Came across this question while chatting with some friends recently. It seems that many or most people feel like an economic bear is coming to the US (and/or the world) soon (but what is 'soon'?).
We were much more split on how we would see that play out. Will we see inflation explode? Or maybe the asset values (property and securities) decline? Something else?
I think it is an interesting question - what say you?
Yes. It will either be an inflation explosion, devaluation of assets, or something else, or a combo thereof.
I don't know when or for how long.
Unfortunately, this is always impossible to predict. Warning signs have been pointing us this way, but they're always pointing us this way. It depends on which ones you look at. I can't predict it, so I'll just stay the course.
In reply to mtn (Forum Supporter) :
Agreed. Doomsayers have been predicting inflation for quite awhile, but it still hasn't happened. The only difference now is this time some of the "fake money" generated by the Fed is actually getting pushed to consumers rather than mainly to Wall Street, so there is now a chance average consumer prices may start to rise faster than it has over the past few years (decades).
yeah I'm not trying to predict the crash timing-wise. I'm curious if there are signs that point toward inflation vs devaluation. I'm sure it will be at least a little of both, but if you look at 1999 and 2008 those were mainly devaluation of assets crashes, not heavy inflationary periods. Perhaps because those crashes were defaults by companies (dot com) and individuals (housing). When a government defaults (or nears default), I would think you get inflation.
Also, I feel like the fed is running out of tools to keep the asset prices propped up. (interest rates, stimulus checks, adding to demand of many assets by buying directly, etc)
I am worried about inflation.
How would your approach differ for either scenario? Interest rates are stupid low. Real estate prices continue to climb.
So stocks are more or less the best option for beating inflation either way aren't they?
Inflation/deflation could impact the "expenses" side of the budget I suppose. Is that what the concern is?
Robbie (Forum Supporter) said:yeah I'm not trying to predict the crash timing-wise. I'm curious if there are signs that point toward inflation vs devaluation. I'm sure it will be at least a little of both, but if you look at 1999 and 2008 those were mainly devaluation of assets crashes, not heavy inflationary periods. Perhaps because those crashes were defaults by companies (dot com) and individuals (housing). When a government defaults (or nears default), I would think you get inflation.
Also, I feel like the fed is running out of tools to keep the asset prices propped up. (interest rates, stimulus checks, adding to demand of many assets by buying directly, etc)
I am worried about inflation.
I'm guessing the Petro Dollar will never see massive inflation as long as it remains the currency for the global oil trade.
If that were to change, I suspect it would be very bad for us.
There were a few people that pulled their money out of stocks and went into safer investments when they saw the 'rona coming. unless they were able to buy back in mid-march, with everyone expecting things to keep getting worse, they might be behind where they would be if they had just held through the crash. I do think there will be some higher inflation coming soon though, but you'd want to be invested rather than in cash when that is happening anyways.
Well, if you can predict inflation, then leverage leverage leverage. But of course that's not great if asset prices are going to tank.
Realistically, right now I've got a HELOC that has a variable rate and thus is very low right now, like lower than the primary mortgage. If you think inflation is coming, you should pay toward the HELOC, because the variable rate will follow inflation. If you don't think inflation is coming, you should pay off the higher rate debt. but that's mostly academic anyway.
But the point of this thread isn't so much what to do (that's always easy if you know what's going to happen - which you don't). The question is what do we think will happen and why?
i predict crash because why is the dow pushing 27k anyway?
AngryCorvair (Forum Supporter) said:i predict crash because why is the dow pushing 27k anyway?
"Danger to manifold"
Millions unemployed, GDP at it's worst ever, crash is coming.
I feel that food costs via grocery are already jumping real high. But, the reporting may fail to notice.
Example:
My grocery store of choice is Meijer. They have had a long standing gimmick of “10 for $10 & the 11th free". You could mix and combine qualifying items. This gets the item to a net price of 90 cents.
But, this long, old promo is gone since covid. The items I want are still in the store but they are at their "everyday price" of $1.29. This means that my real price of buying the item has gone up 30+% even though the msrp has not increased. I have many examples of similar.
In reply to John Welsh (Moderate Supporter) :
real estate prices jumping and stock market gains with no real (or negative) change to the underlying businesses is another "underreported" sign of inflation. Gold and silver up? check.
are groceries, real estate, stocks, gold, etc, etc, all up? Or is the money that buys them all down?
This economy does not seem stable or in any way sane. BP announces a disastrous quarter, cutting dividends in half, and the stock pops 8% CVS Drugstores announce a great quarter with huge profits and the stock drops. I know expectations vs. results drive pricing, but this is just two examples of nuts - there are many more, including the current S&P, Dow, and Nasdaq indexes.
There's an article in the WaPo today quoting the WSJ. Investors are: “preparing for what they believe could be a once-in-a generation opportunity to buy distressed real-estate assets at bargain prices.” Private equity swooped in on the foreclosure crisis after the last big recession. Will history repeat itself?
I don't know where this is all going but I'm more than a little concerned.
In reply to Robbie (Forum Supporter) :
I'm going to vote for inflation. Currently it is impossible to find employees at last years $ per hour even with the sky high unemployment. It's not "worth it" to find a job. Our cost of "essential" goods is going to continue to increase as the wages rise.
In my opinion the stock market is valued off of all the "free" money. There are a lot of companies that will struggle to survive in the next few years.
First one, then the other.
.buying power has been getting worse since the 70s. People on the low end of the income scale are working more and able to afford less, while corporations and scumbags are cleaning up at record rates.
The Fed has been buying corporate bonds, which they were not doing during the Great Recession. Probably having a much more direct effect on the stock market (and other asset values) than it did when they were just buying government debt. Inflation has already been happening, it’s just a question of which asset(s) will be the best for guarding against it.
I cam ask several friends of mine in the finance industry about what should spook people right now- John Welch touched on the rising cost of food, which only now is being quantifiable.
I know of a several-billion dollar "hole" in the housing market right now that gave us a shock back in ~October 2019 thanks to our unregulated mortgage industries- they are the ones that are threatened to fold if people begin to mass-default on their house payments.
In reply to jwagner (Forum Supporter) :
Bargain real estate...just wait until commercial office space does not renew its lease. There's going to be a lot of distressed properties but not sure they are going to be desirable.
In reply to John Welsh (Moderate Supporter) :
The anchors at malls are going slowly broke but the stock prices don't reflect that situation because management continues to buy back its own stock to drive prices higher.
Eventually most stock will be held by a few and the first to bail will profit but the last will go down with the ship.
The fallout is going to be in REITs. I see fewer and fewer cars at the malls. Why get in your car to drive when with a few minutes of keyboard work you can find what you want and have it delivered right to your door in a day or two.
Sorry but Bezo's isn't paying for the government or spreading the wealth around. When too many take too much from society it becomes the setting for bad things to happen.
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