[Discussion] Will the Next one be the Worst Recession in History?

[Warhippy]

Have been reading a lot of paperwork and reports coming out recently indicating that the next Great Recession is not only inevitable, it is already starting to happen.

 

I don't want to be all doom and gloom but the 3 key factor weighed against this are

 

• Over valuation of stock, property and asset
• Geo-Political issues such as Mid East conflict and trade wars
• Personal/Consumer, Business and Corporate Debt levels.

 

Now there is very little any government can do to avoid such issues, as much of it is based on market forces that are well outside of their control, consumer and personal debt levels are based on a persons inability to live within their means.  Trade wars...well we've read about those for the last 17 months and the US seems happy to engage under the current administration without cause or worry to their own interests.

 

I have posted a few links to read over, and while I know most are all US based it still holds weight.  But am truly interested in a discussion here as I know there are a number of people on this site well invested in the real estate market, business and financial markets or personal banking and would love to hear what they have to say about this

 

https://www.ccn.com/the-next-recession-wont-be-triggered-by-a-housing-market-crash-economist/

 

https://www.thebalance.com/could-the-great-depression-happen-again-3305685

 

https://www.stlouisfed.org/on-the-economy/2019/october/consumer-debt-new-peak-depends

 

https://www.ccn.com/buffett-indicator-warns-stocks-doomed-worse-crash-than-2008/

 

https://www.federalreserve.gov/releases/chargeoff/chgallsa.htm

 

https://www.axios.com/world-total-debt-load-91ab8c0a-db67-40cb-940e-a36ac58b629f.html

 

https://www.ccn.com/66-rate-cuts-fuel-dangerous-bond-market-bubble-in-2019-when-will-it-pop/

 

So in all honesty.  What is everyone's thoughts on this?  Please, try to keep this as partisan free as possible because if this mess hits the fan it won't care for party status or choice of team.

 

*Updated Title to reflect current state of things*

Edited March 17, 2020 by Warhippy

[HI5]

Recessions make millionaires; seize the opportunity.

[I.Am.Ironman]

I am in an interesting spot.. I am in my late 20s and going to be earning 'real money' this year for the first time and have paid off my debt from school. I have been thinking about where to put my money from an investment point of view. Weed stocks paid for most of my degree but that ship has sailed. I have been looking at more conservative options (Vanguard etc) but can't help but think a recession or at very least a correction is on the horizon. There is so much uncertainty at the moment I really don't know what to do. Great topic hippy, I am excited to see everyone's opinions.

[Warhippy]

1 minute ago, I.Am.Ironman said:

I am in an interesting spot.. I am in my late 20s and going to be earning 'real money' this year for the first time and have paid off my debt from school. I have been thinking about where to put my money from an investment point of view. Weed stocks paid for most of my degree but that ship has sailed. I have been looking at more conservative options (Vanguard etc) but can't help but think a recession or at very least a correction is on the horizon. There is so much uncertainty at the moment I really don't know what to do. Great topic hippy, I am excited to see everyone's opinions.

My wife and I are also in unique positions.  A household income over $120,000.  Zero personal debt and zero debt tied to my business.  Over $140,000 saved.  Investments paying well and almost zero risk.

 

For a family of 4, we're in a highly unique position to act in any event.  But with such looming uncertainty we're not sure what to do as of yet.

 

I felt this would be a decent topic to discuss those issues and positions

[Warhippy]

7 minutes ago, HI5 said:

Recessions make millionaires; seize the opportunity.

My econn Prof always said

 

"Get in the ground floor of something new, or be ready to move in after it all falls apart"

[naslund.is.king]

The working class in the praires is wondering when the recession is going to end.

 

Edited January 14, 2020 by naslund.is.king

[NewbieCanuckFan]

To be honest, I get LESS worried when there's more "doom & gloom' forecasts coming out.

 

I get REALLY worried when there's a virtual state of Euphoria in the markets (nowhere to go but up).

 

But I don't disagree with what you said in your original post.

[riffraff]

Does this mean I’ll get a day off?

[kingofsurrey]

19 minutes ago, riffraff said:

Does this mean I’ll get a day off?

We  all get the year off when robots take all our jobs......

[Ryan Strome]

Which trade wars? And what impact would that play?

 

Wouldn't a mid east conflict sadly actually spur economies like Canada, US, Russia, etc?

[Ryan Strome]

13 minutes ago, kingofsurrey said:

We  all get the year off when robots take all our jobs......

More like every year off. 

[nuckin_futz]

Good topic @Warhippy However, I think a more appropriate topic would be "Will the next great recession even be allowed to happen?". Case in point, if you were the global Central Banks and you spent trillions of dollars to wall paper over the last recession with endless rounds of Quantitative Easing, would you let it all collapse without a fight? I mean whats another few trillion between friends? We are truly in a new paradigm regarding the rules of finance. If Adam Smith were alive he'd be completely baffled.

 

While the stock market is arguably overvalued. For example Apple stock has increased 70% since August. Have their earnings also increased 70%? Somehow I doubt that. The Federal Reserve is currently expanding their balance sheet by over $100 Billion/month. They insist this is not QE but when the Fed is expanding it's balance sheet, what else is it? I am surprised the effects of the trade war have been so benign, but when money is almost free to borrow you can wall paper over a lot of crap. The personal debt levels in the USA and Canada are truly frightening but then again as long as rates stay low it's manageable.

 

If the Fed ever loses control of interest rates it could get ugly in a hurry. Pay attention to the bond market it will lead the stock market.

 

Many people are unaware that global manufacturing is already in a recession. Germany is the manufacturing hub of Europe it's manufacturing sector imploded in early 2018 and is laying in the gutter, deep in recession territory. US manufacturing readings also indicate manufacturing is in a recession. Despite what the current administration says about it. The numbers do not lie.

 

Your quote " Now there is very little any government can do to avoid such issues, as much of it is based on market forces that are well outside of their control"

 

This is traditional thinking. In 2008 they realized nothing is beyond their control. They can financially engineer anything. Central banks will spend any amount of money to avoid facing the music.

 

I do know this, volatility seems very underpriced at the current moment.

[Lancaster]

I wouldn't be surprised.  Economies always goes in cycles... like a recession every 10 years or so.  

Unfortunately, most politicians do will whatever within their powers to keep the party going... and that usually means higher ups and lower lows.  

 

The EU is probably slowly falling apart, Japan is still going into their Lost 3 Decades now, China's shadow debt levels is off the charts and too many government run companies sucking resources, the US with massive unfunded liabilities and minimal wiggle room with interest rates.... I'm starting to feel that guns and canned goods may be the next best investment out there. 

[Ryan Strome]

@Warhippy btw you say not to get partisan and that's fair enough but if this is well known why is our government running up massive debt and running massive deficits just before the big recession? Not trying to shift the conversation but that seems very, very irresponsible and is setting Canada up for austerity in the future.

[Nuxfanabroad]

Globally I'm quite concerned about this(approx) 250 trillion in Govt debt(with Global GDP at 80 trillion). Can they kick the can down the road forever? Can they always manipulate lending & inflation rates? Here in Japan, many of these issues are not too rosy.

 

Watch interviews where some interesting minds warn of currency values, & whether it all defies gravity. People look for historical parallels, but in many ways the period we're in has no precedent.

[Warhippy]

28 minutes ago, nuckin_futz said:

Good topic @Warhippy However, I think a more appropriate topic would be "Will the next great recession even be allowed to happen?". Case in point, if you were the global Central Banks and you spent trillions of dollars to wall paper over the last recession with endless rounds of Quantitative Easing, would you let it all collapse without a fight? I mean whats another few trillion between friends? We are truly in a new paradigm regarding the rules of finance. If Adam Smith were alive he'd be completely baffled.

 

While the stock market is arguably overvalued. For example Apple stock has increased 70% since August. Have their earnings also increased 70%? Somehow I doubt that. The Federal Reserve is currently expanding their balance sheet by over $100 Billion/month. They insist this is not QE but when the Fed is expanding it's balance sheet, what else is it? I am surprised the effects of the trade war have been so benign, but when money is almost free to borrow you can wall paper over a lot of crap. The personal debt levels in the USA and Canada are truly frightening but then again as long as rates stay low it's manageable.

 

If the Fed ever loses control of interest rates it could get ugly in a hurry. Pay attention to the bond market it will lead the stock market.

 

Many people are unaware that global manufacturing is already in a recession. Germany is the manufacturing hub of Europe it's manufacturing sector imploded in early 2018 and is laying in the gutter, deep in recession territory. US manufacturing readings also indicate manufacturing is in a recession. Despite what the current administration says about it. The numbers do not lie.

 

Your quote " Now there is very little any government can do to avoid such issues, as much of it is based on market forces that are well outside of their control"

 

This is traditional thinking. In 2008 they realized nothing is beyond their control. They can financially engineer anything. Central banks will spend any amount of money to avoid facing the music.

 

I do know this, volatility seems very underpriced at the current moment.

I've heard this same argument actually and i think, to great extent you're right.  Parties, people and interested hands will not allow for it to happen.

 

But the tighter they try to control things the more they'll slip away until the remaining middle class is priced out of existence, or finds their assets effectively as valueless as the paper their currencies are printed on.

 

Needless to say I'm certainly not going to gamble with what we have made until something shakes out.

[Rick Blight]

Recessions are a common inevitable event and the only question is the severity of the recession in terms longevity and severity. Typically, recessions last less than a year and are defined by at least two consecutive quarters of negative economic growth as measured by GDP.

 

The good news (if we can call it that) is that on average, a recession lasts about 11 months, says the NBER. But they can be shorter and milder, or longer and more severe, as we know from the Great Recession of 2008, or even catastrophic, like the Great Depression of 1929.Sep 23, 2019

 

A few personal comments on some of the articles attached to your post:

https://www.ccn.com/the-next-recession-wont-be-triggered-by-a-housing-market-crash-economist/

David Rosenberg is always worried about the economy in both good and bad times. He is pretty much a "perma bear". He is a smart guy and I certainly appreciate his perspective but always take his "gloom and doom" comments with a grain of salt.

 

https://www.thebalance.com/could-the-great-depression-happen-again-3305685

I find this one to be more fear mongering than anything else. To say that 2018 produced the 5 highest single day declines in the DOW is correct but very misleading.These single day declines were nowhere near the largest declines on a percentage basis and that is what really matters.The largest decline in 2018 was 4.6% but 2008 had a decline of 7.87%, 2000 had a single day decline of 5.66%. However, these declines are far below historical major declines in the DOW. October 19th, 1987 the DOW fell a record 22.6%. October 28th, 1929 had a decline of 12.8% followed by a decline of 11.7% the following day.

 

I have already made this too long but let's keep everything in perspective. Yes, a recession will happen at some point, trade wars and debt will likely be major contributing factors but that doesn't mean the markets will crash nor does it mean people should be in fear of their investments. Personally, I doubt that we will see a recession this year but I will make sure I am vigilant and up to date with geopolitics in an effort to wisely(?) control my investment decisions.

[NewbieCanuckFan]

58 minutes ago, kingofsurrey said:

We  all get the year off when robots take all our jobs......

Hey so as long they finally mass produce those fembots, I won't care.

Edited January 14, 2020 by NewbieCanuckFan

[Ghostsof1915]

I'm more concerned of the big picture. The regular cycles happen. The reality is we are running out of resources, and the human population doesn't stop growing. 

I've also never seen society with such greed, political apathy, and corruption as there is now. We are becoming a bread and circuses society. I'm seeing pets both abused in severely cruel ways. And pampered more than some children are. Society as a whole has to sort out issues and stop pointing fingers. We need solutions. Not rhetoric. 

[Shift-4]

Good topic

 

Of the things mentioned in the OP it is the debt levels that I watch. Lots of indications that Canadians want to deal with their debt levels. This will affect spending. I feel this is the biggest risk to the Canadian economy.