The Credit Bubble Explosion & Great Reset JUST Started

we need to talk about a serious

potential issue in the United States and

potentially global economy and this

isn't exactly bullish either it has to

do with a Global Credit bubble and I

know oftentimes when people say the word

bubble there are some people who are

like yeah finally and then there are

others who are like Oh eye roller okay

bubble here we go everything's a bubble

well let's understand a potential

scenario we could actually be facing

using data that just came out minutes

ago as usual I love presenting data as

it just comes out this data was released

minutes ago here on August 7th and this

is the Federal Reserve statistical

release for Consumer Credit it's a

little bit backward looking these

numbers are from June so it does take

them about six weeks to put these

numbers together or as some like to say

rig the numbers but that usually just

depends on what side of the fence post

draw anyway what we found in this data

was that Consumer Credit expanded

substantially more rapidly than we

actually expected it to and this leads

to some potential bubble concerns let's

quickly understand this so expectations

or that we would see a 13.5 billion

dollar increase in credit

the previous increase in credit was 7.24

more in line with trending towards zero

and potentially recessionary instead we

actually got another blowout number at

17.84 and while it's nowhere near the

levels that we had seen at the end of

last year where Consumer Credit was

exploding to the tune of 34 to 37

billion dollars in a month it's clearly

coming in hotter than expected now

personally I think it's important to put

everything into context and these

numbers are clearly smaller than those

30 billion gains we had for Consumer

Credit last say March and really in the

middle of last year where we were really

exploding with Consumer Credit this is

really where people were getting

concerned about a consumer credit

explosion and this softening has

actually come as a way to say okay well

on one hand that's good less bubble risk

but on the other hand does that mean

we're trending towards a recession and

as you can see the trend here is clearly

down this latest beat over expectations

though sets up an idea that perhaps as

we end up getting the July and August

data we could start revisiting some of

the numbers that we saw in early

2022. one of the reasons we might

actually see an explosion of consumer

credit is what I call a weakening of

loan standards now this is really

counter-intuitive because remember

during the banking crisis what was

everybody screaming during the banking

crisis roll with me on this and you

might see something here that's kind of

shocking so during the banking crisis

everybody was worried about credit

contraction but the credit contraction

we actually got was just Trend

contraction we were trending towards uh

oh we might go into recession right we

might have recession so let's plan for

that let's do less risky lending and

companies kind of focused inward on

uh-oh might have recession well now

because more of the economy is

anticipating a soft landing and no

recession guess what you actually tend

to have a trend reversal and this would

be looser credit standards now this is

forward-looking okay this is my opinion

right here we see consumer credits

coming in stronger we don't yet know

that credit standards are loosening but

why do I think that credit standards

might begin to loosen and how could that

lead to a debt bubble well here's

exactly how and then we'll talk about

what it means for recession I believe

that when you have companies like PayPal

who are able to take their buy now pay

later loans and offload them in Europe

to this company called KKR what you're

really saying is the market has an

appetite appetite for high yields this

makes sense if risk-free treasuries are

giving you four to five percent and you

could potentially get 11 to 15 on a

bundle of bnpl loans even if 10 percent

of them default you're still probably

yielding somewhere between rough math

here 9 to 13ish percent on your bnpl

portfolio which is still like twice as

good as treasuries so give me more bnpls

but what happens in a non-recessionary

Time demand for these portfolios demand

for these goes up in recessionary time

demand for these goes down okay so now

you have to think about this as a supply

and demand issue so consider this if

bnpl Supply gets eaten up what do

companies like a firm and Sofi and

PayPal and credit card companies want to

do what do they want to do they want to

increase Supply they want more of these

high-yield BNP loans that they could

sell off to these other Pension funds or

investment funds how do you do that well

you do that by loosening credit

standards basically saying hey hey hey

look we all thought we were going in a

recession but you know what good news

we're not going into a recession come

one come all get your new bnpl loan we

are more than happy to give you the best

rates ever best terms ever come get more

loans from us because the more loans

affirm so if I'm PayPal and the credit

car companies can make the more payments

get processed which is how all these

companies make money in part then they

take the loans and sell the loans which

is another way all these finance

companies make money and then those

institutions they're the ones holding

the bag and the bag's either going to do

very well and they're going to get their

yield or they'll have some defaults or

you go into recession you really end up

holding the bag so this is like a

remarkable flip okay everybody's been

concerned about credit tightening I

actually think now that we're trending

towards a soft Landing we're likely to

go into credit

loosening now what is that actually and

practically going to do for the economy

in the short term and then a recession

in the longer term well in my opinion

here's what happens and obviously I

don't have a crystal bulb but my

expectation is if you have credit

contraction going throughout 2022 and

then you get a reversal in 2023 where

you actually end up getting is no

recession in 2023 you actually end up

getting more spending and more

indebtedness eventually from consumers

eventually those consumers will not be

able to support their household payments

anymore and then you get default and

that's where you actually get a real

recession so if we're potentially right

here in 2023 then this x date I do not

believe that's your default date right I

do not believe that X State actually

occurs until sometime long in the future

like I don't think it's 2024 maybe is it

2025 probably not it's probably more

like a 26 to 30 instance which means you

can really Kick the Can of the recession

down the road and this is something that

bears are not in my opinion paying

attention to right now this is not me

being permeable this is actually

long-term bad this is going to be a real

risk in our lifetimes that we have to

pay attention to the people are going to

take on too much debt and there's going

to be a debt bubble in a terrible

collapse uh and and an increase of

bankruptcies across the board personal

bankruptcies business bankruptcies

everything

and but the problem is right now

household Debt Service payments as a

percentage of disposable income is

actually very low let's pull it up let's

get the latest data right here household

Debt Service payments as a percentage of

disposable income

we're super low right now you know I

know household debt itself like

nominally is high but people still have

the income to support these payments as

of q1 of 2023 people are spending just

9.6 of their income their disposable

income on debts I think we're going to

end up getting back to 13 and then

exceeding that level that we saw before

the Great Recession this is how you

actually really create a bubble you fuel

it now with loosening credit standards

then you get to say 13 to 20

credit uh or uh payments as a percentage

of your disposable income towards credit

and towards that right

and then guess what you end up getting

you get a real bubble that's when you

have the real collapse so what is this

credit figuring mean in the short term

well let's make a conclusion out of this

and let's try to summarize this all

together and keep in mind these are the

sort of perspectives that I like to talk

about regularly in my course member live

streams daily it's not just fundamental

analysis on stocks but it's my opinion

my real fully transparent opinion on

here's what I'm doing here's what's

going on with my businesses here's what

I'm seeing and it's this idea

formulating that we get to do together

generally every day the market is open

sometimes I make a mistake and I miss

but usually I'm there every day the

market is open so what does this

practically mean so practical guide to

this well short term this kicks the

recession down the road what to watch

for credit loosening I know everybody's

talking about credit tightening but

remember the time to start thinking

about what other people are not paying

attention to is now so what does that

potentially mean maybe finance companies

are becoming the place to be in other

words banks credit cards PayPal just

launched their stable coin right these

are these are all examples or of of

places to consider being when you're on

the upswing in in credit expansion you

want to be in these companies hashtag

not Financial advice I am a licensed

financial advisor but obviously I don't

understand your portfolio maybe one day

in the future I can actually give you

personalized Financial advice but that

would be down the road so maybe not too

far down the road though so short term

this kicks the recession can down the

road we look for credit loosening maybe

finance companies start becoming a place

where we really want to fundamentally

look for opportunities

because in credit expansion you want to

be in these companies then the risk that

you want to watch for is credit payments

as a percentage of disposable income

watch this uh approach and exceed in my

opinion 2008 levels I'll probably say

2007 is more accurate uh yeah 2007 was

the peak okay and then uh eventual risk

real uh great reset so to speak bubble

uh explosion crash but before that

I would actually expect an earnings

trough potentially in Q2 Q3

of 2023 and credit expansion supports

New Growth ad companies so short term

this is actually good

longer term this is going to sow the

seeds today of the next financial crisis

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