I've seen this story happen a couple of times. As we're headed into an economic slowdown, there are rumors that "some big firm" is going bankrupt. Back in 2019, people thought that Tesla was going bankrupt. Sometime around that, people thought that Deutsche Bank was going bankrupt too. During the early days of the pandemic, people thought it was American Airlines. And now, people are thinking it's Credit Suisse.

Back in 2007, when Lehman Brothers' CEO talked about having adequate liquidity days before the company declared bankruptcy, the idea that hearing CEOs talking about having adequate liquidity as a sign of concern became coined. Since then, every time we hear CEOs talk about the firm having adequate liquidity, people jump to the conclusion that there's something to be concerned about.

It's odd to think that when a CEO tells you that their firm has the resources to survive a downturn, we would think negatively about it. But thanks to Lehman Brothers, investors' trust in CEOs has diminished immensely. And it's evident with the Credit Suisse news, rumors, and talk that's going around.

The first time I followed through on a rumor that a major company was going bankrupt, was in the beginning and middle of 2019 with Tesla. Personally, I thought Tesla would go bankrupt in 2019. All the cash burn and signs of diminishing demand, as well as the large number of non-Tesla electric vehicles coming into the market. Trade wars were diminishing the prestige of American goods as people living in other countries started becoming nationalistic while at the same time wanting to avoid the tariffs that came with American imports.

Tesla historically had elevated credit default swap prices. But during the first half of 2019, with all of those bankruptcy rumors, those credit default swaps went through the roof.

But of course, Tesla is still here today and is one of the largest companies in the world.

Now for Deutsche Bank. There were rumors that they would go bankrupt as well. Those rumors dragged on for years (if I remember correctly). Today, they're still here. And their credit default swaps haven't surged as immensely as Credit Suisse's credit default swaps today.

During the early days of the pandemic, if anyone remembers, Boeing's CEO said that a major US airline will go bankrupt. American Airlines was thought to be the one that will go bankrupt because its credit default swaps were the most expensive and it had the highest debt load.

Today, American Airlines is here. And they benefited from the large travel season of 2022.

And here we are today, with Credit Suisse. And these rumors all started because the bank talked about having adequate liquidity to weather a huge reversal in economic activity.

From a banking investor's perspective, they would like to know whether the firm will do well as it enters a downturn. Being big on investment banking, Credit Suisse was expected to experience a significant reversal from growth to decline in its revenues. The investment banking industry went from thriving to going to a sudden standstill. Like someone turned on and then turned off the lights.

It's great to hear that Credit Suisse has adequate liquidity. It's great to see that they're trying to be as transparent as possible as some people interpreted their good news as bad.

I have a good feeling that these rumors will go away. As the downturn comes, I wouldn't be surprised to see that Credit Suisse has survived thanks to its adequate liquidity.

Like Tesla, like American Airlines, and like Deutsche Bank, and heck, even WeWork $WE, many of these companies will survive. And I believe that Credit Suisse will also survive.