1667

You have that question, but you have also had the common courtesy to ask questions, try to understand my intent before making a declaration of my intent. Which is why despite the fact i get you have some assumptions (based on your questions) about me, I’m trying to have a good faith discussion.

If you have a suggestion on how I can better obtain my goal, I’l all ears.

Yes, I believe some sort of recession is going to hit (based on the inverted yield) because it has predicted it for almost 70 years. So my objective is to understand what sources today i can trust and not trust to give me useful information (not just assume a source is good because some major media shared it), and understand a little bit of what both the extremes are siting and how reliable they are.

Maybe the truth is, that objective on my part was not reasonable for this forum. I thought of this is a place where peer information sharing and community enrichment would be part of the goal. Maybe that assumption was in error?

1668

You can dispute it, but if you look back at my post, everyone was formed as isn’t this concerning? What am i missing? Is their a context I’m not seeing?

So you can believe whatever the god damn hell you want, but it has nothing to do with me or my intent! I’m also not going to take your god damn directions. Beyond that, got nothing to say to you…

1669

People make or lose a lot of money trying to time the market, including recessions. I’m not trying to debate that.

If you are actually trying to see if the parameters that occurred in 2008 and 2009 are happening today, I don’t know how you can even begin to approach that analysis without talking about subprime mortgages. Now, again, I am focusing solely on the comparison between the two periods of time not some overarching analysis on how the Fed reacts, keyword, reacts, to what they think the market is or will be doing.

So for 2008/2009 keywords, terms for understanding a key component, and no not the only component, but key include:

mortgage backed securities
subprime mortgages
interest only loans

Remember, people went jail over some of these schemes. There is argument, lots of emotions involved on whether or not enough people went to jail, but this was not… people in the know knew these were not good loans. Fannie and Feddie… like all this stuff is important.

Now AFTER you do your research on what happened with real estate/mortgages, then you can look up how the Fed actions/reactions basically made the situation worse. I’m over simplifying here, but focus on the Fed and not the actual cause… it makes no logical sense to do that if you are actually looking for information.

Now if you are rolling the dice and just trying to like decide on when to put money in and out of the market, that’s something else entirely. That’s not an economic study, that’s a completely different motivation than I want to understand then so I can understand now and then use that understanding to parse the information being sent out, knowing that headlines are not information… they’re just attention grabbers.

1670

The inverted yield is the indicator, the red light if you will on the dash

I’m seeking out different sources (and not the corporate sources) that have information on it. I’m asking read, saw this guys. Give me context, is this a viable source, if not why? So to continue the analogy, trying to get a handle myself what the problem is before i trust the ‘mechanic’ not to potentially snow or scam me.

1671

ok, I’m getting where I might have missteped here. I talked a lot about the 2008 crisis, because it fresh on everyone mind. I get THIS crisis isnt the same!

I guess to summarize my actual concern is that there seems like a lot of unusual/'concerning yellow/red signs tripping in quick secession, what are the factors causing it, whats it mean this time, and what will be the safe havens, if it does kick off (as they are not always the same).

MORE IMPORTANTLY, is this a proper place to vette information that is a little over my head and get a (potentially) more grounded perspective on it

Maybe that was my oversight, admitting I’m trying to get a handle on it, and get some thoughts perspective on information I’m finding?

1672

While I agree that David2 is going the wrong way around, I find it hard to not believe a crisis is coming, although more in a perspective of the EU and not the US. Besides my debatable knowledge and minority novel theory, there are 3 important data points that apply to my country: I’ve had an account manager tell me last december they expected a crisis; our prime minister is campaigning with modest proposals as preparation for a near crisis; stunted growth of the whole eurozone, including a near recession Germany that is about to ignore the treaties in a new way to avoid it; bonus, many indicators mostly never recovered to 2007 levels.

But, yeah, @David2, beware conspiracy theories, there’s no lack of people peddling theories for views, financial products or just the canard of increasing the price of gold. Try to learn some macro models (the simple ones, at least), when they apply and don’t, and go from there.

That would be nice to know, although I’ll eat my hat if real estate turns out to be one. Well, treasury bonds of a developed economy are never bad anymore.

1673

Thanks, that’s probably a very good idea. I’m sure a google search will find me a answer on learning macro models, but I’ll ask anyway any good sources you’d recommend that explain it better for a layman?

That said, Donald Amstad didnt seem like a conspiracy theory, in fact several articles from newspapers took him seriously. Otherwise I wouldnt have shared it.

1674

You don’t even know if there is a crisis. This is back to the part why I think some people, including myself, are questioning your intent. If you already there and you’re not moving from it, why ask?

So upturns and downturns aren’t umm, unnatural. There’s really no scenario where all we can do is go up. It’s just not true, not a thing. I mean people believed that and it was easy to believe, but we’ve had several downturns over the years. And I think most people understand that the poor, middle-class don’t weather downturns as well as the wealthy and rich… but even the wealthy aren’t always insulated to it.

I mean there is an old economic joke about the difference between a recession and a depression right… a recession is a period of time when you lose your job, a depression is when I lose my job.

Recessions don’t have to be entered in with a crisis. Have we had a number of them, well yeah Saving’s an Loans, oil crisis. dot com bust… but the there are reasons why the media pushed hard, and unfortunately won, to call the last one a “Great” recession. It threatened to take down our entire financial institutions, not just like one industry but the thing that ALL industry, all people rely on and have confidence in… the subprime mortgages and the crap behind that, the real estate bubble are certainly important but the real crisis were in the financial institutions brought down by that. People have to believe that their money is safe, that what they have is okay even if they face uncertainty in other areas.

I do not believe we are in a position where the government is going to have to prop up our financial institutions to keep them from collapsing, that we will lose the biggest non-commercial account holder in the country, nor do I believe that slapping the creative label on bad mortgage loans to sell them like hot cakes is as easy as it was. I do know they are looking at deregulation… all the time, and that any major market change will hurt the poor more than it hurts the wealthy…

If we do have a bubble of some kind, if we enter recession, I just don’t think it will be nearly as big as the one before, but again, the difference between a big one and not as big one isn’t really important if you are the one hit. It just doesn’t matter at that point, hurting is hurting.

1675

That’s true. I was trying to being clever with words, more than literal.

The likely (unless you disagree its not likely- which case I would like to know what makes you think that) coming recession isn’t necessarily a crisis, but any recession when you are holding on to a shrinking 401k is pretty…unpleasant. So, even a mild recession could become a crisis for some (including me). So this is why i ask…(I’m certainly not going to trust Charles Schwab without better understanding the real story)

1676

I am a very literal person. That is no secret.

So the Feds job, despite what media says and what people want, is not to prevent downturns. There are measurements to determine what a recession is vs a downturn. Some people might say that The Fed is supposed to keep us out of recession. There might be solid argument there, here is what I know for certain, their tools are meant to soften the blows. They’re supposed to keep us from reaching really low lows and really high highs. Politicians can get kind of pissy when they apply the breaks, gradually, on a roaring economy, but really high highs tend to lead to really low lows… so they just sort of apply pressure.

They don’t really cause these things. The Fed sure as hell though can make things worse… and they and did in the past. And the Fed does kind of explain themselves in dry, not fun to read releases, that stuff is available, but people tend to focus on everyone else remarking on what they said and released which is way more exciting and usually contains spin, spin, spin.

Some recessions though only last a matter of months, not even a year. I am not trying to downplay the pain here, and I will keep reiterating that when you’re hit… it doesn’t matter how soft anyone thinks it is. That’s hurt. If we hit a six month recession, and it doesn’t take what I will just call an artery industry entirely down… that’s not a crisis. If we lose say Ford… but not all the others, that’s not a crisis. That sucks for those who are involved, and wish we had more in place to help everyone when that stuff happens but I just… I don’t see any indications that we’re dragging our entire financial industry into ruin again with a future one, even if 84 month car loans raises a brow… but even those are not exactly new.

1677

I get where you going here…,and I’ll admit I was thinking more the .com bust or the 2008 crisis than a maybe a year recession. So this is actually comforting from that perspective.

I have one pointed question though, what makes you think it wont be more severe?

Is this a hope, or the most likely outcome based on select indicators? Is there something that gives you that confidence, based on some secret (to me) bellwether indicator, or just your impression? If, indicator, please share, I’d like to add that to my future research :)

1678

This is ties into what i heard Donald Amstad talking about, in that the Fed took action that they wouldn’t (and didnt) recommend in emerging countries, and pointed to indicators in our debt (that are gibberish to me) that suggest we are playing with a house of cards. Sounded grounded, was hoping with someone with more knowledge would poke holes in it, as that usually (with citations) helps me start to get more of a handle on things that are more complex than I can process.

1679

@David2, are you worried that a recession/depression is coming and that the Fed is CAUSING IT or you’re worried that Fed action will not be enough to PREVENT IT?

From what I recall you were solidly in the first camp a few weeks ago and I’m not sure if you still believe this or if this is part of something else.

1680

I’m not solidly in any camp, just reading and trying to figure out something I should have paid attention to in college, instead of girls.

I’m highly concerned about my shrinking 401k getting wiped out, or damaged to an extent that would be a crisis. I started caring the moment i research how accurate the inverted yield was. Thus why i started posting on this stuff. I was saved from 2000 and 2008 events mostly thanks to my time at Intel. The 2008 crash was actually predicted by my Intel higher ups in 2006 when we had a team building face to face in Swindon, so paying attention i managed to skate past most of that unscathed.

I don’t have that resource this time, I dont even have my previous mental capacity that i took for granted just a few years ago, but that’s me feeling sorry for myself. So trying to figure out how to insulate myself the best i can now with my current resources, knowing something is likely coming.

1681

Well to answer your question more directly, based on previous conversations I’m glad its likely wouldnt cause it, but hopeful they dont try prevent it SO much that is makes it WORSE later (or that they have already done that).

1682

Ok. To broadly summarize, many market indicators do suggest that the US economy is getting close to being due for some kind of a market correction (i.e. recession).

Exact timing, length, severity, etc. of said market correction is mostly speculation and you’ll find ‘experts’ who can back pretty much any permutation you can think of. I remember being convinced back in 2005 that the US was due for a recession but it was another 3 years before the bottom actually fell out.

Keyne’s famous phrase “The market can stay irrational longer than you stay solvent” may be helpful in thinking through this and on the impossibility of timing the market perfectly to minimize the downside.

1683

I have a hard time recommending what I’ve read since it is a non-mainstream monetary theory and I don’t want to look like I’m selling something. And it’s certainly not the new textbook (yet?). But if you’re willing to look at it with a healthy skeptical approach, you can pick a subject and look up what William Mitchell had said in his blog (the Australian one) and find the mainstream view as comparison.

It was “great” because it had a very long recovery with devastating effects in many countries, even if it was fairly moderate in the US.

I don’t know the American fundamentals, though I know they are better than here. But it’s common knowledge that eurozone banks are not healthy, especially the huge German one that cannot fail (the banking union will just make it worse). I’ve looked at levels of private indebtedness and unemployment, and they’re not really better than in 2007, but countries and even more limited in what counter-cyclical policies they will be able to apply. As every country needs to aim at limiting exports, investment is already very limited and an overnight drop in demand will quickly result in higher unemployment from new and improved employment flexibility rules.
Meanwhile, housing prices go up, indirect taxes go up, and global warming makes everything more complicated, taking more money and more demand out of circulation (into Panama). To me, it’s not great.

In mainstream economics, the US is special and can’t realistically go bankrupt without extreme fuckups. Despite many decades of prediction of debt problems (since Reagan?), nothing has really happened. Emerging countries are especially different, since they tend to need more imports. The radical view is that those recommended policies are crap anyway and are imposed as a condition for economic relief (or at the end of gunboat diplomacy).

Bonds are just an investment product for buyers. Like anything, there’s many reasons why they might prefer one or the other. Especially when economic activity is not the same as it has been for the last few decades, like the alternative of having EU bonds being much worse, or the Brexit uncertainty.

1684

I’m pretty sure they started naming it the Great Recession for the same reason they started naming every storm front when that was not something we did either. It was media driven more than it should’ve.

Well banks fail… pretty infrequently, but not the big ones. I mean we’re talking about the difference of someone looking at a savings account and knowing that money will be there tomorrow vs running to the bank before it vanishes. The latter was a real thing in the last recession, took down WAMU, basically.

So if people are looking at their balances and feeling not that it will go away due to lack of income but if they don’t get it right now, cash it out, it will just be gone… that’s different. It’s about things not looking good, not about consumer confidence in the traditional sense, it’s more like… do you and everyone else believe that if you put money in the bank. It will still be there tomorrow. If not, you get runs on banks while there’s still money to be had. You’re saying Germany is in that condition right now?

1685

DB and Commerzebank are fairly big eurozone banks that have had pretty bad investments and are not seen as doing well. The accounts are probably safe with the deposit guarantee, even with German ordoliberalism, they are willing to bend (or mandate the ECB to bend) the rules when it suits them (as in the new protectionist funding initiative). But, not being one to always look for it, I’ve heard other big european banks aren’t so hot either.
It certainly isn’t a 1929 situation, since we’re not limited by precious metal to act anymore. I believe we could whether the storm reasonably fine if we ever recognize that the worse effects of the GFC were caused by self-induced austerity. If the answer is to raise inequality in the same way, I don’t see how Euro treaties can be kept.

1686

@David2 first, I’m sorry to hear about your brain injury. My roommate (also an ex-Intel engineer) suffer a similar loss to his cognitive abilities, he thinks after several rounds of cancer treatments. He retains his curiosity but his ability to understand things is diminished.

I think your concerns are 100% valid, so the logical course of action is to think, “well if I can understand how the economy has historically behaved with these conditions I can figure out what to do next.”

I’ve been investing since I was 16, and so this is the start of my 45th year investing and my 21st year in retirement. I’ve been pretty successful at it. Now, plenty of this is luck (super cheap Intel stock options) but I can also say I’ve done things like taking over my parent’s investment back in the early 80s after they retired early (with not enough money) and making them millionaires to know there is some skill involved.

I will say this The last six to seven years have been the most confusing, head-scratching and challenging investing environment, in my life. Stocks are by almost all traditional metrics overvalued. While the interest rates on most bonds are so low, they offer in the word’s of Warren Buffett, “return-free risk”. So there is no good place using traditional financially instruments to invest your 401K funds.

In my opinion, the answer to your basic question is the US going to have a recession is “Yes we will.” But the real question you want to know is will the recession happen in 2020, 2021 or later, is for all intensive purpose is unknowable. IMO, I think is actually a waste of time to trying to figure when it will occur.

I do think it is worth spending a lot of time to trying to figure out how much money you need to have a bare minimum retirement (say $300K) + social security, how much you need for a comfortable retirement say $1.5 million and the amount of money you need to have more than you’d realistically spend say $5-10 million.

Once you know where you need to end up, you can make more intelligent decisions on how much risk you are willing to take. If you need a $1 million to retire and you currently have $900k, and you concerned with 70% depression level stock market crash, you have lots of options. On the other hand, if you need $1 million and you only have $100K then you have no choice but to remain fully invested since it will take you 116 years to make 10X money with 2% bond yields.

There are lots of financial/retirement calculators these two are by far my favorite. https://firecalc.com/
and cfiresim.com.

IMO, this forum while it has plenty of smart folks, isn’t really a great place to get financial advice and the validation you are looking for.

I think you are over 40, but if you are not. I’d suggest https://forum.mrmoneymustache.com if you are over 50 I’d suggest http://www.early-retirement.org. (In your 40s look at both) Both places are filled with people struggling with the same questions you are asking and have lots of people more than happy to give you investment advice and explain their opinion on the economy.

Feel free to shoot me a PM if you have questions.