wtf stock market

usually when I make YouTube videos one

of the things I love is having the

perspective of bear pieces so that I can

evaluate what do I think is going on in

the world around me how do people feel

about the economy how do consumers act

how are consumer spending what's going

on with uh businesses incomes and

expenditures everywhere around me and I

like to take that information and then

compare it to what I see in earnings

reports at companies then I like to read

bullish reports and I like to read

bearish reports basically I try to read

everything that I can about what's going

on in the economy as of about the last I

don't know maybe two weeks here ever

since TS Lombard flipped there's been a

really big change and it's a big

flip-flop that I'd like to talk about

because I find it quite interesting uh

potentially also important but remember

TS Lombard's flip-flop first of all in

case you don't remember TS Lombard the

way you have to look at them is as a

bear they've pretty much consistently

written bear pieces for the last two

years and what's remarkable is

just about a month ago they flipped and

how did they flip well you might

remember they wrote a bear piece and

said we're bearish but we're going to

go neutral on stocks in other words

we're going to increase our allocation

to stocks because stocks might go up

in other words TS law enforce like we

don't think the FED could stick a soft

landing and we're really big bears we

think inflation is going to continue

there'll be a second wave of inflation

Commodities are going to Boom rates are

going to stay higher for longer we're

all screwed basically

but we're flipping because stocks might

actually go up now after that moment

I've noticed it's been extremely

difficult anywhere to find really

bearish information from people mostly

because it feels like every day somebody

else is flipping and now this on one

hand sounds really great because it

means if everybody's flipping from being

a bear to actually being positive about

the market that eventually we should

start seeing even substantially more

allocation to the stock market uh and

the rising stock market which I suppose

if we look at the NASDAQ and just take a

pause there and a breather for a moment

oh wait that's exactly what's been

happening it's the Nike Swoosh which is

something we've been talking about for

what a couple about a year and a half

now

and the reason it works is because not

all bears capitulate at once they slowly

roll off and then as they roll off they

realize they are underweight equities

and they allocate to various different

stocks and companies and they become

less bearish and as they become less

bearish they don't immediately go from

you know let's say 10 stocks to 100

stocks but they slowly rotate that dial

to allocate it rather than under

allocated

and that's actually what we've seen in

not just the NASDAQ Rising but also I

mean you could see nvidia's meteoric

Rise here Beyond nvidia's meteoric rise

we could look at the djx as well uh Dow

Jones Industrial index

that's been a little bit more stuck but

as of what recently it's also starting

to rise uh let's look at the Spy

all right same thing so every index we

look at even the Dow which has been a

little bit slow picked up yesterday

where the NASDAQ took a little breather

and so even though uh we're going to

take a little piece look at a bit of a

bear uh or um uh piece here on debt uh

billions and corporate debt coming to

you even though we're going to look at

what is maybe a big take on a bearish

piece

I wanted to start this video out by

arguing

it's getting increasingly uh difficult

to find a contra argument to where the

economy is going which seems to be a

relatively soft Landing maybe if there

was a recession a super minor recession

with most employers seeking to retain

their employees and essentially

supporting spending through any kind of

recession that we might face which could

really be base effect based but that's a

way of saying that like hey even if

we're just like 0.1 percent slower of an

economy than we were last year we're

still technically in a recession which I

always find very weird that you could

have such a massive run-up and then the

fact that we didn't know ready go

substantially negative after that crazy

spending we had during 2021 blows my

mind but whatever

so let's take a look at this here's a

Bloomberg bear piece mind you it's it's

so hard to find bear pieces these days

and look you've got like a lightning

bolt striking a building it's it's

supposed to appear scary anyway it talks

about this 500 billion Dollar corporate

debtstorm building over the global

economy and on a daily basis I'm seeing

more and more talk about corporate debt

now what I'd like to do is first mention

that yesterday I was reading a front

page story on the Wall Street Journal

that was talking about one of the

reasons the consumer has been so

resilient is because they actually took

advantage of consolidating their

personal debt during the pandemic so

they have less personal debt than they

did going into the recovery after the

pandemic

which is one of the reasons potentially

the consumers continue to spend

so the consumer's been okay

so if we can't talk bearishly about the

consumer maybe we have to talk bearishly

about

corporate debt

see corporate debt is an interesting one

because if we look at corporate debt we

think okay well this would be bad right

I mean like a massive amount of

corporate debt could end up destroying

companies and leading to bankruptcy

right maybe when you're going into a

bearish market but not when you're

looking at what carvana just pulled off

consider for a moment what carvana just

pulled off

carvana was literally about six months

ago defaulting on their debt

that is step one to bankruptcy textbook

bankruptcy you stop making payments

can't afford to actually pay your debt

holders that's where carvana was six

months ago fast forward to today carvana

Dave

80 of their bondholders a middle finger

and said we are writing you off and

we're not paying you any more suck it

basically extinguished about 400 million

dollars of corporate interest expense

and now their Stock's gone from three

dollars

to 46 dollars like what is that I don't

know 15x or something like that it's

insane

and they did that by being able to

middle finger off the death holder so

even stories where you have corporations

that are like they're going bankrupt

they're not even making their payments

anymore

somehow have been able to survive maybe

it's all driven by Insane uh liquidity

reserves that still exist either at

companies or with consumers or maybe

because the stock market is recovered

it's able to prop up zombie companies or

maybe carvana has truly turned around

and maybe they're unique but it's

fascinating nonetheless and so it's

worth going into this Bloomberg big take

and remembering that

all of these super bearish things so far

just haven't really come to fruition I

mean a couple more things banking crisis

it's basically a nothing burger and that

was like scary when I was going on not

only that but what about the liquidity

crisis oh as expected the buffer of the

fed repo facility is filling the

treasury General's coffers again and now

people are people are literally punching

the air in real life like Kevin

see this is the air punch what is going

on

did you see that our debt is already up

another trillion dollars what is this

man our country's been misbearing it's

just supposed to crash

and it's like

all the Bears literally pissed off in

real life too like how is this possible

how can carvana survive how can the

country uh continue to expand its debt

like this and and all these crises that

we're supposed to have end up not

happening

leads to very unhappy bears

anyway Let's uh try to touch a little

bit of a bear piece here let's just say

you know there's still plenty of ways to

build your wealth specifically with the

zero millionaire real estate investing

course the how to make more money and

get sh9t done faster and of course the

stocks and site group all very popular

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out you can join me daily in the course

member live streams we'll have some new

lectures coming out as well soon so a

500 billion Dollar corporate debt storm

builds over the global economy the

concerns of a credit crisis have receded

but a wave of corporate bankruptcies is

building now that an era of easy money

has come to an end yes yes I yeah of

course it's they're all gonna go

bankrupt okay you're going to see a lot

of defaults it feels different from the

prior cycle because other companies

might not be able to withstand the debt

burden they have and we'll either choose

to default or restructure which could

really hurt the economy should many of

these occur at the same time well

maybe maybe not see

bankruptcies are actually a beautiful

thing

they take bad ideas

and they delete them they take people

who are working for inefficient

companies and they say hey

you're working for a company that's not

that efficient would you mind going and

finding another job see I made that all

like 2023-ish it's really more like

we're going bankrupt you're laid off and

you're like gosh I lost my job if you

can go find something else and you're

like oh I got a better job oh this place

is better anyway that's capitalism right

that's the whole point you're supposed

to see bad companies go bankrupt the

fact that we actually haven't seen more

bad companies go bankrupt via corporate

bankruptcies or restructuring or

whatever

blows my mind anyway continuing

uh so here's an individual who's talking

about this 500 billion dollar storm of

corporate debt distress that's already

starting to make a landfall according to

data compiled by Bloomberg the tally is

all but certain to grow okay and that's

deepening worries on Wall Street by

threatening the slow economic growth and

strain credit markets just emerging from

the deepest losses in decades okay

on the surface much of it looks like the

usual churn of capitalism of companies

undermined by forces like technological

change or the rise of remote work and

emptied Office Buildings see that's kind

of what my impression was yet underneath

the surface there's deeper more

troubling info that loads have swelled

during an era of usually unusually cheap

money and now that's a heavier burden as

central banks ratchet up interest rates

I mean we've heard this one for quite a

while but okay all right whatever

total outstanding corporate bonds and

Loans trading at distressed levels

exceed 590 billion dollars okay so let's

touch on that for a moment

the The Innovation uh dare I said of the

corporate bond is actually quite quite

brilliant because think about a

corporate bond for a moment

you go to a corporation and you say Hey

look

this is you right here

um uh let's draw like the oh dear lord

okay

uh that's our problem oh okay here we go

all right this is you okay

that's you and uh this right here is the

uh paper mill

okay so that's the factory

you're going to give a thousand dollars

to the factory

and the company is going to give you

an IOU and which is a promise to repay

right so they're going to give you a

promise to repay but they're also going

to give you uh potentially some form of

coupon book

where you could redeem your you know

quarterly uh Bond payment or whatever

that's your your yield right when you

paid a thousand bucks maybe you signed

up to get a four percent yield so you're

getting 40 bucks a year congratulations

here's your coupon and maybe you could

redeem that at 10 bucks a quarter okay

great

so what's happened now though is as

we've gone into turbulent times

these corporations are still responsible

for paying this thousand dollars plus

forty dollars

but what freaks people out is that these

Securities right here these bonds these

ious are able to be traded on the public

market so you go to like the New York

Stock Exchange and you're able to say

hey you know what look I have this

thousand dollar Bond here and I need

liquidity because I want to buy a boat

and you bring it to the New York Stock

Exchange and the New York Stock Exchange

is like

for that company bro I'll buy it from

you for 700 and because it's a public

market we see that as a fair price for

what you paid you took a 30 haircut

change it somebody else got it at a

newly marked fair value and you walk

away with a 30 discount but you still go

buy your boat because you had enough

anyway

so now all of a sudden what does that

mean when Bloomberg goes and writes a

story well Bloomberg goes to write the

story and it says oh hey we just saw

corporate bonds fall 30 percent

meanwhile you look over here and the

company's like well that didn't affect

us because that was traded on the

secondary Market

and the person you it's like well I

don't care whatever man so I got a

little bit less back but I still got my

boat

so in other words

in my opinion when we're when we're

looking at these these debt reports and

we're looking at something like this

right here outstanding corporate debt

trading at distress levels

who cares to some extent it doesn't

really matter where it's trading it's

just trading at distressed levels

because the bond markets those things

were going into a recession but there

are plenty of people actually buying the

dip on these bonds because they have

this impression that well if we actually

stick a soft Landing these will actually

recover quite well when you go bring

that thousand dollar coupon to the stock

market for you know now you like if you

took a coupon or or a bond for carvana

that was originally a thousand bucks to

the New York Stock Exchange in November

maybe you'd get 10 bucks for it like

they were written down like nothing

now go bring it to the New York Stock

Exchange you might get 800 bucks for it

right like it's massively increased in

value so there's a buy the dip

opportunity in these bonds as well for

companies that just don't end up going

bankrupt somehow end up Surviving so

really just measuring how much de-stress

there is in like corporate bonds it

doesn't really matter the people are

taking advantage of the free market

anyway I mean think about it like you

could have literally said that last year

the stock market went through a 40 level

of de-stress as everything got written

down 20 to 40 right it's the same thing

it's just an instrument that's traded

freely

anyway the rising tide of de-stress is

of course to a certain degree by Design

caught by surprise as inflation has

surged monetary policy makers have been

aggressively draining cash inevitably

this means some companies will fall the

pockets of corporate credit look

particularly vulnerable to the

ballooning debt in the U.S the amount of

high-yield bonds and leverage loans

which are owned by risky or less credit

worthy businesses has more than doubled

from 2008 to 3 trillion dollars in 2021

before the Federal Reserve started its

steepest hikes and over a generation

a lot of those Securities will need to

be repaid in the next few years

contributing to a 785 billion dollar

wall of debt that's coming due

false a lot of the Securities don't have

to be repaid

but that's the thing like if the company

goes bankrupt

then the Securities don't get repaid and

then people like I'll put them in the

company's bankrupt

so maybe it was supposed to go bankrupt

but that means that money doesn't

necessarily have to be repaid

on the other hand

some of those companies will just go

middle finger baby we saw what carvana

did we will do that too or you'll end up

going to Courtney you get you know maybe

a little bit more of a left-leaning

judge who's like hmm even though you

have secured bonds given that some of

those against carvana were deemed

unsecured we'll just assume y'all are

willing to take a negotiated haircut and

prevent the company from going into

bankruptcy via chapter 7 liquidation and

we'll just restructure the company

negotiating even your secure debt down

with a 50 haircut and then boom guess

what you get a judge that's like 785

billion dollar wall of debt is now half

of that

it ain't that big of a deal anymore it's

crazy and I like like every day I I feel

myself sitting here going just

it just can't be there's not enough bad

news to talk about that that must be

good but then on the other hand and what

are we missing because or I look at bad

news it's just not that bad or it ends

up working out I know we got the

Teamsters Union ups and you know

somebody returned drama we still got the

weed issue with Ukraine we've got

China's economy massively slowing down

people like oh don't worry they'll be

war with Taiwan and China I don't see

that happening at all unless they really

want to destroy their economy and really

solidify the fact that they're not going

to be a manufacturing base in the future

there's no way in hell China is going to

go for that uh look they like to hold on

to power but I don't want to give it

either

let's keep going with cooling growth in

China and Europe

the FED expected to continue raising

rates those repayments may be too much

for some businesses to bear in America

alone the pile of troubled bonds and

Loans has already surged over 360

percent since 2021.

if the spread continues it could lead to

the first broad-based cycle of defaults

since the great financial crisis

bring it on man

it's like an elastic band you could get

away with a certain amount of tension

but there will be a point where it snaps

see these these make such good like

clicky arguments uh in in these these

news pieces it's like yes something's

going to destroy and then I'll finally

get my chance to buy cheap real estate

and cheap stocks false

and that's the pisser right I think

there are a lot of people who are like

Kevin I want to buy real estate I want

to buy stocks but I'm looking at them go

what the hell dude I thought socks worse

must be a good deal like because we're

like a recessionary time or whatever and

I thought I was going to be able to get

a chance to buy real estate cheat and I

just can't get anything right that's

that's what a lot of people are very

frustrated about

now I'm not worried for example for the

real estate startup but I I have a very

unique position in that in any Market

we're in I know I could get phenomenal

deals below market value

so it's it's it's absolutely possible

you could do it as well just have to

know what to look for and how to handle

it

instruction Arbitrage

anyway

that's already starting to happen with

120 bankruptcies so far in the us alone

this year how many have you really heard

of anybody talking like crypto

bankruptcies here like companies don't

really matter or are these companies

that have been going Vancouver were like

yeah well we kind of saw that one coming

and even the companies that are filing

bankruptcy aren't necessarily going to

go to liquidation either anyway even so

less than 15 percent of the nearly 600

billion dollars of debt trading at

distressed levels have actually

defaulted bingo exactly look at that

even though that debt is like they just

shot themselves on the foot with the

article at least they're being

transparent here about that but it's

kind of what I was saying earlier with

like who cares if it's trading for a

lower level that doesn't really mean

anything

and now we find out what only 15

of that distressed at is actually not

being fulfilled so going back to this

picture right here uh when you have this

bond from this company in this IOU

default is when they stop paying you

your forty dollars every year

but only 15 percent of companies in this

situation have actually defaulted huh

it's just not that bad okay great

Moody's said the default rate for

speculative great companies worldwide is

expected to hit 5.1 percent next year up

from 3.8 last year

and under the pessimistic scenario oh

okay it could go as high as 13.7 percent

reaching uh exceeding the level reached

during 2008-2009.

the other thing to consider is that

you know this is sort of a flip side

argument I'm not saying it's definitely

not going to be a big deal I'm just

saying so far it's a pretty weak

argument and I get it yeah oh oh under

the most pit under the most pessimistic

scenario you're gonna tempt me by saying

it's gonna be worse than 2008 and 2009.

well first of all that assumes that your

pessimistic scenario is going to be

correct and second of all

is it though because think about it

today

we're in this really weird environment

where the rich really get richer the big

companies make the most money

and so the speculative smaller companies

matter less to the economy than the big

companies do Apple today is way more of

a Goliath than it was in 2008 when they

were releasing the app store for the

iPhone

yeah who here remembers that when I had

the iPhone 1 in 2007 didn't come with an

app store there was no flashlight app

you had to open your stupid camera go to

video

and Press light

at least there was no light sensor to

know if it was like bright or dark so

you could turn the light on even in

bright areas

but anyway I mean Apple was way smaller

2008 it wasn't even an iPad

I mean my children don't even know a

world that didn't have an iPad Pro

so uh you know it was a little we're in

a little bit of a different environment

the economy for one has remained

surprisingly resilient in the face of

high borrowing cost yes yield spreads in

the US junk bond market a key measure of

perceived risk have narrowed since March

huh interesting in other words people

are buying the dip on these junk bonds

so understand that for a moment

people are literally doing this they're

going over here and going oh you're

willing to sell that bomb for a 30

discount on that trash company while

inflation is going down and it looks

like we're trending towards a soft

Landing yes I'll buy that dip and the

more they're buying this dip

the more these bonds actually recover

it's crazy

okay uh because remember the more you

buy and this I know gets confusing so

let me add this in the more people buy

the junk

the lower the yield goes on the junk and

so if quality debt is trading for five

percent let's say and junk debt is

trading for ten percent that's a spread

of 500 basis points right well if a

bunch of people buy the junk and the

yield on the junk goes down to eight

percent

and treasuries on the two years say five

percent now you have a 300 basis point

spread so that's yields compressing okay

cool so the more defaults rise the more

investors and Banks pull back on lending

right well this is like the credit

squeeze argument but so far we're not

seeing that in fact we're seeing like

the opposite more people are buying the

dip on these bonds because they want a

higher yield

especially after carvana it has more

than one point okay who's this all right

here's a the Canary Wharf group who

cares about the Canary Wharf group

who cares literally who cares I mean

listen to this that's Fallen

particularly hard on the Canary Wharf

two buildings owned by Chinese property

developer Chang K Group

or take it over by receivers after loan

payments weren't made and June came more

bad news HSBC said it's planning to

leave by late 2026 who was an occupant

of this Canary Wharf group the developer

whose credit rating has been cut deep

into junk as vacancy rates rise it has

more than 1.4 billion dollars of debt

coming due in 2024 in California 5. who

cares though okay so some Office

Buildings are going bankrupt guess what

the buildings don't call apps

somebody takes a haircut on their debt

the building still has equity in it to

some extent I mean think about it if you

have a hundred million dollar building

and now it's worth 50 million dollars

well the debt on it was probably only

60 million dollars so some bondholder

gets burned by 10 million dollars the

person who loses most is the person or

entity that owned the equity you know

the 100 to 60 part

so they get wiped out who cares Chang

whatever and his Canary Wharf group

dissolve nobody cares like you don't

wake up going oh

the canary wolf group is going bankrupt

wolf group sorry I started watching Game

of Thrones and eldest direwolf talking

is is getting to me but anyway you

nobody cares

and oh no you know the bondholders had

to take a little haircut okay

uh

uh but again they they're not looking at

what is the part of the debt that's

actually a risk they're just saying well

all uh you know 60 million dollars is at

risk even though there's a big Equity

buffer in real estate to where it's

really only the top edge of the debt

that's at risk right let me picture that

just just to draw you a picture here's a

building

it's worth a hundred million dollars

it's got uh 60 million dollars in debt

uh now the value of the building falls

all the way down to 50 million dollars

okay who lost most of the money

well the investor data the original

building owner the equity holder the

equity holder lost all the money the

bondholder only lost 10 billion or 10

million dollars

but Bloomberg's telling you oh no all 60

million dollars is at risk

shut up

it's it's just nonsense anyway continue

on

what else

uh all right the bio machine private

Equity firms have thrived on easy credit

that often left companies deeply

indebted frequently with floating low

rate loans fine uh soured uh PE back

companies account for more than 50

billion dollars of distressed debt KKR

has a distressed portfolio company you

know whatever black zones in here Apollo

Global Management Carlisle Group a lot

of these are Office Buildings who cares

it's the same thing as Global wolf Wharf

I just talked about

uh okay meanwhile raid straw jumped

Brewing troubles one of the biggest U.S

radio station owners audacity has more

than 800 million dollars of debt due

next year and in May the s p slashed the

company's rating into junk

am I gonna wake up tomorrow sad that

audacity isn't here anymore I don't even

know who that is

I'm sure some people will be sad their

radio station isn't there anymore but

guess what then you open the Twitter app

and oh my gosh wow there's plenty of

stuff for you to listen to or YouTube or

whatever uh so again

whatever

so there you go there's there's what is

you know an example of a scary big take

of disaster and hell and the title of a

500 billion Dollar corporate that storm

builds over the global economy

and then you throw some realism in there

and you're like

damn

time to close my shorts now I want you

to know this when it comes to AI

time is what's going to make you money

and if you can prove that value to an

employer you'll always be able to be

employed so this is another way of

making sure that you don't get replaced

but