hefty discount of 23 percent and only on the good half of assets. The bad half of assets gets to say with the Fdsc because nobody wants that and that's kind of okay. Now look, Svb was the biggest collapse and then you add on top of it Signature Bank You are the top of it Silvergate.

And then you talk about the potential almost collapse of First Republic. Then you add the top of it Credit Suisse You tap on top of the Deutsche Bank even though they're not American Banks Credit Suisse and Deutsche Bank. But basically, it creates a lot of fear in the U.S banking system. From a psychological standpoint, Now, you have to understand that the U.S banking system was already in trouble.

Why? Well, because all of these smaller Banks and bigger Banks were bleeding money like crazy and it has nothing to do with the FED specifically. Well, not directly, but mainly every customer told himself. look, I'm getting 0.5 percent in the bank by keeping my deposit in this Bank Why don't I put it in the money market and get four or five percent. Or you know, do a three-month treasuries.

Six month treasuries get similar Five percent. Why not, right? So this has already been happening. now. the big Banks they can take the Bank of America, the Wells, Fargo the chase, the city group.

They can take it. but if you you're a smaller bank, that's an absolute horror show for you. That's the worst case scenario because you're not working with the same amount of capital. so this was already a thing.

Then on top of it, we had the Svb collapse because of poor management. Also, because Svb was caught up in a really tight spot. They had a lot of bonds which they had to sell off. At last people freaked out, they panicked and all of this led to a lot of extended withdrawals from these Banks and moving to bigger Banks.

So the smaller Banks which were already struggling now got hit with this massive fear and they were actually in the big big problem. So the FED had to do something. So now the hope of the fed and I'm going to tell you right now it's not going to work. The hope of the FED is with the sale of Silicon Valley Bank Credit Suisse being sold to UBS and fresh Republic being saved and the whole Deutsche Bank thing actually seems to fizzle out.

The hope is that now with this sale of Spb the First Republic we get quiet, people relax, and the money flow from smaller Banks stops so they can stabilize their stuff and get some liquidity. Because the thing here is about liquidity. now. look, the FED has has to do that for two reasons.

Reason number one is the Fed does not want the banks to collapse obviously. But reason number two is the Fed is on the mission to raise interest rates. They cannot raise interest rates Into a banking crash. it is literally impossible.

So they first have to deal with the banking crash. They can't hide rates when the banks are collapsing. So the question is right. and is the U.S banking system still in bad shape? Because in credits with situation in Europe, every single European Banker is telling that Credit Suisse was an outlier.

Credit Suisse was a unique situation. It was idiosyncratic and in fact, we never had another. You know, European Bank collapse since Credit Service Well, not never. I mean it's been a week, right? But except with Deutsche Bank not even close to collapse.

But you get where I'm going with this now while in Europe I'm gonna tell you right now that this is a really good structure of banking. in the US it's a whole different situation. Now what I want to talk to you about is liquidity ratios. So these banks in Europe they hold a certain amount of cash, which is a percentage of how much deposits they have.

Ideally, you want to have some sort of a percentage of cash you're actually holding in case a lot of people want their deposits. So you basically are able to pay as much of them as possible, right? So so look at the liquidity percentages for these: EU Banks I'm not even making this up I'm just going to use Deutsche Bank right? Deutsche Bank was the weakest link after credit space. We can all agree to that. That's why I had some trouble.

Deutsche Bank holds 27 27 in cash of their deposits. So if one third, well, let's say one-fourth of people of Deutsche Bank customers, they run to the bank. They can handle that. Now look at other banks in Europe just kind of give example Dnp BNB 33 Subject: Society General 37 and that's just European standards.

As you can see, Deutsche Bank with 27 was one of the lowest ones. So how, what's what's the situation with U.S Banks? Let's look at U.S banks right? Let's compare the U.S banking situation to the European one and I'm going to show you some numbers. So in the US you have two groups of banks, the big Banks and everybody else. So the Bing banks are kind of okay.

not as good as the European Banks and liquidity, but kind of okay. Citigroup has 24 cash Chase 23, Wells Fargo 16 Bank of America 11 and a half percent starts to be problematic dny 10 and a half percent and U.S Bank 10 And these are the best banks. These are the best percentages and as you can see, they're not even close to the European numbers. But if you look at the second group of banks, the smaller Banks, you're going to be shocked.

I'm going to show the numbers: Capital One Nine percent Svb had eight percent Signature Bank had seven percent First Republic Two percent First Republic holds two percent in cash of their entire deposits. meaning that if more than two percent of people want their money right now in First Republic this Bank does not have the money to repay them. State Street 1.7 PNC 1.5 And what about First Citizens The bank that just bought SVP right? SVP had eight percent of cash of their deposits and the bank that bought them First Citizens they have 5.8 percent. First Citizens has a worse liquidity ratio than Svb.

They have under six percent liquidity. Which means that if more than six percent of the clients of First Citizens Bank want their money, they're out. they can cover. now.

You can't tell me that this was a, you know, a stronger Bank Buying a weak bank. it's a really poor Bank buying another really poor Bank You know the blind leading plan little. So let's talk about a little bit. So all these banks in the US that are not the big Banks they don't have a safety margin.

In fact, I'll argue that even some of the big banks are operating at 10. It's a little bit problematic, but there's no safety margin. there's no safety net. And you know what happened with Svb? When you know people realized that they're in trouble, they went for the bank and basically they they you know they started the bank run and the bank collapsed.

Now with other Banks Is it possible in the US Is Svb an outlier? No. I just showed you a lot of these banks have one percent, one and a half percent, two percent that Signature Bank had seven percent First Citizens have 5.8 percent. So no, the other banks are not safe, the other banks are not out of the woods, and the banking crisis is far from over. Now the problem is that the FED here is a little bit between kind of The Rock and the hard place and I'll explain.

Look, uh, I Want to be clear on this so you know how I always talk about how the FED cause inflation, then the FED mishandle inflation made it worse, and now the FED is supposed to solve this problem. Well, the FED ruined the US banking system, the FED literally caused what I just told you about and I'm not even kidding. I'm going to show you some numbers and you're going to see it. So before March 2020, which is exactly when the pandemic started.

For the FED Before March 2020, this was the liquidity requirements for U.S Banks I'm going to read you the actual numbers Up to 16 million dollars of deposits. You don't have to hold nothing. It's too small small potatoes. Up to 122 million dollars of deposits.

only three percent Again, Small Potatoes Every other bank with 122 million and more deposits had to hold 10 percent of the deposits in cash. and that's a fair number. Not as good as in Europe, but a fair number. So on March 2020, the FED comes in and they cancel this.

They basically say, well, now it's zero percent zero I'm not making this up. This is not some sort of embellishment. Zero percent. The FED came in said no more liquidity requirements Reserve requirements Go crazy.

Now they did this. They did this to flood the market with money. They were printing money. Remember we said like in March and April 2020, the Fed was dumping money on the system.

This was one of the ways of the FED to do it to. basically to say hey, Banks empty out your reserves. We need money in the system. Lend it out.

Go crazy. So obviously the banks did it and you're seeing the results. Right now, you're seeing the results. I'm not even kidding, right? I Read you the numbers: State Street 1.7 PNC 1.5 FRC Two percent for Citizens Five point eight percent liquidity.

Insane. This is like This is absolute. This is negligent. This is dangerous I Don't know even how to say how unprofessional that is.

So uh, the result was of this whole story is that after the FED got the banks to empty out the reserves, what happened is that these Banks had all of these bonds which the FED told them to buy. The FED basically instructs Banks to put the money in a safe place in the bonds. So all these banks have now no liquidity and they're sitting on a pile of bonds which they bought when Fed had interest at pretty much zero percent. Okay, now what went on is that the FED Basically Hispanic they panic because of inflation and they immediately Spike interest from zero to five percent in a single year, basically slamming all these smaller Banks holding on to these bonds because when you raise interest rates, the price of these bonds, they they drop like insanely right? So the price of the bonds drops.

Now the banks are sitting on the pile of unrealized losses. According to recent statements and Recent research, we're sitting on 1.7 trillion dollars 1.7 trillion dollars of unrealized losses because of bonds because of what the FED did for U.S Banks Again, the big Banks They're just too big. They can handle it all the smaller Banks they're pretty much screwed. It's a big big problem to sit on so much unrealized losses.

Now the problem. Same with inflation the FED caused this. They got them to empty out the reserves. They slam them into inexpensive bonds from expensive bonds.

So now all these banks have no cash and a lot of unrealized losses. Now, until they have to sell these Bonds on the balance sheets. On the you know, on the financial reporting of these Banks, you can't see these losses as long as you say you hold them to maturity. All these losses are hidden so nobody can see them.

You can only see them if the bank actually wants to sell these bonds. So now the FED is stuck. On the one hand, the FED would love to raise interest, right? They have to raise interest to solve inflation, but that raising interest further would slam the bonds. The bank are hoarding even lower and then cause even more unrealized losses for the bank so they can't do it despite of what John Paul is saying.

On the other hand, the bank can lower rates and bail out. Sorry, The FED can lower rates and then bail out the banks because if the lower rates, the bond prices will go up and the unrealized losses will be gone. But if they do that, inflation comes back. So basically, the Federal Reserve is flirting between, um, you know, an inflationary Spike which they can control or collapse of the banking system which is pretty much the collapse of the U.S economy.

So between these two options, between the collapse of the U.S economy. by default due to destruction of half the banking system or elevated inflation, you know what the FED is going to choose. I've been talking about it for a whole week. I Said the FED has no choice here.

Out of these two evils. there's one less evil. Inflation is less as a lesser evil. It is the best of all worse choices compared to slamming and absolutely destroying the U.S banks.

So the FED will have to save these Banks There's no, there's no two ways about it. And now look, while this is going to happen, the FED will I I believe through interest rates will somehow find a way to do it for for they cannot raise liquidity rates. By the way, to solve inflation. Because you might When you know you might say, well, Tom they can raise liquidity rates, then the banks will have enough cash and then they can cover all these bonds.

Uh, no. if they raise the coded rates, this money has to come from somewhere. The banks will be forced to sell these bonds at the loss. It's going to start another Svb quasi process for all these other Banks.

So here's what's going to happen. and unfortunately, they're going to let inflation go crazy because they can't actually stop it right now because of the banking system. By basically halting their process with interest rates, inflation is going to start taking more tolls on the profitability of companies and or the margin rates. Etc Et cetera, You know inflation is high, Your costs are up, Wages don't catch up with inflation nearly as fast, so people will have less purchasing power.

Companies will have less profit margins and worse performance. So that's going to lead eventually to a Slowdown in the job market. So when people are not buying and businesses have smaller margins, people lose their jobs at the same time. Now all of these banks are not lending money because they're trying to pile up liquidity.

All these Banks Just saw what happened to Svb and these other Banks So they're filing cash as much as they can. so the banks are not lending any money. So with the bad one, there's a kind of a credit crunch. So all these companies now have no capital from the banks, well as much capital from the banks.

The little Capital they have is now way more expensive because of elevated interest rates and people are slowly running out of purchasing power and their margins are eroding. So there's going to be an unemployment Spike along with the existing inflation rate which is speculationary environment. Now speculation is on high unemployment and also High inflation. Now the good news sort of The good news here.

If you're looking for the silver line, that stackflation eventually cures itself. but it takes a long ass time. So when you have declaration which means high unemployment High Inflation eventually if you have high unemployment, people don't spend, and if people don't spend, prices drop and eventually that kills inflation and you step out of it. But last time we had speculation in the 70s, it took five years to get out of it, five years to get out of it, and a very severe recession to the US.

So it's not from I think from 1975 all the way to 1981. So if it will fix itself, but it's going to be a very painful process. and unfortunately the people who will pay the price for all these policy mistakes by the FED are the middle class and the and the and the low class. and and the poor people.

They're going to be the ones you know left holding the back for this. The rich people. They will suffer a little bit, but not nearly as much. and unfortunately it is what it is for the U.S Economy: This means really bad times ahead.

Now there might be a small spike in the stock market after John Paul Actually finally admits they cannot raise any more rates whether it does it in a month or in six months. Whenever they actually feel comfortable to do it, you might see a little bit of a spike in the stock market. I Don't know I Don't trade so I don't care, but long term looking at the next two years it's going to be an absolute show. The best case scenario is going to be kind of a sideways Market Based on everything that happens right now, there's just not good Solutions out here let me know if you agree with me.

let me know if you disagree with me. I Would love to hear your opinion comment below. Sorry to have to bring you bad news, but I'm going to call it exactly like I See it as always. Don't click nothing, don't smash nothing.

Don't buy nothing. Love you all hugs and kisses.