crypto current situation Millions of people will be wiped out.

crypto current situation Millions of people will be wiped out.

if the consumer was already living you know sort of at the knife's edge and using a lot of credit to basically allow them to live a lifestyle that wasn't sustainable whether that meant not having a job or whether that meant you know vacationing and staying in airbnbs all of that will come to an end both traditional and crypto markets are showing weakness the dow suffered its longest losing streak since 2001. 

 the crypto market has shown blood across the charts with tara luna leading the way with a shocking fall from grace causing panic throughout the rest of the market the federal reserve's planned rate hikes have begun a tightening on businesses both small and large and across all asset classes the economy and market at large experienced never-before-seen actions by the federal reserve for the better half of a decade first with their quantitative easing experiment and then furthermore with injecting money into the economy due to the effects of coveted lockdowns this free money created inflated asset prices employee resignations and venture capital to behave recklessly.

  while many analysts and pundits are questioning if we will enter a recession billionaire Chamath pali Hyapatia venture capitalist and owner of the golden state warriors took to his own podcast to explain that the party is over shemothbehemoth explained that we aren't just heading into a recession but we are in a  recession and there's no end in sight to how long we will be here and in reality we haven't even started to see the ramifications of what's to come this might not be the news many want to hear but the harsh reality will allow many to tighten their own spending and prepare for what's coming before we listen to Chamath if you're not subscribed make sure you hit the subscribe button as that greatly helps us keep putting out daily content to keep you updated on the market from 2018  up until the beginning or not really the beginning of this year but probably  q4 of last year.

  you could have calculated an incredibly tight correlation between the stock market and the fed money printer so the fed is in control of how they can introduce dollars into the economy how do they do that they literally manifest money they don't actually technically print it but let's just assume for these purposes that they actually do print it and they literally take that money and they enter the market and they buy things with it and they're giving you this newly created money that they just created out of thin air from 19 or from 2018 up until about q4  of last year there was a  0.92  correlation between that and the s p 500  going up what does that mean.

 so if you look at a negative one correlation that means that if something goes up this thing goes down dollar for dollar that would be perfectly negatively correlated if you look at something that has a zero correlation that means it's just random whether one thing goes up and down has no influence on the other but a  point nine two percent correlation effectively means that for every dollar the fed created the stock market was going up by that same dollar and that is literally what we had up until November of 2021.  From the beginning of this year till about yesterday so I think the number is still going up probably by at least a trillion dollars.

we have destroyed collectively as a society 35 trillion dollars in global market value now to give you a sense of that's  14  of all global wealth that has been destroyed in basically five months and for reference in 2008  when we went through you know a  cataclysmic shock to the system that threatened the banking infrastructure of America and potential contagion to the world that destroyed 19 of the world's global wealth at that point so you know we're uh approaching some really crazy heady moments in time where in terms of the market correction and the value destruction the difference here is that the last time around.

 it was really about a handful of financial institutions and some very specific assets right mortgage-backed securities um you know some parts of the credit market and then a bunch of financial stocks and that was largely it this time around it's literally everything that's getting smoked there is not a place that you can effectively hide that has been safe crypto smoked the credit markets totally frozen the equity markets Nasdaq is in a bear market the s p is basically flirting with the bear market now and I don't really see any end in sight meanwhile we're waiting for cpi to downtick inflation hasn't really done that separately jobless claims are now starting to tick up which means that companies are beginning to affect layoffs.

 because they feel this pressure so now you're going to see an unemployment rate that starts to go up and then meanwhile we're fighting a  proxy war in Ukraine against Russia to the tune of about you know 40 billion dollars every sort of month or so when we open the paper and decide to read about it so you put all these things together it's not clear that there is the momentum to create a market bottom just to be clear we actually haven't started to remove the money in the system so the process of quantitative tightening which is then fed's the mechanism of removing liquidity is going to start now to the tune of about 90 billion dollars a month but to run off all the money that they printed will still take three years right so we have to take about three trillion dollars of excess capital out of the economy and so if you add that 3 trillion as well that's just going to disappear to the 14 trillion we've already you know or the 14  the 35 trillion.

  you know you're starting to touch numbers that are you know as bad as the GFC in terms of global wealth destruction unlike the GFC  this wealth destruction is touching a  lot of normal everyday folks in very broad-based ways and that wasn't necessarily the case there were a lot of people that unfortunately lost their home but even that was still relatively contained to the hundreds of thousands here we're talking about tens of millions of people owning every kind of imaginable asset class who's seen wealth destruction you know.

  somewhere between 25 to 90  now you could say what is the canary in the coal mine and let me just give you one thing that hit the wire this morning which will show you how bad the credit market is so there was an article in Bloomberg that came out that said instead of Elon taking margin loans to fund his acquisition of Twitter there is an idea being floated by Morgan Stanley to use convertible debt now I love this idea because I think it's an excellent mechanism this was you know when Elon had convertible debt on tesla that was you know of one big escape velocity moment for me in my career in 2016 so I believe in these products I believe that they work.

  but the reason I'm bringing this up is that the what it said is I'll just read this to you the preferred equity may have a 20-year maturity and include a feature allowing interest to be paid in kind at a rate of 14 a year if the single greatest investor's cost of capital for debt in today's market is 14  I think you have to really start to question what the credit markets really look like for market-clearing prices because if that's the price for a  risk-bearing asset run by the greatest entrepreneur of our generation.