원문 보기
even Jeremy Grantham is underestimating the risk in the markets today which pains me to say because I can't stand Jeremy Grantham he's been wrong at least probably 20 years now the markets are gonna fall oh my goodness and of course he's a big Greenie he funded the ICL at Imperial College of London uh with Neil Ferguson and the boys and you know what I'm talking about you know what I'm talking about last three years and of course I'm sure Jeremy Grantham flies a private jet while he's wanting us not to be able to use fossil fuels again clown show part one part two part three but even a clown show can be right once in a while and I I worry that he is in this case oh by the way uh yeah um you can't get rich pushing papers from point A to point B and make a net worth of billions of dollars unless you're aligning yourself with somebody that's up to no good if you know what I'm saying well I'll just keep it down right so the lesson of this if you're heavily leveraged and you're expecting the markets to continue to give us a 10 to 12 percent rate of return year of year Allah Dave Ramsey you're freaking nasty let me go to brief tutorial of heavily of being leveraged all right so leverage can work we've got a hundred thousand dollar house we we bought it with only ten thousand dollars down all right ten thousand dollars down is what we bought that's our we put tensions through this in the wrong code we put we bought a house for a hundred thousand dollars only ten thousand dollars so we put ten thousand of equity in the house we have deaths inherently we have ninety thousand dollars of Leverage all right so our loan to value here is ninety percent which is freaking frightening now at least a house gives you a place to live in because you got to live someplace believe it or not so even if that's scary that's not as scary as being heavily leveraged on equity for instance all right so the house goes down ten percent well you're still living in the house that sucks if the house goes down twenty percent you're still living in the house you lose your ten thousand bucks but as long as you're able to maintain the payments on the debt you'll be fine the problem is what happened in 2008 is a lot of people not only do they lose their Equity that ten thousand dollars but they were not able to sustain the payments on that ninety thousand dollars a debt and so they lost their equity in their homes and that happens on occasion it sucks dude it didn't happen to me I mean who was closed but it didn't but it could dude and that's bad but on the other hand what the the the proponents of Leverage will say is well yeah but Josh on the other hand houses don't go down that much out of 2008 mostly they go up yeah so now your house is worth 110.
all right what is your debt well your debt is still ninety thousand dollars this is basic balancing stuff here guys just basic accounting so the AC the the value minus your debt equals your Equity so now your Equity is that 20 000 bucks so even though the house only went up by 10 in value from 100 to 110 your Equity went up by a hundred percent all right because all you only owe the bank ninety thousand bucks they don't oh they don't take more of that they just say you owe us 90 000 bucks or regardless of what the house is worth the house goes up in value the rest is yours baby it's a very alluring alluring concept especially when people see real estate say oh man it doesn't ever go down right man so that's the problem here is I'm going to show you it does in 2008 dude and so here's Jeremy Grantham and I get this off the med favor thing uh Med Faber the idea Farm which I freaking love I actually like this initial quote I hate losing money more than anything losing money is what kills you it's not the actual loss it actually messes with your psychology I could not agree more maybe that's why I don't gamble because I gambled one time um 80 bucks on University of Virginia to beat Kansas Kansas uh in the sweet 16 I think it's a 94 when we went to Las Vegas uh as a visceral pain of losing that eighty dollars I bet on teenage kids uh anyway so what Jeremy's got us is the 10-year treasury over the three months that I.E the inverted yield curve and you're going to see something you see right here inverted yield curve and that was about a 90 basis points is what it is roughly that's we'll just say one four percent here it is in 2019 here it is in 2008 and we remember that horrible thing here it is in 1999 you remember that horrible thing here it is in 1988 but the recession didn't really happen until 1991 so again if you eat carrots you will die every inverted yield curve at your lease a recession yes the same concept now I'm not that silly I get it if there is an inverted yield curve that's not a good sign of a strong economy that's just a fact uh so I'm not like I'm I'm being flippant in some regard but don't sit there and say inverted your curve sell now and that's the freaking stupid all right B doesn't mean yeah here's the big one here there's a monster of all recessions up until the Great Recession right here but the 1979 to 1982 was just bad dude across the board but the feds saved us did they did they really save us 73 74 and then 69.
all right but you'll see right here this doesn't look I mean it looks worse than that looks worse than that looks worse than that it doesn't even look worse than that and it looks it doesn't even come close to being work looking worse in 1979. oh how wrong you are my feather friends let's check this out I think the uh Jeremy was using the 10 over the three my 10-year treasure over the three months I actually like the 10-year treasury over the two year and that's what we're gonna you use here using the data from the St Louis fed or Fred I should say and this goes back to 1976.
uh and you can see right here we're about 90 about 76 basis points um is what the inverted yield curve is that means the two-year treasury pays seven pay three quarters of one percent more than the 10-year treasury all right so here we are right here is like freaking nothing here we are right here and you can see his inverted yield curve you know but again right there February 2006 it didn't even we didn't really have anything until right there October 2007 is when the market started crashing and then the recession wasn't official until January 2008 so again here we are in 1998 uh 2000 excuse me and again we didn't really take a recession until basic end of 2001.
whoa look at that here we are in February 89 the recession didn't really kick in until 90 uh July 1990 it was 16 months or so away all right so I mean that looks bad relative to to this guy's right these all the other ones but not anything compared to 80s and 70s which I already told you but check this out so we're just you know looks bad um recession's coming out the game would argue that check this out what I'm doing is I'm using the two-year treasury in the 10-year treasury going back as far as the FED allows me to go and for the two-year treasury only allows me to go to 1976 the tenure allows me to go back to 1962.
and then we're putting the the uh the short-term money the two years on this scale right here the long-term money the 10 years on this scale right here but then we're logging them to make them the percentages all right so basically one you'll see right here one to two is the same as two to four which is the same as four to eight which is the same as 8 to 16.
you know that's what we're doing logging is what has to be done here to give you a an example of what you are comparatively speaking this right here is worrisome it's but it's much worse because look at this Gap from a logged perspective this look I want to show this look at this look how bad that looks oh my goodness ah look when it comes to hardly a drop of the bucket you know why because the interest rates are so much higher back then the inverted yield curve was like three percentage points or so 300 basis points excuse me 300 basis points are three percent but you're still getting 18 on 10-year bonds so while the the 20 the the short term was paying 21 percent the long-term intent was paying 18.
that looks a lot worse if you're just looking at in terms of the actual percentages the basis points the three percent or 300 basis points but when you're looking at relative to what the current yields are paying that's a whole day or nothing look at this the Gap here is a short-term money my friends on this scale about four and a half here's the long-term money the tenure on that scale about three and a half that's a hundred percent that's a hundred basis points difference if we factor in relative to the current interest rates as they are today look at that Gap it's the worst it's ever been here we go in 2019 but still short-term money was paying about three yeah what's that two and a half I'm not this boat I want to tune in I'm not sure what that is it's probably about three or so I'm thinking long-term money has been about you know that's might be buff and I don't know what that is it's probably three and a half or so we can look it doesn't matter but anyway short term money was paying a signal I want to say significant was paying more than long-term money but it wasn't by much it's about even Steven right there see what I'm saying so even though that looks like a big gap when you look at it from actually here relative to the percentage rates of the interest rates at the time it just wasn't that big of a deal but this one's a big deal look that's a pretty significant Gap short-term money is paying about you know five and a half long-term money has been about four and a half or so but look that's a pretty big deal you know what I'm saying but when it comes to actually the log look at that look at the Gap there the Gap is relative to the interest rates as they are today I hope that makes sense dudes look at that Gap so the inverted u-curve wasn't that big of a deal but relative the interest rates at that time was huge huge a inverted yield curve right here of zero percent or negative five basis points it doesn't seem that much but when the long-term rates are so low to begin with that's a lot bigger deal than an inverted yield curve over here when the rates are at 20 I hope that makes sense ah huge gaps and it wasn't much of a gap there because the rates are so doggone high and as again you could have locked in 10-year money for uh 18 back then yeah the recession sucked but a three basis 300 basis points over 18 is not the same as 100 basis points over three it's just not the equivalent in the freaking chart right here shows us right I cannot stress this anymore the gaps while the the inverted yield curve doesn't look that bad relative over here the gaps look worse because of where the interest rates are already on the ground I probably don't make any sense I'm probably just blown smoking my own butt but then you look at look what happened this is horrible dudes horrible in 2007-8-9 now you can make an argument it's horrible more horrible in 1982.
I get it this was a Great Recession until we had a real Great Recession they were saying this during when Reagan was running in uh 82 uh no he wasn't running but the Senate the uh the con the the house and the Senate every two years they were saying it's the greatest recession since the Great Depression and they're right until 2007-89 came along but look at that Gap 2001 and two that wasn't that great either you might not remember layoffs but I do I knew tons of people got laid off I missed it by two seconds flat as Charles Schwab and I should have stayed there to get laid off to get a severance package but then I've been competing for all these other guys for jobs out in my financial area and I thankfully I already landed one all right anyway if you're leveraging I don't know what to tell you man I just think you're making it if if you haven't taken gains and you're still heavily leveraged now look if you're in a property that you're never going to sell that's one thing or if you got good tenants or something that's fine but I I just if you think the days of 10 to 12 race return are coming to rescue you from your five percent debt I I just don't know what to tell you dude that's a risk I'm not willing to take and you could that's okay that doesn't make me angry at you I just say whoa all right I'm gonna do another video on another risky thing here it comes to my mind
Comments 0