The condition of the global economy weighs heavy on my mind - more specifically, the economic situation as it relates to the US banking crisis and its effects on the broader market.
Some, including the Federal Reserve and the US President, say it is contained - and although this may sound arrogant and pretentious, I beg to differ with their analyses.
The contagion is obvious, and it is right under their noses, but they fail to acknowledge it.
Fed Chairman Powell has done a great job in observing the market conditions and is much smarter than me, that is something to which I certainly concede.
Chairman Powell knows and sees what I am seeing and is acting accordingly. President Biden? Not so much. But who expected anything from him?
Let me address the obvious before I address my primary concerns...
This week I decided to do something new with the newsletter.
Despite the immense value of the factual reports I provide on a weekly basis about the prompt situation of macroeconomics and the state of the crypto market - it doesn't add much unique insight.
Therefore this week I present the reality of the concerning conditions in which the broader market finds itself in a slightly different format.
Purely analytical and personal writing, from me to you.
I would be glad for you to read this and disagree with my insights.
Although, as I stated, the current market conditions do in fact weigh heavy on my mind.
And here is why...
First, I will cover the banking crisis and why it is less contained and is yet to fully unfold onto the market according to my research.
The ongoing banking crisis has left many questioning the safety of storing money at banks.
Some argue that even small local and regional banks pose risks. However, others believe that the risk depends on the amount of money involved. Let's delve deeper into this topic.
It's possible that we might witness money flowing from lower-level banks to more established main-tier banks.
This shift could be driven by individuals seeking increased safety and security for their funds.
While some may prefer to spread their money across various banking institutions, ensuring their savings are safe, others (logically) find the timing of this crisis quite complex.
It's challenging to predict the exact trajectory and severity of the macroeconomic situation.
Amidst the banking crisis, some companies have already halted their hiring processes. It's worth noting that the recent job cuts pale in comparison to the massive hiring spree witnessed during the pandemic. The current figures represent a fraction of that growth.
I heard from a friend that at a certain company, the CEO delivered a speech, highlighting the need to halt the increase in headcount. Although their turnover reached an all-time high, they still incurred losses due to factors like increased stock during the chip crisis.
Predicting when the macro situation will worsen precisely is challenging. However, many extremely smart individuals, including myself (although I wish not to categorize myself as one of such 'extremely smart individuals') have a gut feeling that we haven't reached the worst part yet. It's crucial to keep a close eye on the economic indicators and market trends.
Despite low unemployment figures, companies faced a harsh reality when their sales dipped. It served as a cash flow slap across the face, revealing vulnerabilities within their operations.
The business landscape from 2010 to 2020 was characterized by a focus on rapid growth and prioritizing market share over profits.
However, companies without sufficient cash reserves found themselves in dire straits now that the tide has turned.
The famous investing adage applies perfectly to this situation "A rising tide floats all boats….. only when the tide goes out do you discover who's been swimming naked."
And when I say we've seen a lot of 'reputable' banks & companies swimming naked, I mean we've seen A LOT of them...
A friend and business associate told me: "Classic business wisdom states that lack of profit is like a cancer, slowly eating away at a company. On the other hand, lack of cash can be likened to a heart attack, leading to instant collapse."
I fear that exactly that is upon us, a heart attack.
In the current market, warehouses are filled with inventory, but companies hesitate to offer discounts. The same can be seen in the commercial real estate sector, with numerous empty units on the main streets.
The fear of triggering a downward spiral keeps prices inflated.
This phenomenon is occurring across many companies. The business mantra that resonates today is, "The fastest way to go broke is to get an increasing share of a decreasing market."
Growth was prioritized without considering the costs and exit strategies.
It's crucial for businesses to assess their financial health, focus on sustainable growth, and plan for potential market shifts.
Adapting, maintaining cash reserves, and navigating through challenging times is essential for long-term success.
We've seen bad things this cycle, but I don't think we've seen the worst yet. And I am positioning myself as such.
Am I right?
I don't know.
I don't claim to know, but I do believe that what I've told you here is invaluable to decision-making in the current market.
My apologies for the long read, although this is not the end of the long reads.
I wish to announce that there is a high likelihood that these exact pieces, are the only format of work you will see come out of Boomish for a while.
I hope this will be appreciated by you - I am excited to endeavor on sharing more analytical and what I deem valuable content with you & hope you feel the same way.