The Worsening Banking Crisis | Poor People are Screwed.

hey everyone me Kevin here we gotta talk

about the craziness of the Swiss banking

system what the heck the differences are

between Credit Suisse and Deutsche Bank

because they're a pretty big deal a lot

of people freaking out right now saying

that's it Deutsche Bank is the next chew

to drop in fact we saw their credit

default swap Skyrocket to levels that

started reminding us some of the 2008

financial crisis but even recently we've

been at levels at such Spike levels of

Greater defaults webs in October leading

to the thought that the stress is about

to explode even further and the shoe

will finally drop being the next Domino

to fall first it was archangos then it

was three arrows Capital then it was

Terra Luna then it was brokerages like

block five and FTX and Voyager digital

along with others then came Signature

Bank and Silicon Valley Bank and

silvergate two of those having massive

crypto exposure being massive crypto one

ramps and one of them being a massive

setup for startups in Silicon Valley

basically people with a lot of wealth

using these particular Banks and guess

what happened these Banks got bailed out

by our government because after all

that's what our government does it bails

out the rich people Banks and therefore

it's no surprise that Credit Suisse was

essentially also bailed out on behalf of

rich people remember the old saying get

a Swiss bank accounts or base Swiss bank

account the reason for that was because

back in the day you actually used to be

able to make money have that money wired

to your Swiss bank account and the Swiss

would just be like vido novel money came

from but we don't care we are just

grateful to have you as customer here

thank you very much

and the idea is hey

if you don't deposit it to a U.S Bank

how's the US going to know to tax it now

some of those loopholes have since been

closed the Internal Revenue Service for

example has a deal that requires Swiss

banks to report American deposits in

their Banks so that way the eye the ah

and the S contacts you and make sure

they get their money but isn't it

interesting that it always seems like

the rich people banks are the ones that

get bailed out compared to poor people

consider this in America guess who pays

most of the overdraft fees in America is

it the top 10 percent the top 50 percent

the bottom 50 percent

no folks in America

the vast majority of all overdraft fees

according to a Princeton sociologist

interviewed by Bloomberg is

paid for by the bottom nine percent of

account holders poor people pay all the

fees rich people don't pay all the fees

and get bailed out the reason for that

is simple rich people have a choice with

where to put their money for poor people

it's actually surprisingly difficult to

continue to move bank accounts you have

to come in to schedule why or a pay wire

fees pay overdraft fees bank account

fees it's insane rich people get a

personal banker who they can call up on

their cell phone and go yo I need to

send a 250k wire here there or whatever

and it's done immediately for free poor

people want to cancel a credit card they

get sent to the retention department and

they have to spend an hour on the phone

to cancel a credit card rich people send

a one-line email to their personal

banker and it's considered done there

are big differences between the rich and

the poor America there are also big

differences between Credit Suisse and

Deutsche Bank and quite frankly it's not

just America where you have these

differences it's quite frankly the

entire world now some people get mad at

me for suggesting that oh how could you

call it a bailout that signature Valley

Bank got bailed out it wasn't a bailout

uh yes it was the Federal Reserve

created the b t f p facility that

facility enabled liquidity for Silicon

Valley Bank that it would otherwise have

not gotten for its toxic assets in the

free market

that liquidity is a loan if that loan

doesn't get paid back who is

guaranteeing it not the FED it's

taxpayers because it's backstopped by

treasury Appropriations which come from

Congress which come from you the

taxpayer so yes the taxpayer is

guaranteeing you basically signed on the

deposits at Silicon Valley Bank and the

other sectors of the banking sector now

many make the argument that but come on

Kevin these were systemically important

I mean if they would have collapsed then

the entire system could have experienced

Contagion really then why weren't they

called systemically important from day

one oh because regulation that was

loosened during the Trump Administration

in 2018 which actually passed as a

bipartisan measure the only people

voting against it were the furthest on

the left the more Progressive Democrats

uh and and that Lucent regulation for

banks and so that's how we ended up

where we are now where basically

taxpayers and borrower folks are once

again bailing out richer folks so how is

this also happening in Switzerland well

the failure of Credit Suisse is not just

unique because Credit Suisse was after

all pretty toxic with all the scandals

that it had but

Switzerland and its banking economy is

basically everything Switzerland stands

for Switzerland's banking system is five

times the size of its GDP its banking

system is the Swiss identity Bankers

literally live in mansions around Zurich

around Lake Zurich and they go into town

to buy fancy watches and fancy stuff

because banking is synonymous with

Switzerland back in the 1700s it was

actually a crime to disclose the details

of an aristocrat who banked at Swiss

banks listen to this Adolf Hitler where

do you think he put his money when his

book sales took off for his book Mein

Kampf

Swiss bank account

you can't make this stuff up Swiss

banking exceptionalism especially for

rich people goes hundreds of years back

hundreds of years back and so it's

incredible to see Credit Suisse fall and

then at the same time basically see

taxpayers in Switzerland just like in

America backstop the failure of their

rich people bank but wait a minute I

thought UBS is taking losses on the deal

UBS agreed to buy Credit Suisse for

about 81 cents a share

now

they are agreeing at that purchase price

to take about nine billion dollars of

Fixer-Upper costs so they already know

what their cost is acquisition price

plus Fixer-Upper it's kind of like

buying a broken house by Price Plus my

fix up that's already factored in for

UBS guess who's backstopping the next 15

billion dollars in losses

the Swiss taxpayer in other words if

losses at Credit Suisse end up exceeding

the Fixer-Upper budget think of the

house analogy if the budget goes above

and beyond the taxpayer pays imagine

this you're a rich person you buy a

mansion you literally buy a mansion and

you're like my budget to fix this place

up is 200 Grand and the government says

if you go over budget we'll bail you out

that's literally what is happening and

they're doing this under the argument

that well if the Swiss bank collapses

then that'll not only destroy

potentially our national identity but

it'll be systemically that

maybe that may be true

but it's still important to know that

basically a rich person is buying a

mansion that's a fixer-upper and the

government is guaranteeing them above

their Fixer-Upper budget and the

Fixer-Upper budget is nine billion

dollars and the government is saying our

taxpayers I don't know why I'm doing

that our taxpayers will bail you out to

the tune of an additional 15 billion

dollars if there are additional losses

so rightfully so this is leading a lot

of other people to wonder okay who's

next and that's why eyes are on Deutsche

Bank and it's important that we compare

a little bit of Deutsche Bank to Credit

Suisse because said jammins are at least

a few hundred miles apart from

Switzerland so it's worth talking about

some of the differences but of course if

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what about Deutsche Bank versus Credit

Suisse well this gets interesting so

let's hop on over to credit suisse's

last financial statement before they

ended up going kaput and oopsie dupsies

and if we look at their last

oopsy-doopsy report you could actually

see that things just ain't that

fantastic so look at this

credit suisse's net revenues have

actually been plummeting

since the end of 2021 as reported in

this document here you could see that in

2021 net revenues at Credit Suisse were

about 22.7 billion which fell by nearly

a third to just under 15 billion dollars

actually fell by 34 percent so just over

a third

and then the quarterly revenues have

actually been suffering even more look

at just this fall from q322 to Q4 2022

yikes that's a big oopsie dupsy the

revenues are plummeting but not only are

revenues plummeting at Credit Suisse or

worse since obviously they failed and

were bailed out not only were revenues

vomiting but look at this their losses

have been mounting they lost 600 million

dollars in sorry they lost uh this is in

millions yeah wow oh my Lord they lost

600 million dollars at the end of 2021

they lost 3.2 billion dollars at the end

of 2022

then they lost 3 or 1.3 billion dollars

just in the fourth quarter alone of Q4

so you could look at this company and go

dang this company's absolutely been

getting reamed absolutely been getting

reamed how does this company end up

comparing to Deutsche Bank well first

it's worth noting

that this company was trading for a book

value per share of about tangible book

value per share you could say that takes

out the intangibles of about ten dollars

and sixty cents per share in January of

2022 this was trading for about 10.55

obviously now it's trading for about 90

uh 80 80 to 90 cents that's because

that's what it's getting bought out for

because it failed but this gives you a

heads up of how

ugly the actual earnings report looked

for Deutsche Bank and all we did was

look at one page of the earnings report

now all we're going to do which makes it

sound kind of lazy but all we're going

to do is look at the earnings report for

Deutsche Bank and we'll look at the same

one page essentially for Deutsche Bank

that is not it it is right over here

we're gonna look at the same report for

this company

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uh but anyway

so let's look at the revenues for

Deutsche Bank what do we have in 2020

fiscal year net revenues 24 Billy 21 25

Billy 22 27 billion what do you notice

ah it's growing seven percent growth uh

growth over here growth over here you're

growing so that's fantastic you actually

have growing revenues at the bank great

growing net revenue is fantastic how

about their profits well they had a 600

million dollar profit in 2020 they had a

2.5 billion dollar profit in 2021 and

then a 5.7 billion dollar profit in

2022.

so you actually have a profitable

company where revenues are going up so

for a moment compare Credit Suisse and

and uh uh Deutsche Bank revenue is

increasing versus decreasing income

increasing versus decreasing Deutsche

Bank January around that same January

time I showed you for Credit Suisse was

trading for about fourteen dollars now

it's trading for 9.35

the uh Book value for Deutsche Bank is

sitting right now at about

29 Euros so you're actually trading at a

discount to book right now of almost

threefold how crazy is that uh so so the

book value the tangible Book value well

let's look at tangible tangible book

value per share which is the one below

it is 26.7 Euros per share it's trading

for 9.35 you are getting Deutsche Bank

right now at one third on assets which

basically means its assets are written

down 67 percent

so as long as their assets fall less

than 67 maybe a Deutsche Bank is

actually a buy how weird is that

so then

if you compare to JP Morgan who you know

which company is basically deemed way

too big to fail what do you have over

here well JP Morgan is right now trading

for 124.91

that's down uh from uh 143 dollars

recently and up from 101 as a low in

October but its Book value is sitting

around ninety dollars per share so you

can see JPMorgan is trading at a premium

of Book value

whereas Deutsche Bank is trading at a

discount of about 67 percent on Book

value how crazy is that that's pretty

cool now that actually seems like a

potential opportunity to buy the dip on

Deutsche Bank

now I personally have a rule not to buy

anything related to financials in a

recession it's a rule I have now can

rules be broken can you flip-flop of

course do I have any intention on

flip-flopping on the banks right now no

I personally like to stay away from

financials however

does that discount look pretty damn

juicy and are the fundamentals at least

from what we've seen relatively

different

from

uh what we've seen with Credit Suisse

yeah I mean a 67 discount on Deutsche

Bank where the revenues are going up and

the profit is going up

hot damn that looks juicy so what

happened with those credit default swaps

well even though credit default swap

pricing skyrocketed on Friday because of

fears that maybe Deutsche Bank would

also fall

the credit default swap Market is really

illiquid

so it's super volatile and pricing for

those cds's actually already calmed by

the close on Friday

so maybe the fears that Deutsche Bank

will fall are actually fundamentally

overblown

you should probably have more concern

over smaller Banks maybe like a First

Republic because after all that one

right now is still presently being

determined if basically First Republic

is going to end up getting bailed out uh

by the government and there are fears

that a bank run could be undermined now

who knows after all Jerome Powell and

secretary Yellen have told us hey don't

worry everything is basically guaranteed

of course they've had to walk back those

comments and clarify that well only if

you're systemically important okay well

what's systemically important well it's

whatever we feel like is systemically

important and uh it's very jaded but I

mean you hate to look at it and just say

like so where the rich people are eh

again jaded but uh you know it just

seems to be consistently that case so

bottom line could the banking crisis

continue absolutely

but is it possible that the banking

crisis ends and if so and more

importantly why well the answer is yes

the banking crisis could end could be

over and the more interesting Factor

there is not saying yes things could get

worse or things could get better what's

more interesting is actually thinking

wait a minute why well maybe Signature

Bank and silvergate failed because of

their exposure to a very Niche industry

and that is crypto on and off ramps

which basically have been closed even

back paxos is getting sued right now

it's basically just like binance is the

only player left you know we did a

segment where we talked about how

binance controls 81 of the trading

volume market for Bitcoin they basically

run Bitcoin they can they can pump it or

dump it however they want they have

complete control so if you trust CZ

great you know you're safe with Bitcoin

and this is not to bag on bitcoin it's

just to say that maybe the crypto Banks

Were Meant to go under because crypto

went through hell

maybe signature Valley Bank was meant to

go under because massively unprofitable

startups don't deserve to survive in a

recession go figure out how to make some

money stop burning so much damn cash

learn how to run a cash flow statement

learn how to actually run a startup

that's what we're doing at house hack

which by the way if you're an accredited

investor that round closes in five days

March 31st

you can learn more about that by going

to housestack.com but anyway uh so is it

possible that Credit Suisse failed

because its revenues were going down its

profits were declining and it was known

as being a very risky Bank

yes

so is it then not entirely possible that

this banking crisis is really just a

crisis of the riskiest Banks failing and

everything else maybe it will be just

signed

yes that's entirely possible now some

people have been begging me to look at

First Republic in the comments

fine all obliged because that's what I

do I don't know why but I haven't I

don't know I get enjoyment out of this

so what do we get

so this is First Republic let's just

look let's make this really simple let's

look at their cash flow statement okay

so what are the cash flows at uh First

Republic well first things first net

income increasing good that's fantastic

a billy 1.4 Billy 1.6 Billy that's

really good is that yeah that's in

millions wow 1.6 billion dollars of net

income for First Republic hot damn

that's actually pretty damn good what do

you got over here net cash provided by

operating activities this is starting to

go down a little bit here why uh where's

their money going net change in assets

right here these are people withdrawing

money potentially by the end of the year

so they're definitely seeing money go

down net change in other assets I'm not

sure but we'll have to see uh or that I

mean it could be markdowns on available

no but that's not I mean yeah I guess

that could be those could be losses net

change in other assets could be losses

on they're available for sale Securities

which they're adding back in basically

to their uh

that changed in other assets but they're

not adding them back into their cash

flows they're subtracting them uh so

these are just these have to be other

expenses then I wonder where they're

coming from let's look at these hold on

a sec

where are these expenses going

so non-interest expenses other expense

uh we'll have to look at the footnotes

Information Systems occupancy

professional fees I mean there's so much

here this is my first 30 seconds looking

at this bank I really don't care so much

what I care about is what's the net

operating cash is this okay yeah so net

increase or decrease in cash cash

equivalents at the end of the period

look at this this is where you're

starting to see some of that stress

and last well last year they had about

13 billion dollars in cash the year

before that they had about 5.1 billion

in cash right now they've got about 4.3

billion in cash they still got a good

amount of cash here so that's pretty

good and it looks like they're financing

to take a lot of that here's a net

change in deposits at the end of the

quarter here's deposits there we go

here's 20 bill that came in that's about

half half as many a deposits came in uh

this Q4 is this for the year uh this

year in 2022 then did the prior year

less deposits came in in 2022 then came

in in 2020.

they actually are borrowing money look

at this they've borrowed short-term and

long-term debt of about 10 Billy right

here so they are taking more money out

and then now look at this that's

interesting too proceeds from the fhlb

and then purchases of fhlb stock and

other Investments okay that's fine so

they borrowed somebody here from the

fhlb we know they're one of the big top

10 borrowers at the end of the quarter

from the fhlb which is one of the

reasons by the way people are flagging

them as like potentially uh needing some

more cash but you could see really

what's happened here is their deposits

have halved and I wonder how the

deposits are going to be for this year I

mean this number is probably negative

already for this year so they're you're

going to have to borrow more money from

the fhlb they'll have to probably

liquidate some of the stock uh potential

Investments that they've made uh

dividends they actually paid dividends

on preferred and Common Stocks that's

probably gotta go they repaid some of

their long-term debt 500 mil but they

took 3.6 fill out so that's an offset

that's more borrowing on that

and let's see here this is these are

investing proceeds from sales and

paydowns of available for sale so they

got about a 500 mil in cash from selling

securities

and then they are held to maturities it

looks like they actually put some more

into hell to maturities

uh which is a nice way to hide losses

but anyway it it seems like if I had to

sort of put a gauge on it it seems

somewhat in the middle of the road right

like it doesn't seem toxic like Credit

Suisse it doesn't seem as robust as

Deutsche Bank

but uh it potentially could be slightly

unfairly targeted in this whole banking

crisis because I mean they probably

shouldn't have borrowed from the fhlb I

think that's why they ended up getting

sort of this bat signal go up that's

like oh that's it because as soon as you

borrow from them it becomes public and

then you go on this list and you don't

want to be on that list

the list I'll show it to you the list is

uh of hlb this is the list

that we talked about yesterday here are

the top borrowers from afhlb Members

WAMU Countrywide Maryland Wachovia they

obviously went bankrupt or got absorbed

then you have

current top borrowers oh that's the TV

wrong button current top Borrowers

and there they are they're the second

one they're right under Silicon Valley

Bank in terms of Q4

so kind of crazy

and it should definitely encourage you

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it's working I just push the button so

anyway bottom line out of all of this

maybe just the riskiest banks are the

ones that are going bankrupt Credit

Suisse was a complete disaster the

crypto related ones on the startup

related ones totally explainable we

could totally explain that away only

hindsight will tell in the future though

so we'll have to see anyway good luck

and

good part of the song

uh work on that

oh dear

all right let's go next