Just when you thought it was safe to get back into the water…
Another C-word crisis tanks a prominent financial firm.
Here’s the story (and what it means for investors).
Silvergate bank, a cornerstone in the crypto world, was all the rage in 2021.
They were “innovative,” providing capital and financing to many Web3 projects.
I had reservations; fast forward to today, and the whole thing has crumbled.
Earlier this week, Silvergate announced closing and returning deposits to customers.
In a press release, the bank’s holding company, Silvergate Capital Corporation, said it is shutting down “in light of recent industry and regulatory developments.”
It turns out the crypto bleeding wasn’t over.
This time we’re seeing it in a federally regulated entity. “Long-term” investors who thought we were out of the woods (holding on to stocks) will be in for a rough surprise.
It’s easy to understand why when you look at events unfolding.
Because it’s not just Silvergate Bank shutting down.
Silicon Valley Bank (SIVB) is scrambling to reassure clients after a 60% stock wipe-out.
This is another supposedly “boring” bank that tried to get too friendly with the crypto markets with too much exposure.
The natural result is the gigantic mess unfolding before our eyes.
We’re seeing the emergence of the word “contagion” again.
The spread of an economic crisis from one market to another.
Remember the good old days (circa 2008) when overleverage in terrible housing products took down some of Wall Street's most prominent financial players?
We see similar signs again.
We knew about the problems with Silvergate for a while, but Silicon Valley Bank is another player with serious risk. Signature Bank (SBNY) could get hit too.
These are all “regional banks” that should be paying out decent dividends.
Yet, KRE, an ETF that tracks them, shows the worst one-day selloff since 2020.
This begs the question:
Is it a shock that everything starts right when the Fed is close to its terminal rate?
Not if you’ve been keeping up.
Over the past two years, we’ve seen a massive pullback in liquidity, and it’s starting to bleed over into credit markets. That doesn’t bode well for most investors.
Yet, high-volatility markets offer profit opportunities if you know how to play them.
On the one hand, passive investors who hold on to stocks blindly will be in for a shock…
Especially when considering “inflation-adjusted” returns.
But on the other hand, massive profits are in store if you know where the smart money will be as this new crisis unfolds.
That’s where our bear-market roadmap comes into play.
We know where the institutions are stuck and where they will be forced to sell.
If things get wild, we know where the smart money buys and can cash in quickly.
And because we know how to use options to limit risk and leverage returns, it’s easy to see fast winners. Like the 72% win we peeled off SHOP after yesterday’s market bell.
SHOP is just one of four companies on our radar this month.
If you want to learn more, my free video reveals our approach to finding these winners.