RE:HMMM MORE BANKING LAYOFFS? - IN THE AUTO FINANCE DIVISION! I Keeping seeing unsettling signs not only in the media but in my face. Down the road from where I live, a year and a half ago a developer started construction on a high end waterfront condo project. Units for sale at 1 million and up. They built the ground level for indoor parking and then everything came to a stop. The area is fenced off and I believe the structure built so far is in jeopardy from winter freezing. Same with a big house someone started to build near my place. The structure is up but the site is now abandoned and at risk of deterioration from the weather. These are not good things and I've heard they happening are all over canada.
BMO closing its car financing because they see defaults up 500% and they know it will get much worse.
Consumers are maxed out on thier debt and ability to spend and that doesn't bode well for an economy that's for the most part held up by consumption from debt.
Commercial real estate on the verge of an apocalypse over the next year or so as many low rate borrowings mature.
Banks are in distress...they are short of cash and no one knows the true scope or severity of the problem but it's there make no mistake. Thier overnight interbank borrowing rates keep rising and in the last couple of months they've been increasing the interest they pay on deposits from the public. This is a sign they are not doing well at all....not enough money coming in from all those low rate loans and mortgages they hold. And when they want to refinance some business loan that was 3% and now needs to be 8%, they may find the borrower unable and looking at bankrupty. So it's not only the real estate companies in trouble but also the banks who finance them
Hey if you are lucky to have a secure high paying job, or you are a seasoned professional trader, money will keep coming. But unfortunately the vast majority of people are short sighted and stupid. They never see these coming.
I don't believe sherritt will fail because thier debt is ok till 26 and 29 so that's a good thing. I have some commercial real estate stocks which were doing OK for the last year with high interest rates but are now crashing. Because people are waking up....how will they survive when they have to refinance. But they are only 1% of my portfolio but loosing money is ugly no matter the amount.
So yes there crack showing everywhere but I've seen this before....1982, 1992, 2008 etc. But the thing is....those who will get hurt will be hurt badly. Those who are not out on a limb won't be hurt at all. Also those well positioned with lots of cash will do incredibly well picking up distressed assets
I'm not waiting for rates to go down because I suspect the reason for high rates is much more complex than just to fight inflation as Powell keeps telling us. The western financial system is in serious trouble...mainly the US dollar. There are trillions of US dollars held all ovet the world and investors and BRICS countries are dumping them. They have to keep the interest rates high to try and preserve the status and value of the dollar....encourage people to keep holding since they get a decent interest for doing so. Otherwise the US (and the west in general is in big trouble)
I used to trade bonds and convertibles over the last decade when rates were stable and near zero because there are always fluctuations day by day or week by week. You could accumulate a 20 or 30% gain over a year just by buying and selling the 1/2% to 1% delta that routenely happens....and no risk at all. Now you can't do that because the debt markets are having a tantrum and no one knows what comes next.
We are definitely at a precarious moment in history regardless of what the permabulls say.
Be mindful, follow every bit of info that comes out. Now is not the time to take risks until there is more clarity where this is headed. We'll probably have a better picture a year from now