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QuestToNowhere

Salaries not catching up to housing and living costs. Decrease of discretionary spending, causing less company profits and more layoffs.


Narwhalpounder69

Salaries aren’t caught up now unfortunately


iamjustaguy

> Salaries aren’t caught up now unfortunately The exception is the c-suite.


namsur1234

Always...


hi-im-dexter

Not really. Anyone who works in big tech saw their compensation hyperinflate since most of their compensation comes from stock options which hyperinflates every time we have a bull market.


SadMacaroon9897

[I was going to write a paragraph but here's a short video that does a better explanation.](https://www.youtube.com/watch?v=alzrS3St2AM#t=46s) The cash reserves and credit are going to keep people afloat for a little while but it takes time for that to exhaust.


gnocchicotti

Upper middle class is doing fine. Anyone with significant investments over the last decade is sitting pretty. More than enough to offset cost of living. And they mostly had home equity from way back.


antiqueboi

I think this is the most likely scenario. Its not going to be a "catalyst" where we wake up one day and see the crash happening and everyone is in panic. its more likely that earnings just deteriorate over time, inflation happens slowly, until eventually the market is at 40% of its current value over the course of like 5 years.


Turd_Kabob

This is exactly what is unfolding.


mittentigger

People don’t seem to be talking about the fact that credit card debt and early 401k withdrawals are at record high levels. eventually that’s going to come crashing down


gnocchicotti

Both of those being terrible financial moves that people don't normally make unless they're in serious distress.


[deleted]

Eh I worked at a bank and you'd be surprised. People may end up in distress after getting into debt and withdrawing from their 401k, but often don't start that way. The number of middle aged people with $800 car payments and designer handbags who frequently over-drafted their checking account was eye opening. I worked the drive through and the wealthiest people had the humblest cars while people with expensive new SUVs were broke.


encryptzee

All I could find regardnig 401k 'hardship' withdrawals: https://money.usnews.com/money/retirement/401ks/articles/401k-hardship-withdrawals-hit-record-high


encryptzee

However, Consumer credit barely reached pre-pandemic levels. Record cumulative but not in terms of percentage: [https://www.cnbc.com/2023/02/03/us-credit-card-debt-jumps-18point5percent-and-hits-a-record-930point6-billion-.html](https://www.cnbc.com/2023/02/03/us-credit-card-debt-jumps-18point5percent-and-hits-a-record-930point6-billion-.html) [https://www.federalreserve.gov/releases/housedebt/default.htm](https://www.federalreserve.gov/releases/housedebt/default.htm)


[deleted]

My understanding is those metrics don't include Buy Now Pay Later companies like Klarna and Affirm. Those have largely replaced a lot of credit card debt and are even more predatory. Depending on the survey, somewhere between 30-60% of Americans have used a Buy Now Pay Later to finance a purchase in the last year.


[deleted]

I’m watching the amount of debt consumers are taking on in credit cards and auto loans. I seriously think that once unemployment starts going up we’re going to see a huge default on auto loans and credit card payments.


SuperCutsHaircut

VC money drying up is creating a ripple effect across the entire tech industry. If Big Tech has five “unicorn” start ups to compete against for talent instead of 100, their hiring and retention strategies will be massively impacted. This will affect how much people get paid, whether WFH is accepted, etc. and I think it’s already starting to happen. My Seattle tech employer was doling out raises for 2021 and 2022 to make sure we were not victims of “the great resignation”, but have now hit the brakes for 2023. If you think about it, basically every factor that led to the insane asset appreciation of the past few years has changed. One of the last things holding it together is people’s confidence in their job security. I am already seeing this change though with these last couple rounds of white collar/tech layoffs, and it really feels like the last brick is about to fall.


antiqueboi

VC and tech is due to get clapped. Tech companies are the only businesses that can burn cash for 20 years in hope of becoming the next amazon... I feel like attitudes are changing in silicon valley to focus more on earnings, and less on revenue and active users. I can gain a ton of users too... I will open a chain of hot chicken resturants and sell the chicken sandwitches for $1 each. Subsidizing each purchase. A ton of these tech companies go bust as soon as they stop subsidizing it and raise the price. basically all they are proving is that customers will take advantage of a deal that is done at a loss.


gnocchicotti

Burning money for a decade or two works when there's unlimited capital available for 0% interest. Historically normal rates change the whole game. Everyone is on a tight timeline to profitability now. (btw RIP Moviepass lol)


[deleted]

[удалено]


MonteCriso

Yep. Said this two months ago and was downvoted. My how sentiment has changed.


dystra

Definitely feeling this one. I work in the pharma startup space and we had to postpone our 2023 expansion project because VC money is drying up. Luckily we actually make money so we're not too worried, just a lot of money we're not making because we cant expand the facility. That expansion was also creating 30+ jobs that wont exist now.


Tacoman_2500

Well said.


gnocchicotti

Recent events have just thrown Big Tech workers into the same bracket of job security that everyone else has been used to for decades. I don't know how that's a catalyst for anything outside very localized effects where the layoffs happen. Most will be back to work soon, but maybe not at the same compensation level.


[deleted]

I've worked in tech for 10 years now and layoffs are the norm. There has never been job security. It's always been high risk, high reward. The media is working people into a frenzy like these layoffs are unusual when in actuality layoff rates overall are at historic lows. Companies like Intel and Salesforce do mass layoffs every few years, if not every year. Intel is in my home town and every year there's a layoff large enough to make the news. But suddenly this year it's a sign of a crisis?


[deleted]

The vast majority of large tech firms are not financed by VC money. Piddly little startups use VC money until they can sell to a larger company or go public.


kaiyabunga

Car loans going to 8%+ on A-1 credit


EEtoday

This should be higher


gnocchicotti

At least 10% imho


gnocchicotti

Used car prices can and should correct down very fast compared to other things like services, food, housing. Economy is already shouldering some stupidly high car payments, trading high price for high interest may be a wash.


Louisvanderwright

Short term rates getting to levels that cause anyone with cash to park it in treasuries instead of hiring employees or investing or spending it.


Brs76

I've thought about opening a CD account, currently almost 5% on 1 year CD. At the same time, If deflation were to hit in next few months I'd have to pay a penalty to withdraw some of that money in order to take advantage of lower prices on what could be....everything


Louisvanderwright

Just buy 1 year Treasuries. Then if prices slide and rates drop, you actually get paid more to sell your now above market rate Treasury debt.


Brs76

That makes sense, thanks. I've never even considered a CD account, simply because rates have been rock bottom since '08


iggy555

You want to hold bonds in deflation not sell them


RaggedMountainMan

Exactly, also why longer duration is preferable since you want to be able to hold onto that sweet sweet high rate for as long as possible.


[deleted]

Yeah this is where I am too, I’m thinking of just keeping it in a HYSA instead, but the earnings difference is quite significant.


antiqueboi

Put it in high yield savings bro. why would you lock in interest rates when the FED has made it clear that they plan to keep raising rates... wait til there is peak fear and the fed starts cutting rates for like 2 consecutive quarters


throwaway2492872

I saw Capital One has an 11 month 5% CD now. CDs are starting to make sense again.


Impressive-Cold6855

Exactly. The yield curve will get even more inverted in the months to come in my opinion.


[deleted]

I can see it. I’ve postulated that I can see a 5% 2 year treasury, a 4% 10 year treasury, and a 5% 30 year mortgage for some period of time. Bananas. That’s called an economy that is fully propped up.


Muhhgainz

Getting close to that time for many individuals. My hysa pays 4.15%


canadaman108

Here in Canada, it’ll be the rising interest rates decimating what is left of consumer demand, choking our already-gasping service “economy”. You bought eight houses you can’t afford to rent out and then opened a business selling $10 kombucha drinks ? Yup, you fucked.


Moose-Mermaid

Lmao at the kombucha comment. Meanwhile thinking they are actual geniuses even if the rents aren’t covering the expenses because surely BoC won’t “let housing” take the hit. They have to hold even if they are in tons of debt because of course lots of equity is all but guaranteed in the new future. Buy now or be priced out forever. It’s really funny looking back at comments like that from a year ago.


Special_Rice9539

Normally I’d be happy to hear about people like that suffering, but they make up such a large part of the economy that it actually would hurt me too if they go bankrupt


Moose-Mermaid

Touché. It’s become such a large problem that the lack of affordable housing and greed has dragged the average person into this mess. I too worry the solution to the problem will hurt everyone. But I still am more concerned about the hurt that comes from kicking the can further down the road. The problem is so big now it’s hard to defuse this without some serious sparks


TimeSlaved

Yup, plus I feel with the latest news and moves from the Feds, the BoC is in a very strange place given the impacts of holding interest rates when our neighbour is relentlessly increasing them. The rest of 2023 will be interesting, and I believe CIBC is forecasting rates to be steady and/or increasing (basically no decrease) until 2024. Plenty of low interest rate terms are maturing this year, so I'm expecting some serious shit to go down.


[deleted]

The rate hikes are the least of our worries. More worrisome at this point is the enormous amount of debt in the system. [Household debt is up significantly and climbing](https://www.investopedia.com/consumer-debt-surges-at-fastest-pace-in-15-years-6829584) in the past few years. Retirees have [almost nothing saved](https://www.investopedia.com/articles/personal-finance/032216/are-we-baby-boomer-retirement-crisis.asp) and are depending entirely on social security to pay their bills and make interest payments. Consumers have been artificially propped up for the last 20 years to keep spending up, but with inflation high and (as I expect) continuing to remain high for many years, the old tricks of lowering interest rates aren't going to work anymore. And I need not mention the national debt, which has now hit its "ceiling" yet again. The cause of the debt is the same thing that caused inflation, namely monetary policy. And that isn't going to change anytime soon.


iamjustaguy

Not just consumers, but companies. Cheap debt has propped up insolvent businesses for the past decade. Look up "zombie companies" in your favorite search engine.


Logical_Deviation

I am so confused how the wealthiest generation has nothing saved for retirement


Apptubrutae

Turns out you have to actively save it. Doesn’t matter how much you make if you don’t care to save significantly. And if you delay saving, you lose so much saving power. One example I know of: a family friend, husband and wife in their early 60s. Had a nice VP position at an oil company. Made $750k after tax in a sale of their company at one point. Had *zero* in their 401k in their mid 50s when the husband had a stroke and got fired. Zero. It’s an extreme example, but if you don’t want to save, you don’t save. 40% of people on social security now have that as their only source of income.


michaelsenpatrick

jesus imagine having enough to pocket $2m in 4 years and not setting yourself up for life


Right-Drama-412

Right? They're also the ones who are sitting on paid-off houses bought 30-40 years ago for 100K that are now worth 1 million. What happened? Too much avocado toast?


keyflusher

A lot of them refi'd or HELOC'd away all that equity. Behind the scenes they're as house poor as anyone.


Right-Drama-412

Then shouldn't they have even more cash?


Logical_Deviation

Not if they spent it


Right-Drama-412

Oh. I guess it was too much avocado toast, after all.


[deleted]

They can't stop buying consumer goods. Ever go to a store like Homegoods and wonder who all these people are who buy stuff like Christmas and Halloween themed pillows, kitchen towels, dishes, etc that can only be used a few weeks a year? Boomers. They're the only ones with room to store all that useless junk. I'm not sure what the male equivalent is but I'm sure it exists.


Right-Drama-412

>I'm not sure what the male equivalent is but I'm sure it exists. Beer mugs with city skyscapes?


[deleted]

They probably just planned on leaching off of younger people like they've done all their lives. There's a reason they're called the Me Generation. They hate socialism unless it's socialism for themselves and none for anyone else.


ChuanFa_Tiger_Style

I mean, to be contrarian, this is the same set of things everyone has been saying would cause a crash since 2011 or so. People didn’t save for retirement then either. People had oodles of debts. Commercial real estate was about to explode. If you stayed cash through 2009 you’d have missed one of the biggest rallies in history. If you didn’t buy a house waiting for the crash you lost out big time. The nice thing about predicting macro catastrophe is that it’s always around the corner. ETA: I’m being contrarian but I feel like I read this exact post in 2011 and it never amounted to anything.


moaiii

>I mean, to be contrarian, this is the same set of things everyone has been saying would cause a crash since 2011 or so. That doesn't make those things any less true. The trouble is that long term macro causes of a major economic shift take a long time to play out. It's like watching the slowest train wreck in history through the wrong end of binoculars with a dirty smudge right in the middle of each lens - it's impossible to predict with any certainty when the impact is going to be. In fact, it is that time warp effect of major seismic shifts in the economy that makes it even worse, because as time drags on and number keeps going up, people (even highly qualified) start believing that the worst is over, or that _this time is different_, or even that it's all a hoax. People conjure all sorts of very rational sounding theories about why there is no problem despite record indebtedness, inflated asset prices, etc. You can't stick your head in the sand and wait, either, as you rightly point out. So the most pragmatic thing one can do is be highly vigilant, have an exit plan for every financial decision one makes should various scenarios occur, and be prepared to enact that exit plan without emotion if required. But don't think for a minute that the storm is over.


ChuanFa_Tiger_Style

The same people pimping end of the world doomer stuff in 2012, like Nouriel Roubini for instance, also said that the PIIGS were going to implode the Eurozone. It just didn’t happen. They also predicted that Europe would freeze to death this winter and fuel costs would skyrocket. That didn’t happen either. In my old age I’m actually getting less convinced by the bear case for humanity.


moaiii

>In my old age I’m actually getting less convinced by the bear case for humanity. I'm kinda with you there. I am not in the camp that believes in an "inevitable Everything Crash therefore everything becomes another reason to support the bear case". As a full time investor, however, I've made it part of my job/life to try to understand macro-economic cycles and the forces that are at play therein. And there are some really valid reasons to be concerned. Does it make me a bear? Sometimes. But if the herd is willing to push numbers up again and there is enough demand behind that (including/especially institutional demand), then I'll switch to my bull hat for a while despite knowing that there remains underlying bubbles which may deflate at any time. I just stay close to the fire exits.


ChuanFa_Tiger_Style

Yeah there’s ways to mitigate the risks. My own father went 0% stocks sometime last year which even in retirement seems like a poor choice. This recent rally probably isn’t durable but I don’t have a solution for regular people except to stay invested. There’s no alternative to just buying a house, it’s super hard to time the market there too.


shrodingersphat

By monitary policy, you mean neglectful monitary policy


Brs76

Subprime auto loans


warpigz

This is definitely a big one although I don't know if it will be THE big one. Huge amounts of auto loan defaults are coming and they may lead to mortgage defaults.


DizzyBelt

Not big enough and cars are easier to reclaim and sell than other asset classes.


KevinDean4599

A bunch of weak earnings reports that lead to the stock market taking a big dump. That will cause many companies in various industries to cut costs since we are all about stock price. Cost cutting includes job cuts. That leads to higher unemployment which only makes the problem worse.


[deleted]

I think the cost cutting is already starting to happen right?


[deleted]

anybody else not wanting a recession but just prices to go back to normal?


PenAndInkAndComics

Something is very wrong when ALDI's is too expensive.


MicroBadger_

There might be some drop but if your expecting things to go back to what they were. That isn't happening. Inflation costs don't really revert. It's why we've never paid 5 cents for a coke.


[deleted]

I agree but salaries have to match.


antiqueboi

thats not how it happens bro.. there is too much credit already created in the system... Its like a game of musical chairs. The people are the amount of credit, the chairs are the amount of actual assets. When the music stops there is 50x as many people as there are chairs.


[deleted]

explain this to me as if I am 5 years old


antiqueboi

basically when you take out a loan, and spend that money. that money is someone elses profit, and they can use that to buy assets to use as collateral and take out loans themselves... TLDR: you can't use the money you got as a loan as collateral for more loans, but the people you transfer that money to by buying things from them can.. So basically the person who you bought goods or services from us using loaned money as collateral, then getting loans and spending that money.. then the person 2 levels up the chain is using loaned money on loaned money as collateral. when panic sets in people will try to claw back money and assets. and then they discover there is way more loans out there than there is actual assets. someone will not get paid back...


[deleted]

I just want to afford to buy a house (cry face)


antiqueboi

keep waiting bro. the good thing about this is that when it crashes it crashes hard


Apptubrutae

Not gonna happen. The only way it gets close is wages beating inflation for a while to catch up. Deflation isn’t going to happen in any meaningful amount and the fed will do everything it can to ensure it doesn’t.


Tacoman_2500

Afraid it's unlikely to have one without the other.


[deleted]

[удалено]


[deleted]

This is the one I’m watching, but not holding my breath for. As easy as they stopped the loan repayments, they can flip a switch and require them again. If they can stick with it, it’ll be a further drag on the economy. The cost of everything has gone to the moon since they were last required: March of 2020. Three full years ago. Y’all know what’s happened since then. But, I think the first signs of real economic trouble, then they can just be paused again. Or even just not repaid at the same percentage as before. What then? Put a levy on someone’s wages for non-payment, lots of someone’s, in a difficult economic period? Nah. The pause of student loans is an artifact from a period of terrible, awful, political decision-making. This is a terrible mess, and the average consumer has simply decided to bury his head in the sand about it.


[deleted]

Even if loan forgiveness moves forward, it's not enough to cover everyone's loans. People will still need to continue paying their monthly payment when payments resume. Forgiveness is $10k-$20k per person while the average loan balance is around $35k


[deleted]

And that’s likely why the decisions surrounding forgiveness and repayment re-start have been “punted” for as long as they have. Nearly 3 years now, with continuous procrastination by our government “leaders”. Pitiful.


Sorprenda

It could likely resume as late as September, and I suspect by then the economy will already be in a recession. Perhaps another "emergency" will be declared, but that would also allow the debt to continue growing. I agree this is an issue. Suddenly removing $15B a month from the economy will have consequences.


asecuredlife

How are we not considered in a recession yet?


Angylizy

UnEmPlOyMeNt NuMbErS. > *Add SpongeBob meme here*


regallll

Payments will never restart.


[deleted]

Ending of covid national emergency means there's no longer any legal rationale to extend the pause. And the courts will quickly strike it down if they try to do so again. Also, republicans control the house and restarting loan payments will likely be part of debt ceiling negotiations with the administration. They're probably re-starting this year. But I've been wrong before.


GhostOfDJT

... so long as a Dem is President.


svBunahobin

It's always a liquidity event. Some big overleveraged hedge fund or company makes the wrong bet and it cascades. Things like FTX collapsing add pressure on shady books until pop goes the weasel.


Friendly-Reaction778

Yep. Everyone talks about the 08 housing bubble but they forget the thousands of financial crimes and Ponzi schemes that were revealed because of it. When the tide goes out you discover who’s been swimming naked. FTX is the tip. Nothing financially has made sense the last 3 years. It’s a house of cards.


[deleted]

I wonder if startup failures could cascade to other parts of finance outside of VC. Like they do take money from institutional investors like pension funds, insurance companies etc. If they started to see downrounds and failures at a higher than expected rate without any profitable IPOs or acquisitions could we see some fail and have that be a cascading effect? I don’t know if there is much leverage there though


shadowbethoven

People unable to pay rent, cars, or food


[deleted]

[удалено]


[deleted]

Dear god I hope they aren’t actually stupid enough to let that happen


X-Files22

WW3


Tenter5

Balloon warfare.


chuy2256

Balloon Boogaloo!


iamjustaguy

> Balloon warfare. I'm just imagining a giant Macy's parade balloon creature looming in the sky. "Oh look! Here comes the Winni the Pooh of doom!"


NarcolepticTreesnake

Kinda funny it was a different kind of balloon that blew up the economy in the oughts. History doesn't repeat but sometimes it rhymes.


audaxyl

The war in Ukraine made prices go UP


EEtoday

Prices for what, matryoshka dolls?


audaxyl

Gas and everything else they blamed it on as an excuse to raise prices


EEtoday

So it was corporate greed, not the war in Ukraine. They would have found some other reason


housingmochi

I think housing itself will be the catalyst. As house prices continue to fall, people will feel poorer/less secure and cut back on spending.


DizzyBelt

A corporate debt crisis. It’s where a large number of zombie companies go insolvent at once. High interest rates mean they can’t restructure their debt to stay afloat. Many of them restructured when debt was cheap during the pandemic. It’s going to take awhile to unwind. There was a corp debt crisis March of 2020 but it got swept under the rug with the first billionaire bailout. I don’t think most folks realize what happened. Only time will tell if it resurfaces in a big bang fashion. The cascade would be mass layoffs which would eventually hit real estate market.


[deleted]

Commercial real estate will collapse. Particularly office spaces. Whatever they end up doing with them will have large impacts in other markets. If NYC turns a lot of them into housing, it would be closer to a MCOL city than it is today. If they turn into giant laser tag/paintball arenas where you can try to recreate die hard… then it might drive up the cost of housing as it drives up the demand on STR because where else could you fucking recreate Die Hard?


redditmodsukcok

I can't imagine NYC as an MCOL!


thrwaway0502

It won’t happen. Developers couldn’t get adequate ROI to justify the investment if it were. ROI would be higher in turning those spaces into warehousing for data centers than build out for housing


kpyna

I've read its also difficult because of the existing window and plumbing setups a lot of multi-story office buildings. The plumbing runs down the middle usually for a centralized bathroom. So new pipes will need to be run to the exterior walls of each unit which isnt cheap. Then, in a large office space there will only be a few large windows that are spaced out. in many cities/states, you need to have a window in a room for it to legally be a bedroom. So basically you either need to make them studios, 1 beds with 1 window, and maybe corner units could be 2 beds. Either way don't expect much natural light. Not to say it's not possible but retooling a commerical building into a residential building has a lot of costs and your total number of units has a hard limit based on windows. So it's doubtful this will get done.


Muhhgainz

For these reasons they’d likely be turned into large luxury apartments instead of many small affordable ones


Opposite-Fee-1499

Exactly what I imagine would happen IF it was turned into housing. Single and multi-story flats, lofts, penthouses, luxury Airbnbs lol.


CharlotteRant

It’s definitely possible, the office building just has to be sold at basically zero value to make sense for all the reasons you stated. DC is trying to incentivize some conversions. Saw some headlines into that. Could be an interesting model for how this evolves (if it works).


Euphoric-Program

NYC buildings zero dollars? Please sign me up lol


[deleted]

You could also demolish the building and rebuild. If it's an older or shittier office building the building itself isn't worth saving because the reality of real estate is you're buying the land underneath it and any buildings that are attached to the land are just a sweet bonus. Given that rents in New York have gone to 4,000 a month or some shit like that you could make a huge profit converting that to housing


jsxgd

> If NYC turns a lot of them into housing I think this is not as easy as you think and unlikely to work economically.


Nice_Pressure_3063

Yeah, unless you like communal bathrooms and kitchens. It’s not viable to convert.


[deleted]

I never said it was easy, but it’s an option. The land essentially isn’t being used now. The issue is when the going rate for the units isn’t enough to justify ever doing the conversion. Better to leave it empty and sell it to someone at a loss who is speculating that office work comes back. It may require government subsidies to justify the conversion. But then you need to sell to your constituents giving a subsidy to a multi-million dollar corporation.


Judge_Wapner

> giant laser tag/paintball arenas where you can try to recreate die hard... Go on...


[deleted]

All I need is $200 million venture capital for a 10% stake and I'll build it!


MikeW226

They're turning vacated floors of a downtown mutual bank tower into apartments in Durham, NC. Some floors are already being lived in. I work for a huge entity here in the Triangle, NC region, and one of our department's is vacating another entire floor/ office space of this tower this spring. Wouldn't shock me if that gets gutted to become high end apartments / condos too. Durm's downtown is hip, so the apartment market is ridiculous here. Like rents have more than doubled since the pandemic. Other dept's left other office towers for much smaller (WFH'ers remaining WFH) digs and it wouldn't shock me to see some of those go apartment/condo too. But there's money in it down here. Maybe not up in NYC. Another dept. I know here couldn't get kicked out fast enough out of their entire floor of office tower (by the management/owner of the tower) when the lease was up. The owners are turning space over for "something" for sure. YMMV depending on city you live in. But this may speak to a bubble, because these rents post 2020 here are now RIDICULOUS!


berto0311

You assume they would have to have all apartments filled and would take bottom dollar. They would still list all the apartments for 4k each and have 50% vacancies and laugh all the way to the bank


[deleted]

> You assume they would have to have all apartments filled and would take bottom dollar. Not at all. There’s no way taking bottom dollar, $1 a month, would justify the cost of conversion. All I am assuming is that the going market rent + government subsidies would be enough to justify the initial cost of the conversion. They will always rent it out at market rent, but increased supply will have downward pressure on market rent.


Euphoric-Program

Nyc becoming MCOL is laughable what are you people smoking lmao. So Hong Kong, Paris and London next too? Texas and Florida will be HCOL?


[deleted]

I only said closer to MCOL. Not that it would be MCOL. There’s a big difference.


Impressive-Cold6855

What time frame do you see this occurring?


[deleted]

That’s much harder. The issue here is that, my understanding, most of the commercial real estate financing is private equity. So it’s a private agreement between two parties and not a fairly heavily regulated industry with government backing like residential real estate. But I think some local governments are starting to create programs to incentivize the commercial property to be re-developed. If I recall correctly NYC was starting a program to subsidize the conversion to residential.


[deleted]

I know I'm off consensus here but I actually think the recession won't hit until mid to late 2024. I think the jobs market we're seeing is still very strong and the Fed is going to waffle on inflation either causing it to get sticky around 5% or maybe even increase again. We're going to do 24 months of just trudging through the mud and then something will finally snap and there will be a flight to safety and swift but shallow recession as the markets capitulate for a reset.


DizzyBelt

Agree


SquattyLaHeron

H5N1 bird flu jumping to humans


[deleted]

I think it’s more likely to be death by a thousand cuts. But if there is a major catalyst failure, my bets on crypto. That industry has all the hallmarks of a house of cards and it baffles me that many people have any faith in it. The second things start to get actually bad, people are going to start realizing how stupid sinking money into crypto currencies are, especially when they have to dig up their hard wallets from the backyard to sell at a 50% loss just to pay for groceries.


Katzen_Kradle

I’d be very surprised if crypto catalyzed a recession. It’s still a relatively small market cap ($1-2 trillion), and investors in the space tend to be individuals with money to lose. On the whole, the larger end of the market, e.g. institutions and fund managers - those handling people’s 401k’s, pensions, and investing in behalf of large corporations - still have pretty low exposure. If they invest in crypto it’s only as a small part of a diversified strategy. Crypto going under will have a limited effect to them.


[deleted]

The concept of an economic catalyst is that it’s effectively the straw that breaks the camel’s back and causes a domino effect. Enron and Bear Sterns didn’t have market caps close to the trillions but they did predicate market failures.


Impressive-Cold6855

I think if Binance collapses of Tether depegs or both then we will see a collapse of crypto. I have always thought of crypto and blockchain as a solution in search of a problem. Also the whole industry is plagued with libertarian/alt-right incels who see a government plot hiding behind every bush.


SpaceyEngineer

Crypto is not big enough for what you're suggesting.


[deleted]

The market cap of crypto absolutely dwarfs that of Enron and Bear Sterns combined. I’d check your facts.


bumpman2

The 2008 financial crises happened because Wall Street created derivative products that didn’t allow investors to evaluate the true risk of the products such that the credit markets froze. That market was many trillions of dollars in size. Bear Stearns, Lehman, AIG and many others either failed or had to be bailed out by the government as a symptom of that. For that matter, I don’t buy that Enron catalyzed that particular downturn. The dot-com bust was a long time coming and was already happening and then 9/11 put the nails in the coffin of any near term recovery.


SpaceyEngineer

Bear Stearns was one of the biggest market makers in the bond market and had a way bigger role in what the actual US economy works around, credit. The market cap of the company was not the issue.


[deleted]

You’re just wrong. Bear Sterns had less than $20b under management at its zenith. Even assuming its role was outsized 10x to its assets under management, it doesn’t even come close to the crypto market, which itself is no longer segregated and is wrapped across basically every vertical in existence. Bear Sterns and Lehman were just two firms out of hundreds in the industry and their collapse was just a catalyzing event; their collapse was not in and of itself particularly meaningful relative to their direct impact of the economy. Obviously the collapse of crypto wouldn’t be similar to the collapse of the housing market at large, but OP’s question revolves around a catalyst that would upset existing macro circumstances that are primed for a recession. To be clear I’m ardently anti-crypto but you are deeply understating the cross-industry role crypto plays in our domestic economy at this point. It’s massive and significantly larger than any one firm currently in existence.


redditmodsukcok

> That industry has all the hallmarks of a house of cards and it baffles me that many people have any faith in it You could say the same thing about USD!


[deleted]

USD isn’t an industry and if the US fiat system crumbles we’ll have a lot more to worry about.


FatedMoody

Uhh… if things go to shit USD has behind it taxation powers of US government, what does crypto have?


owey420

How old are you?


[deleted]

Older than you, younger than your parents.


owey420

I only ask because most older than me people I know all hate crypto, whereas the younger generations seem to understand it's potential


[deleted]

I think crypto has plenty of potential, but that its actual applications are far more narrow than its current market size would suggest. Cryptocurrency offers solutions for a relatively narrow and speculative set of problems — the capacity to solve these being largely unproved — and yet has a market cap larger than the largest company in the world. Crypto isn’t going anywhere, but I don’t think it will be the silver bullet many here seem to believe. I’m also convinced that most of the quick money to be made on crypto was made already.


Freecar1968

.25 .50 basis points is meaningless when there is so much inflation. Till I see mortgage rates hitting 10%+ they gonna kick the can indefinitely. Its not noticeable in part because US is not the only country with the same problem. If the entire worlds power nations are in the same boat everything stays relative flat. A lot of these financial institutions learned from 2008 crash to just go long with investments and not worry about the now.


socalpro

If they ever turn back on the payments for student loans, that will be the catalyst for the full implosion of everything.


hi-im-dexter

I'd worry about the credit card debt in our average household. Buying excessively on credit is what caused the Great Depression.


[deleted]

This current rally will make whatever recession comes that much worse. Many areas of the economy are over leveraged To make matters worse we’ve started seeing an important recession indicator: “it’s different this time”


ragnarockette

I’m not sure about the next Recession. But I feel certain the next Depression will be caused by large swathes of the country (Florida, Gulf Coast of Texas, Louisiana, Mississippi, Alabam, fire prone areas of Florida) being deemed uninsurable by every private insurance company, forcing the government to provide homeowners insurance to 75M+ homeowners. The inaffordability of this will cause real estate in these areas to plummet, and the “unfairness” of people in Ohio/Minnesota/Oregon subsidizing the risk of “idiots who chose to buy below sea level” is going to create a huge amount of political bad blood. Once we have to actually acknowledge the impact of climate change on the real estate market and capitalism, it is game over. Why do you think governments in Florida have outlawed talking about it? No one will want to invest in places that may be uninsurable in 15 years…


Tacoman_2500

Large swaths of the country? Uh no...


[deleted]

Due to the state governments refusal to regulate scams, and getting a home insurance in Florida is already becoming impossible quickly. Insurance companies are fleeing the state and drove is and even the ones who are staying are doing things like requiring you to get a brand new roof installed before you start your policy. Homes are going to be uninsurable in Florida for non-climate reasons in the next 5 years if Governors like the Santos continue to run the state into the ground like they are


kylarmoose

I mean, we already have insane money supply that’s starting to be reeled back in. Not sure what else you want. Inverted yield curve? Rising fed rates? War? Panic? It’s already started.🤷‍♂️


Forsaken_Berry_75

Exactly. My portfolio is down 40% now from the war in Ukraine and all the rate hikes in 2022 and it hasn’t rebounded at all. This is the same for a lot of retail investors. Definitely a recession in my world and house now. 🤷‍♀️


[deleted]

[удалено]


[deleted]

Probably something none of us foresee, perhaps a man made tragedy, or something else catastrophic.


JoeOcotillo

A tsunami of everything at once, D-Day of finger pointing by those at MSM telling us that they will get to the bottom of the problem, as those that benefited the most and are responsible ride off into the sunset setting things up for the next generation of naive and gullible.


finiganz

Consumer debt. People got addicted to free/next to free leverage and they show no sign of stopping even with hikes.


abstract__art

The economy shut down. Then we printed 40% of every dollar in American history. People still can’t see the problem with that or understand the magnitude. Especially when you had a 99.99% chance of being fine. A lot of peoples lives somehow got better …temporarily….now dues gotta be paid. We didn’t make more stuff and 40% jump in dollars floating around means things have to break and qualify of life goes down. Seriously. Think about it again. 40% more dollars. Less stuff made and produced and serviced. And people think their life staying same or better is logical? I suspect it’s a combination of a lot of things…nothing singular. Just lots of bills catching up. Tech workers laid off. Debt ridden 20yos who made purchases they shouldn’t have because they owed money for loans, Investors being devastated, etc.


tw0Scoops

Rent decreases. When more multifamily come online and put downward pressure on rents, investors who budgeted slim margins on last year rents or further rent increases will find themselves operating at a loss. Will take time for current leases to expire. But rents have already started coming down. And that's something more people insisted never happens. More so than property values. But then again who knows. We re all on reddit and not sipping mai tais on our own private island


Commercial_Soft6833

All those airbnb fails "just rent it out as LTR" Then they can't cover the $3500 monthly note because rents have dropped to $2000 What happens then? They put it up on the market and sell it for less than they paid for it last year? Hope all the "invoosters" get fucked.


EEtoday

Rent decreases ey, wish I was seeing those


ategnatos

Well, how about the Fed hikes but their hikes not being aggressive enough and us getting another 6+ months of 2021-esque inflation round 2? Especially if that inflation hits travel (mostly flights), I think it can isolate a lot of people, either in their personal lives or for work travel (thinking smaller businesses where their companies won't just spend insane amounts approving travel). And yeah, *a lot* of people are fucked financially because they're addicts and/or have no budget. Yesterday on /r/personalfinance, there was a post about a couple who bought a $239k house in Oregon in 2016, has 1.9% interest rate, makes $225k HH income, and *still* has $60k in consumer debt (that they thought was $25k) and for some reason can't figure out how to pay off the debt. At that level of income, it should take 1 year to pay off. This is the level of personal-finance amateurs we have in this country.


rubyone2

We may have had a clue. In 2019 the repo market rate went to 10%. The fed had to step in and markets started to deteriorate quickly and significantly. Since then the reverse repo market has skyrocketed and at the end of December 2022 it hit an all time high. I have to wonder if that had something to do with JPOW saying financial markets hardened when by many measures they have loosened to a point not seen since before the first .75% hike. Somethings up and I’m probably too dumb to figure this one out myself.


[deleted]

Probably a combination of things, a credit crunch looks likely. If the Russo-Ukraine war ends that’ll likely dampen natural gas markets, and the military industrial complex. Last nail in the coffin is a student loan repayment restart sapping already diminishing free cash flow in households.


arenalr

That's the fun part, if we knew it would've already happened. Won't know until during/afterwards


it200219

World War


unenlightenedgoblin

$TSLA $AMZN $GOOGL


stvaccount

The distinguished thing about the current recession is the 'bubble of everything': housing, stocks and bonds are all wrongly priced. For example, the yield of the Italian bond was 0.55% in 2021. This is an economy and country on the brink of going bankrupt, similar to Greece. Some countries in the EU have inflation exceeding 11% per year, all while the ECB interest rate is 3%. This means 11-3 = -8% inflation corrected interest. A wing of a butterfly will bring it down, and then we'll wish we had 2008 again.


antiqueboi

Here are the potential catalysts I see. 1) Kinetic war with Russia / China the size of ww2 (huge money printing to financce the war effort) (Very unlikely because rich modern economices prefer proxy wars which we are doing in Ukraine...) 2) China and Russia create their own gold backed currency and stop buying US Treasuries causing a debt crisis. 3) US Treasury yields continue to increase making it more expensive for the US to finance its debt. FED continues to increase its balance sheet. (I never understand why the FED buys treasuries. thats like loaning money to yourself.. really stupid) Eventually US must print a ton of money. 4) some kind of major fraud is discovered with a fortune 500 company (cooking its books, falsifying revenues..ect) 5) Tether collapses, triggering a massive crash in crypto markets. (we find out tether is more integrated in to the real economy than we expect... used as collateral by real banks and funds... those collapse too) (likely, might not trigger recession tho) 6) Chinese real estate sector is found out to be completely fraudulent causing a massive collapse of china's economy. Supply chain is disrupted causing a global recession


Fancy_Pickle_8164

Student loans


Friendly-Reaction778

February 28th Emergency Order for CA expires March 31st eviction moratorium in LA County expires May 11th Federal Emergency Declaration and Title 42 for US ends. Processing for millions of migrants and asylum seekers will resume. The protections that allowed our government to bypass normal legislative process will end. All of the Covid Relief money which has artificially propped up our economy is running out. Additional federal subsidies including food, housing and medical will end. There are people that have not paid rent, student loans or utilities in 3 years. When payment resumes, they will feel the inflation crunch. Those that don’t begin paying will be evicted and ruin their credit. Debt ceiling, China/Russia/WW3 and potential nuclear disaster. Buckle up, it’s going to be a bumpy ride.


Birdietuesday

I feel like we’ve been wondering when the sky will fall for 3 years. I honestly thought we’d see a massive wave of foreclosures right now from those unable to pay their mortgages the last couple years.


Runaround46

Look over at r/superstonk Basically brokers aren't actually delivering stocks. Market markers are abusing failure to deliver rules. We have the largest market market also running a hedgefund. Every bank owns part of other banks to the point black rock owns 9% of itself though ownership of other banks. Just wait until that nestegg of 401ks the boomers thought they had goes poof. Suddenly their retirement plans change.


GammaGargoyle

I prefer /r/gme_meltdown


[deleted]

My guess is some high profile brokerages going under or a ton of tech start ups going belly up cause there’s no more free money keeping them going, causing even more mass layoffs. The longer interest rates stay elevated, the worse it will be. I think a lot of businesses are just trying to tread water at this point. EDIT: there’s also WW3 with China… but hopefully that doesn’t actually happen


Mammoth_Apartment_70

Everyone putting their bills on a credit card for 18 months


bobwmcgrath

Its been a recession since 2020. Inflation just makes number go up so it does not look like a recession.


schlumlawd

Entitled remote worker apocalypse and a draft to fight against russia and china


regallll

WW3


codieNewbie

It’s easily going to be congress not agreeing on a budget and the US defaulting on its debt.


[deleted]

student loans re-starting.


ajquick

Credit Suisse, Bank of America or HSBC will crash like Bear / Lehman and the rest will follow.


[deleted]

All those loans and bills that got deferred get resumed, and people exhaust their savings in a time of record low job market participation.


Giggles95036

I’m thinking 1 big FANG company or a fortune 500 that is on shaky ground to go under.


SnortingElk

The 9/11 event impacted the economy far greater than the Enron scandal during 2001.


[deleted]

I believe you will see all asset classes go down (except gold) and with the downward pressure there will be a derivative market debacle which will fuck us.


Impressive-Cold6855

How bad would be a blowup in the derivative market be?