Financial expert Peter Schiff gives a gold update and says, “The price of gold is going to skyrocket, and it’s going to go up so much more than this because we are just getting started. What is really going to power the rise is not only are we going into a recession in the U.S., but it’s going to be an inflationary recession. When the dollar tanks, because the Fed doesn’t raise rates, then consumer prices are going to take off. Click the link below.
https://www.youtube.com/watch?v=SkliWdFdJmw
An unsettling
trend has emerged from the heavy selling that sent global markets tumbling this
year: Investors are getting nervous about the world’s biggest banks.
The concerns about the banks are
clearly reflected in the stock markets, where shares in banking giants are
plunging. But there are also ominous signs in markets that investors use to bet
on the perceived creditworthiness of large financial firms.
A crucial benchmark for the
banking sector, the KBW Nasdaq Bank Index, was down more than 3 percent on
Monday and had lost nearly 20 percent of its value this year.
When investors sell bank shares
or bet against the banks in credit markets, it can be a signal that a period of
financial turbulence has entered a new, potentially more serious phase. It
suggests that banks — meant to act as the gears of an economy, transmitting
credit to firms and households — are becoming more vulnerable to the market
volatility and any underlying economic weaknesses. In sluggish economic times,
banks may suffer higher losses on some loans, while the current low interest
rates make it hard for lenders to earn robust profits on other loans.
Analysts noted that the declines
in bank shares had occurred as other traditional indicators of fear flashed
more brightly. “The fear trades are becoming more obvious — and one of those is
dumping financial stocks,” said James W. Paulsen of Wells Capital Management.
The recent plight of bank
stocks does not bode well.
On Monday, shares of Deutsche
Bank, Germany’s largest bank, plummeted nearly 10 percent in
Frankfurt, while those in Standard
Chartered, a British bank, fell nearly 6 percent, and stock in
Citigroup declined more than 5 percent.
Deutsche Bank and a handful of
other European banks are contending with their own problems that could explain
the depth of their recent declines. Banks issue debt to raise money for their
loans and operations. In recent weeks, investors have paid a higher price to
buy insurance against a bank defaulting on such debt. The cost of using
so-called credit-default
swaps to gain
protection for five years on Deutsche Bank’s debt has doubled since the start
of this year, according to data from Markit.
Outside of Europe, though, the
moves in bank shares are hardly reassuring.
Citigroup’s shares, for
instance, are down by more than a fourth so far this year. And its stock trades
at nearly half of the bank’s book value, which is a theoretical measure of the
value that would be left for shareholders if the bank were liquidated. The
discount to book value exists at other large banks and effectively indicates
that investors have doubts about the banks’ ability to earn a strong return on
their capital.
Still, Citigroup made over $17
billion in profits last year, has stable management and, looking at its balance
sheet, possesses the financial strength to weather an economic slowdown.
There is a good chance that
investors have become too pessimistic about the big banks’ prospects, and their
stocks could bounce back if the wider funk in the market passes. Most banks,
after all, are substantially stronger than they were in 2008. And, since then,
the banks have managed to earn profits even as they have dealt with a barrage
of government lawsuits as well as economic and financial turbulence in Europe
and Asia.
Still, the declines in bank
shares may not indicate that banks are particularly fragile right now but that
investors think they will struggle to earn solid profits in the future, at
least in part because of ultralow interest rates around the world.
Central banks have kept interest
rates low to stimulate demand for loans. But loans with low interest rates are
often less profitable for banks. As a result, banks may then lend less, which
may then reduce the overall impact of low interest rates on the economy.
