The Ripples...What comes next in the economic world...

No, this headline and interview above isn't from January 17th, 2020, this interview with Robert Kiyosaki is dated January 17th, 2018, two full years ago.  Robert Kiyosaki is best known for writing the financial bestseller,  Rich Dad, Poor Dad (not a paid link), and several other books.  This clip was taped less than a month after President Trump signed the massive tax cut bill, which most people at the time thought would send the stock markets soaring.  In reality, the Dow, S&P 500, and Russell 2000 all peaked a few days later, after this interview, on January 26th, 2018, and then headed slowly downward.  The Nasdaq went higher for a few months, and then it, too, headed south.

Here's what I see coming soon, after last week's stock market slide:

-One or two up days in the stock market this next week, but another major downhill slide for 2-3-4 days.  There will inevitably, and very unfortunately, be a "community spread" of the virus we're all worried about, in some major city.  This will let us all know this virus issue will be playing out for longer than any of us want it to, and will cause far more trouble that we're hoping it will right now.  That news will have another huge negative effect on the financial markets. 

-Some major investment/lending business goes bankrupt/closes permanently... soon.  In 2008 it was Bear Stearns and then Lehman Brothers investment banks that closed suddenly, sending shock waves through markets and business people.  This time, my educated guess is that we'll see a collapse somewhere in the "shadow banking" world... within days or a few weeks from now.  Some business, like a mortgage lender or auto loan lender, but not an "Official" bank, there have been a lot of rumors of businesses in that world struggling recently.  This one will ripple through the markets in a massive way.

-Large scale layoff announcements at one or more major companies, over the next several weeks and months.

-Some major, established, well known corporation will file for bankruptcy soon, within a month or two.  Yes, we've had several bankruptcies in retail already, once colossal department store, Sears, is in bankruptcy already, for example.  Will it be another major retailer, or some other corporate giant?

-Major downgrading of many businesses' BBB rated corporate bonds into the junk category.  Institutional investors will then be forced to sell a lot of these bonds, which will cause another negative ripple in the markets.

-Farther into the future ( a few weeks, 1-2 months)- Visible signs of a pull back in home sales and commercial real estate, sales and prices will begin dropping in most places.

-At some point, there will be some kind of meltdown in student loan debt.  According to this Nerd Wallet article, nearly 40% of federal student loan debt wasn't being back on time in early 2019.  If that number hasn't increased, it will soon.  We saw a sub prime mortgage loan meltdown in 2008, that was a major trigger of all the other issues.  Student loan debt could be one of several debt meltdowns this time around.  If that happens, then we have to start watching colleges and universities for signs of financial distress.


Why do I think these things will happen?  Because these are the kinds of things that happen when we have underlying financial system issues like we do right now, and then a "black swan" event triggers a downturn.  

The clip above, after last week's horrific stock market crash, seems quite prophetic.  Robert Kiyosaki isn't a mystic, and he wasn't staring into a crystal ball two years ago.  He has just spent his life gaining financial intelligence, learning, building businesses, buying properties, and investing in many things.  He understands money and the financial world at a level few people do.  So he was in a position to call a coming crash "in the next two or three years," in that clip.  He also talks about both "equity bubbles" and "debt bubbles" in this clip.  Right now, we have huge examples of both.  It appears one of the equity bubbles, the stock markets, are popping.  Time will tell, but this looks like a lot more than a market correction.  So here are the main financial bubbles in place right now:

The Asset Bubbles:

The stock markets- The Dow Jones Industrial Average went from about 7,224 in March 2009, after the 2008 crash, up to 29,551 on February 12th, 2020.  That's a rise of over 400% in just under 11 years.  We're definitely in bubble territory.  Source: DIJA chart (Max)

Residential real estate-  We went from a median U.S. home price of about $171,000 in January 2012 ($193K inflation adjusted), to nearly $272,000 in July 2019.  As we all know, real estate hasn't moved much in some areas of the U.S., and has soared in areas like San Francisco, New York City, and other tech hub cities.  Another bubble.  Source: Historical median home price chart.

Commercial real estate- According to the chart linked, major categories of commercial properties, like apartments, core commercial, retail, and industrial, all surged after the 2009-2010 market bottom.  This chart only goes to 2016, and retail was leveling off some then, but we get the idea.  Source: Commercial real estate trends.

And now, the Debt Bubbles: (Source: U.S. National Debt clock, unless another source is given)

U.S. national (government) debt- $23,394,536,000,000 ($23.3 trillion)
U.S. GDP (Gross Domestic Product- everything bought an sold in the U.S. in a year)- $21,845,407,000,000 ($23.84 trillion)
U.S. corporate debt- $15,500,000,000,000+ one year ago, ($15.5+ trillion)- Source: "US Corporate Debt Continues to Rise..."/Forbes, January 2019
U.S. credit card debt- $1,123,222,000,000 ($1.1 trillion)
U.S. mortgage debt- $16,155, 222, 000000 ($16.15 trillion)
U.S. student loan debt- $1,655,530,000,000 ($1.65 trillion)
U.S. car loan debt- $1,200,000,000,000 ($1.2 trillion) - Source: Investopedia article

These huge debt loads, the stock market euphoria, and the other parts of the big financial world picture have been building for over a decade now.  On top of that, interest rates have been kept historically low, and are even negative in some countries.  We're in a weird financial world Never Never Land, and no one is really sure exactly how things will shake out, ultimately.  But we have multiple tends and soaring debt levels that just can't go on forever.  And that's why we're seeing what appears ot be the beginning of a serious shake-out in the financial world.

These are the things I see happening in the next few weeks or months.  We'll see how things actually play out in the real world. 

The Federal Reserve is pumping HALF A TRILLION DOLLARS into the economy in December to try and keep it from collapsing

Yes, the economy is doing great, just listen to Larry Kudlow and that guy getting impeached.  But The Fed is going to quietly jam $500 billion into the repo markets/economy, in December alone.  You know, just to make sure things are cool.  Because the $380 or so billion they already flushed into the Repo markets is just barely keeping the economy functioning.  Kind of. 

Like I've said before, in 2008, things got sketchy behind the scenes.  Then 100+ year old investment bank Bear Stearns collapsed and went bankrupt, "out of nowhere."  Then investment bank Lehman Brothers went bankrupt and closed shop a couple weeks later.  Then all hell broke loose, and The Fed began a massive bailout to keep the entire economy from collapsing.  We've actually had "rolling bailouts ever since, hyper low interest rates and "quantitative easing."  Then they tried to slowly edge interest rates back up, and begin heading back towards "normal" conditions in 2017.  The stock markets freaked, and The Fed did a quick U-turn.

This year, in 2019, when this thing called the Repo Market seized up in mid September, The Fed rushed in and through money at the problem like a Dubai oil baron throws money at strippers.  Well, actually, a lot more than that.  This time around, The Fed began the bailout BEFORE any major banks could collapse.  And they keep having to jam tens and hundreds of billions of dollars at the problem to try and keep banks and other businesses (names unknown, but including some hedge funds it appears) from collapsing.  This won't end well, and the longer they keep this charade going, the worse the inevitable financial collapse will be. 

To put 500 HUNDRED BILLION DOLLARS in perspective, that's like giving every single man, woman, and child in the United States $1,514 all at once.