By: Jeff Cooper

Hit and Run Bonus Report: March 20, 2023

The Hitchhiker's Guide to the Financial Fiasco

Is the biggest confidence game in history collapsing?

We are in a confluence of cycles flagged in this space over the last 18 months that are exerting their downside influence.

These are both “natural” cycles and market cycles.

They are exemplified by a convergence of  three macro imbalances:

The debt problem of the 1940’s.

The speculative environment of the late 1990’s.

The inflationary environment of the 1970’s.

This country has never had all three issues occurring at once.

Moreover, when the Fed tires to raise quickly after being so low, for so long and when debts are this high, chaos and volatility ensue.

Central banks are doing the opposite of what they did in 2009. They are tightening into a mushrooming credit crisis.

This means we are in the ugliest cycle since the 1930’s.

The solidity of the fractional reserve banking system is based on confidence.

Banks only have a fraction of the money available at any given time. The more leveraged, the less money is available when confidence evaporates and depositors realize that the whole system is just a hole backed by nothing.

Over the weekend, CS is being bailed out by UBS.

Should we believe that a state-subsidized takeover of Credit Suisse by UBS will solve the problem? Or is it another episode of rearranging the chairs on the Titanic. There are still too few lifeboats.

When Swiss Gnomes are upside down, who knows what evils can fall out of Pandora’s Box?

The Swiss National Bank balance sheet is larger than the Swiss GDP.

SNB lost $143 billion in 2022 part of it speculating in US tech stocks.

Are they a bank or a hedge fund?

Remember when the term Swiss bank was synonymous with safety and stability?

It has a central bank which is bigger than  the country’s GDP. And a banking system which is 5 times the Swiss GDP.

Like many countries this adds up to, too big to save.

The consequence of what is happening will be what the Central Banks have resorted to in modern monetary times: we will be witness to the most massive tsunami of money printing ever.

Cycles have been pointing to a Super Cycle with a top one degree larger than that of 1929.

The idea of just another crisis will evaporate in a green fog of cause and effect:

Currency debasement has been the effect of elite banking mandarins taking control of money for their own benefit.

The T-Rex in the ointment is the unseen exposure by non-bank financial institutions to things more risky than the stuff bringing down the banks… especially the potential that an insurer and counterparty in the derivatives market is going to go belly up.

Since 1987 when Greenspan pulled a liquidity rabbit out of the hole, the Fed has been rushing to the rescue.

There is a difference this time:  inflation. Will the Fed pivot and foot fault?

Gold thinks so.

While the NAZ scored its best week last week since January as growth glamours rallied on an echo bubble of lower rates, this week ties to the end of the Gann Panic Cycle counting from the early February high. The market may see a rally attempt at the end of March, but the indication for April is for dramatic drops.

We must be mindful that while the 1987 crash was almost identical to the 1929 crash both seeing a gradual decline of 20% to 25% over 6 weeks, followed by a sharp decline of 20% to 25% over one to two days.

Those actual crash days occurred just past the Gann Panic Zone.

That points to April 2023.

Notably, April is 180 degrees straight across and opposite October when the 1929 and 1987 crashes played out.

As well, April 11 is 180 degrees straight across and opposite the so far October 13,2022 bear low.

At the same time, April 11 squares out with 349 (3490) on my Square of 9 Time/Price Calculator.

There is a lot of synergy exerting downside influence in April.

Remarkably, we get an FOMC decision on Wednesday right into the brunt of the end of the Gann Panic Window.

The ensuing FOMC Cha Cha this Wednesday promises to be on steroids.