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Friday File: Gold, Energy Income and Fallen REITs

Solving a "Perfect Income Investment" tease, plus some portfolio updates

By Travis Johnson, Stock Gumshoe, March 24, 2023

OK, so no more banks have failed just yet, even First Republic (FRC) is holding on so far, and the Fed increased interest rates by a quarter point, which freaked people out a little bit because they wanted the Fed to “pause” while we see how the Treasury copes with the stress of the first few meaningful bank failures we’ve seen in many years. The fear of future bank runs remains high, thanks largely to the inverted yield curve (with long-term rates much higher than short-term rates) stressing balance sheets and causing depositors to leave in search of juicier returns, though Treasury Secretary Janet Yellen did essentially say that although they’re not officially extending full FDIC insurance to everybody right now, like they did with Signature Bank and Silicon Valley Bank, they will if they have to.

The government, whether that’s the Federal Reserve or the Treasury Department, would love to be able to talk down the problems instead of having to take extraordinary action, so the Fed is counting on continued tough talk on inflation to keep prices from getting overheated again, and probably quietly counting on the indirect “tightening” that worried banks are providing for the economy right now, as they become more conservative with lending… and the Treasury is counting on the fact that if they say the banks are safe, they might not have to engineer any more large-scale rescues, or do anything that sounds like a “bailout.”  So far it’s actually showing some signs of working, with inflation probably moderating and short-term rates coming down a bit faster than long-term rates, but there’s plenty of room for scary surprises still. And there’s also room for a deeper banking crisis to force the economy into a recession, and bring Fed rate cuts this year even though the Fed thinks that is unlikely, and that potential for future rate cuts seems to be keeping the animal spirits alive, especially among tech stocks.

So yes, the stock market had a terrible year in 2022, but those animal spirits that help drive inflation are still out there — you can see them in some cryptocurrencies (Bitcoin is up 70% this year), you can see them in NVIDA and AMD as they ride the AI mania (up 80% and 50% so far this year, respectively), you can see them in the Nasdaq 100, up 16% since January 1… though one ...

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