The Banking Collapse is JUST the START.

and Central Bank just stuck with a

shocker of interest rate hikes and it

could be the nail of the coffin for a 25

BP hike next week from the Federal

Reserve there's been a lot of debate

about whether or not the FED would go

with the 25 basis point hike or a zero

basis point hike or maybe even

potentially cut but the European Central

Bank might have just put a nail in that

coffin they are sticking with a half

Point rate hike they are rake hiking

rates by 50 basis points and while they

have lower inflation forecasts they're

projecting inflation will remain high

for quote too long they're not offering

guidance on their prior moves there is

no flagging of future intentions they're

saying but the price action and markets

today provides confidence that they need

to give their pre-committed rate hike of

50 BP markets were pricing in at 50

chance actually for 50 BP so it was a

little bit more like a coin toss but

this is what the ECB is saying uh the

first sense of the first sentence so the

policy statement reads inflation is

projected to remain too high for too

long this is a big tell for the Federal

Reserve it's a towel for the Federal

Reserve that basically says listen up

we're going to be going with 25 BP but

it's also a tell that says maybe the

banking crisis is over maybe the banking

crisis is not as bad as fear uh that's

uh that's an idea so while 50 of the

market was expecting the ECB to go to a

25 50 was expecting 50. we did end up

getting 50. this is leading the 10-year

treasury in the United States to fall

even more just sitting at 3.4 right now

that should be a boon for real estate in

the short term so we'll see anyway that

gives you the ECB update and updates for

today thanks so much for being here

check out the programs and building your

wealth get life insurance in as little

as five minutes by going by kevin.com

life 12 free stocks with weibo by going

to metcaven.com weeblehead well now we

gotta dive deep into what just happened

with the bailout for credit Suite so we

talked about yesterday but also the

implication Nations that this is leaving

for markets let's get started with that

oil I think is The Biggest Loser here

because markets are really starting to

price in the likelihood of a recession

oil on a Brent basis is sitting at 73

bucks and wti's down at 69 just a couple

of weeks ago we were sitting above 80

for both of these we've plummeted on oil

prices nearly 10 bucks each type of oil

this is incredible because oil is

absolutely one of the inflationary

impetuses for this market so if you

could thank the banking crisis for

anything it's to thank you thank the

banking sector and their drama for

potentially reducing the pain of higher

oil and gas prices now usually people

say pet cabinet core inflation takes

that out who cares about that and core

services are sticky yeah well guess who

charges more when oil and gas prices are

higher Airlines hotels service providers

whether it's Transportation or otherwise

there are a lot of sectors of our

economy that are actually services that

use oil or gas as an input cost for

heating or Transportation or otherwise

in English if the banking crisis is

leading oil prices to plummet then thank

you for helping contribute to a decline

in inflation hopefully that would be

fantastic certainly five-year break

evens are expecting that right now

five-year break evens have just Fallen

to

2.39 down from a high just about a week

ago of 2.8 which was very very high

you've got a terminal fed funds rate now

being priced in a terminal rate of about

4.9 percent that's well off the 5.65 we

saw about a week ago and we now expect

rates to be down to about 3.8 percent

that is an about 100 basis point or one

percent cut by a December now yesterday

we did hear that the Swiss National Bank

is uh in the midst of a quote-unquote uh

managing a confidence crisis leading the

leading Chris uh Credit Suisse to borrow

50 50 billion francs works out to about

54 billion dollars from the Swiss

National Bank uh and uh and and they

offered up some of their debt as well

now what's fascinating about this is

yesterday you had Credit Suisse shares

plummet about 24 in one day but after

this bailout surged by about 40 percent

the most on record the bank's credit

default swaps also no longer were

trading at about a thousand a bip spread

they shrank substantially which is great

because now there are a lot of Bankers

coming out like an individual from JP

Morgan who says look the reason this

bank had problems was because of uh

confidence issues at this particular

bank that this is more

idiosyncratic or individualistic to

Credit Suisse not to be worried although

I hate saying this but if you go back to

what happened in 2008 in March of 2008

guess what we heard oh bear Stearns is

going under don't worry the market has

bailed out bear Stearns everything is

fine the banking risks are not systemic

they are just based on idiosyncratic

problems with the individual Bank

and what ended up happening well within

six months we were in the depth of a

severe financial crisis and that's

essentially where fears point us today

that what if this is all just the tip of

the iceberg that's what Jeffrey gundlock

is saying that's what under individuals

and hedge fund managers are telling us

they're saying be careful this is

dangerous you've got investors ranging

from a Jeffrey gun law but also Michael

burry suggesting this is just like 2000

and 2008 all over again and you've got

uh an individual that CNBC interviewed

yesterday Steve Eiseman of The Big Short

said that if the spreading banking

crisis stops the Federal Reserve from

raising rates next week investors should

actually be phased by that 50 basis

points is off the table so they're

either going to do 25 BP or they're

going to do nothing he said on fast

money but if the FED doesn't raise rates

maybe it'll be positive for a couple

hours or weeks but by the FED not

raising rates because they're scared

well you should be scared in other words

he goes on to say in his video interview

that hey look If the Fed doesn't raise

rates it's a sign that this banking

crisis could be a whole lot worse than

we actually think it is uh so uh you

know this individual also says in an

interview though he sort of Hedges what

he's saying about potentially this being

a systemic financial crisis by saying

look Credit Suisse I say

basically has been a problem child in

investment banking for as long as I can

remember I think that's actually kind of

interesting this idea that ah well it's

no surprise that Credit Suisse is the

one going under I mean after all they're

the ones who were exposed to the drama

of green Zill capital and arcago's

capital management and those blow ups

the most and that's LED off thanks to

that sort of instability they've had to

basically

sell off at a discount billions of

dollars of risky loans but anyway we

know that the treasury Department is

actively monitoring this for whatever

good that does us the real question here

is is there going to be Panic around an

ongoing banking crisis uh obviously you

know this is starting to sound not only

eerily similar to 2008 but I hate to say

it yearly similar to last week last week

remember when I said hey I had dinner

with Kathy Wood and what did she say oh

don't worry it's just Silicon Valley

Bank yeah and I agreed with her at the

time but now it's not just Silicon

Valley Bank or silvergate from last week

but it ended up turning into a signature

in New York on Sunday and then Credit

Suisse yesterday on Wednesday now

technically Credit Suisse hasn't gone

under yet but I mean they needed a

bailout right so it's you're starting to

scratch your head like okay we literally

said last week it was just going to be

just these two then it was going to be

just these three now it's just these

three Plus Credit Suisse so it is

creating a little bit of nervousness and

a lot lot of questioning around okay

what does the Federal Reserve going to

do here now we actually remember that uh

yesterday it was the Saudi uh Saudi

National Bank that said hey we're not

going to contribute any more funds to

this bank that created a massive amount

of fears uh keep in mind the the Credit

Suisse even though yesterday we talked

about how they sat at about 582 83-ish

billion dollars in assets under

management this is a bank that used to

have about 800 billion dollars under

management so think about that a bank

that went from 800 to 580 or yeah three

billion dollars in assets under

management has already lost basically

the size

of Silicon Valley Bank think about that

800 minus the size of Silicon Valley

Bank puts you at about 589. Credit

Suisse is 583 billion under management

so it just shows you how large this bank

is and they've already basically had a

run to the tune of 100 the size of

Silicon Valley Bank still got another

two and a half of those to go so it's

leading to a lot of fear that uh oh if

we have any sign a sticky inflation

we're screwed now at least there is some

good news here and we do we're going to

go through this Bank of America piece

here on CPI inflation uh but you know I

want to give you also the heads up that

today the ECB is expected to declare

whether or not the uh they're going to

go for a 50 basis point hike or a 25

basis point Hike The Hope is that

they'll end up going with a 25 again if

we have zero then then potentially it's

a sign that uh oh we have bigger issues

than basically everybody is letting on

and we don't want to hear that uh now we

so we expect that today uh and then of

course if we end up getting uh 25 BP hey

that'll be neutral it'll be a nice

little leading indicator for us at the

Federal Reserve as well so what do we

have here regarding

CPI and then of course you've got First

Republic as well which just got

downgraded to junk at Fitch and s p

which are rating agencies but then again

if you remember 2008 uh you know you

know the rating agencies mean nothing

what's up Matt cores you know a lot of a

lot of banks are reporting uh or

interested in potentially selling their

assets right but what's so problematic

about Banks selling is that the more

time goes on the less valuable those

Banks actually become a Silicon Valley

Bank is looking for basically under

receivership is looking looking to be

sold out but every day that goes by

those Banks become less valuable why

well first of all corporations who would

want to potentially buy out these banks

are going to heavily discount the

existing assets at those Banks to be

able to hedge that they potentially

would overpay generally investors do not

want to overpay for a bank so you're

likely to get lower bids than the assets

are actually worth at individual Banks

the problem though compounds every day

that goes by at either a First Republic

or a Silicon Valley Bank or Credit

Suisse or otherwise every day that goes

by where these banks are in the news

people are looking at their phones going

crap I bank with that bank you know what

why not rather be safe than sorry why

don't I just leave that bank and go to a

big four or a big eight Bank you know

something that's actually fully

regulated by the Federal Reserve stress

test and now you know systemically

important Bank now all of a sudden you

actually every day you don't have a sale

or somebody come in and swoop out these

Banks you lose more customers and if you

lose more customers every day then

you're basically taking a skeleton

that's rotting that has a little bit of

meat left on the bone and you're rotting

away whatever is left of that rotten

bank already so there's there's nothing

to left to eat anymore there's nothing

there's no calories left so to speak and

every day that goes by you have more and

more of that evaporation so uh it's it's

a problem but not only is it a problem

but it could be a massive disaster if

all of a sudden the Federal Reserve ends

up you know having to come out and say

hey we've already used the entire 125

billion dollar facility could you

imagine the Panic that would happen then

if the FED says hey we're we just ran

out of money in that facility now we

need more more money you know no they

could do that via leveraging but uh and

and we're not clear if they need to be

transparent with us on whether or not

they're leveraging but it's all a

disaster uh anyway Bank of America here

reporting at least if we have this dual

concern of a banking crisis and

inflation which weirdly enough in 2008

we didn't even have the inflation crisis

you know we had some but but nothing

like what we're seeing today so you're

really fighting a dual crisis here but

at least Bank of America is telling us

that the CPI inflation for the year

should end up continuing to moderate I

want you to pay attention to this box

right here and you're gonna see that

it's core services that makes up the

bulk of the inflation that we are

forecasted to see going into 2024 but

Bank of America gives us a little bit of

an idea in terms of how this might end

up coming down

so let's scroll over here so they do

mention that we expect elevated wage

costs and ongoing employment shortfalls

to continue to lead to more persistent

food away from home inflation fine

indeed average hourly earnings for

production and non-supervisory workers

at food and service drinking places

where up six percent annualized over the

last six months that's really showing

you where in retail and Hospitality

where you're still

experiencing from a smaller labor sector

than you had before the pandemic think

about that

2019 you were at level X let's say and

now you're actually x minus uh you know

why you're you're smaller in terms of a

labor sector than you were between by

2019 or compared to 2019 whereas

Healthcare is at the same level but

these these industries should not be at

the same level of employment they should

have grown Healthcare should have had an

additional 900 000 workers we just don't

have that right now

so uh it's uh you know this is one of

the reasons you're continuing to see

this sort of pressure but what does Bank

of America tell us in terms of how these

core Services might end up coming down

well first look we're still waiting for

that shelter a disinflation to show up

that has not happened yet uh this is the

shelter inflation right here these are

the expectations for it on a quarterly

uh basis month over month we hope that

it'll go down from about 0.7 in q1 maybe

to about

0.6.58 in Q2 down to about 0.4 and Q3

and by Q4 hopefully we're down to about

0.2 which would be great because that'd

be about 2.4 annualized inflation and

then the FED can come in and just fade

this away right but take a look at this

excluding shelter the forecast is

unfortunately not so clear we continue

to expect this component will approve it

will prove to be a sticky problem for

the Federal Reserve that said we do

expect a recession to start in Q3 and

for the unemployment rate to rise to

four point seven percent above estimates

of the natural rate by q224 over time we

expect the rise in the unemployment rate

to put more persistent downward pressure

on wage inflation and in turn core

Services X rent and owner's equivalent

rents so in other words Bank of America

is making this argument that look

inflation is probably going to remain so

sticky for so long that even though we

think you know we might see that

downward pressure on rents we're seeing

vacancy ratios climb a bit and we've got

plenty of forecast in terms of where we

might end up being on CPI here it's

important to remember that wait a sec

wait a second that sticky segment's got

to come down so what kills the sticky

sector well this is something we've

actually talked about before what kills

the sticky sector is when you at the

margin have a group of people stop

spending money on restaurants air try

travel you know food basically delivery

services any kind of services that they

can cut out discretionary Services they

can cut out this is actually why I

personally am relatively fearful of the

S P 500 because if you go through the

top 30 companies in the S P 500 there

are really only about four that have

pricing power to some extent Apple

Nvidia Microsoft

I can't remember the last one but uh

anyway uh there are about four that have

pricing power the rest of them are all

uh some form of either energy or staple

or discretionary like Coca-Cola

McDonald's or otherwise a Visa

Mastercard are up there and in my

opinion if you look at the economy as

sort of a spectrum and you cut off it

like you take the bottom thirty percent

of people and you reduce their spending

by 50 percent that's like taking 15 away

the middle income and the higher income

people keep spending take that lower

segment away who loses well those sorts

of discretionaries in that S P 500 again

all you have to do is go to the S P 500

top 30. let's do it together really

quick we did this in the course member

live stream yesterday we often do things

like this uh uh top 30 companies top 30

companies uh on sort of a daily basis in

the course member livestream which is a

great way for you to have a reminder to

check out those programs of building

your wealth link down below okay so top

30 companies remember you get lifetime

access and the price goes up over time

you're guaranteed to get the best price

if you join today although you can

always email me kevin.com if you have a

concern oh yeah Tesla of course duh

Apple Microsoft Tesla Nvidia those were

the pricing power stocks that I believe

are in the s p 500. uh the ones that I

don't uh think will fare as well are I

hate to say Google Johnson Johnson Exxon

Mobil I hate to say it JPMorgan meta

Visa Proctor and Gamble Home Depot

Chevron Eli Lilly MasterCard I'm going

to skip appv uh Pfizer Merc I don't know

and then you get Pepsi Bank of America

and Coca-Cola now look I understand JPM

and Bank of America are getting a ton of

deposit inflows but I still think you're

going to see a compression in net

interest margin you're going to see a

compression so that these these Banks

can actually retain those individuals I

think lending standards will tighten

you'll see a higher default risk and I

don't think the banking sector is out of

the woods I personally I would speculate

on the banks like just swing trade first

Republic or whatever sure but do I want

to Long hold these suckers hell no I

know I couldn't remember Tesla on the S

P 500 I know that's quite embarrassing

uh but anyway uh see I must not be that

much of a bull but anyway uh point being

that's the sector where I'm really

nervous about it's a lack of pricing

power ones that are going to be most

affected by a hit at the margin I

actually don't think a Tesla Apple

Nvidia and and Microsoft or hit that

terribly I actually don't know Microsoft

so maybe to some degree but at least the

other three are hit that terribly in

sort of a consumer driven recession now

interestingly going back to Bank of

America for a moment Bank of America is

basically saying look the Q3 recession

is actually actually probably what will

drive the unemployment rate up and that

will finally be what actually kills the

sticky problem of services-based

inflation so in other words no killing

of inflation that sticky portion until

we have a recession and this goes back

to the idea that the FED has to force a

recession to kill inflation and that's

kind of what I expect now I really think

if the Federal Reserve thinks these

banking crises are not systemic they

will give us a 25 BP hike it's a coin

toss right now I believe that's what's

going to happen but we'll have to see so

that's my take but if it makes you

nervous get life insurance in as little

as five minutes by going to metcaven.com

life you could Apple pay Android pay for

it it's what Lauren and I use we

personally use it along with Weeble you

could get 12 free stocks metkevan.com

free they'll give you sort of the

parameters for how you can get 12

totally free stocks just for signing up

and uh yeah we'll see you uh well let me

know what your thoughts are the Credit

Suisse at debacle rather