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Assessment: As a friend who trades just messaged me…banks fail and the market goes up! LOL! If you remember back to 2008, something similar happened. We had some initial bank failures and the market was quite resilient. One or two banks can be bailed out and saved, once you get to contagion level…that’s when the problem comes in. So, we are not at contagion level, but could we get there?
The big concern is commercial real estate. Since COVID less office space has been needed as companies cut expenses by moving employees into their homes. Remote work has taken off and why spend big money on a fancy, but empty office space?!?
Here’s an article on the topic: https://www.cnbc.com/2023/04/30/charlie-munger-reportedly-warns-of-trouble-for-the-us-commercial-property-market.html
Long story short is that banks are already having trouble and if you start getting commercial real estate issues and problems on their balances sheets…it could get ugly fast. The market always needs demons…and the demon of the month is now commercial real estate in conjunction with the current banking industry issues. I don’t disagree with it. Frankly, I have been concerned about commercial real estate for a couple years…but life has gone on. So, I am not thinking this is something where the market implodes tomorrow, but it is worth educating yourself on.
FMA Subscribers…I will have an update out within the hour.
Good luck in your trades!