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NOTABLE! The Coming Recession (2019-2020?)

Rivoli

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Most people / Ray Dalio believe the recession isn’t coming 2018. More like end of 2019, beginning of 2020
 

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Rivoli

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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've paired down significantly and actually started going long volatility. I've been short vol for nearly 4 years.

To repeat...
But the yield curve hasn’t inverted. And there’s haven’t been a recession within 9 months of the inversion or before it like the past 60 years


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JScott

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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?
All of my units are C Class properties, which are much more immune to a market downturn -- typically, Class A and B properties get hit worse, as those renters move down a class to save money. That said, I've decided to be opportunistic and sell my 38 unit Class C apartment complex. We got a better offer than I think we're likely to get after a downturn, and I'd rather sell now than in five years for the same price (and don't want to hold it longer than that).
 

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Are you referring to the midterms in November?
Let's just say that there are some very powerful people / countries that would like to see a reversion to the "status quo", and these are entities that can move markets.

If not this November, in 2020.
 

Rivoli

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Let's just say that there are some very powerful people / countries that would like to see a reversion to the "status quo", and these are entities that can move markets.

If not this November, in 2020.
Any further reading on this I can look at? Sounds intriguing.

Ray dalio said it’s a 60-70% chance recession before trumps reelection - but unlikely this year.

I’m planning my business strategy around a recession Q3 2019 - Q1 2020


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garyfritz

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All of my units are C Class properties, which are much more immune to a market downturn -- typically, Class A and B properties get hit worse, as those renters move down a class to save money.
I see, thanks. My properties are all solidly class B -- ~15-20 years old, nice neighborhoods. Northern Colorado has NEVER had a significant downturn (nothing more than about 10%) but who knows what the future will hold?
 
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JScott

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Northern Colorado has NEVER had a significant downturn (nothing more than about 10%) but who knows what the future will hold?
I don't know exactly what constitutes "northern Colorado," but the Denver MSA was down about 24% peak to trough during the 2008 recession.
 

garyfritz

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Generally north of the Denver/Boulder MSA area. :smile2: So Fort Collins, Loveland, Longmont, Windsor, Greeley, etc. I can't remember the source I got it from (where did you look?), but if I remember right I found history going back over 100 years, and there were no big dips.

The FRED database shows only a 10% drop in the statewide all-transactions price index from 2007 to 2011, at a time when the Case-Shiller index dropped 28%. NoCo is supposed to have done better than the statewide average and certainly better than Denver.
All-Transactions House Price Index for Colorado

Several projections suggest a significant (>20%) downturn in 2019-2022, however.
 
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JScott

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The FRED database shows only a 10% drop in the statewide all-transactions price index from 2007 to 2011, at a time when the Case-Shiller index dropped 28%.
I don't know how to find data for smaller areas (outside the major MSAs), so I honestly don't know what north of Denver did. That said, Colorado values, in general, peaked before much of the country -- probably closer to 2004. So, if you're going to compare peak to trough, you should compare a little earlier.
 
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JScott

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Something I posted in response to a FB question I received yesterday about the great unemployment numbers (and an article that came out a couple hours later that says it better than I did)...

"If that unemployment number was associated with increased wages keeping up with inflation, that would be a very positive sign. Unfortunately, wages are stagnated, and inflation is forecast to increase over the next 6 to 12 months. Couple that with interest rate hikes, and Americans are now spending more money on their monthly consumer debt, which is at a peak.

The foundational metrics of our economy have not been strong for 12 years now, and are only getting worse... now that the FED is reversing course on inflation and interest rates, and the likely impact of tariffs on working class jobs (if the tariff stuff progresses as indicated), I'm still very, very bearish on the economy at this point.

And that doesn't even factor in the corporate credit situation... With all the recent stock buy backs, and the peak in corporate credit extension, I think corporate credit could be the next bubble.

Will be interesting to see how much corporate welfare is extended should that be the case. We still haven't fully recovered from the government welfare extended to the financial sector back in the first Obama administration term.

Long story short, we've been kicking the can for 12 years now, and that can is getting much bigger and heavier while our foot is getting very sore.

....

Oh, and that doesn't even touch one the risk to the currency markets given the current political climate. But that would get into politics, and I'm going to avoid that in this discussion...
"
Analysis | Inflation hits 6-year high, wiping out wage gains for the average American
 

garyfritz

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That said, Colorado values, in general, peaked before much of the country -- probably closer to 2004.
By what measure? Inflation-adjusted maybe? That FRED data I linked didn't show any peak until late 2007, but it's not inflation-adjusted.

If I adjust for inflation (using Denver MSA CPI from FRED), the Colorado prices still don't peak until 2006.

BTW it turns out FRED has all-costs data for the Fort Collins - Loveland MSA, where my properties are. According to that (non-inflation-adjusted) data, there was only a 5% dip in 2008-2011, and none before that.
All-Transactions House Price Index for Fort Collins, CO (MSA)

Some additional data points (this link and follow-on posts)...feel free to consider them or ignore them:

The bond market is sounding an alarm on the economy as 'yield curve' spread hits narrowest in 11 years on Friday
Yes, the yield curve is a traditional recession warning. But here's a deeper analysis.

Ed Yardeni is an extremely well-regarded analyst with a very good record. In his 7/10/18 blog he looks at the yield curve and several other measures. His conclusion is, as long as Trump doesn't crater the economy with a trade war, we're still in pretty good shape.

Dr. Ed's Blog
 
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JScott

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By what measure? Inflation-adjusted maybe? That FRED data I linked didn't show any peak until late 2007, but it's not inflation-adjusted.
Sorry, didn't mean to say "peaked" before much of the country...meant to say trended upwards before much of the country. Using Case-Shiller for my data:

http://www.hbadenver.com/site/publisher/images/emailContent/case-shiller-index-graph.png


Yes, the yield curve is a traditional recession warning. But here's a deeper analysis.

Ed Yardeni is an extremely well-regarded analyst with a very good record. In his 7/10/18 blog he looks at the yield curve and several other measures. His conclusion is, as long as Trump doesn't crater the economy with a trade war, we're still in pretty good shape.

Dr. Ed's Blog
Yup, there's a lot of "this time it's different" talk these days. I remember a lot of "this time it's different" talk back in 2006 as well, and I'm sure there's a lot of "this time it's different" talk before each recession. Maybe he's right and this time it really is different, but I'm betting (literally) that it's not. I guess we'll see...
 

Carlitos

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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:

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.
What good is it to hold assets that hold their value if they need to be liquidated in order to get that value in cash. So If the dollar was to get destroyed in this next recession, then we are clearly back at square one.

Yea wages are really high, a lot of companies are raising their wages because they are having a hard time getting good employers. Also living expenses are really high in NYC the minimum wage right now is $13 and entering 2019 it will be $15. So with payroll going up companies will need to increase their services or product prices which still we are back at square one.

I’m really trying to figure out or at least get an idea what will this next recession hit hard. I’m also looking to get my first apartment in September I moved down to Atlanta from NYC after I saw how crazy expensive it was getting. Now I’m looking to pursue some sort of Internet business will having a 9-5 job.


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WJK

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We've been a recession here in Alaska since the oil market went from $123 to $35 a barrel around 2015/2016. I live in an "oil patch" area. It's the first recession this state has experienced since the 1970s. We're still in it.

No one around me here knew how to handle it. Coming from Los Angeles, I had been through several economic cycles since 1976 when I started.

I knew exactly what to do -- how to handle my low to moderate income, residential rental business. I cleaned house. That housekeeping included several evictions of marginal tenants, slightly lowered my rents and I stabilized my income stream.
Several people in my little world told me that I crazy, but I didn't listen. It was a rough winter for me, but I did what I had to do.
My program worked. I came out the other end stronger. I cut my vacancy rate and my collection problems. It's July and I haven't done any evictions so far this year. I have only 1 vacancy that has been available for less than 2 weeks.
These things can be handled.
 

MJ DeMarco

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Any further reading on this I can look at? Sounds intriguing
There isn't. This is just a gut feeling based on market action, global macroeconomics, and geopolitics.

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?
Just to reiterate... my speculation is just that, speculation. However if someone want to make a bet on it, buying some cheap SPX or NDX puts could yield some huge gains. The time to buy these would be NOW because once the move starts and volatility spikes, you won't be able to buy cheap.

Just to give you a TASTE on how cheap puts respond during a correction or a major market move, here is how my cheap puts blew up in value during February's big decline.

Basically 4 cheap SPX puts bought for $450 turned into over $7,800.

Screen Shot 2018-02-05 at 2.37.56 PM.png

So if volatility retreats back to 11 or 12 (it spiked today due to Turkey drama) it could be the time to buy, although I'm still speculating that the decline will start toward the end of August/early Sept.

Just airing my speculation, this is not a recommendation to buy or sell any security.
 

Hurley32533

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So, what’s everyone’s thoughts on purchasing a business this year with a fixed Sba loan? This business has 1-3 year contracts in place with 30 ish large corporations. The main service being offer to these large companies is recurring parking lot sweeping with additional add on services as needed. In terms of buying environment bear or bullish under these current economic predictions being made in this thread?
 

Hurley32533

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So, what’s everyone’s thoughts on purchasing a business this year with a fixed Sba loan? This business has 1-3 year contracts in place with 30 ish large corporations. The main service being offer to these large companies is recurring parking lot sweeping with additional add on services as needed. In terms of buying environment bear or bullish under these current economic predictions being made in this thread?[/QUOTE

Guess you have to have a higher worthless status to get a response around here? “Epic fakery” as they say
 

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@Hurley32533

"Guess you have to have a higher worthless status to get a response around here? “Epic fakery” as they say"

Or people on here have a life and don't owe you shit.

And why on earth would a you let a life changing decision like taking a (presumably) large loan and to buy a business be influenced by people on the internet.

First of all, MJ and others think there will be a market correction soon as in weeks, a lot of other people in the world tend to think it won't happen for another 2 years. Both of those groups of people could be absolutely wrong.

Secondly, isn't it smarter to look at the business and run a worst case scenario? A recession is guaranteed to happen at some point in your life time again. How are you going to handle it?

What if you buy the business and the next day the world economy craters, a 2008 style melt-down. How would your business be impacted? How will your clients be impacted? Will they still need a parking lot sweeping service? And if not, how will you pivot/position to ensure that you provide value in a recession?
 

c4n

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Guess you have to have a higher worthless status to get a response around here? “Epic fakery” as they say
  1. asks a generic question no one can give a good answer to without knowing the details
  2. waits for < 10 hours
  3. gets piss*d off, tags people who have been here longer and have actually provided value to many others as "higher worthless status" and "epic fakery"
You are off to a great start, welcome! :clap:::thumbsup:
 

Hurley32533

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@Hurley32533

"Guess you have to have a higher worthless status to get a response around here? “Epic fakery” as they say"

Or people on here have a life and don't owe you sh*t.

And why on earth would a you let a life changing decision like taking a (presumably) large loan and to buy a business be influenced by people on the internet.

First of all, MJ and others think there will be a market correction soon as in weeks, a lot of other people in the world tend to think it won't happen for another 2 years. Both of those groups of people could be absolutely wrong.

Secondly, isn't it smarter to look at the business and run a worst case scenario? A recession is guaranteed to happen at some point in your life time again. How are you going to handle it?

What if you buy the business and the next day the world economy craters, a 2008 style melt-down. How would your business be impacted? How will your clients be impacted? Will they still need a parking lot sweeping service? And if not, how will you pivot/position to ensure that you provide value in a recession?
Now this is what I’m talking about. Definitely aware that no one owes me sh*t so that’s no news flash.

First off no where was it ever mentioned in the post that a decision to purchase the business was going to be influenced by what anyone on the net had to say.

Worst case scenario test ✔ (Solid advice)

Finally some useful feedback. @jpn thanks for putting me in my place. Sad it took making a snide remark to elicit some member participation however it seems it definitely did the trick.Note to self
 
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Hurley32533

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  1. asks a generic question no one can give a good answer to without knowing the details
  2. waits for < 10 hours
  3. gets piss*d off, tags people who have been here longer and have actually provided value to many others as "higher worthless status" and "epic fakery"
You are off to a great start, welcome! :clap:::thumbsup:
@c4n, On behalf of the community we all thank you for the play by play. Sadly you chimed in but left zero value but hey you responded! Appreciate your time champ!
 
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JScott

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Guess you have to have a higher worthless status to get a response around here? “Epic fakery” as they say
A lot of people aren't checking every post every day. Had you simply been a little bit more patient, you would have gotten a lot more useful responses. You probably won't at this point.

I was going to reply to your original post, but instead I'm going to choose to provide "zero value" instead. Feel free to whine, cry and call me names if you have to...
 

Hurley32533

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A lot of people aren't checking every post every day. Had you simply been a little bit more patient, you would have gotten a lot more useful responses. You probably won't at this point.

I was going to reply to your original post, but instead I'm going to choose to provide "zero value" instead. Feel free to whine, cry and call me names if you have to...

@JScott , I sincerely appreciate your advice and I will take it into consideration in the future.You provide tons of value in this community as well as others and I’m honored to have received a response from you. No whining,crying or calling names here. Now on to more important things!
 

socaldude

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So there was an emerging market sell off.

You guys think this foreshadows something in US markets?

I went ahead and bought some SPX puts with some FU money. The VIX is low so I figured they were cheap.

I guess well just have to see what happens next week.
 

Timmy C

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They're all interconnected- no one escapes, just a matter of how much the impact will be felt among economies.

Over here in the land down under we escaped the last recession.

This will not happen again we will also go down with the sinking ship.
 

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Back during the 2008 recession...housing and jobs were the two factors that concerned me most...and I noticed them both becoming an issue in 2006.

I have a weird addiction to the MLS...and I watched (daily) as every new home listings came on the market for sale. In 2006...I noticed a flattening period where more and more houses were being listed and nothing was selling. I reached out to all of my friends who worked in the mortgage industry...and they assured me everything was fine. Most of my realtor friends said the same. Then finally...I got a hold of a realtor friend who was the most successful out of the bunch...and I sensed tremendous fear in his voice. He said this looks bad. He also said that this could be bad for as long as 10 years. He encouraged me to sell everything I had and rent for a little while...and to tell everyone I knew.

My sister had just listed her place for sale. I encouraged her to dump it and brake even. She was looking for the big payoff, and it sat for months and eventually it got foreclosed on. Another friend was buying, and I told him not to...and that he could buy that same house for half the price in a year or two. He laughed...and said there was a bidding war for that house. He bought anyways...and later got foreclosed on.

In my area at the time, the last home sold for $315k, but I listed mine for sale for $285k...lower than any other current listing. I had just bought it a year earlier for $235k. I was the last to sell...and everything else sat on the market for months before the market came crashing down.

Then I sat on the sidelines...waiting for my opportunity to jump back into the game and swallow up properties at a bargain...but then my company went out of business. I was let go. No worries...I had year of savings to hold me over...but then I couldn't find a job for the life of me. I couldn't even collect unemployment because I was considered a contractor who made 100% commission. I ended up having to move into my mom's house...with my new wife...who was pregnant with our first child at the time.

I searched for work for 2 YEARS...and nobody was hiring. I practically begged one employer during an interview to hire me for his minimum waged job...that was almost an hour drive away...but he wanted someone who knew how to operate a forklift with shift gears. It still haunts me, till this day, that I was giving up so much control of my life to some stranger that I didn't know...and begged for a job I didn't really want.

I decided this would never happen again. I immersed myself in reading, and educating myself in business, and marketing, and success. I started several businesses because nobody would hire me. Most of them failed, but one kept me afloat for years. I didn't make much. We struggled financially. Then I found the Millionaire Fastlane and discovered everything that was wrong with all of the businesses I tried...and everything wrong with the business I currently owned.

Fast forward to today. I was working at a bank for a while...paid off all my debts...bought a few properties...saved money...and I recently quit to jump back into business again. Interestingly enough...now that I'm going back into business...I'm back here at the Fastlane Forum with you fine folk. :)

Some of my successful colleges suggest that we're overdue for a recession. I totally disregarded that...until I noticed the data myself. The housing market has flattened out. Employment is still looking solid in my area. All I know is that IF another recession comes our way...then I'm going to make the recession my B@#%*. I'm better off financially, mentally, and spiritually than last time...and I'm prepared. It caught me off guard last time around. I intend to profit from those who are panicking.

What side will you be on? Prepared...or panicking?

Best of luck to you all!
 

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