Welcome to the Causey Consulting Podcast. You can find us online anytime at CauseyConsultingLLC.com. And now, here's your host Sara Causey.
Hello. Hello, and thanks for tuning in. I had not intended to record another Sunday night special but here we are. Lo and behold, here we are. There were some headlines that I read this morning while I was having my breakfast and I thought this is important. It needs to get out on the airwaves. I don't need to wait until I have more time publishes a blog later I need to do this now. On Friday, I published a blog post titled with the swiftness of a lightning strike, which refers to a reasonable article titled, with the swiftness of a lightning strike Charles Schwab fires as many as 2000 employees with no public announcement affecting legacy Schwab as well as TD Ameritrade staffers. This is the reality in corporate America, that you can be employed one day thinking everything's fine. No notice. And then, the next day, you're tossed out the door on your behind. I've said many times on my broadcasts and on my blog, Lynette Zang, has said many times on her broadcasts on YouTube, things happen slowly, until they happen very fast. Whether we're talking about banking failures, or whether we're talking about companies going under, you don't always have advance notice of what's going to happen. And when you're on the slow part, it feels like you've got all the time in the world to prepare. But when you're on the downhill slide, where the snowball turns into an avalanche, you're screwed. In my opinion, if you wait for the avalanche to strike before you start to prepare, you're screwed. This also made me think about the inner workings, the meeting that happened at the FDIC, where they said, if all hell breaks out, then we'll make the announcement on a Friday night. Why so that John and Jane Q Public can just sit at home and freak out over the weekend. And then maybe by the time Monday morning rolls around, they will have cooled off and cooler heads will prevail and everything will be fine. But don't tell them that trouble is afoot when they actually can do something about it. Just make them sit at home and stew in their own juices. And hopefully they'll cool down. Let's don't forget a headline that appeared in the New York Post on March 10. NYPD called to Silicon Valley Bank as depositors attempt to pull cash. building managers at Silicon Valley Banks Manhattan branch reportedly called the police Friday morning after a group of tech founders showed up and attempted to pull out their cash. Police responded after a group of about a dozen founders went to SPBs Manhattan location on Park Avenue journalist Eric newcomer said in a substack post, one of the founders was former Lyft executive Dora Levy who provide a newcomer with text updates from the scene in quote. So let's think about this. If a bank branch would call the cops on a group of tech founders, including a former lift executive on Park Avenue in Manhattan, what do you think would happen to you and me? Those of us in the unwashed masses, if we tried to have a bank run and form a rabble we would get shut the hill down and it would be immediate. You've got police out here looking like paramilitary now. Do you really think that they would allow people to have a bank run? I don't freaking think so. The cops would show up like that and shut you down? If they would do it to a group of tech founders on Park Avenue who I'm sure didn't look like down and outers. What do you think they would do to me and you? This is why you've got to prep, you've got to understand you've got to stay aware, by the time that the Poopoo hits the fan and everybody knows that it's happened. It's too late. By the way also on Friday, a little footnote on Reuters, Bank of America notifies customers of temporary industry wide deposit delays. Bank of America's mobile app flashed a message on Friday that said customers could be facing temporary delays in depositing funds into their accounts after a technical glitch impacted multiple financial institutions. Besides Bank of America, the issue was also impacting apps of JP Morgan Chase, truest financial and US Bank Corp, according to outage tracking website down detector.com. So I mean, I hope you weren't counting on those deposits. But you know, you got a little footnote on Reuters on a Friday. Hope those deposits weren't important to you. Now a couple of things popped up this morning. As I was eating breakfast, I saw some headlines from the daily huddle and I was like, Whoa, I don't think this is being reported elsewhere and it needs to be talked about $40 billion in unrealized losses hits JP Morgan Chase as Bank of America, Wells Fargo and Citigroup face exposure to US Treasuries, or JP Morgan Chase has quietly Oh, there's that word again. Like the government quietly revising his job market numbers to you know, not be so spectacular. Quiet cutting. The banks are letting all of these people go as they have done all year long, but you're not supposed to know about it. Because he you're supposed to be a fool and think that we have the goat of all job markets. Sure. Yep.
Quietly, quietly, quiet, quitting quiet, cutting quiet layoffs.
JPMorgan Chase has quietly revealed 10s of billions of dollars in losses on securities according to a new report on the company's overall balance sheet. Hmm, I wonder if this has anything to do with old Jamie diamonds desire to sell off a buttload of stock? Hmm, I wonder. The banking giant is now stuck with roughly 40 billion in unrealized bond losses as of q3 of this year, which is a 20% rise over the previous quarter reports barons. The new numbers were located in a footnote. Ever, twas ever thus, the new numbers were located in a footnote on the firm's third quarter financial supplement and were higher than an expected $34 billion loss. The news follows a new quarterly report from Bank of America revealing it now has a total of $131.6 billion in unrealized losses. Although Wells Fargo and Citigroup have also reported third quarter earnings, they have yet to reveal the latest stats on their own unrealized losses. In q2 of this year, Wells Fargo said it had $40 billion in unrealized bond market losses while Citigroup had $25 billion in paper losses. The dangers of unrealized losses came into focus early this year amid the collapse of Silicon Valley Bank. The bank sudden failure back in March was sparked by an announcement that it had booked a $1.8 billion loss from selling a portion of its underwater bond portfolio. as a whole. Moody's estimates that the US banking industry is facing approximately 650 billion in unrealized losses as reported by Reuters, those losses stem from a historic collapse in bonds amid the Feds push to keep interest rates higher for longer, end quote. Holy crap, y'all. But hey, hey, hey, the same people who told you that inflation was transitory. Also have told you that the banking system is sound. We had some hiccups. We had some little problems earlier this year, but it's all been solved now. Does that sound to you, like churn and burn and doing great all the problems have been solved? Because it doesn't to me. I remember reporting on a bank failure that happened in Kansas, a little town, a mom and pop style, homespun little town here in the Midwest in Kansas, where there was a banking failure. Okay, now, as of November 4, which was yesterday, fifth bank failure of 2023 declared Iowa bank insolvent due to significant loan losses. So here we go. Another bank in the Midwest. We're not talking about Silicon Valley where someone like Dave Ramsey would tell you they were just play us. They were big time they were venture capitalists. This is not the bank where little Timmy keeps his paper route money. And Grandma has her savings account. No, this was for playoffs. This was for big shots. Sure, just like the bank in Kansas and now the bank in Iowa. The Federal Deposit Insurance Corporation or FDIC has shut down a bank in Iowa after regulators discovered significant loan losses on its balance sheet. The FDIC is adding Citizens Bank and Sac City to its list of failed bank says I would trust and Savings Bank has assumed all deposits in order to protect depositors. The bank's pair of physical locations will reopen is Iowa trust and savings bank on Monday. Citizens Bank was established in 1929 and is the first bank closure in Iowa since 2011. Its closure represents the fifth bank failure in the US this year following the collapse of Heartland tri state bank, first republic bank, Signature Bank and Silicon Valley Bank. According to the Iowa division of banking, the bank had about $66 million in total assets and $59 million in total deposits as of September of this year, during a joint and ongoing The examination of the bank examiners identified significant loan losses that had not been previously identified by the bank. The bank was declared insolvent. The bank had a concentration of out of territory and out of state loans to one industry hmm And incurred heavy losses on some of those loans. Regulators have not specified which loans went sour at the bank, but I'm sure curious, aren't you? As a whole, the banking industry has been plagued by underwater bond portfolios throughout 2023, triggered by a series of aggressive rate hikes from the Federal Reserve. The pitfalls of the so called unrealized losses came into focus early this year amid the collapse of Silicon Valley Bank, and abrupt run on the bank back in March was sparked by an announcement that the bank had booked a $1.8 billion loss from selling a portion of its underwater bond portfolio. According to a recent report from Moody's, the industry is facing approximately $650 billion in unrealized losses that don't have to be marked at market value and, quote, ignore these stories. At your own risk, in my opinion, naivete is coming at too high of a price. Whether it's naivete about what's going on in the banking sector, the economy, the job market, burying your head in the sand and saying, Well, I'm not in Iowa, this doesn't affect me. I'm not on the job market right now. What's going on with the job market has no impact on my life. Hmm. Right. Just just keep on thinking that way. When we google Sac City, Iowa, we find that the population as of 2021, was barely more than 2000 people. So we're not talking about these Dave Ramsey plans, Oh, didn't this big time. These are still Silicon Valley people, venture capitalists just Oh, and got tons of money, and they're doing high risk behaviors. This could very well happen. Let's hope and pray that it doesn't. But this could happen on any Main Street in any little community bank, any little regional bank in the US look at how much insolvency there is. I mean, my gosh, you're talking about $40 billion in unrealized losses hitting these major banks, right, JP Morgan Chase, Bank of America, Wells Fargo, Citigroup, those are not your little small hometown, homespun banks. So let's just let's, let's zoom out a little bit and think about it this way, if the big banks are having trouble, and then the smaller banks are shutting down and being declared insolvent and the FDIC is coming in, what does that say about the big picture? Not trying to scare anybody, and I'm definitely not telling you to go pull your money out and stick it under a mattress. In my mind, that is way too dangerous to do something like that. If you have concerns, talk to a financial planner or a money manager who is trustworthy. I myself would not recommend that you talk to a bullshit artists. I've seen some on local TV around here that seem to be exactly that. They just tow the line of the mainstream media, everything's fine. Just because it happened at Silicon Valley doesn't mean it'll happen here. Your everything's fine little baby, go back to sleep. Talk to someone that you feel is trustworthy. vet them. Really ask them the tough questions, see how informed they are? See if they're on the same page as you there are ways to do money protection. It's not my place because I'm not a financial planner to get into any of those things on the air. I don't give you advice on I don't tell you what to do. I sit here and I opine for your entertainment only the most that I will say in that direction is please stay aware. Please stay informed. Be so so careful with any of these talking heads in the media that just want you to take your pablum and go back to sleep. Stay safe, stay sane, stay aware. And I will see you in the next episode.
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