Money Is “Disappearing”: Bank Crisis Not Over, Says Bond Trader | Patrick Perret-Green

Last year, Patrick Perret-Green, veteran bond trader and macro strategist, warned his clients that plummeting liquidity at regional U.S. banks could cause serious issues. Now that these issues have made themselves apparent with the fall of three U.S. banks, Perret-Green of PPG Macro joins Forward Guidance to share his views on bank liquidity, loan growth, and credit risks within banks as well as shadow banks. Filmed on May 11, 2023.

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Timestamps:
00:00 Intro
00:28 Patrick's 2022 Warnings About Banks
10:33 Credit Risks
15:49 Shadow Banking System
19:35 Permissionless
20:38 Loan Growth
29:17 Global Liquidity Is Collapsing
34:32 Foreign Banks Are Having Issues
37:20 The Pain Trade Is For The Dollar To Go Higher
40:11 Rate Hikes "An Economic War Crime"?
43:34 Commercial Real Estate (CRE)
49:42 Bank Run Risks
56:14 Blockworks Research
57:16 Where Are Interests Rates Headed?
01:00:54 China
01:08:50 Closing Thoughts
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Disclaimer: Nothing discussed on Forward Guidance should be considered as investment advice. Please always do your own research & speak to a financial advisor before thinking about, thinking about putting your money into these crazy markets.

[andrew.alonzo]

About the current bank situation, I'm really concerned. I am worried about a lot more if a bank the size of SVB may fail. I have a friend who manages a fast-growing startup and was severely impacted by the bank run. I have taken more than $950k out of my bank. Since the FDIC only provides coverage up to $300K, an implosion could have negative consequences. presently want to invest in the stock market. Does anyone have any ideas on how I might proceed?

[Macvicky]

Everyone's preaching doom, without any key data-trajectory on how to maneuver, it's obvious stocks are unstable but folks are still pulling off huge 6 figure profits from this same market y'all are warning us about, videos on such strategies to maneuver will really be helpful, thank you.

[darnellcapriccioso]

Is it advisable to continue saving in the United States dollar given the recent occurrences with SVB, signature bank, and first republic bank? These events seem reminiscent of the 2008 market crash 2.0. Alternatively, would it be wise to consider investing in gold at this time?

[seconds]

Jack Farley continuing to impress! Such patience, such professional temperament. He's not easily intimidated, which is refreshing.

[trazzpalmer]

As an elder millennial, one of the few advantages is having lived through the Great Recession. My advice. Reduce unnecessary expenses, increase your savings by investing in financial markets and do not sell. One thing I know for sure is that diversifying your income can help insulate you from much of the craziness going on in the world.

[peterwilliams]

I am new to the stock market. Every stock that I bought so far, I was out of luck because I bought them when they were expensive. I feel I missed out on all the stock opportunities so far for the tech stocks.I believe having 175K yearly income would be a good investment so I want to plug all my savings into the stock market. I know this sounds a bit dull but I would like to know if I should learn investing or let somebody else (more capable like a FA) do it for me? Please share your thoughts. I am kind of tired of searching for a good stock to buy and losing all the good opportunities

[jonathanlee]

👍Thanks, Jack, for tying your guest down on saying what the difference/similarity is between commercial bank-loans to the public and bank credits received from central-banks which buy back their own gov's bonds from banks. I.e does QE affect M2. Strong interviewing.👍

[gurneetchatha]

Brilliant work this show is becoming better and better by episode . Thanks to the host great 👍 work

[tulumataman]

I HAVE INCURRED SO MUCH LOSSES TRADING ON MY OWN...I TRADE WELL ON DEMO BUT I THINK THE REAL MARKET IS MANIPULATED... CAN ANYONE HELP ME OUT OR AT LEAST TELL ME WHAT I'M DOING WRONG ?

[tomamix]

Excellent interview (although chaotic). Key takeaway: the majority of credit risk (bad loans) is not with the banks, but rather private equity, hedge funds, and "shadow banking" (including entities like Blackstone REIT and probably BDC's). Also, Tier 1 capital ratios tell you how risky any given bank really is (should be well north of 10%). The credit crunch is coming, and corporate debt (at 75% of GDP) is far too high.

[SeanORiley]

Actually read the FED Minutes 700 pages report in October 2012 where they discuss this exact problem. How they are going to burst the long term fixed interest bubble and discuss all the effects and place the time line about two years ago.

[DocDanTheGuitarMan]

I love the “providing liquidity” phrase. Finance speak for a bailout.

[jaybird]

One of the things I see at the lower level is this notion of ingrained inflation where people seem to think their old push lawn mower or clucker car is worth twice as much as it was before pandemic. It'll take a while to shake out all of this fantasy pricing. Perhaps it's begun as deflation takes hold of our economy now.

[JohnTaylor-tswk]

Great interview.
In 2008, I actually did move savings to HSBC online because they matched the Fed Funds rate.
Within a month after the Fed cut rates to zero (and HSBC followed), I moved my savings back and closed that account.
My savings has been kept in my TD Ameritrade trading account ever since. I never had a problem with the idea of investing my own savings.

[bn]

Jack you are wrong about the bank BS. Your thinking is based in “bailout logic”. You said that “banks had interest rate risk” and not credit risk. Together they both come to the value of the bond. Your thinking is that the Fed will just ignore the price of the bond and loan the KRE u limited funds.

The banks have too much leverage, made bad investments, and many are insolvent if market to market. Now the Fed plays a little game of not marking them to market currently and that may work out for many banks.

But you cannot just say “it’s interest rate risks” so banks can ignore it. We also cannot overlook this problem is all throughout the Pension system, HedgeFunds and anybody who doesn’t mark to market.

[MakuLabs]

Independent judgement and decisions trump everything else. Thanks for sharing!

[ValueAnalyst]

Forward Guidance should have its own YouTube channel, please 🙏

[babakmohebbi]

True, the banks that used the money that they borrowed from the Fed and did not lent it to their customers and bought into the treasuries will fail. Well deserved.

[bitley]

I see a lot about SBB and "commercial buildings" but please don't read that as SBB would sit with unrented spaces. They have schools. Homes for elderly. Their fleet of buildings is rented out. The stock does not reflect the real value. SBB has been trying to navigate in a world where the interest rate is rising. However this also means they get higher rent income. I would probably even go as far as saying the stock is a bargain right now.

[markhow]

Wow Jack - this guy is smoking smart! Like Stephanie Pomboy - keep ‘em coming!