Porter Stansberry: Silver Is Soaring Because the Banking System Is Approaching Its Breaking Point

Many analysts have described the rise in silver prices using traditional market dynamics, citing increasing tech demand and reduced capacity for producing more as causes.

Financial editor and founder of Marketwise, Porter Stansberry, believes that the rise of silver, which is experiencing a bull market, is driven by deeper causes than just the increase in tech-related demand. He links the increase in the prices of this commodity with the upcoming destruction of America’s banking system, which is being signaled by the movements of seasoned investors.

According to Stansberry, real banking investors, such as Warren Buffett and Ray Dalio, have been shedding bank stocks since 2020. They have sold millions of dollars in shares of Bank of America, UBS, Wells Fargo, JPMorgan, and Goldman Sachs. The reason behind these actions is a one-trillion-dollar-deep hole in the commercial banks’ balance sheets.

“One-third of the reserves of our biggest banks are deeply ‘underwater,'” Stansberry explained. “That’s because they bought $2 trillion worth of long-term bonds (and mortgages) at interest rates around 1%.”

According to his analysis, the value of these assets has declined as a result of rising interest rates, leading to the fall of institutions such as Silicon Valley Bank, Signature Bank, and First Republic Bank. However, the Federal Reserve, in an attempt to address the situation, has undertaken a loan program to try and patch the problem and postpone the crisis for a later date. One year after the program has been closed and these loans must be repaid.

This event can sink big institutions like Bank of America, Stansberry alleges. “Bank of America reports it has $86 billion in unrecognized ‘mark to market’ losses on that bond portfolio. The bank has tangible equity (that is, real equity) of $200 billion. If rates go above 5%, I believe Bank of America’s tangible equity would be wiped out,” he stressed.

However, not only Bank of America would be at risk, but the whole financial system would have to run to raise capital if interest rates keep rising, with bank runs ensuing.

The writers’ take:

Stansberry’ perspective about investors taking refuge in commodities in the face of a countrywide bank failure is interesting as it explains the rise of silver and gold from a perspective different than the classic central bank, tech-related demand, and supply-side constraints. However, it remains to be seen if the Fed would allow this to happen without organizing another bailout to protect the system again.

What do you think about Porter Stansberry’s explanation for the silver bull market? Tell us in the comments section below.