The crisis is building...

Gold and U.S. Treasurys were among the few bright spots. Gold in particular has been soaring. It rallied 4.3% today, and is now up nearly 20% since bottoming in late December.

Regular Digest readers know we take most of what we read in the financial media with a grain of salt. Many of the reasons attributed to the market's short-term moves are little more than guesses at best... or distractions at worst.

Still, we can't help but notice... with so much turmoil recently in so many different areas of the market, the financial media are having a harder and harder time trying to explain it all.

China, oil, emerging markets, junk bonds, and other topics have all made headlines over the past several months.

Today, the media focused on a new worry: weakness in the banks.

As we mentioned yesterday, most banks and financial stocks in the U.S. and Europe are already in a bear market. And many fell even further today.

This morning, French bank Societe Generale announced it would be unlikely to meet its earnings targets this year. The stock closed down more than 12% today, and the broad sector sold off with it.

Also of note, British megabank Standard Chartered declined nearly 4%. Like Deutsche Bank and Credit Suisse – the two banks recently singled out by "Bond God" Jeffrey Gundlach – it too has now fallen below the levels seen during the worst of the 2008 financial crisis.

Here in the U.S., financials led the decline as well...

The broad sector – as represented by the Financial Select Sector SPDR Fund (XLF) – fell nearly 3%. Several major banks – like Bank of America (BAC) and Stansberry's Investment Advisory short recommendation Citigroup (C) – fell even more.

The selloff in banks is being blamed on a handful of problems...

Recently, the European Central Bank ("ECB") published a new test of bank risk known as the "SREP ratio." The results showed that several major European banks – including Deutsche Bank – are unexpectedly close to "failing" an important test of capital levels.

The details are beyond the scope of the Digest, but what's important to know is if these banks fail this test, a widely owned type of bond known as "contingent convertible bonds" (or "cocos" for short) could cause big losses for investors.

In short, under normal circumstances, cocos behave like normal bonds. Investors get paid a coupon and can expect to have their investment paid back in full when the bond matures. But if the bank fails this test – meaning, if its capital levels fall below a certain threshold – cocos can be converted into equity. Coco bondholders can instantly become shareholders instead... meaning the bank no longer has to pay them interest or return their investment.

Cocos were created after the financial crisis as an alternative way to help save troubled banks. In the "unlikely" case of a new crisis, banks would have access to capital without requiring a government bailout. In exchange for taking on more risk, investors would receive higher yields than they could get buying traditional bonds.

It sounds great in theory... but we doubt investors expected to see bank troubles again so soon.

In addition, years of super-low (and now negative) interest rates are making it harder and harder for banks to earn a profit. And if recent news is any indication, it won't be getting easier anytime soon...

Last week, Japan's central bank, the Bank of Japan, became the latest to push short-term interest rates into negative territory.

Last night, Sweden's central bank – known as the Riksbank – cut its short-term interest rates even further into negative territory. It lowered its primary rate from negative 0.35% to negative 0.50%, and said additional cuts could be coming.

And in Congressional testimony yesterday, Federal Reserve Chair Janet Yellen hinted the U.S. could be the next to implement negative interest rates. When asked about the possibility of negative interest rates, she said she was "not aware of anything that would prevent us from doing it."

We'll take a closer look at the potential consequences of negative interest rates in a future Digest, but the point here is that they more or less act like a "tax" on the banks.

Negative rates mean banks have to pay interest (rather than earn interest, like usual) on the reserves they're required to keep with the central bank. It also means the spread they can earn lending to customers is much smaller.

Finally, some analysts believe banks could be holding undisclosed losses from bad debts in the energy sector – similar to the problems in mortgage debt that bankrupted so many in the last crisis.

This is likely... though critics are quick to point out that the big banks are much better capitalized today than they were in 2007, and the debts in question are much smaller.

We agree with Gundlach... Seeing some of the world's biggest banks trading below crisis levels is frightening. But the folks blaming the banks for this week's market selloff are likely missing the point.

The real "reason" behind the market turmoil is probably much simpler... and much bigger...

It's debt.

As Porter put it in the September 25 Digest...

Far, far, far too much money – mind-boggling amounts – has been borrowed by people and countries that are not creditworthy. These debts are going bad. The chain reaction is starting. And nobody knows exactly what will happen next because the world has never seen so much bad debt before.

Over the past six or seven years, we've seen a credit boom unlike any other in history. But unlike the last boom, the money didn't just flow into housing.

As Porter has explained, much of it flowed into the oil sector, auto loans, student loans, and emerging markets. But it didn't stop there... virtually every area of the global economy was affected.

Now, as these debts go bad, problems are popping up all over the world in seemingly unrelated areas. But they're all connected... and they likely won't end with the banks.

We continue to recommend caution.

In the short term, we wouldn't be surprised to see a sharp rebound rally. The market has fallen four out of the first six weeks to start the year, and several measures of investor sentiment have reached extremes that often precede significant rallies.

But more and more evidence suggests the long-term trend has flipped from bullish to bearish, and a historic bear market could be starting. If you still haven't taken a few simple precautions to protect your portfolio, we urge you to do so today.

Tomorrow afternoon, we'll be publishing the latest module in our Bear Market Survival Program. Module 4 will cover "special situations" in the market. These are one-time events that cause high-quality businesses to go "on sale" and give investors an incredible opportunity. To learn how you can access the latest module and the rest of the program, click here.

And as we mentioned yesterday, this is also the best opportunity you'll ever have to try all of our "bear market" research – including our new distressed-debt service, Stansberry's Credit Opportunities – for yourself.

Until March 9, we're hosting a virtual "open house" where you can check out each of the 14 investment and trading services we publish – including our exclusive $5,000-per-year Stansberry Venture­ advisory – for a small, one-time fee of $99.

You can literally read (and even print out) every issue and special report we've published, and see for yourself which of our services are the best fit for you. Click here to join now.

We'll finish today's Digest with a brief update from Gray Zurbruegg, director of The Atlas 400...

As you're reading this, Atlas members are heading to the last major landmass settled by humans. The final frontier. New Zealand.

They'll fill their days with whitewater rafting, guided wilderness tours, fly-fishing, wine tastings, and much more. Over the course of the 12-day adventure, they'll enjoy some of the most exclusive lodges in the southern hemisphere.

One of the lodges is perched on the northern tip of the South Island. Located miles from civilization, the lodge sits on 5,500 acres of a 150-year-old working sheep station. There are few more iconic locations in New Zealand for a luxurious country estate.