The Everything Bubble:
The Everything Bubble.
We’re in one.
A majority of asset classes.
Overvalued.
If not, in a bubble.
Bonds have already popped.
Went from 0% interest rates to 5%.
When lending was essentially free during Covid, bonds hit their all-time high.
Now they’ve lost a ton of their value.
Massive bubble.
Especially in the US.
No one is working at the office anymore.
Or if they are, it’s significantly less than they were.
Billions of square foot of commercial space that was once offices is now mostly empty.
Who’s paying those rents?
Companies.
But not for much longer.
Also what happens to the developer when they got the building financed at low rates?
And now rates are at 5%?
This is what happens to variable rate properties every few years.
If you need to refinance your mortgage at a significantly higher rate, and you don’t have the cash to pay, you’re done.
Your asset is gone.
Imagine that for a trillion dollars of commercial real estate.
Stocks.
Let’s look at NVIDIA.
A company that recently knocked it out of the park on their earnings.
But it’s not sustainable.
How is AI going to scale when they don’t have the energy to maintain it?
How are there a few companies worth trillions of dollars when most of the world economy doesn’t produce that in GDP?
Here’s how.
Options.
Derivatives.
Things people trade back and forth that hold trillions of dollars of value.
Instruments of financial destruction as Warren Buffet would like to call it.
The entire stock market is overleveraged.
Most of those trillions of dollars are nothing.
Nothing but algorithms controlled by a few market makers who set the price of everything.
The stock market is rigged.
That’s not a controversial statement.
Read ‘Flash Boys’ if you don’t believe me.
Or watch this Michael Lewis video.
It’s been rigged for decades and no one wants to do anything about it.
What else is in a bubble?
Chinese real estate.
They popped their debt bubble the last few years.
We’ve still yet to see the major effects of it.
Banks have gone under and disappeared over weekends, but we’re still waiting to see the fallout.
When the 3rd largest commercial real estate company in China goes bankrupt, someone’s going to suffer.
And it’s not just China’s banks as much as it is the world banks.
What else?
Canadian mortgages.
Canadian banks are in a bubble of massive proportions.
Canada’s economy has been propped up on real estate in the last decade.
Most of that debt is held by the banks.
Canada survived 2008 for the opposite reason.
The banks were in good shape because they didn’t have too much real estate debt.
That’s the opposite today.
Oil also went to 150 in those years.
And you know what Canada had a lot of?
Oil.
We were pumping in a decade ago.
Now, much less so.
The reason that’s a problem is if you get an inflationary spike, which it looks like we’ll get in the near future, oil will skyrocket.
That means if you’re an oil-producing country like Saudi or Russia, you just keep printing money.
For a country like Canada which has some of the largest oil reserves in the world, that’s bad when you’re not pumping oil.
Instead, you’re putting your entire net worth in real estate.
Canadian real estate is a bubble waiting to be popped.
The thing with all of these is governments can’t afford to have them fail.
There are too many people relying on these systems.
As we learned from 2008, a financial panic can lead to massive destruction.
So what will happen instead?
Money printing.
Endless money printing.
With that comes inflation.
If you think things are expensive now, just wait.
The world is about to get a lot more expensive.
Great for the rich and asset holders.
Terrible for everyone else.
Also means they’ll just keep the bubble going.
Until one day it can’t go anymore.
That world will likely happen in my lifetime.
Scary to think about.
But better to be prepared than not.
So what can you do?
Take a look at gold and commodities.
Build a community.
Have access to food.
Don’t watch the news.
Get off your phone.
Invest in yourself.
Invest in your own education.
Those are the only things that’ll save you after the everything bubble pops.
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