🔔 WALL STREET is selling you TOXIC SLUDGE, exit Stock and Bond markets in an orderly fashion 🔔
Steve Van Metre provides an excellent analysis in his video that describes the imminent collapse in commercial real estate. In Silence's opinion, we are truly in a delusional period of time, such as 1930, 1968, early 2001, early 2008, and the end of 2019, to name a few periods in time where things had already broken, and the writing was on the wall, but where the market had some kind of euphoric rally where they thought everything would be okay. This rally that we have seen in early 2023 from the October 2022 bottom is one of those rallies, and history will prove this.
The predominant lenders of commercial real estate are regional and community banks. The same exact institutions that are calling in loans and cancelling projects because there is a mass exodus of deposits leaving to chase higher yielding, perceived less risky assets such as Treasuries (Direct or through broker intermediaries) and Money Markets (Mutual Funds). This almost seems like a controlled demolition of most banks in the US, except for the largest who are "in on the game". The smaller and regional banks were either highly encouraged or outright instructed by regulators to purchase low yielding Treasuries over the last couple of years, and to make loans on risky but lucrative high rise commercial projects, all the while the big banks use the Feds reverse repo window to get the prevailing rate of interest, risk-free, knowing they would want a lot in liquid as rates rapidly increased. Because banks with less than $250 Billion in deposits did not have to go through the Feds stress testing, they were allowed to do things that the larger banks couldn't do. So when times are good, they are really good for these "growth banks". When times are bad, they get very bad (usually shuttered or absorbed by a larger bank).
This just goes to show you that the more that government has its hands in the cookie jar, the worse things get as time goes. Bidenstalin and regime could never let a good crisis go to waste without creating one, and then presenting the solution to the problem they created!
Any small or regional bank (or even large one for that matter) can get trapped in a doom loop, where withdrawals beget more withdrawals... Add in a commercial real estate crisis to an already spinning doom loop, and what we all saw in China 2 years ago with Evergrande, could be stateside.
We are repeating 2006-2008 all over again. This time, a new set of brainwashed participants, bravely stepping up and saying how everything will be just fine. Some people are just clueless. Go woke, go broke. He who holds the money controls the power. Silver is God's money. Everything else is credit.
These faceless corporations who have structured these deals in such manners will simply turn the keys in and walk away, leaving the bag with someone else. Steve describes in great detail in the video of how corporations go to great lengths in order to provide completely separate entities for their commercial real estate holdings. We know how this all ends, with defaults, and either more government bailouts and money printing; or, we have a deflationary depression with necessary goods Hyperinflating because everyone can afford to go nowhere...
This is the tipping point, when you get to the point in the commercial real estate bubble when the existing owner decides if they want to put more money in, or if they view the payment and expenses as "not worth it". This is the point in which they will turn in the keys, first not by choice, but because they could not obtain credit, and then when the doom loop starts, people will walk away and give up hope on the asset class. This time around, I believe it will happen much more quickly as more people have learned than in years past on all fronts, including faster defaults, people walking away from properties faster, a faster crash, and those with real money will be buying towards the end of the crash and on the way back up. What essentially took 6 years to drag out from 2006-2012, far worse will happen, but in just 2.5 to 3 years this time around. We are only in the third inning of this baseball game with stocks and bonds, and real estate might even still be in the second inning!
As always, we will see major cracks within government programs first (FHA). This is when the insiders get their sell signals. There will be tremendous pain if government removes itself from the marketplace at some point in the future.
Demand is falling off a cliff, as investors and even first time home buyers are learning from past mistakes, and are deciding to sit this one out.
Analysts are not worried and are not sounding the alarm... Because biases tend to gravitate towards what you want to expect to happen as your base case, with a worst case, far less worse than what is likely to happen, and always very positive outlooks long-term. How else would people invest? The investment world has far more toxic investments than Wall Street wants you to ever find out...
Banks are leaving dealerships, why? Because they no longer have money to lend to lower credit buyers, which are no longer borrowing because credit cards are maxed out and people are starting to lose their jobs. Once someone knows someone close to them who lost their job, particularly a good job, that can send shockwaves as people's spending habits will change very quickly.
Word to the wise - raise cash, and raise your precious metal allocation to a healthy position!