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The Bell

The bell #4: Everything is fragile.

Name a ‘system’ that is not under pressure … hard, isn’t it? It seems that everything is fragile at the moment. It’s like trying to stop a forest fire with a bucket of water.

The COVID crisis accelerates almost everything, both the good and the bad.

Last week I rewatched The Big Short, and it reminded me that we never fixed the 2008 financial crisis. Today in 2020 the same issues are knocking on our door again, on top of the rest.

People, businesses, cities, governments are collecting debt in a rapid tempo, and while this happens, we’re being told that this isn’t a problem.

We create ‘zombie’ companies, while history doesn’t repeat itself, it does rhyme: ‘The term “zombie company” was applied to Japanese firms supported by Japanese banks during the period known as the “Lost Decade” after the collapse of the Japanese asset price bubble in c.1990.’ (source)

When everything is under pressure, things start to crack. You can already see it happening, the question is; when and how will it end.

My semiconductor conspiracy theories, part 1: Sept 19, 2020

I’m long $tsm. This is quite the story;

‘I think that the next world war will be with China, over Taiwan, due to the fact that the world’s most important company, the Taiwan Semiconductor Manufacturing Company (TSMC) is headquartered there.’

The Looming Bank Collapse

‘The financial crisis of 2008 was about home mortgages. Hundreds of billions of dollars in loans to home buyers were repackaged into securities called collateralized debt obligations, known as CDOs. In theory, CDOs were intended to shift risk away from banks, which lend money to home buyers. In practice, the same banks that issued home loans also bet heavily on CDOs, often using complex techniques hidden from investors and regulators. When the housing market took a hit, these banks were doubly affected. In late 2007, banks began disclosing tens of billions of dollars of subprime-CDO losses. The next year, Lehman Brothers went under, taking the economy with it.’

America tried to reform, but it never happened:

‘After the housing crisis, subprime CDOs naturally fell out of favor. Demand shifted to a similar—and similarly risky—instrument, one that even has a similar name: the CLO, or collateralized loan obligation. A CLO walks and talks like a CDO, but in place of loans made to home buyers are loans made to businesses—specifically, troubled businesses. CLOs bundle together so-called leveraged loans, the subprime mortgages of the corporate world. These are loans made to companies that have maxed out their borrowing and can no longer sell bonds directly to investors or qualify for a traditional bank loan. There are more than $1 trillion worth of leveraged loans currently outstanding. The majority are held in CLOs.’

A Pandemic Is a Terrible Time to Buy Real Estate

Home prices are high and so is uncertainty.