Monday May 2 2022
First Andy Kessler Debt Can be a Killer. I have detailed the Archegos financial crisis in a power point for my classes. Last week the architect of the scheme Bill Hwang, was finally arrested. But first he caused Credit Suisse to lose its entire annual income om just his machinations. Andy makes the point that most crises start with the discovery of debt and dwindling collateral. He notes Musk is leveraging his Tesla stock to buy more Twitter. Enron was another poster child for hiding debt right up to the collapse. Andy and I ask the same question, how much more debt is out there we don't know about. The CEO of Credit Suisse had never even heard of Hwang until the margin call occurred
Second if anything Art Laffer and Stephen Moore are wildly optimistic. They compare 1966-19825 noting the DJIA dropped from 1,000 to 777 by7 summer 1982 but far lower than that adjusted for inflation. They suggest 29,50 on a similar basis by 2038. But mid way 1966-1982 was the 1974 low of 577. With a drop of 989 just this past Friday after tops in most indexes November to January, I would think much lower numbers will appear before a final 29,500.
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