Will Elon Musk Buy Silicon Valley Bank?

Dear Reader,

I want you to level with me…

And be honest…

Did you know Silicon Valley Bank existed five seconds ago?

Personally, I’d never heard of it before it crashed.

What's crazy is I’ve asked around and everyone says the same thing.

This gigantic bank financed half of U.S. venture-backed tech companies… and no one had ever heard of it.

Strange…

It’s just like when Sam Bankman Chicken-Fried came on the scene.

He appeared out of thin air and was already testifying before Congress.

What a joke.

Now, the question is: Did the insiders at SVB know the bank was going to crash?

According to SEC filings, President and CEO Gregory Becker sold $3.5 million worth of stock on February 27. Chief Financial Officer Daniel Beck sold $500,000 in stock on the same day. And Chief Marketing Officer Michelle Draper sold nearly $300,000 worth at the beginning of February.

Not the best look, but I always like to give people the benefit of the doubt. We’ll see what the SEC says…

But at the end of the day, it was a classic bank run. The good news is markets are predicting this will convince Jerome Powell to knock it off with those rate hikes. And I hate to say I told you so, but I took a deep dive into interest rates last year and came up with the theory that a bank run would in fact happen again, and when the Fed stopped raising rates because of lower inflation numbers, the market would go parabolic.

How did I do that?

I started at the beginning.

America: A Nation Founded on Debt

In 1789, after U.S. had ratified the Constitution, the new American government created a permanent Treasury Department in order to control the nation’s debt. President George Washington named Alexander Hamilton as the Secretary of the Treasury, and he proposed reviving the nation’s ailing economy and repairing its damaged credit by repaying its $75 million of war debt. Hamilton's first step was to establish a centralized monetary institution, including the national bank.

Just three years later, the country found itself in a debt panic, the Panic of 1792, which was a two-month financial credit crisis where prices of U.S. debt securities and bank stocks fell, eventually resulting in a bank run. This led to the creation of the stock market as we know it today. On May 17, 1792, 24 stockbrokers and merchants gathered under a buttonwood tree outside 68 Wall Street to sign the Buttonwood Agreement, a document that would set the foundation for the New York Stock Exchange. Revered as one of the most influential financial documents in history, the Buttonwood Agreement sought to stabilize the securities market after the Panic of 1792. The agreement proposed the creation of a system in which brokers and merchants would trade only with each other and for a set commission per transaction. The contents of the document are short but sweet:

We the Subscribers, Brokers for the Purchase and Sale of the Public Stock, do hereby solemnly promise and pledge ourselves to each other, that we will not buy or sell from this day for any person whatsoever, any kind of Public Stock, at a less rate than one-quarter percent Commission on the Specie value and that we will give preference to each other in our Negotiations. In Testimony whereof we have set our hands this 17th day of May at New York, 1792.

By creating a membership-only exchange, the signers set up the beginnings of an investment community we now refer to as Wall Street…

Fast-forward a little over a century to October 1907 and the U.S. once again found itself in a debt crisis after the stock market lost 50% of its value, wreaking havoc on the banking system.

We can see that neither the Treasury nor Wall Street accomplished their goal of preventing financial disasters. In fact, on average, nationwide panics have occurred every 15 years since the founding of the country. That’s why some of the richest and most influential men in the U.S. came up with a secret plan to create a centralized, government-backed reserve banking system to fix this thing once and for all, including one very important number that affects us all to this day…

The Federal Reserve: A Modern-Day Jekyll and Hyde

In November 1910, six men boarded a private train car in New Jersey under the guise of a duck-hunting trip. They were embarking on a mission so secretive that they were instructed to only call each other by their first names… Nelson, Henry, Frank, Paul, Piatt, and Arthur became known as the “First Name Club,” and they were headed to a secluded island off the coast of Georgia called Jekyll Island.

The meeting was likely arranged by J.P. Morgan, a member of the private Jekyll Island Club, known as “the richest, the most exclusive, [and] most inaccessible” club in the world. We’re talking about members of the crème de la crème of U.S. high society: Morgan, Field, Vanderbilt, etc.

The mission was simple: Reform the nation’s banking system. After tireless days and sleepless nights, what came out of the gathering was called the Reserve Association of America, where the U.S. would have one central bank with 15 branches across the country. According to the Federal Reserve History website:

The branches would be responsible for holding the reserves of their member banks; issuing currency; discounting commercial paper; transferring balances between branches; and check clearing and collection. The national body would set discount rates for the system as a whole and buy and sell securities.

Under President Woodrow Wilson, Congress passed the Federal Reserve Act in 1913.

However, this didn't prevent financial disasters. The last bank run (before the SVB crash) occurred only 15 years ago, during the 2008 financial crisis. Time and again, U.S. markets have crashed, wiping out millions and now trillions of dollars of wealth.

But like all good bureaucracies, the Fed has kept growing to try to counter these economic woes. It’s now the most powerful economic entity in the world because it controls one important number. And if we keep track of it, we’ll know the exact moment the market will turn around and enter a new bull market…

The Critical Pivot

Today, the Fed comprises two parts: the Board of Governors and the Federal Open Market Committee (FOMC). We’re only concerned with the FOMC for our investing purposes, as it’s responsible for open market operations. The FOMC meets eight times a year, and since 1977, it’s operated under a “dual mandate.”

First, it wants to keep prices and employment stable while maximizing economic output. Second, it wants to avoid high inflation or deflation. Right now the Fed is focused solely on inflation. That’s why the Fed has kept dramatically increasing the fed funds rate to combat inflation.

Now, the fed funds rate is simply the interest rate at which banks lend money to each other.

High rates equal falling stock prices…

Low rates equal rising stock prices…

Raising rates essentially adds an extra tax to anyone who uses the U.S. dollar, which is the entire world! High rates also make it more expensive to borrow, which lowers the money supply and, in theory, brings down inflation.

So in order to measure that inflation, the Fed carefully studies one economic measure above all else… It's this important number that will spark what we're calling the "critical pivot" — the exact moment the market turns around and enters the next bull run. And we think it could be right around the corner.

That's why I've created an urgent investor presentation detailing everything you need to know and what stocks could benefit the most.

I've opened up free access to it right here.

I urge you to watch it before it's too late.

Stay frosty,

Alexander Boulden
Editor, Wealth Daily

Check us out on YouTube!

After Alexander’s passion for economics and investing drew him to one of the largest financial publishers in the world, where he rubbed elbows with former Chicago Board Options Exchange floor traders, Wall Street hedge fund managers, and International Monetary Fund analysts, he decided to take up the pen and guide others through this new age of investing.

Alexander is the investment director of Insider Stakeout — a weekly investment advisory service dedicated to tracking the smartest money on the planet so that his readers can achieve life-altering, market-beating returns. He also serves at the managing editor for R.I.C.H. Report, a comprehensive service that uses the highest-quality investment research and strategies that guides its members in growing their wealth on top of preserving it.

Check out his editor’s page here.

Want to hear more from Alexander? Sign up to receive emails directly from him ranging from market commentaries to opportunities that he has his eye on.