The Recession is in whether you agree or not
Actualizado
The Recession formula:
1) Unemployment rate under 4.5% ---Check it's at 3.6% as of March
2) Fed is feebly attempting to un-fuck QE since 2013. These shots of 50 basis points are not enough; a true adrenaline shot is needed; 500 basis points!! ---Check fed raising rates
3) US GDP below 2-3% ---Check its at 1.4%
The explanation is simple - Everyone is at work making money, markets been on a tear for 10 years, everyone has become an expert in trading and investing. Can't run into anyone that isn't involved with the market. This scares me. Inflation has run rampant devaluing the dollar causing prices to surge, the stock market particularly getting a double dose of adrenaline, one arm with the Fed pump, the other from the millions of retail "traders" that have entered the markets. Companies have seen north of 87% revenue growth due to low interest rates to finance money and record low unemployment to qualify to boost stock prices even more. But now with the Fed trying to pull their heads out of their assess and raising rates, people can no longer finance money for purchasing power. Now the demand for all market classes is dwindling. Now the big box companies and soon the small businesses are going to see the 6–12-month projections and realize that they can 't continue production at the rate that they are currently producing. Now they have to consolidate, tightening the belt and letting people go. This is where things start to pick up. Now the car note, mortgage grocery bill can't be paid, and the lifestyle cannot be maintained because the revenue source is gone. Production employees can no longer use services companies anymore because they can't afford it. Those small businesses and even large ones that provide those services, they dry up and those employees now join the unemployment express straight to hell...and we haven't even touched on company pension plans and 401ks that will be thrashed as well.
The pieces to the recession are key and you need all three for it to work. We have officially reached that point with the GDP. I am no financial advisor; I do not hold any accredited accolades; I did not graduate college. II am a student though of those that have ridden this ride and have come out on the other side. I hope that you head my warning and have secured your finances - and not in crypto either. Nothing is going to be safe from this move down - stay cash heavy because there is going to be a fire sale on everything!!
The Fed has no more moves but to raise interest rates. The game is up, the pain is only going to get worse and those financing right now especially on property is going to feel really shitty come a year from now imo. Always could be proven wrong but history always repeats itself and right now all the writing is on the wall. If you are old to remember the 2008 -2009 recession it was a painfully long climb out of that hole. This is going to be 1980's all over again but exponentially worse due to the amount "players" that are involved now. This pandemic sell off is not the same thing...we quickly recovered, and it was event driven. This mess that we are about to enter will not be quick, will be global and will take a very long time to recover from. As always, the market prevails, and light will shine again but we have reached max altitude for now and have stalled the aircraft.
1) Unemployment rate under 4.5% ---Check it's at 3.6% as of March
2) Fed is feebly attempting to un-fuck QE since 2013. These shots of 50 basis points are not enough; a true adrenaline shot is needed; 500 basis points!! ---Check fed raising rates
3) US GDP below 2-3% ---Check its at 1.4%
The explanation is simple - Everyone is at work making money, markets been on a tear for 10 years, everyone has become an expert in trading and investing. Can't run into anyone that isn't involved with the market. This scares me. Inflation has run rampant devaluing the dollar causing prices to surge, the stock market particularly getting a double dose of adrenaline, one arm with the Fed pump, the other from the millions of retail "traders" that have entered the markets. Companies have seen north of 87% revenue growth due to low interest rates to finance money and record low unemployment to qualify to boost stock prices even more. But now with the Fed trying to pull their heads out of their assess and raising rates, people can no longer finance money for purchasing power. Now the demand for all market classes is dwindling. Now the big box companies and soon the small businesses are going to see the 6–12-month projections and realize that they can 't continue production at the rate that they are currently producing. Now they have to consolidate, tightening the belt and letting people go. This is where things start to pick up. Now the car note, mortgage grocery bill can't be paid, and the lifestyle cannot be maintained because the revenue source is gone. Production employees can no longer use services companies anymore because they can't afford it. Those small businesses and even large ones that provide those services, they dry up and those employees now join the unemployment express straight to hell...and we haven't even touched on company pension plans and 401ks that will be thrashed as well.
The pieces to the recession are key and you need all three for it to work. We have officially reached that point with the GDP. I am no financial advisor; I do not hold any accredited accolades; I did not graduate college. II am a student though of those that have ridden this ride and have come out on the other side. I hope that you head my warning and have secured your finances - and not in crypto either. Nothing is going to be safe from this move down - stay cash heavy because there is going to be a fire sale on everything!!
The Fed has no more moves but to raise interest rates. The game is up, the pain is only going to get worse and those financing right now especially on property is going to feel really shitty come a year from now imo. Always could be proven wrong but history always repeats itself and right now all the writing is on the wall. If you are old to remember the 2008 -2009 recession it was a painfully long climb out of that hole. This is going to be 1980's all over again but exponentially worse due to the amount "players" that are involved now. This pandemic sell off is not the same thing...we quickly recovered, and it was event driven. This mess that we are about to enter will not be quick, will be global and will take a very long time to recover from. As always, the market prevails, and light will shine again but we have reached max altitude for now and have stalled the aircraft.
Nota
- Major structural price level(s) have been broken.- Economic data continues to be grim.
- Fed still hasn't started clearing their balance sheets
- Inflation still high with more room to run
but really has me concerned in a repeat of the 2008 housing market crash. The last 2 years people have been purchasing properties (and corporations) at 2-3x fair value. These properties are worth 6-7x net annual household income. Historically, these properties should only be 2x annual household income.
Additionally, adjustable mortgage rates are at a 14 year high with people foolishly financing themselves into a financial disaster. These unfixed rates will purge them from a property that will by itself, send the owner underwater once the value depreciates. But additionally the adjusted rate will send them into foreclosure.
Now financial institutions say "you can just refinance at a later date, build a bit of equity and then ask a lender to refinance". The uneducated are baited at this point accepting a adjustable rate. These banks will not touch a toxic asset once the house of cards collapse. They WILL NOT refinance a property with zero equity. These people (and there are millions) who will be at a lose and homeless. There wont be an option to bail people or companies out. This country has ran out of rope and is going to hang by all of it.
Nota
Downside will continue to gain momentum at this point. Geopolitical tensions now rising in China will effect the volatility IF things become dire. The Fed must raise interest rates; no doubt that this will happen as inflation is running rampant. Bottom line - price action post Feb 2020 is fantasy land zone. This was all hyper inflated by the central banks to prevent a market collapse due to "the pandemic". Really what should have happened was a collapse because that would have been logical sense (no business' open no commerce). Instead balance sheets continued to grow and people kept investing in companies that have 0 profits!!! Now here we are facing the music.
My price prediction has us returning to the pre pandemic high HOWEVER, it needs to be noted that it may not stop there. QE has been going on since 2013 and if the geopolitical game board sentiment doesn't change over in China, then we could be looking at a world order challenge which would put the USD in the crosshairs.
Nota
Russia raises interest rates to 20%. This will be felt across the globe. This has not been "priced in". Additionally, prices continue to rise state side and around the world but people are still living their lives as normal maintaining the cost of living life styles they have been accustom to. Could this be leading to a credit bubble?
Nota
CPI at 8.6% added more downward pressure today. This is far from over.Nota
with the change in policy this has inadvertently changed the narrative. The continued spending and paper printing will cause prices to rise and generate false security values. Ride the wave at this point - changing my position and going long.
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