You Thought the Original Was Bad? Wait for the Sequel!

We all know that the sequel is rarely as good as the original. And when the original was bad…

Mike Maharrey has argued that current dynamics in the markets and the economy look a lot like those in the years just before the 2008 financial crisis.

He’s not alone.

JPMorgan CEO Jamie Dimon recently made the same argument.

In this episode of the Midweek Memo, Mike highlights the parallels between then and now in light of Dimon’s analysis. He also covers the current dynamics in the platinum market.

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Mike opens the show, reminding listeners that a movie sequel is generally worse than the original.

“And when the original was awful…well, the sequel is probably going to be even cringier!”

Mike notes that he’s been drawing parallels between the run-up to the 2008 financial crisis and today for quite a while.

“Well, I’ve been saying for a long time that they are producing a sequel to the 2008 Financial Crisis and Great Recession. I remember that film. It wasn’t good. This follow-up has been a long time in the making. There were some delays because of the Rona. But production is ongoing, and that sequel could be out any time!”

Mike then offers a confession. He says he sometimes suffers from “impostor syndrome” in doing his job.

“Don’t get me wrong. I’m not unqualified. I went to business school and earned a BS in accounting. Beyond that, I have spent decades studying economics and financial markets. I’m nerdy like that. But I don’t have a PhD in economics. I never worked on Wall Street. And I’ve been actively working in the financial sector for a little over a decade. On top of that, I’m not a mainstream guy. That means I spend an awful lot of time going against the flow. I’m sure most of the talking heads on CNBC or Fox Business would blow me off as a nobody. But none of this makes me wrong.”

Given his insecurity, Mike concedes it makes him feel vindicated when he sees bigwigs in the mainstream making similar points.

“That happened this week when I ran across comments from JPMorgan CEO Jamie Dimon. Now, there’s a name the CNBC people will take seriously, eh?”

Mike highlights some of the parallels he’s drawn between today and 2007.

“I have argued that the current economic environment has a lot of eerie parallels to 2007. We have extremely high asset valuations, the economy is loaded up with debt, and monetary policy has taken a similar trajectory, with easy money blowing up these bubbles. We even have characters like Larry Kudlow talking up the economy just like they did in 2007.

“I’m not the only one who sees these concerning parallels. Dimon recently said elevated asset prices and an increasingly competitive banking environment, pushing more credit, remind him of the pre-2008 financial crisis years.”

Dimon expressed worries about high asset valuations — in other words, bubbles. He also warned about high levels of debt. He said people are “getting a little comfortable that this is real,” and that “we will have no problems whatsoever.” But he cautions that the cycle will turn.

I don’t know what confluence of events will cause that cycle. My anxiety is high over it. I’m not assuaged by the fact that asset prices are high. In fact, I think that adds to the risk,” Dimon said.

Mike summarizes the ramifications.

“Loose standards lead to bad loans. Bad loans create malinvestments. Malinvestments ultimately unwind, perpetuating a crisis. In 2006 and 2007, it was artificially low interest rates coupled with a government drive to increase homeownership that blew up a real estate bubble. Dimon said he wasn’t sure what would precipitate the next crash, but there is always something looming on the horizon.”

Mike points out that there are additional parallels to consider — the similarities between 2019 and today. He reminds listeners that the Fed didn’t try to normalize monetary policy until seven years after the financial crisis, and even then, its efforts were half-hearted. Even so, modest tightening began to crack the economy in 2018. By 2019, the Fed was cutting rates and running quantitative easing — very much as it is today.

“The pandemic bailed the Fed out in 2020, allowing the central bank to slash rates to zero and take QE to unprecedented levels. This kicked the can down the road, giving the easy money-addicted economy a surge of its preferred drug, and keeping the inevitable crash at bay. Were it not for the massive monetary injection during COVID, the economy would have likely gone into a deep recession to cleanse the monetary excesses of the Great Recession. Instead, the pandemic allowed the central bank and the government to double down with stimulus, delaying the inevitable.”

The enevitable with eventually rear its ugly head.

Mike says no matter how the plot plays out, there is one certain thing.

“We’re looking at an increasingly inflationary environment. The money supply is already growing at the fastest rate since July 2022, in the early stages of the tightening cycle, and the pace of money creation will increase as the Fed continues QE (without calling it QE). We will also likely see additional rate cuts. That means you can look forward to the purchasing power of your dollar declining even more rapidly.

“Of course, this will also add even more fuel to the fire Dimon is warning about.”

Mike offers a bit of advice.

“Plan accordingly.”

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Mike then pivots to the platinum market.

“Somebody asked me the other day why platinum isn’t surging like gold and silver. It actually has, although its recent correction was a bit deeper.”

Mike points out that platinum was up 119 percent last year. It peaked at $2,923 an ounce. Since the correction, it seems to have found support around $2,000.

According to the World Platinum Investment Council (WPIC), despite the recent correction, “the factors underpinning platinum’s all-time price high remain entrenched.”

The council specifically emphasizes the fundamental supply and demand dynamics.

Mike points out that much like silver, the platinum market faces significant structural deficits with demand outstripping mining and recycling supply.

“In 2024, the platinum market ran its third straight supply deficit with a 995,000-ounce shortfall. While the final numbers aren’t in, the WPIC projects a slightly larger deficit in 2025, with the market forecast to roughly balance this year. Looking ahead, the WPIC projects modest market deficits in the 300-400k range through 2030.”

Mike goes on to highlight five factors the WPIC says will support the platinum price in the near to mid-term.

“Platinum is a good way to diversify your precious metals holdings, and we do sell some platinum products here at Money Metals, including IRA-eligible coins and bars.”

Mike closes the show with a call to action: call 800-800-1865 and talk with a Money Metals precious metals specialist today, reminding people that no matter how the sequel plays out, we can count on the government continuing to devalue your money.