Top of Mind
What happened to Silicon Bank, gold's reaction, CPI, & fear seeping in.
Hello everyone…happy Sunday. Baseball got rained out this weekend so I’ll spend some time here on The Tobin Report.
A few thoughts top of mind. I’ll get right to it.
The Collapse of Silicon Valley Bank
By now everyone has heard about the collapse of Silicon Valley Bank. The stock (SIVB) was trading above $760 per share just a couple months ago…and is now worthless...or close to it.
Could this be the trigger that affects fed policy moving forward?
I’m not making predictions…just looking at possibilities.
This could be the beginning of many more dominos to fall.
That said, I think it’s important to understand what actually happened. And instead of trying to fumble in an area that is not my expertise, I decided to share with you one of my FAVORITE reads, written by Vince Lanci of
…who lays it out perfectly.I HIGHLY recommend subscribing to
if you haven’t already. Great content.Vince answers the following questions in detail:
GOLDFIX NEWSLETTER What happened to cause this?
Why was JPM poaching depositors before it went under?
This happened days after California and the broader US ended its Covid pandemic exceptions for bank risk- How much of that was a factor?
The FDIC took over very quickly. Quicker than Lehman. Why?
What will the Fed do with interest rates?
Did the SVB executives do anything?
What is one thing you can say with large confidence?
Is there contagion risk?
Anything Else?
Addendum
Full Article Here:👇👇
This is what happened in Silicon Valley on Friday
How did gold respond to the Silicon Valley bank crisis?
Gold:
Long story short, gold sees the possibility that the Fed may need to ease off the gas regarding rate hikes. Gold is now less than 10% off it’s all time high.
And while panic selling was starting to set in on much of the market on Friday…many of my junior mining precious metals stocks were doing the opposite…and some on good volume. 👇 Why? Again, the possibility of rate hikes coming to an end…Inflation NOT transitory. Bank(s?) collapsing. More coming. Wheels falling off…
Unless this was just a one-off.
To support this idea of rate hikes nearing an end:
➡️ US 2 Year Bond Yield
The 2-YR is a proxy for Fed Funds rate. Meaning...as the 2 year moves…so does the Fed. I won’t get into how or why but suffice it to say that the bond market is telegraphing rate hikes coming to an end sooner than later…
This isn’t Eric Hyde saying this…it’s the bond market. And it certainly doesn’t mean that IS what will happen…it’s just what the bond market is telling us today.
HOWEVER…this could all change next week as we have inflation data coming out on Tuesday.
Consumer Price Index (CPI)
Tuesday, March 14th. Big day. Higher inflation print means higher rates coming…lower inflation print means Fed may raise by .25%…and markets would rejoice.
BE AWARE: If inflation prints higher…be prepared for a major selloff…in everything.
Lastly, I’ll finish with this thought…
Fear has started to seep into the markets recently.
Interest rates rising at the fastest pace…Jerome Powell’s recent testimony that he will likely increase rate hikes (50bps instead of 20bps) again this month…the 2nd largest bank failure in history (behind Lehman in 2008) with the possibility of more on the horizon…and the fear index (VIX) spiking again…
In all of history, the time when peak fear set in was the opportunity of a lifetime. I’m not saying we are there…and in fact I think we are far from PEAK fear…but it could get there VERY quickly.
For example, the Lehman crisis was in September, 2008…and markets took a 50% haircut in the coming weeks before bottoming in March of 2009.
That said…from March of 2009 till 2022…well, you know what happened. 💹
However, this is the time to manage emotions and think like a contrarian. When everyone is scared and selling…that might be the time to scoop up some deals...cautiously of course. And when the fear subsides…because it always does…money flows back into markets.
That’s all for now.
Thanks for reading…or skipping to the bottom. Either way is fine. 🥃
Eric