what's different between today and 2008 market crash 2008 market crash was about no income no assets Nina loans Banks were giving them money left and right stated income you're trying to qualify for a $720,000 loan how much money would you make last year I'm a school teacher $48,000 you're not going to get qualified for this time I want to ask this question one more time how much money did you make last year I just told you $48,000 do you want to get qualified for this or not yeah okay one more time how much money did you make last year 62 that's what it was no income no asset in 2008 right 2007 and then I remember the month when I knew it's over because the one guy in La who was making 400 Grand a month had an office in Tanga Valley in Tango or Koga 30,000 ft of office space November of 2007 he shuts it down oo and this is right after you're seeing WAMU Countrywide you all these other companies that are doing what they're doing very problematic when that took place so then you saw cities like Riverside Community Riverside County 65% houses forclosure oh then you had loan modification then you have people that were buying five six homes paying the negative amortization payment which means if you got a loan this was a program that came here from Australia with the story you always hear about that this program was in Australia we brought in America it was meant to only be for people who are affluent okay you got a $20 million loan on a house you you got $40 million in a bank account I'll give you 202 million no problem you got four payments to make you got your 15-year loan which is going to be the biggest loan you got your 30-year fix which is going to be reasonable but it's not a 15-year loan then you have your interest only that you're literally only paying interest and the loan stays the same amount or you got your negative amortization payment which means the loan gets bigger every month that you pay it because it's negative amortization every month the loan gets bigger okay so for example for the average person in America would have been something like this it would have been n gam payment was 1,200 bucks a month interest only was 1,800 bucks a month 30e fix was $3,100 a month and 15E was $4,500 a month okay so people are like dude buy another house and another house and a nut and I got five houses that I'm paying 1,200 bucks on I can afford to do that except that was only for two or three or five years and then all of a sudden your 1,200 payment goes to $4,200 that's 5 houses how do you pay $20 a month you can't do it boom foreclosure foreclosure foreclosure so that's not the case study of today the case study of today is somehow someway the government thought it's a good idea to lower interest rates to 1% and we had 3% loans that were going on and then we talk about 128 month expansion by the way if there's no covid that would have been 150 month expansion that we would have had that's not good to have 150 month expansion because during that cycle that we went on top money money was so cheap that people were just picking up money and buying stuff left and right it was so cheap go get a house go get a car rates were low you know these big companies are getting $50 million lines $100 million lines $200 million lines go get as much money as you can then Co hits when Co hits philosophically it was a show go work from home 18 months that's what you got to do essential non-essential and then when that took place companies like Twitter and many others said at Twitter under Jack dorsy you can work from home for the rest of your life what a Noble company that's what we got to do and then so we go through that cycle and then people started abusing employers and they had two jobs where they weren't telling anybody but they're making 82 here and 88 here so they're making $170,000 thinking they can do this fraud that they're doing for the rest of their lives and then they're living a $170,000 year lifestyle not realizing that's not going to be around forever and then the money that they put into the system all of a sudden people have cash in a bank like never before so we had $2. 2 trillion of cash Americans every quarter that thing went from 2. 2 trillion to 1.
7 trillion to 1. 4 trillion to 1. 1 trillion and our savings as a nation kept going lower and lower and lower and lower so then we have more money being printed into the economy and then we have the election then now Co is gone now we got to get people to come back to work they don't want to come back to work they want to work from home then companies like David Solomon Goldman Sachs they start saying no you got to be there for accountability on Monday morning and all this other stuff if you don't you're not getting your bonus people started kind of getting creative that's unfair that's not cool I'm going to go get another job many did then some companies came out and said no we're just not doing that and then you know that has taking place and then you have a bit of War you have craziness going out with another War you have all of these things taking place and then suddenly cherome pow ceas infl going to 8% wait a minute what's going on here we got to lower it to 2% how do you lower it to 2% let's start increasing interest rates we raise this is crazy we raised 4.
88% in the shortest amount of time ever in the history of America there's a chart on statistic you got to see this it's a great Visual and it shows historically when we've had to increase rates it's over a threeyear span or it's over a six-year span or a 3 and 1/2 year span no no this is over a 12mon 15-month span 4. 88% boom like this hoping inflation goes down okay inflation moves a little bit sales of homes to the lowest than 20 years mortgage applications lowest than 27 years people who were doing loans I don't know if you have friends who were doing loans or mortgages or real estate these are guys that were making a half a million dollars 3 years ago per month they're not making nothing right now guys who are making $100,000 a month are having a hard time making $8,000 a month right now in loans there is no loan application because even new homes are not being sold to do the loans of new homes so home sales are down cuz typically when refi comes down people will sell homes no one's selling homes today why are they not selling homes today because they're still sitting on some cash and they don't want to give up that 3% loan they got a year and a half ago and then you look at the data okay let's just say I do sell this house I got to go buy another house but I got to get that house at 8% I'm not willing to do it why would I do it so I'm not going to there is no motive to sell the house so now what's the ticking Time Bomb few things one Jerome Powell is trying to increase rates hoping unemployment increases cuz that's what we need they need the unemployment to increase it's not moving still 3. 7 3.
5 3. 8 3. 9 it's not moving it's right there okay so either we need unemployment to go up or we need people to run out of money if people run out of money and they're stressed out guess what they do they're going to sell the house so today numbers came out saying it's 55% more cheaper to rent than buy this is the highest we've had ever it's 55% cheaper to rent than to buy today this is not a buying season this is a renting season okay there's a Wall Street Journal many of these other articles we'll talk about okay meanwhile the economy is growing the econom is going up Dow Jones oh it's killing it based on seven companies magnificent 7 you know who these magnific seven companies are Nvidia you got these Facebooks the Amazon the apples these seven companies that are preventing the country uh the market from having a crash then while all this stuff is taking place Powell now is dealing with a war he's afraid he wants to raise the rates a quarter but due to the war that took place in Israel he doesn't and then data shows which is by far the most interesting data to answer your question here is how much after these five situations where we rais the rates multiple times in a span this being the shortest uh in the most condensed time frame how long does it typically save is there a formula of when recession comes if at all here's what they realize recession usually comes on average 11 months after the last month they raised the rates so what does this mean if Powell's no longer going to raise the rates and the last time they raised the rates was September let's just say that means recession is going to come when not October so you got October November December January February March April May June July August August of next year that's if it follows the trends of the last five times when they raised interest rates so how did I start off the story I talked about the doctor that has met 4,000 different patients and the 420 you're kind of going through this the problem of everything I just told you could be completely wrong because there's a fifth when the doctor says I've never seen this before so we've never seen current climate before for us to be able to put it and say well according to this and according to that we've never had this situation before yeah that's the thing that makes me really tense but there are fundamentals that when I look at I think ooh like there it isn't possible to sustain this so the thing that I just keep coming back to is debt and interest and when you look at the charts that show the interest payments and how they're going to go up and up and up and even people that locked in you know say three-year fixed rates at really low rates in the corporate Market that all goes away in a few years and so you start looking at just the absolute Behemoth numbers that are going to be due to service that money and it becomes completely untenable and the bad news is it becomes untenable both at the individual level where we're more in debt than I forget ever or close to it but individuals are in psychotic amounts of debt corporations are in ridiculous amounts of debt and the nation is in a ridiculous amount of debt all while we've had two major printing events since 2008 and so now you really have a very unstable market so there's a great quotes called Minsky's Financial institutional hypothesis instability hypothesis excuse me and he said when an economy is stable people get optimistic when people are optimistic they go into debt when they go into debt the economy becomes unstable and now that's even without the crazy rising in interest rates so we have like this for me it seems self-evident that there is going like that gravity insists that things come back down but they haven't yet and so just when I want to get bullish and be like hey obviously this is all going to come crashing down it just keeps not and not and not my intuition is that a recession is inevitable but the market can remain crazy longer than you can remain solvent whatever the quote is why hasn't it happened yet and how do you think about cuz obviously you have similar concerns that I have only the paranoids survive but how do we turn paranoia into an action plan yeah so everything is right now about mapping out different possibilities so for example if we're right down in a conference room and we got bored to write on we would write on you and I would write down and we would say okay uh World War III takes place what do you think of the chances of this taking place Ray doio says 50% okay Jamie Diamond says this is the most dangerous time we've had in America in decades Okay cool so if World War I happens what happens to the economy who's going to be the parties involved are we going to be involved purely through proxy or is there going to be attack here then you write down the possibilities okay if this happens what are you going to do if this happens what are you going to do then next what happens if unemployment all of a sudden goes to 7% 6% what happens if inflation goes down what happens if Powell starts lowering rates back down to 54% Holy that's going to be crazy what Happ so you got to write all of these different scenarios down but but here's a couple things that we have to be thinking about and you said which was fascinating One credit card debt highest it's ever been you know what's a craziest thing about credit card being the highest it's ever been the average interest rate on credit card is the highest it's ever been Jesus forget about the debt so people are worried about the debt so imagine the interest rates in the last 5 years has gone like this to 23% or the average is 23% on credit card you know what 23% means that means the debt doubles about 2 half years that's like loone shark that's loone shark three years your debt is doubling right but that's what we got right now credit cards okay so our debt is record-breaking forgiveness for your loan school loan is gone so now you have to start paying for that's $3 $400 a month that people are expecting I think October November starting then let's set that part aside go to the corporations you were talking about that are borrowing money this year their interest payment on corporation that borrowed money is going to end up being around $530 billion just interest oh my God next year it's going to 730 next year it's going to 1.
1 trillion in the next 5 years it's gone between 1. 3 to $1. 5 trillion just on the corporate debt that we're talking about by the way next part car payment a credit no one's affected good credit they're making the credit payments on time mortgages we're not saying anything crazy with people with bad credit not making payments we're still good car payments and subprime they're seeing a spike and defaults where people are not making car payments the first sign you're seeing on what's taking place no problem let's go to the next one that's the scariest one us has 35 trillion dollar of that worst that's ever been highest that's ever been no problem what does that really mean nobody can really figure it out here's what it means of the money that we have about 8 trillion of it the rates are going to recalibrate and we're going to have to have new rates that we going every single time the rates go up one point just one point for the US government our interest payments increases by $320 billion so imagine we raise rates by three points just interest it's a trillion dollars more per year if it's 6% $2 trillion more per year that's that then last thing that I'll just kind of get you to be thinking about so any time you want to know if the economy is back to normal go to Vegas Vegas is humming like okay we're good and always whenever you go to Vegas talk to C drivers and talk to the drivers who are doing Uber always ask how's conventions doing how are you seeing with traffic are you noticing things cancelling no this has been crazy for us the last 3 months everything's good but if they start seeing a downturn they're typically an indicator of what's to come Transportation industry we consult for a lot of Transportation companies at BV Consulting one of my friends I'm about to go meet with them right after this is their construction company does very well we have these three clients that we have who are doing Transportation two of them are doing 100 million 80 million a year numbers are down 40 50% one of them is doing a billion a year their revenue is down 70% oh so let's actually talk about transport why would Transportation be down 70% aren't Walmart Amazon companies ordering stuff to ship it from here to there why would that be lowering what do they know that we don't know again these are people who have data to Insider stuff that we can sit there and say these are great indicators when you're studying these things on what's going on does this mean recession is going to come here like I told you earlier when we were talking my bigger fear is a reverse market crash which Venezuela just went through which all of a sudden the rates get lowered and DOW an S&P goes and DOW goes from 40 4550 5560 just goes Voom is that just the dollar losing its purchasing power yes exactly that's what happens the more we're printing like for example a Michael Jordan card uh years ago a bgs 92 sold for $78,000 I like oh my God that's crazy but then all of a sudden all of these boxes kept entering the marketplace of 1986 Fleer M so guys started buying these things and they were sending more to get graded at Becket and PSA the more they got cards graded that $78,000 card bgs 9 half became a $660,000 card $50,000 card $40,000 card $30,000 card you can probably buy a bgs 9 and a half today for $220,000 $25,000 okay so the inventory increases the more we print money the more you print dollars and it's more accessible the less it's value the less it's worth so these are some things that's going on uh today you know like you sit there you're like Okay so does this mean guys are not going to make a lot of money no no you're going to see the first trillionaire in the next 24 months cuz none of this is going to affect the guys at the top none of it this printing money every time they print money the guys at the top make more money every if there's anybody that should be against printing money it's low and middle- income families if there's anybody that should be against printing money is them if there's anybody that's for printing money guess who it is the guy's at the top why because the poor in Middle America can't keep money they spend it and when they spend it what do they buy a product owned by somebody in the S&P 500 or other people who have businesses money flows up they can keep printing money all they want so when low and middle income families are like look at these guys all they care about as themselves let that bill pass for $2.
