S&P Near a Record... 60% of Its Stocks in a Bear Market

The breath in the US market has only been this bad twice in all of the last 100 years. In both cases, the S&P dropped nearly 50%. 86% of the S&P 500 is a bare market. Rates are going to hit 8%. I don't know what fantasy world people are in if they think the consumer is in such good shape. This is the type of inflationary psychology that can really spiral because now you have hoarding. the shelves are going to empty out and then the merchants are going to see all of this and they're going to jack up their prices even faster when they see all of this demand. It's already repeated twice. Why not a third time? Remember the most dangerous words in the investing dictionary are this time it's different? Because everybody says this time it's different but it never is. [music] The Peter Schiff Show. >> I'm going to begin today's podcast pretty much in the same way that we began the last podcast, and that's talking about the relentless rise in long-term interest rates as reflected in the bond yields, particularly US Treasuries. Now, again, this is no surprise to my audience. It's not like we didn't see this coming. I've been talking about this for years because I knew that it was inevitable. But what's also amazing about what's happening in the bond market is the fact that it's having no impact on the overall stock market. And it's not that stock market investors aren't noticing what's happening in the bond market. In fact, they talk about it every day. So, it's not like it's happening behind the scenes somewhere and people haven't noticed it. They've noticed it, but they just don't seem to care. They keep rationalizing excuses for why this time it's different and why rising bond yields are not bad for stocks. Well, they're not competition for stocks. And so, the stock market can keep rising even if interest rates are high or continue to rise. And people believe that the economy is for some reason immune to the impact of rising interest rates or to the effect that they even think it's going to slow down the economy a bit. They're not concerned that it's going to slow down the stock market. And I think these thoughts are at best just wishful thinking. But more likely, it's just a lot of ignorance or people are just talking their books and they're putting a positive spin on whatever negative news is is coming up. If you look at where the yields went, so the 10-year Treasury closed Friday at 5.16%. So this is the highest it's been the highest on a closing basis in whether is it 19 or 20 years. The intraday high on Friday was 5.22%. And that was the high of the week. So bonds pretty much were falling and yields were rising all week and the only reason that yields stopped rising was that the week came to an end. It was Friday. And you know, I'm sure if the markets were trading on Saturday, which is when I'm recording this podcast, bond yields would be rising again and they would be higher than the 5.16 that the 10-year closed at. The 30-year closed at 5.49. The intraday high was 5.53. Again, that is about a 22-year high in yields. And in fact, even the five-year now closed out the week with a five handle exactly at 5%. But intraweek, I saw the yield maybe 5.05. I forget what the exact high was, but it did get some distance above 5% before there was some pullback in the afternoon on Friday. The 2-year yield got above 4.9. I think I saw 4.91, maybe 4.92. Now, it pulled back to 4.85 on the close, but I don't think it's going to be long before the 2-year is also above 5%. So, we'll have the 2-year, the 5-year, the 10-year, and the 30-year all above 5%. 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This is not the time to assume you'll find what you need later. Visit preparewithper.com and build your 90 days of real food security. And again, it's not just US yields that are rising, yields are rising around the world. Look at Japan again. That is a particularly important market that I have been talking about for years and forecasting that this would happen. The 10-year JGB settled the week above 3%. 3.05. That's the highest close that I recall. And the 30-year yield at 4.13. Again, that's the highest. And that's an all-time record high because Japan hasn't been issuing 30-year bonds for that long. What is 20 years or something? But this is the highest the yield I've ever seen. But these are still low yields. But even the two-year now in Japan is getting close to 2%. It's 1.91. The 5-year is 2.38. So yields are rising around the world. And this is a major problem for economies and for the stock market and of course the housing market. Mortgage yields are now above 7%. I think about 7.2 7 and a quarter. And the only reason why they're not substantially higher, the only reason that a 30-year fixed rate mortgage is not already at 8% is because the Trump administration ordered the GSC's Fanny and Freddy to buy long-term mortgages. And they've been doing that. And of course, they've been losing money on those purchases because as mortgage rates rise, the value of the mortgages that Fanny and Freddy already bought are coming down. That's one of the reasons that these stocks continue to make new 52- week lows. Look at these things falling apart. Now, they had a big runup when Trump was elected on the promise that he was going to privatize them. and all of his buddies had loaded up on these shares before and immediately after the election and then he talked it up in the first few months to really goose the market. But of course, nothing has happened because nothing can happen for the reasons that I stated early in the Trump presidency, which was that there was no way that he could pull off this trick. And in fact, by ordering the GSC's to buy up mortgages and basically take a hit in order to prop up the housing market was more indication of why it would be impossible to privatize these companies when they're being used for political purposes when they're deliberately losing money so that they can influence home prices, which would obviously benefit politicians who are trying to get the vote. votes of homeowners or keep the markets from collapsing. But rates are going to hit 8% even with the GSC's buying. And what's also interesting about the rise in bond yields this week is that oil prices fell. They were remember about $100 a barrel and I think they finished around 92. So, there was some hope out there that maybe we're going to have some resolution to the war. Maybe we're going to have a peace. Maybe the strait's going to open up. None of that is probably going to happen, but there was a lot of talk that maybe it would happen. Of course, we've had that talk before, but the markets seem to be fooled by it every time. But the interesting thing was yields on bonds kept rising for a while. there was a very strong correlation between oil prices and bond yields. They were kind of in lock step. And so if you saw a fall in oil prices, you would expect a similar fall in bond yields because it was all keyed on what they thought the Fed might do. Rising oil prices will push up the CPI, putting more pressure on the Fed to hike rates, and therefore bond prices were falling and yields were rising. And conversely, if oil prices were going down, oh, the inflationary pressures are subsiding, maybe they don't have to hike rates and then bonds were coming down. Well, now the bond market has broken out of that and bond yields are rising regardless of what happens to the price of oil. That's how weak the bond market is. And remember, before the Fed's last rate hike, the view was that that hike was going to be good for bonds. That that was going to finally convince the bond market that the Fed is serious about fighting inflation. It's not just talking, it's acting. And so by hiking rates, that will solve the problem of rising bond yields, they would start to fall because now they would have confidence that the Fed was going to reign in inflation. Well, that ship sailed. The Fed hiked rates and interest rates continue to rise. Bond yields show no sign that they're going to stop rising even though the Fed delivered that symbolic rate hike that everybody thought was required. But now if you look at the probabilities, the probabilities of two and three rate hikes have also risen on the week because obviously it's not one and done because as I said, one is not nearly enough, especially since it was just 25 basis points. But again, the stock market investors are shrugging all of this off. This profound weakness in the bond market. In fact, some stock market investors have now conceded that yields are probably going to keep rising regardless of what the Fed does. Now, they don't realize just how high they're going to go. Maybe in their minds, they think, "All right, maybe five and a half, 6% top, something like that." I don't think they have a realistic understanding of just how high these rates are going to go, but they concede that they're probably going to go higher and they don't care because they think everything is so good, the economy is so good that we could just afford it. We'll just pay higher rates, no problem. And I even hear talk about how the consumers in such great shape. You know, the unemployment rate is really low and the consumers have a lot of cash, so they can afford to pay higher interest rates. No problem. I mean, I don't know what fantasy world people are in if they think the consumer is in such good shape. Look at the consumer confidence numbers that came out this week. We got the final numbers for the month for University of Michigan, but consumer sentiment dropped from 51.7 to 48.1. And the year-over-year inflation expectations, this is one-year expectations, rose from 4% to 4.6% and 5-year expectations edged up to 3.4%. And one of the interesting things about the survey was that now even Republicans are becoming more pessimistic. In the past, the Democrats were extremely pessimistic, but the Republicans were still holding on to a lot of optimism because of their confidence in President Trump. Well, that confidence is now waning because now even Republicans are starting to get worried. And in fact, one of the interesting things too about the Michigan numbers is that it reveals that consumers are now buying stuff because they're worried that if they wait, the prices will be even higher. So spending is being pulled forward that might have normally happened later because consumers are afraid that if they wait and buy stuff when they actually need it, it'll be a lot more expensive. So, they're buying stuff before they need it because they're worried about it being more expensive. This is the type of inflationary psychology that can really spiral because now you have hoarding. And what have I been recommending that people do on my podcast for years? I have been telling people to do exactly that. to stock up to buy the things that you need even if you don't need them because you know you're going to need them in the future. So, as long as they're not going to perish, as long as you can store them and keep them and they're not going to go bad or expire or something, I've been saying load up because I knew that the return on that investment would probably exceed what you're going to get in the stock market, certainly in the bond market, because if you need to buy something, but you don't need it today, you're going to need it next year. And if next year the price is 10% higher than it is this year, if you buy it this year, you made a 10% return on your investment tax-free. You don't have to pay taxes if the toothpaste you bought a year before you use it goes up 10% between the time you bought it and the time you used it. So that's a tax-free gain. So stocking up on stuff makes a lot of sense. But what happens is it's a self-perpetuating spiral. When just the Peter Schiff podcast listeners do it, it's no big deal. But when the whole country adopts that mentality that I better buy it now, I better just, you know, load up my my closets with stuff, the shelves are going to empty out and then the merchants are going to see all of this and they're going to jack up their prices even faster when they see all of this demand. There is no way to look at these numbers and conclude that the consumer is so flush that he can afford higher prices. In part because the current spending numbers are actually skewed by the the spending that's being pulled forward by people who are afraid that if they wait it's going to be too expensive. So they're buying stuff now. But that also means that future buying is going to come down because people have already bought the stuff that they were going to buy later. they bought it sooner and so future numbers on consumer spending are going to be a lot weaker and prices of course will be a lot higher. But look at what happened to the stock market this week. The S&P despite this rise in interest rates the S&P was up 63%. The Dow was down.15%. But the NASDAQ with all the tech stocks, NASDAQ was up 1.2% on the week despite the route, one of the worst weeks yet in the bond market. Only the Russell 2000 really reacted. That index was down 1.3% and that's because it doesn't have all these big tech stocks in it. And so these are more regular businesses that are going to be clearly impacted by rising interest rates. Every investor understands counterparty risk. When you deposit money in a bank, it's not really your money anymore. It's a claim on the bank. Most people never apply that logic to their passwords. They reuse the same one everywhere. They trust some company's server to keep it safe and then that company gets hacked. Now their one password is everyone's password. That is a single point of failure and you built it yourself. Here's what I'd want instead. Something closer to self-custody. 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They think that rising interest rates aren't bad for the overall stock market. They are, but they think they are bad for gold and silver. And they're not. Gold closed down 1.4% about 4,284. Silver down about 3% at 6417 on the close. The reason again and and this is very important that you understand this rising bond yields are good for gold and silver. They will harm the economy. They will lead to bigger budget deficits. They will lead to more money printing and more inflation. And that is good for gold and silver. And of course, if you are a sovereign and you have a bunch of US treasuries in reserve and you want to sell those treasuries and sell the dollars, what are you going to buy to replace that asset in your reserves? You're going to buy gold. So, if people are losing money in treasuries and you know, central banks are losing money and they want to get rid of their treasuries to avoid losing more, what are they going to do as an alternative? they are going to buy gold. Gold is how you hedge a weak bond market because gold is an ultimate inflation hedge. Inflation is the destroyer of fixed income. It's a destroyer of bonds. Gold is your savior in that environment. I've always been saying that gold will be the last safe haven standing because treasuries are not a safe haven if what you're afraid of is inflation. Because when it comes to inflation, treasuries are right in the crosshairs. That's what is going to get hit the hardest. So if you want a safe haven from inflation, you can't buy US treasuries. You have to buy gold. If you're a central bank, you can buy stocks, you know, as long as they're not really overpriced. You could buy real estate, but foreign central banks aren't going to buy real estate. They're not going to be loading up on US stocks. No. What are they going to buy? Their only real alternative is to buy gold. and they are going to continue to do that. So, this is all very bullish for gold and silver. Traders will figure that out eventually, but in the meantime, it's an opportunity for investors who understand it to accumulate more. Fool's gold also dropped a bit on the week, but it's about 84,000. So, Bitcoin is still holding on to a big chunk of the big gain that it got the prior week. And again, on Monday, it was up. But look at Micro Strategy giving up a lot of the gains, down 5.6%. 6%. By the way, Stretch, even though they've been buying shares of Stretch every week, it's still not par. It closed at 98.54, down.3% on the week, and so the yield is 12.2%. But though I started off the podcast by talking about how the stock market is shrugging off the rise in bond yields, it's actually not. It's only the major averages that are shrugging off the rise. And that's because that's masking what's happening with the vast majority of stocks in the S&P 500. In fact, the S&P 500 is only.7% below its all-time record high. So, it's almost at a record high right now. But the vast majority of stocks aren't even close to an all-time record high. In fact, the average stock in the S&P 500 is 19% below its record high. And of course, the average includes all the ones that are making record highs. In fact, if you take out the top 70 stocks from the S&P and just look at the other 430, the average of those 430 is 21.7% from the highs. So on average, 86% of the S&P 500 is a bare market. But if you want to drill down to the individual stocks, 60% of all of the stocks in the S&P 500 are more than 20% below their highs. So you've got 60% of the stocks in bare market territory. And in fact, look at the highs and lows on the week in the S&P 500. Just this last week, 14 stocks out of those 500 made new highs. But 41 made new 52- week lows. You basically have 3 to one new lows to new highs in a bull market where the market is almost at a record high. You normally don't see 3 to one new lows unless the whole market is in a bare market. In fact, the breath and that's what you call when you compare how all the stocks are doing compared to the averages and the ones on top with everybody else, right? the generals compared to the troops. The breath in the US market has only been this bad twice in all of the last 100 years. The first time was January of 1973. That was really the peak period from the 1960s Nifty50s stock market bubble. Following that 1973 high, the S&P dropped 48.2% 2% almost 50% and the market didn't really make a new high until the early 1980s. So it was a brutal bare market and the warning sign was breath as bad as the breath we have right now. Now the only other time during the last hundred years where you had breath as bad as the one we got now was in late 1999 early 2000. That was the peak of the dotcom bubble. And following that peak, the S&P dropped by 49.2%. Of course, the NASDAQ did even worse. It dropped by almost 80%. So, you have what we're experiencing now, only two precedents, and in both cases, the S&P dropped nearly 50%. Now, why wouldn't it do it again? Well, you have to argue that this time is different, that it's okay for the breath to be this lousy, even though it wasn't okay in 1973 and it wasn't okay in 2000, because this time it's different. Well, if it's different this time, it may be because it's worse because the fundamentals of the economy are much worse now than they were then. The only potential wild card again is AI, but we don't really know how fast these benefits of AI are going to be delivered in the economy and if it will be fast enough to save us from history repeating. It's already repeated twice. Why not a third time? Remember, the most dangerous words in the investing dictionary are this time is different because everybody says this time is different, but it never is. If you run a business, a real business with inventory and ad spend and actual customers. 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And maybe the smartest part, it isn't locked into one AI model. That's what people don't realize. Perplexity computer orchestrates all the leading models behind the scenes and automatically sends each step of the project to whichever one is right for the job. I just tell it what I need done and then I get out of the way. For a limited time only, our listeners can try Perplexity Computer for free. Head to pplx.ai/ AI/Gold, that's pplx.ai/gold, to try computer today. Most AI tools are still answering questions while Perplexity Computer is completing full projects. In fact, one of the guys who was talking his book, I think, this week is Bill Aman. He's one of the guys, you know, who's really big in the Fanning and Freddy trade. And so obviously he's got incentives here, but he is criticizing the Fed for raising interest rates because he says this time it's different. He says that because of the incredible returns that can be made by investing in AI, building out data centers, the returns are just so great that nobody cares what interest rates are. that companies are going to keep on borrowing money no matter how high rates rise. So it's not going to deter borrowing. So the Fed should not even try. That in fact all of these rate hikes are not only not going to reduce inflation, they are going to make it worse because it's just going to build a higher cost structure which will be passed on to the consumer. Now that part is true, but that's always true. Higher interest rates are a cost. I've said this, I've been saying this for years. This is nothing that Aman is discovering for the first time. I've said that the cost of interest, what businesses pay on capital to borrow money, is the same as wages and salaries and raw materials and insurance and rents. It's a cost of doing business. and all the costs of doing business ultimately are passed on to the consumer because if the business can't cover all of his costs, well, he's not in business anymore. Businesses have to generate a profit. And that means they have to sell their products for more than it costs to produce them. And if part of the production process is paying interest on the money you borrowed for your capital equipment or whatever it is you needed to produce the goods that you're selling, you've got to recapture that cost. And the only way to recapture it is from the consumer. But the way rising interest rates will slow inflation is by stopping the consumer from borrowing, not the businessman. If the business is borrowing to produce, that's okay. What we don't want is the consumer to borrow to spend because that's just demand, right? That is what's driving higher prices. We need businesses to invest to raise supply. That's good. We've got to clamp down on consumption spending, which means consumers and governments have to stop borrowing because government spending and consumer spending is what's fueling inflation. investment spending, capital spending is not if the capital spending is going to lead to more production. So it's not like the Fed can do what Aman is saying and just not hike rates because what then is the Fed going to do according to Aman? Nothing. What's Aman's recommendation? Raise the inflation target. Just surrender. Aman is saying look stop hiking rates and raise the inflation to 2 and 1 half to 3%. Now, why is he choosing 2 and a half to 3%. Because conveniently, that's where the Fed claims it is. Even though headline is higher than that, maybe its core numbers are about that. And so, Aman just wants to move the goalposts because we can't score where they are. So, we need to move them. But, of course, if the Fed were to follow Aman's advice, then inflation would go well above 3%. It would go to 4% or 5%. Then what do we move the goalposts again? Because now if Aman was afraid of rate hikes when the Fed had to reign in 2 and 1 half 3% inflation, how much higher are those rate hikes going to be to reign in four or 5% inflation? That is the problem with Aman's advice. And the other big difference, you know, Aman is giving advice because it will benefit his investments. He needs interest rates to stop rising because rising interest rates are hurting his portfolio. So he wants the government to pursue policies that will enrich him. I am advocating that the government pursue policies that will be harmful to my investment strategy. Why am I doing that? Because I am advising the government and the Fed to do what's right for the country. Now, my investment portfolio is based on the fact that I know that they're going to ignore my advice. I know that no matter what I say, it's not going to matter. And so I'm still going to speak the truth. I'm still going to recommend that the Fed hike rates a lot, hundreds of basis points, shrink the balance sheet, shrink the money supply, cause stocks to go down, bonds to go down, including the ones that I own, and gold and silver to go down. So I am advocating policies that will be harmful to my portfolio because I know they're correct. I know they're going to work. In contrast, Aman is advocating policies that will benefit his portfolio. Now, of course, those policies will benefit my portfolio, too. If the government, if the Fed does exactly what Bill Aman wants them to do, I'll probably make more money than he does. Maybe not in aggregate because he's got a bigger base than I do, but maybe my investments will end up with an even better return than his if the government is dumb enough to follow his advice. But he is giving the advice that will help his book. Now maybe he thinks that that will also help the economy. I don't know. I don't know if Bill Aman understands what I understand. Maybe he actually is sincere. Maybe he actually thinks what's good for Bill Aman is good for the country. Like he's General Motors or something. I don't know. Another big story this week or much of do about nothing was the the meeting that the president had with chairman Chi from China. lot of pomp and circumstance, a lot of photo ops, but really much to do about nothing. I mean, they didn't really accomplish much. None of the big things. I know that the president is trying to get China to back away from buying oil from Iran and there was no commitment in that respect. The only thing that the president really got out ofQ was a statement that he doesn't want Iran to have a nuclear weapon. Well, who the hell wants Iran to have a nuclear weapon? I don't think there's anybody that wants that. So, getting China to adopt the policy that they don't want Iran to have a nuclear weapon is no big deal. The key is what is China going to do to stop Iran from getting a nuclear weapon? Apparently, nothing. because they are going to continue to buy oil from Iran. And not only that, they're going to keep buying oil from Russia because they got no commitment whatsoever, nothing about Russia. And that's despite the fact that Congress actually in a bipartisan vote gave Trump the permission to put 100% tariffs on countries that continue to do business with Russia, which obviously includes China. Yet nothing about China doing business with Russia was achieved during this summit or meetings, whatever they're calling it. But of course, again, why is Congress even authorizing something so absurd? Because why should we punish Americans? If China is going to do business with Russia, how does punishing Americans solve that problem? China has already shown that it doesn't need the United States. China's surplus was a record high last year and it's going to beat it this year over trillion dollar surplus. The mirror image of our trillion dollar deficit, but our trade deficit with China has been going down. But it hasn't solved our problem because our overall deficit is still enormous because now we're just buying from other countries and paying higher prices the stuff we used to buy from China. And China is doing great without us because they're just selling stuff that they used to sell to Americans. They're selling it to other people and they still have a huge trade surplus. So none of this is harming China. None of our trade tariffs are really harming our trading partners. They're harming Americans. They're harming the US economy. That's one of the reasons that higher interest rates are going to be particularly problematic for Americans because they're already struggling with higher prices in part the result of tariffs. And speaking of tariffs, nothing's happened on the northern front there with our trade war against Canada. Canada's our biggest trading partner and everything that we're bringing in from Canada is going to get more expensive. And of course there are some US companies that are going to be harmed, individual companies, because they're losing their Canadian customers. So yeah, I mean that's also going to be harmful. And of course, yes, there are going to be Canadian companies that lose US customers, but there's a big world out there that Canada can trade with. We're the ones that have massive trade deficits. We don't have a bunch of extra stuff to sell. We have a deficit of stuff that we need to buy. So making all the things that we can't produce ourselves but have to import, making all that stuff more expensive is harmful. I want to move forward though on the podcast and focus a little bit more on the ongoing saga regarding my bank and my lawsuit against the IRS for violating FOYA. So, if you recall from my podcast years ago, I requested all this information from the IRS regarding communications between various IRS agents and the regulators in Puerto Rico, OSF and themselves and other members of the J5, in particular the Australian Tax Office. I wanted to see the communications regarding my bank and why my bank was shut down because I knew that the bank didn't do anything wrong. I mean, yes, they had small technical violations that should have been no big deal. Violations that were only revealed when the bank finally had its first audit after the 60-inut story came out, after the New York Times article. And in fact, that article is what convinced the regulators to finally audit us. We had been operating in Puerto Rico for several years, like three or four years, and we had been asking the Puerto Rican regulators to audit us, because we wanted to get our first audit so we could fix whatever we were doing that was wrong. After all, we moved the bank from St. Vincent in the Grenadines to Puerto Rico, and we began operating for the first time in 2017 in a brand new jurisdiction. And we wanted the government to come in, look over everything we were doing, and tell us what we were doing right and what we were doing wrong so we could fix. And we kept asking for an audit. They just wouldn't audit us. Even though they were supposed to audit us every year, they didn't care. But once the media put us in the spotlight, once the media accused us of basically banking the mob and helping organized criminals launder money to evade taxes, they had a lot of pressure to finally audit us. And so they did and the audit was probably a lot stricter because they were under a microscope now to find something. So they found a lot of small things that they made a big deal out of. But what they didn't find was any evidence that the bank was facilitating tax evasion or money laundering or any financial crimes or anything even similar to what was alleged in the 60 Minutes broadcast or the New York Times article. But of course, I won my defamation lawsuit against 60 Minutes Australia, against Nick McKenzie and Charlotte Griev because they had no evidence that my bank did anything wrong. Yet, they lied and pretended that it did anyway. So, there was a lot of pressure, but I knew they found nothing wrong. And I knew that when the bank got shut down, even the OSV commissioner reluctantly had to admit because she got a question from a reporter that there was no evidence that the bank did anything wrong, that the bank committed crimes, that the bank was just being shut down because it was critically insolvent, which I knew was a lie. I knew we weren't insolvent at all, let alone critically so. We had plenty of cash. Now, technically, we didn't have as much cash as we needed, and we found that out during the audit, but the ose of commissioner gave me time to raise more capital. In fact, I offered to put in capital, and she said, "You don't have to." Because she knew I was trying to sell the bank and she told me and the bank's lawyer that we could wait for the new buyers to add the new capital. And she said that, you know, we were fine operating with the capital that we had. And part of the reasons was my bank didn't make any loans. So the capital requirements were there for banks that had loans that could go bad. We were a 100% reserve bank. So nobody was at risk. My bank was fine. And yes, my bank was losing money thanks to all the bad publicity. But I was personally covering those losses. I had signed an agreement and the auditors signed off on it. Every month I was writing a check for $250 $300,000 to the bank to plug the losses so that the bank's capital would stay about $2 to $3 million positive above its liabilities. So I was making sure that there was a comfortable cushion between what the depositors were owed and what the bank had. So everybody knew the customers were safe. I was protecting them and I was looking for a buyer that could operate the bank without the stigma that now I had because of all this this bad press. So I wanted to find out, okay, I want to get the dirt here. I want to know what was really being said internally about shutting down my bank. So I submitted the foyer questions and the IRS was not giving me the information. They gave me little bits of it and even the little bits I got were extremely incriminating. All of these foyer productions, you can see it all on ninefraud.com. Go to the website ninfraud.com, read through all this stuff. It's incredible stuff. Plus, I got all the discovery from my winning defamation lawsuit from Australia 60 Minutes. All that stuff is on there, too. I mean, it it it's really explosive information, and it's worth spending some time reading everything that I put together on ninfraud.com. But most of what the IRS was producing was redacted. So they were giving me hundreds and hundreds of pages that I couldn't even read because every word on the page was redacted in black and I had no idea what was there. So I didn't think these redactions were legal because the IRS was citing exceptions that did not apply to the documents that they were redacting. So, I had to file a lawsuit and it took me a couple of years to win the lawsuit because the IRS dragged it out. We finally settled the lawsuit after I won it, right? Because they threatened to appeal it even after I won it at the district court level. Then the IRS submitted a motion to reconsider and the district court judge denied that. And so then they were going to appeal it to the appellet court. That would have delayed it another year. So because of that, I agreed to settle with them. And so there are a few things that I agreed they didn't have to show me, which they swear don't relate to my bank, and a few other things. But as a result of this settlement, they are now going to turn over thousands of pages that they haven't even given me because one of my foyer requests, they didn't even answer at all because they claimed it was too broad. And the judge disagreed and said, "It's not broad at all." He's very specific. how could you say he's broad? So, they were coming up with all kind of excuses. But in the meantime, as a result of winning that lawsuit, most of what had originally been redacted was unredacted. And I finally got to read it. And what I want to just mention on today's podcast is the last pieces that I got from my first foyer request. Now, I'm gonna get a lot more because the emails that I've seen so far, the earliest one I have is midappril 2022 and you know, my bank was shut down June 30th, 2022. But according to the emails I've seen, the IRS first started working with OSF in December of 2021. I don't have any of those emails. And those are probably going to be some of the most incriminating emails yet. I haven't seen any of those. But the IRS was ordered by the court and the IRS agreed now to produce all of that information. One of the things I had to agree to was to pay for it. I'm having to pay the cost of copying all that and all this stuff. So, I agreed to that rather than paying more legal costs for the appeal. I said, "Fine. You want to bill me more money?" Now, they owe me my legal bills. I mean, I spent over a hundred grand getting them to do what they should have done anyway. Ultimately, they're going to have to pay my legal bills, but according to my lawyers, I have to wait until the whole thing is over and I get all the production because what might happen is when the IRS produces all this stuff, they might redact it again. And now I'm going to have to go back to court to get the stuff unredacted because the IRS really doesn't want me to see this stuff because it's very incriminating of these top IRS agents. and agents in the ATO and at OSF. But I want to go over one in particular and you can read these. I'll put up the exhibits. But so the former chief of the IRS, Jim Lee, spoke at the press conference to announce the shutdown of my bank. And that entire press conference is up on YouTube. I also have it embedded on the nine fraud website. But he arrived in Puerto Rico to speak at the press conference to shut down my bank. Oh, by the way, I just read this just yesterday. I think the former CEO of Notice Bank, which was another Puerto Rican bank that was also shut down by OSF, just like my bank was shut down by OSF. The former CEO was just sentenced to nine years in federal prison, plus two or three years of probation after that for wire fraud and for conspiracy to evade US sanctions. So, here is a Puerto Rican bank that was shut down about the same time that my bank was shut down that actually was involved in criminal activity where the guy who ran the bank is actually going to jail for committing these crimes. Yet, there was no press conference when they shut down Notice Bank. There was no press conference about this conviction. I mean, you wouldn't even know about it unless you were searching for it. Yet my bank, they held a press conference to announce the closure of my bank when my bank didn't do anything. There wasn't even an indictment, let alone a conviction. Here, the government actually convicted the guy that ran Notice Bank. They didn't even charge me. They didn't charge anybody at my bank. And charging is a much lower threshold than convicting. You know, you have to have probable cause, right, to charge somebody, but you have to prove guilt beyond a reasonable doubt to convict them. So, they were able to do that with Notice Bank, but they couldn't do that with my bank. Yet, my bank got all the publicity. I got the press conference. I got all the press coverage. My bank is the one that everybody knows, oh, your Pacific Bank was this bad bank doing all this bad stuff. No, it wasn't. We didn't do any bad stuff. That's why nobody got charged for anything. But anyway, so Jim Lee is coming to Puerto Rico to speak at this conference. Now, the morning of the conference, right, he's he speaks at like 2:00 that day, he's sending an email to the IRS guy who's the head of public relations, Justin Cole, and he's like, "Hey, Justin, I got some questions. I know I'm doing this press conference about Europe Pacific Bank. Can you answer these questions so you know I'll be up to speed and I'll be able to handle the press. Right. So the questions themselves tell me that Jim Lee didn't have any idea what was going on with this investigation and actually believe that the bank was guilty of tax evasion and moneyaundering. See, he didn't know it was all just a show. it it was just a PR stunt that the bank was in fact innocent and they were just pretending it was guilty because this email shows that he was not in on that fraud. He actually expected that he was going down to Puerto Rico to shut down a bank that was guilty of tax evasion and moneyaundering even though that officially had nothing to do with the reason the bank was shut down. The bank was shut down because apparently it was under capitalized and it had some other regulatory violations that had absolutely nothing to do with the criminal conduct that he thought he was going down there, you know, to expose and take credit for putting a stop to it. But anyway, I'm going to read the first question and that's the longest one. He says, "Do we have a collaboration and resource exchange agreement to assist the local regulator in its investigation efforts, particularly in instances like Europacific in which the entity has operations and or holds assets outside of the local jurisdiction. The OSV press release indicates this. Now, he's read the press release before it's been released, right? Because they haven't even announced the shutdown of the bank yet, but he is reviewing their press release in advance because they coordinated all this." Now, here is the answer to that question. Now, the questions themselves, I finally got those questions in my foyer reply before the one that I just got. So, for the first time a few months ago, I got these questions because before that, the entire email with the questions was redacted. So, I finally got the email that had the questions, but the answers were redacted. What I just got in this latest reply was the unredacted answer. So there were seven questions. Five were answered. One, the answer is redacted and I agreed that they could redact that answer because they said that it related to an individual who was being investigated that had nothing to do with my bank. So somehow that got in there and they didn't want me to see who that was. So I agreed that they didn't have to unredact that. But I know the question was answered because they if it was blank there would be no reason to redact a blank. So I know for a fact that five of the seven questions were answered. I could read four of the questions and I can see the blank or I can see that there's no reply to the other two and those are actually the most important ones. But anyway, so the answer to that first question was yes. an approvedou between CI which is criminal investigation of the IRS and OSF. For the first time, I learned, this is this week, that there was a memorandum of understanding executed between OSF and the IRS about shutting down my bank. Again, at the press conference, both the former commissioner Natalyia Zakaria and the former IRS chief Jim Lee lied and said that OSH acted independently in its investigation. Well, how do you act independently if you have a memorandum of understanding to act together, right? And I've already seen the evidence that they worked together. They admitted that they worked together. They just admitted that to themselves. They lied about it to the public. Anyway, so I want to get thatou and I will when I get these earlier emails that are going to get produced, I'm going to get theou, the drafts, right? The back and forth, the mockups. I'm going to get all the dirt that they're still holding on to. Here's the second question. What is happening to the owners of the bank? No response. No response to that question. Just ignored it. Question three, do we expect any more criminal or civil investigations in the US? Answer: Unknown. Since the bank catered to non US persons, finding them at the bank is complex, i.e. active criminal case subject used a fraudulent BISE passport to open account. So that shows you that in order to get for an American to get an account at my bank, he had to defraud our bank with a Bleian passport. Now, I'm not sure what this case is because to my knowledge, nothing ever happened. I don't know about any criminal conviction or prosecution of somebody, an American that was at my bank under a Bleian passport. But basically, he answers this question. Another question, is it safe for me to say that the five countries combined have hundreds of civil or criminal investigations ongoing associated with clients that used the bank services? His answer was definitely over 100 civil/criminal cases worldwide. Now I doubt that and when he says civil/criminal he means civil because I mean there's really no criminal. Now in another email that you can see in this production they mentioned how many cases there are in Australia and according to these documents there were two civil cases and one criminal case possibly right under investigation. Two remember 60 Minutes Australia said that my bank was helping hundreds of Australians evade their taxes. Yet, according to the official records, the Australian tax authorities had only identified two civil cases that they were reviewing and one possible criminal case and that was the extent of it. That was it. That's nothing, right? Talk about making a mountain out of a molehill. Now, here is the question where the answer was redacted. And that question was five. What is our one US person target involved in currently and what office is it out of? Now, apparently that US person that they were talking about was not me because initially I thought maybe it was me. It wasn't me and it wasn't anybody related to my bank. And the reason that they wanted to redact it is because they didn't want to expose that person's identity to me. So, I agreed that they could redact it. But here's the key. It's the two questions that they didn't answer. One, I already mentioned what's going to happen to the owner of the bank. Now, the owners, he said owners, right? Because he doesn't know how many. He assumes there's more than one owner. No, it's me. Now, in the in the email when Jim Lee emailed this to Justin Cole, Justin Cole emailed it to another IRS agent, Shapely. And and so Shapely is the one that answered the questions and responded to Cole. And then Cole forwarded the answers to Lee. But in his reply email, he said, "Here are some quick answers. The rest are better discussed." Meaning the other two questions that he refused to answer, he didn't want to put it in writing. He said, "We we need to talk about this." Now, why? Well, obviously, it's because of the answer. So, the question, what's going to happen to the owner of the bank? The answer is nothing. And of course, why didn't he just write that? I mean, some of the answers had a lot more words. He could have just said nothing is happening to the owners. Well, how could nothing be happening to the owners? If the bank is guilty of committing tax evasion and moneyaundering, if Jim Lee is going to Puerto Rico to shut down a bank that was facilitating tax evasion and moneyaundering on a big enough scale that it warranted his flying down to Puerto Rico to talk at the press conference to announce this major shutdown. Well, how could you say nothing's going to happen to the owner of the bank? Because the bank isn't facilitating tax evasion and money laundering on its own. Somebody has to be directing it, right? Obviously, the owner of the bank is the mastermind behind all the criminal activity. So, the the question, what's going to happen to the owner? You would expect, well, he's about to be indicted. You know, we're announcing the indictment any day. The real answer is nothing is going to happen to the owner. And then you would say, well, what do you mean nothing's going to happen to the owner? Why is nothing going to happen to the owner? Well, the owner didn't do anything wrong. Well, what do you mean he didn't do anything wrong? Well, he didn't do anything wrong because the bank didn't do anything wrong. There actually was no tax evasion of money laundering. See, all of this would have followed if he just gave a truthful answer. So, he couldn't answer the question. Now, I have no idea if they actually had a conversation or not. But clearly, he didn't want to put this in writing that the bank's owner was innocent because if the owner of the bank was innocent, then the bank was innocent. But the other question that they didn't answer is even more telling. Both of the fact that Jim Lee didn't realize the whole thing was a scam and the fact that it was a scam. So here's Jim Lee's other question. Give me two brief examples, typologies of what the bank did for its clients to evade taxes and launder money. Obviously, right, he wants to have these examples. He's going to have a press conference. He's he's there to announce the shutdown of a bank that he believes is being shut down for tax evasion and money laundering. So he wants some examples. He wants to be able to tell the press, "Yeah, this is what the bank was doing. This is the bad stuff. This is why we shut them down." The answer is blank. He doesn't answer it. Why not? I mean, how hard is that? Just give him two examples. The reason he couldn't is because there are no examples. Now, he couldn't just say, "We have no examples." What do you mean you have no examples? How could you have no examples that on what basis are you shutting them down? I mean, he would probably thought we had hundreds of examples. He only wanted two and they couldn't even give him two. They couldn't even give him one. So, I don't know, you know, what these guys said. They must have sat him down and say, "Hey, Jim, I got to let you in on something. You know, this is all a stunt, right? The bank the bank is actually innocent. This is what we're doing. We're shutting it down so we can pretend it was guilty, you You know, so you got to walk a fine line here when you when you're at this press conference. Don't let the cat out of the bag. We got to make sure everybody thinks that the bank actually did all this stuff, right? That's what happened. And in fact, even in this last FOYA report that production, there is some more stuff in there about how all of this was publicity that OSF and even the governor and the secretary of the treasury that everybody thought that sacrificing this innocent bank was worth it for the public relations benefits because Puerto Rico there was a stigma. People thought of Puerto Rico as a tax haven, as a place where you would have money laundering and you would have tax evasion, where you had lacks regulatory oversight. That was the stigma. This was supposedly going to solve it by shutting down Europacific Bank and allowing the IRS and the J5 to claim it was for tax evasion and moneyaundering. This was the proof that Puerto Rico was not a tax haven. It was not a haven for moneyaunderers and tax evaders because look, they shut down Europacific Bank. This proves it. They would not tolerate moneyaundering and tax evasion. Now, of course, they they couldn't let anybody know that that was the that that was the case. In fact, one of the problems, and I'm going to get to that now, of the liquidation of my bank, what really complicated it initially is the Portuguese government, after my bank was shut down because of all the publicity, wrongly stating that it was shut down for tax evasion and moneyaundering, the Portuguese government froze the bank's Novo account in Portugal, which is where most of the deposits were kept. It froze it for over eight months, which really threw a monkey wrench in the entire liquidation because we early on had about 500 wires ready to go out to customers and we couldn't send them out because Nova Bank refused to process them because of the Portuguese government freeze. Well, the freeze was because they didn't want all this illegal money, all this tax evaded laundered money to go back into general circulation into the legitimate economy. And I tried to get the OSV commissioner to publicly come out and say, "Hey, Portuguese government, you got this wrong. Don't believe what you read in the papers. We're the regulators and we can tell you that the bank is not guilty of tax evasion money laundering. That's not why we shut it down." But she refused to do that because she didn't want to push back against the public narrative that that's exactly why the bank was shut down. So, she sat back and just allowed the freeze to happen. But anyway, the last thing I want to talk about related to this is this the receiver who was put in charge of my bank. And again, they decided on a receiver months and months before the bank was shut down. you know, while we still thought that everything was fine, but the OSV commissioner had assured me many, many months before she even began talking to the IRS cuz I had talked to her about the problems I was having in my bank and the losses that we were suffering as a result of the bad publicity and that I was trying to sell it, but if I couldn't find a buyer, I was just going to shut it down. And I got her assurance to me, which is memorialized in writing in conversations with my lawyers, that she assured me that if it ever came down to the bank having to be shut down, that she would not appoint a trustee, a receiver to do it, that she would allow me to self-liquidate the bank. which makes a lot of sense because when you appoint a receiver, you create an immediate conflict of interest because now the receiver doesn't have an incentive to quickly return the money to the customers. He has an incentive to elongate the process and not give the customers their money back so he can keep paying himself for handling the liquidation. So these are the numbers. So first of all, my bank was put into receiverhip 4 years and almost 3 months ago. During those four years and 3 months, 78 customers have gotten their money back. Just 78. There was about 3,500 customers when the bank was put into receiverhip. So about 2% of the customers have got their money back. The rest have got nothing. Now, to put this in perspective, when the 60-minute story and the New York Times story broke in the fall of 2020, we had over 8,000 customers. So, in less than two years, 4500 customers closed their accounts and we sent them back all of their money in less than two years. In more than four years, more than twice the amount of time, the government was only able to send 78 customers their money back. 78. This is the difference between the free market and government. We had no problem sending 4,500 customers their money in less than two years. Yet, all the government was able to do in more than four years was repay 78 customers. And remember, the justification for putting my bank into receiverhip was protecting the customers. Yeah. The only protection they need is from the receiver. That's the one that's screwing them over. They didn't need any protection from me. I was protecting them. The bank's balance sheet protected them. We were 100% reserved. There was no risk at all. And there was no need to put the bank in the receiverhip. The records indicate that it was done as part of the show to make the bank look bad. See how bad this bank was? We put it in receiverhip. It did not belong in receiverhip. And no competent regulator would have ever put my bank into receiverhip. Why would you inconvenience the customers for no reason when the bank had no debt when the bank had made no loans? In fact, no competent non-corrupt regulator would have even shut the bank down. Why shut it down? Let it operate. If it needs more capital, allow it to come in. Allow the bank to be sold. Why destroy all the jobs? Why do all that? The Foya evidence shows they discussed the job loss and they said it's acceptable trade-off for the publicity. I have already unredacted over 500 pages of emails and not a single email says that shutting down this bank is actually going to stop any crimes, any money laundering, any tax evasion. The only effect that they were trying to achieve by shutting down the bank was publicity for the IRS, for the J5, for the ATO, for OSEP. That was it. A pure publicity stunt. But anyway, getting back to these numbers. So 78 people have been paid in four years and three months. Yet during those four years, the receiver spent $2.2 million in bank capital was spent. Bills and checks that he paid $2.2 2 million. And of that, over $850,000 was money he paid to himself. To himself. Now, if you want to look at that on a per paid claim, the bank paid the receiver $28,000 for every claim he paid. $28,000. Now, granted, the process was slowed up initially. that may have been beyond the guy's control, but that problem was solved a couple of years ago. It's all on him now. All of it. In fact, his most recent quarterly report, and that's why I'm talking about this, cuz I just got these numbers yesterday. His most recently quarterly report, which was almost two months late, by the way, but he finally filed it. And in the most recent quarter, he paid 27 claims. Now, those 27 are included in the 78 claims paid total, right? He So, he paid 27 claims. That's an average of two claims per week. That's it. This is just wiring money to a customer. He's only doing two per week. Now, I said there were 3,500 customers of my bank. I don't know what happened, but according to the receiver, there are only 679 official claims that he is even paying, including the 78 he paid. So, I guess the other customers couldn't even figure out the crazy forms. They couldn't even get their claim submitted and so they lost everything. Apparently these guys are getting nothing. So the vast majority of the customers who were supposed to be protected by the receiverhip are losing everything because of the receiverhip. None of it was necessary. But so the claims that were just paid in this quarter if you look at how much he spent. So he spent $170,000 on the quarter. Now again, I don't know what all this money is for because the bank's not even in business. It's not doing anything and he's barely doing anything. He paid about $110,000 to himself, right? The receiver is earning now over $400,000 a year doing a job that I could do myself in a couple of weeks for nothing. But anyway, so the cost per claim, if you look at the $170,000 he spent in the last quarter or Q2, it cost $6,200 for every claim that he paid. Look, this is a fiasco. At the current pace that he's paying claims, if he simply pays all the claims that he admits he has, it's going to take another five and a half years and he's going to pay himself. Forget about what it's going to cost the bank. He's going to pay himself another $2.2 million. Yeah. Why does he want to stop that gravy train, right? This is why the customers are being put through the ringer even four years after their money was unnecessarily frozen as a publicity stunt. So look, this is government. This is an example of how governments operate. Governments don't give a damn. They don't care about people. They care about themselves. The greediest people are the people who work for government. I've always said that the most dishonest people are the ones that work for government. And it really is ironic that so many people are fearful of businessmen and capitalists and they look to government to protect them. It's the other way around. It's the capitalists. It's the entrepreneurs. The businessman, he's the guy that's going to look out for you. He's going to protect you because he wants to earn your business. He wants a good reputation. Businessmen always put the customer first because that's their bread and butter. The government doesn't give a You're just a bunch of sacrificial lambs. You're there so they can make money off you. The customers who are in receiverhip have no choice. They don't want to be there. They did not want the government to handle this liquidation. But the government is handling it. And that's why it is taking so long. Had I been allowed to do it, everybody would have got their money four years ago. And of course, had the government not acted corruptly, there would have been no reason to liquidate the bank. There would have been no reason to sell the bank. The bank would still exist today. In fact, it would be vibrant. It would be doing good business. It would be very valuable. It'd have a lot of happy customers. The reason it doesn't is because corrupt politicians destroyed it. Anyway, all the evidence of that is on my nine fraud website. I would encourage everybody to go there and watch because there's going to be a lot more evidence that I'm going to be adding as I start getting all this new previously hidden evidence that the government is only disclosing to me because a court finally ordered them to do so, proving that the IRS was breaking the law during all the years where it refused to turn it over. Because not only did the IRS commit crimes, but then it committed more crimes in the cover up. And the most frustrating part about it now is that the Republicans in Congress and of course they're not going to be controlling Congress much longer. But they've been in control of Congress since Trump won. We've had a Republican House and a Republican Senate. And despite my efforts and despite all the talk about how Republicans, they don't like the weaponization of the IRS, they don't like the IRS targeting conservatives and they're going to go after the IRS. There is zero interest in Capitol Hill to do anything about this. Nobody even wants to look into it. Nobody cares in the Republican party what the IRS does. It's just a campaign issue. They want to talk about it, right? Just like the Fed, right? They're not really going to fight inflation. So, Republicans are not going to do anything about the IRS. They don't care. But they know it's a great issue. Yeah, they can talk tough. Oh, we hate it where the IRS is harassing our citizens. But when it comes down to actually doing something to put a stop to the harassment, they are all talk and no action. Anyway, don't forget if you like the podcast, give it a thumbs up. Don't forget to subscribe to my YouTube channel if you're not watching it on YouTube. Bye for now. [music]