OWP liVe REPORT

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“US junk bonds flooded the market starting in April 2020,” said Schmedders. “The Federal Reserve is printing money to buy junk bonds, so private investors have also followed suit.”

Uncertainty of the future – Save for a rainy day

"Unfortunately, forecasters believe that 40% of newmortgage holders don’t make enoughmoney to keep their loans afloat once the subsidies go away." Another example is Russia’s current housing boom, which has doubled the amount of loans in the country thanks to a mortgage subsidy scheme provided by Putin’s government. “Unfortunately, forecasters believe that 40% of new mortgage holders don’t make enough money to keep their loans afloat once the subsidies go away,” said Schmedders. backed securities. In 2007, residential mortgages went under; this time around there are problems with commercial mortgages, which in 2020 so far defaulted at triple the rate of 2019. “Take the Mall of America, the largest shopping facility in the United States,” said Schmedders. “Some stores on the brink of collapse were bought out by the real estate company itself so it could handle rental income directly – which is insane.”

bonds that are making negative returns – to the tune of $17 trillion. There could be sovereign debt issues due to many countries’ large stimulus packages, and it will be very difficult for government and central banks to extricate themselves from these investments. “Cheap money is dumb money,” said Schmedders. “Companies should have kept sufficient reserves for a deep recession.” Schmedders is not the only financial expert to agree this day of reckoning will come sooner rather than later. Hedge fund manager Bill Ackman invested $27 million in credit default swaps in February 2020 when he first got word of a growing pandemic in China; he liquidated them for $2.6 billion. “Should it worry you that Ackman has just announced he’s back to the same bet as before?” said Schmedders. “Absolutely.” Did they learn their lesson?

Proving that organizations have not learned from their earlier mistakes, there are still worrying trends in mortgage-

Pension funds are another area that might be in trouble, with their focus on low-risk

KARL SCHMEDDERS