Let's talk about the next impending economic crash.

[Mai72]

When Will the Next Recession Hit and How Bad Will It Get?

There is no shortage of opinions about economic downturns, so we dived straight into the data.

observer.com

If Trump is reelected how soon do you think the next recession will be? Is it going to be as bad as the 2006-8 downturn? The things that I'm currently concerned about...

1) Student load debt exceding $1.2T
2) Increase in car defaults
3) People taking out car loans that exceed 5 years
4) 78% of Americans can't cover a simple $400 issue without using a credit card
5) Most Americans are currently living paycheck to paycheck
6) Credit card debt is at an all time high
7) Automation will start to strip away many low skilled jobs
8)Home ownership is dropping. This could be because oung people would rather rent than buy, but IMO it's significant and says more about student loand debt than anything else.
9) By 2030 it's estimated that 38-50% of jobs will be gone via automation
10) Many 65 plus Americans don't even have retirement savings
11) The gap between the rich and poor is widening at an alarming rate.
12) The Chinese/US trade war should scare everyone. It could have a negative impact within the next year or two
13) The US debt currently stands at $22T.
14) Pension crisis that could affect people and their pensions.
15) An older population that will have to be cared for. People are living much longer now.
***Did I miss anything else?

Check out this video with Ray Dalio. If you don't know Ray Dalio he is a highly respected in the finacial field, and has found great success with his company BridgeWaters Associates. He released Principles last year which is one of those books that everyone should read. It is truly life changing. He is very worried about this economic downturn. Downturns happen all the time, but he argues that this time could be much different. IMO, we should be stacking cash, so we could take advantage of the next recession. But, how many people are in a position to put away large sums of money? Not many...

 

[cytg111]

What I want to know is : Whats gonna happen with interest rates already at rock bottom, even negative? Further down down down we go... or what?

 

[fleshconsumed]

What I want to know is : Whats gonna happen with interest rates already at rock bottom, even negative? Further down down down we go... or what?

Well, between great recession and Japan I think we have a pretty good idea. During the great recession the short term interest rates did briefly go negative because cash holdings over $250,000 are not FDIC guaranteed and anyone having that much money would rather accept a small negative yield on federally guaranteed short term treasuries as opposed to risk losing deposits if a bank goes down. If you're a small guy with less than $250,000 in liquid assets just keep it all in an FDIC account and you'll be fine. If the next downturn becomes a systemic restructuring of our society like Japan, then much like Japan we're probably going to be stuck at 0 interest rate/0 return in the stock market for a decade or two. The latter would be devastating to the US economy as I don't think US society will be able to handle it as gracefully as Japan did.

 

[Muse]

What I want to know is : Whats gonna happen with interest rates already at rock bottom, even negative? Further down down down we go... or what?

Negative interest rates? Can't you park your money where it won't slowly disappear? Mattress stuffing? Well, inflation can kill that one. I guess if you can't get much of a return you can just use the best savings account you can find and hold your breath for a recovery.

I've never been one to live hand to mouth unless absolutely necessary. And I know how to be frugal when I want to. I even have a sewing machine, needles, thread and cloth.

 

[cytg111]

It is not as much to do with credit on hand, rather the other way around.
I am not quite sure how your guys mortgage loans are structured, but some of these loans are structured with a variable rate ... so for negative interest rates that translate into a big plus for home owners. (Of course the bank will find a way to rip you a new one anyway but still).
I guess what I am getting at; is there a chance it will sky rocket under a crash? I dont pretend to understand the mechanics, I just know its volatile, and often shit happens that on the surface is counter intuitive.

 

[Muse]

My money's in stocks (SPY ETF), but I won't ride it down in a bear market. I have a sell signal that's iron clad, it will get me out, for good or ill, but I need that because I refuse to trust my intuition in the markets. It's never worked out for me all things considered. I started using my system this year. So far so good and I'm sticking with it. I back-tested it against the SPY since back when it started about 1992.

 

[Mai72]

What about real estate? It seems like that is the one true investment that has the least amount if risk. People are always going to need shelter. Baby Boomers are heading into retirement by the masses, and will be for some time. It's a hard asset, meaning that you can see it, touch it. Real estate tends to grow with time, and when it's paid off it can serve as strictly cash flow. You can also leverage real estate. Take out more funds to buy more property, etc. If done right, it's a steady stream of checks every month.

I do realize that there is a downside to real estate. You need to do your homework l. A market crash could impact real estate. There is usually a ton of work involved. Fixing up the place when you initially purchase. Fixing broken toilets, calls at all hours of the night, unruly tenants, etc. But, when you get established you could hire a property manager that could mitigate much of the work. Again, if done right it could in time be a huge source of income.

 

[Bitek]

What I want to know is : Whats gonna happen with interest rates already at rock bottom, even negative? Further down down down we go... or what?

What it means is the toolbox the Fed uses to recover from recessions has no leverage left in it.

Additionally, Trump's 1.2T budget deficit IN A GOOD ECONOMY means the deficit will explode when we have a recession.

Which also means limited ability to spend and tax cut our way out of recession.

So what do I think will happen? All the debt out there would make you assume rates will go way up. For any other country that would be true. However, being the safe investment haven we are, scared investors could flee to safe assets (us t bills), thus pushing rates down.
On net it may be a wash or to the lower side.

If we ever lose that safe haven status, we are utterly fucked.

IDK about an impending "crash", but when even a mild recession hits it will turn ugly and protracted.

It will repeat the GR politically. Rs will freak out and find deficit religion again, Ds will point to low rates and want to spend to fix it, plus reign in the tax cuts for rich as pay fors. Rs will utterly reject it.
Then we bicker and fix nothing as the house burns.

 

[Bitek]

My money's in stocks (SPY ETF), but I won't ride it down in a bear market. I have a sell signal that's iron clad, it will get me out, for good or ill, but I need that because I refuse to trust my intuition in the markets. It's never worked out for me all things considered. I started using my system this year. So far so good and I'm sticking with it. I back-tested it against the SPY since back when it started about 1992.

Care to share?

 

[brycejones]

Hookers and blow always have a market

 

[Mai72]

I'll also say that if you're in a job that could be easily automated like retail you should be very very scared. Most people don't heed this and they just want to ignore the warning but it's everywhere. When the next recession hits we are going to see automation take hold, and many many people are going to lose out. Even if your company says that they aren't going to automate you still have to be very worried, because they might not have a say. They will be forced thru completion, and will have no choice but to eliminate jobs. This next recession is going to get nasty. Or maybe not, and nothing much happens. But, I'd rather play it safe and prepare than sit on my ass and be surprised.

 

[Commodus]

It might not wait until the outcome of the 2020 election. There have been numerous warning signs that a recession is looming, and my own financial advisor urged me to shift to a more cautious portfolio anticipating something happening within months.

The sad thing is that a pre-election recession would almost be a good thing in that it would torpedo Trump's attempts to campaign based on not screwing up the economy (never mind that performance has been noticeably weaker in key areas since he started having an impact). He'd probably try to blame it on Democrats, but I don't think that'd stick with the voters he needs to win over.

 

[Lanyap]

What about real estate? It seems like that is the one true investment that has the least amount if risk. People are always going to need shelter. Baby Boomers are heading into retirement by the masses, and will be for some time. It's a hard asset, meaning that you can see it, touch it. Real estate tends to grow with time, and when it's paid off it can serve as strictly cash flow. You can also leverage real estate. Take out more funds to buy more property, etc. If done right, it's a steady stream of checks every month.

I do realize that there is a downside to real estate. You need to do your homework l. A market crash could impact real estate. There is usually a ton of work involved. Fixing up the place when you initially purchase. Fixing broken toilets, calls at all hours of the night, unruly tenants, etc. But, when you get established you could hire a property manager that could mitigate much of the work. Again, if done right it could in time be a huge source of income.

It's probably too late to get into real estate. The market is high in most areas or at least back to where it was pre-2008. You would be buying high, adding more money to fix it up and then you can't sell it if the economy crashes like 2008. You can rent but when the economy crashes even renters can't afford reasonable rent so then you have the house sitting there while you are paying a mortgage, property taxes, insurance and maintenance. When your mail person tells you about how many houses they bought and are renting them out you need to get out of real estate. In the Tampa Bay area all of the professional house flippers are either buying the few properties at decent prices that are left and then turning around and selling to new flippers without remodeling or they are making money giving advise to new flippers. My wife and I bought a second property several years ago as an investment and for vacations since it's near the beach. The seller bought it in 2005 from a flipper for several hundred thousand more than he sold to us. We might be able to rent it on a short term basis to pay for property taxes and insurance for the few people who can afford a vacation in an economic crash.

Baby Boomers will be selling their larger homes for smaller homes if they can get one for a reasonable price so all of those homes they are selling will be flooding the real estate market and make things even worse.

But, like you said, if you are smart and you really know what you are doing then you may come out ok in real estate in the current environment.

 

[Lanyap]

I'll also say that if you're in a job that could be easily automated like retail you should be very very scared. Most people don't heed this and they just want to ignore the warning but it's everywhere. When the next recession hits we are going to see automation take hold, and many many people are going to lose out. Even if your company says that they aren't going to automate you still have to be very worried, because they might not have a say. They will be forced thru completion, and will have no choice but to eliminate jobs. This next recession is going to get nasty. Or maybe not, and nothing much happens. But, I'd rather play it safe and prepare than sit on my ass and be surprised.

Even IT is not as safe as it used to be. My daughters boyfriend wants to get an IT related degree. I advised him to get into cyber security or networking.

 

[Franz316]

The Fed's recent actions with interest rate and easing are curious. If the economy is doing so bigly great that would not be so necessary. Maybe Orange Man pressured them into an interest rate drop to stave off a crash for one more year. We've had 10 straight years of things going up, it will stop eventually.

 

[s0me0nesmind1]

The gap between the rich and poor may be growing in the US, but because of globalism much more people are being brought out of poverty in shithole countries.

It isn't ideal in a nationalistic sense for our country.

That said, I help install software that helps automate things in the accounting world.... So... I'm basically the person that helps sell the robots for automation. I should be good for a while at least until it becomes normal for robots to do presentations




As far as a recession, etc. If you couldn't tell from the housing bubble - because of globalism we are attached at the hip. If we have a recession, everyone has one.

 

[IronWing]

I should be good for a while at least until it becomes normal for robots to do presentations.

Where I work, this is standard practice.

 

[UNCjigga]

What about real estate? It seems like that is the one true investment that has the least amount if risk. People are always going to need shelter. Baby Boomers are heading into retirement by the masses, and will be for some time. It's a hard asset, meaning that you can see it, touch it. Real estate tends to grow with time, and when it's paid off it can serve as strictly cash flow. You can also leverage real estate. Take out more funds to buy more property, etc. If done right, it's a steady stream of checks every month.

I do realize that there is a downside to real estate. You need to do your homework l. A market crash could impact real estate. There is usually a ton of work involved. Fixing up the place when you initially purchase. Fixing broken toilets, calls at all hours of the night, unruly tenants, etc. But, when you get established you could hire a property manager that could mitigate much of the work. Again, if done right it could in time be a huge source of income.

The only time I’ve seen real estate work out real well for people it’s been commercial property development. Some developer will put together a prospectus for redeveloping an unused or underused parcel of land for mixed retail, medical, or high density residential purposes. People buy in at $50K to $100K, and get a 200-300% return in 4-5 years.

 

[Vic]

IMO, the cause of the next financial crisis (whenever it might occur) will be from either:
1) The Fed is no longer able to control inflation without drastically raising interest rates and curtailing monetary policy, or
2) Continued low interest rates and loose monetary policy leads to irresponsible lending practices which drives a market bubble that eventually pops.

So.. the usual suspects..

 

[TheVrolok]

IMO, the cause of the next financial crisis (whenever it might occur) will be from either:
1) The Fed is no longer able to control inflation without drastically raising interest rates and curtailing monetary policy, or
2) Continued low interest rates and loose monetary policy leads to irresponsible lending practices which drives a market bubble that eventually pops.

So.. the usual suspects..

Is like we could have learned from the past but chose not to due to greed...

 

[highland145]

After reading about repurchase operations, I'm still not sure what this means but it can't be good.
https://www.zerohedge.com/markets/a...ket-gargantuan-365-billion-year-end-liquidity


https://www.seeitmarket.com/is-repo-market-fiasco-about-to-get-serious/

Thoughts?

 

[Pipeline 1010]

I've been feeling like the stock market and the economy has been too hot for too long. You know that feeling you get when it starts to feel like it will be this way forever? That's kind of what it feels like right now and to me, that's what happens just before a large correction.

The crash in 07/08 felt like that. But that crash was entirely predictable once we began learning WHY housing prices got so high in the first place and why a $40K/yr salary could finance a $750,000 home with no money down.

This time I feel like we're in a bubble, but I don't know what the catalyst for the correction will be. Maybe it will be an old fashioned stock market crash. But a correction does look like it needs to happen, even if it's in the form of slowed growth.

 

[[DHT]Osiris]

When Will the Next Recession Hit and How Bad Will It Get?

There is no shortage of opinions about economic downturns, so we dived straight into the data.

observer.com

If Trump is reelected how soon do you think the next recession will be? Is it going to be as bad as the 2006-8 downturn? The things that I'm currently concerned about...

1) Student load debt exceding $1.2T
2) Increase in car defaults
3) People taking out car loans that exceed 5 years
4) 78% of Americans can't cover a simple $400 issue without using a credit card
5) Most Americans are currently living paycheck to paycheck
6) Credit card debt is at an all time high
7) Automation will start to strip away many low skilled jobs
8)Home ownership is dropping. This could be because oung people would rather rent than buy, but IMO it's significant and says more about student loand debt than anything else.
9) By 2030 it's estimated that 38-50% of jobs will be gone via automation
10) Many 65 plus Americans don't even have retirement savings
11) The gap between the rich and poor is widening at an alarming rate.
12) The Chinese/US trade war should scare everyone. It could have a negative impact within the next year or two
13) The US debt currently stands at $22T.
14) Pension crisis that could affect people and their pensions.
15) An older population that will have to be cared for. People are living much longer now.
***Did I miss anything else?

Check out this video with Ray Dalio. If you don't know Ray Dalio he is a highly respected in the finacial field, and has found great success with his company BridgeWaters Associates. He released Principles last year which is one of those books that everyone should read. It is truly life changing. He is very worried about this economic downturn. Downturns happen all the time, but he argues that this time could be much different. IMO, we should be stacking cash, so we could take advantage of the next recession. But, how many people are in a position to put away large sums of money? Not many...

Related to car defaults, but you left out increasing vehicle debt and the rise of subprime auto loans:

Client Challenge

Apparently nobody learned their lesson from the mortgage adventure.

 

[s0me0nesmind1]

Related to car defaults, but you left out increasing vehicle debt and the rise of subprime auto loans:

Client Challenge

Apparently nobody learned their lesson from the mortgage adventure.

Cars are different in that their value is based on something that can be easily repo'd and sold off.

Houses and their ridiculous climbs in value isn't quite the same as cars which are depreciating assets.

 

[Jhhnn]

After reading about repurchase operations, I'm still not sure what this means but it can't be good.
https://www.zerohedge.com/markets/a...ket-gargantuan-365-billion-year-end-liquidity


https://www.seeitmarket.com/is-repo-market-fiasco-about-to-get-serious/

Thoughts?

Zerohedge. Ugh. OTOH, I agree that the whole thing is looking shaky. Both Congress & the FRB have behaved irresponsibly with corporate/ investor class tax cuts & low interest rates. It culminates in excess risk & therefore loss at a systemic level.

So why did the banks quit lending to each other? What changed? From the FRBNY-

“Consistent with the most recent FOMC [Federal Open Market Committee] directive, to ensure that the supply of reserves remains ample even during periods of sharp increases in non-reserve liabilities, and to mitigate the risk of money market pressures that could adversely affect policy implementation, the amount offered in overnight repo operations will increase to at least $120 billion starting Thursday, Oct. 24, 2019.”

The Federal Reserve is in stealth intervention mode

What the central bank passes off as ‘funding issues’ could more accurately be described as liquidity injections to keep interest rates low, argues Sven Henrich.

www.marketwatch.com

What "sharp increases in non-reserve liabilities" do you speak of, Kimosabe?