Authored by Jack Phillips via The Epoch Times (emphasis ours),

The Biden administration on Wednesday ruled out designating Mexican drug cartels as foreign terrorist organizations following the kidnapping of four Americans that led to two deaths near the U.S.-Mexico border.

“Designating these cartels as [foreign terrorist organizations] would not grant us any additional authorities that we don’t really have at this time,” White House press secretary Karine Jean-Pierre said in a news briefing with reporters. “The United States has powerful sanctions authorities specifically designated to combat narcotics trafficking organizations and the individuals and entities that enable them. So, we have not been afraid to use them.”

The White House is in touch with the families of American citizens who were kidnapped or killed in Mexico in a high-profile international incident that drew the response of the FBI and top Mexican law enforcement, said Jean-Pierre.

In a Wednesday briefing, Jean-Pierre said the administration has spoken with the families of the victims but did not offer many details. It’s not clear if President Joe Biden personally spoke with the families.

“We will do everything in our power to identify, find, and hold accountable the individuals responsible for this attack, and we continue to work in coordination with the Mexican government,” she said. The U.S. Treasury Department, she added, has sanctioned Mexican firms and individuals in connection with the drug trade and cartels in recent months.

In October 2022 and last month, the agency sanctioned members of the powerful Sinaloa cartel who are allegedly part of the organization’s fentanyl and methamphetamine trade. The agency last week targeted Mexican companies linked to the Jalisco New Generation Cartel, known as CJNG, with fresh sanctions, according to a news release.

CJNG in some areas has “become heavily engaged in timeshare fraud, which often targets U.S. citizens,” the department said. “This crime, which can defraud victims of their life savings, results in another significant revenue stream for the cartel and strengthens its overall criminal enterprise. Today’s action exposes this CJNG scheme and also serves as a warning to potential victims, many of whom are elderly.”

Jean-Pierre’s response about the Biden administration’s strategies targeting cartels came in the wake of a violent incident that occurred in Matamoros, Mexico, which is located just south of Brownsville, Texas. Four Americans were kidnapped and two of them were killed after they crossed the border for reported medical treatment, according to U.S. and Mexican authorities.

Read more here…

With rising inflation putting pressure on household finances, some low-income Americans have turned to “Dollar Tree Dinners” as their meal of choice.

Rebecca Chobat’s TikTok videos have garnered the interest of budget-conscious shoppers, particularly as food inflation continues to persist at its highest level in four decades. Through her videos, which reach an audience of 742.5k followers, she explains how to make meals using products from the discount retailer with a weekly budget of $35.

Chobat has published numerous videos showcasing “unique recipes and cooking ideas from the Dollar Tree.” Some of her video titles include “Dollar Tree Gumbo” and “Dollar Tree Beef Pot Pie.” 

Although consumers can save money by consuming Dollar Store meals, there are some negative aspects to consider: 

The Institute for Local Self-Reliance recently published a report expressing worry about the absence of fresh produce in discount stores. Most food sold at Dollar Tree contains highly-caloric and heavily-processed items, which are not considered nutritious options.

However, due to negative real wage growth taking a toll on household finances, some individuals have no alternative but to turn to Dollar Stores for food. For some, even Walmart has become too expensive. 

Since the 2008 financial crisis, there’s been an explosion of Dollar General, Dollar Tree, and Family Dollar stores nationwide as the vast majority of folks are getting poorer. All three discount retailers operate 34,000 stores nationwide and are set to open thousands more in the coming years. 

Chobat told Bussiness Insider these videos are having a real impact on people saving money in these challenging times. 

“I get those messages fairly frequently but that one really struck home for me,” she said. 

Regularly consuming food from discount stores could lead to health issues in the future. Therefore, it is imperative to revitalize local economies and supermarkets to promote the availability of fresh food products.

Authored by Gary Bai via The Epoch Times (emphasis ours),

The Senate of Georgia passed a bill last week that aims to toughen up oversight measures on the state’s prosecutors, after a special purpose grand jury counsel wrapped up investigations into alleged election interference by former President Donald Trump and his allies.

The bill, SB 92 (pdf), would create a Prosecuting Attorneys Qualifications Commission, which would “have the power to discipline, remove, and cause involuntary retirement of appointed or elected district attorneys or solicitors-general.” The Republican-majority Senate passed the bill in a 32 to 24 vote on March 2.

Republicans introduced the bill in the House in February 2021 as HB 411. The House passed the bill by a 104 to 61 vote in March 2021. but it was held off in the Senate. It was revived in the Senate in March 2022.

The bill introduces several grounds for disciplining a state district attorney or solicitor general, including mental or physical incapacity, willful misconduct, willful and persistent failure to carry out his or her professional duties, the conviction of a crime involving moral turpitude, and conduct prejudicial to the administration of justice. Disciplinary measures include removal or involuntary retirement.

The bill would “protect the citizens of Georgia and clean up the criminal justice system where it needs to be cleaned up,” Georgia Republican Sen. Randy Robertson (R-Catula), the bill’s sponsor, said on the upper chamber’s floor on March 2.

“We have, in a community near our state university where somebody who’s an elected DA says they can choose—not based on evidence but based on how they feel and what their political leanings are—as to who they will prosecute,” Robertson added. “In order to solve this problem, there needs to be oversight.”

Meanwhile, the opposition party warned that the state might use the proposed commission to target prosecutors who differ politically.

“We’re going to use a commission like this, potentially, to harass or put the fire under prosecutors of a certain party in certain urban areas that don’t align with what state government wants,” said State Sen. Josh McLaurin (D-North Fulton) on Thursday.

The Epoch Times has contacted the Georgia Senate for comment.

The Peach state’s GOP lawmakers in the lower chamber are also working to pass House Bill 231 (pdf) to mirror the upper chamber’s oversight body, which, if passed into law, would create a Prosecuting Attorneys Oversight Commission in the House.

Read more here…

Authored by James Rickards via DailyReckoning.com,

Remember Modern Monetary Theory or “MMT”? I first sounded the alarm back in 2018 and then again in 2021.

At the time, MMT was all the rage among monetary and fiscal policy wonks. It seemed to offer the best of all possible worlds. You can spend as much as you want without any downside.

The main tenets of MMT are that debt and deficits don’t matter because the Fed can monetize the debt by printing money. The Fed can just wire money directly to government contractors to pay bills.

But MMT gradually faded from the headlines.

The pandemic of 2020 changed everything. MMT was still not a topic of discussion. It didn’t matter, because MMT was being practiced, even if by stealth.

COVID relief and economic “stimulus” was Job One. Congress provided $2.7 trillion in new spending including $1,400 checks sent to every American. Then, on Dec. 21, 2020, Trump signed another $900 billion relief package that provided an additional $600 check to every American.

Wait, There’s More!

Not to be outdone, the new Biden administration passed the American Rescue Plan Act of 2021 (ARPA), which provided another $1.9 trillion of deficit spending, and sent another $1,400 check to every American.

The runaway spending didn’t end there. On Nov. 15, 2021, Joe Biden signed the $1 trillion Infrastructure Investment and Jobs Act. This was followed by $737 billion in new deficit spending for the Green New Deal in the misnamed Inflation Reduction Act of 2022 (IRA) signed by Biden on Aug. 16, 2022.

The U.S. debt-to-GDP ratio has risen from a dangerously high 106% at the start of the Trump administration to an astronomical 124% or so today, the highest in U.S. history.

For perspective, the other countries with a debt-to-GDP ratio in that range include Lebanon, Greece and Italy. The U.S. is now a full-fledged member of the deadbeat club.

Does this debt and deficit debacle mean that MMT has achieved its goals and is now the guiding light for fiscal and monetary policy?

The answer is: yes and no.

It’s Complicated

The “yes” answer is easy to explain. MMT says that spending doesn’t matter and deficits don’t matter. The U.S. can issue as much debt as it wants and spend as much money as it wants.

As long as the debt is denominated in dollars and the Fed has a U.S. dollar printing press, we can always monetize the debt with new money. Problem solved.

With $10 trillion of new debt in three years and a 124% debt-to-GDP ratio, the U.S. is certainly acting as if debt and deficits don’t matter. This is the essence of MMT.

The “no” answer is more nuanced and political. It’s true that we are acting in accordance with MMT, but the MMT advocates are keeping their heads down. Why shouldn’t they? They are getting exactly what they want and the Republicans have gone along with it.

Trump increased the deficit by $4.6 trillion in his last year in office, almost half the $10 trillion total increase under Trump and Biden together since 2020. There’s no need to push MMT or even discuss it if Republicans and Democrats are acting in accordance with it.

So the U.S. is implementing MMT without acknowledging or even understanding it. It now exists in practice, but it has not passed a political litmus test. The future of MMT hangs in the balance starting now.

The Debt Ceiling “Crisis”

We’re facing a debt ceiling “crisis.”

What is the debt ceiling exactly? It’s a numeric limit on the total debt that the U.S. Treasury is allowed to issue. There’s no debt ceiling in the U.S. Constitution. Instead, it’s imposed by statute. There’s no legal requirement for that statute.

The debt ceiling itself could be repealed by Congress at which point there would be no limit on the size of the national debt. Still, Congress likes the idea of a debt ceiling. It forces the White House and Treasury to come back to Congress from time to time to request increases as needed.

This gives Congress some leverage to ask for political concessions in return for raising the debt ceiling. So the debt ceiling is really a political football rather than a serious macroeconomic policy tool.

In the end, Congress always approves the ceiling increases. In a way, the debt ceiling debate is all for show. To be clear, the debt ceiling does not mean the Treasury cannot issue any new debt. It means that the Treasury cannot issue debt that increases the total outstanding above the ceiling.

The Looming “X-Date”

The “X-Date” is the day the Treasury is projected to run out of cash and can’t pay bills or pay off Treasury note holders. Right now, the X-Date is estimated to be around June 5, 2023, but even that is a guess. The real X-Date will depend on how much positive cash flow the Treasury generates during tax season around mid-April.

Congress and the White House are also battling over the budget for fiscal 2024, which begins on Oct. 1, 2023. If a new budget is not passed by Sept. 30, 2023, the government will shut down at midnight.

It is possible that Congress could extend that deadline with a continuing resolution (CR) that permits government agencies to keep spending at existing levels for existing programs until Congress gets around to passing a budget.

Although the debt ceiling increase and the budget are separate issues with separate procedures, they are converging at about the same time. Mid-April is the date when markets will focus on this more intently because of the X-Date.

We’ll have better estimates of the X-Date by April, and a kind of “countdown to default” will begin.

Where does the MMT crowd stand in all of this?

Putting MMT to the Test

As noted, supporters of MMT have had the luxury of getting everything they want politically without having to stand up and defend MMT publicly. COVID and climate change (really, bogus climate alarmism) acted as the perfect cover for the Trump and Biden spending seemingly without having to worry about debt or deficits at all.

The mantra in Washington was “spend, spend, spend.” And they did.

Now that the pandemic is over and the Green New Scam is law (for better or worse), a day of reckoning has arrived. If the debt ceiling is raised and deficit spending is increased without serious reforms, it will be left to MMT’ers to explain why none of this matters.

They will rise to the occasion. Again, the main tenets of MMT are that debt and deficits don’t matter because the Fed can monetize the debt by printing money. If inflation emerges, the government can simply raise taxes to cool off the inflation.

Of course, MMT is nonsense. One can be reasonably sure that if members of Congress don’t understand MMT, they definitely do not understand the flaws in MMT. But that won’t stop the banner from being raised. Expect to hear a lot of commentaries that “deficits don’t matter,” and “debt doesn’t matter” as the debt ceiling and budget battles are being waged in the months ahead.

We can be sure of a few things…

There Will Be No Default

The Treasury will not default on its debt. You’ll be reading a lot of stories about a debt default in the coming months. Those stories will be used to scare voters into a “clean” debt ceiling increase.

Whatever your views on the debt ceiling, you can ignore these default stories. It won’t happen because it serves no one’s interest. A better way is to think of the debt ceiling debate as a game of chicken between conservative Republicans and the White House.

In the end, Republicans will get some (not all) of what they want and the debt ceiling will be raised. That will lay the issue to rest … until the next time.

Passing the budget is more complicated. The budget is huge and there’s a lot more at stake than just debt issuance. Spending increases, defense spending, support for Ukraine, social programs, tax increases and more are all on the table.

Although the budget deadline is Sept. 30, Congress will try to get something done over the course of July and August. This will happen at exactly the same time that the debt ceiling and X-Date crisis is playing out.

In the end, the debt ceiling will be raised, most likely in July. A government shutdown in late September is a real possibility. That will be another point of high volatility in stocks. All in all, it will be an interesting year.

At a minimum, investors should expect increased market volatility as default talk grows louder. It may be a good time to reduce equity exposure and increase your cash allocation.

The release of over 40,000 hours of January 6th security footage by Speaker of the House Kevin McCarthy to Tucker Carlson of Fox News has sparked an immediate backlash from Democrats who claim Carlson is exploiting the footage to misrepresent the event.  Say what you want about Fox News, but Carlson as an individual has shown consistency in his reporting and an effort to get beyond the mere surface of events.  The assertion that Carlson is misrepresenting J6 footage remains unfounded.

Leftists were not able to describe how, exactly, surveillance footage from the capitol is rigged to depict events that did not happen, but their reactionary behavior indicates a number of inconvenient truths:

First, leftists went on the attack before the footage was ever received by Tucker Carlson.  They didn’t want him to have it.  The Democrats at least believed that unreleased footage might show evidence contrary to their carefully crafted narrative of an “insurrection.”  Or, they knew that it would debunk their narrative.   Either way, they preemptively accused Carlson of mishandling the footage as it was made available to him. 

If the public can be convinced that certain information is a lie before they ever see the information, then the release of those facts becomes irrelevant.  The populace has been strategically infected with bias, so they will not see what is right in front of their eyes.

Second, Democrats and some GOP NeoCons have shown once again that they think the public should not be allowed to determine the meaning of data and evidence for themselves.  In fact, one might suspect that establishment elites have something to hide as they rage indignantly about the mere release of video surveillance.  Why are they so opposed to the public viewing the information unless that information threatens to expose establishment lies?  

Third, much like the release of the Twitter Files, it is actually a majority of the corporate media that is seeking to misrepresent the evidence being revealed as rigged, incomplete or not important.  Their goal is to suppress new information, and if they can’t do that they will try to undermine it by sowing false seeds of doubt. 

Numerous Democrat leaders and some NeoCon politicians, without taking time to acknowledge the implications of the surveillance being presented by Tucker Carlson, have immediately denounced the footage as “lies” and “sleight of hand.”  Senator Chuck Schumer was quick to go on the attack, calling Carlson’s recent segment on J6 a “perversion” of the truth.  Not only that, but Schumer openly called for Rupert Murdoch to stop Carlson and remove him.  

Why?  Because “our democracy depends on” the censorship of such materials.  

NeoCon Mitch McConnell went even further, stating:

“It was a mistake, in my view, for Fox News to depict this in a way that’s completely at variance with what our chief law enforcement official here at the Capitol thinks.”

In other words, the mainstream news should be taking its cues from government officials and repeating exactly what THEY say, rather than reporting on the evidence as it exists.  In their view, the narrative of the government supersedes the determinations of the public.

This is the exact sentiment that was expressed by U.S. Capitol Police Chief Tom Manger, who argued that Carlson’s conclusions were “offensive and misleading.”  Manger claimed that:

“TV commentary will not record the truth for our history books…The justice system will. The truth and justice are on our side.”

Again, they believe that they write the truth.  They write history, and history is whatever they say it is.  The J6 Committee had one job, which was to perpetuate the historical narrative of an insurrection by conservatives on the steps of the Capitol Building.  They were not interested in the truth, which is why over 40,000 hours of surveillance footage was never released to the public.  They showed us what they wanted us to see, not the full reality.  

Beyond the numerous videos showing police opening the doors and inviting protesters inside (which the media continues to lie about), there is also the question of intent which the J6 Committee was never able to prove.

The FBI found no evidence that the Trump Administration had anything to do with the Capitol protesters and scant evidence of any form of organization or coordination that would be required for an insurrection.  Where were the plans for takeover?  Who intended to run the government after the supposed coup?  Where was the army that was going to secure the capitol after the insurrection’s success?  None of these things existed.   

In fact, none of the protesters on J6 were even armed and the only person killed when the protests turned violent was Ashli Babbitt, a protester.  It’s pretty difficult to pull off an insurrection without weapons, without organization and without a plan.  In other words, there was no insurrection.  The claim is an erroneous lie, and always has been.  The establishment has tried to reinvent a protest that turned aggressive into an act of war against “democracy” itself.

Tucker Carlson’s footage shows what most of us already knew – That the media and elements of the government have completely overblown the events of January 6th for political gain  The footage also reconfirms that no police were killed by protesters, and yet the media continue to perpetuate that disinformation.  It is likely that Carlson will be releasing new footage for many months to come which runs contrary to the official version of events, which is why Democrats are calling for him to be taken off the air.        

There is far more proven organization during the BLM and Antifa riots across the US for the past few years.  Just this week Antifa engaged in a highly organized direct attack on a police training center site near Atlanta, Georgia.  But the media doesn’t want to talk about that, or how leftist groups represent a danger to our constitutional freedoms.  And it is this double standard that is only making half the country more inclined to not care about such notions. 

If our system is so corrupt that the release of hard video evidence “threatens our democracy,” then maybe our democracy isn’t worth saving. 

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

A doctor violated the law by administering COVID-19 vaccines to children without consent, according to a new lawsuit.

Dr. Janine Rethy, chief of community pediatrics at MedStar Georgetown University Hospital, is being accused of holding two children in a room until she convinced them to get a COVID-19 vaccine.

The minors are both children of NaTonya McNeil, a Washington resident who brought the suit in D.C. Superior Court.

“Ms. McNeil’s two minor children were held in a room by Defendant until she overcame their will and forcibly vaccinated them while physically preventing them from consulting with their mother, who was right outside the room,” the 9-page suit states.

The children were also allegedly provided with “false and fraudulent information” in order to get their purported consent to administer the vaccines.

Rethy told the kids that they had to get a COVID-19 vaccine to attend school and that they could not legally decline vaccination, according to the filing.

The kids gave in when given the false information.

Rethy and MedStar did not respond to requests for comment.

Annual Check-Ups

McNeil took the children to Rethy for annual physical examinations on Sept. 2, 2022.

The location was the Georgetown Kids Mobile Medical Clinic/Ronald McDonald Care Mobile, which is operated by the Georgetown University Hospital, at a recreation center. Rethy is director of the mobile clinic.

McNeil waited outside with her 1-year-old child while the two other kids went inside. But she called her daughter’s cell phone soon after and asked to speak with the doctor. McNeil told Rethy she was outside and available if needed to answer questions or provide information.

Rethy never asked McNeil about any vaccinations, according to the suit.

The 16-year-old child, who attends Dunbar High School, went first. Rethy “came at me with a needle,” the girl was quoted as saying. Rethy, asked what the injection was, said it was a COVID-19 vaccine. The minor said she did not want the shot.

“Dr. Rethy told K.M. that the injection was required for her to attend school, and then injected the needle,” the suit states. The younger child, 14, “also reluctantly agreed to accept the injection after seeing his sister be injected, although he had repeatedly refused COVID-19 injections previously as well.”

“Both children were very upset and angry that they had been coerced into being injected,” the filing states.

Rethy also injected the children with a meningococcal vaccine.

Neither Rethy nor clinic staff provided information about the vaccinations to McNeil or the children, the suit says. Rethy did speak with McNeil, but only told her she was going to call a prescription for the asthma of one of the children.

Read more here…

Update (1730ET): SVB must have seriously upset someone…

Founders Fund, the venture capital fund co-founded by Peter Thiel, has reportedly advised companies to pull money from Silicon Valley Bank..

The firm told portfolio companies that there was no downside to removing their money from the bank, according to the people, who asked not to be identified because the information isn’t public.

Additionally, Bloomberg reports that Garry Tan, the president and CEO of Y Combinator, warned its network of startups that solvency risk is real and implied they should consider limiting their exposure to the lender.

“We have no specific knowledge of what’s happening at SVB,” Tan wrote in a post viewed by Bloomberg News. 

“But anytime you hear problems of solvency in any bank, and it can be deemed credible, you should take it seriously and prioritize the interests of your startup by not exposing yourself to more than $250K of exposure there.” He added, “Your startup dies when you run out of money for whatever reason.”

Venture firm Tribe Capital has advised its portfolio companies to move some, if not all, of their balances from SVB. 

“What’s important to understand is that banks all have leverage and they use deposits, so almost by definition any bank with a business model is dead if everyone moves,” Tribe co-founder Arjun Sethi told portfolio companies in communication reviewed by Bloomberg.

“Since risk is non-zero and the cost it tiny, better to diversify your risk if not all,” he added.

An email thread of more than 1,000 founders from Andreessen Horowitz was abuzz with the news Thursday, with many encouraging each other to pull cash from the bank.

SIVB shares down further after hours (-70%), back below $80…

A cunning plan perhaps –  numerous VC icons potentially ganging up to crush a midsize bank  – which could be systemic. What better way to force Powell back into QE to ‘save the world’?

*  *  *

Update (1500ET): As the day wore on and SIVB shares collapsed (and fear spread contagiously across other banks and asset-classes), The Information reports that Silicon Valley Bank CEO Greg Becker on Thursday told top venture capitalists in Silicon Valley to “stay calm” amid concerns around a capital crunch that wiped nearly $10 billion off the bank’s market valuation.

“I would ask everyone to stay calm and to support us just like we supported you during the challenging times,” he said.

On a call, Becker said that “calls started coming and started panic.”

He added that the bank has “ample liquidity to support our clients with one exception: If everyone is telling each other SVB is in trouble that would be a challenge.”

Haven’t we heard that kind of reassurance before?

*  *  *

Is the bursting of the tech bubble finally spilling over to the financial system?

One day after the biggest crypto-focused bank, Silvergate Capital, announced plans to unwind and liquidate after a deposit run effectively killed its core business model, this morning its far larger peer – the parent company of the venerable Silicon Valley Bank, SVB Financial Group – saw its shares plunge the most in more than two decades after the company took “steps to bolster its financial position” that included not only a highly dilutive stock offering but also a panicked asset sale that sparked fears of a liquidity crisis at one of the biggest and original providers of funding to the Venture Capital industry.

The Santa Clara-based company’s shares sank by as much as 60% on Thursday, their biggest decline in the company’s history since going public in 1987.

The slump in the shares to their lowest level since May 2020, came after SVB i) announced a stock offering, ii) sold substantially all of the available-for-sale securities in its portfolio and iii) updated its forecast for the year to include a sharper decline in net interest income.

Put in context, this 60% plunge smashes SIVB back to its lowest since 2016…

“While we view these actions combined with a weaker guide as a clear negative, we do not believe that SIVB is in a liquidity crisis, especially following the significant proceeds” from its sale of securities, Wedbush analyst David Chiaverini wrote as he cut his price target for the company to $200 from $250. Others clearly disagreed and dumped the stock at a pace not seen in a quarter century.

The bank also said it had sold about $21 billion of securities from its portfolio (with a plan to reinvest the proceeds but don’t hold your breath) which will result in an after-tax loss of $1.8 billion for the first quarter. And the cherry on top was SVB’s announcement of equity offerings for $1.25 billion of its common stock and $500 million of securities that represent convertible preferred shares. Additionally, General Atlantic committed to purchase $500 million of common stock, taking the total amount being raised to about $2.25 billion.

It wasn’t immediately clear whether the SIVB liquidity crisis is a function of assets, i.e., loans collateralized by toxic early stage investments that have turned sour… or liabilities, i.e., a good old-fashioned deposit bank run.

“The improved cash liquidity, profitability and financial flexibility resulting from the actions we announced today will bolster our financial position and our ability to support clients through sustained market pressures,” the company said in a letter to stakeholders but judging by the stock reaction, nobody believed it.

Multiple analysts have pointed to the high deposit outflows as the catalyst for the liquidity sale, which stoked fears for the banking industry as a whole.

Truist analyst Brandon King says “the increase in balance sheet asset sensitivity should lower the left tail risk to higher interest rates” but expects material value per share dilution from the proposed capital raise.”

“The proceeds from the sale are expected to be reinvested into short duration US treasuries along and hedged with receive floating swaps”

KBW analyst Christopher McGratty says SVB Financial will exit 2023 on a notable lower earnings run rate due (NII and share count), and “it’s possible that 2024E is in the $16.00-$18.00/share range” pending the price of the capital raise

SVB Financial sold $21B of securities to better manage liquidity, in light of accelerated deposit outflows

For the broader sector, “balance sheet management for the group is unquestionably front and center” and it’s possible that banks with “more volatile/flightly deposits” could trade lower on this news. Namely, SBNY and PACW

Evercore ISI analyst John Pancari:

“We favor SIVB’s strategy to shore up liquidity and reposition the balance sheet for increased asset sensitivity, particularly in lieu of the Fed’s more hawkish recent tone”

Management’s updated outlook reveals incrementally weaker deposit dynamics – an output of more resilient than expected client cash burn trends, and the likely catalyst of the move

Jefferies analyst Casey Haire says the balance sheet restructuring and capital raise will boost net interest income and nudge capital ratios higher…

…but also reveal that SVB Financial’s ecosystem is still challenged due to higher for longer interest rates and a surprise pick-up in client cash burn

Also notes the updated 2023 guidance that implies EPS of ~$15 against consensus of $19

Bloomberg Intelligence analyst Herman Chan notes the sale “comes as a surprise considering the bank’s ability to source off-balance-sheet client funds for deposit funding”

To ease the hit, SVB will raise $2.25 billion through common stock, depositary shares and a sale of shares to General Atlantic

In an earlier note, Chan notes that “SVB is sitting on a $15 billion unrealized loss position in its $91 billion held-to-maturity securities portfolio”

$SIVB $SIVBP

You can see $15.1 billion of unrealized losses on the HTM vs. $1.3 at 2021. This is all MBS and its toasted more now than at 12/31/22. Average yield on this book is a mere ~190 bps. They can’t sell this. They are frozen. pic.twitter.com/3XMxtZ3ecV

— Lake Cornelia Research Management (@CorneliaLake) March 9, 2023

As Lake Cornelia Research Management goes on to note, the market implications of this situation are far and wide.  

We have a $210+ billion balance sheet (which was a mere 86 billion 2 years ago) that could well have an unwind.  It is not a stretch at all to argue that on a current mark to market basis that equity is negative to the tune of of billions (you can be insolvent but liquid and survive as a bank).  The hit to the startup eco-system of an impaired or vanquished $SIVB would be substantial.  

Beyond the negative duration risk we highlighted (asset side locked at sub 200 bps vs. liability side could increase to 200+), the simple mark to market on the HTM and the $88 billion of HTM and $70 billion of loans is likely far greater than the realized losses on the AFS securities sold at a $1.8 billion loss.  The asset growth since 2020 is crazy.  Total assets for $SIVB are 50% of $BSC at time of $JPM bid.  

We do not believe it would be crazy to see $SIVB at $50 or lower per share when this is all done.  The negative earnings loop, and associated balance sheet pressure, of higher deposit rates plus potential for fleeing private bank clients is a dark scenario.  There are many scenarios where they will need to raise more capital (dilution to existing holders) and this may not have fixed the situation.     

We have rarely seen a situation where buying a bank when it is down 40% on the day to be a good entry…these things can unwind far quicker than people realize.  People with facilities with $SIVB may well call them / draw which would further stress liquidity.  Just haircutting by 10% the value of the 21-22 growth of held loans and HTM securities alone would be a $5+ billion hit to book equity (which is ~$20 billion post these transactions). 

The GA concurrent PIPE we think was the wrong investor.  If there was ever a situation to bring in an “Elliot” / “Baupost” / $GS “Prop Desk” it was this one.  The balance sheet needs to be seen as credible and diligenced.  The earnings and conference call transcripts are farcical; the CEO talks about the VC funding environment and IPO pipeline as opposed to any questions on the balance sheet position.  If this plays out adversely, it will be another sad case of a storied franchise that had a great moat..and then woke up during the $ARKK boom and decided to blow it all on a $140+ billion balance sheet growth splurge on a mortgage and loan book yielding a blended ~3.25% with massive correlation risk…which ran right into rising interest rates.   

Seeing the preferred stock trade down 15% today should be eye opening to many.  It is at $16.60.  This is distress debt mafia stuff.  Par is $25 for reference.  

Lot of digging to do and all the above could well be wrong.  Many / most people far smarter than I am on fins (and other things).  The point is we don’t think this is over and there are a lot of second and third order implications.

Rents across the country may be finally sliding amid a “crush” of new supply as reported last week…

… but no such luck for New York City residents and apartment hunters who have yet to see any relief from near-record rents.

According to appraiser Miller Samuel and brokerage Douglas Elliman Real Estate, effective median rents rose from a year earlier for the 18th straight month in Manhattan as landlords grew less willing to grant concessions and renters desperate to find a home amid dwindling inventory engaged in bidding wars. The median rent rose 10.7% year-over-year to $4,095 in February from $3,700 the same month a year earlier, and down just $2 – yes, two dollars – from January, Bloomberg reported. The median rent peaked at $4,150 in July and has held close to that level ever since, breaking with the market’s traditional pattern for the cooler months, when costs typically drop as competition for apartments eases.  

“Every couple of months the market sees some sort of record,” Miller Samuel President Jonathan Miller said. “What’s different is, instead of rising sharply upward, it’s just pressing against the record levels every month. Sometimes it exceeds it and sometimes it doesn’t. “

“The takeaway from that is that rents, since the summer, don’t appear to show any signs of declining,” he added. 

While NY landlords clearly still have the upper hand in rental negotiations, there are finally signs that renters are pushing back on renewal increases. Roughly 1,200 more new leases were signed in February than a year earlier, while the number of units left on the market at the end of the month was up by 1,400. Those numbers suggest that a larger-then-usual share of people are rejecting their landlords’ rent hikes and searching for new apartments, according to Miller.

“Landlords are still trying to catch up” and align renewal rates with the prices they’re getting for new leases, Miller said. “So that’s pushing people to churn, to look for new space.”

“Essentially, all three markets are doing the same thing this particular month, where they’re seeing at or near-record prices, but effectively moving sideways to a record set in the summer,” Miller said. “Leasing activity is relatively high and we’re seeing inventory relatively low. So that combination is creating a fairly robust New York City rental market.” 

In Manhattan, listing inventory fell month-over-month at a higher rate than the February average over the last 10 years. The number of new leases rose year-over-year by 43.5%, the biggest annual increase in new leases in the last 19 months.1 Higher mortgage rates drove up the cost of buying and pushed many prospective homeowners into rentals.

“We’re seeing activity expand a lot faster than we would normally expect seasonally. That’s an indicator of the impact that rising mortgage rates are having on would-be homebuyers into the rental market,” Miller said. 

In some cases, renters seeking to renew are being quoted prices that no longer include the discounts and free months they were able to score early in the pandemic.

“There is a definite sticker shock,” said Gary Malin, chief operating officer of Corcoran Group. “People are saying, ‘I was paying this and I’m supposed to be paying that if I want to stay.’”

While vacancies are ticking up, landlords haven’t felt particularly compelled to fill empty apartments by cutting prices unlike their office lending peers (where the market is in freefall). Instead, according to Malin, they’re holding out to see how demand looks during the traditionally high-volume spring and summer months.

“They want to see how deep the market is — why not be a little bit more aggressive and hold onto my current rent,” he said. Once the market gets busier, “they’ll be able to fill them all if they really want to.”

Making their lives even easier, renters are hedging against even more increases in the future by signing longer leases thus taking out future capacity out of the market. Over 50% of the new deals signed last month were for two-year terms, up from 36% in October, when it appeared that a recession — and lower rents — might be on the horizon data from Miller Samuel and Douglas Elliman show.

Renters are also working against the calendar. Heading into the busy spring and summer months, Miller doesn’t expect Manhattan renters to catch a break. With the increased pressure on the market, rates will likely “edge higher, just enough to break the last record,” he said.

While Manhattan remains unattainable for most, there are some signs of topping in the outer boroughs. In Brooklyn, the median rent was $3,400, down 2.8% from January, according to Bloomberg. The number of leases signed rose 19% from a year earlier, while available listings increased 20%. In Northwest Queens, the neighborhoods closest to Manhattan, the median was $3,238, a 3.9% drop from January.

Authored by Jeff Deist via The Mises Institute,

“Governments create money all the time. We do that for war.”

This is the argument for more money printing, and perhaps unlimited money printing, recently advanced by Professor Mariana Mazzucato on prime-time BBC.

“This whole notion that you run government like you run a household…is a complete myth”

Economist Prof Mariana Mazzucato tells #Newsnight Government’s should address social issues through taxhttps://t.co/P0zxS1DNGF pic.twitter.com/I6NLtXgDqN

— BBC Newsnight (@BBCNewsnight) March 6, 2023

Channeling Warren Mosler, the godfather of modern monetary theory, Dr. Mazzucato argues against “austerity”—by which she means any natural restraints on government spending. In order to spend, sovereign states need not “earn” tax revenue like a household must earn money, nor do they need to borrow. There is a third option: they can print new money at will and enjoy the profit of seigniorage. Just look at Germany, she says approvingly, which recently conjured up €100 billion by executive edict for the war effort in Ukraine!

She certainly is correct that governments print money to pay for wars. America was effectively born into debt during the Revolutionary War, and borrowed/printed money for every war thereafter.

But beyond that she is entirely and embarrassingly wrong. The fundamental reality is that more money does not create any new goods or services in the economy. Money is not wealth. Wealth is productive capacity; the ability to create actual goods and services. Germany and the European Central Bank can create euro stretching to the moon, but that will not produce a single missile or aircraft for the Ukrainians.

Actual production requires the allocation of real resources and real capital. Resource allocation requires choices, whether made by political edict or in the marketplace. In both cases there are inherent opportunity costs to not allocating those resources and capital to other uses. Politics doesn’t magically eliminate tradeoffs. Resources are scarce even when money is not.

A case in point, courtesy of economist Peter Schmidt: “During WWII, the Germans fielded an airplane that made every other aircraft obsolete—the ME262. Even though the German government faced no limits on how much currency it could create, it couldn’t conjure into existence the fuel the planes needed.” In fact, the Germans used oxen to put this most advanced fighter in takeoff position to save fuel!

One gets the sense that all of modern economics is dedicated to refuting Say’s law. The melding of economics and politics promises the proverbial free lunch, where demand creates its own production. Mazzucato is a worthy exemplar of this thinking.

An economist at University College London, Mazzucato wrote an oxymoronically titled book, The Entrepreneurial State. Not surprisingly, she urges greater “investment” by governments to innovate where the private sector supposedly cannot or will not. She is also a graduate of the New School for Social Research, an institution which truly lives up to its radical progressive history. Only of its early leading lights, the noxious reformer John Dewey, was a particular bête noire in Murray Rothbard’s critique of postmillennial pietism. Of course, neither Mazzucato’s background nor her political views alone negate her arguments. But it is worth noting how the Left consistently elevates its radicals and how mainstream outlets like BBC are entirely comfortable featuring them. This only works one way. We cannot imagine a scenario where BBC interviews Per Bylund on the topic of entirely eliminating central banks in favor of private money. Yet Mazzucato’s MMT prescription for almost unlimited political provision of money is at least as radical relative to the status quo in monetary and fiscal policy.

But money creation is not magic. It certainly does not create any new wealth, and in fact destroys wealth by directing resources toward inherently inefficient (nonmarket) uses.

It benefits early recipients and the political class at the cost of higher prices and terrible distortions in the invaluable structure of production which makes the West so wealthy.

Progressives of all political stripes would happily put America and the West on a permanent wartime footing. Mazzucato and her contemporaries are political people, and politics is war by other means. Inequality, climate change, racism, transphobia, pandemics, and a host of other issues—none of which ever should have been politicized—are now tantamount to battlefields. War costs money, and magic economics wants us to believe national treasuries and central banks can foot any bill.

The United States obtained a warrant to seize a Boeing 737 aircraft owned by Russian oil company Rosneft that is valued at over $25 million, the U.S. Justice Department said.The US District Court for the Eastern District of New York authorized the seizure on March 8, 2023.

“Today’s enforcement action demonstrates there is a price to pay for Russian companies and oligarchs that flagrantly evade sanctions that the United States has imposed in response to the unjustified war against the people of the Ukraine,” stated United States Attorney Peace. https://t.co/IPZdIjBmLW

— US Attorney EDNY (@EDNYnews) March 8, 2023

Authorities were given the go-ahead to seize the jet based on violations of the Export Control Reform Act (ECRA) and the recent sanctions issued against Russia, aerotime reported.

Rosneft’s CEO, Igor Ivanovich Sechin, is a close friend of the Russian President Vladimir Putin and was sanctioned along with multiple oligarchs in 2022. The sanctions impose export controls and license requirements to protect US national security and foreign policy interests.

Since February 2022, when the export controls that prevent US-built planes re-entry into Russia went into effect, the Boeing 737 has left and reentered the country at least seven times.

“By violating Commerce Department export controls, Rosneft has converted its jet into contraband,” Andrew Adams, a Justice Department official, said.

The Boeing jet was last in the United States in March 2014, and is currently believed to be in, or traveling to or from, Russia, according to Reuters.

“Today’s enforcement action demonstrates there is a price to pay for Russian companies and oligarchs that flagrantly evade sanctions that the United States has imposed in response to the unjustified war against the people of the Ukraine,” U.S. Attorney Breon Peace said.