by FlacidPasta
Call me chicken little, but here’s my rationale:
1) Big banks are increasing dividends. They did the exact same thing in mid 2007 and 2008 right before Lehman brothers went bankrupt. They do this to create an illusion of financial safety, and to draw in smaller investors before cashing out the equity for institutions.
2) Federal reverse repo activity is extremely high. Almost 850 billion dollars right now. It signals serious liquidity issues for institutional investors, with the Fed increasing demand for UST collateral.
apps.newyorkfed.org/markets/autorates/temp
3) The economy did not recover this fast after COVID. The same UST liquidity injected through reverse repos were used by big investors to have more cash on hand because most of their trading is done with margin debt (need to meet margin requirements), and the UST money prevented a bigger crash last March. But their leverage has not gone down, and the stock market being at the peak is unjustified.
4) Fed continously pumping liquidity through stimulus checks for retail and reverse repo for institutions is dangerous. Producer price index is at an all time high. Lumber, oil, and steel futures are skyrocketing because of supply shortage. So much speculation in stocks, cryptocurrency (allows 100x leverage…), and real estate. Asset bubbles form before a crash.
5) The yeild curve is flattening. Long term yields between 5 year and 30 year bonds have fallen, and FOMC expects overnight rate hikes in early 2023. This is typical before a recession.
The news media is trying to tell everyone that everything is fine, but it’s not. Everything is debt, everything is overexposed to leverage, and the strain on the financial system is starting to show. Just remember, all the news was very positive right before 2008. Don’t listen to the news. Listen to the data and the facts. Protect your savings.
Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence or consult your financial professional before making any investment decision.