March 2, 2023
David Einhorn’s Greenlight Capital’s hedge fund, with a 36% return in 2022, says investors should be “Bearish on Stocks, and Bullish on Inflation,” for the coming year. Is anyone listening?
With the 10 year U.S. Treasury yield topping 4% reaching a level not seen in several years, and mortgage rates hitting the 7% level, reasons for stock and real estate market optimism are slowly evaporating.
For those invesors looking for “Canary in the Coal Mine,” types of warning signs, I should draw attention to the 50% collapse in the share price of the crypto-banking group, Silvergate Capital, Symbol SI From a high a year ago of close to $100/share, to today’s price at about $5.00/share, because of concerns it may not be able to remain a going concern.
Also, in the category of a warning shot across the bow to investors is the fact that the giant Bank, Credit Suisse, which began in the banking business over 150 years ago, continues to make new price lows, with no bottom in sight, as clients pull billions of assets from what appears to be a sinking ship.
Another troubling sign, is the fact that the giant Blackstone’s private equity real estate income trust as halted investor withdrawals from the Trust. Is it only me, who thinks that these giant private real estate funds, competing against each other for trophy real estate projects, over the past 10 years, may have driven commercial real estate prices to unrealistic levels?
And now that they may need to sell, there is no one with the cash or borrowing credit left to buy these overpriced properties. As the saying goes, “You want to sell, who wants to buy?”
This lack of liquidity which pemitted these wealthy groups to drive up prices, will now find as interest rates, and carrying costs increase, that the party may be over.
Who is going to bail out these over-extended hedge funds and private capital groups as their risk exposure becomes a burden, and they all head for the same exits?
Not the Central Bankers this time, I think, who have their own inflatioln problems and over leveraged balance sheets to worry about.
As I have said before, quoting Warren Buffett: ” It is only when the tide goes out, that you learn who is swimming naked.”