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NOTABLE! The Coming Recession (2019-2020?)

Patrickg

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I would say I agree the crash has to happen soon. Who knows when but the writing son the wall.

However, I will say I'm so glad I'm in fastlane! Because during the next recession there won't be a boss to tell me they are letting me go. very enjoyable thing about creating a business that creates value.
 

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WJK

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The markets have always gone in cycles. The part that bothers me about the stock market is that there a lot fewer stocks traded. And they are being chased by too much money. It's the old supply and demand rule. The cash, which would go into other investments, is being thrown into the stock market. It is in response to the Feds artificially lowering interest rates.
 

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Reading this thread is making me think twice (ok more like fifty times) about starting to invest in RE this year....should it? I'm still saving a good chunk of cash monthly, so waiting until the market cools off some is no problem.
 

Kid

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Reading this thread is making me think twice (ok more like fifty times) about starting to invest in RE this year....should it? I'm still saving a good chunk of cash monthly, so waiting until the market cools off some is no problem.
I'm staying cash or very near liquid position, when sh*t hit the fans, is when you buy and make profits!
Same here. I'd rather wait for crash and then invest in RE or index funds.
 

GoGetter24

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Reading this thread is making me think twice (ok more like fifty times) about starting to invest in RE this year....should it? I'm still saving a good chunk of cash monthly, so waiting until the market cools off some is no problem.
Li Ka Shing became the richest guy in Asia precisely because he did what he was told. As Rothschild said: "buy when there's blood on the streets". He did that (during the Hong Kong leftist riots, when everyone else was running away), and the rest is history. (Yes, as "probability guy", I recognize there are shadows behind him of guys who tried that but got wiped out).

I've heard so many dumb stories in real estate, about 3 generation loans and the such. There are so many places, like China and Australia and a bunch of European countries, where the RE market is overheated for ages without correction. Probably best to keep the powder dry.
 

WJK

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Reading this thread is making me think twice (ok more like fifty times) about starting to invest in RE this year....should it? I'm still saving a good chunk of cash monthly, so waiting until the market cools off some is no problem.
The apartment market should be heating up, and the housing market should be pretty stable in most marketing areas. The office and commercial market have been very iffy for a long time --many bricks and mortar businesses are trying to go toe to toe with the on-line businesses. Small industrial may be a bright spot for investors as manufacturing picks up. So, it depends on WHAT part of the market you're interested in for investing your money.
 

RayAndré

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The apartment market should be heating up
What's causing this?

Small industrial may be a bright spot for investors as manufacturing picks up
this is interesting...and different. What types of manufacturing are picking up?
 

WJK

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What's causing this?


this is interesting...and different. What types of manufacturing are picking up?
The reason I predict the apartment market will be heating up is the tax changes. I see it like this -- Those changes will become more visible this coming April 15th. I wrote a blog about it on my website. Higher standard deductions will cause an estimated 92% of the taxpayers to no longer be able to take deductions associated with their homes. That puts rental toe-to-toe with home ownership. In the short term, renting will be more affordable.

More renters mean more investors. More investors mean higher market values and appreciation in that market segment. I believe that eventually, this will also change the single family house market as well. READ MORE

As far as the small industrial market, I'm expecting an uptick in that market. The current low unemployment figures and surge in the business community will create a new pool of small businesses. Most start-up businesses rent space rather than owning their workspace. Unlike the guy with his work on his computer tablet, people who do physical work or produce products have to have a workspace.

The developing international trade tensions and sweep of nationalism will further support this trend. There's a lot of people who have been waiting for the right moment to step out and start their businesses.
 

lewj24

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In America:
Credit Card debt is at an all time high.
Student loan debt is at an all time high.
Auto Debt is at an all time high.
Govt. Debt and spending is at an all time high.
Trade deficits (if you take out oil) is at an all time high.
Real inflation is at an all time high.
Home refinancing is at an 18 year low.
Interest rates at an all time low for 10 years. Now rising.
And now a trade war?

I believe this next recession will be worse than the Great Depression. At least statistically speaking. Maybe not in real life because of our modern technology.

I do want to correct one thing you said:
Increased prices means inflation (literally).
Inflation is when the govt. prints more money. they "inflate" the money supply. This then raises prices. This is why people think raising prices is inflation because that's the only way you can see it. However, it is possible to have inflation and decreasing prices.

In every recession a specific part of the economy is hit. In 2008 it was housing. In 2000 it was tech companies. What will it be this time? I believe it will be the dollar. And the bond market which is basically just dollars. All time record high debt combined with raising interest rates will lead to the crash of the economy. This being said I believe the govt. will bail out everyone again and slash interest rates as much as possible by inflating the money supply, thus destroying the value of the dollar.

If you believe me. Then sticking with cash is a bad idea. Sticking with assets that hold their value is the main goal. Things like real estate, metals, oil, etc.

I have learned a lot by listening to Peter Schiff. He knows a ton about Austrian economics.
 

Jason "GrandK"

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They are calling this the everything bubble, in contrast to the real estate bubble in 2008 and the tech bubble in 2000.
 

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JScott

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Inflation is when the govt. prints more money. they "inflate" the money supply. This then raises prices. This is why people think raising prices is inflation because that's the only way you can see it. However, it is possible to have inflation and decreasing prices.
This just isn't true. By definition (in the world of economics, at least), inflation is specifically the sustained increase in the prices of goods and services over time.

Now, you might be thinking about "reflation," which is monetary policy aimed at stimulating the economy by reversing deflationary trends. When the rate of inflation drops below long-term trend lines, reflation is the price growth back up to the trend line. Reflation is often achieved by increasing the money supply or reducing taxes -- the two best ways to stimulate spending and economic growth.

Basically, inflation and deflation are directional metrics of performance (price growth up or down). Reflation and disinflation are subsets of inflation and deflation, relative to trend lines...and are often driven by monetary policy.

I have learned a lot by listening to Peter Schiff. He knows a ton about Austrian economics.
Peter Schiff sold out a few years ago; he's now peddling precious metals and his message of an imploding dollar and hyperinflation aligns well with his goal of selling his listeners gold and silver. (I assume that's where you got a lot of your thoughts on the next recession being a result of hyperinflation.)

There's too much of a conflict of interest for me to listen to anything Peter Schiff has to say anymore (and I was one of his biggest fans a decade ago).
 

lewj24

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Peter Schiff sold out a few years ago; he's now peddling precious metals and his message of an imploding dollar and hyperinflation aligns well with his goal of selling his listeners gold and silver. (I assume that's where you got a lot of your thoughts on the next recession being a result of hyperinflation.)

There's too much of a conflict of interest for me to listen to anything Peter Schiff has to say anymore (and I was one of his biggest fans a decade ago).
Hmm I don't think that is a conflict of interest. He believes he is right and is doing the just thing by selling the things he believes will go up in value and spreading the word about it. Did he not do the same thing when he predicted the housing crash back when you were a fan? Isn't the point in business to help others? Why would he sell what he doesn't believe in?

If he wanted to make the most money I don't believe he would be selling metals. Selling metals because of a currency crisis of the reserve currency isn't an easy sell. I have listened to a lot of what he has to say and I can't come up with any arguments against him. If you can come up with specific reasons why it won't be a currency crises, besides saying Peter Schiff is a sell out, let me know. I want to hear all points of view in economic thought.

I also think there are other Austrian economists out there that believe the same thing, not just Peter Schiff. He just has the loudest voice and biggest fan base.
 
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Guest3722A

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Here's an interview segment from a couple days ago with Lloyd Blankfein interviewing one of my all-time favorite traders, Paul Jones. They go into additional factors with the current landscape that's been discussed here and touch a bit on timing. Interesting stuff.
 
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JScott

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Did he not do the same thing when he predicted the housing crash back when you were a fan? Isn't the point in business to help others? Why would he sell what he doesn't believe in?
No, he wasn't selling anything back then from what I remember, other than some books...

Regardless, this is just my opinion based on listening to him for 15 years and hearing a change in how he has approached things. I could certainly be wrong (it wouldn't be the first time!) -- I can't read his mind, and perhaps there is no conflict of interest. But, based on my take, he's lost my confidence...
 

WinTheDay

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It seems that as the weeks go by this topic keeps coming up in various forms..for instance just today in my University class my programming professor took some time out of lecture to lecture(oh the irony) the class on how he believes that an recession will come within the next 2 months - year basically. He was urging all of us to basically hurry the F*ck up and get a job as soon as we are qualified to do so.

Now obviously me being on this forum I like to think that I think differently from the majority of the people in my University. The only thing his words made me do was develop a more "sense of urgency" to get my business in a consistent cash flow. Not really to keen on the job market, I don't plan on the 9-5 life. Anyway I was thinking of a few things that a recession can't change since the level of technology we are experiencing now.

One is YouTube, people on this platform basically get paid by the subscribers or view count. No matter how bad the economy is these guys will continue to make their high clean profit monthly because this is a completely free platform unless you choose to pay a premium. These people will probably even THRIVE in this "upcoming recession", why? because technology is different than 10 years ago. It is a lot more capable and a lot cheaper, as the guy earlier in the thread said the recession won't hit as hard because of how advanced the world is today.

I think a lot of people fear the recession, which is understandable but money is still being exchanged daily. People will still pay you for value, just because 1st world countries may take a hit doesn't mean a 2nd world country isn't growing at a rapid pace and a new market won;t emerge. I'm sure its people on this forum that experienced the prior recession and profits didn't take a hit and maybe increased. Warren Buffet made $10B during the so called "financial crisis".

That's all I really wanted to say, can't speak on any type of investments. Only thing I can do is focus on my daily goals and make sure I have the best systems in place to continue to see growth.
 

MJ DeMarco

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that an recession will come within the next 2 months
I'm already on the record to say that it will start at the end of August, drift poorly into September, with October being an absolute shit-show -- the confirmation that, holy-sh*t, this is reallllly bad.

And then guess what happens in November?
 

Patrickg

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I'm already on the record to say that it will start at the end of August, drift poorly into September, with October being an absolute sh*t-show -- the confirmation that, holy-sh*t, this is reallllly bad.

And then guess what happens in November?
I'm in cash... so November is blue light special month....
 

DustinH

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Just want to throw some perspective out there on the real estate side:

If the stock market has a downturn this fall (which tends to happen in the fall, see 1929, 1987, 2008, etc) then the real estate market always has a lag of several months. Commercial market could estimate a lag of 6-12 months before it suffers. The residential market will have problems in 2020 by my prediction. The worst year for housing recently was not 2008, it was 2010.

Now, there is no overall real estate market for the US. There are approximately 400 markets across the US who have their own ups and downs. So, some markets in a recession stay flat rather than decrease in value.

Compared to 2008, there are less people who own a second, third, or fourth home. So, that domino effect will not happen like it did back then.

The new animal I've been hearing about is HELOC liabilities. Many homeowners are borrowing against their house to pay off credit card debt or to pay for vacations or whatever. Therefore, they have little equity in their home. Banks, though, only lend up to a 90/10 LTV (some will only do 80/20 LTV). So, there is always a little bit of equity (unlike 2008 when you could get 100% financing or 120% LTV). Having said that, a 10% downturn in housing prices will cause these homeowners to lose all their equity if they need to sell.

I don't know where you can go to track HELOC lending but I would track it if there was somewhere you could look it up.

Another interesting observation, home ownership is actually at it's lowest point since the 1960s. So, there are a higher percentage of renters than there has been in the last 10-20 years. So, you could argue that there are a good number of renters waiting on the sidelines to buy houses if prices came down or if the supply increases. Therefore, the housing market would remain somewhat stable. Of course, in coastal markets where average home prices are unaffordable to the average salary you would still see that downturn in the market.

In terms of investing, office and retail space are doing great in some areas and doing terrible in others. If you're market has a lot of office space vacancy then I would rent it out to all these work-from-home people like Regus or Espaces. Not having a long-term commitment to an office space is very attractive to many people. Then, what are we going to do with all these empty malls and big box retailers vacated space??? The Sears and Toys R Us stores have a lot of usable space. If I could figure out that dilemma then I would be a billionaire.

The apartment market is saturated with buyers. A lot of institutional money has come into the market it's more competitive than ever. In an economic downturn, apartments would be a great asset since you would assume that less people would be buying homes. How that shakes out in a recession is anyone's guess. The market could remain the same as now. Maybe more renters will be able to buy houses if the home prices come down. Who knows???

Anybody else have thoughts on the long-term outlook of real estate?
 

WinTheDay

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Question though...seeing how during the 2008 recession I was only in 6th grade I don’t really know what even happens during a recession. Outside of jobs being lost and jobs being harder to find I don’t really know much else. What really goes on? Outside of the famous phrase “it’s a recession” being said 100x a day haha.
 

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DaveC

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I'm not really a real estate expert, but I've noticed two things in Chicago:

1) Way more foreign ownership of upscale condos, then left vacant. I only used to see this on the coasts (Vancouver, SF, NYC, etc....). I think they are wealthy investors looking to diversify.

2) Way more vacant retail/commercial. I live in a decent neighborhood, and condos are selling like hotcakes, but commercial strips are vacant already and they are still building more. Big office complexes in the suburbs are getting abandoned. Most indoor malls are completely dead.

I think there will be a correction here, but not as much in residential as its been driven up by a lot of buy and hold foreigners or just regular growth and not flippers and speculators as much. Commercial RE in general is going to get pounded. Malls/stores are under assault from Amazon, commercial strips are having their rents raised as its more lucrative to have expensive condos there, and office space (especially suburban) is going to be hurt from WFH trends and the need for more flexible workspace (Wework, REgus, etc...).
 

WJK

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Just want to throw some perspective out there on the real estate side:

If the stock market has a downturn this fall (which tends to happen in the fall, see 1929, 1987, 2008, etc) then the real estate market always has a lag of several months. Commercial market could estimate a lag of 6-12 months before it suffers. The residential market will have problems in 2020 by my prediction. The worst year for housing recently was not 2008, it was 2010.

Now, there is no overall real estate market for the US. There are approximately 400 markets across the US who have their own ups and downs. So, some markets in a recession stay flat rather than decrease in value.

Compared to 2008, there are less people who own a second, third, or fourth home. So, that domino effect will not happen like it did back then.

The new animal I've been hearing about is HELOC liabilities. Many homeowners are borrowing against their house to pay off credit card debt or to pay for vacations or whatever. Therefore, they have little equity in their home. Banks, though, only lend up to a 90/10 LTV (some will only do 80/20 LTV). So, there is always a little bit of equity (unlike 2008 when you could get 100% financing or 120% LTV). Having said that, a 10% downturn in housing prices will cause these homeowners to lose all their equity if they need to sell.

I don't know where you can go to track HELOC lending but I would track it if there was somewhere you could look it up.

Another interesting observation, home ownership is actually at it's lowest point since the 1960s. So, there are a higher percentage of renters than there has been in the last 10-20 years. So, you could argue that there are a good number of renters waiting on the sidelines to buy houses if prices came down or if the supply increases. Therefore, the housing market would remain somewhat stable. Of course, in coastal markets where average home prices are unaffordable to the average salary you would still see that downturn in the market.

In terms of investing, office and retail space are doing great in some areas and doing terrible in others. If you're market has a lot of office space vacancy then I would rent it out to all these work-from-home people like Regus or Espaces. Not having a long-term commitment to an office space is very attractive to many people. Then, what are we going to do with all these empty malls and big box retailers vacated space??? The Sears and Toys R Us stores have a lot of usable space. If I could figure out that dilemma then I would be a billionaire.

The apartment market is saturated with buyers. A lot of institutional money has come into the market it's more competitive than ever. In an economic downturn, apartments would be a great asset since you would assume that less people would be buying homes. How that shakes out in a recession is anyone's guess. The market could remain the same as now. Maybe more renters will be able to buy houses if the home prices come down. Who knows???

Anybody else have thoughts on the long-term outlook of real estate?
I think about it every day. I've started in real estate in 1976 -- 42 years ago. I wrote about the SFR market and the apartment market concerning renters earlier in this thread. Changes are in the works. There's going to be an upsurge in the percentage of residential renters over the next few years. I even think that our archetype of the American dream will change.
 
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JScott

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Question though...seeing how during the 2008 recession I was only in 6th grade I don’t really know what even happens during a recession. Outside of jobs being lost and jobs being harder to find I don’t really know much else. What really goes on? Outside of the famous phrase “it’s a recession” being said 100x a day haha.
Several things:

- Higher unemployment, so many people are out of jobs and struggling;
- Oftentimes there's higher-than-average inflation, so things cost more;
- Tightening of credit -- banks don't want to lend so getting credit cards, mortgages, HELOCs, etc. are harder;
- Consumers have less disposable income, so businesses see fewer customers and sell fewer services/products;
- Assets often go "on sale" -- because people need money, they are willing to part with their assets (everything from real estate to jewelry to art to automobiles) for below market prices;
- People with money (investors) look for safe-havens for their cash, so investments that are "recession proof" often do well;
- People often move to cheaper housing and/or double-up with friends/family, so Class A & B real estate often takes a hit.

I'm sure I've missed some there (maybe some big things), but those are the first things that came to mind...
 

msufan

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It sure feels to me like this might be a good point to reduce exposure to stocks for the time being. I am partially out but not completely and am curious what others are thinking/hearing/noticing.
 

MJ DeMarco

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It sure feels to me like this might be a good point to reduce exposure to stocks for the time being.
You might be late on that, market hit a triple top today and the S&P futures are down nearly 30 overnight (trade war stuff). Looks like a pretty significant down move might happen Wednesday.

I am partially out but not completely and am curious what others are thinking/hearing/noticing.
I've paired down significantly and actually started going long volatility. I've been short vol for nearly 4 years.

To repeat...

I'm already on the record to say that it will start at the end of August, drift poorly into September, with October being an absolute sh*t-show -- the confirmation that, holy-sh*t, this is reallllly bad.

And then guess what happens in November?
 
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JScott

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It sure feels to me like this might be a good point to reduce exposure to stocks for the time being. I am partially out but not completely and am curious what others are thinking/hearing/noticing.
A couple weeks ago, I purchased a good bit of LEAP Puts (expiration 1Q19 and 2Q19) on QQQ and XHB. Basically a hedge against the real estate I own that I would consider selling early next year. If the market stays strong, I make money on the real estate; if the market tanks, I make money on the options.

At this point in the economic cycle, I think it's important to hedges in place for any large investments that won't likely weather the storm very well (like real estate).
 

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@JScott, how do you plan to manage your rental properties when the SHTF? Very likely some of your renters will no longer be able to afford their rent. But very likely the same will be true for lots of other people too, so replacing your renters will be difficult. How to respond to that?
 

msufan

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@JScott, how do you plan to manage your rental properties when the SHTF? Very likely some of your renters will no longer be able to afford their rent. But very likely the same will be true for lots of other people too, so replacing your renters will be difficult. How to respond to that?
Won't there be homeowners forced to sell their houses and switch to renting a place, though?
 

msufan

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I'm already on the record to say that it will start at the end of August, drift poorly into September, with October being an absolute sh*t-show -- the confirmation that, holy-sh*t, this is reallllly bad.

And then guess what happens in November?
Connect the dots for me. Are you referring to the midterms in November? If so, are you thinking that this recession could lead to a Democrat surge in November because the party in charge will be blamed? Or something else?
 

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