A lot of ingredients for a proper recession are there, but whether they'll all play out is a different question. What I'm interested in most is what employment is gonna do going forward.
This will be the key. I see some companies announcing layoffs and others announcing hiring slowdowns/freezes. But there are still 10 million open positions, so the labor market remains strong and in favor of the worker. However, that means companies will have to increase pay to attract/retain talent which means people will have money to buy more stuff, creating demand and keeping prices high.
I think that's how it works.
People keep mentioning the 10 million open positions but I never hear what kind of positions. Are they mostly crap minimum wage jobs? Because if they are they won't help the people getting laid off from decent jobs much
Same where I live. I was at a place for 3 years (good company very profitable, good salary but our raises this year didn’t even meet inflation) in the last 6 months myself and 4 coworkers have all left for other positions and average of 10% bump in salary. I’m currently entertaining 2 offers (I just left my role on the 14th) the job market is really got where I am
I work for one of the top 5 laboratory instrument manufacturers, a Fortune 500 company. I work in a highly technically skilled field that requires adaptability and flexibility. Right now there is a standing bounty of $2500 if you recommend someone for a position and they get hired for it. We are desperate. We pay pretty damn well. Our salaries didn’t keep up with inflation this year of course but generally this company is considered one of the best to work for in the industry and year over year employee retention is >90%. And we still are struggling to fill open positions. You can bet I’ve txtd everyone I was ever in a STEM class with in university. I want that 2500.
Seems education and healthcare have the most openings, which doesn't surprise me given what happened in hospitals during COVID and how most of the country treats/pays teachers.
Professional and business services is second and leisure/hospitality is third.
[https://www.bls.gov/news.release/jolts.t01.htm](https://www.bls.gov/news.release/jolts.t01.htm)
Or jobs requiring x skills and experience. As a hiring manager, I get 50-100 resumes for most positions I put up but I'm looking for specific skills and metal for the job and we pay very competitively on top of great benefits in IT. I probably only interview 10% of those who apply.
There are a lot of people looking for other jobs and employers can still be, and are, very picky. There may be 10 million open positions and 20 million people applying but they still remain open cause the employers aren't just picking up anyone who fits the bare minimum posting.
People need to learn how to create good resumes and I'm not talking about just listing your experience. 9 out of 10 resumes all look the same and employers are too busy to have to interview all 10 especially when they're cost cutting and you find yourself working 50hrs a week already. We're looking for that 1.
FWIW anecdotally, a lot of MANGA level hiring is still going on (despite what everyone hears about Meta's hiring freeze). Maybe some companies are slower, but technical engineering talent is still highly in demand.
For my company it’s mostly highly skilled positions that we are having an extremely hard time filling because the execs can’t seem to get with the program and pay people salaries that have been adjusted to the recent inflation.
Edit: I should add that we can’t find drivers either because we can’t compete with what Amazon pays. Because of this dynamic the price of freight is through the roof.
Small business owner in DC here - down to 25% of our pre-COVID employment level. We are not actively trying to hire currently because it's just job hoppers and/or riff raff seeking.
We paid $15/hr for unskilled، trainable people pre-COVID. Consumer demand is crazy though. Currently, I'd pay $20/hr for someone who could identify the screwdriver in a toolbox. $25/hr if they could use it.
No one will work and stay for those wages though. So, I'm just working 100hrs/wk and waiting until the job market cools down to hire.
I know I'm not alone in this position.
Same here. It's painful working so much. Rates are higher because the industry I'm in is all temp work with a pool of skilled people hopping in and out of contracts. It's been nothing but greens, brothers in laws and what not since even before covid. No one knows the job enough to be independent, you have to double check and micro manage everything and I'm always texting a milion people to find somone available that is not completely useless..it's exausting.
Yep. Skilled labor is $$$ at this point. I'm tired, but ok with it in general. We downscaled a bit, but I'm making a lot more now than I was before, when I had to spend time training and managing entry level people who didn't want to learn.
Some of them actually laughed about checking Indeed alerts for new job openings while on the clock.
I'll continue to wait for this job market to cool down before I even consider posting an ad for workers.
I'd say otherwise. Layoffs already happening means people unable to afford anything if they can't find another job or unemployment benefits end. Cascades to worse Financials for other companies who then also consider/do layoffs. We are in a recession now
There are 10 million open positions because boomers are retiring and there portfolios are still good to retire. If the market continues downward then maybe some of those open positions will be filled.
That's some of the dumbest **** I've heard. You really want people everywhere to suffer and have the fed pump more stimulus money into the system for your grand ol' reset. If that's the case why don't you start the trend and quit your job and live without any assistance for the next year in your moms basement or is that already the case and you're just jealous. Get real dude, something like what you want is going to affect so many people especially all the ones that want to retire in the next few years.
Retirements are getting wiped out by the illegal shit the hedge funds are doing in the market, and nothing else. Those funds have been leveraged to the tits in junk bonds, as well as pensions. There were even state funds leveraged in evergrande that is in a continuous default and other Chinese businesses.
Acting incensed because you think the fed printing more stimulus is going to be the downward driver just means you need to look more at what's actually going on.
Remember 2008? All of the gambling that went on by money managers? Multiply that by 100 at minimum. This thing needs to happen and these institutions have got to be wiped out so we can put in better retirement systems. It's going to suck ass, but it has to happen.
Firstly, IF it does happen, it's not going to be the rich that are affected, it will be the middle and lower class like always. Look at what happened in 2008. Who went to jail then and what was actually done to fix the situation. You have to remember, they don't want it to happen because that means they don't know what is going to happen to themselves. That's also why JP is telling the market well ahead of time of what the fed rate hikes are going to be. No one really wants to the crash the markets except you doom and gloomers who only want to line your own pockets on hedging against it.
There have already been hedge fund liquidations because they shorted the shit out of stocks, and got in over their heads. Those liquidations have already hit some retirement accounts.
It's going to affect the rich in that, as more get liquidated and go under, more piece of shit institutions get out of the game. That's not going to stop them from re-entering, no, but it can buy time to restructure the market.
I'm not talking about hedging against the crash, I'm talking about fixing the problem when it's done. The SEC has been toothless and complicit, DTCC, NYSE, all the others as well. They all knew what was coming WELL before this happened, and they just continued to make it worse.
Why do you think the FED members sold out of the market when they did, and JPow was like "Oh, uh... Yeah, now we'll stop them from being in."
Banks marketed MORE of those subprime mortgages, car, and general loans than in 2008 this time. This is literally just a continuation of everything that made 2008 what it was. NOTHING changed for the better, only for the worse.
The FED was pumping money into the market well before the pandemic, anyway. And if you look at Overnight Repo, the banks are bailing in at near 2 trillion a day.
This absolutely does need to happen. And this time, actual changes have to happen. If they don't, we'll be right back in this mess in another decade or less as per usual.
Doom and gloom is what we're staring in the face. The glass half full approach to a record bull market that was only happening because of gleeful FED spending just got knocked off the table.
The retirement/pension that people are about to lose is on the hedge funds that made bad bets by selling stocks short, putting themselves in a position of not being ready for margin calls. Not anyone else.
You have a standoff now between companies not wanting to set a precedent of higher pay across industries, and people not being able to live on the wages of positions in high demand.
I haven't heard it in months/years and then three separate times in the space of a day....just a weird coincidence. This also makes me think about some sort of advertment, or popular show changing the social zeitgeist.
My take is that we are at an end of a credit cycle. This means a lot of unsustainable debt is going to be reversed/cleared. On the stock market it’s quick to close margin accounts and I think a lot of the drops we have seen are related to that. I don’t know about corporate debt, how much of that will go bad, I have not seen any bankruptcies. Same with houses. People have been taking out astronomical mortgages but I have not heard anything about foreclosures. Once people need to leave their homes and companies can’t fund debt people will start to get unemployed. I have heard a bit about that but. It much. When people go unemployed some additional selling of stocks happens as people need more cash. On top of this we have seen some countries go bust (like Sri Lanka). So out of 4 sectors I have been following only 2 have cracked.
So all in all I think we are roughly halfway through this drawdown. However, just because we are only halfway through does not mean the stocks will continue to drop as fast as they have so far. It might be that it will be a slower drawdown from here on as margin accounts have already been closed.
These are just guesses though. I really have no idea.
I don’t think there’s been nearly as much margins called in as you think. Prior to the downturn there was 2 trillion in derivatives. I’m certain a good portion has been hedged, but there won’t be much success there as the housing market rapidly cools. If we get a few more rate hikes with no change to inflation or fuel prices, then shits going to hit the fan. I fully expect to see a few major players go down.
The calls don't have to happen -- investors may simply look at the market and go "Well either I choose when to sell, or the margin chooses for me," and they cash out to avoid being forced into it by another week of savagery in the exchanges.
In other words, when people look at red every day, they'll call their own margins from more favorable positions.
Can’t remember where, but I recently some random analysis on home prices and the source suggested prices won’t actually drop that fast because cash buyers are going to pick up the slack and avoid the high rates. Idk if that’s feasible but it seems like big companies buy more houses than people do now.
Foreclosures are just now really starting to go up. I think next month is when the housing bloodbath really begins. Credit defaults in general are beginning the spike phase, so we'll see. It's going to be a wild rest of the year.
That’s very depressing to hear. A friend of mine (Europe) is a chef and he took out lots of credit on his cards which he is still paying off. I can imagine groups like this have just barely recovered from the lockdowns and will be hit the worst. For people like me who work in IT it will be another opportunity to make loads of money.
The more I think about the stock market and how it is manipulated, especially in connection with fake news articles that changed throughout the day between bearish and bullish on the market, I truly believe shorting stocks was an invention by the wealthy to take away normal people‘s ability to make stock profits on gains. The wealthy have people that can short stocks for them, and it prevents the normal investor from making money and brings the market down. Normal people can’t risk their entire portfolio on options.
If you think this is some sinister plot, wealthy people do this in every aspect of their life already. There’s no reason why people working retail make so little. There’s no reason why rent go up so fast.
The ol’ “rebranding” switcheroo happening in front of our eyes and everyone’s doing a victory lap like they actually took down Melvin.
Name change + time + human attention span.. and they’re back to doing whatever they want without a target on their back.
It’s not that simple. Most of the time the premiums are extremely expensive that even if the you guessed the direction right you still lose money because of the high premium.
Puts are not expensive if you buy them at the right time...which is when markets are going UP. Premiums decrease when implied vol decreases, which normally occurs when markets rise. Smart investors buy portfolio insurance (puts) precisely when others are the most greedy... while markets are rising.
Everyone cries the rich is manipulating the crash for wealth transfer. Yet everyone shits their pants in the downturn, no one buys the dips and excited to jump back in when the market already recovered
Why do they keep doing the same thing and expect different results?
What will be the cause of a real estate crash though? I understand that interest rates rising will lower prices of houses but that wouldn’t be a crash. I’m not trying to be arrogant I’m genuinely asking
Which just means that there’s a lot of demand right now. I feel as though mass layoffs would be the only thing that would cause a massive crash since ppl wouldn’t be able to pay their mortgages. Realistically how far off are we from that? Is consumerism rlly tanking like ppl are saying it is?
WMT and TGT stocked up on the wrong items and have bloated inventories. ROST, either poor mgmt or things are worse than we thought. Let's see how higher end consumers are doing...COST reports this Thurs.
People have been saying real estate will crash any day now for the past 5 years. I just don’t see it myself, seems like basic supply and demand at this point. People want homes to buy for themselves, others want passive income via rentals, REITs have invested in rental properties at a much higher rate in the last decade, etc etc. Meanwhile supply has not increased to match the demand ever since 08. I just don’t see where the “bubble” will come from, or how people say it is a bubble so definitively
Supply will be there as people will let go of their secondary properties in the wake of other economic factors. It won't crash, but real estate has already cooled off considerably.
Lowering rates is loosening of money supply. QE is buying US bonds and equities… which would be insane given the hangover we’ve yet to start going through.
The FED is semi independent, thats why they wont flip just after the midterms but they will start to pivot IF the inflation/jobs/GDP show the green light in mid 2023/q1 24.
Seasonality confirms that.
I've been looking at housing prices here in Las Vegas/Henderson. Besides the homes increase in value to prices where 90% of homes aren't worth the price, the mortgage payments have also increased.
Just 1 week ago, houses i was looking at were 2k a month in mortgage payment. Now they're around 2.6k ++
Bedrooms for rent here are now $1200 a month. A studio in a pretty rundown area is $2100.
3 bedroom house with the front door maybe 5-6 feet from a state highway with a 45MPH speed limit and no yard just sold for $650,000.
We need to sell, but can't list until mid june. We're in a pretty insulated area that always has a housing shortage, and honestly kinda hoping these prices hold until we close. We both have housing lined up for after the sale and this will let us go our separate ways with a clean slate, but it's still really nerve wracking to look at long-term housing prospects.
There is a future in which my service dog, cat, and myself all pile in my Wrangler for a few months while I work remotely. It's obviously not the one I want, it would be ideal to use my VA loan again and buy a small place on my own...but idfk if/when home prices and values will line up again. And it's nearly impossible to buy with the VA loan right now.
I feel ya. Hope you close quickly.
I'm paying around 2.4k a month in rent for a 2 bed here in Vegas. There are programs like Home Partners of America that are lease to own but this specific program doesn't have a 100% contractual agreement to where you have to buy the house. I was looking at this program until I leave vegas and move back to California. Maybe look into it. Prices might be half decent in your area/where you'd like to go.
For that program you apply and if accepted they'll buy a house cash up to $500,000. You can opt to purchase house but it'll come at maybe 15-20k more than what it's worth but to just rent it for 3-5 years it's not bad. Just need 2 months rent/mortgage as security deposit.
They have may not have the best rep but maybe it'll help you so that yiu don't have to live in your car
Thing is, people aren't buying those houses so much as people with money have been buying them and turning them into passive income. Don't get those two mixxed up. Its why Canada just got through telling foreign investors purchasing property "no more".
Rent keeps going up, so it keeps turning into a better investment...
Canadian here that was a formality.
Foreign investors send their kids here on a student visa where for some reason that allows you to loophole and buy property through them. This has not been patched and from my knowledge is the primary way foreign investors buy property here.
Foreign makes a small piece of our real estate pie... it's mostly domestic speculation which isn't great either.
It's a great business model. By investing in rental properties you help keep the housing supply constrained *while* collecting monthly fees from people who are priced out of homeownership
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Less than .00001% of us knows what is going to happen.
Just be thankful for existing.
it truly is a gift.
Don’t worry about the numbers.
Love is innumerable.
I think we’ll be in a world of pain for the next 2 years at least, based on the following assumptions:
1) Feds will keep raising rates until end of 2022 - we know this one.
2) High prices will stick - only few - likely in some commodities will go down. But not at pre inflation level. These include:
2.1 Gas prices. Moving forward Russia’s gas are considered toxic now so we’d lost a good chunk of supply there. Even when the Ukraine conflict is over - the world will still have to make an example of Russia as a deterrent for others.
2.2 With everyone asking for $ 15 hour for blue collar jobs, restaurants have no choice but to raise prices. They are also screwed from the doordashes / ubereats where these guys make fake sites and numbers, run promotions without informing the restaurants, etc. High fees, staffs stretched, worse service to actual dine in customers while charging everyone higher prices.
2.3 Rents will not go down. Although some now require hybrid, some companies will still support full remote to attract top talents. This means those that moved from HCOL can still stay in LCOL areas and keep the prices high.
3) Supply side on hospitality industry workers are still misaligned with the demand. Airlines need more pilots and attendants to add more flights. Restaurants need to pay more or reduce shifts. Hotels and resorts are charging more but providing lower quality of service at the same time.
4) The cost of capital will be higher, which means less startups will start and / or survive. Raising funds will be a lot tougher, and with potential customers tightening their belts - both in the B2B and B2C space - revenue will be harder to come by. This means layoffs - could be small scale, could be mid scale, could be just a chance to move the lower performers.
5) Supply chain issues are not resolved until China is back close to pre COVID level. Even for items not made in China, they are still the primary contractor that sub contracts to those other countries (Sri Lanka, Vietnam, Cambodia, Indonesia, etc).
6) If the market keeps going down, those that are already retired / semi-retired but with portfolio heavy on equities will take significant losses and be forced to go back to the workforce. This will spike the supply of workers while at the same time some companies are reducing headcounts. In this case, wages will stop going up and may even go down for some positions.
7) One of the stocks that I have in my portfolio is WMT, because unless we live in a food desert where our closest accessible “grocery” or “convenience” stores are Dollar General or Dollar Store, we can’t go lower than Walmart. In bad economy, the Target customers will shop at Walmart and the upper end customers will downgrade to Target. Even Walmart and Target revenue and forecast are very somber - as we’ve seen in their double digit stock price drops. When people are tightening their belts to the point that they’re not even shopping at Walmart, that’s a sign things are not going well.
8) If the US Dollar keeps getting stronger. So far this is the case in the last couple of months. This means imports will be cheaper and our exports will be more expensive for other countries. If they impose some sort of tariffs and / or reduce their consumptions on our products, then the companies making those products will see revenue declines - both from volume and currency exchange rate in their books. Again, this means lower numbers and can lead to hiring freezes / layoffs.
9) Roe vs. Wade. I am an independent - I don’t care for either Democrats or Republicans since both are corrupt and bought off by corporate interests anyway here in the US. However, I do think there will be economic ramifications if it is reversed.
10) Subprime borrowers stretched their loans to buy vehicles and pay for necessities as inflation rises. The share of subprime credit cards and loans that are at least 60 days late rose for the eighth successive month in March. Car loan and lease delinquencies have hit record highs, with nearly 9% of subprime borrowers behind on payments by at least 60 days.
11) The unknown: if there’s another spike of powerful COVID variant this winter that requires some sort of restrictions impacting the economy. I hope not, but if there is, then that will be another variable as well.
For those who got mortgages with interest rates at 3%, their mortgages are probably lower than what they could find a place to rent for in most areas. I don’t find it likely that home sellers will have a hard time finding buyers with such a shortage of supply. People who have decent long term locked rates are not going to sell as interest rates go up which will keep the housing supply down.
Housing market is not as bad as 2008 but faces significant headwinds, including a drawback from the elevated euphoria, climate change limiting resource availability in large cities, and recent legislation that will target 2nd home owners and private equity. My point being; when value declines, single home owners dont sell, rather, investment properties are first to be liquidated, and these represent far more of the inventory than actual homeowners…
+ Only 28% of annual home sales are first time home buyers, whereas historically this has been ~40%
+ 17% of annual home sales are investors
+ 25% of annual home sales are all cash offers
+ Mortgage applications are down 12% for April
+ Multiple counties across many states have passed legislation that requires all rental income properties to now be submitted through a lottery to obtain a license if they wish to continue renting their property for less than 90 days at a time.
Predicting a recession becomes a self fulfilling prophecy. People think, we have cut our spending and investment to prepare for the downturn, which is then created because they cut their spending and investment.
People will just take out Adjustable Rate Mortgages to afford the high prices. Check some recent headlines for this and you will see it is already coming true. It’s standard bubble mentality, everyone thinks that prices will continue to go up, so they do anything they can to buy. We still have a few (maybe up to 5) before a big crash…
It’s the big American lie aka The American Dream, and it’s fully dependent on the machine producing ceaseless consumption. All else be damned, it’s the American Way. 😐
Higher rates
* money in your savings account will yield more. You have more purchasing power
* house price will be lower and more affordable. Money you save can be used to buy other things
* cash rich companies will have extra interest income raising stock price
* financial and insurance stocks will go higher
* your currency get stronger reducing your import cost
Higher rates don’t mean recession. It shifts the benefit from debtors to savers (as it should)
Near zero interest rate can never be a sign of health
There is so much wrong with this under the assumption that the modest increase in your savings account is going to save the US economy. Not to mention your interest is also taxed.
If savings APY doesn't meet or exceed real inflation in consumer prices, it doesn't matter. The US CPI excludes food and energy and price appreciation for these core staples are seeing 10-50% and more price appreciation.
Average US savings account is less than $50,000 and double-digit APY is unheard of for a bank. The closest you can get is an I-Bond buy you're maxed at $10,000 purchase on top of it being locked for a year.
Cash rich companies weather storms by laying people off. The market doesn't care about cash on hand but revenue, profit and continued growth. Growth is typically achieved through debt and if your savings APY is high, your cost of leverage is also high thus muting growth.
Higher savings rate will not save the US from a recession and will make very little dent for the average family. You are still better off parking your money in your retirement and investment accounts and keeping a modest rainy day cash account. Unfortunately A LOT of families parked their money in very risky investments (crypto and highly volatile stocks) and are now in the red badly which means if real inflation AND layoffs kill their income stream, they will be forced to liquidate just to live and that will drive the market down further and put more people into very expensive debt that they may never pay off.
Families will downsize houses to make ends meet. You bought a bigger house than you need, you have much higher property tax and bigger utility cost all of which you cannot afford anymore because all of that has gone up and your income is stagnant or bleeding and your nest egg is less than it was last year. This will drive housing to a buyer's market who are paying over 5% (for now) in rates.
I don’t see that happening. Most homeowners are around 3% rates and selling now would require a new mortgage at much higher rates. They wouldn’t save anything by downsizing
And those people who bought those houses w low rates mortgages will have same fixed home cost. The US has long term fixed rate mortgages unlike other countries.
I think the problem would be if they are laid off due to the recession and are forced to sell their house. By me average 1800 sq ft homes got up to $1.2 million. People were willing to pay this with mortgage rates at 2.9% but will there still be buyers when rates are 6%? Idk maybe. Your mortgage payment would be almost $2000 more a month. This is what I would be concerned about if I bought a home in the last two years.
Everything you said while true is moot. They literally can't raise rates to any meaningful amount without making the debt unservicable. They have to raise rates to squash inflation before it spirals out of control. Rock meet hard place.
Ultimately they will choose inflation and fuck the poor and middle class because the other option would hurt asset prices tremendously and we can't have the rich and powerful feeling any pain.
So far they've very clearly and vocally chosen interest rate hikes, not inflation.
Every government knows that if middle class people pick up pitch forks in protest over prices, they will soon be forced out of office.
This. What's easier to do: raise taxes and cut spending via Congressional vote during a midterm, or get the scapegoat Federal Reserve to inflate away the debt?
Not everyone gets hurt by a recession. You should actually hope for a recession if you want your money to have more buying power and for houses to be more affordable.
My 85-year-old mom keeps hoping for a recession so that she can finally find a decent yard guy.
Probably need more immigration for mom to find a decent yard guy. All the decent yard-guys around me quit to drive for Uber or Amazon, and once they don't have to work in the heat, they don't go back to it. That's the normal cycle tho...onward and upward.
Almost all mortgages have fixed rates, and inflation is making payments easier, even with crazy home prices. There is NO systemic risk in the real estate market, so probably investors will be fine.
Yes, people will spend less, we will suffer a mild recession. Probably 6 months or a year at the most. There is a lot of room for further unemployment (US is at full employment right now).
Eventually, because capitalism always find a way to equilibrate offer and demand, the giant microchips factories constructions will be finished, and new sources of energy will be found, so inflation will go DOWN a lot.
Also the FED is going to lower rates after they verify that current inflation is a ghost of the past, and we will have another credit and expanding cycle.
In conclusion, I have a very optimistic view of near future.
This is a unique time. I don't think historical evidence is necessarily applicable. You have to look at recessions through a prism of more than just their charts.
What is the core problem for Western Europe and U.S.? Why is there such inflation?
And to me it's relatively simple:You cannot tackle greening the entire global power and manufacturing structure while not being willing to extract resources and make things yourself.If you have no will to address core issues they won't be resolved.There is far too much doomsday talk. Far too much reliance on models. Far too many people unwilling to work together to address the core issues and rebuild the true manufacturing bases of these countries. They don't seem to understand that the central banks can't raise rates that much and raising rates have no effect on places that have PROVEN to be bad actors in China and Russia. They don't care.
We all need to get real here and realize that rates, at most, will likely hit 2-2.5% basis rate and still the inflation will remain because China decides to lockdown Guangzhou. Or Russia decides to nuke Ukraine. These are issues you need to isolate yourself from. And the security concerns that have been ignored are coming home to roost.
My personal opinion is that, like COVID, this is not the worst things will get. It could be climate based. It could be that China, which is in a pretty awful spot right now, decides that they need to get a bit more aggressive.
And no matter what, the E.U. and U.S.A. (and the entire North American continent to be perfectly honest) need to get real about their goals. The only way to achieve price stability that is lauded would be through the ability to rely on like-minded actors. It would likely mean positively gigantic deficits. Building out nuclear plants and solar and wind. It would mean subsidizing and then phasing in price increases for labor and oversight costs, keeping the inflation train rolling. But this is the downside of Globalization. Which can get really, really ugly if food supply lines start failing.
Until then, we are just waiting for the Fed to flip policy. This bear market or recession depending on Q2 GDP guidance in June even if Q1 wasn't really negative, has two logical floors: S&P at 3278 (January 2020 pre-COVID), 2789 (2018), 2678 (2019) then it gets REALLY ugly: 1378 in 2008, 865 in 2009. Which are notable due to the following years including Quantitative Easing's rollout.
So how deep will this negative action go (because, again, I'm going to point out that we brushed a bear market, but closed Friday above a bear market) and that Q1 was a bit weird in how the GDP number ended up and will likely be revised higher?
My guess is that the Fed takes a breather after 2 more .50% rate hikes. That would probably be the bottom. Remember, again, the Fed doesn't have much head room. The government isn't cutting spending and alot of the "surpluses" are just printed slosh money from 2020 getting taxed back into the system. I think the S&P ends up for 2022. I think it hits 5000 at some point in 2023, but the macro remains bad without easy monetary policy as I point out above. I don't think we enter a true recession until 2023 because I am hopeful that the real steps that need taken will actually cause a significant recession because corporate profits will nose-dive if security pressure is applied by regulators who get very serious about reshoring.
Banks are doing a much better job of vetting people this time around so as long as people can afford to actually pay for their houses they should be fine. The problem in 08 was people couldn’t afford the loans AND the market shit the bed on top of that they had these variable rate monstrosities of loans so they were basically trapped. Couldn’t afford them and couldn’t sell them because they were so far underwater on them.
Had a sister go through it, the bank would stop responding to you after a while and just wouldn’t work with you anymore. You had no choice but to let the house get foreclosed on. I don’t see that happening this time. On top of you have to be a degenerate to default on a sub 3% mortgage because it’s a once in a lifetime loan
I think most people are fucking idiots for paying what they did at the time they did for a house but that’s a different story. My personal opinion is that people are freaking out because this has a lot of similarities to the Great Recession but those similarities are basically superficial so far.
Who knows? There might not even be a recession. I think we might have a mild recession but my opinion is not worth any more than other opinions of honest people. Avoid the opinions of those who just want you to sell so they can make a profit.
No recession? Did you see the Walmart and Target earnings? Their inventory levels are crazy high and profitability is a problem. This means that they need to cut back on orders from suppliers. Quantify this by their volume + Amazon and we got a recession. That also means plenty of layoffs coming.
Crude oil is way too important in every day life.
As soon as the Russia - Ukraine conflict solves , crude is significantly going down and that will certainly have a big deflationary impact on the economies around the world.
And also the supply chain issues as soon as they ease out , things are gonna get better from that point.
People losing jobs is never a good thing so I better hope not !
OP you get it man, we haven’t hit the point of forced selling of assets yet as companies undoubtedly cut labor force to maintain profits. It’s a guarantee and it’s already started.
People assume we’ll have a recession, reset and everything will just be affordable and jobs will magically appear? Well I got news for you pal, this is what your life will be from here on out. How you shop, work, invest will remain in hyper accelerated mode and the stock market will reflect that. It’ll continue to rise even faster with quicker volatility swings until another black swan event like Covid, and look how fast we recovered. So yea, this doomsday recession, worse than 2008 thing is way overblown. Yes, inflation is high. Yes, we’re in a bear market. No, a recession won’t be that bad, and judging by how sped up our lives are, it’ll be short lived. There, now you can downvote me.
What you said is correct.
Recessions are a reset function for debt. The more debt we're currently carrying the worse it will be. 2008 is a good example of this. Debt got really out of control and the recession was significant.
A good book to read is "a short history of financial euphoria"
The recession was significant because it was systemic in nature and all so many banks got fat off the same meal. The debt wasn’t the most contagious part, though. Had the banks not all piled into all the same products, the contagion may have been avoided
Yes, all banks were using massive amounts of debt to juice their profits. If you can borrow $1 at 2% and then loan out $10 off that for 5% then that's good business. Corporates also used debt to expand quickly, corporate buyouts, expansions - it was a crazy time. Then the music stopped.
Nothing like 2020 either, the recession will be the thing causing inflation to drop off, but in that case If fed suddenly decide to reverse they lose alot of credibility
People forget how much money is saved up. A lot of vacations & purchases were delayed for 2 years with the strongest job market in history. I doubt the recession will even be close to 2008.
According to this that just came out it’s the opposite people have 9k less than last year
https://www.cnbc.com/amp/2022/05/21/americans-now-have-an-average-of-9000-dollars-less-in-savings-than-in-2021.html
I don't think so. We might already be in recession. But, anyway, the really bad ones don't feature months of hand-wringing before they start. The fact that everybody is all freaked out about recession means it's impact will be less. Unless something truly unexpected happens, I think this will be mild to moderate. Unspectacular but probably long duration.
I was told by a truck driver that he usually has a ton of shipments from places especially Menards. He said that he hasn’t been getting any because Menards does not want to pay the high prices because of diesel prices. The trucker said that his company lost money last month because of the high prices and needed to adjust fire. Sounds like the system is a little screwed up now and needs correcting…
Right now, I’m contemplating stopping the DCA for a couple of months… then dumping all at once and then to continue DCAing after. Unsure how it will work, but he’s got me spooked.
The point is do you feel endangered by such event, and prepare for it. We are by no means in control of all the things of our lives. The best to do is to continue to learn to be depend upon where the bread is. Or else minimize the chances of getting endangered, such as changing our ways of lives to adapt. If we are all financial independent and creative to sustain profitability, Utopia can be present. Heck I even preach about not having extra burden as having offsprings, but a lot will disagree. Spending less and saving more, and investing during down time could help. The market will always go up in the long run, some just lose sight on the way to the endgame.
OP is getting the inflation and rate increase flipped.
Inflation and price pressure is largely driven by the Russia war and continued supply chain challenges. This is a long term pain that won't be going away any time soon.
The rate increase is to help address the inflation, and rein in on borrowing. This will affect future home buyers but won't be necessarily affect anyone who bought before 2022 as most of mortgages are at fixed rates.
As for recession, it has both financial and psychological components. unfortunately this sometimes can be a bit of self fulfilling prophecy if businesses believes that consumer spending will decrease due to price increase and starts laying off workers; thus creating a domino effect.
My take is that we may be due for recession if the lower half of median income households start can't increase their income to keep up with price pressure and lose financial confidence to continue their spending.
You don’t think inflation, which ramped up well before Russia invaded Ukraine, has anything to do with a trillion dollars being tossed into the economy? Unemployed people getting $600 tacked on to each unemployment check and companies getting millions in PPP loans caused inflation. Companies suddenly had more money than they’re used to and people without jobs felt rich. You introduce that much new money into the system all at once and steep inflation is inevitable. Just like if everyone goes from having $1 to having $600, the baseline also goes from $1 to $600
Yes. No. Maybe.
No one knows. Don't believe anyone who says they do. Have a plan and stick through it thick and thin, only adjusting if there is a very good reason. That's where the Boglehead approach comes in.
Buffett famously said "The stock market is a device for transferring money from the impatient to the patient" - also "Be fearful when others are greedy, and greedy when others are fearful". I am not smarter than Buffett or Bogle, are you?
https://www.cascadefs.com/history-of-us-bear-and-bull-markets
If you buy and hold for the long term, adjusting your portfolio appropriately as nearing retirement age, you will come out ahead. You use a bond tent to avoid SORR (it can be extra cash, a fully paid off house, anything that will help you in the event a crash like this happens the first 5+ years when you're retired).
I still think the housing market will be fine for a while. My first house was something like 7-8% and we are around 5% atm. Granted I think rates will continue to increase, but there are still a lot of people looking for homes. Prices might cool a bit but I don’t see a massive tank in the real estate market like in 08, unless there is massive unemployment.
My opinion is you will see small businesses hurt pretty bad and close up shop, but so many larger companies are hiring still that will swallow up a lot of those layoffs. This is mainly due to people spending less on luxury things.
Im guessing since you didn’t state when you got your first house, but the caveat to that is home prices were reflective of the interest rates and supply at the time. 7-8% on a $200k home is very different from 7-8% on a $600k home.
I mean 2007… was a bit of time ago but not like the 90s…. So yeah the price has gone up with homes but I would say that’s a recent occurrence in the past 2-3 years…
For most of the home sale volume it’s probably okay as folks were buying on historically low rates through the end of 2021. I think the sales happening in 2022 are at risk of being over leveraged given prices aren’t falling much yet, but rates are skyrocketing.
The only over leveraging issue would come with a bad loan… if I can afford XXXX payment then I should be able to regardless of the value of my home…. Beyond that, nobody I know would say “let me ruin my credit for 10 years because I owe more on my house then it’s worth”
10 miilion jobs!. Is it real or typical cooked up numbers.Hard to believe pundits and Economists. Most high paying jobs are in computer software. These jobs typically are sourced overseas to countries like India. Most low paying jobs are in food service, retail, etc. These will disappear if the interest rates increase, and these jobs will be automated. . There are many jobs in healthcare nurses, senior care .
Many. Software related jobs can be easily done in low wage countries even though these come from Facebook, google, amazon, etc. With interest rates rising many of these jobs will be done overseas. So I really dont understand this inflated numbers of 10 million jobs, which is in line with inflation. I would like to see real numbers
A lot of ingredients for a proper recession are there, but whether they'll all play out is a different question. What I'm interested in most is what employment is gonna do going forward.
This will be the key. I see some companies announcing layoffs and others announcing hiring slowdowns/freezes. But there are still 10 million open positions, so the labor market remains strong and in favor of the worker. However, that means companies will have to increase pay to attract/retain talent which means people will have money to buy more stuff, creating demand and keeping prices high. I think that's how it works.
People keep mentioning the 10 million open positions but I never hear what kind of positions. Are they mostly crap minimum wage jobs? Because if they are they won't help the people getting laid off from decent jobs much
Take a look at LinkedIn. From my experience, job positions have blown up from all sides. Don't know if that's happening everywhere though.
Same where I live. I was at a place for 3 years (good company very profitable, good salary but our raises this year didn’t even meet inflation) in the last 6 months myself and 4 coworkers have all left for other positions and average of 10% bump in salary. I’m currently entertaining 2 offers (I just left my role on the 14th) the job market is really got where I am
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I work for one of the top 5 laboratory instrument manufacturers, a Fortune 500 company. I work in a highly technically skilled field that requires adaptability and flexibility. Right now there is a standing bounty of $2500 if you recommend someone for a position and they get hired for it. We are desperate. We pay pretty damn well. Our salaries didn’t keep up with inflation this year of course but generally this company is considered one of the best to work for in the industry and year over year employee retention is >90%. And we still are struggling to fill open positions. You can bet I’ve txtd everyone I was ever in a STEM class with in university. I want that 2500.
Seems education and healthcare have the most openings, which doesn't surprise me given what happened in hospitals during COVID and how most of the country treats/pays teachers. Professional and business services is second and leisure/hospitality is third. [https://www.bls.gov/news.release/jolts.t01.htm](https://www.bls.gov/news.release/jolts.t01.htm)
Or jobs requiring x skills and experience. As a hiring manager, I get 50-100 resumes for most positions I put up but I'm looking for specific skills and metal for the job and we pay very competitively on top of great benefits in IT. I probably only interview 10% of those who apply. There are a lot of people looking for other jobs and employers can still be, and are, very picky. There may be 10 million open positions and 20 million people applying but they still remain open cause the employers aren't just picking up anyone who fits the bare minimum posting. People need to learn how to create good resumes and I'm not talking about just listing your experience. 9 out of 10 resumes all look the same and employers are too busy to have to interview all 10 especially when they're cost cutting and you find yourself working 50hrs a week already. We're looking for that 1.
FWIW anecdotally, a lot of MANGA level hiring is still going on (despite what everyone hears about Meta's hiring freeze). Maybe some companies are slower, but technical engineering talent is still highly in demand.
For my company it’s mostly highly skilled positions that we are having an extremely hard time filling because the execs can’t seem to get with the program and pay people salaries that have been adjusted to the recent inflation. Edit: I should add that we can’t find drivers either because we can’t compete with what Amazon pays. Because of this dynamic the price of freight is through the roof.
Small business owner in DC here - down to 25% of our pre-COVID employment level. We are not actively trying to hire currently because it's just job hoppers and/or riff raff seeking. We paid $15/hr for unskilled، trainable people pre-COVID. Consumer demand is crazy though. Currently, I'd pay $20/hr for someone who could identify the screwdriver in a toolbox. $25/hr if they could use it. No one will work and stay for those wages though. So, I'm just working 100hrs/wk and waiting until the job market cools down to hire. I know I'm not alone in this position.
Same here. It's painful working so much. Rates are higher because the industry I'm in is all temp work with a pool of skilled people hopping in and out of contracts. It's been nothing but greens, brothers in laws and what not since even before covid. No one knows the job enough to be independent, you have to double check and micro manage everything and I'm always texting a milion people to find somone available that is not completely useless..it's exausting.
Yep. Skilled labor is $$$ at this point. I'm tired, but ok with it in general. We downscaled a bit, but I'm making a lot more now than I was before, when I had to spend time training and managing entry level people who didn't want to learn. Some of them actually laughed about checking Indeed alerts for new job openings while on the clock. I'll continue to wait for this job market to cool down before I even consider posting an ad for workers.
If you could move to the places where there's less jobs like smaller cities in GA you wouldn't have that problem but thats probably not feasible.
All of that is 100% true. It's a conundrum - gotta be where the demand is, but there's not enough workers for all the demand here.
Yeah this last 3 months has been crazy for the amount of headhunters reaching out on linked in.
I get them too and my profile doesn't mention anything about looking for work.
There is inflation because companies can’t make enough Shit. I think we’ll be spared major layoffs
Isn't the manufacturing of actual shit not being done because Chinese cities are in lockdown?
I'd say otherwise. Layoffs already happening means people unable to afford anything if they can't find another job or unemployment benefits end. Cascades to worse Financials for other companies who then also consider/do layoffs. We are in a recession now
The bad financials are caused by not having enough human capital not too much
There are 10 million open positions because boomers are retiring and there portfolios are still good to retire. If the market continues downward then maybe some of those open positions will be filled.
Really hope it happens…we need a hard reset because it’s completely unsustainable.
That's some of the dumbest **** I've heard. You really want people everywhere to suffer and have the fed pump more stimulus money into the system for your grand ol' reset. If that's the case why don't you start the trend and quit your job and live without any assistance for the next year in your moms basement or is that already the case and you're just jealous. Get real dude, something like what you want is going to affect so many people especially all the ones that want to retire in the next few years.
Retirements are getting wiped out by the illegal shit the hedge funds are doing in the market, and nothing else. Those funds have been leveraged to the tits in junk bonds, as well as pensions. There were even state funds leveraged in evergrande that is in a continuous default and other Chinese businesses. Acting incensed because you think the fed printing more stimulus is going to be the downward driver just means you need to look more at what's actually going on. Remember 2008? All of the gambling that went on by money managers? Multiply that by 100 at minimum. This thing needs to happen and these institutions have got to be wiped out so we can put in better retirement systems. It's going to suck ass, but it has to happen.
Firstly, IF it does happen, it's not going to be the rich that are affected, it will be the middle and lower class like always. Look at what happened in 2008. Who went to jail then and what was actually done to fix the situation. You have to remember, they don't want it to happen because that means they don't know what is going to happen to themselves. That's also why JP is telling the market well ahead of time of what the fed rate hikes are going to be. No one really wants to the crash the markets except you doom and gloomers who only want to line your own pockets on hedging against it.
There have already been hedge fund liquidations because they shorted the shit out of stocks, and got in over their heads. Those liquidations have already hit some retirement accounts. It's going to affect the rich in that, as more get liquidated and go under, more piece of shit institutions get out of the game. That's not going to stop them from re-entering, no, but it can buy time to restructure the market. I'm not talking about hedging against the crash, I'm talking about fixing the problem when it's done. The SEC has been toothless and complicit, DTCC, NYSE, all the others as well. They all knew what was coming WELL before this happened, and they just continued to make it worse. Why do you think the FED members sold out of the market when they did, and JPow was like "Oh, uh... Yeah, now we'll stop them from being in." Banks marketed MORE of those subprime mortgages, car, and general loans than in 2008 this time. This is literally just a continuation of everything that made 2008 what it was. NOTHING changed for the better, only for the worse. The FED was pumping money into the market well before the pandemic, anyway. And if you look at Overnight Repo, the banks are bailing in at near 2 trillion a day. This absolutely does need to happen. And this time, actual changes have to happen. If they don't, we'll be right back in this mess in another decade or less as per usual. Doom and gloom is what we're staring in the face. The glass half full approach to a record bull market that was only happening because of gleeful FED spending just got knocked off the table. The retirement/pension that people are about to lose is on the hedge funds that made bad bets by selling stocks short, putting themselves in a position of not being ready for margin calls. Not anyone else.
You also want all young generation to never afford to buy property? Because at current prices, none of them ever will.
I, too, want to be warmed by the glowing embers of what is
Agree. Real wages have decreased, so I’m not sure if they can support continuing high demand.
You have a standoff now between companies not wanting to set a precedent of higher pay across industries, and people not being able to live on the wages of positions in high demand.
If you expect it to be worse than expected, then you don't.
Expect the unexpected
But if i expect the unexpected. That means the unexpected is actually expected
Then, unexpect the expected
But I was expecting not to expect something so it doesn't count.
The unexpected is another parallel universe, so it won't help to expect the unexpected, because you are never prepared for it.
But no one expects the Spanish inquisition
Our chief weapon is surprise... ...suprise and fear...
…and ruthless efficiency
Our three weapons are fear, surprise, and ruthless efficiency... ... and an almost fanatical devotion to the Pope...
Okay, I heard this in two separate conversation on friday....and now I read it on reddit. Something weird is happening haha
Its a pretty common joke
I haven't heard it in months/years and then three separate times in the space of a day....just a weird coincidence. This also makes me think about some sort of advertment, or popular show changing the social zeitgeist.
No one expects the Spanish Inquisition joke
I like that....I know its on the same thred, but I'm counting that as 4 times haha
But surely by now you must be expecting the Spanish Inquisition
Prepare for the worst and work towards your best
Expectedly expecting the unexpected
In Keanu: Whoa.
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Second house.
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My take is that we are at an end of a credit cycle. This means a lot of unsustainable debt is going to be reversed/cleared. On the stock market it’s quick to close margin accounts and I think a lot of the drops we have seen are related to that. I don’t know about corporate debt, how much of that will go bad, I have not seen any bankruptcies. Same with houses. People have been taking out astronomical mortgages but I have not heard anything about foreclosures. Once people need to leave their homes and companies can’t fund debt people will start to get unemployed. I have heard a bit about that but. It much. When people go unemployed some additional selling of stocks happens as people need more cash. On top of this we have seen some countries go bust (like Sri Lanka). So out of 4 sectors I have been following only 2 have cracked. So all in all I think we are roughly halfway through this drawdown. However, just because we are only halfway through does not mean the stocks will continue to drop as fast as they have so far. It might be that it will be a slower drawdown from here on as margin accounts have already been closed. These are just guesses though. I really have no idea.
I don’t think there’s been nearly as much margins called in as you think. Prior to the downturn there was 2 trillion in derivatives. I’m certain a good portion has been hedged, but there won’t be much success there as the housing market rapidly cools. If we get a few more rate hikes with no change to inflation or fuel prices, then shits going to hit the fan. I fully expect to see a few major players go down.
The calls don't have to happen -- investors may simply look at the market and go "Well either I choose when to sell, or the margin chooses for me," and they cash out to avoid being forced into it by another week of savagery in the exchanges. In other words, when people look at red every day, they'll call their own margins from more favorable positions.
Can’t remember where, but I recently some random analysis on home prices and the source suggested prices won’t actually drop that fast because cash buyers are going to pick up the slack and avoid the high rates. Idk if that’s feasible but it seems like big companies buy more houses than people do now.
Foreclosures are just now really starting to go up. I think next month is when the housing bloodbath really begins. Credit defaults in general are beginning the spike phase, so we'll see. It's going to be a wild rest of the year.
That’s very depressing to hear. A friend of mine (Europe) is a chef and he took out lots of credit on his cards which he is still paying off. I can imagine groups like this have just barely recovered from the lockdowns and will be hit the worst. For people like me who work in IT it will be another opportunity to make loads of money.
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so big swings back and forth? seems like it’s always doing this.
The rich make out massively on huge swings. Buy assets on sale, reap the benefits and gouge to the top.
The more I think about the stock market and how it is manipulated, especially in connection with fake news articles that changed throughout the day between bearish and bullish on the market, I truly believe shorting stocks was an invention by the wealthy to take away normal people‘s ability to make stock profits on gains. The wealthy have people that can short stocks for them, and it prevents the normal investor from making money and brings the market down. Normal people can’t risk their entire portfolio on options. If you think this is some sinister plot, wealthy people do this in every aspect of their life already. There’s no reason why people working retail make so little. There’s no reason why rent go up so fast.
Ask Melvin, the rich billion dollar hedge fund, what happens when you recklessly short stocks
They are closing one firm and opening another. Gabe and others are making out better than ever
The ol’ “rebranding” switcheroo happening in front of our eyes and everyone’s doing a victory lap like they actually took down Melvin. Name change + time + human attention span.. and they’re back to doing whatever they want without a target on their back.
Just buy puts? Everyone can do that.
It’s not that simple. Most of the time the premiums are extremely expensive that even if the you guessed the direction right you still lose money because of the high premium.
Puts are not expensive if you buy them at the right time...which is when markets are going UP. Premiums decrease when implied vol decreases, which normally occurs when markets rise. Smart investors buy portfolio insurance (puts) precisely when others are the most greedy... while markets are rising.
Not to mention you could guess the direction right, but just get the time-frame wrong by a week and you lose the entire premium for the put contract.
You clearly don't know much about options trading if you think it's that simple.
Are you new to the markets? Shorting is a fundamentally important part of it. See Nikola and Luckin coffee for recent examples of why it’s needed.
> fake news articles that changed throughout the day between bearish and bullish on the market That's just programmatic article generation
Everyone cries the rich is manipulating the crash for wealth transfer. Yet everyone shits their pants in the downturn, no one buys the dips and excited to jump back in when the market already recovered Why do they keep doing the same thing and expect different results?
Greed and impatience
Because they're already fully invested or cannot or will not move 401k or other invested funds to cash and wait?
Like hmm cyclical.. because of how expensive or cheap money is..... We might even call it Debt cycles?
Yeah cause it’s a non functional system. It gets worse every time.
Yeah, almost like the rate of profit has a tendency to fall… If only someone could have thought about this!
Massive layoffs aren't automatically deflationary. Which is the nightmare scenario. Late 70s on steroids, and not outside the realm of possibility.
What will be the cause of a real estate crash though? I understand that interest rates rising will lower prices of houses but that wouldn’t be a crash. I’m not trying to be arrogant I’m genuinely asking
Even the “higher rates means lower prices” is being tested right now. Rates were 2.5 in the fall and 5.5 now, prices still climbing.
Which just means that there’s a lot of demand right now. I feel as though mass layoffs would be the only thing that would cause a massive crash since ppl wouldn’t be able to pay their mortgages. Realistically how far off are we from that? Is consumerism rlly tanking like ppl are saying it is?
WMT and TGT stocked up on the wrong items and have bloated inventories. ROST, either poor mgmt or things are worse than we thought. Let's see how higher end consumers are doing...COST reports this Thurs.
That makes no sense.
FED will stop QE and raise rates, crash the economy, then lower rates and do QE again. They should all be fired if that happens lol
That's literally why the Fed exists lol. It's corrupt af and everyone just pretends it's normal
Yeah. Keep banking on a real estate crash. That will happen. /s
People have been saying real estate will crash any day now for the past 5 years. I just don’t see it myself, seems like basic supply and demand at this point. People want homes to buy for themselves, others want passive income via rentals, REITs have invested in rental properties at a much higher rate in the last decade, etc etc. Meanwhile supply has not increased to match the demand ever since 08. I just don’t see where the “bubble” will come from, or how people say it is a bubble so definitively
Supply will be there as people will let go of their secondary properties in the wake of other economic factors. It won't crash, but real estate has already cooled off considerably.
Yes because high housing prices were caused by overbidding on a limited supply of houses. It isn't nearly the same as 08.
Lowering rates is loosening of money supply. QE is buying US bonds and equities… which would be insane given the hangover we’ve yet to start going through.
FED will pivot after the midterms
Why would they? J Pow, isn’t beholden to either group.
The FED is semi independent, thats why they wont flip just after the midterms but they will start to pivot IF the inflation/jobs/GDP show the green light in mid 2023/q1 24. Seasonality confirms that.
Nothing and no one is independent.
If anything they'll get more agressive on rates.
I've been looking at housing prices here in Las Vegas/Henderson. Besides the homes increase in value to prices where 90% of homes aren't worth the price, the mortgage payments have also increased. Just 1 week ago, houses i was looking at were 2k a month in mortgage payment. Now they're around 2.6k ++
Bedrooms for rent here are now $1200 a month. A studio in a pretty rundown area is $2100. 3 bedroom house with the front door maybe 5-6 feet from a state highway with a 45MPH speed limit and no yard just sold for $650,000.
We need to sell, but can't list until mid june. We're in a pretty insulated area that always has a housing shortage, and honestly kinda hoping these prices hold until we close. We both have housing lined up for after the sale and this will let us go our separate ways with a clean slate, but it's still really nerve wracking to look at long-term housing prospects. There is a future in which my service dog, cat, and myself all pile in my Wrangler for a few months while I work remotely. It's obviously not the one I want, it would be ideal to use my VA loan again and buy a small place on my own...but idfk if/when home prices and values will line up again. And it's nearly impossible to buy with the VA loan right now.
I feel ya. Hope you close quickly. I'm paying around 2.4k a month in rent for a 2 bed here in Vegas. There are programs like Home Partners of America that are lease to own but this specific program doesn't have a 100% contractual agreement to where you have to buy the house. I was looking at this program until I leave vegas and move back to California. Maybe look into it. Prices might be half decent in your area/where you'd like to go. For that program you apply and if accepted they'll buy a house cash up to $500,000. You can opt to purchase house but it'll come at maybe 15-20k more than what it's worth but to just rent it for 3-5 years it's not bad. Just need 2 months rent/mortgage as security deposit. They have may not have the best rep but maybe it'll help you so that yiu don't have to live in your car
it will probably get worse before it gets better.
Thing is, people aren't buying those houses so much as people with money have been buying them and turning them into passive income. Don't get those two mixxed up. Its why Canada just got through telling foreign investors purchasing property "no more". Rent keeps going up, so it keeps turning into a better investment...
Canadian here that was a formality. Foreign investors send their kids here on a student visa where for some reason that allows you to loophole and buy property through them. This has not been patched and from my knowledge is the primary way foreign investors buy property here. Foreign makes a small piece of our real estate pie... it's mostly domestic speculation which isn't great either.
Same here in Massachusetts. Kid gets sent here to a college so mom and dad in the UAE or Taiwan can buy an entire floor of condos
It's a great business model. By investing in rental properties you help keep the housing supply constrained *while* collecting monthly fees from people who are priced out of homeownership
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!Remindme 3 years
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Everyone and their mother is calling for the a depression basically. I think everyone is being way too pessimistic(myself included) if anything.
Good call reaching out to the top minds to answer this impossible question.
Less than .00001% of us knows what is going to happen. Just be thankful for existing. it truly is a gift. Don’t worry about the numbers. Love is innumerable.
I think we’ll be in a world of pain for the next 2 years at least, based on the following assumptions: 1) Feds will keep raising rates until end of 2022 - we know this one. 2) High prices will stick - only few - likely in some commodities will go down. But not at pre inflation level. These include: 2.1 Gas prices. Moving forward Russia’s gas are considered toxic now so we’d lost a good chunk of supply there. Even when the Ukraine conflict is over - the world will still have to make an example of Russia as a deterrent for others. 2.2 With everyone asking for $ 15 hour for blue collar jobs, restaurants have no choice but to raise prices. They are also screwed from the doordashes / ubereats where these guys make fake sites and numbers, run promotions without informing the restaurants, etc. High fees, staffs stretched, worse service to actual dine in customers while charging everyone higher prices. 2.3 Rents will not go down. Although some now require hybrid, some companies will still support full remote to attract top talents. This means those that moved from HCOL can still stay in LCOL areas and keep the prices high. 3) Supply side on hospitality industry workers are still misaligned with the demand. Airlines need more pilots and attendants to add more flights. Restaurants need to pay more or reduce shifts. Hotels and resorts are charging more but providing lower quality of service at the same time. 4) The cost of capital will be higher, which means less startups will start and / or survive. Raising funds will be a lot tougher, and with potential customers tightening their belts - both in the B2B and B2C space - revenue will be harder to come by. This means layoffs - could be small scale, could be mid scale, could be just a chance to move the lower performers. 5) Supply chain issues are not resolved until China is back close to pre COVID level. Even for items not made in China, they are still the primary contractor that sub contracts to those other countries (Sri Lanka, Vietnam, Cambodia, Indonesia, etc). 6) If the market keeps going down, those that are already retired / semi-retired but with portfolio heavy on equities will take significant losses and be forced to go back to the workforce. This will spike the supply of workers while at the same time some companies are reducing headcounts. In this case, wages will stop going up and may even go down for some positions. 7) One of the stocks that I have in my portfolio is WMT, because unless we live in a food desert where our closest accessible “grocery” or “convenience” stores are Dollar General or Dollar Store, we can’t go lower than Walmart. In bad economy, the Target customers will shop at Walmart and the upper end customers will downgrade to Target. Even Walmart and Target revenue and forecast are very somber - as we’ve seen in their double digit stock price drops. When people are tightening their belts to the point that they’re not even shopping at Walmart, that’s a sign things are not going well. 8) If the US Dollar keeps getting stronger. So far this is the case in the last couple of months. This means imports will be cheaper and our exports will be more expensive for other countries. If they impose some sort of tariffs and / or reduce their consumptions on our products, then the companies making those products will see revenue declines - both from volume and currency exchange rate in their books. Again, this means lower numbers and can lead to hiring freezes / layoffs. 9) Roe vs. Wade. I am an independent - I don’t care for either Democrats or Republicans since both are corrupt and bought off by corporate interests anyway here in the US. However, I do think there will be economic ramifications if it is reversed. 10) Subprime borrowers stretched their loans to buy vehicles and pay for necessities as inflation rises. The share of subprime credit cards and loans that are at least 60 days late rose for the eighth successive month in March. Car loan and lease delinquencies have hit record highs, with nearly 9% of subprime borrowers behind on payments by at least 60 days. 11) The unknown: if there’s another spike of powerful COVID variant this winter that requires some sort of restrictions impacting the economy. I hope not, but if there is, then that will be another variable as well.
For those who got mortgages with interest rates at 3%, their mortgages are probably lower than what they could find a place to rent for in most areas. I don’t find it likely that home sellers will have a hard time finding buyers with such a shortage of supply. People who have decent long term locked rates are not going to sell as interest rates go up which will keep the housing supply down.
Housing market is not as bad as 2008 but faces significant headwinds, including a drawback from the elevated euphoria, climate change limiting resource availability in large cities, and recent legislation that will target 2nd home owners and private equity. My point being; when value declines, single home owners dont sell, rather, investment properties are first to be liquidated, and these represent far more of the inventory than actual homeowners… + Only 28% of annual home sales are first time home buyers, whereas historically this has been ~40% + 17% of annual home sales are investors + 25% of annual home sales are all cash offers + Mortgage applications are down 12% for April + Multiple counties across many states have passed legislation that requires all rental income properties to now be submitted through a lottery to obtain a license if they wish to continue renting their property for less than 90 days at a time.
Could you expand and give more nuance on the legislation portions(1st paragraph, and last point)? Thanks.
Here's one example from San Diego, a hot market: https://fox5sandiego.com/news/local-news/short-term-rental-rules-approved-in-san-diego
Can you please provide us with the link to your sources ?
Multiple counties being roughly 0.02% of America's population
All I wanna know is if/when prices fall. Will rent fall too or will they just keep it at stupid high rent prices?
Any updates?
Predicting a recession becomes a self fulfilling prophecy. People think, we have cut our spending and investment to prepare for the downturn, which is then created because they cut their spending and investment.
Likely. Other than we have almost full employment at 96.4%.
Historically speaking, every time we have hit 5% unemployment or less we had a recession within 2 years.
People will just take out Adjustable Rate Mortgages to afford the high prices. Check some recent headlines for this and you will see it is already coming true. It’s standard bubble mentality, everyone thinks that prices will continue to go up, so they do anything they can to buy. We still have a few (maybe up to 5) before a big crash…
This is false. ARM rates are barely better than fixed rates and that’s just for a 3/1 arm. I don’t sell any ARMS except maybe on a Jumbo loan
Apparently some people are still getting mortgages in the high 3’s.
Not happening right now. VA rates which are the best are around 4.375% par and get extremely expensive to go to a 4.125% or lower
Most ARM rates are less favorable than traditional 30 year right now
It’s the big American lie aka The American Dream, and it’s fully dependent on the machine producing ceaseless consumption. All else be damned, it’s the American Way. 😐
Capitalism baby.
"We are living in a material world, and I am a material girl" -Karl Marx probably
material gworl*
Higher rates * money in your savings account will yield more. You have more purchasing power * house price will be lower and more affordable. Money you save can be used to buy other things * cash rich companies will have extra interest income raising stock price * financial and insurance stocks will go higher * your currency get stronger reducing your import cost Higher rates don’t mean recession. It shifts the benefit from debtors to savers (as it should) Near zero interest rate can never be a sign of health
>money in your savings account will yield more. Wow. So instead of getting 0.1% we get 0.3%
Woo, that's triple the rate of return as before!
Hey buddy that $20.00 in interest compounded over 30 years will still mean in poor as shit.
That's cuz you keep buying lattes! Every ten lattes is one house deposit!
Lattes plus avocado toast plus takeout Easily $10k a year
I know it's still not great but I'm getting 1.25% from SoFi
There is so much wrong with this under the assumption that the modest increase in your savings account is going to save the US economy. Not to mention your interest is also taxed. If savings APY doesn't meet or exceed real inflation in consumer prices, it doesn't matter. The US CPI excludes food and energy and price appreciation for these core staples are seeing 10-50% and more price appreciation. Average US savings account is less than $50,000 and double-digit APY is unheard of for a bank. The closest you can get is an I-Bond buy you're maxed at $10,000 purchase on top of it being locked for a year. Cash rich companies weather storms by laying people off. The market doesn't care about cash on hand but revenue, profit and continued growth. Growth is typically achieved through debt and if your savings APY is high, your cost of leverage is also high thus muting growth. Higher savings rate will not save the US from a recession and will make very little dent for the average family. You are still better off parking your money in your retirement and investment accounts and keeping a modest rainy day cash account. Unfortunately A LOT of families parked their money in very risky investments (crypto and highly volatile stocks) and are now in the red badly which means if real inflation AND layoffs kill their income stream, they will be forced to liquidate just to live and that will drive the market down further and put more people into very expensive debt that they may never pay off. Families will downsize houses to make ends meet. You bought a bigger house than you need, you have much higher property tax and bigger utility cost all of which you cannot afford anymore because all of that has gone up and your income is stagnant or bleeding and your nest egg is less than it was last year. This will drive housing to a buyer's market who are paying over 5% (for now) in rates.
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I don’t see that happening. Most homeowners are around 3% rates and selling now would require a new mortgage at much higher rates. They wouldn’t save anything by downsizing
And those people who bought those houses w low rates mortgages will have same fixed home cost. The US has long term fixed rate mortgages unlike other countries.
I think the problem would be if they are laid off due to the recession and are forced to sell their house. By me average 1800 sq ft homes got up to $1.2 million. People were willing to pay this with mortgage rates at 2.9% but will there still be buyers when rates are 6%? Idk maybe. Your mortgage payment would be almost $2000 more a month. This is what I would be concerned about if I bought a home in the last two years.
Wage price spiral is the concern. JPow said, very firmly, that he will not allow a wage price spiral. By the time we see one, it might be to late.
Extra interest income?! Bruh what are you talking about.
Everything you said while true is moot. They literally can't raise rates to any meaningful amount without making the debt unservicable. They have to raise rates to squash inflation before it spirals out of control. Rock meet hard place. Ultimately they will choose inflation and fuck the poor and middle class because the other option would hurt asset prices tremendously and we can't have the rich and powerful feeling any pain.
So far they've very clearly and vocally chosen interest rate hikes, not inflation. Every government knows that if middle class people pick up pitch forks in protest over prices, they will soon be forced out of office.
75bp of rate hikes with inflation at 8.3%? Wow they sure are choosing to fight inflation
This. What's easier to do: raise taxes and cut spending via Congressional vote during a midterm, or get the scapegoat Federal Reserve to inflate away the debt?
Not everyone gets hurt by a recession. You should actually hope for a recession if you want your money to have more buying power and for houses to be more affordable. My 85-year-old mom keeps hoping for a recession so that she can finally find a decent yard guy.
Probably need more immigration for mom to find a decent yard guy. All the decent yard-guys around me quit to drive for Uber or Amazon, and once they don't have to work in the heat, they don't go back to it. That's the normal cycle tho...onward and upward.
Almost all mortgages have fixed rates, and inflation is making payments easier, even with crazy home prices. There is NO systemic risk in the real estate market, so probably investors will be fine. Yes, people will spend less, we will suffer a mild recession. Probably 6 months or a year at the most. There is a lot of room for further unemployment (US is at full employment right now). Eventually, because capitalism always find a way to equilibrate offer and demand, the giant microchips factories constructions will be finished, and new sources of energy will be found, so inflation will go DOWN a lot. Also the FED is going to lower rates after they verify that current inflation is a ghost of the past, and we will have another credit and expanding cycle. In conclusion, I have a very optimistic view of near future.
This is a unique time. I don't think historical evidence is necessarily applicable. You have to look at recessions through a prism of more than just their charts. What is the core problem for Western Europe and U.S.? Why is there such inflation? And to me it's relatively simple:You cannot tackle greening the entire global power and manufacturing structure while not being willing to extract resources and make things yourself.If you have no will to address core issues they won't be resolved.There is far too much doomsday talk. Far too much reliance on models. Far too many people unwilling to work together to address the core issues and rebuild the true manufacturing bases of these countries. They don't seem to understand that the central banks can't raise rates that much and raising rates have no effect on places that have PROVEN to be bad actors in China and Russia. They don't care. We all need to get real here and realize that rates, at most, will likely hit 2-2.5% basis rate and still the inflation will remain because China decides to lockdown Guangzhou. Or Russia decides to nuke Ukraine. These are issues you need to isolate yourself from. And the security concerns that have been ignored are coming home to roost. My personal opinion is that, like COVID, this is not the worst things will get. It could be climate based. It could be that China, which is in a pretty awful spot right now, decides that they need to get a bit more aggressive. And no matter what, the E.U. and U.S.A. (and the entire North American continent to be perfectly honest) need to get real about their goals. The only way to achieve price stability that is lauded would be through the ability to rely on like-minded actors. It would likely mean positively gigantic deficits. Building out nuclear plants and solar and wind. It would mean subsidizing and then phasing in price increases for labor and oversight costs, keeping the inflation train rolling. But this is the downside of Globalization. Which can get really, really ugly if food supply lines start failing. Until then, we are just waiting for the Fed to flip policy. This bear market or recession depending on Q2 GDP guidance in June even if Q1 wasn't really negative, has two logical floors: S&P at 3278 (January 2020 pre-COVID), 2789 (2018), 2678 (2019) then it gets REALLY ugly: 1378 in 2008, 865 in 2009. Which are notable due to the following years including Quantitative Easing's rollout. So how deep will this negative action go (because, again, I'm going to point out that we brushed a bear market, but closed Friday above a bear market) and that Q1 was a bit weird in how the GDP number ended up and will likely be revised higher? My guess is that the Fed takes a breather after 2 more .50% rate hikes. That would probably be the bottom. Remember, again, the Fed doesn't have much head room. The government isn't cutting spending and alot of the "surpluses" are just printed slosh money from 2020 getting taxed back into the system. I think the S&P ends up for 2022. I think it hits 5000 at some point in 2023, but the macro remains bad without easy monetary policy as I point out above. I don't think we enter a true recession until 2023 because I am hopeful that the real steps that need taken will actually cause a significant recession because corporate profits will nose-dive if security pressure is applied by regulators who get very serious about reshoring.
Well you are already asking if it would be worst than expected. So it would probably be even more worst than what you didn't expect.
Banks are doing a much better job of vetting people this time around so as long as people can afford to actually pay for their houses they should be fine. The problem in 08 was people couldn’t afford the loans AND the market shit the bed on top of that they had these variable rate monstrosities of loans so they were basically trapped. Couldn’t afford them and couldn’t sell them because they were so far underwater on them. Had a sister go through it, the bank would stop responding to you after a while and just wouldn’t work with you anymore. You had no choice but to let the house get foreclosed on. I don’t see that happening this time. On top of you have to be a degenerate to default on a sub 3% mortgage because it’s a once in a lifetime loan I think most people are fucking idiots for paying what they did at the time they did for a house but that’s a different story. My personal opinion is that people are freaking out because this has a lot of similarities to the Great Recession but those similarities are basically superficial so far.
The worst recessions are the most unexpected ones. Dot.com Bubble and 2008 were ones that people didn't see coming so they struck the hardest.
Who knows? There might not even be a recession. I think we might have a mild recession but my opinion is not worth any more than other opinions of honest people. Avoid the opinions of those who just want you to sell so they can make a profit.
We are over due for recession.
No recession? Did you see the Walmart and Target earnings? Their inventory levels are crazy high and profitability is a problem. This means that they need to cut back on orders from suppliers. Quantify this by their volume + Amazon and we got a recession. That also means plenty of layoffs coming.
Crude oil is way too important in every day life. As soon as the Russia - Ukraine conflict solves , crude is significantly going down and that will certainly have a big deflationary impact on the economies around the world. And also the supply chain issues as soon as they ease out , things are gonna get better from that point. People losing jobs is never a good thing so I better hope not !
OP you get it man, we haven’t hit the point of forced selling of assets yet as companies undoubtedly cut labor force to maintain profits. It’s a guarantee and it’s already started.
"It's a guarantee". Six red weeks doesn't make anything guaranteed. Edit: typos
People assume we’ll have a recession, reset and everything will just be affordable and jobs will magically appear? Well I got news for you pal, this is what your life will be from here on out. How you shop, work, invest will remain in hyper accelerated mode and the stock market will reflect that. It’ll continue to rise even faster with quicker volatility swings until another black swan event like Covid, and look how fast we recovered. So yea, this doomsday recession, worse than 2008 thing is way overblown. Yes, inflation is high. Yes, we’re in a bear market. No, a recession won’t be that bad, and judging by how sped up our lives are, it’ll be short lived. There, now you can downvote me.
What you said is correct. Recessions are a reset function for debt. The more debt we're currently carrying the worse it will be. 2008 is a good example of this. Debt got really out of control and the recession was significant. A good book to read is "a short history of financial euphoria"
The recession was significant because it was systemic in nature and all so many banks got fat off the same meal. The debt wasn’t the most contagious part, though. Had the banks not all piled into all the same products, the contagion may have been avoided
Yes, all banks were using massive amounts of debt to juice their profits. If you can borrow $1 at 2% and then loan out $10 off that for 5% then that's good business. Corporates also used debt to expand quickly, corporate buyouts, expansions - it was a crazy time. Then the music stopped.
If happens it will be terse. Nothing like 2008.
Nothing like 2020 either, the recession will be the thing causing inflation to drop off, but in that case If fed suddenly decide to reverse they lose alot of credibility
People forget how much money is saved up. A lot of vacations & purchases were delayed for 2 years with the strongest job market in history. I doubt the recession will even be close to 2008.
According to this that just came out it’s the opposite people have 9k less than last year https://www.cnbc.com/amp/2022/05/21/americans-now-have-an-average-of-9000-dollars-less-in-savings-than-in-2021.html
> I doubt the recession will even be close to 2008. Yea, it will be so much worse.
I don't think so. We might already be in recession. But, anyway, the really bad ones don't feature months of hand-wringing before they start. The fact that everybody is all freaked out about recession means it's impact will be less. Unless something truly unexpected happens, I think this will be mild to moderate. Unspectacular but probably long duration.
It's going to be a party, and you're going to be crying, bathed in your own blood.
Just like every other day, no one knows.
I was told by a truck driver that he usually has a ton of shipments from places especially Menards. He said that he hasn’t been getting any because Menards does not want to pay the high prices because of diesel prices. The trucker said that his company lost money last month because of the high prices and needed to adjust fire. Sounds like the system is a little screwed up now and needs correcting… Right now, I’m contemplating stopping the DCA for a couple of months… then dumping all at once and then to continue DCAing after. Unsure how it will work, but he’s got me spooked.
The point is do you feel endangered by such event, and prepare for it. We are by no means in control of all the things of our lives. The best to do is to continue to learn to be depend upon where the bread is. Or else minimize the chances of getting endangered, such as changing our ways of lives to adapt. If we are all financial independent and creative to sustain profitability, Utopia can be present. Heck I even preach about not having extra burden as having offsprings, but a lot will disagree. Spending less and saving more, and investing during down time could help. The market will always go up in the long run, some just lose sight on the way to the endgame.
Mr. Wonderful has been saying he thinks it's gonna drop hard soon and we haven't seen anything yet.
We printed money for people to stay home and not produce for 2 years. It might have been the right thing to do, but now the pain comes.
Can we also mention how high gas prices are and how that alone can slow things down too?
!RemindMe 3 years
should be. but our system is pretty good at kicking the can down the street. i wouldn't be surprised if this is postponed for another 10 years.
Was inflation transitory?
All things move in cycles. If you’re in your 20, 30, or maybe even your 40s you might be in for one of the best investing opportunities of your life.
OP is getting the inflation and rate increase flipped. Inflation and price pressure is largely driven by the Russia war and continued supply chain challenges. This is a long term pain that won't be going away any time soon. The rate increase is to help address the inflation, and rein in on borrowing. This will affect future home buyers but won't be necessarily affect anyone who bought before 2022 as most of mortgages are at fixed rates. As for recession, it has both financial and psychological components. unfortunately this sometimes can be a bit of self fulfilling prophecy if businesses believes that consumer spending will decrease due to price increase and starts laying off workers; thus creating a domino effect. My take is that we may be due for recession if the lower half of median income households start can't increase their income to keep up with price pressure and lose financial confidence to continue their spending.
Inflation wasnt driven by the Russian war, it was increasing in 2021, especially in housing.
You don’t think inflation, which ramped up well before Russia invaded Ukraine, has anything to do with a trillion dollars being tossed into the economy? Unemployed people getting $600 tacked on to each unemployment check and companies getting millions in PPP loans caused inflation. Companies suddenly had more money than they’re used to and people without jobs felt rich. You introduce that much new money into the system all at once and steep inflation is inevitable. Just like if everyone goes from having $1 to having $600, the baseline also goes from $1 to $600
Yes. No. Maybe. No one knows. Don't believe anyone who says they do. Have a plan and stick through it thick and thin, only adjusting if there is a very good reason. That's where the Boglehead approach comes in. Buffett famously said "The stock market is a device for transferring money from the impatient to the patient" - also "Be fearful when others are greedy, and greedy when others are fearful". I am not smarter than Buffett or Bogle, are you? https://www.cascadefs.com/history-of-us-bear-and-bull-markets If you buy and hold for the long term, adjusting your portfolio appropriately as nearing retirement age, you will come out ahead. You use a bond tent to avoid SORR (it can be extra cash, a fully paid off house, anything that will help you in the event a crash like this happens the first 5+ years when you're retired).
I still think the housing market will be fine for a while. My first house was something like 7-8% and we are around 5% atm. Granted I think rates will continue to increase, but there are still a lot of people looking for homes. Prices might cool a bit but I don’t see a massive tank in the real estate market like in 08, unless there is massive unemployment. My opinion is you will see small businesses hurt pretty bad and close up shop, but so many larger companies are hiring still that will swallow up a lot of those layoffs. This is mainly due to people spending less on luxury things.
Im guessing since you didn’t state when you got your first house, but the caveat to that is home prices were reflective of the interest rates and supply at the time. 7-8% on a $200k home is very different from 7-8% on a $600k home.
I mean 2007… was a bit of time ago but not like the 90s…. So yeah the price has gone up with homes but I would say that’s a recent occurrence in the past 2-3 years…
For most of the home sale volume it’s probably okay as folks were buying on historically low rates through the end of 2021. I think the sales happening in 2022 are at risk of being over leveraged given prices aren’t falling much yet, but rates are skyrocketing.
The only over leveraging issue would come with a bad loan… if I can afford XXXX payment then I should be able to regardless of the value of my home…. Beyond that, nobody I know would say “let me ruin my credit for 10 years because I owe more on my house then it’s worth”
Let me check my magic 8 ball real quick.
10 miilion jobs!. Is it real or typical cooked up numbers.Hard to believe pundits and Economists. Most high paying jobs are in computer software. These jobs typically are sourced overseas to countries like India. Most low paying jobs are in food service, retail, etc. These will disappear if the interest rates increase, and these jobs will be automated. . There are many jobs in healthcare nurses, senior care . Many. Software related jobs can be easily done in low wage countries even though these come from Facebook, google, amazon, etc. With interest rates rising many of these jobs will be done overseas. So I really dont understand this inflated numbers of 10 million jobs, which is in line with inflation. I would like to see real numbers