저자: Kevin · 외국인
요약 보기
연준이 월가 딜러들과 긴급 회의를 열었고, 레포(repo) 시장 스트레스가 커졌다는 진단. 최근 65일간 First Brands, Tricolor, Renovo 등 신용 사건이 잇따랐고 사모신용 익스포저가 은행권으로 번질 위험이 있다고 주장. 2020년식 QE 기대는 인플레 우려로 연준이 느리게 대응할 것이므로 잘못이라 하며, 시장 과열(버핏지표 역대 최고, 빅테크 집중)과 공포지수 극단을 근거로 블랙스완형 신용 쇼크 가능성을 경고. 자산 방향에 대한 명시적 매매 지시는 없고 위험 경고 중심.
다듬은 글
Holy smokes. The Federal Reserve just convened an emergency meeting with Wall Street bankers because of liquidity issues. I'm going to break all of this down and what the details are in this because there are a lot of folks that are now saying, Kevin, this is not a liquidity issue anymore. This is now a solveny issue.
The difference, mind you, is liquidity is, yo, you got the cash, so you can do some more lending. Solveny is, hey, we got some cash, but we got way more debt and this don't balance out anymore. This is a big problem, folks. We got to talk about this because this has happened in history before. So, we're going to talk about what's going on now and then what history tells us in terms of which direction we go next.
We'll talk about it. First, let's understand what just happened. So, the Financial Times reported this that New York Fed President John Williams convened a meeting uh this week with Wall Street dealers over a short-term lending offic uh facility underscoring officials concerns about strains in US money markets.
This was a hastily arranged meeting that was arranged under the cover of another Treasury market conference that was going on. So, they kind of did it under the guise of another meeting. They didn't really want people to know that this was going on because now the stress in the repo markets is starting to show up.
Uh and so they did end up confirming that the meeting took place. So the Fed has verified that yes, we did have a rapidly arranged meeting that took place and yeah, it was an emergency meeting. And what this is is this all about trying to make sure that our repo facility at the Federal Reserve functions.
Now, that doesn't mean much for us as individual investors until it does. And that's really what we're going to spend time talking about because when you look at this chart of usage of the repo facility, you might think, eh, this isn't really a problem, is it? But when you actually zoom out for four years, you realize that it's actually rare that we have blue over here at all.
Sure, it's not near some of the peak levels that we saw like at the end of last month, which could have been end of month rebalancing uh or or normal sort of end of the month of funding. But then again, you know, you don't see that in any of these other end of months. So, it suggests that maybe this last end of month was worse than some of the prior.
Now, why could that be? Well, it could potentially be because we've seen a lot of credit stress in just the last 60 days. Let me just remind you really quick as a summary of what's happened in literally the last 65ish days. Now, September 10th, goes bankrupt after JP Morgan rugpulls them on a $700 million line of credit.
Now, obviously, the immigration situation didn't help. Maybe that company was just fraudulent. Maybe it was just that company that sucked. you know, they didn't do they did no credit loans for autos, right? But JP Morgan took $170 million haircut on this. Then on September 28th, First Brands collapsed after receivables fraud, which is really interesting because the company that was auditing First Brands was fined for failing to identify similar receivables issues.
But the auditor's lender, so the person lending the auditor money, ended up having a short against the very company that defaulted. And it kind of makes you scratch your head like how diabolical that if you're trying to like raise money, you're putting your financials out there to privately raise money.
Imagine your bank shorting you after you showed them your tax returns, right? Who knows? Maybe that's just an individual issue. But then of course on November 1st, UBS closes two private credit funds because people are demanding their money back. On November 3rd, Black Rockck's Renovo Homes literally goes from, "Oh, we value these assets at 100%." to 3 days later, they're actually worth zero.
It was literally like straight out of South Park. Yeah. Oh, we'll take all your money and it's gone. Then on November 10th, Sonder Hotel Group, think they ended up blaming Marriott, but when you actually look at the bankruptcy filings, what you find is Saunder Hotel Group got rugpulled by their construction lender who said, "Yeah, no, we ain't giving you any more money." And Saunders's like, "Yo, the construction of our Ritz Carlton resort isn't done yet." And the letter's like, "Peace." Uh oh, okay.
You know, that's all that's all just in the last 65 days. Let's not even get to the fact that Open AI just hinted that they might need back stops to keep getting loans and the IMF told us that 90% of this private credit funding where people are like, "Oh, you know, that's just private credit. Who cares?
Let that all fall." Well, 90% of that private credit comes from big banks like JP Morgan, which means the entire financial system is built up on stuff like this. Now, hopefully it's not an issue, but when you combine those credit issues, you can understand why there's some money stress that the Federal Reserve is starting to panic about.
Now, we've seen this in the past. We're going to go through some of these historical examples, but quickly on how this repo situation works. Basically, when banks have little excess cash, which tends to get worse towards the end of the year, banks start running out of reserves and they stop lending.
If you stop lending in the American economy, it collapses. Now, that's not what I'm calling for here, but I want you to think about what they did in 2020. They literally did the opposite for banks. They went to banks, the Fed went to banks and said, "Hey, um, instead of you having to keep 10% in cash, in other words, if you go lend out $100, we want you to have $10 in the bank to sort of back stop at least with something." Uh, why don't we just say you don't need to keep anything in the bank at all?
You could go lend a h 100% out. Yeah, that's the new fractional reserve banking situation that we have. That probably helped us boom for the last 5 years. Like, it's been great. Banks have been able to lend lots of money. The economy has been booming. But now we're at that point where quantitative tightening at the Fed has brought us to oh crap, banks are now at the point where we're starting to have these liquidity issues, not enough cash.
At the same time as we have credit issues and high debt and OpenAI is making people nervous. It's all not good. Now, when people hear these liquidity issues, the first thing they usually do is they think that the Federal Reserve is now going to print money and bail everyone out just like they did during CO.
I mean, I hate to say it, but there are literally people on YouTube like this guy who's like, "Guys, remember what happened last time? We got stim checks. We got PPP loans. We got unemployment benefits. And we pumped trillions into the economy. It's got to happen again. Therefore, we're going to go to the moon.
Yet, when you listen to this kind of content, they either glaze or gloss over it very briefly. Uh or they just completely ignore the fact that the last time we got that, we had 40 years of essentially disinflation going on. 40 years of a trend of inflation going down. And everybody is like, we won't have inflation if we print money.
Let's just print as much as we can. How much should we print? Yes. Donald Trump printed under the first CARES Act with bipart with a bipartisan Congress. Donald Trump printed again with $600 stimulus checks. Joe Biden printed again with $1,400 stimulus checks. And we did get PPP, EIDL, every kind of emergency facility under the sun to backs stop uh corporate stock, to backs stop corporate bonds.
The Fed was directly backstopping corporate bonds. Every liquidity aspect under the sun was brought out. And people think, "Oh, okay. Well, if the Fed has liquidity cris crisis today, they'll just start immediately doing all that again. And unfortunately, this is where they're entirely wrong. No, unfortunately, I don't think that charts like this posted by uh Leo apparently follows me.
What's up, Leo? Uh Leo posts this chart mostly because he has a price target on Ethereum of like $30 to $80,000. But anyway, he's like, "See, the last time the Fed had to end QT because all of a sudden we had liquidity stress and we had these emergency meetings. Look how much they printed after that." But again, completely ignoring that we had COVID in 40 years of disinflation to say, "Oh, let's print.
There won't be inflation problem. Inflation will be transitory." Now, you have a totally different situation. First of all, a liquidity support or temporary backs stop by the Fed for this repo facility like what we saw in 2018 to 2019 during that liquidity crisis. Really what the Fed just does is they issue very short-term overnight lending to help stabilize the banking system.
That's really all they do. This is not long-term liquidity. This is not stimulus. This is not pumping money into the economy. So this idea that the Fed's going to end QT is going to all of a sudden be massively stimulative is misplaced. Now if there's some kind of shock, the big thing that most people miss is that the Federal Reserve and Congress, remember in 2020 they worked in concert together.
Congress is like, "We'll spend it if you print it." And the Fed's like, "Yep, we got we got the message loud and clear." The uh the problem is people forget of how humanity works. If right now we have any kind of issue where we actually have to provide quantitative easing with the Federal Reserve, we will have the Federal Reserve and Congress extremely gunshy about inflation, which is totally reasonable.
They're not going to want to issue as much QE. they're going to be much slower to do so because of the deep-seated disdain for inflation that grew over the last four to 5 years. And therefore, the true risk is that we don't have a COVID Larry Cuddlo V-shaped recovery, but that if we do end up having a problem or crisis in the economy that the Fed has to solve.
The real risk is that they will be much slower this time, which is really bad. Historically, they do tend to be too slow. In 2008, they were way too slow. It took until February of 2009 for them to bail out markets. During the dotcom bubble, it took until March of 2003 for them to bail out markets. They're usually at the end of the cycle, not at the beginning of the cycle.
Co was so weird and unique where they were actually at the beginning of the cycle and started printing basically before we even locked down. And then of course throughout all of that March which was insane but it led to this inflation. So therefore are we likely to see a Fed that prints like they did in CO again?
I don't think immediately. I actually think they'll be massively slow on it. And so this is where we can look at history a little bit and understand what has happened historically when we've had these little repo crises before. In 1994, we've seen a failure like this before. Orange County, yes, literally the entire county went bankrupt.
Allan Greenspan then immediately pivoted, cut rates, and boom, we got a soft landing. So, there is a precedent for actually some kind of, oh my gosh, there's been some collapse. Oh my gosh, we've tightened too much. Let's cut rates. The pressure on the Fed to cut rates then was massive, and they did.
The problem today is the pressure on the Fed to cut rates is massive. I mean, look at Donald Trump. But inflation due to tariffs or, you know, whatever is keeping the Fed uncertain and we don't have data to actually show that the economy is deteriorating underneath the hood because it's been delayed because of the shutdown or whatever reason or it's ragged.
Who knows? We'll see what we get. Uh so even that next 25 basis point cut only has like a 43% chance of happening right now. Well that's not great. We really if we were really nervous about plumbing here of the financial stability of the economy we would be seeing consistent cutting and that would be the correct thing to do.
The problem is already you have the Fed going ah but inflation. So all these people that are like oh we're going to see QE infinity again. Have you not forgotten what how that ended up being a massive mistake and the pain that put people through? But that's not the only time we've seen the sort of U-turn on QT.
In 2019, the day of my interview with Jordan Belelfford about Grant Cardone, the overnight repo facility spiked from 2 to 10% and the Federal Reserve immediately ended QT and set up emergency operations. Of course, while that solved issues for about the next 6 months, we just walked right into co So the question in 2019 was did we have that repo crisis because people already knew what was coming and they were already sort of like hoarding cash.
If you look at the bond market, the bond market actually inverted just about 2 months before that liquidity crisis in 2019. And so some people argue that in the summer of 2019, people already knew what was going on at Wuhan. the bond market already knew and insiders who have billions of dollars already started positioning into safer assets hoarding more cash leading to the very 2019 repo crisis and that's why people look and say okay so are we more like 2019 today or we more like 1995 well 1995 Alan Greenspan just started cutting well today the Fed's like we don't need to cut.
So that kind of makes people think that oh crap this is more like a 2019 where insiders already know what's coming that the mag 7 is way too concentrated. What 40% of the flows into into markets right now are like mag seven stocks. It's wild. Uh insane concentration built up on the peg leg of artificial intelligence.
I honestly think that a lot of the data that we're getting for the Atlanta Fed real GDP at 4% is just AI. And if that peg leg of the economy falls over, there's nothing left to support it. But that that part is my opinion. So we're not really like 1995. We might be like 2019 liquidity stress. And then is there any other example where we had this sort of repo stress?
Oh, yeah. After Lehman Brothers in 2008, but that SH9T show was so large, any of the Fed's bailout facilities didn't work until, well, we had to go through a nasty recession that took about 8 months to really bottom out on. And of course, the stock market recession was even longer than that because stocks started falling well before Leman Brothers.
You just got a much more volatile shock afterwards. So this now creates some really big potential problems, but hopefully they don't, right? The best case scenario here is that jobs start coming back. No more credit crisis. You know, we don't have any more bankruptcies and the Fed stabilizes the repo operations through their emergency meetings and inflation just keeps cooling.
That's the best case scenario. That's the best case scenario that says, "Okay, buy the dip. We're going up. Like just load up." You know, who knows? Maybe consumer stocks are cheap or whatever. Great. e're seeing so much foreshadowing of real private credit risk that likely trickles over to the banking sector that we might just be a hair trigger away from a true shock.
You all know I've mentioned many times before that the 210 Treasury spread is really your indicator for when you were shock primed. It doesn't mean that you're at the level of a shock, but anytime you're above 50, you're shock primed like we were in 1995, but we were cutting rates and we were able to engineer the soft landing.
The labor market wasn't rolling over and we weren't propped up by, you know, one industry like AI right now. These issues are very, very different from 1995 where our labor market is collapsing. Hopefully, that turns around magically. We do have an economy that's propped up by one industry, artificial intelligence, leading to massive concentration and massive valuations in the stock market.
Things that we didn't see in 1995. I mean, all you have to do is look at the Cape uh Schiller or the uh Warren Buffett indicator and see where our valuations sit today relative to where they sat then. So, here you go. In 1995, we sat right here. one standard deviation below the trend line of valuations.
So we were cutting rates in 1995 actually setting the standard for the dot bubble that really then started. We were just setting the the the stage for this sort of runup right here. And then of course when we peaked in the dot bubble we were up here at 2000. You could actually argue that 1995 is probably much more like 2020 and we just set up for this big run where we are finally now at the highest level ever on the Buffett indicator for valuations.
Therefore, the situation we're facing right now is very much the opposite of what we saw in 95 with a discounted environment. Now, how does this all boil over? Well, there are two ways you could fall into a recession. and we pray that this doesn't happen. Uh, you know, we strategize on this all the time in the alpha report like, okay, here's, like I was just sending alerts.
Here's what I'm selling. Here's the amount that I'm selling. Here's what I'm buying and the amount that I'm buying. You'll see that what I'm buying is a fraction of what I'm selling. And that's because of where my sort of concern sits about this loaded shotgun. I really feel that we have this loaded shotgun and you've got Donald Trump with, you know, Jimmy arms almost like don't talk bad about my tariffs and we're literally just that hair trigger away from some kind of collapse or shock or whatever at a big bank or a big company or a big institution or somewhere.
We don't know where it'll pop up. That's why it's called a black swan. And then what happens? We're already foreshadowing that shock via the repo stress, private credit issues, the IMF warning, the Bank of England warning. We're already foreshadowing the loaded shotgun. We see the 210 spread. Like all the foreshadowing is in place.
The black swan part is we just don't know who's it going to be. This is like the potential Leman light or maybe even Leman big moment. And it's a solveny issue, not a liquidity issue. So there's too much debt in the system, which of course we've been talking about in the last videos with thinner margin debt, Robin Hood debt, leveraged ETFs, uh leveraged Bitcoin.
I mean, there's there's no shortage of this. You could almost argue that Bitcoin is almost the harbinger of this sort of near-term pain, uh that we might be approaching. Uh who knows, maybe it's short- termism, but look at this. Bitcoin has returned 2.67 this year. 2.67% 67% this year. And compare that to VO, like your most basic ETF on a year-to- date basis, up 15%.
Bro, that's crazy. Okay, who knows? Some people say it's an indicator. But how does this potentially play out? Well, here's the issue. Two ways this plays out. Well, I guess three ways. There's the good way. The good way this plays out is jobs come back. Jobs come back, the credit stresses go away, the Fed stability works out, and we're guched.
Gucci, gu. Okay, then there are two bad ways this plays out. Bad way number one, slow bleed. Okay, this could happen. This is kind of like you're walking through the desert, right? You got the cuts in the legs, death by a thousand cuts, jobs deteriorate over time, eventually you hit corporate revenues, eventually stocks bleed, and sort of the cycle ensues, right?
Because as jobs deteriorate, revenues at corporations come down and then companies miss earnings and stocks bleed more and you kind of get this back and forth cycle that have more layoffs or whatever and you get a slow bleed kind of recession. That's scenario two out of three. So one is good, two is bad uh and and then you have the worst case scenario which is a credit shock.
Okay. Now a credit shock is really interesting because a credit shock hits markets really really hard and fast. This is why and and and you know people think like, "Oh, I'll always have time to get out of margin." Not necessarily. If you wake up and the premarket's down 10% on the cues and your favorite stocks are all down 40%.
You're not going to have time to get out of margin. And I think people forget that that can happen. If you actually look at the CNN greed and fear index, there's something very interesting here. We are literally within 4.2% of all-time highs and we are at extreme fear. This is wild, mind you. Okay, so look at the components.
Market momentum, fear. Stock price strength, extreme fear. Stock price breath, so the number of stocks going up versus down is that extreme fear. Most stocks going down basically. Uh put call ratio, extreme fear. The only thing that and then a safe haven demand, junk bond demand, all this is extreme fear.
The only thing that hasn't actually gone to extreme fear yet is market volatility. Well, guess what pushes market volatility up? A shock. So, like the gun is loaded. The the shotgun has a massive incendiary shell in it and it's been racked back. Uh I if you have the AR15 style shotguns, you you rack them like this.
Okay. If you have a shotgun, like a pump. Okay. Anyway, I just want to clarify that for the gun folks. There's some really cool AR-15 frame shotguns. I've got them. Uh and they're pretty cool. mostly super tangential, but you know, you have an AR-15 in California, you're limited to semi 10 shots. Well, if you have an AR-15 shotgun, you're semi duh, cuz you're not going to auto that thing.
It's so freaking powerful. Uh, but you get 10 slugs, bro. 10 slugs. Uh, anyway, sorry. Okay, so um or what some people do is they'll mix them. Slug buck. Slug buck. This is nasty stuff. Anyway, so getting back to all of this insanity over here, cuz I I don't know if it's like autism or just like squirrel.
Uh getting back to all this insanity over here, it's bad. Now, the good news so far is that banks ev there's no evidence, at least broadly yet, that banking standards are tightening. Usually banking standards tightening will lead credit shock. But the problem is the charts tend to lag, right? So reconcile what I just said there.
The charts give you the information late, but usually credit tightness leads. So in other words, like wouldricolor have collapsed if JP Morgan didn't call them and go, "Yo, we have a $700 million line of credit with y'all for your like warehouse line of credit operations." Not to be confused with like actually running a warehouse.
It's just sort of a larger business line of credit that you could use because you you pay for things then you wait for your payments from your customers and then you pay it off and then you pay for things again, right? That's a warehouse line of credit. Anyway, like would Tricolor have collapsed if JP Morgan didn't rug them?
Maybe not. Would Sunder have collapsed if their lender didn't rug them? Maybe not. And that's where you can kind of keep the tides up where you don't really see who's swimming naked because the lenders are still like letting things pass. But as soon as the lenders get nervous because they're hoarding cash, that's how the cycle begins.
And we're at the moment where where the lenders are basically at that precipice of out of money. That's scary. But again, not showing up in the charts yet. domestic banks tightening standards for credit card loans, even though defaults are way up. No tightening here yet. No tightening right here yet on commercial or industrial loans.
Not seeing it here. Not seeing the tightening yet over here at commercial and industrial loans to small firms. Not seeing the tightening yet, right? These are all down. So, we're seeing less tightening, which is great. But again, think of how the cycle is and how much faster the cycle can be versus what actually ends up showing up in the charts.
And I think one way to look at this is sort of the pattern that you would expect. Okay? So, if you were thinking like if you were a bank, how would you operate? Okay, we're going through quantitative tightening. That's going to mean less cash. Higher rates, that also means less cash. So, this puts pressure on corporations, especially the weakest of the corporations.
They fail first. Then banks start looking like they've got egg on their face. UBS closed their funds. Black Rockck people like what the hell? How do you go from 100% value to zero? JP Morgan, how did you end up losing $170 million toricolor? Like what the hell? And then people start going, who's next?
And then Jamie Diamond goes, "Yeah, cockroaches check the balance sheets." Now all of a sudden trust goes down in the economy. credit default swaps start skyrocketing at Coreweave and Oracle, which is exactly what we're seeing, what we're seeing. And it's literally people just going, "All right, who's next, homie?
Have you found them yet?" You know, they're getting on their little company radios and they're like, "Who is it? Who's it going to be?" And this is where you see even more tightness. And all that tightness the Federal Reserve tries to respond to. Now, mind you, the Federal Reserve is kind of like putting a bandage on this.
Imagine it's sort of like there's a giant water cooler and inside the water cooler is like really nasty poisonous water, but nobody sees it because the water cooler is one of those big blue like emergency coolers and you don't know that the inside water is all like moldy. But you're like, "Oh, I got that giant tank over there in case there's ever like a, you know, an emergency like a, you know, I don't know, Walking Dead situation where we need water and there's Armageddon or whatever." You don't know the water's moldy until you open it up.
Anyway, now it's starting to leak. And what's leaking out is like, ew, that's moldy. Oh, well, maybe that's just mold at the bottom of the tank. Maybe the rest of the 99% is totally fine. And the Fed's just kind of like, all right, boys. We're going to [sighs] hold on everyone. Here we go. We got this.
We got this. Just go ahead and place that. [sighs] It's just a little leak. Ah, all better. All better. I'm sure it's fine. Like their liquidity facility on their emergency meeting here, folks. It is not solving what's in the bucket. It is hoping that the bucket don't burst and all the poop comes out.
That's all it is. So now this like comes at the same time as the Fed is getting headlines again because of Cougler. So remember Cougler left at the Fed to abruptly go teach at Georgetown yet all of a sudden was nowhere to be found on scheduled classes. You know apparently just like you know oh Georgetown with a bunch of Trump alumni trying to align with the Trump administration because Trump is forcing you know universities to make decisions as to whose side are you on otherwise we're going to cut your funding better be my side.
Well, apparently uh the US Office of Government Ethics uh reports found out that she was potentially involved in multiple individual stock purchases, including Apple, Southwest Airlines, and Cava. Now, she disclosed in 2024 that this happened, trades between a,000 to $250,000, and complained that her spouse did that, her husband did that, and in 2024, she reversed the trades.
Nothing ever came out of that. But that wasn't under Trump. That was under Biden. So they kind of let that slide. And in fairness, it could happen. But the fact that it happened again looked really bad because right before the July 29th Fed meeting, which she excused herself from, she realized that her husband did it again.
She selfreported and said, "Yo, we effed up again." And then she's like, "Yo, Powell, can you give me permission to undo this?" He says, "No." My assumption now Trump administration hears about it, hits up Georgetown, make a make the phone calls, she resigns August 1st, boom, my takes her place. Myin is shilling for rate cuts, which is probably the right move anyway. Catches you up a little bit on all the stuff going on, doesn't
Comments 0