by Gary Alexander
March 14, 2023
“A soothsayer bids you ‘Beware the Ides of March …
–Brutus to Julius Caeser in Act I, Scene 2 of “Julius Caeser”
Will the Ides of March (tomorrow, March 15), bring another banking failure or “hot” inflation data, or a surprise? The Consumer Price Index (CPI) comes out today, March 14, and the Producer Price index will be released tomorrow, March 15. We haven’t had very good luck with the inflation indexes so far in 2023 or financial fates on previous March 15’s. I’ve got four stories to chill your spine this mid-March week.
- The Ides of March 1968
My first job out of college was researching international economics for a major magazine. I got my post-graduate economics education via the newsletter industry. My dad was in an investment club in Seattle and he sent me copies of the jam-packed International Harry Schultz Letter, and I did most of my research in a college news bureau in Southern California which subscribed to the S.J. Rundt economics newsletter. I found more valuable insights in those two letters than in most economics textbooks or news.
On November 18, 1967, while I was writing a long series of articles on Japan’s emerging economic power, Britain devalued its pound sterling. We wondered if the dollar was next, so we decided to invite the Swiss banking guru Stefan Jean (S.J.) Rundt, head of the company bearing his name, to address our college and faculty. Then our News Director sat down for an extended interview with him on January 10, 1968. While he didn’t directly say the dollar would be devalued soon, he did say it was being held afloat by too many financial “gimmicks,” and he could see “the downfall of the entire global currency structure” coming. As for the dollar, he said, “I think the dollar will not survive over 2-1/2 years” in its current form.
He wasn’t exactly a soothsayer, but his prediction came true on the Ides of March, just two months later:
On Thursday evening, March 14, the U.S. government asked the British to close their gold market the following day, March 15, due to heavy gold demand in exchange for our inflated dollars. The Queen complied, declaring a Bank Holiday on the Ides of March. An emergency conference was held over the weekend in Washington DC, leading the U.S. Congress to repeal the requirement for any gold reserve to back the U.S. currency as of Monday, March 18. The London gold market stayed closed for two weeks, while gold prices soared in other nations. This marked the death knell for the London Gold Pool.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
I certainly did my part to deplete U.S. gold reserves, buying a one-ounce gold 1967 class ring ($40) and two gold wedding bands for our marriage on the Super Bowl Sunday (January 14) after S.J. Rundt spoke!
So S.J. Rundt was right. The Ides of March 1968 marked the “downfall of the entire global currency structure,” based on the postwar gold exchange standard. And 3-1/2 years later, President Richard Nixon permanently closed the gold window and devalued the dollar, meaning Mr. Rundt was just one year off.
Ironically, the U.S. officially established the gold standard when President William McKinley signed the Gold Standard Act, using a new gold pen, on March 14, 1900, shelving the bi-metallic silver-and-gold standard favored by William Jennings Bryan and the Democrats, so that gold standard lasted 68 years.
- The Ides of March 1985
As we entered the era of high inflation, banks were unable to offer high interest in passbook savings accounts, so the Savings & Loans stepped in, offering more, often by investing their deposits in riskier assets. There was greed and fraud involved in many S&Ls, but their main systemic problem was the lack of risk metrics for making real estate loans after inflation retreated in 1982 and real estate corrected. As the 1980s boom replaced 1970s stagflation, S&Ls began to fail, with those failures soaring after the 1987 market crash.
Specifically, on Friday, March 15, 1985, Ohio Governor Richard Celeste temporarily closed all 70 of Ohio’s S&Ls after the biggest, Home State Savings Bank, began to collapse. He re-opened the healthy S&Ls the next Thursday, March 21, but withdrawals were capped at $750 per account, to prevent a run on the banks; but he couldn’t stop that run, nor the massive failure of banks and S&Ls over the next decade. From 1986 to 1995, almost a third (1,043 of 3,234) of S&L associations (and about 2,000 banks) failed.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Could the SVB Financial crisis be the new Ohio Home State Savings Bank — the first of many to come?
- The Ides of March 2008
On Wednesday, March 12, 2008, Bear Stearns CEO Alan Schwartz went on CNBC to assure investors that his firm had ample liquidity to survive, so the stock closed at $61.58. (The average price target on Wall Street was a lofty $98.87). But on Friday, March 14, JPMorgan, backed by the Federal Reserve, had to provide a large (but undisclosed) volume of emergency financing to Bear, which finally admitted that its “ample” liquidity had deteriorated dramatically in just the past 24 hours. The stock plunged over 50% to $30.85, but the average price target only dropped about 5%, to $93.62. Then came the Ides of March.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
In harried weekend meetings (March 15-16, 2008), JPMorgan agreed to buy Bear for $236 million, or $2 a share – just a penny on the dollar from its price at the start of 2007. That marked the end of Bear’s 85-years of independence on Wall Street. On Monday, shares opened at $4.81, on hopes that a buyer would emerge, but no nibblers arrived. The average target price fell to $2. The 2008 crisis was now underway.
Alas, it appears that Jim Cramer also recommended Silicon Bank during a “Mad Money” segment on February 8, 2023. Watch out below!
- The Ides of March 2020
Here’s the one we still feel…with annual after-quakes – the COVID-19 pandemic crash and its aftermath:
On Sunday, March 15, 2020, the Fed met in emergency session, reducing rates a full 1% to zero. The Fed also offered unlimited liquidity (QE4-Ever), but the Dow fell 3,000 points the next day anyway. The VIX (volatility index) reached an all-time high of 82.69 that Monday, beating the previous record from 2008.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
In the next few months, Modern Monetary Theory (MMT) went into overdrive, with the Treasury throwing $6 trillion of new money into the air. This infusion of money (surprise!) caused inflation.
On March 15, 2021, when higher inflation rates began to surface, the major practitioners of MMT began to deny their role by using the word “transitory” as their habitual adjective before inflation. I rebutted that evasion with force in my April 13, 2021 column here: “Inflation Will Roar Again, and Probably Soon.”
Here are the 12-month run rates for the spring months for 2020, 2021, and 2022, showing dramatic increases each year, year over year, bringing us the worst round of inflation since 1979-80.
| Consumer Price Index: Year-Over-Year | ||||
| Year | March | April | May | June |
| 2020 | 1.5% | 0.3% | 0.1% | 0.6% |
| 2021 | 2.6% | 4.2% | 5.0% | 5.4% |
| 2022 | 8.5% | 8.3% | 8.6% | 9.1% |
| Source: The Bureau of Labor Statistics | ||||
On March 15, 2022, the Producer Price Index for February was released at double digits, +10% year-over year, the highest annual rate in the entire history of the Producer Price Index. Inflation was near its peak.
The Good News: A Quick, Sharp Market Recovery
Just two days after the Dow dropped 3,000 points in a day, at mid-day Wednesday, March 18, 2020, a billionaire hedge fund manager, Bill Ackman, called CNBC (I was watching) and launched a 28-minute fear-laden plea to shut down the stock market, and the entire global economy for 30 days: “Shut it down. Shut it down now,” he virtually yelled. “America will end as we know it” unless we “completely close down the economy. Shut it down for 30 days. Hell is coming.” (See: “March 2020: How the Fed Averted Economic Disaster,” by Nick Thomas, Wall Street, February 19-20, 2022)
The Dow fell off a cliff while Ackman was talking, dropping as much as 2,000 points and triggering a market-wide 15-minute trading halt shortly before 1:00 pm, one of several halts during that month.
Alas, this soothsayer was too late. Just three trading days after Ackman’s tirade, the S&P bottomed out and gained 24% in three days! Without shutting down the global economy, stocks soared, as did real estate, bitcoin, and several other markets, due in large part to the $6 trillion in new “helicopter” money.
Let me close with some more good news. Inflation won’t go on forever. The Fed has cut back from its QE binge and its massive money infusion, and the Fed may not raise rates much longer. Slush fund spending bills in Congress may be over. This will dampen demand in many areas, shrinking prices by year’s end.
If we can just get through tomorrow…
Navellier & Associates Inc. does not own Silicon Valley Bank (SVB), Boeing Co (BA) or Jpmorgan Chase & Co. (JPM) in managed accounts. Gary Alexander does not personally own Silicon Valley Bank (SVB), Boining Co (BA) or Jpmorgan Chase & Co. (JPM).
All content above represents the opinion of Gary Alexander of Navellier & Associates, Inc.
Also In This Issue
A Look Ahead by Louis Navellier
What Friday’s Jobs Figures Really Mean
Income Mail by Bryan Perry
Will California’s Big Bank Failure Halt Further Rate Hikes?
Growth Mail by Gary Alexander
Should We “Beware the Ides of March”? (Again)
Global Mail by Ivan Martchev
The Fed is on the Cusp of a Gargantuan Mistake
Sector Spotlight by Jason Bodner
“Numbers Don’t Lie” – Or Do They?
View Full Archive
Read Past Issues Here
About The Author
Gary Alexander
SENIOR EDITOR
Gary Alexander has been Senior Writer at Navellier since 2009. He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks. For the previous 20 years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.
Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s. He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division. Before that, he covered the economics beat for news magazines. All content of “Growth Mail” represents the opinion of Gary Alexander
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