RELAX! Banks Are Safe!

Banks collapsing in 90 days? Nope. [Altucher Confidential] March 29, 2023 [WEBSITE]( | [UNSUBSCRIBE]( By All US Banks to collapse in 90 days? I will bet ANYONE ANY AMOUNT OF MONEY that this is false. [Hero_Image] RELAX! Banks Are Safe! James Altucher America’s #1 Gold Expert Issues Urgent Buy Alert [Click here for more...]( For the first time in a decade, gold is once again red-hot. - Global demand for gold soared 18% in 2022 to its highest level in over a decade. - Central banks bought a record 1,136 tons of gold in 2022, worth around $70 billion. - And M&A has begun to pick up in the gold mining sector at a significant pace. But you must hurry. The price of gold has just climbed past $2,000 an ounce. And America’s #1 gold expert says this is only the beginning of a much larger move. [To see just how high gold could run in the coming years – and how you can prepare today, even if you’ve never bought any gold before – click here now.]( [Chris Campbell] CHRIS CAMPBELL [Yesterday]( we introduced the “great bank debate of 2023.” Our colleague Jim Rickards has issued a stark warning. Watch out, he says, more bank failures are coming. Altucher argues from the other end: “Relax,” he says. “The banks are safe.” Obviously, this is a crucial debate. Where you stand on this issue will inform how you invest in the coming days, weeks, and months. You heard from Jim… Now let’s hear from James. Read on. RELAX! Banks Are Safe And Here’s Why James Altucher There’s a lot going on right now, but isn’t there always? Geopolitical uncertainty… war in Ukraine… unpredictable Federal Reserve policy, oh my! Then you turn on the TV and suddenly banks are collapsing left and right. “The sky is falling, the sky is falling!” says the mainstream media. Not so fast. First we need to understand how banks work. Why does a bank collapse? What potential solutions exist? And how does this apply to right now? Time to take a closer look at bank stocks to get the real story. 1: Banks hold onto your deposits. You give the bank all of your money and some of it you put into a checking account and some into a savings account. 2: They give you 1% a year. Or whatever the interest rate is on your savings account. So if you put in $100,000 - the bank gives you $1,000 a year. 3: They then invest YOUR money. They might put it in treasury bills. Last year those bonds/T-bills were yielding around 3%, give or take (I am oversimplifying to explain). So they take your $100,000 and make $3,000 a year by investing in US Treasury Bills. 4: Their profit is the difference between what they pay you and what they make with your money. In this case: $3000 - $1000 = $2,000 profit. 5: When the Fed raises rates the value of the T-bills goes down (who wants a 3% T-bill when they can get a 4% T-bill?). US Treasury Bills are 100% safe. The bank knows they will get back the FULL AMOUNT they invested in them…plus interest. HOWEVER, if the Federal Reserve raises interest rates, then, short term, the treasury bills trade at a loss. Because who wants a T-bill yielding 3% when you can buy a new T-bill yielding 4%? So...on paper - the bank is holding a T-Bill worth less than they paid it for. Note: If they hold the T-Bill for the full duration (a bond is like a loan - eventually the bondholders get paid back their money unless the bond issuer, in this case the US government, goes bankrupt. The US government is not going bankrupt), then they get ALL of their money back plus interest. However, if they have to SELL the bond/T-bill before the duration (for instance, if they own a 5-year T-bill they have to hold for 5 years), then they lose money if the Federal Reserve has raised interest rates. Secret Gold Back currency RUINING Biden’s plans for a digital dollar? [Click here for more...]( What I’m holding in my hand is a completely new form of money… As we speak, it's being used as an alternative currency across the U.S. minting in places like Utah, New Hampshire and Nevada… And since it’s made out of a thinly printed sheet of REAL gold... It may be the single best way to protect your wealth from Biden’s plan for a government controlled digital dollar. That’s why, I want to offer to send one to you today. But since I have a limited number I need you to respond to [this message]( by Wednesday at midnight. [I’ve recorded a short 2 minute message that explains everything here.]( 6: So even though the T-Bills are “safe” (they will pay back), the banks are short-term losing money on paper. Again, this is because, with higher interest rates, the treasury bills trade at a loss in the short term. 7: They only have to take that loss if there is a run on the banks (depositors want their money). The bank has to have 10% of all of their depositors’ money available in cash just in case 10% of the depositor money is withdrawn by depositors (i.e. you and me). If more than 10% of depositors want their money back, then they have to sell their T-Bills (again, oversimplifying but this is what happens). If they have to sell their T-bills at a loss and a lot of depositors want their money back, then the bank would collapse EVEN THOUGH the T-bills are 100% safe. It’s because the T-bills go down as explained above. 8. Aren’t they supposed to hedge this risk? Yes and no. If you think interest rates will hit a maximum of 3% then you can place bets that interest rates won’t go higher than 3% and try to make money even if interest rates are rising and your T-bills are losing money. But if you are wrong, then you lose money on your T-bills AND on your hedge. Since the Federal Reserve has raised interest rates AT THE FASTEST PACE IN HISTORY, no bank could have hedged appropriately. Essentially, every bank in the country is probably bankrupt if there is a run on the banks. A great demonstration of this is the movie It’s a Wonderful Life with Jimmy Stewart. A classic movie that explains the entire US banking system. 9. THERE IS A SOLUTION: A few weeks ago there was no solution if a run occurred on a bank. It would just collapse and the FDIC would take care of insured depositors up to the amount of $250,000. However, there is a better solution. 10. THERE IS A SOLUTION part II: Since the Federal Reserve knows that the US T-Bills the banks buy will pay back IN FULL, they can say to a bank (and this just started happening with the Federal Reserve doing this for Silicon Valley Bank and also saying they will do this for everyone), “We will loan you up to the FULL AMOUNT you invested in the T-Bills. We will take part of your profits and you can pay us back when the T-Bill duration is over.” This is a great solution and does not cost the taxpayers anything. HOWEVER, a better solution is: there should always be some consequences. Any bank that experiences such a run on its bank and has to borrow this money from the Federal Reserve should give up some equity, maybe 5-10% of their bank so the US (i.e. the taxpayer) can make a little bit of money as the banks recover in stock price. 11. Because of this new lending policy by the Federal Reserve, the banking system is mostly safe. I say mostly because banks are very regulated and usually invest conservatively. Mostly they just buy Treasury bills and also lend people money to buy homes. The safety of the US banking system is what allows people to become homeowners through mortgages. The safety of the US banking system is what allows people to become homeowners through mortgages. Once a bank makes enough of these loans they usually package them together (this is called a mortgage-backed security) and then sell them to hedge funds and other investors who are willing to take on more risk. When they sell those mortgage-backed securities they take the money and buy conservative US T-bills and also lend out more money so more people can buy homes. Why do you need to know all of this: A. This is the basics of how ALL banks work. B. Your money is safe. You can relax. C. The media wants you to be scared. Right now, as I write this, I can see headlines like, “All US banks might collapse in the next 90 days”. I will bet ANYONE ANY AMOUNT OF MONEY that this is false. The media loves to scare people. D. Most importantly, now that you know this you can carefully buy banks that have gone down too much. They won’t be home run moonshots but they will be good safe plays that will give nice dividends. Best, James Altucher For Altucher Confidential --------------------------------------------------------------- [The Daily FWD] URGENT! FREE Report: 6 Ways to Beat a Financial Disaster Another financial crisis could be just DAYS away! That’s why world-renowned macroeconomist Jim Rickards released this brand-new FREE report revealing the 6 most important things you NEED to do right now to protect yourself. Simply click below to sign up for the elite new research letter The Daily FWD – which will give you honest, unfiltered news on EVERY important issue impacting your wealth and security… The moment you do, we’ll rush you this exclusive new report straight to your inbox. 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