Just before Shavuos, some scary business stories broke - not scary in the way watching a Dracula or Frankenstein movie is, fiction where anything can happen but no one really gets hurt. These news stories were frightening because they were about real life, appeared within a day or two of each other, and were about events that may be imminent. With just a few words some of Wall Street’s most brilliant gurus sent shivers down investors’ spines. Even now, about two weeks later, The Street is still rattled by their comments.
The first story concerned the remarks made by Jamie Dimon, who for more than two decades has been head of J.P. Morgan Chase, one of the largest and most powerful banks in the world. Dimon spoke to investors about what he thinks is happening in the market, and he certainly shocked everyone when he used the “H” word. He said that “a hurricane was heading to the American economy and that no one knows what is going to happen next.” He added that whatever it is, his gut feeling tells him it’s going to be very bad.
“Right now, it’s sunny and things are doing fine,” he said. “Everyone thinks the Fed can handle the economy’s problems. But there’s a hurricane out there, down the road and coming our way. We just don’t know if it’s a minor one or a Super Storm Sandy. And everyone has to brace himself.” Dimon made clear that J. P. Morgan is preparing for any eventuality, doing everything it can to make sure it will survive whatever storm comes.
Dimon is certainly one of the savviest business experts in the world - not a fear monger or alarmist - so his choice of words should be taken very seriously. Although he wasn’t specific about the economic problems that could be headed toward the US, he did hint that somewhere down the road oil could rise to a new all-time high of $180/barrel. And he also said that he was concerned about the Fed’s plan to aggressively tighten monetary policy to cool inflation, and about the ramifications of the Russia-Ukraine war, which will create serious challenges for individuals as well as the global economy.
A day after Dimon raised the anxiety level, Goldman Sachs President John Waldron piled on the pessimism. While he jokingly said he would avoid “using any weather analogies,” he said that risks from inflation, changing monetary policy, and Russia’s invasion of Ukraine could combine and punish the global economy. “This is among -- if not the most -- complex ... environments I›ve ever seen in my career,» he said. «The confluence of the number of shocks to the system to me is unprecedented.»
Bloomberg reported that Waldron has been one of the harshest critics of the Fed. Earlier this year, he sharply criticized the Fed for its “lack of autonomy” and for “its lack of resolve to withstand the pressure to carry out measures needed to tame the hottest inflation in 40 years. We expect there’s going to be tougher economic times ahead.”
When Musk Talks, Everybody Listens
As if this weren’t enough, Elon Musk, CEO of Tesla and SpaceX, expressed a very similar bearish opinion about the near term. Musk, the richest person in the world, emailed top executives at Tesla that he has a “super bad feeling” about the U.S. economy.
Morgan Stanley analyst Adam Jonas believes that Musk’s concerns should be taken seriously, explaining that he “has a uniquely informed insight into the global economy and we believe that a message from him is very credible. In our view,” Jonas added, “Tesla is not your average canary in the coal mine. It’s more like a whale in the lithium mine.”
Because of his bearish outlook, Musk said that the company would freeze all hiring and will be forced to cut about 10% of total employees worldwide, which translates to some 10,000 pink slips. Musk also warned that the U.S. economy is either already in a recession or headed towards one, and estimated that it will last between 12 and 18 months. Musk sold shares in Tesla valued at approximately $8.5 billion in late April, presumably to help finance his intended purchase of Twitter. In separate transactions, Musk sold about $16.5 billion of Tesla stock late in 2021.
To Be Blunt....
Robert Kiyosaki is a bestselling author and investor who has written 26 books, some of which were translated into 51 languages, and which sold a combined total of 41 million copies. He has been the subject of several lawsuits, as are many successful business people. And he frequently shares his commentary about the market as well as precious metals and some crypto currencies. Kiyosaki endorsed Trump for President in the 2016 race and co-authored two books with him.
Not all that long ago, Kiyosaki had a reputation for being optimistic, but these days he has become more like a perennial bear. Back on March 8, he tweeted this message:
“Do you have a plan “B”? We are in BIGGEST BUBBLE in world history. Bubbles in stocks, real estate, commodities & oil. FUTURE? Possible DEPRESSION with HYPER-INFLATION. My PLAN B: be an entrepreneur, stay out of stock market, create own assets, use debt as money, save gold, silver, bitcoin.”
A few days later, he tweeted the following:
“BRANDON & FED want INFLATION to pay off trillions in debt. BEST INVESTMENT may be stocking products you will always use such as toilette paper, trash bags, canned goods, frozen foods, gold, silver, Bitcoin. I do not trust Brandon or Fed. They are Marxists. End the Fed & Brandon.”
And on April 15, he stated that a “hyper-inflation depression” has arrived, adding that…
“Wiley COYOTE moment coming. Biggest Bubble Bust coming. Baby Boomer’s retirements to be stolen. $10 trillion in fake money spending ending. Government, Wall Street & Fed are thieves. Hyper-inflation Depression here. Buy gold, silver, Bitcoin before the coyote wakes up. Take care.”
It’s A Free Country
It should be noted that the opinions above have not been cast in stone, and may prove to be very far from what will actually happen over the coming months. There are other experts, also very informed and highly regarded, who disagree strongly with both the political and economic messages expressed in the views cited above. In other words, there is no reason to panic or get alarmed.
Still, as ordinary people, we don’t have access to the detailed information, the analyses, or the funds that the gurus above do. That’s why this might be the right time to become more cautious and defensive: paying down debt to the extent possible, saving money, and pushing off big expenditures if possible. Your financial advisor will be able to give you specific advice about things you should or should not do, and how to prepare for a possible hurricane. If the experts cited above are even partially correct, an umbrella won’t be enough for this upcoming storm.
Sources: bitcoin.com; bloomberg.com; nypost.com; reuters.com; yahoofinance.com; theeconomiccollapseblog; zerogedge.com