The Banking Crisis That Was

Three of the largest five bank failures in US history happened between March and May of 2023: Silicon Valley, Signature and First Republic.

Most investors are barely aware. The collapse in regional banking was quickly papered over by a Federal Reserve program to buy the bad bonds at face value.

A full-blown crisis was narrowly averted, but it didn’t go away.

Yesterday, Zions Bancorporation and Western Alliance Bank dropped 13% and 10% respectively, dragging the S&P 500 down with them.

In pre-market trade this morning, the broader banking sector also got whacked. JP Morgan was down 1.5%, while Citi fell 1.9% and Bank of America was down 2.9%. In Europe, meanwhile, the regional Stoxx Banking Index fell almost 3%.

The Federal Reserve stopped tracking “unrealized losses” at regional banks in 2022. But occasionally, a snippet of data will come to light, like this piece from the FDIC earlier this year:

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America’s regional banks are sitting on substantial losses (Source: FDIC)

For individual investors, yesterday’s headline selloffs are worth paying attention to. In a credit crisis, banks go first.

~ Addison

P.S. “The private credit market is showing signs of cracking too,” notes Andrew Packer. The popular alternative asset class has notoriously opaque reporting requirements. Andrew digs into private credit in the October Grey Swan Bulletin – which will hit members’ inboxes (as soon as Addison gets his lead on Anduril and Palmer Luckey written!)

Much like Treasury Secretary Scott Bessent alludes to financing the national debt, stress in banks and in the credit market is the leading edge of a broader crisis in debt financing. That’s another reason to like the precious metals here.

Gold at $4,300 isn’t a mania. Silver above $50 isn’t a panic. They’re the visible signs of trust sliding down the pyramid to safer assets.

Check out the Dollar 2.0: The Final Countdown replay, right here.

If you have any questions for us about the market, send them our way now to: feedback@greyswanfraternity.com.

Three of the largest five bank failures in US history happened between March and May of 2023: Silicon Valley, Signature and First Republic.

Most investors are barely aware. The collapse in regional banking was quickly papered over by a Federal Reserve program to buy the bad bonds at face value.

A full-blown crisis was narrowly averted, but it didn’t go away.

Yesterday, Zions Bancorporation and Western Alliance Bank dropped 13% and 10% respectively, dragging the S&P 500 down with them.

The Federal Reserve stopped tracking “unrealized losses” at regional banks in 2022. But occasionally, a snippet of data will come to light, like this piece from the FDIC earlier this year:

Turn Your Images On

America’s regional banks are sitting on substantial losses (Source: FDIC)

For individual investors, yesterday’s headline selloffs are worth paying attention to. In a credit crisis, banks go first.

~ Addison

Gold at $4,300 isn’t a mania. Silver above $50 isn’t a panic. They’re the visible signs of trust sliding down the pyramid to safer assets.

Check out the Dollar 2.0: The Final Countdown replay, right here.

If you have any questions for us about the market, send them our way now to: feedback@greyswanfraternity.com.

If you’re from New York—or know anyone there—you’ll probably agree: most New Yorkers are fed up with crime, the outrageous cost of living, government incompetence and corruption—and, yes, the rats.

But the fact that a hard-core socialist like Mamdani is their favorite pick to solve those problems tells you that most voters have no idea why any of it is happening.

Their hatred of Donald Trump—and a steady diet of MSNBC—has made them blind to the obvious: it’s the Left’s policies creating these problems. You have rent control shrinking supply by forcing landlords to pull units from the market, union giveaways jacking up the cost of transportation, zero-bail laws putting criminals back on the streets, and so on and so forth.

Markets are having themselves a moody little week.

The Dow’s off 1%, the S&P 500’s down 2%, and the Nasdaq — where the AI darlings dance — has stumbled nearly 4%.

Even the refuge assets are catching cold: gold glitters less, and bitcoin, ever the high-strung teenager of finance, is down nearly 8%.

At the moment, traders aren’t sure what to make of it all.

Trump’s tariffs are under review at the Supreme Court, Zohran Mamdani’s socialist experiment is about to begin in New York City, and the AI trade — Wall Street’s favorite bedtime story — is between plot twists.

It isn’t hard to see why young people are looking for an alternative.

This cohort came of age through financial crises, inflation, a pandemic, trillion-dollar federal debts, chronic political deceit, a rough job market, predatory credit, expensive degrees with dubious ROI, and rents that make homeownership a punchline.

The status quo clearly isn’t working for the young. In that vacuum, socialism seems “cool,” so why not try it?

Decline will be felt by the economy on a lag and could be what ends up torpedoing his second term, along with his tariffs and the greatest bubble in history way overdue to burst in the next few years.

I objectively expect the music to stop while Trump is still in office, and no president gets re-elected in a bad economy (or his VP Vance), and this should be the worst since 1930-33.

If this decline had occurred right after he entered office, he wouldn’t have been blamed for it, or not as much. But after a full year+ and his tariffs appearing as a trigger, he will very much end up being blamed.