Where ARE we?? And WHO is Bill?
So, Where Are We?
Great question; tell me and we’ll both know, but that’s not how this Report works.
Confidence is what makes an economy work; when there is no trust in anything, you’re trading your chickens for grain or your grain for chickens and then the chickens for a sword.
Optimism is also a key ingredient, something that I think distinguishes America from most other countries; that’s why folks keep coming here.
They know they can have a better life here than from the country they came from. But I digress.
Going against this are the folks that tweet, post, ‘gram, livestream, in all caps, about the end of (insert name of industry here) as we know it.
The name of the industry this week is ‘Banking’.
That said, Flagstar Bank has purchased the non-crypto deposits of Signature Bridge Bank, the successor to the failed Signature Bank, and they also purchased some of the loans.
What is Flagstar Bank? They are owned by New York Community Bank.
Why does that ring a bell?
They are also the owners of Desert Community Bank in the high desert area of the Inland Empire.
These are the same folks that contracted to issue the debit cards for the Middle Class Tax Credit paid by the state of California to California Tax Payers.
And just like that, Signature Bank is gone.
And life goes on.
The Feds and the FDIC will continue to have our backs as long as our accounts have less than $250,000, or if … never mind. I feel a rant coming on and it’s better focused on March Madness.
Let’s see how far UCLA makes it.
Continued Conversation on Banks, if you’re not tired of it already.
I find it curious that all of the conversation is around Silicon Valley Bank – SVB – and to a lesser degree, Signature Bank, when much of the conversation should be around Silvergate Bank.
Silvergate was the first bank to be hit by a run, except something odd happened on the way to the bottom.
Management could see what the end result was going to be, so they unwound the bank to save all of the depositors money. No FDIC, no rescue; they did it on their own.
They could see the ship was sinking, made an orderly exit and all the passengers were saved.
I don’t know the internal details, but it’s pretty clear to me that they realized something bad could happen and then planned for it just in case it did.
The importance of a plan cannot be overstated, in good or bad times.
Just a bit of a contrast to Silicon Valley Bank.
The Economy As it Stands
Two weeks ago, folks were talking about even higher increases from the Fed. This week, not so much, for a few reasons.
One: the bank problem.
Two: the bank problem.
Three: the CPI – inflation – actually decreased year over year. It was 6% compared to 6.4% the previous month.
Still high, but a nice drop.
Four: the bank problem
Five: The PPI – Producer Price Index or wholesale cost – dropped from 5.7% to 4.6%.
Another good drop, but Core PPI stayed the same.
Six: The ba… never mind.
And what is this “soft landing” everyone keeps talking about?
Simply that employment is not terribly impacted by the rate increases and it does NOT cause a recession. That’s a soft landing.
Given the huge amount of job openings, it WAS looking more and more like a soft landing, but see items one, two and four above; they may have an impact.
What’s a hard landing?
A full recession that takes unemployment over 7%. That’s as hard of a landing as a Southwest flight landing at Ontario Airport during Santa Ana winds.
Remember, a recession is basically when the country takes a pay cut and the gross domestic product (combination of goods, services and government) falls over a period of two quarters or more. You have negative GDP.
From the Bureau of Labor Statistics
The number of job openings decreased to 10.8 million on the last business day of January.
That’s a lot of job openings.
During the month of January, 6.4 million people were hired and 5.9 people were “separated” (fired or quit).
Within separations, quits (3.9 million) decreased, while layoffs and discharges (1.7 million) increased.
“Quits” are getting fewer and “layoffs” are getting higher.
The economy continues to soften, albeit ever so slowly. I think that’s a good thing; who’s in a rush?
Finally…
You may have heard we had some snow in southern California, something we are not used to. Taken from the Inland Valley Daily Bulletin:
A 67 year old bearded, bedridden man, who asked to be identified only as Bill, stuck inside a tiny house on North Village Lane, said he isn’t intimidated by the unusual wintery weather. Bill, who puffed on a cigarette and watched television while hooked up to a tank of oxygen, recounts a far worse snowstorm in the 1980s that completely covered his house, plunging it into darkness. After the storm cut electricity, he opened a living room window and dug a makeshift igloo in the snow outside where he kept his perishable food from spoiling.”
I’m not sure which is more incredible: smoking while on oxygen during this last storm or digging an igloo from his living room window to act as his freezer in the ‘80’s.
Somehow he’s still alive, and I’m guessing his money was never in a bank.
At any rate, may you have the tenacity of Bill, whether it is in your business or your life. Or both. Given his ability to survive, he sure sounds like a business owner to me.
