The movie The Big Short with Ryan Gosling and Brad Pitt was just released on Netflix and I watched it for the 100th time. It’s still unbelievable to me that essentially no one at any bank or mortgage company faced any charges or suffered any consequences. Because of this all the same bad actors and companies have been left in place the last decade to help orchestrate financial crisis 2.0 Just the other day, I was driving and there was a radio ad offering loans for people who needed money for a mortgage down payment and if they took the loan they could borrow 100% of their mortgage!
This is obviously not sustainable and unfortunately the many millennials who scraped every penny they had and paid sky high home prices are going to face a severe downside when this market breaks. But don’t hold your breath because the government has shown that it will do just about anything to protect the real estate market even when real estate prices should have corrected, for example during Covid-19, but instead the government said no one had to pay their mortgages. Because of this, no bankruptcies happened and no homes hit the market causing an even greater short squeeze in the real estate market. We do not live in times of rational economics, but in a new era of voodoo economics and government intervention, therefore we must think outside of the box to maintain and grow our financial wealth in the coming years.
Dr. Michael Burry played by Christian Bale in The Big Short was the analytical genius who was the first to short the housing market and is now making news again after shorting the stock market with a massive $1.6 billion bet. I don’t doubt that Dr. Burry is going to be spot on with his predictions and potentially make billions of dollars, but my question to him is what is your endgame? Every bank that accepted bets against the housing market via credit default swaps became insolvent or collapsed like Bear Stearns turning winning bets into worthless paper. Every bet you make in the traditional financial system will have a counterparty risk. After trillion of dollars in bailouts, I am not sure the public will go for bailing out banks and insurance companies once again, but unfortunately it will be the most likely outcome because without trillions more in bailouts the economy could collapse.
I believe that the Big short 2.0 is going to be Bitcoin and when this new massive wave of money hits the economy to help revive the economy, Bitcoin will take off like a rocket ship. Bitcoin, gold, and silver are all assets that have zero counterpart risk and should perform well, but Bitcoin will be leading the charge. Gold and silver prices are controlled by the banks, just like the credit default swaps pricing was controlled by them in the movie, the banks wouldn’t let them rise until they were on the right side of the trade. Precious metals prices will be kept down at all costs, in order to not reveal the dollar's weakness, but Bitcoin price can not be suppressed and will perform very well in times when many investments are not.
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