Things Are Starting To Break

In late September I wrote a blog titled “Something Is Going To Break”. The premise was that if the Fed didn’t start to ease up soon something would break. With the failure of crypto exchange FTX it’s starting to happen. In retrospect it’s no surprise that crypto would be the first to crack.

But it’s not just FTX and crypto. Smaller but previously beloved growth stocks are starting to look like zeroes. The two I’m thinking of are Carvana (CVNA) and Upstart (UPST).

While the markets can survive the failure of FTX CVNA and UPST the point is that if the Fed continues its maniacal rate hiking bigger and more important entities will come under pressure as well. Of course smaller and weaker companies will succumb first. They are canaries in the coal mine. As financial conditions become tighter and tighter bigger and more important players are at risk as well. Nobody saw the failure of Long Term Capital Management or Lehman coming. Why would this time be different?