Great Depression Coming Soon?

Question

Several months ago I posted about Austrian Economics & hard assets & preparing your real estate business for recessions big & small. It stayed on top of the thread wall for a week & got hundreds of responses!

So Bigger Pockets, after the financial scare & shakedown in December plus last couple days volatility (even though I look at long term trends) & J Scott’s book, podcast & post on today’s wall, are we headed for the next Great Depression?

If not that severe of an event try & compare it to 2008 for everyone’s equal perspective.

Personally, I think the biggest elephants in the room in order are subprime auto, corporate debt, stocks, student loans & last real estate.

And the King Kong of them all is the fiat dollar that’s not worth the paper it’s printed on & the Federal Reserve that has it printed endlessly & the National Debt!

$22 Trillion as of today & at least another $100 trill in promises during a time of record deficits.

And yes I think a crash will finish off Trump as he will be blamed after taking responsibility for economy’s success!

Thoughts BP land?!?

Bill F. · Answer

To me, spending any amount of time trying to predict the timing of the next recession/depression is a massive waste of our most scarce resource. Bulge bracket firms, the gov, universities, all have thousands of smart, educated, and motivated people who have spent their entire lives trying to figure predict these things and they, for the most part, can't with any degree of accuracy.

What makes anyone think that a bunch of randos on the internet with little to no economic training will do any better? I know that a correction/recession of some sort will happen; its simply the nature of any market. Its drivers and timing, for the most part, are inconsequential to me. I am not nearly educated or trained enough in all the areas of the market to even attempted such a herculean (or Sisyphean depending on your point of view) task.

Knowing that it could happen is enough and I choose to spend my time building a portfolio that has some degree of resistance to rather than predicting when a contraction will occur and what may cause it.

In short, my thoughts are: it's not if, it's when, so I'm going to keep buying assets that have a quality moat around their operations for significantly less than their intrinsic value.

@Matt Millard

What  exactly is it about the elephants that concerns you and what has lead  you to these conclusions?  Their size relative to something, the terms  on which they are offered, ect?

Account Closed · Answer

Everything described in the scenario could happen at any time and will happen eventually (I just don't know when).  When markets crash, it really only matters that they've crashed and not so much why they've crashed.

I've built an ark of sustainable wealth rather than attempting to try to predict when the rain might arrive and how I might dodge the rain drops once the rain starts.  Only time will tell if I've been successful or not.

Frank Wong · Answer

Exactly.  The when is the $10m question.  No one knows but anything can happen at any given time.  I think the most important thing is to live your life without fear and prepare for things just in case.  How do you prepare?  Don't be overleveraged and have a lot of cash.

Joel Owens · Answer

Doesn't typically matter with my commercial clients. They have millions to tens of millions in cash. They buy now for a certain yield and if recession/depression whatever they take the long view and still buy even more at the bottom.

It's the single investment owners that are dependent on the cash flow with national average median incomes that can get affected in  a big way. Lot's of single family house type rentals get crushed in a down turn. Last down turn think of all the foreclosures, short sales, etc.

If investors are prudent now than many can ride out a recession/depression if it happens and be just fine.

Account Closed · Answer

Best guess is that we will see Europe go through a major downturn first. Then Asia, particularly China and finally the US will follow suit. It's called "contagion". A domino effect.

There are weekly protests in Paris (yellow vests) and Merkle and Marcon are trying to create a new NATO of just the two of them not to mention the issue of Brexit in Great Britian. The economy of China is collapsing internally and the US right now, is doing rather well.

The US has the worst economy and highest debt, except for all of the others.

(A slight rewrite of "Democracy is the worst form of government, except for all the others.” ―        Winston Churchill )

President Trump will be fine and he knows how to capture the focus of the base to solve problems. He had 76% approval from the State of the Union and the Dems responded by wanting to ban the combustion engine.

Russell Gronsky · Answer

@Matt Millard, I literally just wrote out the below response to your question in another thread. Here is a copy/paste:

The bottom line is: no one knows. Sure you can keep track of  treasury note yields to give you indicators but that's really all they  are, indicators. They may suggest that the environment is ripe for a  recession but a recession needs a trigger to start it, so until that  happens, there won't be a recession. And, even when it does start, it's  not apparent right away.

If  you look at GDP from '07-'09, you'll see it start to fall and then then  it comes back up for a while, then it starts to tumble. You see, no one  knows if a reduction in price is just a correction or a recession so  when prices dip 5, 10, 15%, money that was on the sidelines, jumps in  thinking they are about to scoop up some investments at a discount. And  who knows, maybe they are right. Because maybe the government will do  something like...oh, I don't know....maybe take Fannie and Freddie out  of conservatorship....that would probably re-energize the stock and RE  market and all the money turnover that happens from it will push the  economy even higher. OR, we could have a mild correction. OR, we could  have a deep recession as I think we are coming due for one of those bad  "every 75-years recessions" or something like that.

The best  precautions I think are to watch housing statistics in your local market  (your agent can provide you that stuff from previous years) and pay  attention to days on market and prices listed vs prices sold for houses  in your target areas. Those will be your best indicators of where your  local market is going but overall, in the end, no one really knows,  BUT..... the risk of not investing is even bigger.

Michael Quarles · Answer

I’m old enough and young enough to survive.

Most can’t pluck a chicken or shuck corn much less grow it.

Who has a Years water supply.  ME.  And guns to protect it.

And I can start fire without a match.

Just saying

Justin R. · Answer

No great depression coming. Bull Markets don't die of old age, and higher lending standards protect us from market crashes we saw a decade ago.

Buy smart, and don't be afraid of small "corrections."

Great Depression Coming Soon?

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