The United States and the world is still grappling with an economic crisis, and we have been dealing with it for some time. The stock market crash happened on March 13. We are now in mid-July, four months later, and things are still pretty bad. That is a really long time. And so the question on everyone’s mind is, “When will the recession end?” WATCH NOW!
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I make YouTube videos every week, and have been trying to explain what has been going on in financial markets. I went back to the video I made three weeks after the stock market crashed. This was on April 5. In that video, I made a prediction…
“If you go back through all the market crashes that have happened in the United States, there are three main things that always happen.
- The stock market crash is a front-page story in the New York Times
- A Fortune 500 company goes bankrupt
- Someone goes to jail”
This was the list I gave of things that needed to happen for the economy to recover. Let us go through this list again and do a quick check on where we are at today.
The first one is obvious. The economy has been on the front page of the New York Times for a while. This is a signal of the magnitude of the situation.
The second item is a fortune 500 company goes bankrupt. Now a number of large companies have gone bankrupt since the crisis began. Forbes has been publishing a list of notable bankruptcies. When you look at their list from last week, it contains 100 names. There is a lot of companies that have gone bankrupt. Most of them are medium sized companies but some have been very large. I am sure you have heard of JC Penny (286), Hertz (326), Chesapeake Energy (373). I have included their rankings from the Fortune 500. These are obvious examples from three sectors that have been hit very hard: retail, travel, and oil & gas. https://www.forbes.com/sites/hanktucker/2020/05/03/coronavirus-bankruptcy-tracker-these-major-companies-are-failing-amid-the-shutdown/#eae5fd83425a
So has item two from my list been satisfied. I do not think so. When you go through the list of 100 bankrupt companies, something stands out. Even though the list covers a wide range of sectors across the entire economy, there is an interesting thing that is missing. No major US Airlines are on the list. This is a sector with historically small margins that has seen passengers decrease by around 90% from last year. I find it strange in our current economic situation, that no US Airlines have declared bankruptcy. https://www.businesswire.com/news/home/20200520005547/en/Travel-Agency-Air-Ticket-Sales-Continue-Decline
But the airlines is not the only sector missing from the list. The list does not contain a single financial company. There is not a bank or an insurance company on the list. This also seems strange since we are in this environment where people are not paying their mortgages, people are not paying their credit card bills, 100 companies just went bankrupt, and we are at record unemployment. It seems strange there is not a single financial company on this list.
What this tells me, is the 100 companies that have gone bankrupt so far, is just the beginning. There are more bankruptcies to come. Actions by the Federal Reserve has given some of these companies a life line. But that has just delayed companies that should go under, but are continuing to operate using debt. Until these companies go bankrupt, the economy is not going to be able to rebound from the recession.
Let’s consider item number 3. Someone needs to go to jail. We have had some interesting developments in this area. A huge accounting fraud has been uncovered in a German company named Wirecard where there is $2B missing from company bank accounts. This is exactly the type of fraud I was expecting to see. When times are good, companies can hide theft, but when times are bad, the missing money is going to be revealed.
So has item three from my list been satisfied? I do not think so. There is an even bigger story that is more interesting. The news story I am watching closely is what happens with Jeffrey Epstein and Ghislane Maxwell. I am sure you heard what this case is all about. Jeffrey Epstein died before the recession, and Ghislane Maxwell is in prison currently. The crimes have to do with sex trafficking for rich and powerful people. It is a horrible, disgusting news story, but here is why it is important.
When times are good, rich people can protect themselves, but when times are bad, they no longer have the resources. Ghislane Maxwell is going to name somebody who is rich, powerful, and famous, and somebody is going to go to jail.
These are all things that have to happen for the economy to heal and grow again. So when someone asks when the economy will rebound again, it will happen when the three items on my list are satisfied. As soon as that happens, the economy will turn back on. One of these big companies we are all waiting for has to go bankrupt. And somebody has to go to jail.
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Neither Zach De Gregorio or Wolves and Finance shall be liable for any damages related to information in this video. It is recommended you contact a CPA in your area for business advice.