Recession coming?

[+ augustus]

3 hours ago, SouthOfTheBorder said:

the biggest threat to the American economy is political instability.  If something happens where the US is no longer regarded as the safe-haven for global investment & deposits, then all bets are off.  Be careful what you wish for.

Unfortunately for your theory, it wasn't political instability that caused the Euro Crises of 2009.  It was excessive national debt levels.  You see, when people begin to suspect that their savings won't be paid back, they head for the exists.  

[BSR]

2 hours ago, augustus said:

Even the IMF said recently when the recession hits in the US it will have been caused by the excessive debt levels here, particularly the Federal Government. 

We have hit record highs of credit card debt, school loans, home equity loans, commercial loans, and federal govt debt.  But according to some, the economy is just fine and recession will not happen.  Even worse, these same starry-eyed optimists accuse those of us worried about unprecedented debt levels of pushing a political agenda or a preferred narrative.

Yeah, uh huh, just keep insisting it's just a flesh wound ...

[+ stevenkesslar]

20 hours ago, augustus said:

That has barely kept pace with inflation. 

Thanks for confirming my point.  The sky is falling!  The sky is falling!  The sky is falling!

I read @EZEtoGRU's point about staying on the topic of recession.  So I will only focus on how the two things are related.

I'm actually a bit surprised how pissed so many people are about inflation.  I don't feel the sting.  But I'm a Gay man with a decent income and high net worth.  Which I think is the point.  Everyone in my family and friends who is like me feels about the same.  

The people I know who bitch about inflation are people with lower incomes struggling to get by.  My tenants are among them.  They are working class families with kids, mostly, who are mostly one paycheck away from doom.  The main way I have contributed to their fate is keeping all their rents way below market rate.  It helps me, because they are stable tenants who don't move.  But they don't have much net worth.  And I'm pretty sure inflation in a family with kids hurts a lot more.

I think what the polls say loud and clear is that young people are the most pissed.  Because they are the least likely to own homes or stocks.  Because they are young.  And they are the most likely to be paying rents that have gone up a lot.  So it probably feels like no gain, all pain.  That is factually incorrect.  Because as I noted above their net worth doubled.  Prices did not double.  But if what that means is you have some stocks that you don't touch, and meanwhile your rent goes up a lot, you might be pissed.  Even if your income is going up as well.  At some point, if you have to spend less, that could cause a recession.

Now that student loans kicked back in, the best estimates seem to be it could shave a fraction of 1 % off GDP growth.  So that won't kick an economy growing in the most recent quarter at 5 % into recession.  But 40 % of borrowers missed their first payment.  So it has to be causing some pain.

Meanwhile, the two thirds of America that own homes, who tend to be older, are making out like bandits.  I'll personalize it.  My monthly housing cost is about $2000 a month, which includes a mortgage with taxes and insurance.  How much has it gone up since 2019?  Pretty much zero.  And it is far and away my biggest monthly expense.  Now my pool servicing has gone up.  I'll guess maybe $25 a month.  Life sure sucks, doesn't it?  Meanwhile, my home equity is just not keeping pace.  It only went up about $200,000 since 2019.  Life sure sucks. doesn't it?  Somehow, I can manage to pay the $25 more a month to service my pool.  And the extra $30 or whatever it is that groceries may cost when I go to the store.  If we have a recession, please don't blame it on me.

I think the broader economic principle is that when people have higher net worth, they tend to spend more and save less.  As I noted above, that is exactly what happened in the 1990's.  And, by the way, we used some of that growth to pay down government debt.  There's a thought! 

You can say that it is good or bad.  But it is real.  And it drives economic growth, not a recession.

Edited December 19, 2023 by stevenkesslar

[+ stevenkesslar]

56 minutes ago, BSR said:

We have hit record highs of credit card debt, school loans, home equity loans

That's just not true.  We are actually closer to record lows.  Please fact check.

Household Debt Service Payments as a Percent of Disposable Personal Income

You may or may not like the fact that two Presidents in a row sent most Americans free money.  Factually, it did help drive consumer debt levels to record lows.  Factually, we have recovered to average low levels of debt, rather than average high levels of debt.  I'm talking about consumer debt, not federal government debt.  So relatively low consumer debt and relatively high consumer net worth would all drive economic growth, not recession.

[EZEtoGRU]

Inflation drops below 3% in November. Recession likely avoided. 
 

Inflation finally dips below 3 percent as U.S. economy nears 'soft landing'

STOCKS.APPLE.COM

---

A key annual inflation metric fell below 3 percent in November, the latest sign that the U.S. is coming...

 

[+ augustus]

4 hours ago, EZEtoGRU said:

Inflation drops below 3% in November. Recession likely avoided. 
 

Inflation finally dips below 3 percent as U.S. economy nears 'soft landing'

STOCKS.APPLE.COM

---

A key annual inflation metric fell below 3 percent in November, the latest sign that the U.S. is coming...

 

Inflation slowing from an excessive rate does not mean a recession is likely avoided.  It is not necessarily a direct corollary. 

[+ augustus]

On 12/19/2023 at 4:44 PM, stevenkesslar said:

That's just not true.  We are actually closer to record lows.  Please fact check.

Household Debt Service Payments as a Percent of Disposable Personal Income

You may or may not like the fact that two Presidents in a row sent most Americans free money.  Factually, it did help drive consumer debt levels to record lows.  Factually, we have recovered to average low levels of debt, rather than average high levels of debt.  I'm talking about consumer debt, not federal government debt.  So relatively low consumer debt and relatively high consumer net worth would all drive economic growth, not recession.

That's true.  Household debt in nominal dollars is at a record high, but it is not at a record high in inflation adjusted terms or as a percentage of GDP (although it's pretty close).  What definitely is out of control in any terms is the Federal Government's debt level.  It's horrendous.  Worse than 1945 coming out of World War II.  

[+ stevenkesslar]

1 hour ago, augustus said:

That's true.  Household debt in nominal dollars is at a record high, but it is not at a record high in inflation adjusted terms or as a percentage of GDP (although it's pretty close). 

Actually, it's not near a record high as percentage of GDP.  As a percentage of disposal income it  is closer to a record low.

There's no question that some combination of "free money" (which means federal debt) and "enforced savings" (meaning I can't go to Paris or Disneyland) reduced pandemic consumer debt to a low, not a high, as a percentage of disposal income.  So we are BELOW where we were at the beginning of a long boom in the 1990's.  As a percentage of GDP, consumer debt is way below where it was during the Great Recession.  Consumer spending is not the only thing that fuels the US economy.  But it is the biggest thing.  So this is a big reason why we have not had a recession, and we may not have one.  Consumers are ready, willing, and able to spend.

The virtuous cycle in the 1990's was that the economy grew, people made more money, people paid more taxes, and some of that money was used to pay down federal debt.  Which helped the economy grow.  Rinse, wash, repeat.  So if we can somehow figure out how to do that again, we could create the same virtuous cycle.  

Carville was right about the bond market.  Which is as good a symbol as any for the beating heart of American investors.  If we want a good investment future, this is what we will somehow figure out.  While consumers have lots of money to spend and taxes to pay.  If we just party like it is 1999 and don't pay down debt, it will be much harder when we have the consumer debt levels we did in 1999.  Or 2009.

 

Edited December 22, 2023 by stevenkesslar

[+ augustus]

Holy Smokes....Google is going to lay off 30,000 employees and replace them with AI.

[+ stevenkesslar]

 

The Absolute Worst Predictions of 2023

PREDICTED BY: A WHOLE LOT OF PEOPLE …

• CNBC, Oct. 10, 2022: “JPMorgan’s Jamie Dimon warns U.S. likely to tip into recession in 6 to 9 months”
• Bloomberg, Oct. 17, 2022: “Forecast for US Recession Within Year Hits 100% in Blow to Biden”
• The Economist, Nov. 18, 2022: “Why a global recession is inevitable in 2023”
• Bloomberg, Dec. 6, 2022: “Wall Street Chorus Grows Louder Warning That 2023 Will Be Ugly”
• Wall Street Journal, Jan. 2, 2023: “Big Banks Predict Recession, Fed Pivot in 2023”
• Fox Business, Feb. 6, 2023: “Bank of America ‘still forecasting’ 2023 recession”
• POLITICO, April 4, 2023: “Jamie Dimon warns of new economic storms ahead”
• CNBC on April 12, 2023: “Fed expects banking crisis to cause a recession this year, minutes show”

Edited December 29, 2023 by stevenkesslar

[EastCoastBtm]

On 12/19/2023 at 3:43 PM, BSR said:

Even worse, these same starry-eyed optimists accuse those of us worried about unprecedented debt levels of pushing a political agenda or a preferred narrative.

Or those trying to revive the Political Forum through posts in other forums?

[+ stevenkesslar]

On 12/19/2023 at 12:43 PM, BSR said:

Even worse, these same starry-eyed optimists accuse those of us worried about unprecedented debt levels of pushing a political agenda or a preferred narrative.

 

4 hours ago, EastCoastBtm said:

Or those trying to revive the Political Forum through posts in other forums?

I agree with @BSR on this one.  To put it in apolitical terms, it goes like this.  It is a fact that my Dad was always a conservative.  It is a fact that I have always been a liberal.  We were both deficit hawks.  In fact, since I got my values from him, he made me a deficit hawk.  Neither one of us viewed it as being a particularly ideological or partisan thing.  It was more the idea that you just don't do things that don't make financial sense.  You don't bury yourself in debt so deep you can't get out.  It is a very bad investment strategy.

I think most Americans see it that way.  

NEW SURVEY: 9-IN-10 VOTERS CALL FOR BIPARTISAN FISCAL COMMISSION AS NEW SPEAKER TAKES HELM

To paraphrase one of the poll results, 90 % of Americans agree that the huge national debt is a problem that needs to be addressed on a bipartisan basis.  I think it would be better if we could all agree that it is not primarily a political problem.  It is an investment problem.  If all of us want a growing stock market or a stable and growing real estate market, this just doesn't help. 

Stated even more simply, 9 out of 10 Americans have basic financial common sense.  We don't want to be buried in debt.  So, like in the 1990's, we should focus on the fact that some type of compromise to do something about massive debt that creates a bad investment environment is doable.  And, just like in the 1990's, it can be done if we all insist on it.

A Surplus If You Can Keep It:  How The Federal Budget Surplus Happened

Quote

Last July CBO estimated that annual budget surpluses would rise from $161 billion in 2000 to $461 billion in 2009.

[Kevin Slater]

Let's not stray too far from the topic of this thread: is a recession coming? 

Kevin Slater

[TonyDown]

16 hours ago, stevenkesslar said:

 

The Absolute Worst Predictions of 2023

PREDICTED BY: A WHOLE LOT OF PEOPLE …

• CNBC, Oct. 10, 2022: “JPMorgan’s Jamie Dimon warns U.S. likely to tip into recession in 6 to 9 months”
• Bloomberg, Oct. 17, 2022: “Forecast for US Recession Within Year Hits 100% in Blow to Biden”
• The Economist, Nov. 18, 2022: “Why a global recession is inevitable in 2023”
• Bloomberg, Dec. 6, 2022: “Wall Street Chorus Grows Louder Warning That 2023 Will Be Ugly”
• Wall Street Journal, Jan. 2, 2023: “Big Banks Predict Recession, Fed Pivot in 2023”
• Fox Business, Feb. 6, 2023: “Bank of America ‘still forecasting’ 2023 recession”
• POLITICO, April 4, 2023: “Jamie Dimon warns of new economic storms ahead”
• CNBC on April 12, 2023: “Fed expects banking crisis to cause a recession this year, minutes show”

In those articles, they quote Jamie Dimon predicting economic "headwinds" coming 

and more recently that economic

"storms" are approaching, which sounds worse, right?

One thing for sure, we might all agree with Dimon when he warns

 “...you can’t talk about the economy without talking about stuff in the future — and this is serious stuff,”

No wonder he leads the biggest of the big banks.  

 

I recall the last recession followed a financial implosion that was caused by misbehavior of large institutions after shadow investments on Wall Street were deregulated.

 

In more recent times, bank failures were in the news.   Were those an anomaly?   Perhaps so, because GDP has been rising since those failures.  

That said, I believe a recession will come.  They always do, right?

Frankly, I don't believe the big banks or Jamie Dimon know what stuff will ultimately be the cause.  Hopefully he will just stay out of the way and not add to the "stuff" our economy encounters. 

 

Edited December 30, 2023 by TonyDown

[+ stevenkesslar]

2 hours ago, TonyDown said:

In more recent times, bank failures were in the news.   Were those an anomaly?   Perhaps so, because GDP has been rising since those failures. 

If I had to name one thing that would drive a recession in the next year, it would be commercial lending.  There was some recent report that up to 500 banks, mostly regional, are at risk.  Because they have a lot of loans on their books to office buildings and retail that were negatively impacted by COVID. 

So far, that's a theory.  As you said, I don't think any of these geniuses know what is going to cause a recession.   They'll figure it out with 20/20 hindsight. 

The poster child for that is subprime.  I thought it was obvious that there was a massive housing bubble that was going to burst.  In part because they were really toxic loans, designed to blow up.  But Alan Greenspan, for one, didn't see it coming.   Something similar is not at all apparent to me on commercial loans.  Yes, they are under stress.  Yes, lots of those loans have to be refinanced in 2024 or 2025 at higher rates.  But will it cause some big explosion like subprime?  That's very murky.  We'll know it when it happens.  if it happens. 

Meanwhile, Glenn Neely's prediction six months ago that we'll be at S & P 5500 by Summer 2024 or so is looking more likely.  We're now half way there.

I don't buy all the pessimism about consumer debt and consumer financial stability.  Yes, inflation sucks.  Yes, I want my fucking Big Mac for 25 cents, like in the good old days.  But, that said, 2 in 3 Americans own homes with low fixed rates.  Middle America's average net worth went way up.  Consumer debt balances were at all time lows during COVID, and have now simply returned to the low side of normal.  Consumers are the ones who will drive prosperity, not a recession.  Even if what a Big Mac costs does suck.

I brought up the federal deficit because a lot of smart people - Druckenmiller, Dalio - argue that could cause a huge financial crisis.  But they are not saying that is imminent, or anytime soon.  We have time to get our shit together before anything like that hits, at least in their minds.

Edited December 30, 2023 by stevenkesslar

[+ bashful]

On 12/8/2023 at 12:16 PM, EZEtoGRU said:

Yes...but...people want to live much larger today than they did 60 years ago.  The typical household has a much bigger house than before and on a much bigger lot.  Two or three cars instead of one.  People take much more luxurious vacations now than before.  A week at the cottage will no longer do.  It needs to be at least two weeks during the summer in Italy and then a one week winter cruise to the Caribbean... plus a long weekend in Las Vegas somewhere in between. 

I wonder if an average one salary household could sustain a family today if they lived like folks did in the 50's/60's: in a 1500 sq ft bungalow on a 5,000 sq ft lot.  One car and a one-week summer vacation on the lake up north in a small rented cottage.  

This was my childhood.  A 3 bed, 1 bath Detroit bungalow for six of us.  A week up north every summer.

[marylander1940]

On 12/19/2023 at 11:33 AM, BSR said:

I am on topic.  If/when a recession hits, something will have caused it.  I think that cause will be unprecedented and unsustainable levels of debt.

Before the Lehman Brothers bankruptcy, similar conversations were taking place between those predicting bad times ahead and those insisting the economy would keep chugging along.  Hard to believe now, but plenty of people in the aughts insisted that the good times would keep rolling.  In fact, those people then sounded a lot like some of the posts in this thread.

Nothing in recent times compares to the 2008 great recession, not even the self-inflicted Covid-19 economy shutdown. 

What did you want Greenspan, W and others to do... yell the sky is falling and provoke a bank run? 

 

[BSR]

The 2008 recession was caused by a crisis of subprime lending.  Banks lent $billions to unqualified buyers who (surprise!) couldn't make good on the loans.  This time, I think the recession will be sparked by a crisis in commercial lending. 

Left, right & center, real estate companies are giving up on commercial properties, leaving banks with $millions unpaid and commercial properties worth a fraction of their initial selling or development price (sound familiar?).  Unlike the 30-year fixed mortgage on the residential side, commercial real estate loans have variable interest.  The increases in the prime lending rate have resulted in many foreclosures.  The high vacancy rate (work from home, pandemic aftermath) means even more foreclosures.

As much as you hear about a "soft landing," I have grave doubts.  If the powers-that-be do pull off a soft landing, it'll be a miracle.  So here's to praying for a miracle.

[+ augustus]

The people have less spending money because prices have come up much faster than most people's pay. This is why we are seeing expansion in poverty for the first time in decades and a shrinking of the middle class. The number of jobs doesn't matter when they are working poor jobs.   My Big Mac meal has gone from $8 to $13 in just 3 years.  That's an increase of 60%!

[+ augustus]

The California Teachers Pension fund announced they are seeking a loan for "liquidity purposes" so that they don't have to sell their assets at "fire sale prices"........Translation: their private equity portfolio has turned to crap.

[+ augustus]

I have a very difficult time comparing 2024 to past business cycles as people like to do here.  Big bloated federal government back then compared to unbelievably huge monstrous bloated federal government in every aspect of our lives. I think it is like comparing a stick of dynamite to a hydrogen bomb.  It’s only matter of time before this debt fueled growth comes to an end.

Total Treasury debt at end of 2000 was approx. $5.7T and is now over $33T. Federal budget deficit is over 6% of GDP now during an economic EXPANSION. OMB forecasts over $2T in annual deficits WITHOUT a recession over next 10 years.

Things are just peachy!

Edited January 5 by augustus

[EZEtoGRU]

Let's get back to facts and the real world.  The December jobs report came in today and blew past expectations indicating that the US economy remains strong and resilient. there is no recession in sight.   Facts actually do matter.

The US economy added 216,000 jobs in December | CNN Business

WWW.CNN.COM

---

The US economy added 216,000 jobs in December, according to Bureau of Labor Statistics data released Friday, blowing past expectations and capping off a year of...

 

Edited January 5 by Kevin Slater

[BSR]

12 hours ago, EZEtoGRU said:

Let's get back to facts and the real world.  The December jobs report came in today and blew past expectations indicating that the US economy remains strong and resilient. there is no recession in sight.   Facts actually do matter.

Some facts about that rosey jobs report ...

US Labor Market Summarized:

1. 10 out of the last 11 jobs reports revised lower

2. ~25% of jobs gains in 2023 ultimately revised away

3. Government jobs accounted for 25% of December jobs gains

4. Part time jobs UP 762,000, full time jobs DOWN 1.5 million in December

5. Full-time job gains are FLAT for 2023 while part-time is up sharply

6. Inflation adjusted earnings ~3% BELOW 2021 levels

But still, the initial jobs number beats expectations and prints headlines before being revised lower.

Source:  The Kobeissi Letter

[+ augustus]

16 hours ago, BSR said:

Some facts about that rosey jobs report ...

US Labor Market Summarized:

1. 10 out of the last 11 jobs reports revised lower

2. ~25% of jobs gains in 2023 ultimately revised away

3. Government jobs accounted for 25% of December jobs gains

4. Part time jobs UP 762,000, full time jobs DOWN 1.5 million in December

5. Full-time job gains are FLAT for 2023 while part-time is up sharply

6. Inflation adjusted earnings ~3% BELOW 2021 levels

But still, the initial jobs number beats expectations and prints headlines before being revised lower.

Source:  The Kobeissi Letter

This analysis is shocking and speaks volumes about what really is happening.  Things are not well!

[+ augustus]

On 1/5/2024 at 9:59 AM, EZEtoGRU said:

Let's get back to facts and the real world.  The December jobs report came in today and blew past expectations indicating that the US economy remains strong and resilient. there is no recession in sight.   Facts actually do matter.

Let's..........THE REAL WORLD:

Americans Hold Grim View of Economy - Suffolk University

WWW.SUFFOLK.EDU

---

First-ever Sawyer Business School/USA TODAY poll shows that despite declining inflation rate, 70% of Americans believe economy is getting worse, not better