July 12, 2024

‘Shark Tank’ Star Kevin O’Leary: Skyrocketing Interest Rates Could Cause Economic Chaos

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“Shark Tank” investor Kevin O’Leary is sounding the alarm on America’s housing market, predicting a bumpy ride for the economy starting in September. He points out that regional banks are still determining their capital needs, causing them to pull back on loans, which is hitting small businesses hard.

“This was inevitable. We talked about it six weeks ago, and now you’re just starting to see the chips start to fall. The layering is as follows: The regional [banks] don’t know yet what their capital requirements are going to be. So, their loan books have closed like a turtle in a shell,” he explained during an appearance on “Kudlow.”

“This gets worse before it gets better. And what’s it doing to small business? Killing them right now,” he warned Tuesday. 

But what caused this mess? The Federal Reserve decided to crank up interest rates like never before, which sent mortgage rates shooting past 7%. This is the first time they’ve hit this high in around 20 years. The goal was to cool down the hot housing market post-COVID.

Unfortunately, those rates aren’t rushing back down. Last week, they hit a fresh high for the past two decades. Freddie Mac, the mortgage giant, reported that the once-favored 30-year fixed mortgage is now hovering around a staggering 7.09%. This is significantly higher than the 5.13% from a year ago and the pre-pandemic average of 3.9%.

O’Leary points fingers at the U.S. banking sector, predicting “real chaos” in the near term.

“What I anticipate is going to happen here, while we still have full employment, which is remarkable, and you don’t put any capital into the small business sector, which is 60% of the jobs in America, you’re going to start to see some real chaos come September, October, November. This is an issue for Congress, Larry. It’s very simple,” O’Leary explained to FOX Business’ Larry Kudlow.

“They gave all their money to S&P 500 in two acts, the Chips and Science Act and the other, Inflation Reduction Act. Not a dime for small business. A trillion for the big boys, nothing for the small guys. And the small guys, they run America, so it has to be rebalanced somewhere, Larry.”

Shifting gears, O’Leary looks at China’s “dovish” economic policy. He predicts this shift might spell trouble for Big Tech stocks.

“Lots of people, including the Europeans, have started to look elsewhere. And China’s starting to realize if we’ve got to stay north of 4%, we need to be a little nicer to everybody around the world. That’s my guess. They’re not going to be as hawkish. And I think you’ll see the tone die down on invading anywhere else in Asia,” O’Leary continued.

“It’s bad for tech. If we keep squeezing out tech companies from selling to them, you’re going to see some correction in PE’s. I agree with you, Larry, but this is now the time to force them to the table and squeeze their heads and, show them the stick, and get a level playing field. I’d love to see that.”

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