Thanks for this article. I’m watching real estate. Sounds like the rate increases are starting to slam the commercial market and if the bank loans on these undervalued properties go upside down then our fed has another issue with assets,except these will be realized losses.
There is no way out. Our debt structure is killing us slowly. All assets have to be marked down. The sooner we take the medicine the better, but that concoction of castor oil, milk of magnesium and all other medicines that tasted like crap are going to make us upchuck. But that is what is needed.
I have no idea how this plays out but you're right, the powers that be will try to keep the very rich afloat, meanwhile caring less about breaking the middle and lower classes.
Thanks for the article--and to commenters. Well said by all. Adding my 2 cents, I keep thinking of a book by Jim Rickards in 2011- he focused on a geopolitical alliance between China and Russia and a return to gold backed assets that cause the dollar to tank. So that’s my guess...
CRE is next -- and maybe soon. The recent banking blowups are the equivalent of Bear Stearns hedge fund problems in July 2007. We’re in the bottom of the 1st, maybe top of the 2nd.
Mar 27, 2023·edited Mar 27, 2023Liked by Quoth the Raven
It explains why Uncle Warren keeps half of his stock allocation in Apple.
Europe should be the likely guess. They have nothing good going on there.
At a regional level, Silicon Valley/SF real estate. The house my parents bought in Menlo Park for $50,000 is now worth $4 million. Not much more than 2,000 square feet. Throw in $50,000 per year in property taxes (forgetting reparations for the moment), you’d have to be seriously mentally ill to buy it.
You raised the idea of comparing this “everything is fine” mentality right now to the same thing that was occurring just before Covid hit. I agree that it feels similar. Then the media proclaimed trump and his voters the Enemy, quickly followed by the unvaccinated. Figure out who the financial enemies will be to figure out their gameplan. Gold? BTC? Someone is going to be scapegoated….
There will be no major breakdowns or collapses. That they can and WILL prevent crashes, maybe in except areas where the US gov wants a crash. Energy comes to mind in this.
As for crypto, everything they do to prevent collapses is inflationary. This will cause stock markets to go up and crypto is essentially leveraged nasdaq at this point. So unless they ban it, BTC will do well. Alts could go down.
We called my 65 yr old newly-retired brother in law, who has his entire life savings in a 401k, and a big chunk of cash in his savings account, and had a conversation about the banks. We told him he might want to buy some physical gold with some of that as a protection. He shook his head and said, "We keep most of our money in the market, so we're safe."
He is also 35 years into a mortgage but still sees no reason to pay it off. We calculated that he's roughly paid about 900,000 for a 300,000 house so far. "You gotta have debt!" he says, for your credit score.
I was late reading this but you are spot on. We are getting complete weird push back from advisors saying shit like. My behavioral psychology antenna is off the charts; "Well I just don't think we have a recession because everyone is calling for it" I think they see the double bottom in Oct. and December and refuse to see that the worst "may" be in front of us. They also believe no recession then ergo those 240 SP eps Est are valid and the market is cheap or reasonable and you should ride through it. "It always comes back"! My sis in law said that exact thing to me. I know she is parroting her advisors. She and hubby are gonna get destroyed by the young ED Jones advisor. I just say "Good luck". What we have learned you can't help people develop a alternative outlook with the massive Fin Services industry married to EMH and Systematic passive /Target. You can say " get in the boat or grabe the rope. Then the advisors says. "You are panicking, look at the covid bottom". Peeps are going down with the Titanic for the most part.
The one constant is dollar degradation - buy hard assets - something you can touch.
Thanks for this article. I’m watching real estate. Sounds like the rate increases are starting to slam the commercial market and if the bank loans on these undervalued properties go upside down then our fed has another issue with assets,except these will be realized losses.
There is no way out. Our debt structure is killing us slowly. All assets have to be marked down. The sooner we take the medicine the better, but that concoction of castor oil, milk of magnesium and all other medicines that tasted like crap are going to make us upchuck. But that is what is needed.
CRE, VC and PE having a mark to market event. That’ll be”fun”
$h1t’s goin down. Buy gold.
I have no idea how this plays out but you're right, the powers that be will try to keep the very rich afloat, meanwhile caring less about breaking the middle and lower classes.
Thanks for the article--and to commenters. Well said by all. Adding my 2 cents, I keep thinking of a book by Jim Rickards in 2011- he focused on a geopolitical alliance between China and Russia and a return to gold backed assets that cause the dollar to tank. So that’s my guess...
CRE is next -- and maybe soon. The recent banking blowups are the equivalent of Bear Stearns hedge fund problems in July 2007. We’re in the bottom of the 1st, maybe top of the 2nd.
It explains why Uncle Warren keeps half of his stock allocation in Apple.
Europe should be the likely guess. They have nothing good going on there.
At a regional level, Silicon Valley/SF real estate. The house my parents bought in Menlo Park for $50,000 is now worth $4 million. Not much more than 2,000 square feet. Throw in $50,000 per year in property taxes (forgetting reparations for the moment), you’d have to be seriously mentally ill to buy it.
You raised the idea of comparing this “everything is fine” mentality right now to the same thing that was occurring just before Covid hit. I agree that it feels similar. Then the media proclaimed trump and his voters the Enemy, quickly followed by the unvaccinated. Figure out who the financial enemies will be to figure out their gameplan. Gold? BTC? Someone is going to be scapegoated….
There will be no major breakdowns or collapses. That they can and WILL prevent crashes, maybe in except areas where the US gov wants a crash. Energy comes to mind in this.
As for crypto, everything they do to prevent collapses is inflationary. This will cause stock markets to go up and crypto is essentially leveraged nasdaq at this point. So unless they ban it, BTC will do well. Alts could go down.
Excellent piece.
We called my 65 yr old newly-retired brother in law, who has his entire life savings in a 401k, and a big chunk of cash in his savings account, and had a conversation about the banks. We told him he might want to buy some physical gold with some of that as a protection. He shook his head and said, "We keep most of our money in the market, so we're safe."
He is also 35 years into a mortgage but still sees no reason to pay it off. We calculated that he's roughly paid about 900,000 for a 300,000 house so far. "You gotta have debt!" he says, for your credit score.
There's just no talking to him.
Friday’s Hartnett note attempts to answer these questions and does a pretty good job.
Friday’s Hartnett note attempts to answer these questions and does a pretty good job.
Chris,
I was late reading this but you are spot on. We are getting complete weird push back from advisors saying shit like. My behavioral psychology antenna is off the charts; "Well I just don't think we have a recession because everyone is calling for it" I think they see the double bottom in Oct. and December and refuse to see that the worst "may" be in front of us. They also believe no recession then ergo those 240 SP eps Est are valid and the market is cheap or reasonable and you should ride through it. "It always comes back"! My sis in law said that exact thing to me. I know she is parroting her advisors. She and hubby are gonna get destroyed by the young ED Jones advisor. I just say "Good luck". What we have learned you can't help people develop a alternative outlook with the massive Fin Services industry married to EMH and Systematic passive /Target. You can say " get in the boat or grabe the rope. Then the advisors says. "You are panicking, look at the covid bottom". Peeps are going down with the Titanic for the most part.
Ken R
Carpathia
So true Chris, and then there is that little geo political thing going on. Oh well, everything is fine, buy the dip.