Transcription
what's different between today and 2008
market crash 2008 market crash was about
no income no assets Nina loans Banks
were giving them money left and right
hey uh stated income you're trying to
qualify for $720,000 loan how much money
did you make last year Tom I'm a school
teacher
$48,000 you're not going to get
qualified for this Tom I going to ask
this question one more time how much
money did you make last year I just told
you
$48,000 do you want to get qualified for
this or not yeah okay one more time how
much money did you make last year
62 that's what it was no income no ass
in 2008 right 2007 and then I remember
the month when I knew it's over because
the one guy in La who was making 400
Grand a month uh had an office in Tanga
Valley in Tanga or Koga 30,000 ft of
office space November of 2007 he shuts
it down o and this is right after you're
seeing in WAMU Countrywide you know all
these other companies that are doing
what they're doing very problematic when
that took place so then you saw cities
like Riverside Community Riverside
County
65% houses forclosure then you had loan
modification then you have people that
were buying five six homes paying the
negative amortization payment which
means if you got a loan this was a
program that came here from Australia
with the story you always hear about
that this program was in Australia we
brought it in America it was meant to
only be for people who are affluent okay
you got a $20 million loan on a house
you got $40 million on a bank account
I'll give you 20 million no problem you
got four payments to make you got your
15year loan which is going to be the
biggest loan you got your 30-year fix
which is going to be reasonable but it's
not a 15-year loan then you have your
interest only that you're literally only
paying interest and the loan stays the
same amount or you got your negative
amortization payment which means the
loan gets bigger every month that you
pay it because it's negative
amortization every month the loan gets
bigger okay so for example for the
average person in America it would have
been something like this it would have
been NE gam payment was 1,200 bucks a
month interest only was 1,800 bucks a
month 30-year fix was $3,100 a month and
15E was $4,500 a month okay so people
are like dude buy another house and
another house and another so I got five
houses that I'm paying 12200 bucks on I
can afford to do that except that was
only for two or three or 5 years and
then all of a sudden your 1,200 payment
goes to $4,200 Time 5
houses how do you pay $20,000 a month
you can't do it boom foreclosure
foreclosure forclosure so that's not the
case study of today the case study of
today is somehow someway the government
thought it's a good idea to lower
interest rates to
1% and we had 3% loans that were going
on and then we talk about 128 month
expansion by the way if there's no covid
that would have been 150 month expansion
that we would have had that's not good
to have a 150 month expansion because
during that cycle that we went out
Tom money was so cheap that people were
just picking up money and buying stuff
left and right it was so cheap go get a
house go get a car rates were low you
know these big companies are getting $50
million lines $100 million lines $200
million lines go get as much money as
you can
then Co hits when Co
hits philosophically it was a show
go work from home 18 months that's what
you got to do essential
non-essential and then when that took
place companies like Twitter and many
others said at Twitter under Jack dorsy
you can work from home for the rest of
your life what a Noble company that's
what we got to do and then so we go
through that cycle and then people
started abusing employers and they had
two jobs where they weren't telling
anybody but they're making 82 here and
88 here so they're making $170,000
thinking they can do this fraud that
they're doing for the rest of their
lives and then they're living a $170,000
year lifestyle not realizing that's not
going to be around forever and then the
money that they put into the system all
of a sudden people have cash in the bank
like never before so we had $2.2
trillion of cash Americans every quarter
that thing went from 2.2 trillion to 1.7
trillion to 1.4 trillion to 1.1 trillion
and our savings as a nation kept going
lower and lower and lower and lower so
then we have um more money being printed
into the economy and then we have the
election then now covid is gone now we
got to get people to come back to work
they don't want to come back to work
they want to work from home then
companies like David Solomon Goldman
Sachs they start saying no you got to be
there for accountability on Monday
morning and all this other stuff if you
don't you're not getting your bonus
people started kind of getting creative
that's unfair that's not cool I'm going
to go get another job many did then some
companies came out and said no we're
just not doing that and then you know
that has taking place and then you have
a bit of War you have craziness going on
with another War you have all of these
things taking place and then suddenly
Jerome Powell sees inflation's going to
8% wait a minute what's going on here we
got a led to 2% how do you to 2% let's
start increasing interest rates we raise
this is crazy we raised
4.88% in the shortest amount of time
ever in the history of
America there's a chart on statistic you
got to see this it's a great Visual and
it shows historically when we've had to
increase rates it's over a threeyear
span or it's over a six-year span or a
three and a half year span no no this is
over a 12 month 15 month SP span
4.88% boom like this hoping inflation
goes down okay inflation moves a little
bit sales of homes to the lowest in 20
years mortgage applications lowest than
27 years people who were doing loans I
don't know if you have friends who were
doing loans or mortgages or real estate
these are guys that were making a half a
million dollars three years ago per
month they're not making nothing right
now guys who were making $100,000 a
month are having a hard time making
$88,000 a month WR down loans there is
no loan application because even new
homes are not being sold to do the loans
of new homes so home sales are down
because typically when refi comes down
people will sell homes no one's selling
homes today why are they not selling
homes today because they're still
sitting on some cash and they don't want
to give up that 3% loan they got a year
and a half ago and then you look at the
data okay let's just say I do sell this
house I got to go buy another house but
I got to get that house at 8% I'm not
willing to do it why would I do it so
I'm not going to there is no motive to
sell the house so now what's the ticking
Time Bomb few things
one Jerome PO is trying to increase
rates hoping hoping unemployment
increases because that's what we need
they need the unemployment to increase
it's not moving still 3.7 3.5 3.8 3.9
it's not movement it's right
there okay so either we need
unemployment to go up or we need people
to run out of money if people run out of
money and they're stressed out guess
what they they do they're going to sell
the house so today numbers came out
saying it's 55% more cheaper to rent
than buy this is the highest we've had
ever wow it's
55% cheaper to rent than to buy today
this is not a buying season this is a
renting season okay this is what Wall
Street Journal many of these other
articles we'll talk about okay
meanwhile the economy is growing the
economy is going up Dow Jones oh it's
killing it based on seven compan
companes magnificent 7 and you know who
these magnificent 7 companies are Nvidia
you got these Facebooks the Amazon the
apples these seven companies that are
preventing the company from country uh
the market from having a crash then
while all this stuff is taking place um
Powell now is dealing with a war he's
afraid he wants to raise the rates a
quarter but due to the war that took
place in Israel he doesn't and then data
shows which is by far the most
interesting data to answer your question
here is how much after these five
situations where we rais the rates
multiple times in a span this being the
shortest uh in the most condensed time
frame how long does it typically save is
there a formula of when recession comes
if at all here's what they realize
recession usually comes on average 11
months after the last month they rais
the rates so what does this mean if
Powell's no longer going to raise the
rates and the last time they raised the
rates was September let's just say that
means recession is going to come when
not October so you got October November
December January February March April
May June July August August of next year
three months before election that's if
it follows the trends of the last five
times when they raised interest rates so
how did I start off the story I talked
about the doctor that has met 4,000
different patients and the 420 you're
kind of going through this the problem
of everything I just told you could be
completely wrong because there's a fifth
when the doctor says I've never seen
this before so we've never seen current
climate current climate before for us to
be able to put it and say well according
to this and according to that we've
never had this situation before yeah
that's the thing that makes me really
tense but there are fundamentals that
when I look at I think oo like there it
isn't possible to sustain this so the
thing that I just keep coming back to is
debt and interest and when you look at
the charts that show
the interest payments and how they're
going to go up and up and up and even
people that locked in you know say
three-year fixed rates at really low
rates in the corporate Market that all
goes away in a few years and so you
start looking at just the absolute
Behemoth numbers that are going to be
due to service that money and it becomes
completely untenable and the bad news is
it becomes untenable both at the
individual level where we're more in
debt than I forget ever or close to it
but individuals are in psychotic amounts
of debt corporations are in ridiculous
amounts of debt and the nation is in a
ridiculous amount of debt all while
we've had two major printing events
since 2008 and so now you really have a
very unstable market so there's a great
quotes called Minsky's Financial
institutional hypothesis instability
hypothesis excuse me uh and he said when
an e omy is stable people get optimistic
when people are optimistic they go into
debt when they go into debt the economy
becomes unstable and now that's even
without the crazy rising in interest
rates so we have like this for me it
seems self-evident that there is going
like that that gravity insists that
things come back down but they haven't
yet and so just when I want to get
bullish and be like hey obviously this
is all going to come Crashing Down it
just keeps not and not and not
um my intuition is that a recession is
inevitable but the market can remain
crazy longer than you can remain solvent
whatever the quote is um why hasn't it
happened yet and how do you think about
because obviously you have the you have
similar concerns that I have only the
paranoids survive but how do we turn
paranoia into an action
plan yeah so everything is right now
about mapping out different
possibilities so for example if we're
right now in a conference room and we
got bored to write on we would write on
you and I would write down and we would
say okay uh World War III takes place
what do you think of the chances of this
taking place Ray doio says 50% yes okay
do a um Jamie Diamond says this is the
most danger Dangerous times we've had in
America in decades Okay cool so if World
War II happens what happens to the
economy who's going to be the parties
involved are we going to be involved
purely through proxy or is there going
to be attack here then you write down
the possibilities okay if this happens
what are you going to do if this happens
what are you going to do then next what
happens if unemployment all of a sudden
goes to 7% 6% what happens if inflation
goes down what happens if Powell starts
lowering rates back down to 54% holy
that's that's going to be crazy
what Happ so you got to write all of
these different scenarios down but
here's a couple things that we have to
be thinking about and you said which was
fascinating one so credit card debt
highest it's ever been you know what's
the crazi thing about uh uh credit card
there being being the highest it's ever
been Tam the average interest rate on
credit card is the highest it's ever
been Jesus forget about the debt so
people are worried about the debt so
imagine the interest rates in the last 5
years has gone like this to 23% or the
average is 23% on credit card you know
what 23% means that means the debt
doubles about 2 and a half years that's
like loone shark number that's loone
shark three years is your debt is
doubling right but that's what we got
right now credit cards okay so our debt
is
record-breaking the forgiveness for your
uh loan uh school loan is gone so now
you have to start paying for it that's
$3 $400 a month that people are
expecting I think October November
starting then let's set that part aside
go to the corporations you were talking
about that are borrowing money this year
their interest payment on corporation
that borrowed money is going to end up
being around $530 billion just interest
oh my God next year it's going to 730
next year it's going to 1.1 trillion in
the next 5 years it's going between 1.3
to$ 1.5 trillion just on the corporate
debt that we're talking about by the way
next part car payment a credit no one's
affected good credit they're making the
credit payments on
time mortgages we're not saying anything
crazy with people with bad credit not
making payments we're still good car
payments and subprime they're seeing a
spike and defaults where people are not
making car payments the first sign
you're seeing on what's taking place no
problem let's go to the next one that's
the scariest one us has $33 trillion of
debt worst that's ever been the highest
that's ever been no problem what does
that really mean nobody can really
figure it out here's what it means of
the money that we have about 8 trillion
of it the rates are going to
re-calibrate and we're going to have to
have new rates that we going every
single time the rates go up one point
just one point for the US government our
interest payments Tom increases by $320
billion Jesus so imagine we raise rates
by three points just interest it's a
trillion dollar more per year if it's 6%
$2 trillion more per year that's that
then last thing that I'll just kind of
get you to be thinking about
um so anytime you want to know if the
economy is back to normal go to
Vegas Vegas is humming like okay we're
good and always whenever you go to Vegas
talk to C drivers and talk to the
drivers who are doing Uber always ask
how's conventions doing how are you
seeing with traffic are you noticing
things cancelling no this has been crazy
for us the last three months
everything's good but if they start
seeing in a downturn they're typically
an indicator of what's to come
Transportation industry we consult for a
lot of Transportation companies at Bed
Consulting one of my friends I'm about
to go meet with them right after
this they're they're con their
construction company does very well we
have these three clients that we have
who are doing
Transportation two of them are doing a
100 million 80 million a year numbers
are down 40
50% one of them is doing a billion a
year their revenue is down 70% oh so
let's actually talk about transport why
would Transportation be down
70% aren't Walmart Amazon companies
ordering stuff to ship it from here to
there why would that be lowering what do
they know that we don't know again these
are people who have data to Insider
stuff that we can sit there and say
these are great indicators when you're
studying these things on what's going on
does this mean recession is going to
come here like I told you earlier when
we were talking my bigger fear is a
reverse market crash which Venezuela
just went
through which all of a sudden the rates
get lowered and DOW an S&P goes and DOW
goes from 33 40 45 50 55 60 just goes
Voom is that just the dollar losing its
purchasing power yes exactly that's what
happens the more we're printed like for
example a Michael Jordan um card uh
years ago a bgs 9 a half sold for
$78,000 I was like oh my God that's
crazy but then all of a sudden all of
these boxes kept entering the
marketplace of 1986 Fleer so guys
started buying these things and they
were sending more to get graded at
Becket and PSA the more they got cards
graded that $78,000 card bgs s 9 half
became a $60,000 card $50,000 card
$40,000 card $30,000 card you can
probably buy bgs 9 half today for
$20,000 $25,000 okay so the
inventory increases the more we print
money the more you print dollars and
it's more accessible the less it's value
the less it's worth so these are some
things that's going on uh today uh so
you know like I you sit there you're
like okay so does this mean guys are not
going to make a lot of money no no
you're going to see the first
trillionaire in the next 24 months cuz
none of this is going to affect the guys
at the top none of it this printing
money every time they print money the
guys at the top make more money every if
there's anybody that should be against
printing money it's low and middle
income families if there's anybody that
should be against printing money is them
if there's anybody that's for printing
money guess who it is the guys at the
top why because the poor in Middle
America can't keep money they spend it
and when they spend it what do they buy
a product owned by somebody in the S&P
500 or other people who have businesses
money flows up they can pre keep
printing money all they want so when low
and middle income families are like look
at these guys all they care about is
themselves let that bill pass for $2.7
trillion you simply look at him and you
say you have no clue how money works you
have no idea how money Works guess what
let's print $10
trillion Rich are okay with it you ain't
going to get the r complaining about
printing $10 trillion or $5 trillion
black Rock's going to be like all right
cool we're at $8 to10 trillion of money
in our ETFs and we're buying up a bunch
of different companies we're buying up
all these properties today right now
it's going to be nothing but in the next
few years you have to go through us and
we dictate the market and we're going to
own it all and what are you going to do
about it you know these are these are a
lot of different moving parts that is
going on to me and again for me um the
the idea of middle America not being
able to make the money they need to make
to be able to afford a house send their
kids to school live in a nice place
enjoy some of their dreams maybe not the
biggest ones but some of their dreams
are going to become a reality Middle
America is getting smaller and smaller
and smaller every single time we print
money if you like that clip check out
the full powerful episode here and I'll
see you there