 Hey everyone, this is Dan. Let's talk about the recent bank failures and what the federal reserve banks have been doing to prevent 2023 from turning into another global financial crisis. As you probably know already, Silicon Valley Bank with more than $200 billion of assets was posed by regulators on March 8, 2023 because some of the depositors of the bank were withdrawing vast amounts of money causing the bank to incur huge losses as the bank sold off their long-term treasuries. On March 12, 2023, Signature Bank with more than $100 billion of assets also failed because of similar problems. You might say that these two banks were probably not managed as well as some of the other banks, but the fact that the federal reserve banks increased the Fed funds rate by more than 4% in the last year was also a major reason why the two banks got into trouble. On December 2022, FACSET published a list of 20 banks which had high levels of unrealized losses compared to their total equity capitals. Signature Bank was among the list of 20. Another bank, Silvergate, was on that list also. Silvergate did not get shut down by regulators, but Silvergate's holding company recently decided to shut down the bank also because of losses due to long-term securities and their business dealings with the problem Cryptocurrency Exchange FTX. Many people feel that the rest of the banks on this list and maybe some other banks are also failing because of the systemic issues related to the Fed rate hikes. Some people started to compare 2023 to 2008 when there were many bank failures. Let's look at what happened in 2008. According to FDIC, 25 banks failed in 2008. The situation got worse in 2009 with 140 bank failures. In 2010, there were even more, 157 banks failed. So far, we have only two banks that failed in 2023. The bank failures in 2008 to 2010 brought on what we know as a global financial crisis, which caused S&P 500 to drop more than 50% and the unemployment rate in the U.S. to go up to 10%. Are we going to have another global financial crisis in 2023? To answer that question, I looked into the data from 2008 and compared the data to today. I found something very interesting, especially related to the reactions of the Fed to these bank failures. I got a list of all the bank failures from 2008 to 2010 from the FDIC website. I also added into this list the failures of Bear Stearns and Lehman Brothers. Bear Stearns and Lehman Brothers were investment banks. They were not supported by the FDIC. That's why they are not on the FDIC list of bank failures. However, we absolutely need to include Bear Stearns and Lehman in our analysis because of their share sizes and their spectacular failures back in 2008. As the Fed has proven during the 2008 market crash and the 2020 pandemic market crash, one of the most effective ways to save the economy is for the Fed to increase its total assets. Generally speaking, the bigger the economic problem, the more the Fed total assets would need to be increased in order to stimulate the economy. When the Fed increases its total asset, it buys Treasury's mortgage back securities and other debt instruments from the banks. In exchange, the Fed transmits money to the banks electronically. The more assets the Fed owns on its balance sheet, the more money will be created by the Fed. As the Fed pumps the newly created money into the banks and into the economy, the economy and the stock market start to recover. To measure how bad the situation was with bank failures back in 2008 to 2010, I use the assets of the failed banks as an indicator. Now, when a bank fails, its assets do not completely vaporize. There will be asset destruction when a bank fails, but some of the assets are also preserved as the bank is bought out or absorbed into another healthier bank. It is however still meaningful to use the assets of the failed banks as an indicator to measure how big the problem was during the global financial crisis. If you look at the cumulative assets of the failed banks, represented by the black line here, it started out as zero in the beginning of 2008, then went up and up as we went from 2008 to 2009 and 2010. I've also plotted on the same chart the change in Fed total assets as indicated by the green line. As you can see, the Fed total assets also increased during this time. In other words, the Fed was pumping money into the economy to try to reverse the market crash. In the beginning, the failed assets were piling up much faster than the Fed was printing money. The black line was way above the green line. In 2009 and 2010, the Fed started to print money at a much faster pace and the distance between the two lines got narrower. To simplify this chart, I would just plot the difference between these two lines with this chart. The higher the red line here means the problem was bigger back during the time between 2008 and 2010. On this chart, I will add S&P 500 index. As you can see, when the Fed allowed the failed bank assets to get much greater than the freshly printed money, S&P went down and after the Fed started to pump a lot more money into the system to catch up with the failed bank assets, S&P finally started to recover. Tomorrow of the sorry is, therefore, when in trouble, print money. And you have to print money very quickly. Did the Fed apply that lesson learned to what happened in the last couple of weeks? Let's look at 2023. Since March 8th of this year, the two failed banks have total assets of about $319 billion. Also, since March 8th, 2023, the Fed has increased its total assets by $391 billion. The Fed is ahead of the failed assets by $72 billion, which places today here on this chart. We can see that in 2023, the Fed has increased total assets much faster than what it did back in the beginning of 2008. If the Fed continues to do so to stimulate the economy in face of these bank failures, it might just prevent the economy and the stock market from crashing much further. The added liquidity due to Fed money printing will, of course, also prevent some of the banks from actually failing. In the March 22 FOMC press conference, Fed Chair Jerome Powell set the following. Our view is that the banking system is sound and it's resilient. It's got strong capital liquidity. We took powerful actions with Treasury and the FDIC, which demonstrate that all depositors' savings are safe and that the banking system is safe. Deposit flows in the banking system have stabilized over the last week. Chair Powell also mentioned an internal review that the Fed is conducting to identify the cause of the recent bank failures and to develop a plan to prevent more bank failures from happening. He did not mention the details that the Fed had already gotten into the firefighting mode by pumping $299 billion into the system since March 8th of 2023. My opinion is that it's good for the economy and for the stock market in the near future if the Fed continues to be so proactive or accommodating. Some might argue that the Fed has already printed too much money since 2008. Besides printing more and more money will continue to cause high inflation. As you know, the Fed has been trying to bring inflation down from the high PCE inflation index of 5.4% in February to 2%, which is the Fed target inflation rate. The Fed will have to balance the need to curb inflation with the need of maintaining stability in the banking system. From the Fed actions we saw in the last couple of weeks, the Fed seems to have chosen to stabilize the banking system first. Hopefully after the Fed has stabilized the banking system, it'll get back to the task of controlling inflation. I'm sure in the next few weeks the Fed will share more information with the public about what they plan to do after their internal review of the bank failures. So far I can see that the Fed is already on the right track with preventing another global financial crisis from happening. So what are my investment strategies in light of all these? First of all, I have not dumped my stocks and ETFs at this point. In fact, if there's no more bank failure in the next two to three weeks, I might be buying more long positions in anticipation of the market recovery. I've been swing trading ETFs such as SPXL, SPXS, TQQQ and SQQQ, and I'll continue to monitor the technical indicators of SPY such as RSI, Bollinger Bands, and DMI to identify swing trading opportunities. And I'll share some of my trades with my subscribers on Twitter. If you like what you have seen in this video, please click the like, subscribe and notification buttons. I'd also like to suggest that you subscribe to my Twitter account, which is DanMarketL, so that you can see some of my stock trades and get my latest news updates. If you have any questions, comments or suggestions, please send them to me on YouTube or by way of Twitter. I'd like to remind you that I'm not a financial advisor. I share my stock trading strategies and analyses for educational and entertainment purposes only. If you want to buy or sell stocks, you should make your own decisions and you should definitely consult the financial advisors before you do so. This wraps up my video for now. I will chat with you again in the next few days. In the meanwhile, I'd like to wish you the very best of luck with your financial investments.