저자: KevinPaffrath · 외국인
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은행권 유동성 우려와 First Brands 파산을 2007년 서브프라임 위기에 비유하며 신용 스프레드가 낮은 복합 위험을 경고. 단기로는 트럼프의 중국 관련 '타코'로 반등 가능성을 보았으나, 신용경색·관세 타격·AI 버블 붕괴 중 하나라도 발생하면 조정 위험이 크다고 주장. 본인은 부채 없이 현금 비중을 높이고 있으며, 채권(TLT) 상승을 대안으로 언급하고 금은 경고 신호로 해석.
다듬은 글
There's one hell of a tangled web going on in the banking system. And while we got taco from Trump this morning, which is great, Donald Trump talked about how Xiinping is a good man. And you know, China only respects strength, so we have to put up these unsustainable tariffs and make it look like we're being really, really aggressive.
what actually happened over the last 24 hours and what we saw last night in the futures market with the NASDAQ down 1.3% multiple stocks selling off 4% I mean it was a bloodbath in the futures market last night why it was all because of the tangled web of the banking crisis and how far this spreads is scary and this story gets deep because what you're about to see is how an auditor could potentially fail at auditing companies, get fined millions of dollars, still be in the business of providing audits, only to give their own lender, the auditor's lender, only to give them potentially first looks at risky business that's going on.
so that those suits could then short first brands with credit default swaps to make some big dollars while they go bankrupt. It is a disaster and it smells like fraud up and down every way you slice it. And a lot of the suits are going to be telling us on CNBC or around the world that don't worry, this is just idiosyncratic.
Which when you hear somebody say a problem is idiosyncratic, immediately say idiot. They're idiots. Because when you have smoke in one place, there's fire everywhere. This is the same kind of fraud that was rampant in 2007. And it's not isolated. It never is. It's just a matter of how bad is it going to get and how much is it going to smell like 2007 and 8.
Let me go show you a quick example and then we'll get into the disaster of the story because history tends to maybe not repeat but it certainly rhymes. Subprime mortgage market wounds woes seem well contained. Here's a Reuters article from August 2007. And guess what this Reuters article tells you? It tells you the following.
Watch this. The subprime mortgage market is little more than an asterisk in the overall economy, said a Roth Capital Partners economist. The concern that rising defaults among subprime borrowers will spill over into lower consumer spending is unwarranted, says a director of the University of Central Florida.
It's the latest episode of hysteria. It's just a small segment of the overall market and its problems aren't akin to a currency crisis or contagion. This is just everything's fine. These are just little idiosyncratic problems and they'll burn out. We'll have some bankruptcies and the economy will be fine.
I hope so. And I so much want to believe in that opium. But what we saw at First Brand, it goes deep. And I'm going to show you exactly how to watch for this potential contagion spreading. So, first you got to understand that First Brands has apparently, we just saw this this morning, their CEO has been down this road before.
Literally, that's how the Financial Times article starts. You can't make this stuff up. The First Brand's chief, Patrick James, has been here before, well over a decade before this bankruptcy that he's now gone through, showing over 11 billion in liability uh in liabilities. The Ohio-based businessman was battling creditors in court over millions of dollars in defaulting debts and fending off allegations of fraud.
So over a decade ago, this guy's getting rich, settling with people who were calling him a fraud, buying massive mansions in Ohio, and maybe not paying his creditors. And now all of a sudden, you're seeing the same thing happen again. See what I mean? With maybe it doesn't necessarily repeat, but it certainly starts rhyming.
And this is where First Brands comes up. See, first Brands, they're not that big of a deal in the broad scheme of things. It's not a really a First Brands issue. It's an auditing and it's an institutional money management issue. That's the problem that's potentially setting up for a real crisis here.
So, when we talk First Brands understands it, it doesn't matter that this windshield wiper maker is going bankrupt and auto parts supplier. They started as a windshield wiper maker. Who cares? Nobody really cares about them. What we care about is what does this mean for the broader market? Why is it that all of a sudden we see the Fed repo facility, which fortunately today wasn't used, but the Fed repo facility is rocketing again.
This, by the way, just to give a simple explanation of the repo facility, which is not to be confused with the reverse repo facility. I'll tell you that gets really confusing. So, I'll give you the bottom line here. Okay. the repo facility. When this spikes up, which it hasn't since co up until recently, it means institutions need money.
It means banks, credit unions, globally systemically important banks or gibs or other asset managers, they have treasury bonds. They can't liquidate them for their cash needs at night or they don't want to or whatever because they don't want to recognize the losses on them. So they go to the Federal Reserve and say, "Yo, hey, can I deposit this with you overnight and can you just give me a bag of cash cuz I got some bills to pay.
I'll pay you back tomorrow." That's how this works in banking. Even overnight matters. Like for us as humans, this doesn't make much sense because it's like if you have a bill on your desk, you're like, I'll just I'll just pay it in two days. Like, who cares? It doesn't work that way for the banks because they continuously have to be in compliance.
Otherwise, they could lose their banking charters or just get fined by regulators, even for the non-banks, right? So this repo spike, fortunately it settled down today, but even Nick T at the Wall Street Journal is looking at it because he's like, "Whoa, this is a sign of a liquidity crisis. This isn't great." Now, are we seriously in major stress right now because of this first branch or banking issue?
No, not really. Right? This is where if you look at high yield uh corporate bonds versus short-term treasuries right now, if you look at the ratio of this, usually you see this line basically spike up when there's big stress. Stress or you could call it complacency. Stress is really low right now where complacency is really high right now.
Liberation Day had much higher credit spreads. The Japanese carry trade, the bank crisis of 23, uh the rate hikes of 22, like these were all moments of substantially higher spreads. So, it really suggests, you know, right now markets don't really care that terribly much about what's going on with this banking poopy duping.
It's one of the reasons why this morning, uh, and, you know, this this is a little nuanced, but , you know, the stocks the stock market was down like 50 basis points on the cues. And this morning I'm like, look, in the very short term, this is bullish because Donald Trump is tacoing, which suggests we're probably not going to get bad news today.
Donald Trump's tacoing on China. Oh, it's unsustainable. Whatever. Great. We're probably not going to hear more bankruptcies today. We might in the next few weeks or months, but today we might end up getting a rebound. And I'd be looking at the cues and specifically Tesla. Now, Tesla bounced on 414 this morning.
And I always like watching for the first five minutes to see if we're going to revisit otherwise bullish. Uh and so there were a couple course members who were nice this morning who who left comments on this. Uh gold uh gold Josh says, "Finally caved and joined the membership in the alpha report. Already made my money back on Q's calls from this morning.
Made about $1,500 on Tesla and Q's calls from the alpha. Thank you." Uh says uh Peele here. Peel. That's funny. Uh but anyway, uh you know, these are the things we'll do. Like even when the market's red in the morning, we're like, "Hey, strategically, we could get a bounce in the morning. That's playable.
Just be careful. There's going to be profit taking in this market." So, that doesn't mean the market's going to be green forever, but it creates an opportunity to trade. And that's the whole point. That's what we do every morning in the Alpha Report. And if you want to be part of it, not only get my shortterm ideas, you get my medium-term ideas, my long-term ideas, you also get the top 10 stocks to buy, you see what I'm selling, you see what I'm selling, you see what I'm buying.
Uh, and you also get the courses. uh the all eight courses when you join the Mecv membership over at meet.com. Use that coupon code schumer siesta. Now with all of that said, let's understand what actually happened at First Brands. And again, this is a story that you really want to understand. This is this is not just First Brands.
This has to do with $2 million fines from the PCAOB against the auditor for First Brands. And when you understand that the PCAOB, which is the public accounting public company accounting oversight board, when the oversight board, which is authorized by Congress, finds the auditor $2 million for similar issues to what happened with First Brands.
It says that the underlying fundamentals of a a lot of our financial markets could be either fraudulent or rigged. And what we're seeing now are just the the early dead fish kind of percolating up to the surface. And now the question is how many more fish are dying below the surface. Understand this.
The PCAOB sanctioned BDO. BDO was the auditor for first brands. The PCAOB sanctioned BDO $2 million. This is a massive fine. Okay. Like that's huge. This isn't like, oh, you guys made a little oopsy dupsies here. Like, this is you guys were criminal is almost what the level of this what this rises to.
In fact, they went as far as not just sanctioning the company. They went as far as saying the actual individual auditors are also going to get fined. Look at this. Civil penalties for the company of $2 million, $35,000, and $25,000 for the actual individual auditors. That's crazy. So what happened? Well, what happened was this PCA uh this nonPC the BDO is not a PC.
They are overseen by PCAOB, but they were not doing PCAOB audits for uh this company that they got sanctioned for or first brands. PCAOB level audits are the most rigid standards for auditing. They're deemed to be the best audits you could get in America. typically reserved for broker dealers or public institutions.
I pay tens of thousands of dollars extra at house hack every year now including the last year uh actually I think in the last two years now to have PCAOB level audits because we want the highest standard of audits and BDO didn't have that for first brands or this company and look at what happened when they got fined here for AAC holdings this had to do with short pays for uh insurance claims like claims by ACA AAC that they could make a lot of money in revenue from picking up short pays from insurance companies, but there was no proof that they actually had any historical evidence they could actually make that money.
And so the PCAOB is like, we're finding you guys because you guys failed to properly evaluate this company that ended up going bankrupt and you therefore failed to protect investors. And it all had to do with accounts receivable, which is really interesting because accounts receivable are exactly what the problem was with first brands.
So the first brand situation, how does this work? So the first brand situation is unique because you go from a windshield maker, you know, windshield making company to basically a company that became a financing company for taking on debt based IUs. So really what it is is quick example. Let's say you make these mugs, okay?
You're going to sell me this mug for $10. Okay? So uh you give me this mug for $10 and I'm like, "Yeah, I'll pay you in 90 days." Cool. Well, what happens if I don't pay you? Well, you get burned and that sucks. There's risk there, right? I'm giving you a note that I'm promising to repay you. Well, First Brands does this with a lot of different people and now they're sitting around going, "Man, we can't really manufacture more of those coffee mugs because uh, you know, we don't have any money.
We're waiting for all these bills to come in. So, why don't we just call someone up? Hey, yo, bankers. Yo, can we finance and get some debt on these IUs that we have, these accounts receivable?" So, basically on their balance sheet, the bankers come in and they go, "Oh, well, uh, it says here your accounts receivable have a lot of money coming in.
This looks this looks pretty good. You guys got a lot of cash flow coming in. That's good. That's good. And did you guys get audits on these?" And they're like, "Hell yeah, we got an audit by BDO. Yo, and the bankers are like, "Oh, okay. You're audited. Oh, that sounds good." They're not paying attention to the fact that it's not a PCAOV audit.
They're not paying attention to the fact that BDO got slammed for accounts receivable failures and find $2 million for basically the same damn crap that happened at first. They're not paying attention to that at all. Why? Because the bankers don't give a flying f. The bankers aren't looking at actually underwriting this product.
I hate to say it. They're looking at how to make money. That's all. How am I going to make fees? I hate to say it, but that's how the soup business works. Okay? That's why people don't like the suit very much. So here's how the soup business works. Oh, accounts receivables look good. Okay. Yeah, we got an audit.
Oh, okay. You know, we could package this. We could take this product and we could put, you know, this is a high yielding product. We could put all of this into this this giant bucket. Uh, and then we could sell this to a bunch of little companies. And then we'll have fees for each one of these little tickets.
We'll have a fee for every one we process and you know our investors will be left holding the bag but but we'll make a fee and we could disclose to them that these are audited and we don't really need need to look too hard cuz the auditors already did it. So you know what do we care and we're going to sell this product and make money.
That's kind of how the financial system works. And you bundle this crap up as you know whether you want to call them CDOS's collateralized debt obligations which are somewhat similar to CLLO's a little different collateralized loan obligations you see with commercial mortgage back securities which that's a whole another bubble you end up finding that institutions can make a lot of money selling and packaging this crap Jeff people look at Jeffre and they're like oh it's an investment bank it must be regulated like the government should be looking at Jeff wrong.
Nowhere near as much as a bank because Jeff is called a nondepository institution. They're basically an investment bank is a company that helps companies IPO or invest into certain packages of dudu to get a yield for their assets, right? So Jeff doesn't have the level of regulation that banks do and so they can much more easily just sort of rely on like a BDO audit or something miscellaneous for their investment products and the banks they don't really know because they're relying on Jeff.
So you remove a whole regulatory element here. And so Jeff can get loans and Jeff can go create products that are full of crap and they can bundle it together into something like Point Bonita, which is what they did. They bundled all these First Brands debts into a company called Point Bonita because they didn't even want their name on it.
It's not like Jeff Fund 17. It's Point Bonita. Oh, Point Bonita had the losing money. Hm. Interesting. So, when all of a sudden the first brands company starts not being able to pay their bills because they're not actually getting money coming in or worse, they're total frauds and they're double and triple dipping on those accounts receivable.
So, in other words, you know, I you sell me this mug and then you have that accounts receivable and you're like, hm, I could go to Bank of America and get a loan. I could go to Jeffrey's and get a loan. I could go get a loan from three different banks. Now, you're double triple dipping on the same accounts receivable.
you're really just creating this tangled web of fraud. Now, who was able to profit from the tangled web of fraud? Ah, enter Apollo. And this is where things get really interesting. Uh, and the really way the way to see this is you kind of have to draw this out because it's just it's sad. This is why the suits always win and retail usually always gets screwed.
It's so sad. But watch this. So, First Brands goes bankrupt. Okay, so we'll write First Brands right here. They go bankrupt. Now, who loses money? Well, who loses money is all of the people who invested in the slices of crap over here. All these people are now sad. They lost a lot of money. But guess who made a lot of money?
Well, remember how First Brands was audited by BDO that got fined $2 million for sucking at accounts receivable auditing and here they are auditing First Brands for accounts receivable. Well, their lender is a company called Apollo. Apollo Asset Management has lent BDO $1.3 billion. So Apollo has a loan to BDO the auditor for $1.3 billion and First Brand is experiencing financial difficulties.
And so what does First Brands do? First Brand says, "Hey, we need to raise some money." Guess who gets a first look? Apollo. Apollo comes in and says, "Hey, so you guys need some money? Show us the stuff." Apollo in 2024 gets a first look to provide credit. Uh so basically to provide a loan to provide a bailout and they don't instead they short it.
They short first brands uh with a collater uh credit default swap is what they used here which is the same crap that we saw in 2007 and 2008. Apollo goes in buys credit default swaps on first brands because they're like that is a flaming pile of poop. And so they set up their short position because they got the first look because they happened to lend a lot of money to the very auditor who got fined for failing on the same stuff that they should have been watching first brands on.
Apollo didn't rely on BDO because they I feel like realized that was just a layer of Apollo actually looked at the stuff and they're like, "This is bad. This is a flaming pile of dudu. Let's short it." And that got no attention for, you know, the last year. And people are like, "All right, whatever.
you took out those credit default swaps. Big deal. That's okay. It was just a matter of time. And sure enough, now Apollo, they look like geniuses or they had insider information. This is how the suits always win. And so what happened over the last 24 hours wasn't really about this company with 11.6 billion of liabilities.
Who cares? Like in the grand scheme of things, is an amount of 11.6 billion really that big of a deal? No. You know, you've got these emails circulating on on Twitter where people are like, you know, you've got this email going in, hey, you know, can you guys tell us did First Brands actually get $1.9 billion?
What happened to it? How much money do you guys have in the segregated account for those receivables? Uh, we don't know. And zero, in other words, like over $2 billion of money vanished at First Brands. People don't know what the hell happened. Like, it's just gone. What they were doing is they were double triple dipping and then they were blowing the money to finance probably I mean we don't know for sure but it'll all come out over time but to finance you know the CEO's lifestyle or whatever with his Ohio mansion or some car.
I hate this stuff. And then they got crappy audits to boot. So what ends up happening is first branch goes under and you get losses that circulate. You get JP Morgan down $170 million. You've got Raystone down uh $2.3 billion. You've got Jeff down up to $715 million. You've got UBS with a $500 million exposure.
You've got uh Katsumi Global. Uh this is a Japanese company that's wholly owned by Nu and Mitsu. Probably screwing up those names. They extended $1.75 billion to First Brands. And you might wonder like why are these companies extending debt to First Brands? It's because the yields were good, man. The yields were good.
The product paid a good commission probably. You know, we're assuming that because that's what the bankers do. This is one of the reasons why I've gotten such a hate on for JP Morgan because like at like when I was starting my career, I'm like, "Oh my gosh, JP Morgan, the biggest bank in the world. This is great.
They're going to give you all these great products or whatever." But you know what it turned into? It literally turned into the schmucks at JP Morgan going, "Hey, Kevin, you you should sell your Tesla stock and invest in our JP Morgan product." And I'm like, you schmucks. You call me all the damn time to try to pressure me to sell Tesla stock to invest in your JP Morgan products so you guys can make your damn fees.
That's all it is. That's all banking is. It's so annoying. And you know, now I look at like, sorry, little tangential here, but I look at like Mercury Bank. I'm sorry. Like I don't even have like an official referral relationship with them, but I I did take the affiliate link that they give Banking Done right.
But it's only because it's it's it's not that I want to pitch that. I really don't care. It's that I use like Mercury now and I'm like, "Wow, the technology they have is so much better than the crap at JP Morgan. I say so excited about it." And I combined that with like the productized business that is banking and I hate it.
I hate banks. You You don't hate the big banks enough. But understand so much of this is just layered upon layered fugazi. And that's the scary part is the layered onlayered fugazi is that the bankers are like, "Hey, this is good. Why is it good?" Well, because Jeff says it's good. Okay. Well, why does Jeff think it's good?
Well, Jeff thinks it's good because, you know, they're audited by BDO. Do we believe BDO? Well, it's an auditor. Why wouldn't you? Maybe because they got sanctioned for accounts receivable nonsense uh on a company that went bankrupt. And now here's another one that we're supposed to believe them on.
and Apollo's shorting them because they happen to have the insider info. It don't sound too good. But anyway, so what you end up with is just first brands going under. Now, how does this apply to the rest of the economy? Well, it tells you that now it's not a first brand's issue. What it tells you is you are in a shockprone environment.
And what do you think bankers and lenders do now? bankers and lenders now go, "Oh man, the cat's out of the bag. There are some crappy audits going on and there are some crappy balance sheets." So, what are we going to do? We're going to go grab the sheets and we're going to go, "You look into the balance sheet for this company we're lending to.
You look at the balance sheet for this company we're looking to. You look into the balance sheet." And so all of a sudden you get executives like, "You think JP Morgan wants to be on TV talking about how they lost money lending to a cockroach? That's embarrassing for these people." So now all of the suits are going to go, "Bro, check this cuz this is bad." And when that happens across the board, lending starts tightening.
And that's what you have to be careful of. It's not First Brands, nobody cares. It's not Zion's Bank and these, you know, this these two guys that are supposedly frauds. It's not Western Alliance with the same two guys that are supposedly frauds. It's the same crap that happened in 2008. That's what the problem here is in a low liquidity environment where all of a sudden the repo facility is starting to pop off.
Hopefully it doesn't keep popping off. But I mean, look, Reuters is is is reporting on this. US banks borrowed 6.5 billion from the Federal Reserve Sanding Repo facility on Wednesday. Central bank data showed the repurchase rates suggest tightness in meeting funding obligations with large net treasury settlement due this week.
The rise in the repo was unusual. This is more of a sign that liquidity is slowly but surely decreasing. It's not alarming yet, but it's a trap, you know, and and mind you, this is why Powell is turning dovish on the vacuum cleaner. You know, Powell, just last week, he told us that some signs have begun to emerge that liquidity conditions are gradually tightening.
That's bad. When people start running out of money at the same time as they start doubting the financials and they start thinking everything's a fraud, then they get fearful. They run into gold and they get out of any kind of complicated financial instrument. This is one of the reasons why I believe Bitcoin is having a little bit of a struggle here recently.
Now, it's not that Bitcoin is inherently complicated. Bitcoin is having, in my opinion, just basic technicals here, the worst sell-off that we've seen since the liberation, like the more most rapid selloff that we've seen since liberation and the Japanese carry trade, uh, you know, days of last August.
Okay, we're having the worst selloff since then. Now, does that mean it's going to sustain TBD? We'll talk about that. But what it is is less money is flowing into the strategies of people like Michael Sailor with all these leveraged ETFs and monetize the stock to try to buy more Bitcoin. And people are looking for a bailout from Michael Sailor and it'll work until it doesn't.
See, that's the thing. Yesterday, Bitcoin went down to 106,000 and people on social media were losing their SH9T going, "Holy crap, Michael Sailor, please buy." because they realize daddy is the only thing propping up the Bitcoin valuation right now. Institutions have come in, retail's come in. We need more leverage buying from Michael Sailor in this environment.
That's very bad short-term because Micro Strategy is on an ugly downtrend. Look at this. Since July, you are down from $456 down to $284. That is a decline of 38% on Micro Strategy stock. Now Micro Strategy stock you have to think of it like a ballast. Okay. So it's sort of like it's a buffer. When Micro Strategy goes to zero, which eventually they will have printed so many shares they will have diluted their shareholders to zero.
When Micro Strategy's premium goes away and they keep diluting their shareholders, that buying support for Bitcoin gets rugged. That's your biggest risk for Bitcoin. But it's also the most bullish thing for Bitcoin. I tell people I want to load up on Bitcoin when Michael Sailor goes bankrupt because it means daddy got flushed out.
And when leverage daddy gets flushed out, that's the best time to buy. When the leveraged people, when the emperor wears no clothes and all of a sudden you're like, "Wow, look at all the debt get flushed out." That's the time to buy. Anyway, it's a little rant on Bitcoin, but the point is it's related because this whole financial system right now is built up on a pile of debt.
And if people start doubting debt and credit spread starts skyrocketing and credit l and lending standards collapse or like tightness increases, right, the availability of credit collapses, you have no more legs to stand on. Realize first Brands was paying like 9%. Actually, no, I'm sorry. BDO the auditor who is auditing first brands you know how much money they pay in interest 9% BDO Apollo loan cut staff they're cutting stuff the very auditor look at this you can't make this stuff up this is this shows you how bad debt is okay BDO US lays off employees amid Apollo's debt repayment Apollo is the principal financeier to BDO providing a loan facility worth $1.3 billion to fund their employee stock ownership plan.
And as a result, now BDO has laid off employees to reduce expenses and is considering new debt arrangements. So in other words, they're laying off staff because they're so out of money. They can't pay for this. They're paying 9% interest on these loans, which is insane. Mind you, um Elon Musk via uh XAI is paying 12.5% interest for his Nvidia lease credit line.
He's he can't even buy the Nvidia chips because he's out of money. So, he's having to lease the Nvidia chips via lease option with 12.5% interest rates at 40% down. He's putting 40% down while Meta's putting 10% down because lenders are starting to get smarter. They're starting to go, "Ah, we got to be a little bit more careful here." There it is.
BDO debt is currently paying interest of 9%. These are insane interest rates. These are very, very high. And that's an auditor. An auditor is paying 9%. And this comes at the same time as options activity has never been higher. One week ago, Friday, we had the highest level of options activities traded ever in the history of options.
October 17th. that follows Liberation Day, which was also a pretty remarkable day for um uh options trading. But look at this. Options are a form of leverage. Absolutely skyrocketing. Uh margin debt is a form of leverage. All-time highs on margin debt. Leveraged ETFs aren't even considered in all of this.
This entire economy is propped up on debt. Now, is it going to collapse? Well, not necessarily. There are things that could happen. And the economist actually had a great piece on, you know, what we could do to sort of avoid this. And so here is the recipe to avoid profit taking. Number one, the private credit disaster blows over with no more large bankruptcies or very limited uh bankruptcies and people end up saying, "Ah, see, it was idiosyncratic after all.
There's no problem here. No new banking crisis. Everything's fine." Best case scenario number one. Condition number one, there are three conditions. Okay, three conditions for the boom to keep going. Number one, private credit blows over. Number two, tariffs don't actually end up hurting the economy, not in the last 6 months, but the next 6 months.
That's where it matters more because, you know, people pulled forward inventory and built up inventory to insulate from tariffs. That insulation wears thin. When the insulation wears thin, that's when we're going to actually see the real pain of tariffs. And then then you will know if the economy actually receives any kind of damage.
Okay. Number three, the AI bubble doesn't pop. As long as we don't have a private credit disaster, tariffs that hurt, or an AI bubble that pops, as long as we don't get any of those three, we could keep going. Okay, we're going to soft, we go back to alltime highs, calls on the Q700, baby, we going to the moon.
If any of those go poopy dupy, we're screwed cuz we're sitting on a mountain of toxic debt. We can't even trust the damn auditors anymore. That's scary. So, what's my point of view on this? Like, what am I doing? Well, I mean, you already know this to some extent if you've been paying attention very clear on this.
There are short-term trades that you can make. We talk about those in our alpha report every morning. You know, people made great money this morning on on uh the plays that we talked about this morning. Mind you, I was also bearish on Coreweave and MP Materials. MP material is now down over 20% since my call of a top when it was like in the 80s.
I'm like this is going to go to 100 and it's going down. It literally went to 100 in pre-market technically went to 104 and it's been down 20% since then. Down like 25% if you consider the 104 or 24%. But anyway, so join the alpha report. But beyond that, the other thing that you want to watch credit spreads.
We are at complacency levels of credit spreads. This is insane. Credit spreads are so low right now. There's only really one way credit spreads are going to go and it's up. That means credit is going to get harder and less available. Now, we've had other cases where credit has become less available, but you have to think about what's added onto the crap here.
stocks at all-time highs, the actual effects of tariffs, and jobs. Those are three things that make this potential credit event even worse. Like, we didn't have stocks at all-time highs in 23 during the banking crisis. We already had a stock selloff over here during this credit event. We didn't have high debt during these scenarios.
We weren't at the highest levels of margin or options trading ever in any of these other scenarios. That's all unique to now. And we didn't have a jobs issue. You know, here we started having a jobs issue here around the Japanese carry trade. Started to. Those were the early warning signs. I think the enthusiasm of Trump winning really put pause on this for a while, which was great.
But the bills got to get paid. So, there are definitely like people ask me, they're like, "All right, Kevin, I go to, you know, meet Kevin.comdata to see your barebull scale. I should really update it because I feel a little more bearish today. But, you know, whatever. I think it's at 42. You know, maybe it's like what?
It's 43. Whatever. You know, maybe I update it to like 39 or 40, right? I'll I'll do that after this. Uh, you know, big deal. The point is, there's a reason why I haven't been over a five. There's a reason why I don't want debt. Like I said, you know what I'm doing? I just When does Kevin pay off debt?
I just paid off my house and the house I bought for my dad. paid off. Okay, I have no car debt, you know. I'm also looking at like there's no there's no debt in my stock portfolio, right? So, I look at this and I go I am not playing the debt game in this environment because I am nervous about where the economy sits.
And so, I think of that as just sort of like hopefully a warning for everybody because I think in in the near term there's going to be a lot of profit taking in this market. Now, it could just be seasonal October and like I said, maybe the credit stress will go away and we won't see credit yields widen.
We won't see bad jobs numbers and we won't see an AI issue. But there's so much fugazi that making like wild bets on margin right now or leverage that everything is going to be fine. I don't think it's worth going to zero. You know what I mean? Like take some money off the Vegas table, be safe, and if somebody else makes a little bit more money, who cares?
Stay away from that toxicity of relativity. Right. Somebody says Dave Ramsey would be proud of you. Yeah. Somebody else says buy gold. Gold has been gold is actually your warning sign, right? I I mean I'm not going to buy gold right now because you know usually what happens is you get these crazy runups of gold and we've talked about this before and then obviously when poop actually hits the fan, gold also comes down.
Uh so but gold is to me more of a warning sign than than an investment vehicle. It's it's a tool that tells you, hey, people are concerned. Where do people go when they take profits on stocks? Think about this for a moment. When people take profits on stocks, usually they're looking for the next trend.
They're not trying to sit in a money market. That's boring. So, what's the next trend? Gold or bonds? Bonds actually have a good shot. A little bit of a give back today, but bonds are like the stepchild of gold right now. Look at the slow uptrend you're getting on the 25-year average maturity bond right here.
Uh this is TLT. It actually says 20-year Treasury bond, but it actually says 20 plus year because the average maturity is like 25 years. But you've had an uptrend on TLT, for example, since May. And you're potentially breaking out of the 90 level over here. It's down 20 pips today. But if we actually get to the next gulf over here, I don't know when it'll happen, but as these shocks become more pronounced, there's a good shot of TLT rapidly going over 100 because it'll be a bond play.
You know, people will flee to the bond play. It's funny. This morning in the alpha report, I said, "Hey, we're, you know, 137. This isn't looking good." Like, we're back at 137 again. It just cannot stay above 137. That's so I was bearish on Core this morning. But anyway, those are my thoughts on what the hell just happened over the last 24 hours. It's a pretty big dea.
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