Let's talk about the next impending economic crash.

[pmv]

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.

(the linked article is paywalled, so haven't read it)

The car thing though, at least here, is about leasing, and precisely the fact that they depreciate. Which means they won't be worth anything like as much when the lease ends as the leasing company was counting on. Especially if a lot of them are surrendered at the same time, say in the event of a big economic downturn, which would cause values to fall.

Traditionally here people bought cars outright. Of late it's become fashionable to lease ridiculously flash cars that you can't really afford. The maths of the whole leasing business is looking a bit shaky. In that regard I don't see it's very different from people surrendering houses that were worth less than the mortgaging company was expecting.

 

[Jhhnn]

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.

There are differences, particularly in scale, but it all comes back around in the securitized debt market. When investors don't get their premiums, all hell breaks loose. Real world values plummet. Banks' ability to borrow against them also plummets & credit contracts hugely because of the leverage of fractional reserve lending. Every dollar they can't borrow turns into 10 they can't lend.

 

[shortylickens]

Yeah but the stock market is good and thats all that matters.

 

[Mai72]

(the linked article is paywalled, so haven't read it)

The car thing though, at least here, is about leasing, and precisely the fact that they depreciate. Which means they won't be worth anything like as much when the lease ends as the leasing company was counting on. Especially if a lot of them are surrendered at the same time, say in the event of a big economic downturn, which would cause values to fall.

Traditionally here people bought cars outright. Of late it's become fashionable to lease ridiculously flash cars that you can't really afford. The maths of the whole leasing business is looking a bit shaky. In that regard I don't see it's very different from people surrendering houses that were worth less than the mortgaging company was expecting.

If I could get away with not having a car I would do that tomorrow. When I lived in Asia I didn't have a car. Public transportation is very cheap there. Taxis are also very cheap. I didn't have a $300-500 car payment and no car insurance. I was able to save $300-500 every month. It was a great feeling.

 

[theeedude]

Next crash is going to be dollar crash. That's the only way we can dig out of all these debts, to devalue them. The Fed will keep printing money to artificially suppress interest rates.

 

[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.

Care to share?

It's simple enough, called 10/40 crossover system. Pick your security (for me the SPY ETF, you could use QQQ or DIA, or whatever, even a stock, or other ETF). The graph is the plot of the 10 week and 40 week exponential moving averages on a weekly basis (not daily) of the security. When the 10 week crosses below the 40 week, you wait N weeks for confirmation (N is generally 2 or 3 weeks, your choice. I'm using 3 weeks). When you have confirmed that the crossover is still in effect (i.e. the 10 week is still below the 40 week), you have your sell signal. SELL!

You stay in cash until you get your buy signal, which is simply the reverse of the buy signal... the 10 week crosses above the 40 week and you have your N week confirmation. BUY! I got a buy signal on the SPY on Mar. 15, 2019, have been riding it since. I'll do nothing until I get my sell signal and then SELL!

Rinse and repeat!

I backtested this for the SPY since it's inception about 1992 and it gave ~2% improved performance over the average return, i.e. ~12% versus ~10% annual return.

Doesn't work every cycle. The last sell/buy events (wouldn't have worked well for you, i.e. you would have lost money with your sell/buy compared to if you'd just held onto SPY. The last sell signal was in last December, using my 3 week confirmation. As I said, the last buy signal was middle of March, 2019. But, previous sell/buy signals averaged a ~2% improvement over just holding and never selling.

 

[Muse]

Hookers and blow always have a market

But hard to make money at it unless you're a dealer, pimp or hooker.

 

[Muse]

If I could get away with not having a car I would do that tomorrow. When I lived in Asia I didn't have a car. Public transportation is very cheap there. Taxis are also very cheap. I didn't have a $300-500 car payment and no car insurance. I was able to save $300-500 every month. It was a great feeling.

I drive my car average 1200mi/year. I own it outright. My overhead for having a car (didn't for 20 years of my adult life) is the insurance and registration, aside from the minimal gas and upkeep. I figure to change my own oil this week. I can and often do not touch my car for 2 weeks at a time. Bicycle.

 

[Homerboy]

I work in the collections industry so from my personal standpoint a recession is great (assuming the economy rebounds in 2 years or so)
But obviously, from a "bigger picture" standpoint, I don't want to see this happen. The overall affects on the communities and country aren't worth the personal gain.

I can tell you that we do deal in student loan debt and it's cringe worthy seeing it ramp up in our office every single month - the numbers are getting staggering.
As a parent of a 16 and 18 year old looking to enter college soon (I have virtually no college money set aside for them), the idea of them taking on student loan debt is just saddening. I think I have my 18 year old convinced that a local community/junior college for the 1st two years, and saving $60K is the right move.

 

[IronWing]

I use gas station maintenance as a leading indicator of recessions. Gas stations neglect maintenance when things are going south. Lots of broken pumps out there right now.

 

[cytg111]

But hard to make money at it unless you're a dealer, pimp or hooker.

Or know where the dealer hides his stash.

 

[cytg111]

I work in the collections industry so from my personal standpoint a recession is great (assuming the economy rebounds in 2 years or so)
But obviously, from a "bigger picture" standpoint, I don't want to see this happen. The overall affects on the communities and country aren't worth the personal gain.

I can tell you that we do deal in student loan debt and it's cringe worthy seeing it ramp up in our office every single month - the numbers are getting staggering.
As a parent of a 16 and 18 year old looking to enter college soon (I have virtually no college money set aside for them), the idea of them taking on student loan debt is just saddening. I think I have my 18 year old convinced that a local community/junior college for the 1st two years, and saving $60K is the right move.

Ill bankroll my kids through college. Assuming I have a job of course.

 

[Homerboy]

Ill bankroll my kids through college. Assuming I have a job of course.

I would have loved to, but just didn't have the means to do so. There's been lots of health issues for both of them that I bankrolled, so they can thank me for that 🙂
Ironically, I'd now have the means to tuck a little away each month but it's too late to make it matter.

 

[nOOky]

My financial advisor sees a slow down, but not a true recession next year. I'd really love to see Trump destroy the economy, if only his supporters suffered though. The tax cut for the rich was so, so stupid. It gave the economy a small blip but has since then done nothing other useful. I don't think I'll try and time anything in regards to my 401k or Roth, I'll admit I'm not smart enough to dabble in stocks or to try and time any of my investments so I'll let it run it's course.

I think the bottom line is that if Trump stays out of the federal reserve's business we may have a cyclical bump in part due to the world economy dipping, but nothing like 2009. I hope.

 

[soundforbjt]

I drive my car average 1200mi/year. I own it outright. My overhead for having a car (didn't for 20 years of my adult life) is the insurance and registration, aside from the minimal gas and upkeep. I figure to change my own oil this week. I can and often do not touch my car for 2 weeks at a time. Bicycle.

The same with me. since 2013, I've only put on 5,000 miles.

 

[Hayabusa Rider]

It's a nice topic but a trivial thing as economies recover. There are things much more important but we are stupid animals.

 

[woolfe9998]

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.

If a recession hits before the election, Trump will lose big. His only approval not underwater is his handling of the economy. Not only that, but the entire GOP will lose big.

Given the cyclical nature of the economy, a new recession is always looming at some time in the future. Better to have it next year than the year after. It's for the good of the country.

Oh, and you missed an aspect of how Trump will handle it if it occurs. He'll deny that there's a recession AND blame the democrats for it at the same time.

 

[Jhhnn]

It's a nice topic but a trivial thing as economies recover. There are things much more important but we are stupid animals.

Excuse me, but this blowup in the repo market is far from trivial. There are things going on with that critical market under the surface that really haven't been explained. The FRB is injecting a lot of liquidity for reasons ill defined but nonetheless real. I don't understand how the system needs more liquidity with all the hot tax cut money that's out there.

 

[JEDIYoda]

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?

start another thread,,,

 

[Jhhnn]

start another thread,,,

Why? One of the things that happened in 2008 was that the repo market locked up. It prompted huge changes that seemed to work just fine, up until September when it threatened to lock up again. That's symptomatic of some deeper malaise. It's obvious that the FRB has to deal with it as best as they can, but why are we here?

 

[Muse]

It's a nice topic but a trivial thing as economies recover. There are things much more important but we are stupid animals.

Yeah, I have felt the pain and demoralization many times. It's why I have given up active trading. I did learn some things. I spent a whole lot of time trying. Managed to not lose a lot of money. The irony of it all is that I found a system that should work out well for me and requires no work at all. You could train a 6 year old to execute it as well as anyone and get identical results. But I would never have found this if I hadn't gone through a lot to find it. Ironic, indeed.

 

[alcoholbob]

Ray Dalio, Jeffrey Gundlach, Warren Buffet, all of the major fund managers are expecting a crash which is why they are sitting on record amounts of cash to swoop in and buy assets cheap.

S&P 500 P/E ratio is as high as any quarter before the 2000 and 09' stock market crashes. The yield curve inversion and re-steepening which has preceded every recession has gone by. So...now we wait.

 

[[DHT]Osiris]

Yeah, I have felt the pain and demoralization many times. It's why I have given up active trading. I did learn some things. I spent a whole lot of time trying. Managed to not lose a lot of money. The irony of it all is that I found a system that should work out well for me and requires no work at all. You could train a 6 year old to execute it as well as anyone and get identical results. But I would never have found this if I hadn't gone through a lot to find it. Ironic, indeed.

Putting it all in Index funds, and ignoring it until you're retired?

 

[jmagg]

P/E ratios are thru the roof and unsustainable imo. Wont matter who is Pres.

 

[alcoholbob]

Putting it all in Index funds, and ignoring it until you're retired?

Seems too casual. We have 3 separate decades in the last 80 years where the stock market traded sideways for the entire decade, and stocks underperformed bonds during that entire period. Makes no sense to just sit in index funds and collect a 2% dividend with no capital appreciation for an entire decade at a time. Dalio's all weather fund makes more sense.