By Gregory Mannarino, TradersChoice.net
The silence here is deafening.
There is a BIG secret being kept from the public, one which has the potential to send the already vastly overleveraged financial system into a tailspin on an unprecedented scale… and that is a commercial real estate time bomb.
Every single major investment bank, including the biggest names in the world, banks like Goldman Sachs, JP Morgan, Morgan Stanley, and Wells Fargo, have hundreds of billions of dollars’ worth of exposure to commercial real estate. CRE is a black hole in the financial system, with untold sums of leveraged bets against it.
CRE prices have been under a great deal of pressure as of late, from the onset of the scamdemic right up until now, with no end in sight. Demand for CRE has been in a steep decline, and with demand expected to continue to fall, CRE prices are expected to drop much faster moving forward.
So how did we get here?
Scamdemic aside, CRE prices were seeing a rapid increase beginning around 2012, which was sparked by a loosening of lending standards for CRE, and wild speculation. These things have inflated a massive CRE hyper-bubble. Commercial real estate investors were given easy access to credit by the major institutions, and that is all it took! And as usual a loss of touch with reality became real.
What we have now is a CRE financial nightmare, which is getting almost no attention from the mainstream media.
Today we are clearly seeing cracks in the banking/financial system. Over a year ago I warned my followers that there was a serious underlying problem with the banks, and it came down to just three things.
- No deposits.
- No loans, and
- No deals.
These three things are the direct result of a cratering economy and surging inflation. And since that time, we have seen the beginning of major problems for the smaller/regional banks, who also have exposure to CRE, but certainly not to the magnitude of the larger institutions. While it is true that regional banks have increased their exposure to CRE at a greater pace than the large banks since 2015, the overall exposure to CRE by the larger investment banks eclipses that of the smaller banks.
What this comes down to is yet another “crisis” lying in wait to unfold directly in our path. It is my belief that this “crisis” will lead to a greater consolidation of the banking system itself and a greater concentration of power. More control over the entire system concentrated in fewer and fewer hands.
Let me give you one guess as to who will bear the brunt of this rapidly approaching CRE hyper-bubble bursting/crisis which was brought on by easy credit, and wild speculation?