Is the recent collapse of the FTX crypto platform a warning that their are significant flaws in the world’s financial system? It certainly could be a wake up call for those investors who believe that as soon as the Federal Reserve (the Fed) starts to “pivot” on their program of raising interest rates, the Bull Market will resume.
A recent report indicates that FTX and its various subsidiaries owes nearly $3.1 billion and has over 50 major creditors. How many Banks and Leveraged Hedge Funds are on that list?
Watching the weakness in Bitcoin as it struggles to maintain a price of $16,000 per coin, and TSLA ($185) as it breaks major support at $200 suggests to this observer that there are more financial risks ahead.
Although not investment advice, I think this is a good time to remind my readers of the Warren Buffett quote:
“You Don’t Know Who Is Swimming Naked Until the Tide Goes Out”
And it certainly looks to me that the tide is going out for many of the high risk high return investments that have been promoted by Wall Street and the Hedge Funds. Like the 300 or so Special Purpose Acquisition Corporations (SPAC’s) that have been promoted to the public the past two years.
You might want to check out the free Wolf Street letter which has done an excellent job on reporting on the on-going meltdown of many of these former high flying investments.
It is my hunch that we could see the markets break their June lows in the coming months. Of course, I have been too negative in the past and could be too bearish now. Talk with your financial advisors and consider your own tolerance for risk. Even Bear Markets are subject to fast and furious rallies whenever some piece of positive news hits the news.
In any event, have a safe and happy Thanksgiving Holiday with good friends and family.