Hey everyone Me: Kevin here. Wow! The Swiss move really fast so remember quite a Credit Suisse massive potential bankruptcy risks and contagion risks. Uh, credit default swaps for pricing in massive premiums this morning? 1 000 bit premiums? I Mean we had some insane quotes this morning and you won't believe what? the uh Swiss uh, basically version of the Federal Reserve just did. But let me give you a first, a little bit of a breakdown.

So a lot of the crisis today and Credit Suisse's stock was caused by the Saudi National Bank the largest shareholder of Credit Suisse declining to increase their stake. That led to massive, uh, fear and pandemonium. They were blaming a regular regulation saying oh, well, you know we don't want to go above a 10 stake because then, uh, we'll be subject to more regulation. That was sort of their excuse for not investing more.

but everybody's like, uh, no, you don't want to throw any more good money after bad, especially during a liquidity crunch that led to a lot of freak out this morning. I Mean we had quotes like the Uh quote. The collapse of Silicon Valley Bank feels like a death in the family for the tech community. and now we've got Credit Suisse that was Sequoia Capital You've got quotes uh, like uh oh, this is the uh, the next shoe to drop and this one is systemically important and too big to fail.

This is really bad. Uh, however, we did just get a very, very large update on Credit Suisse which keep in mind the size of Credit Suisse We're talking about 580 billion dollars of assets under management that is substantially different from Uh from from what you have with Silicon Valley bang Silicon Valley Bank was technically at about about 211 billion dollars of assets under management under the 250 uh, statutory, systemically important bank or requirement. Of course, they still ended up getting the unlimited FDIC bailout and we could talk about the moral hazard of that in a different video. But more importantly here: A Credit Suisse Clearly above 250 Bill However, this is a Swiss bank, not an American Bank So what would the European Union or potential eventually Switzerland Think about this.

Well, their largest shareholder thinks. sorry guys, not interested. Good news though. Switzerland's Central Bank has swiftly entered the scene and Switzerland's Central Bank is bailing out Credit Suisse if necessary.

That's right. if you signed up for life insurance, it's probably still a good thing to have met Kevin.com Life. You could do that within as little as five minutes. But listen to this.

Credit Suisse Group AG will receive a liquidity backstop if needed. This is, according to Bloomberg just minutes ago seeking to restore confidence in the troubled lender after a record slump in its shares. Credit Suisse after all, was down as much as a 30 over 30 percent in pre-market uh percent today and Zurich trading it was down as much as 31 31 end of the day in New York down about 14 Uh, and so so clearly some of that uh, bailout helping uh, of course this Bank A lot of Bankers are saying this bank is different. This is not contagion.

You know your credit Suite had poor management after all. they lent to Arcados and they were exposed to other potential uh, you know, bad deals basically and bad risk management and the blame is on them. But anyway, the government Central Bank and Finma have been discussing ways to stabilize the bank. After a tumultuous day sparked by the firm's largest investor ruling out increasing its stake the Treasury Department in America Earlier mentioned that they were now actively monitoring the situation.

Uh, with Credit Suisse this is a big deal. Obviously, at this point now after this bailout, uh, well, it's a backstop. There is technically no bailout right now. it's just them saying look, we'll provide whatever liquidity Credit Suisse needs Which basically is a fancy way of saying look, if people want to withdraw their money from Credit Suisse because they're panicking and we end up having a bank run or whatever fine, we'll backstop them.

So what do we have here? Uh, let's see in a recent interview, the chairman of the Saudi National Bank State he had no intention of increasing its 9.9 stake fine, but that hey, that 9 point nine percent stake is probably lower now given all the pain it's had in an attempt to call markets and restore confidence credit. Suites As appeal to the Swiss National Bank for a public show of support which it has now received, the CEO of BlackRock Larry Fink Also warned this morning of more seizures and shutdowns coming in the financial sector. but really, this is just the beginning of the crisis that we are facing. That's scary, obviously because it reminds us of the 2008 financial crisis.

Uh, banking crisis. Very bad. Uh, we uh, Larry Fink says we are going to see a lot of idiosyncratic events taking place. That's a fancy way of saying we're going to see a lot of individual Banks get screwed.

Whether it's because of crypto or because of a lack of Regulation or a lack of of, uh, you know, risk mitigation, Who knows. Uh, The good news is you can still get that same Paddy's Day coupon code linked down below. Look, everything's green for Saint Patty's Day Today that was totally planned. Uh, anyway, you get lifetime access and the best pricing guaranteed going forward and you get uh, lifetime access to the course member live streams.

Anyway, as a result of the Credit Suisse crisis, projections for the monetary tightening have now shifted for the first time today. Uh, well, actually, for the first time in this cycle, we are now seeing pricing for the Federal Reserve at a greater likelihood of a zero percent hike compared to a 25 basis point hike. Now, this could have shifted just since we do have this breaking news here. It takes a little bit for the markets to react, so this could shift a little bit.

I would say we're probably at a coin toss of 25. BP A lot of people asking what my opinion is I know it was 52 for 0 and 48 for 25 earlier. Uh, personally. I Think let's let's just be clear.

let's rule out a uh a 50 BP let's rule out zero. Uh, I don't Uh, sorry. let's rule out negative a cut. So let's rule out the high side of 50.

let's rule out a cut. Uh, we could rule both of those things out. Now, markets are pricing at 100 basis points of cuts by the end of the year, but not yet. We're really debating.

Is the Federal Reserve Concerned enough about this financial crisis? Uh, this banking crisis? This liquidity crisis that they end up pausing That could actually end up being bad for markets. Ironically, that could be a sign that things are so bad that they need to u-turn That means they've broken too much if we get 25. BP In my opinion, it's actually bullish to get 25 here because it means your contagion risks per the Federal Reserve which remember, they have access to all this Bank data way more than we do I Mean they have 2 000 economists that work at the Federal Reserve Uh, not saying they're always right at what they do. I mean they still manage to get things wrong like they're still printing money when inflation is over six percent in March of 2022.

But but then again, you know maybe that's just J-powell's fault. No. I like J-pal I don't want to say that. Uh, but anyway, we did see a lot of fears of contagion spread throughout the market today.

We did have First Republic stock in a lot of the smaller Banks trade down. Uh, throughout the day. Of course, this bailout definitely helped buoy some of the losses a little bit, but you were getting a lot of fear that uh, oh, even though we've got that FDIC bailout of 125 bill with the FED is that going to be enough? Now the FED didn't tell us. Usually the FED will tell us, hey, we're going to leverage this or not.

Uh, that's actually something they usually do. Look out the window by the way. doesn't that look cool? Anyway, usually they say we're going to leverage that. Oh, that's a dam.

Usually they said damn. Usually the Federal Reserve will tell us. oh, we'll leverage this. uh, 125 billion dollar bailout facility ten to one or whatever.

That's what they did during Covid. They didn't tell us whether or not they were going to this time according to JP Morgan that's actually a way of them going. hint, hint. We can do whatever we need to do without being blunt about it.

This looks beautiful, man. Okay, uh and then the Economist by the way stating now that uh, regardless of of what happens with Credit Suisse The Economist says we are entering a new phase here in which the Fed's tightening cycle starts to bite. The phase is characterized by markets working with the FED instead of against it silicon. Valley's Bank collapse has shock markets into doing the Fed's job of tightening Financial conditions such as lending standards tightening lending standards.

We're seeing that, especially in Auto. You're going to see that as well in home mortgages as well. Even as rates come down, lending standards might actually tighten substantially. Uh.

Interest costs, money, Market liquidity, reduced aggregate demand, cooling prices. you create fear right? When you create fear, people stop spending money The Economist Also noted tension between the Fed's inflation Target and its duty to protect Financial Stability Exactly. That's what we're sort of evaluating. Now is what's next.

What's going to happen? Are we going to get zero? or 25 is Credit Suisse Too big to fail? Well, according to the Uh Bank of Switzerland, the answer to that is yes it is. It is considered a systemically important bank and it is getting a liquidity. Bank From the Uh Uh. Basically, the Federal Reserve of Switzerland The ECB may even adopt a more cautious stance going forward towards hiking.

They were expected widely expected to hike about 50 basis points, and now we're looking at probably a 25 BP hike uh for Uh or from the ECB instead of 50. we also have, let's see a little bit more information here: Uh, this is all CEO's efforts to reassure investors that's boring First Republic Bank was downgraded to a junk rating by S P and Fitch well duh I wouldn't touch these things with a 10-foot pole. The only way I would play these right now like the little Banks is I would trade them. Oh dear uh.

I would trade them. That's that's the only thing I would do. Uh I I There's no way I would buy and hold these smaller ones I Wouldn't be surprised if we end up getting honestly hundreds of small Bank bankruptcies. Uh I Think there's going to be so much consolidation to the big ones because nobody's going to want to take that risk anymore.

Yes, we technically have the unlimited FDIC bailout now, but you know what happens if that unlimited FDIC bailout goes away anyway. now I'm checking out Austin Uh, quite literally right now checking out Austin we're basically looking at the floor over here. Oh yeah, turn it a little more. Yeah, look at that.

This is how we look at real estate. Uh anyway I want to be very clear that uh I pay for this not Househack or the House Hack investors and that is a guarantee I give you as well as subject to our audits, the House Hack has paid Zero dollars for this plane. That's because I pay for it. but anyway.

Uh, that's that's my way of doing my best to make sure I'm the best. CEO for this company that looks beautiful out there. But anyway. so wow.

I'm really surprised Credit Suisse is officially bailed out? Uh well. I Think we should wrap up on saying we've got probably Okay, let me put it this way. regarding the Fed get your coupon code: get your life insurance.com life, and make sure you get your 12 free stocks at Weeble by going to Metcaven.com free. Okay, once you do that.

So my thoughts on the FED I I Really do lean towards the idea that the FED will go 25. I Do not. I Actually agree with Blackrock's CEO Larry Think that these are going to be idiosyncratic risks Fancy way of saying individualistic, right? Individual companies are going to fall off the shelf. Uh, they're like gonna be.

They're little. like let's say, you got a bunch of flies floating around in your house. uh and uh. And and they're all banks.

They're all little Voltron all little vampires trying to suck your blood, little mosquitoes and uh, the the weakest of them are just gonna go bankrupt. but they're not gonna kill you. You're still going to be there for the other Banks to suck on. and I think the other strong mosquitoes.

Will Survive and I think the FED realizes that. So not only does the FED realize that, but um, I I Highly expect a 25 BP hike. Let's let's get to where we were thinking four point, 0.75 maybe even five. Maybe another 0.25 I Don't think they want to send the signal of panic, but I think the pause is imminent I Don't think we're going as high anymore as previously thought.

I I Think six is out of the question? Uh, this year? Uh, this cycle I Don't think we're getting to six anymore. After now, we're starting to break things. but can we knock on the door of five? Yeah, Yeah, absolutely. Uh.

again, they do not want to send a signal of panic. Uh, unless they do. You know I mean if they do, it's a sign that they actually do have some concerns uh, about the banking stability and that's a sign that the bank runs could be continuing even with the unlimited FDIC bailouts. So personally, I think that's uh, that zero would be more scary to me.

ironically. I mean I think everybody generally cheers for like less now. I think quite frankly, we kind of want to be cheering for 25 and right now the way Market's pricing, it is a coin toss. I Will say though, what we got from PPI this morning, what we got from retail sales was very good.

Uh, retail sales? Uh, we barely got adjustments from January There were some course members this morning asking me about hey, you know what, what's your take on the adjustments for January the adjustments for January were nominal and I think a lot of us were thinking that, oh, you know, the numbers are all cooked and rigged. We're going to get massive adjustments we barely got. Gosh, Austin's beautiful by the way. Look at this.

We barely got adjustments. Uh, for January barely I mean I think retail sales, for example, went from three percent to 3.2 Super nominal adjustments less than uh, you know, eight, eight to ten percent in terms of adjustments, not actual percentage points. Super nominal adjustments. Super nominal adjustments actually.

Uh, a baguette accuracy in the January numbers. And they reiterate what? I've been saying that this is not trying to Pat myself on the back. It's just to be consistent here. and I'm not going to be consistent for the sake of being consistent.

It just is what it is anyway. Uh, this reiterates that January was an outlier that the retail sales for January were due to a warm uh January This is not some kind of re-explosion of people going nuts spending money. Uh, yes, people are still spending through this recession. But to some degree, we want retail sales to be relatively stable so we can avoid a recession.

Remember, the consumer drives about 72 percent of our economy. It's the opposite in China consumer only drives about 30 percent of the economy. although they hope that this year maybe the consumer will drive a little bit more. But uh, ah well, we'll see China's a whole nother story.

I Think the Chinese consumers are a lot more skeptical than American consumers are, as they should be. I mean what they went through here with three years of law, three years of lockdowns, folks? Absolutely insane. But uh anyway, say hello to uh Austin Texas uh. we got the Gigafactory somewhere out here, but right now it looks like I just got Elonville.

Uh, not really. but this is us coming for landing. We get to enjoy it together. How about that? So kind of cool.

You can actually see the cockpit up here. It's also kind of cool, but uh yeah, this is breaking news. It's actually broke I was downloading news stories and this broke as we uh as we were taking off and I'm like oh, all right now we're Landing So there you have it. Uh, hopefully that was insightful I think this is very good news and uh, bottom line: uh, bailout.

Not a surprise from the Swiss bank. Uh, you know some of these guys are gonna go bankrupt and I think they need to according to capitalism I Don't think it's best that uh, we always have unlimited bailouts. At some point it has to stop. but at least we have relief on the inflation front.

So the volatile Nike Swoosh continues and I'm still bullish. If you want to ask me questions directly, join the course member live streams I Know this is an uncertain time, but if you want to get the first heads up for when we start buying real estate and when we, uh, you know, anytime I flip-flop links down below, you get lifetime access. You join one of them. You get lifetime access to basically course member live streams which is awesome.

All right folks I'm in Austin now. Thanks so much for watching and we'll see in the next one. Bye.