A little then vs now.
Got a pulse? Get a loan! <Thank you very much Bill Clinton>
Back during the 2008/2009 time frame I was working in Big Tech, which around that time had a propensity to do layoffs right around mid-end of December. Classy, eh?
That was when I first coined the term "Survivors Lament". It starts with a lot of free floating anxiety on whether you might not make the cut and evolves into a brief relief when you do, then it turns more impactful as the work load of the recently departed falls on to your already full lap, which brought forth the phrase: "In addition to your others duties, you will now also have ..."
The upshot was that after several running years of the cycle, you really had to look at your finances with a different "eye". Review what you spend and where - then focus on what you could skinny down to in a pinch. There I coined the phrase "What do you need to keep the lights on". Essentially, eliminate discretionary spending altogether and focus on rent/mortgage, utilities, food, keeping the old car running and not much else. I found it to be a whole lot less than I thought.
With a bit clearer head, I was able to see past the 2008/2009 mortgage crisis with a simple, trick, question: "Do I care if my house value goes way down, when I have the resources to "keep the lights on" and have no intention or reason to move? Turns out - No. Luckily, I had made the latest purchase a few years before when the market was already down and rates were artificially low. QE for-evah...
What I missed in all of that was ye olde TBTF dynamics ,aka the Okey-Doke Shuffle, the change all the rules because - PANIC mode activated!!. So fast forward to today's woke-tardville and current economy.
I was recently doing a little review with my FA and wanted to lower some risk classes and they pitched a twisted idea which essentially was to "lean into TBTF", buy into the TBTF bonds/stocks. I said something akin to: what are you F*ing NUTS?!? The rational appeared to be: Hey, TPTB are gonna pick who the winners/losers of the banking world are and change the rules to match their choices anyway, might as well be on the winning team now, because there will be consolidation, just like in 08-09 and probably worse because it's gone more global this time around.Hmmmmm...
Now, I do like me some Contrarian thinking from time to time. Short story, while I did see some merit, I balked at that plan because I strongly feel like the Lockness Monster of Commercial Real Estate has not come to the surface yet or been slayed and a lot of those commercial loans will be Okey-Doke shuffled with the shuffle - IMMHO. Also, I had already leaned pretty heavily into updating/upgrading some real estate last year. The one thing I was not able to accomplish there was to acquire a live river compound out in the hill country here, like in the Llano to Goldwaith corridor or in the Luling to Gonzales area. Oh well, much like the Cubbies - there's always next year - I hope. Maybe I can get it on the cheap even...
So is there still time to maneuver?!? Beats hell outta me. I had already invested in physical possession of some precious metals like lead, copper and steel in small pellet sized denominations, typically clad on to a brass casing. Of course, more skinnying down and narrowing down my span of control items along with diversifying a bit more might help - but I think the next bumps in the road are gonna make for a pretty bad road rash.
Quote:
Originally Posted by Tiny
The shit may have just hit the fan. A good friend, who's a successful stock trader and bond investor, was driving around the West Coast city where he lives late this afternoon adding "payable on death beneficiaries" to his certificates of deposit.
Here's how this works. Say Why_Yes_I_Do buys a CD for $1.25 million and directs the bank to distribute that $1.25 million upon his death to eccieuser, Blackman, royamcr, and Adav8s28 in equal shares. Presto chango! There are now 5 names on the CD, so he's increased his insurance from $250,000 to $1.25 million for that bank! And as long as he doesn't die, the money is still all his.
I believe I'm one of my friend's beneficiaries, so if he croaks I'll be sitting pretty!
He even withdrew $7,000 from his Wells Fargo account this afternoon, I assume to get his account balance down to $250,000.
He thinks we may be on the cusp of something worse than 2008/2009.
Why? Well, in after hours trading today (but still during business hours on the West Coast), bank stocks really tanked, led by PacWest, down 60% on reports the bank is looking at selling out to another bank.
This appears to be totally driven by sentiment. Some of the banks had pretty decent first quarter results. They've stabilized deposits, and none would normally be in danger of going under. But you've potentially got what George Soros calls a vicious circle happening. The prices of bank shares tank, just like they did for First Republic. So depositors get scared and jerk their money. Now the banks have to sell assets at fire sale prices, or borrow at rates higher than what they were paying for the deposits. The price of the shares go down some more. More depositors jerk money. Etc. And the bank goes under.
My friend believes the government needs to explicitly guarantee all deposits now, or this potentially won't stop. He's even worried about the big banks, as evidenced by his withdrawal from his Wells Fargo account. He says the politicians and regulators aren't taking this nearly seriously enough.
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