OT: Recession in the works

[2300 Nueces]

I was incorrect. It looks like we won't make it quite to recession(bear mkt s&p). The bottom is probably going to be in within the next 2-3 weeks. I look at the supply of $$ in the econ.. I did not take into account the cash brought in from Trump's tax plan which allowed corps. to bring back off shored profits. The corp buybacks have really buoyed the market compared to what the selloff could have been. Business has been slow but the market has fared well. Anyway, bottom in soon. Fed will prolly not hike on Wednesday.

Why? 3 things:

1. Fed has been selling all kinds of bonds into the decline which dries up liquidity. This will continue.
2. Treasury has been holding funds for tax cut in spring.
3. Fed has been hiking fed funds rate. This will prolly end Wed..

Corp buybacks, rate hike termination with money flowing back into econ through tax cuts will move market higher into late winter to spring and summer. It's going to be slow tho.. It will be enough to create a floor.

 

[westx]

I was incorrect. It looks like we won't make it quite to recession. The bottom is probably going to be in within the next 2-3 weeks. I look at the supply of $$ in the econ.. I did not take into account the cash brought in from Trump's tax plan which allowed corps. to bring back off shored profits. Anyway, bottom in soon. Fed will prolly not hike on Wednesday.

I was thinking it would be a longer decline. But, you are definitley more in tune with it. I plan to remain on the sidelines for a while.

 

[LonghornMM]

I was thinking it would be a longer decline. But, you are definitley more in tune with it. I plan to remain on the sidelines for a while.

Yes. By putting your money into the money market, you won't have any gains, but at least you won't go backwards and lose money during a bear market, which is what is happening now.

 

[clob94]

We have the lowest unemployment rate in our lifetimes. There are currently 7 million jobs that need filled.

Apple, google and facebook are each building MASSIVE new servor facilities and campuses across the nation.

This dip has nothing to do with the economy. It has to do with elections.

 

[LonghornMM]

We have the lowest unemployment rate in our lifetimes. There are currently 7 million jobs that need filled.

Apple, google and facebook are each building MASSIVE new servor facilities and campuses across the nation.

This dip has nothing to do with the economy. It has to do with elections.

clob, please elaborate...

 

[2300 Nueces]

We have the lowest unemployment rate in our lifetimes. There are currently 7 million jobs that need filled.

Apple, google and facebook are each building MASSIVE new servor facilities and campuses across the nation.

This dip has nothing to do with the economy. It has to do with elections.

Low unemployment + no fed funds rate increases = higher OIL prices. Inflation. There is too much debt in the system. Buckle up, the next 10 years are going to be bumpy.

Some things to ponder:

1. The aging of America is a fact. Only half of baby boomers have retired. Where are we going to get the $$$ to fund this? Ruh Roh

2. The welfare state in America is yuge. When have politicians (R&D) ever cut an entitlement?

3. This is the biggie.... We have broken the 30 year trend line of decreasing interest rates for corporate and government debt and rates in the long term are going to move upward, painfully. The compound interest on the national debt is going to gut every living thing out of the budget and then some. GET READY for it.

 

[westx]

Yes. By putting your money into the money market, you won't have any gains, but at least you won't go backwards and lose money during a bear market, which is what is happening now.

Yep. That is what I meant by being on the sidelines. I don’t have anything in stocks. I do have some in precious metals. But most is just sitting there in trading account

 

[TX1972]

clob, please elaborate...

Democrats.

 

[UTGrad87]

I prefer to invest my Y(d) in big teeted blonde hookers. My IRR is tremendous!

 

[clob94]

clob, please elaborate...

The economy and investors thrive on unfettered capitalism. Now that there is an opposing political party in one of the houses of congress, the market is uncertain what the reverberations will be. Will the current administration's actions be hand cuffed by subpoena after subpoena thus slowing any executive decisions that could be made per China and the EU? Will the fed raise rates? With relatively low fuel prices and low unemployment, we should all be kicking ass and taking stock dividends. Institutional lenders are happy as hell right now, banks are trying to give away loans.... I get a dozen solicitations a week, private equity investors call daily looking to drop money in projects.......... but for SOME reason, the Dow isn't getting the memo.

 

[2300 Nueces]

The economy and investors thrive on unfettered capitalism. Now that there is an opposing political party in one of the houses of congress, the market is uncertain what the reverberations will be. Will the current administration's actions be hand cuffed by subpoena after subpoena thus slowing any executive decisions that could be made per China and the EU? Will the fed raise rates? With relatively low fuel prices and low unemployment, we should all be kicking ass and taking stock dividends. Institutional lenders are happy as hell right now, banks are trying to give away loans.... I get a dozen solicitations a week, private equity investors call daily looking to drop money in projects.......... but for SOME reason, the Dow isn't getting the memo.

You in the oil industry? Own oil/gas in the ground? Inflation is coming. Inflation means increased operating costs for many businesses which translates to smaller profit margins and lower earnings per share (Dow headwinds). The only thing that may inhibit runaway stagflation are the high employment numbers. Private equity investors are chasing yield and want anything they can get that is attached to oil/profitable oil services companies that can pass on inflation in price increases and have a small impact on the bottom line.

 

[071191mhW]

Low unemployment + no fed funds rate increases = higher OIL prices. Inflation. There is too much debt in the system. Buckle up, the next 10 years are going to be bumpy.

Some things to ponder:

1. The aging of America is a fact. Only half of baby boomers have retired. Where are we going to get the $$$ to fund this? Ruh Roh

2. The welfare state in America is yuge. When have politicians (R&D) ever cut an entitlement?

3. This is the biggie.... We have broken the 30 year trend line of decreasing interest rates for corporate and government debt. and rates in the long term are going to move upward, painfully. The compound interest on the national debt is going to gut every living thing out of the budget and then some. GET READY for it.

Love your posts. Thank you for sharing your take. People can hate or love it but either way it's rich with thought. Thank you. In my humble opinion, Demography is king. Like cash. Also, presidential party in office is fascinating to research as it relates to the markets. Let alone possible impeachment. Politics aside. Just looking at the empirical data.

I think we have had a good run since the last crisis...but I take the approach of traveling the country (as I do) and asking people I meet (a lot) how they are doing financially/what do they think of the economy and how their companies and clients are doing. These range from executives to high level-middle managers. I've got to tell you...People are struggling.

If you only look at the top 10% of the population who are doing well you miss what's happening to the 90% below them. High earners below the top 10% are paying off high college loan debt and their is an imbalance of talent for the industries that make a higher wage. Technology is displacing the revenue model for lower tech jobs. There is a lot more to add but I'm suffering from Cedar fever. So maybe my head is foggy from all the allergy meds but I agree that the next 10 years could be EXTREMELY bumpy... not withstanding our political situation will be the same.

 

[2300 Nueces]

Love your posts. Thank you for sharing your take. People can hate or love it but either way it's rich with thought. Thank you. In my humble opinion, Demography is king. Like cash. Also, presidential party in office is fascinating to research as it relates to the markets. Let alone possible impeachment. Politics aside. Just looking at the empirical data.

I think we have had a good run since the last crisis...but I take the approach of traveling the country (as I do) and asking people I meet (a lot) how they are doing financially/what do they think of the economy and how their companies and clients are doing. These range from executives to high level-middle managers. I've got to tell you...People are struggling.

If you only look at the top 10% of the population who are doing well you miss what's happening to the 90% below them. High earners below the top 10% are paying off high college loan debt and their is an imbalance of talent for the industries that make a higher wage. Technology is displacing the revenue model for lower tech jobs. There is a lot more to add but I'm suffering from Cedar fever. So maybe my head is foggy from all the allergy meds but I agree that the next 10 years could be EXTREMELY bumpy... not withstanding our political situation will be the same.

Thanks, glad to help. The 10% you speak of live at the government teet in some way, not all but a lot. They may be direct employees, sit next to the spigot (Fed window) aka cheap loans, or have direct contracts (mutually beneficial) with the government. The current government largess has been the ticket for sometime. I am certainly not in the top 10% of earners but I am not hurting. I am pretty frugal and have almost no debt. I make a nice living but I also create my own "free time" which I value more than being in the top 10% of wage earners. The government largess won't last much longer. The bottom 90% or so are going to get "woke" shortly (if they haven't already) and realize they have been eating cake for too long. Personal responsibility and responsible government will be back in style!

 

[Longyac]

We have the lowest unemployment rate in our lifetimes. There are currently 7 million jobs that need filled.

Apple, google and facebook are each building MASSIVE new servor facilities and campuses across the nation.

This dip has nothing to do with the economy. It has to do with elections.

. This is the biggie.... We have broken the 30 year trend line of decreasing interest rates for corporate and government debt and rates in the long term are going to move upward, painfully. The compound interest on the national debt is going to gut every living thing out of the budget and then some. GET READY for it.

It is about the deficit and how huge it has become after the tax cut and what that does to the value of money relate to the market's value.

We're about to get served the third helping, in the last 40 years, of trickle down economics doesn't work . Reagan's tax cuts => Bush 41's recession. Bush 43's tax cut plus huge war spending=> The Great Recession. Trump's tax cut=> all signs are to another recession.

We're borrowing money from China to pay farmers for their lost soy bean sales to China from Trump's tariffs. Boy that really showed the Chinese.

 

[2300 Nueces]

It is about the deficit and how huge it has become after the tax cut and what that does to the value of money.

We're about to get served the third helping, in the last 40 years, of trickle down economics doesn't work . Reagan's tax cuts => Bush 41's recession. Bush 43's tax cut plus huge war spending=> The Great Recession. Trump's tax cut=> all signs are to another recession.

We're borrowing money from China to pay farmers for their lost soy bean sales to China from Trump's tariffs. Boy that really showed the Chinese.

Love you man but political bickering ain't gonna get us there. Everyone fighting over the Fed's scraps is pretty silly. Gen X is going to have put on the big boy pants in the next decade. Gen X is going to fix this. Problem for Gen X, every last one of us will never see a day of retirement. All of us will work to the grave.

 

[clob94]

You in the oil industry? Own oil/gas in the ground? Inflation is coming. Inflation means increased operating costs for many businesses which translates to smaller profit margins and lower earnings per share (Dow headwinds). The only thing that may inhibit runaway stagflation are the high employment numbers. Private equity investors are chasing yield and want anything they can get that is attached to oil/profitable oil services companies that can pass on inflation in price increases and have a small impact on the bottom line.

Yes. Several projects.

 

[2300 Nueces]

Yes. Several projects.

Tomorrow if the Fed balks, it will mark the beginning of inflation for years to come. You'll be busy.

 

[Drtxhorn]

I left everything as is in my 401k. My account is well balanced between cash and stocks. I like taking these big blue chip discounted stocks and accumulating more shares. I'm no financial expert but it seems to work out fine once the market eventually rebounds.

 

[4MNChampsHorn]

I left everything as is in my 401k. My account is well balanced between cash and stocks. I like taking these big blue chip discounted stocks and accumulating more shares. I'm no financial expert but it seems to work out fine once the market eventually rebounds.

That’s what I do with all my retirement investments.

 

[clob94]

I left everything as is in my 401k. My account is well balanced between cash and stocks. I like taking these big blue chip discounted stocks and accumulating more shares. I'm no financial expert but it seems to work out fine once the market eventually rebounds.

Honestly, I put my parents in mostly blue chips that paid a nice dividend years ago. They always had cash on hand to buy in during a dump. And it's worked very well for mom. She could throw the keys to dad's company in the ditch and drive away and still live like a queen forever. And then still leave her two sons a very nice gift when she passes .

 

[elcapitan009]

The economy and investors thrive on unfettered capitalism. Now that there is an opposing political party in one of the houses of congress, the market is uncertain what the reverberations will be. Will the current administration's actions be hand cuffed by subpoena after subpoena thus slowing any executive decisions that could be made per China and the EU? Will the fed raise rates? With relatively low fuel prices and low unemployment, we should all be kicking ass and taking stock dividends. Institutional lenders are happy as hell right now, banks are trying to give away loans.... I get a dozen solicitations a week, private equity investors call daily looking to drop money in projects.......... but for SOME reason, the Dow isn't getting the memo.

You make it sound like the economy didn't do great under the last administration? We're officially in the red for 2018 and that's WITH the tax cuts already implemented. WTC just took a nose dive.

 

[elcapitan009]

You in the oil industry? Own oil/gas in the ground? Inflation is coming. Inflation means increased operating costs for many businesses which translates to smaller profit margins and lower earnings per share (Dow headwinds). The only thing that may inhibit runaway stagflation are the high employment numbers. Private equity investors are chasing yield and want anything they can get that is attached to oil/profitable oil services companies that can pass on inflation in price increases and have a small impact on the bottom line.

WTC just took a nose dive. Shale will be the only safe bet for a while. Land will be decent, but $45 a barrel is below most break even prices. Offshore is going to be killed.

 

[2300 Nueces]

Patience senor. They are shaking out the weak hands.

 

[Drtxhorn]

You make it sound like the economy didn't do great under the last administration? We're officially in the red for 2018 and that's WITH the tax cuts already implemented. WTC just took a nose dive.

Clob is correct in that markets thrive when the fundamentals of the economy aren't artificially disrupted instead of reacting to normal market conditions. Now that we have the Democrats taking over the House in January and their repeated statements at continuing ongoing investigations as well as efforts to repeal or stymie the effects from the tax cuts. Remember that the House controls the purse strings and budget for the government. The market appears to be reacting to those developments. That's not a political statement. Markets have reacted this way to these kind of developments for decades.

 

[2300 Nueces]

You make it sound like the economy didn't do great under the last administration? We're officially in the red for 2018 and that's WITH the tax cuts already implemented. WTC just took a nose dive.

It's all relative. The econ does great when CREDIT expands and shrinks when credit contracts. This is the Fed Funds Rate. The Fed uses the supply of dollars as weapon over politicians and even the public. For example, observe what happens after the rate decision today. You will learn something. The Fed needs to sell their holding of expensive bonds in a competitive market. They need medium and long term rates to go down so that they may sell their bonds at a premium. Small problem for us, they contract credit to increase the value of their bonds. Aka, crashing stocks and commodity prices.

 

[2300 Nueces]

Clob is correct in that markets thrive when the fundamentals of the economy aren't artificially disrupted instead of reacting to normal market conditions. Now that we have the Democrats taking over the House in January and their repeated statements at continuing ongoing investigations as well as efforts to repeal or stymie the effects from the tax cuts. Remember that the House controls the purse strings and budget for the government. The market appears to be reacting to those developments. That's not a political statement. Markets have reacted this way to these kind of developments for decades.

The politics are a clown show to divert from what the magician doesn't want us to see.

 

[Crimson_Warrior]

Disagree on the ineffectiveness, in terms of short and mid-term economic growth, of this recent tax cut.

IMHO, reducing taxes on corporations and "pass-through" businesses is smart, and, ceteris paribus, the bump that the economy will get from the last tax law change will keep us out of a recession for at least the next 24 months. However, I really, really, don't like the way Congress borrowed the money to pay for the cuts. That was very irresponsible (again IMHO).

As you can probably tell, it's the deficit that bothers me more than anything.

 

[2300 Nueces]

Disagree on the ineffectiveness, in terms of short and mid-term economic growth, of this recent tax cut.

IMHO, reducing taxes on corporations and "pass-through" businesses is smart, and, ceteris paribus, the bump that the economy will get from the last tax law change will keep us out of a recession for at least the next 24 months. However, I really, really, don't like the way Congress borrowed the money to pay for the cuts. That was very irresponsible (again IMHO).

As you can probably tell, it's the deficit that bothers me more than anything.

Oh, I agree. It's the debt based money that is killing us. We need to be free from the usury. Go to anything, rocks..... as long as we don't have to payback rocks just for using them.

 

[elcapitan009]

It's all relative. The econ does great when CREDIT expands and shrinks when credit contracts. This is the Fed Funds Rate. The Fed uses the supply of dollars as weapon over politicians and even the public. For example, observe what happens after the rate decision today. You will learn something. The Fed needs to sell their holding of expensive bonds in a competitive market. They need medium and long term rates to go down so that they may sell their bonds at a premium. Small problem for us, they contract credit to increase the value of their bonds. Aka, crashing stocks and commodity prices.

As the fed is independent, the only thing that affects it's rate decisions is the health of the economy, which is affected by political fiscal decisions, correct? i.e. if you cut taxes so the economy goes up, the fed has a responsibility to adjust rates in order to keep the economy from overheating (inflation). As I, an admittedly layman, understand it: the economy is not doing "great" when credit expands; it is simply adjusting to market conditions. In a healthy and robust economy, rates don't need to be lowered to encourage lending (or risky lending).

If the Fed is simply trying to crash the economy to lure in bond purchases, wouldn't this be a perpetual issue? Are they required to have a certain amount of capital on hand?

 

[2300 Nueces]

As the fed is independent, the only thing that affects it's rate decisions is the health of the economy, which is affected by political fiscal decisions, correct? i.e. if you cut taxes so the economy goes up, the fed has a responsibility to adjust rates in order to keep the economy from overheating (inflation). As I, an admittedly layman, understand it: the economy is not doing "great" when credit expands; it is simply adjusting to market conditions. In a healthy and robust economy, rates don't need to be lowered to encourage lending (or risky lending).

If the Fed is simply trying to crash the economy to lure in bond purchases, wouldn't this be a perpetual issue? Are they required to have a certain amount of capital on hand?

The Fed is a PRIVATE bank that is beholden to it's share holders. It is the Fed that causes recessions/depressions and asset bubbles with the supply of money. They do this not out of error but out of greed. One example, they increase short term rates to slow the econ and drive the price of medium to longer term bonds higher so that they may sell to the public. This is called the flattening of the yield curve. The reason the fed does this is to sell debt instruments at higher prices that it purchased from the gov or on the open mkt in a previous more serious contraction.... like 2008. Likewise, they create asset bubbles via easy credit so that they may scoop us assets at depressed prices when it pops. They sell at a profit at a later date. This is done on purpose. Do you understand how a dollar is created?