Caution: Trouble Ahead
Andy Snyder|April 6, 2023
Cue the recession… and our get-rich action plan.
The troubling signs are adding up.
We’ll start with something our VIP subscribers are likely quite familiar with. It’s a chart we show near the start of each of our monthly video calls.
It’s the Atlanta Fed’s real-time GDPNow tracker.
The effect of the banking crisis is obvious…
The nation’s economy grew steadily (much to the surprise of many) through mid-March. Then the house of cards began to quiver and shake. Banks fell… and the nation’s spenders – large and small – washed their hands of the mess.
Volume data shows retail traders moved to the sidelines. Options data shows traders got bearish. Retail spending fell.
If the trend continues, the most anticipated recession of all time will become reality.
But there’s a bigger concern. It’s even more powerful than what’s happening in the retail space. It has much more leverage… and is much more explosive.
It’s something most investors hear about and yawn. It’s never been much of a headline maker. But then again, few black swans are.
Morgan Stanley came out with a dire report on Monday.
It says the commercial real estate crash will be worse than anything we saw in 2008.
That’s a big prediction. But the math backs it up.
Over just the next two years, some 50% of the debt that funds the nation’s commercial property sector will need to be renegotiated. That’s close to $1.5 trillion.
Much of it will come with an interest rate twice as high as what’s on the note right now.
That’s painful.
What’s worse, though, is the properties are worth less – often much less. With remote working now the default in many sectors, commercial rental demand has plunged, taking rent prices with it.
Occupancy in many markets is at only 60% or 70%.
Using some experience to put the puzzle pieces together, we can see that what happened in the banking sector last month was merely a prelude to a much bigger show.
After all, regional banks flat-out make their living on commercial real estate and the loans that fund it. For many regionals, as much as 80% of their loans come from the sector.
There will be trouble everywhere.
But wait… there’s more.
In recent months, imports of consumer goods have fallen by 25%. That’s trouble for one of the quickest-growing aspects of the commercial real estate sector… all those warehouses that seem to be growing in cornfields lately.
Rent growth in the sector is expected to come in at just one or two points next year – well off recent highs.
A slowdown there would certainly ripple throughout the economy.
To be clear, we’re not out of the woods yet. The recent stock market rally is merely a knee-jerk reaction to the idea that lower rates lie ahead.
It’s not sustainable.
That’s where the pile of cash I mentioned yesterday comes in. It’s a key part of our get-rich plan.
As the Fed starts talking up inflation and puts on its hawk costume once again, valuations will fall. The strong markets we’ve seen of late will turn around… quickly.
That’s your opportunity.
This is a trader’s market. We’ve taken strong advantage of the recent uptick.
But we must be nimble. It can’t last.
And when the market turns south, we’ll be glad we have that cash.
Opportunity will abound.
