The man being interviewed in this CNBC clip (July 2023) is Nicholas Nassim Taleb, the guy who wrote the book The Black Swan. That book popularized the idea of a "black swan event," a low probability event that has an incredibly high impact, like the pandemic, for example, or a meteorite hitting your house. The chances of it happening are very, very low, but if it does happen, it will have a huge effect.
In this clip Taleb says outright that what's happening in today's economy is a white swan event. All of the things that are collapsing the economy today are right in front of us. We have far more debt than we did in 2008, The Fed used super low, zero or near zero interest rates, to prop up the economy for 15 years. Using that short term tool over a long term warped the economy, banking, and business. Now The Fed has raised interest rates back up close to historically normal levels, which is sending shock waves through financial markets, banking, business lending, personal lending, commercial real estate, and residential real estate. Those days are over.
"The whole structure needs to tumble," Taleb says. A whole generation of people now have to learn how to operate in a world with higher interest rates. We don't need a black swan event to spark a market crash today. All the reasons it will happen are right in front of us. It's just a question of when. With Europe already in recession, the huge Chinese real estate market now collapsing, and the U.S. economy grinding to a halt, a major market crash, in stocks and real estate, is inevitable at this point. These things have a long history of happening in September or October, looking back over history.
A lot of smart investors have pulled their money out of stocks, and parked their money in either short term T-bills or money market funds. Some are even calling this the "T-Bill and Chill" idea. You can get 5% to 6% to sit on the sidelines an wait to see things play out right now. When things become more predictable, and good investment opportunities come up, they can act quickly to take advantage of those opportunities.
Unfortunately, most average, retail investors still have much of their life savings or retirement fund in the stock market, generally in 401k's, or similar instruments. It looks like most average Americans are about to lose a huge chunk of their life savings in the next 6 to 12 months. That's not good.
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