When Rick Santelli speaks, traders listen as he channels the unvarnished truth that is so seldom allowed to leak out on to the airwaves and into the great unwashed’s eyes and ears.

This morning was one such episode as he and Joe Kernan had a brief discussion about the inevitability of the current crisis… and what happens next.

“Many are seeing recession. I don’t see a way to avoid it… Is this really a banking crisis? It’s a Fed crisis, it’s a rate hiking crisis, it’s a crisis built on a crisis we never solved… is it any wonder there’s so much volatility in the market?“

Then the veteran pit trader took it to ’11’…

“Listen folks, we all need to take a step back… how many trillions of dollars of negative securities were hovering through Europe… How could anybody be shocked… I was shocked the news wasn’t worse three months ago… and now we are starting to see the realities of it…“

Santelli ends with a reflection of Powell’s hypocrisy in enabling Congress “magical monetary theory” and now “leaving us all out to dry.”

Take two minutes out of your morning for some refreshing reality…

CNBC’s Rick Santelli: “Many are seeing recession. I don’t see a way to avoid it … Is this really a banking crisis? It’s a Fed crisis, it’s a rate hiking crisis, it’s a crisis built on a crisis we never solved … is it any wonder there’s so much volatility in the market?” pic.twitter.com/R9YNBndpPd

— Tom Elliott (@tomselliott) March 24, 2023

With regard to Santelli’s comments on The Fed’s Dot-Plot, the market has completely dismissed it, with year-end rate expectations now a stunning 150bps lower than The Fed expects…

As we tweeted following his rant, “Oh we “solved” it alright: by printing $20 trillion. Guess how much it will cost to “solve” the current crisis…”

Perhaps that is why gold and bitcoin has been soaring since this ‘banking’ crisis re-emerged from the darkness.

Finally, Larry McDonald summarizes it even more succinctly…

Dear Central Banks –

When you see suppress the true, market driven cost of capital for longer and longer periods of time. You incentivize the HTM yield reach across the banking system. Then you juice rates 500bps in 13 months to “fight” inflation and light it all on 🔥 fire.

— Lawrence McDonald (@Convertbond) March 24, 2023

The Financial Times reports that Environmental, social, and governance (ESG) investing is on the verge of a significant transformation, as index provider MSCI is set to remove the ESG ratings from hundreds of funds. This change is part of a major overhaul of the MSCI’s rating methodology. 

According to unpublished research by BlackRock Inc.’s iShares unit, cited by FT, MSCI intends to downgrade the ESG rating of hundreds of funds. The adjustments, scheduled to be implemented by the end of April, will apply to all exchange-traded and mutual funds worldwide.

Index providers are pushing the changes to tighten the requirements for what qualifies as an ESG-compliant fund amid pressure from regulators concerned about “greenwashing.” 

One of the highest-profile greenwashing scandals has been Deutsche Bank AG and its asset management arm, DWS Group, in Frankfurt, Germany, which exaggerated green investments in ESG products. 

The decline in funds with top ESG ratings implies that ESG-focused investors will face limited investment options, which could potentially increase the price of assets with a sustainable label. 

Under MSCI’s changes, all “synthetic” ETFs that use swaps to track the value of assets will lose their ESG rating — even if funds that own the identical underlying assets are rated highly.

In addition, most “physical” funds, which directly hold portfolios of equities or bonds, are likely to have their rating lowered. 

The changes, due to take effect by the end of April, will apply to all ETFs and mutual funds globally. -FT

MSCI did not provide details on the extent of the downgrades but said these changes “will lead to fewer funds being rated as AAA or AA and will reduce the volatility in ESG fund ratings, which are outcomes that our client base broadly supported.” 

The unpublished research reveals 1,476 Europen ETFs will have their ESG rating slashed, 905 will remain unchanged, and 78 will receive a rating boost. A staggering 446 funds, including over 400 derivative-based funds, will lose their ratings entirely.

Perhaps the ESG hype cycle is well beyond its peak… 

… and all along, Elon Musk was right. 

ESG is an outrageous scam!

Shame on @SPGlobal

— Elon Musk (@elonmusk) May 18, 2022

Authored by Simon White, Bloomberg macro strategist,

Collapsing velocity will lead to financial conditions continuing to tighten even as the Fed rapidly expands its balance sheet.

When banks are in trouble, it has a geared impact on the rest of the economy. In 2008, money velocity (essentially, how many times each dollar changes hands in a given period) collapsed as banks stopped lending; central banks responded by cutting rates to zero and massively expanding their balance sheets.

To no avail, however, and velocity kept falling until 2020 when it started to rise again – it’s no coincidence we now have an inflation problem. The remedy has created a new nightmare for policymakers as banks around the world are reeling from the fastest rate-hiking cycles seen for several decades.

Central banks are now back in the game of trying to arrest the fall in velocity – deteriorating their balance sheets – to avert the deep recession that would result. The signs are so far it is not working.

The Fed over the last two weeks has effectively reversed two-thirds of QT, if we look at the size of its balance sheet. But the key metric to watch is reserves – these are the higher-velocity part of the central bank’s liabilities, as they are the other side of the coin of bank deposits. Yet even reserves are 30% higher.

Despite the expansion, velocity is still falling. Why?

Deposits are leaving small banks, with some of them going to large banks (we’ll see how much when the latest data is released this evening). But the large banks don’t want them (observe their stubbornly-low deposit rates). Thus higher-yielding money-market funds will keep attracting funds.

Indeed, the latest data showed another rise in MMF assets, climbing by almost $250 billion over the last two weeks.

MMFs are a low velocity use of reserves, as they generally invest in bills and low-risk short-term loans. But an even lower velocity use is the RRP, where they are effectively neutralized.

The RRP is growing again, rising about $220 billion over the last week to new all-time highs of $2.65 trillion – expected given the facility offers a higher rate than T-bills (the curve is now very negatively sloped at the front).

There is very likely more banking distress to come as lenders harbor an estimated $2 trillion in losses in hold-to-maturity securities.

Unfortunately for the Fed, the current set-up means the accelerator and brake pedals are joined together.

Russia says it is supporting efforts to recover forensic evidence from the underwater site of the Nord Stream sabotage blasts, which may provide clues as to the culprit behind it. Images of a new mystery object have emerged, with Moscow saying it is vitally important that it be carefully examined.

The Kremlin in a Friday briefing called the recovery and examination of the object “critically important” as it has been discovered lying next to one of the damaged Nord Stream pipelines.

Kremlin spokesman Dmitry Peskov said during a daily briefing: “It is critically important to determine what kind of object it is, whether it is related to this terrorist act – apparently it is – and to continue this investigation. And this investigation must be transparent.”

The Danish Energy Agency has invited the Russia’s Gazprom (owner of Nord Stream 2 AG) to assist in salvaging the mystery object. It was actually Putin who was the first to publicly reference the object and ongoing investigative efforts to ascertain what it is, per the AFP:

Russian President Vladimir Putin, who revealed the discovery of the object earlier this month, said experts believe that the object could be a signal antenna to activate an explosive in that part of the pipeline. 

…The Danish energy agency released a photo late Thursday of the cylindrical object standing near the Nord Stream 2 pipeline at the bottom of the sea.

The agency said it is “possible” that the object is a maritime smoke buoy, 40 centimeters tall and 10 centimeters wide, and that it “does not pose an immediate safety risk.”

Peskov meanwhile said regarding the ongoing German, Swedish and Danish investigation that it is “certainly positive news” that Copenhagen invited Nord Stream 2 AG to take an active role in the investigation.

Since the September 26 clandestine bombings which permanently disabled the Russia to Germany natural gas pipelines running under the Baltic Sea, the prevailing narrative has shifted dramatically. Initially, Western officials and media pointed the finger at Moscow, but then in February legendary journalist Seymour Hersh issued an investigative report detailing that it was a CIA and US Navy covert operation.

Denmark is salvaging an unidentified object found next to the Nord Stream 2 undersea gas pipeline that was damaged in a blast last September

Latest updates: https://t.co/Hiek57LSeR pic.twitter.com/GXB5WuoP7M

— Bloomberg (@business) March 24, 2023

After the Hersh report, allegations that Russia bombed its own pipeline have largely died down (given also it would obviously run counter to Russia’s self-interests), and instead a new theory has been advanced by mainstream media – that a small group of rogue Ukrainian operatives did it. However, the Kremlin has blasted this as ludicrous, pointing out that only a state and military would have the resources to carry out such a difficult and complex operation. Hersh has since alleged based on his sources that the CIA itself planted the “Ukrainian partisans” narrative in friendly media outlets in order to shield the White House.

Authored by Allan Stein via The Epoch Times (emphasis ours),

Coin Heaven co-owner Gabe Wright saw precious metals demand rise to new heights during the pandemic, but nothing as spectacular as Silicon Valley Bank’s (SVB) collapse.

“It’s getting real,” Wright said, standing behind the glass showcase filled with various silver and gold bullion, coins, jewelry, and sterling in his busy Cottonwood, Arizona, shop on March 20.

“On a dime, it turned around—big time. It’s unprecedented,” he said. “We’ve seen the demand high, but not like this. Of course, SVB started this phase we’re in.”

And where the buying phase—more like a buying frenzy—ends up is anybody’s guess, Wright said.

Once regarded as a “barbarous relic” by the Wall Street financial sector, gold and silver are now in heavy demand to hedge against inflation and financial risk.

Wright said retail demand for precious metals could soon outstrip supply, and if more banks fail, to expect a full-blown “panic.”

He agreed that U.S. Treasury Secretary Janet Yellen didn’t help matters by not announcing a government bail-out for SVB after depositors withdrew $42 billion in early March, spurring the bank’s collapse.

The Federal Deposit Insurance Corporation (FDIC) insures depositor accounts up to $250,000.

Almost immediately after the run on SVB, people began buying gold and silver on the spot market, putting the squeeze on coin and bullion dealers large and small.

As of March 20, gold was on sale at $1,979 per troy ounce, and silver at $22.51 per ounce.

One troy ounce weighs 31.10 grams or 1.1 regular ounces.

Buy Low, Sell High

In November 2011, an ounce of gold rallied to a multi-year high of more than $2,000 while silver soared to almost $50 an ounce before the bull run on precious metals corrected to new lows.

Wright, whose uncle started Coin Heaven in 1985, said that demand for precious metals was robust during COVID-19.

“But after that bank fell, it created quite a panic, and people wanted to get their funds out of banks and into something real and tangible—gold and silver,” Wright told The Epoch Times.

“It’s something you own. There’s no third party involved. It’s solely yours.”

Galina Suvorova, owner of Galina Fine Jewelers in Cottonwood, said business has been steadily increasing since the fall of SVB, and “there’s more interest in bullion—specifically, bullion and coins.”

Read more here…

A federal appeals court has blocked President Joe Biden’s order forcing federal employees to take the Covid-19 vaccine.

On Thursday, the 5th US Circuit Court of Appeals in New Orleans rejected arguments that Biden is ‘the nation’s chief executive’ – and has the same authority as the CEO of a private corporate in mandating that employees get vaccinated, NBC News reports.

Opponents of Biden’s forced vaccination policy said it was an encroachment in the lives of federal workers which neither the Constitution nor federal statutes authorize.

The ruling was made by the full appeals court of 16 judges, and reversed an earlier ruling by a three-judge 5th Circuit panel that upheld Biden’s vaccine requirement. The opinion in Thursday’s ruling for a 10-member majority was written by Judge Andrew Oldham, a Trump nominee.

The ruling maintains the status quo for federal employee vaccines. It upholds a preliminary injunction blocking the mandate issued by a federal judge in January 2022. At that point, the administration said nearly 98% of covered employees had been vaccinated.

And, Oldham noted, with the preliminary injunction arguments done, the case will return to that court for further arguments, when “both sides will have to grapple with the White House’s announcement that the Covid emergency will finally end on May 11, 2023.” -NBC News

Biden signed an executive order in September 2021 which required all executive branch agency employees to take the vaccine, with exceptions made for religious or medical reasons. It took effect the following November, after which U.S. District Judge Jeffrey Brown, who was appointed to the District Court for the Southern District of Texas by Trump issued a nationwide injunction two months later, before it moved on to the 5th Circuit.

The case then went through several machinations – with one panel of 5th Circuit judges refusing to immediately block the Executive Order, after which a different panel upheld the order – agreeing with Biden’s position. The broader court majority then agreed with the smaller panel, ruling that federal law does not preclude court jurisdiction over cases having to do with “private, irreversible medical decisions made in consultation with private medical professionals outside the federal workplace.”

But then a majority of the full court voted to vacate that ruling and reconsider the case, which was heard on Sept. 13, and here we are today.

The dissenting opinion was written by Obama nominee Judge Stephen Higginson, who wrote: “For the wrong reasons, our court correctly concludes that we do have jurisdiction,” adding “But contrary to a dozen federal courts — and having left a government motion to stay the district court’s injunction pending for more than a year — our court still refuses to say why the President does not have the power to regulate workplace safety for his employees.”

Via SchiffGold.com,

The dust continues to settle after the failure of Silicon Valley Bank and Signature Bank, and the ensuing government bailout. Many people in the mainstream seem to think the crisis has passed. But a closer look at the condition of the banking system reveals these two banks were just the tip of the iceberg. Peter Schiff appeared on NewsMax Wake Up America to talk about the financial crisis. He said that there are more bailouts to come.

Peter emphasized that the problem wasn’t just two isolated banks going under, saying most US banks are technically insolvent.

This is the result of a dozen years of zero percent interest rates and quantitative easing. The Federal Reserve created the first financial crisis with artificially low interest rates. And the current financial crisis is actually even worse because it kept interest rates even lower for longer.”

One of the hosts noted that Silicon Valley Bank filed for chapter 11 bankruptcy and asked “what happens next?”

I think what happens next, unfortunately, is more bailouts. We’ve already bailed out several banks and their large depositors. The president of the United States is pretending that this doesn’t cost anybody any money. It’s going to cost everybody! Because inflation is the way we’re paying for this.”

Peter pointed out that the Fed balance sheet is already blowing up.

Everybody’s bank account is now at greater risk than ever, maybe not because your bank is going to fail because the government is not allowing that to happen, but because everybody’s bank account is going to lose value. Inflation is going to destroy the value of everybody’s savings.”

The host pointed out that some struggling banks are getting bailed out by bigger banks. Peter said it’s important to remember that a lot of these bigger banks are getting money from the Federal Reserve.

Remember, these large banks are able to take their Treasuries and mortgage-backed securities, which have depreciated dramatically because they were foolish enough to invest when interest rates were at all-time record lows. So, they’re able to take paper that maybe is worth 70 cents and just give it to the Federal Reserve in exchange for a dollar. And then they’re taking some of that windfall and depositing it in other banks. So, the whole thing is a bailout in disguise. And again, the bag-holder is the American public. They get the bill in the form of higher prices.”

So, is the banking system safe?

Peter responded with an emphatic, “No!” adding that it is completely unsafe.

But again, even if the government steps up and bails out all these insolvent banks and stops the runs, the only way they can do it is by printing trillions and trillions of dollars, and it gets spent into circulation. So, either you’re going to lose your money because your bank fails, or you’re going to keep your money because your bank is bailed out, but your money isn’t going to have much value. So, what good is it if you can withdraw your money, but when you go to spend it, you can’t buy very much?”

The hosts played a clip of Treasury Secretary Janet Yellen explaining why Silicon Valley Bank lost money selling its bond portfolio, noting that it had lost value due to the recent interest rate increases. They asked if the central bank would have to reconsider its rate hikes to fight price inflation. Peter’s first response was to call Yellen “incompetent.”

She was incompetent at the Federal Reserve Bank of San Francisco. She was incompetent as Fed chair. She kept interest rates at zero for practically her entire term. That’s what helped banks load up on these low-yielding Treasuries. But unfortunately, the Fed is going to stop raising interest rates. It’s already gone back to quantitative easing. They should be raising interest rates much more. And the government under Secretary Yellen should be cutting back spending. If she was competent as secretary of the Treasury, she would be telling her boss Joe Biden that we need to dramatically cut government spending. Instead of trying to raise the debt ceiling so we can go deeper into debt, she should be advising her boss to start cutting spending and actually pay our bills so we don’t have to raise the debt ceiling.”

One week after former President Trump told his supporters to “PROTEST” and “TAKE OUR NATION BACK” ahead of a Tuesday indictment that hasn’t happened (yet), Trump is now warning of ‘potential death & destruction’ over the reaction to ‘such a false charge.’

“What kind of person can charge another person, in this case a former President of the United States, who got more votes than any sitting President in history, and leading candidate (by far!) for the Republican Party nomination, with a Crime, when it is known by all that NO Crime has been committed, & also known that potential death & destruction in such a false charge could be catastrophic for our Country?” Trump wrote just after 1 a.m. on Friday.

“Why & who would do such a thing? Only a degenerate psychopath that truely hates the USA!” Trump continued.

Manhattan District Attorney is rumored to be on the verge of indicting Trump if a grand jury recommends it in the case of hush payments made to former porn star Stormy Daniels in 2016 to keep quiet about an alleged affair with Trump. Of note, the grand jury did not meet on Wednesday or Thursday, and any charges are not expected to be filed until next week at the earliest, The Hill reports.

Bragg’s argument was seemingly undercut earlier this week, after a 2018 letter emerged in which former Trump lawyer Michael Cohen’s attorney says Cohen himself paid Daniels [Stephanie Clifford] out of his own pocket, and was not reimbursed.

“In a private transaction in 2016, before the U.S. presidential election, Mr. Cohen used his own personal funds to facilitate a payment of $130,000 to Ms. Stephanie Clifford [Stormy Daniels],” reads the 2018 letter from Cohen attorney Stephen Ryan to the Federal Election Commission, which asserts that Trump was not involved in the hush payment to the former porn star.

🚨BREAKING: New Bombshell Document DESTROYS Manhattan DA’s Case Against Trump

2018 Letter from Michael Cohen’s lawyer to the FEC declares Cohen used his own personal funds to pay Stormy Daniels. Trump Camp. NOT party to transaction, did NOT reimburse Cohen for payment. It’s OVER pic.twitter.com/QacsjSbZAz

— Benny Johnson (@bennyjohnson) March 22, 2023

In a response to House GOP investigators’ questions over Bragg’s ‘weaponized’ case against Trump, Bragg said that Trump gave a ‘false expectation’ that he would be arrested.

The GOP letter went on to shred the ‘untested legal theory’ underpinning Bragg’s expected indictment, and calls out former Trump Attorney Michael Cohen, Bragg’s star witness and a convicted perjurer, as having a “serious credibility problem.” GOP investigators demanded all documents and communications related to the decision.

Bragg claims the GOP is overstepping their bounds, writing that “The letter’s requests are an unlawful incursion into New York’s sovereignty.”

Trump will hold a rally this Saturday in Waco, Texas. 

Authored by Jesse Felder via TheFelderReport.com,

“By far the best economic predictor I’ve ever met is the inside of the stock market.”

– Stan Druckenmiller

If you have been watching the “inside of the stock market” over the past six months or so, you’ve been able to see the increasingly popular “soft landing” narrative regarding the direction of the economy play out in prices.

Specifically, I’m referring to the the relative performance of things like transportation stocks, materials, retail and small caps.

After leading the stock market lower through the first half of last year, they began to show signs of life from that point forward, lending credence to the “soft landing” narrative.

Over the past month or two, however, they have taken another sharp dive, implying the “soft landing” scenario may not be as likely to materialize as stock market bulls may hope.

In fact, their recent weakness strongly suggests you “better be careful and keep your eyes open” because we may be headed for a hard landing after all.

And that’s a scenario that analysts and stock prices have not yet begun to discount.

Find this chart and many more like it in my free public chart list at StockCharts.com.

Authored by Charles Hugh Smith via OfTwoMinds blog,

Everyone wants a trend they can trade for effortless gains. That may no longer be realistic.

Market commentators tend to focus on Bulls and Bears and Federal Reserve policies as drivers of stock market gyrations, but there’s a far more profound dynamic working beneath these veneers: the forces of adaptation and evolution transforming the economy and society as conditions change.

While the general expectation is that the post-Covid economy “should” revert to the stability of 2019, this ignores what was already unraveling in 2019. The global economy experienced fundamental shifts in technology, production, energy, capital flows, labor, currencies and geopolitics in the past 25 years, and all these forces are not just in motion but accelerating in ways that are destabilizing the status quo.

The necessity of adaptation and evolution can be summed up very simply: adapt or die. This is the natural state not just of Nature and species but of systems such as societies and economies. Those which cling on to failing models stagnate and decay, while those which embrace dissent, transparency and a constant churn of experimentation and trial-and-error will adapt and evolve and emerge stronger and more adaptable.

The US economy went through a comparable period of instability and forced adaptation in the 1970s, a dynamic I explored in The Forgotten History of the 1970s (January 13, 2023). Everyone benefiting from the status quo arrangements fought the much-needed changes tooth and nail, and so progress was uneven. Transitioning to a more efficient and responsive industrial base required tremendous capital investments and scaling up new technologies.

The transition is more costly and takes more time than we would like; the 1970s transition took about a decade. We can anticipate a similar scale of capital investment and time will be needed for this structural adaptation.

As the chart below illustrates, the 1970s was characterized by high inflation and big swings up and down in the stock market. Successful adaptations generated hope for quick recovery, while lagging adaptations tempered the hope with painful realities.

Again, it is likely that the decade ahead will track this same general dynamic of big swings generated by hope that the worst is over and the realities that progress is only partial and instability still reigns.

Everyone wants a trend they can trade for effortless gains. That may no longer be realistic.

*  *  *

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