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Brace Yourself 2008 is Coming

Brace Yourself 2008 is Coming

| May 03, 2023

Maybe I’m wrong. Would love for you to read this and make the case for a bull market or even a mild recession. If I’m right, we’ll see 2008 on steroids. If I'm right, this is the most important thing you'll read all year. Gird your loins.

  • Remember, things can break down quickly. Why? Because they’ve actually been happening under the cover of denial and obfuscation. The people in power always tell you everything is fine. And then suddenly, woops, it’s not. They are lying liars who sometimes tell the truth.
    • As a recent example, on January 21, 2020, we had the first CDC confirmed US Coronavirus case. By March 13, we had the beginning of our “two-week lockdown”. 
    • In April 2008,  we were in for a technically “mild recession." Two quarters later they conceded we had a credit crisis dumpster fire in September of 2008.
    • Yellen knew housing was a disaster but wouldn’t say anything. Why upset the hoi polloi? 
    • A few days ago, we were told there is NO BANKING CRISIS and then we were told the banking crisis is now over. And yes, I’ve been warning you through my blogs.
    • So, no, I'm not the smartest guy in the room. I just have post traumatic stress from being three years in the business in September of 2008. It prepared me for such a time as this.
  • But, Rey, the SP500 is up for the year. That’s true, but what’s the return if you take out the tech stocks that were punished last year. As they revert to their mean they move the entire SP500 index. For now.
  • Billions of dollars are leaving banks and moving into money market funds. That’s what rich people do, they put their money where it is treated best. That means banks don’t have as much money to loan against or to justify existing loans. Less credit from the banks means less spending in the real economy and in real estate.
  • We have already outpaced 2008 in bank failures adjusted for inflation. And commercial real estate losses haven’t even been realized yet. 
    • Zions and Pacific Western stock trading was halted because they were down over 30% down in a day. These are banks that cater to the wealthy (who are leaving banks en masse).
    • First Republic owns loans that can’t be securitized according to the current rules. How they mark those loans to market as the bank changes ownership should be David Copperfield-level entertainment worthy of Las Vegas.
  • The US Treasury is out of money. The cost to insure US treasuries is the highest it’s ever been according to people who put their money where their mouth is. Credit Default Swaps were instruments of contagion in 2008, as you’ll recall. 
  • The FDIC said they had 128 billion dollars in reserves for bailouts and back stops. They’ve spent it all by today, if my simple math is correct. And yet they say they can make up the difference with the recent First Republic sale to JP Morgan/Blackrock. The math ain’t mathing, folks. 
  • Stanford Institute for Economic Policy Research says that there are at least $2.2 trillion in unrealized losses. How is this possible, you ask. Because we don’t know how bad the empty office and warehouse buildings are going to get. Even stock market cheerleaders like Morgan Stanley are getting in front of this.
  • Inflation hasn’t even been tamed. We are spending almost a trillion dollars so Europe can barely keep the heat on or food on the table. This will not drive prices down long term for the United States. 

There’s more. More concerns, more links and more graphs. But I’ll stop here. My conscience is clean and I’ve done my part to sound the alarm. If you’ve considered becoming a client, please call or email our office. It’s on you now. If you are a client we’ve already talked or will be talking very soon. I wish you good fortune in the wars to come.