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NOTABLE! The Coming Recession (2019-2020?)

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JScott

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Fourth Quarter GDP numbers out tomorrow. :somber:

I do have some long puts in place.
Came in at 2.2%, which was in line with expectations. Many were thinking it was going to be less than 2%, which is why I don't think we're seeing much movement on the news.

Q1 should be very interesting. Between the forecasted slowdown and the government shutdown, it's quite possible that we see a number between 1% and 1.5%. Depending on how that number is spun, it could cause some turmoil in the markets.

I bought a bunch of VIX CALLS and XHB PUTS with May expirations today... We'll see what happens.
 

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What about buying cheap land and finance the construction on a loan and then go with a 15 year mortgage rate.
You REALLY don't want to be building during a downturn. New construction values plummet, there's no buyer demand, and even if there were, banks are going to be hesitant to finance these purchases.

The best way to utilize land purchases during a recession is to buy discounted land that you're happy to bank for a year or two or three and then sell to developers once the recovery is underway.

Once we hit the downturn, and assuming it's a decent sized downturn, a lot of developers are going to sell their undeveloped (or under-developed) lots back to the bank and the bank will be willing to sell the lots off cheap. Buy the land, hold it for a few years and then sell it when building begins again (or build on it yourself).
 

Carlitos

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You REALLY don't want to be building during a downturn. New construction values plummet, there's no buyer demand, and even if there were, banks are going to be hesitant to finance these purchases.

The best way to utilize land purchases during a recession is to buy discounted land that you're happy to bank for a year or two or three and then sell to developers once the recovery is underway.

Once we hit the downturn, and assuming it's a decent sized downturn, a lot of developers are going to sell their undeveloped (or under-developed) lots back to the bank and the bank will be willing to sell the lots off cheap. Buy the land, hold it for a few years and then sell it when building begins again (or build on it yourself).
Yes I wasn't looking to build to sell, I was looking to buy cheap land and buid on it for my first home, basically im looking to see if building my first home during a downtrend would be a lot cheaper was my question.
 
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Yes I wasn't looking to build to sell, I was looking to buy cheap land and buid on it for my first home, basically im looking to see if building my first home during a downtrend would be a lot cheaper was my question.
Ahhh...that's much different. You'll find that once housing starts to slow down, a lot of builders will be selling off lots that they didn't get to develop, and the banks will start taking back some of these lots as well. So, there will be some good deals on land at that point. Additionally, construction costs (both labor and materials) should start to drop around the same time as well.

Long story short, yes, building your personal residence during a downturn is often a great strategy. The biggest risk you face is financing -- getting construction loans during a downturn is difficult, and if the ARV of the project drops during construction, your construction to permanent loan may not appraise where you think and it may be difficult to get your refi.

But, if financing isn't a concern, I think this is a good strategy...
 

Silverfox148

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A recession would be personally good for me, as I am ready this time, a recession disrupts and opens up new avenues of opportunity. Real estate was a big opportunity last time, may be again.

I wouldn't bet on any recession until Trump is out of office, the Federal Reserve is very keen on keeping the economy going by any means necessary, I could be a while before this one blows, but when it blows there will be much opportunity to snap up assets if you have capital.
 

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Ahhh...that's much different. You'll find that once housing starts to slow down, a lot of builders will be selling off lots that they didn't get to develop, and the banks will start taking back some of these lots as well. So, there will be some good deals on land at that point. Additionally, construction costs (both labor and materials) should start to drop around the same time as well.

Long story short, yes, building your personal residence during a downturn is often a great strategy. The biggest risk you face is financing -- getting construction loans during a downturn is difficult, and if the ARV of the project drops during construction, your construction to permanent loan may not appraise where you think and it may be difficult to get your refi.

But, if financing isn't a concern, I think this is a good strategy...
JScott, would it be a bad time to get started with real estate investing? It's been one of the key factors that has held me back from putting my money into real estate in the past year or so. I know that timing the market is impossible, but reading through this thread, it seems like some may have, at the least, some insight as to what's to come.

I'm reading and learning from people's RE strategies, but it seems they got in 2010-2014 time frame. What about today? Not banking on the same equity appreciations, but would I be setting myself up for failure if I got an FHA loan on a large multi-unit residence at this stage of the game?
 

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JScott, would it be a bad time to get started with real estate investing? It's been one of the key factors that has held me back from putting my money into real estate in the past year or so. I know that timing the market is impossible, but reading through this thread, it seems like some may have, at the least, some insight as to what's to come.

I'm reading and learning from people's RE strategies, but it seems they got in 2010-2014 time frame. What about today? Not banking on the same equity appreciations, but would I be setting myself up for failure if I got an FHA loan on a large multi-unit residence at this stage of the game?
I think while buying at recession-level prices obviously beats "ordinary" prices, if you hold off on purchasing because of concern of recession, you could still miss out on a lot of long term benefit. If you buy something solid now (reasonably priced, actually cash-flow positive after expenses, room to force appreciation, etc), I personally think you'd be way better off buying NOW. Even if the recession comes soon, if you're cash flow positive it doesn't matter - just hold it and wait until the market rises again.
 
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JScott, would it be a bad time to get started with real estate investing? It's been one of the key factors that has held me back from putting my money into real estate in the past year or so. I know that timing the market is impossible, but reading through this thread, it seems like some may have, at the least, some insight as to what's to come.

I'm reading and learning from people's RE strategies, but it seems they got in 2010-2014 time frame. What about today? Not banking on the same equity appreciations, but would I be setting myself up for failure if I got an FHA loan on a large multi-unit residence at this stage of the game?
It's never a bad time to buy real estate, as long as you're using the strategies and tactics that make sense given the current economic conditions. For example, I wouldn't recommend that someone who never flipped a house before get into flipping houses right now. But, if you wanted to purchase rentals, certain types of commercial real estate, get into certain aspects of lending or wanted to focus on more creative deal structures, then now is a perfect time.

Basically, if your exit strategy relies on appreciation, now isn't the time. If your exit strategy relies on recession-resistant cash flow, now is a good time.

Not just trying to plug my own stuff, but if you're interested in more details, I wrote a book on the topic. Check out "Recession Proof Real Estate Investing" in the BiggerPockets store.
 

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Get a hard money lender, head to the courthouse auctions on friday mornings at 10am and buy foreclosures for fractions of their value. It gets ridiculous. My partner owns 17 rentals since 08. He's a wealthy wealthy man now.
This is great advice, and my spouse and I have been considering this. It's a great avenue for first time home owning that bypasses the accepted system, plus a great way to rehab/flip a house cheaper. We'll be going this route when we start investing in property within the next two years.
 

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I wouldn't bet on any recession until Trump is out of office.
What if a second term happens?
I live on the other side of the planet but am planning to work with US based companies so I want to be prepared for both cases. As far as I know, Trump seems to be running the US economy well and that's good for me.
 

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So I browse Hacker News a lot. Something I noticed, there have been a LOT of IPOs lately. Uber, Lyft, and just now some company called Fastly: Fastly S-1 | Hacker News

I've read sections of Benjamin Graham's The Intelligent Investor. Something he mentions are lots of IPOs are a sign of a turning tide. Think about it...if you owned a private company, when's the best time to IPO? When the market is at its peak. That's what happened in the 2000 internet bubble. Keep a watch out for IPOs, it's like a canary in a coal mine.
 

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Silverfox148

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What if a second term happens?
I live on the other side of the planet but am planning to work with US based companies so I want to be prepared for both cases. As far as I know, Trump seems to be running the US economy well and that's good for me.
I don't believe we will have recession in the U.S anytime soon really under any president/party, the political situation will no longer allow for it any longer, we are in for a Japan style flatline for a couple of decades. The Federal Reserve will be used to keep us at baseline. The U.S is at a unique moment in time as it makes the transition politically/financially to a corporate-socialist type government in a bid to maintain the power status quo for the wealth/power strata.

This itself present opportunities to leverage/make money off the people who still believe in a strict capitalism environment and refuse to accept things have changed and put their money betting for a recession, you can bet against them and make some money, do not bet against the Federal Reserve. Individual companies may fail such as Tesla , Uber, but nothing widespread will be allowed.
 

jcvlds

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The U.S is at a unique moment in time as it makes the transition politically/financially to a corporate-socialist type government in a bid to maintain the power status quo for the wealth/power strata.
What makes you believe this?


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Silverfox148

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What makes you believe this?
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My observation of living here in the U.S, paying attention, looking at the trend lines, etc. A crash like the one in 2008 would threaten the power strata of those in power, they will not allow that happen, the whole institutions, it's not a conspiracy just a desire to retain the status quo. This same script has already been played out in Japan for a couple of decades at least. This is not a political argument but rather a simple acknowledgement of the situation on the ground, failure is not an option because failure would mean a demand for real change on the ground.
 

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My observation of living here in the U.S, paying attention, looking at the trend lines, etc. A crash like the one in 2008 would threaten the power strata of those in power, they will not allow that happen, the whole institutions, it's not a conspiracy just a desire to retain the status quo. This same script has already been played out in Japan for a couple of decades at least. This is not a political argument but rather a simple acknowledgement of the situation on the ground, failure is not an option because failure would mean a demand for real change on the ground.
Just because failure isn’t desired doesn’t mean it can be prevented... I’m sure the 2008 crash wasn’t desired, yet it happened, and for many reasons.

Just because ‘failure isn’t an option’ doesn’t mean it can’t happen.


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srodrigo

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So, is this happening? :) almost mid-2019 and things look alright so far. I wonder about 2020 though. Looks to me like there's going to be a crisis in Europe if Brexit goes ahead. There are even some countries that didn't really get out of the previous crisis and might go south pretty easily.
 

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The tendency for a yield curve inversion is a pretty strong indicator, indeed. However, the recessions usually took place 1 to 2 years after the inversion. Thus, it will strike most likely in 2020.

And I am not too sure about the stability of the system so far. It needs just one knock down, so that the domino effect is triggering several other issues. For example, it was reported today that Munich's rents dropped the first time since 15 years. This can have a major effect on real estate and let a bubble pop.

So, what I am doing is to get out of the market in the next 3 months and I will reinvest in 2020 when it goes down, I am not too sure though whether I really want to go short right now. Votility is relative high ...
 
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SamRussell

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So, is this happening? :) almost mid-2019 and things look alright so far. I wonder about 2020 though. Looks to me like there's going to be a crisis in Europe if Brexit goes ahead. There are even some countries that didn't really get out of the previous crisis and might go south pretty easily.
Brexit won't change anything whichever way it goes. Worst case scenario, imports and exports of something ridiculous like toothbrushes get held up for two weeks then its back to business as usual.
 

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Even prior to this trade ordeal thing... a lot of underlying dots imo were lining up really well for reduced consumer spending in Q3, disappointing upcoming Q4.

From a psychology standpoint; "greed" and "euphoria" of the general population was at about the levels at which the last leg of topping out happens imo. This was months ago, as I also started noticing people completely disregarding the underlying (fairly obvious) weak fundamentals found all throughout the markets.

The weird thing about crypto was that I got to experience every aspect of all of it in an accelerated way, and even though I am not too much into stocks other than mid-long term positions.. Boy oh boy, is it all the same thing. Same exact movie, different actors, different fruition speeds.
 

jcvlds

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What are the best sources of pure facts and stats on the national economy? No opinions or stories, just the important factors that one can use to get a feel for the economy, markets, and psychology?

Thanks


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James Fend

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What are the best sources of pure facts and stats on the national economy? No opinions or stories, just the important factors that one can use to get a feel for the economy, markets, and psychology?

Thanks
Honestly, it's purely knowing the basic human psychology and what drives us. My only tip on reading market is: Observe what people DO, and not what they SAY.

What creates the movements in stocks? Human behavior.

What drives human behavior? Emotion.

One thing about humans is that we are the most hypo-critical things on earth. Although many of us Fastlaners have mastered ourselves with high self-awareness & brutal self-honesty, the majority of the population are no where near it.

Saying that.. Most people aren't fully aware of their own emotions. They think they do, but they don't. This is why Contrarians are so successful in trading/investing.

So hypo-critical humans will SAY something, but we know they are clueless.. which is why observing what they DO (behavior) shows their exact underlying emotion(s).
 

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Just because failure isn’t desired doesn’t mean it can be prevented... I’m sure the 2008 crash wasn’t desired, yet it happened, and for many reasons.

Just because ‘failure isn’t an option’ doesn’t mean it can’t happen.


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I love when people unironically believe the "crash" of 2008 was a failure. The aftermath of the crash of 2008 was one of the greatest transfers of wealth in history. The top 0.01% have accumulated resources at an unprecedented rate... not saying it was conspiratorial just that there was a huge boon for the ultra elite.

In events like those, it is only the peasants that suffer. The elite call their friends in government to bail them out and start up the printing presses.
 
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A friend of mine talked to her financial advisor at Morgan Stanley to review their current investment portfolio.

The advisors told her they are recommending a very cautious approach to their customers as they are getting ready for a major market correction. Their general suggestion was to move their investments and 401(k) portfolio into a very conservative stance as a wait to minimize loses.

Obviously, I can't tell how good these guys are, but they do manage money for millionaires and this is what they are recommending, so I thought of this thread right away.

Assuming they are correct, how would one move their investments into a more conservative posture?

Bonds?
Large corps?
Stick to Large cap indexed funds?
 

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A friend of mine talked to her financial advisor at Morgan Stanley to review their current investment portfolio.

The advisors told her they are recommending a very cautious approach to their customers as they are getting ready for a major market correction. Their general suggestion was to move their investments and 401(k) portfolio into a very conservative stance as a wait to minimize loses.

Obviously, I can't tell how good these guys are, but they do manage money for millionaires and this is what they are recommending, so I thought of this thread right away.

Assuming they are correct, how would one move their investments into a more conservative posture?

Bonds?
Large corps?
Stick to Large cap indexed funds?
I made a killing in 2008 on UST's.


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lludwig

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New IPOs are historically without question a top.

There are so many signals of a top.
- PE 10 (or Shiller PE) at 30 or close to an all-time high
- New IPOs with especially a decrease in valuation post IPO.
- Dividend Discount Model is expecting lower than average returns
- Inversion of the rate curve
 

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