These Are Just the Coming Attractions

A busy weekend for big bankers... This week's main event... The weak hands are folding already... These are just the coming attractions... A nation full of zombies... Get ready for the next 'real' credit crisis now... [Stansberry Research Logo] Delivering World-Class Financial Research Since 1999 [Stansberry Digest] A busy weekend for big bankers... This week's main event... The weak hands are folding already... These are just the coming attractions... A nation full of zombies... [Get ready for the next 'real' credit crisis now](... --------------------------------------------------------------- How was your weekend?... For a decent chunk of the Davos crowd, it was probably busier than preferred, yet productive... Yesterday, Switzerland-based UBS (UBS) agreed to buy its beleaguered domestic counterpart, Credit Suisse (CS), for about $3.3 billion. The government-brokered deal aims to stomp out what has been a string of whack-a-mole-type bank crises around the world. Then, later in the day, the Federal Reserve joined the central banks in Canada, England, Europe, Japan, and Switzerland on a plan to encourage international investment in the U.S. dollar. The first piece of news is fairly self-explanatory: Credit Suisse has a new owner. Beyond that are a few important details, though... First, it was a forced deal by the Swiss government to put an end to years of bad news around the bank. And second, roughly $17 billion of a group of Credit Suisse's high-yield bonds was written to zero as part of the deal by Swiss bank regulators. Worthless. The nitty-gritty of the second piece is that the world's leading central banks have agreed to increase U.S. dollar "swap line" maturities from once a week to daily, starting today. The arrangement will continue at least through the end of April, the Fed said. As our colleague and Ten Stock Trader editor Greg Diamond [wrote to his subscribers today](... They're opening up the spigots for global investors to access U.S. dollars. This isn't much different than what happened in March 2020. I (Corey McLaughlin) think both moves – a Swiss-brokered buyout of a namesake bank and letting U.S. dollars flow around the global economy more easily – are obviously a response to the same situation: the run on Silicon Valley Bank and fears of what might happen next. They're also, of course, temporary paper fixes. They won't resolve deeper-rooted issues tangled in a web of rising interest rates, still-way-above-average inflation, a world that hasn't seen either in a long time together, and a nation full of "zombie" companies. But, for one day, at least, the developments abroad and out of the Fed seemed to placate what has been a jittery marketplace. The benchmark S&P 500 Index rose close to 1% today, and bond yields were up slightly. Up next... The main event this week is the Fed meeting tomorrow and Wednesday. As Greg said, he'll be waiting for the next big break – one way or another in the markets –to happen around or after then... "unless another shoe drops for domestic and international banks" over the next two days. About that... Shares of San Francisco-based First Republic Bank (FRC) continued to tank today after Standard & Poor's cut the credit rating of the bank for the second time in the past week. There are reports JPMorgan Chase (JPM) is advising First Republic about a capital raise. Close readers might have noticed we've mentioned credit ratings a few times over the past few weeks... That's because the recent turmoil with banks isn't just about a "loss of confidence," as is the buzzword in financial media today. Quite possibly, it's the early stages of the next debt and credit crisis for more and more institutions and businesses... The weakest hands are already getting into trouble... And more failures, defaults, and bankruptcies could come. One good indicator of debt-market health preferred by our Stansberry's Credit Opportunities editor Mike DiBiase – high-yield credit spreads – has climbed sharply higher in the past two weeks. As Mike told me in a Q&A we [originally published last May in our Masters Series](... You can gauge fear in the credit market by looking at what's called the high-yield credit spread... It's the difference between the average yield of less creditworthy junk bonds and the yield of similar-duration U.S. Treasury notes. It's measured in basis points ("bps"). A spread of 600 bps means that junk bonds yield 6% more than U.S. Treasurys. That's about the average throughout history. Early this month, this spread was just under 400 bps. Today, it's closer to 520. That's a big jump in a short period of time, reminiscent of February 2020 in the early days of the then "coronavirus" panic when this measure leapt roughly the same amount in two weeks. Back then, high-yield spreads spiked to over 1,000 bps by March... That's what Mike considers a "real" credit crisis. They soared to more than 2,000 bps during the financial crisis. As Mike told me in our interview... That's when bonds go on sale. I'm talking deep discounts. Remember, bond prices and returns are inversely related. The lower the bond price, the higher the return. Turn the 'bad' into 'good'... We're not in the midst of a full-blown credit crisis yet, but we're getting closer... So, the time to prepare for what's ahead is right now. You might think of what has been happening the past two weeks – the weakest hands in banking being revealed – as the "Coming Attractions" of the movie to come. We haven't even seen the fallout in the corporate world just yet. As Mike explained to me... About 1 out of every 5 U.S. companies are considered zombies... companies that can't afford the interest on their debt. Even after refinancing much of their debt with record-low interest rates following the pandemic. That's higher than before the last financial crisis and higher than the previous peak of 17%, set back in 2001. These companies are living on borrowed time. There are around $10 trillion of U.S. corporate bonds outstanding today. Around $1.7 trillion, just under 20%, matures in the next two years. Zombies are dependent on creditors who are willing to lend them more money when their debt comes due. The coming recession is going to bury many of them. Zombies are already choking on today's higher interest rates and inflation. An economic downturn will be the final nail in the coffin. And when record numbers of companies suddenly go bankrupt, no one is going to want to own corporate bonds. That's the very best time to buy them. As Mike shared in a pair of excellent Masters Series essays over the weekend ([here]( and [here]( he believes the credit bubble is on the verge of bursting... But that doesn't mean you have to suffer. In times of crisis, perfectly safe bonds sell off to absurd, distressed levels. Most people get scared, but credit crises are when savvy investors scoop up these bonds for cheap and make a killing... We've seen it throughout history. In fact, one of Mike's paid-up subscribers recently went on camera to reveal how this strategy helped him retire early at age 52... and how it has allowed him to never worry about his money. [Click here for all the details]( and get ready for the next "real" crisis now. CBDCs Will Be Used to Manipulate Us Market analyst Jim Bianco thinks central bank digital currencies ("CBDCs") are "coming faster than we think." And he tells our editor-at-large Daniela Cambone, "I think they are probably the worst idea that we have in finance... They are a behavioral state tool." [Click here]( to watch this episode of The Daniela Cambone Show right now. And to catch all of the videos and podcasts from the Stansberry Research team, be sure to [visit our Stansberry Investor platform]( anytime. --------------------------------------------------------------- Recommended Links: [DOUBLE-Digit Yield Potential... TRIPLE-Digit Capital-Gain Potential... Backed by LEGAL Guarantees]( The fallout from the recent bank failures has barely begun. Recession risk remains high. Many will panic – but YOU don't need to. In short, there's a simple way to receive near-guaranteed income – legally owed to you – from outside the stock market. The last time we saw similar market conditions, you could have seen 772% gains. [Click here to learn more](. --------------------------------------------------------------- [Pentagon Consultant: Here's How Biden Wins Landslide Reelection]( A forensic accountant who consults for the U.S. Pentagon, FBI, and Marines says a surprising July 25 "twist" could make many Americans vastly wealthier... but also hand Joe Biden a landslide reelection win. The full story, including four steps you can take to protect your money, [is detailed here](. --------------------------------------------------------------- New 52-week highs (as of 3/17/23): inTEST (INTT), MarketAxess (MKTX), NVR (NVR), and Torex Gold Resources (TORXF). In today's mailbag, feedback on Dan Ferris' Friday essay on [what really killed Silicon Valley Bank]( including an analysis from a regional banking veteran... and thoughts on Mike DiBiase's Masters Series essays over the weekend... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com. "I howled with laughter! This was just great. Brilliant piece. Truth cuts. We need truth. Scary times. Thank you Dan Ferris." – Paid-up subscriber Karen C. "Dan, that was funny! Talkin' to all my friends the most amazing thing, to all of us, is that this bank didn't realize or just simply believed bond prices would rise again for a full year as interest rises cost them billions. Billions! Really? I'm probably naive but I thought banks were in the business of money management." – Paid-up subscriber Al M. "Dan, So true. Hit the nail on the head! Another thing about SVB that was foolishness; although the bank board was very diverse, only one of its members had any banking experience! As always thanks for your great insight!" – Paid-up subscriber Larry N. "Article as usual is well written, witty, and 'mostly right'. Super cheap money clearly was a major contributor to SVB's demise; but, in their case was NOT the primary reason for their failure. You simply cannot make up for incompetence/stupidity. Those characteristics are tattooed on the forehead of SVB's Management and Board. "I'm a retired 45 yr.+, third-generation community and regional banker (20 years as CEO/Board member/organizer of community and multi state regional banks). Let me explain my comments above: - Given the essentially zero rate environment, NO Bank Management Team worth their salt would even consider making the horribly mismatched (with respect to duration, interest rate & structure) purchase of the [mortgage-backed securities] and Treasuries that SVB did when they received the avalanche/glut of deposits that arrived at their doorstep! - Their own internal Asset/Liability Management programs/monitoring & reporting systems would have been 'screaming' about dangerous interest rate risk/sensitivity as they produced monthly Board Reports AND quarterly FDIC Call Reports!! (NOTE: Rates were at 'zero'... Were they going to go up... or down?? Hello) - Where were the [California Department of Financial Protection and Innovation] AND the FDIC Examiners?? During 2021 or even early/mid 2022 either the FDIC or California State or both would have examined SVB... PLUS, being alarmed after seeing the quarterly FDIC Call Reports, they (the examiners) would have to have said 'Guys, your asset/liability mix and structure in terms of maturity mismatch and interest rate risk (shock) is dangerously precarious in this interest rate environment and needs to be modified and reworked ASAP'! - Recipe for disaster... given rates are still at historical lows! 'You can't fall out of the basement'... Where, other than UP, are rates going to go? "I could go on and on with a damning epistle about SVB's Management and Board incompetence, but I'll leave it for another day. "'Cheap Money' is/was and will be forever a BIG problem for 'incompetent/inept bankers'. However, good solid astute bankers, consistent with the vast majority of regional and community bankers in this country, can and will deal with that deck of economic cards with success, safety & soundness!! "The overwhelming majority of community and regional banks across the USA are in GREAT financial condition... assuming no outside political or regulatory or media driven misinformation/panic that is completely unfounded. U.S. consumers and small businesses should be thankful for their existence! Thanks." – Paid-up subscriber Rick M. "Hi Dan, Big fan of your work, thank you for your efforts. SVB failed because they failed to hedge their positions with respect to rising interest rates, not because of cheap money. The more interesting part of this story is why were uninsured depositors (pretty much all of whom are sophisticated investors) bailed out and what moral hazards this brings into play." – Stansberry Alliance member Charles C. "Your analysis of SVB left out a crucial detail. You failed to explain the role our current interest rate system had in the problem. Our current interest rate system can't work in an inflationary environment. All those Treasury bills and notes put on their books at low interest rates are hard to get rid of without taking losses when rates start to rise. If SVB didn't want to be stuck with them, then you can be sure that nobody else did either. "The solution is to move to a price-level adjusted interest rate system. Setting the savings rate that banks pay us lowly depositors at a 3% 'real' rate of interest would pretty much fix the system. This is based on my understanding that a 3% interest rate has been a fair rate throughout history, assuming there was no inflation. "Real rates of interest should be fixed by law to prevent the Fed or other institutions from playing around with them. Interest rates, especially 'real' ones, should never be used as a matter of policy as they are now. "Picture a scenario where SVB had 3% to 4% real rates on Treasuries. Real rates should never move so these Treasuries would be sold at or near par avoiding the losses that SVB incurred under our current interest rate system..." – Paid-up subscriber William S. "Mike, The Fed has already given up. The billions they printed to save the few depositors of these failed banks will be levered up to the tune of 1 trillion and more. And if that is not enough they will create as many new vehicles as needed to hold the tsunami of printed money to come. "Inflation will snap back with a vengeance. Our only hope is that things spiral out of the Fed's hands before the printers are at full capacity and deflation takes hold to heal what it can while it is allowed to work." – Paid-up subscriber Rexford H. All the best, Corey McLaughlin Baltimore, Maryland March 20, 2023 --------------------------------------------------------------- Stansberry Research Top 10 Open Recommendations Top 10 highest-returning open positions across all Stansberry Research portfolios Stock Buy Date Return Publication Analyst MSFT Microsoft 11/11/10 1,009.1% Retirement Millionaire Doc MSFT Microsoft 02/10/12 868.3% Stansberry's Investment Advisory Porter ADP Automatic Data 10/09/08 768.0% Extreme Value Ferris ETH/USD Ethereum 02/21/20 623.9% Stansberry Innovations Report Wade HSY Hershey 12/07/07 585.6% Stansberry's Investment Advisory Porter WRB W.R. Berkley 03/16/12 537.0% Stansberry's Investment Advisory Porter BRK.B Berkshire Hathaway 04/01/09 420.4% Retirement Millionaire Doc AFG American Financial 10/12/12 397.2% Stansberry's Investment Advisory Porter ALS-T Altius Minerals 02/16/09 332.3% Extreme Value Ferris FSMEX Fidelity Sel Med 09/03/08 308.9% Retirement Millionaire Doc Please note: Securities appearing in the Top 10 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the model portfolio of any Stansberry Research publication. The buy date reflects when the editor recommended the investment in the listed publication, and the return shows its performance since that date. To learn if a security is still a recommended buy today, you must be a subscriber to that publication and refer to the most recent portfolio. --------------------------------------------------------------- Top 10 Totals 4 Stansberry's Investment Advisory Porter 3 Retirement Millionaire Doc 2 Extreme Value Ferris 1 Stansberry Innovations Report Wade --------------------------------------------------------------- Top 5 Crypto Capital Open Recommendations Top 5 highest-returning open positions in the Crypto Capital model portfolio Stock Buy Date Return Publication Analyst ETH/USD Ethereum 12/07/18 1,410.1% Crypto Capital Wade ONE-USD Harmony 12/16/19 1,186.2% Crypto Capital Wade POLY/USD Polymath 05/19/20 1,056.2% Crypto Capital Wade MATIC/USD Polygon 02/25/21 953.7% Crypto Capital Wade BTC/USD Bitcoin 11/27/18 629.6% Crypto Capital Wade Please note: Securities appearing in the Top 5 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the Crypto Capital model portfolio. The buy date reflects when the recommendation was made, and the return shows its performance since that date. To learn if it's still a recommended buy today, you must be a subscriber and refer to the most recent portfolio. --------------------------------------------------------------- Stansberry Research Hall of Fame Top 10 all-time, highest-returning closed positions across all Stansberry portfolios Investment Symbol Duration Gain Publication Analyst Nvidia^* NVDA 5.96 years 1,466% Venture Tech. Lashmet Band Protocol crypto 0.32 years 1,169% Crypto Capital Wade Terra crypto 0.41 years 1,164% Crypto Capital Wade Inovio Pharma.^ INO 1.01 years 1,139% Venture Tech. Lashmet Seabridge Gold^ SA 4.20 years 995% Sjug Conf. Sjuggerud Frontier crypto 0.08 years 978% Crypto Capital Wade Binance Coin crypto 1.78 years 963% Crypto Capital Wade Nvidia^* NVDA 4.12 years 777% Venture Tech. Lashmet Intellia Therapeutics NTLA 1.95 years 775% Amer. Moonshots Root Rite Aid 8.5% bond 4.97 years 773% True Income Williams ^ These gains occurred with a partial position in the respective stocks. * The two partial positions in Nvidia were part of a single recommendation. Editor Dave Lashmet closed the first leg of the position in November 2016 for a gain of about 108%. Then, he closed the second leg in July 2020 for a 777% return. And finally, in May 2022, he booked a 1,466% return on the final leg. Subscribers who followed his advice on Nvidia could've recorded a total weighted average gain of more than 600%. You have received this e-mail as part of your subscription to Stansberry Digest. If you no longer want to receive e-mails from Stansberry Digest [click here](. Published by Stansberry Research. You're receiving this e-mail at {EMAIL}. Stansberry Research welcomes comments or suggestions at feedback@stansberryresearch.com. This address is for feedback only. 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