Blain’s Morning Porridge – 23rd March 2023: Banks, The Fed, Rates, Inflation = A Stagflationary Bust?
“How do you know there is about to be a bank crash? Because one isn’t crashing at the moment.”
This morning – The Fed tries to be dovish to calm market fears, but banking fears and inflationary threats on the economy may lead us somewhere new: A Stagflationary Bust!
Apologies for very late Porridge this morning – all I have to say is trains, failure at Weymouth, thus no carriages available to go to London. Welcome to Britain in 2023.
Relax. Calm. Calm.
Nope. I am worried. Things feel angsty… change, and not of the good kind, is coming. Last night ex Merrill economist David Rosenberg said the changing guidance from the Fed means… “Peak Growth. Peak Inflation. Peak Credit Cycle. Peak Rates. Buy Bonds!” I don’t necessarily agree.. Why?
Something wicked this way comes – and it might just be a monumental Stagflationary Bust and a complete rebuild of the whole financial system… again… That’s bad for bonds as well… my answer? Stay long gold.
Bank crashes are like London Buses. None arrive for ages, then suddenly a whole bunch of them arrive together…
While there is a sort of tedious inevitability to bank failures there are very good reasons why they come in groups. Financial regulators and central banks expended loads of mental energy to ensure banks don’t go bust like they did in 2008 – through regulation and messing with fundamentals of capital and debt subordination by allowing the bad compromise of the now discredited AT1/CoCo capital bonds. Meanwhile, banking management cadres have been industriously innovating whole new ways to break their banks and destroy confidence in the institutions of the finance system – at which point we really must acknowledge and applaud the skill sets displayed by Credit Suisse’s series of progressively less and less competent idiots-in-chief to destroy value.
My own simple theory on banks is worth remembering: All good banks are alike; but each bad bank is bad in its own way, as Leo Tolstoy did not say… Understand the multiple ways banks can disappoint, and you are half-way there to understanding them….
Continued...

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