General Economic chit chat/updates.

[max225]

I figured I'd get this going... Just because we seem to talk about it frequently but not necessarily keep it in one spot.

One things I wanted to let you all know about... things are about to get a lot WORSE.
Predictors for the end of 2022.

1. Mass layoffs
+This hasn't happened yet and the 3.5 UE rate is fake... it is masking the true market fundamentals.
+ (see point 2,3,4) which will all feed into #1, and then further feed 2,3,4. Creating a vicious circle.

2. Struggling retailer sales
+Currently everyone is at record inventories... consumer spending is trending down... terrible combo
+Heavy discounting will be here this holiday season to draw customers in
+Heavily compressed margins will lead to #1
+ China and Europe are dropping off the cliff for consumer confidence and sales, this will be a global downturn,

3. Beginning of a real housing price correction
+There is record construction of apartments at the moment... more than at any time in history... 4% of all of appartments are being built in 2022 760K units!
+Consumers are spending less due to constricted budgets on travel etc...
+Airbnb mom and pops will have cash flow issues due to increased carrying costs of rental units/inflation/interest rates/taxes etc.
+A shit ton of units will hit the market by the end of this year... but the real brunt will be in 2023... as this takes time to go through
+ Evictions are finally legal... and those units will hit the market after the due process

4. Significant correction in car market
+Repos are a thing again
+Who can afford a $800 car payment? + Gas + insurance
+ consumers squeezed by the housing costs+ groceries etc all cut back on cars
+ Inventories are starting to build on the used market
+ OEMS are starting to produce more and more vehicles

5. Inflation will drastically improve before end of year... we have peaked back in June... prices are going to come down on most things... But it will take time.


What to do?
+I would say reduce all unnecessary expenses NOW. Not later... being CASH HEAVY is really good right now
+Convert 401ks into stable things like commercial paper etc... for the next 6-12 months at least
+Do not panic it is just part of the cycle... things will turn up again in a few years... but the short term pain will be real.
+start planning major projects around the house etc... especially if you don't move as things will get a lot cheaper soon


That's all for now... I will keep updating this as things change.

[Tar]

I love economics. Thanks for posting.

[Tar]

This slow motion train wreck has me thinking about cashing out the cottage. It's the right thing to do, but also a life altering course redirection. Between the fees, taxes, and capital gains, there are huge ramifications to the move, and I won't get back to this debt level for said asset. Even if l sold at peak, I'd probably just regain my losses with a 20% buy back discount.

I do expect a 20% correction here though. Europe is already getting pummeled, another English dude i know came home from a 6 wk vacay, and it's looking kind of grim.

[Huckleberry]

+Convert 401ks into stable things like commercial paper etc... for the next 6-12 months at least

Can you elaborate on this?

[D Griff]

Interesting talking points. I am not really a numbers guy so much so I appreciate the insight. Credit where it's due, Max has made a lot of pretty on point predictions over the years based on my observations.

I might actually take to heart the idea of planning some home improvements if things become less costly and more importantly more available - I'm not looking to hunt down contractors as a full time job, but I'd love to build a sidewalk out to a new concrete pad which houses a new larger shed. It would also be dece to remove our popcorn ceiling and get non formica counters in the kitchen. I think those couple of things inside would modernize the house a bit and at least break even in paying for themselves down the line.

I'm kind of hesitant to mess with long term investments much but curious for elaborated thoughts on that as well.

Obviously this being DFD, biggest for me is the car market. I am traveling with this new guy this week to train him (he covers a similar role for the Midwest and started three weeks ago). The dude lives in Minnesota which I imagine is pretty low cost, but owns a Rivian and a Miata... seems quite baller for the income level and $800 payment I imagine is optimistic. So many people in this boat and it was interesting hearing his thoughts on it, basically that it will be worth $100K+ for many years so

He was also telling me Rivian stock is quite low, I am still oddly tempted by that one but it probably has a bit more to fall?

[golftdibrad1]

He was also telling me Rivian stock is quite low, I am still oddly tempted by that one but it probably has a bit more to fall?

you missed the bottom, i bought some at around 20 a share. watch for a few weeks and see if it dips back into the 20's and buy then. There is support at 32 a share.

[golftdibrad1]

I figured I'd get this going... Just because we seem to talk about it frequently but not necessarily keep it in one spot.

One things I wanted to let you all know about... things are about to get a lot WORSE.
Predictors for the end of 2022.

1. Mass layoffs
+This hasn't happened yet and the 3.5 UE rate is fake... it is masking the true market fundamentals.
+ (see point 2,3,4) which will all feed into #1, and then further feed 2,3,4. Creating a vicious circle.

2. Struggling retailer sales
+Currently everyone is at record inventories... consumer spending is trending down... terrible combo
+Heavy discounting will be here this holiday season to draw customers in
+Heavily compressed margins will lead to #1
+ China and Europe are dropping off the cliff for consumer confidence and sales, this will be a global downturn,

3. Beginning of a real housing price correction
+There is record construction of apartments at the moment... more than at any time in history... 4% of all of appartments are being built in 2022 760K units!
+Consumers are spending less due to constricted budgets on travel etc...
+Airbnb mom and pops will have cash flow issues due to increased carrying costs of rental units/inflation/interest rates/taxes etc.
+A shit ton of units will hit the market by the end of this year... but the real brunt will be in 2023... as this takes time to go through
+ Evictions are finally legal... and those units will hit the market after the due process

4. Significant correction in car market
+Repos are a thing again
+Who can afford a $800 car payment? + Gas + insurance
+ consumers squeezed by the housing costs+ groceries etc all cut back on cars
+ Inventories are starting to build on the used market
+ OEMS are starting to produce more and more vehicles

5. Inflation will drastically improve before end of year... we have peaked back in June... prices are going to come down on most things... But it will take time.


What to do?
+I would say reduce all unnecessary expenses NOW. Not later... being CASH HEAVY is really good right now
+Convert 401ks into stable things like commercial paper etc... for the next 6-12 months at least
+Do not panic it is just part of the cycle... things will turn up again in a few years... but the short term pain will be real.
+start planning major projects around the house etc... especially if you don't move as things will get a lot cheaper soon


That's all for now... I will keep updating this as things change.

I agree with all of this.

[golftdibrad1]

So how do we think 300 billion plus of student loan write-offs will assist with inflation issues? How are the feds even doing that math internally? Just burning the IOU's?

[ChrisoftheNorth]

We just drove 1,500 miles through the middle of nowhere, and man...retailers are HURTING out there. We went in this one farm store (which just basically carries everything you can imagine) in Blue Earth, MN and it seemed like EVERYTHING was on sale. We picked up a $300 Yeti cooler on sale for $150 (these are traditionally NEVER on sale), they had a ton of DeWalt tools on sale 25%+ off, so I picked up some screwdrivers and whatnot I've been waiting to buy. Shelves were literally overflowing.

Even in tourist towns, tons of trinkets, art, knick knacks were on clearance/sale also overflowing inventory.

Only thing not overflowing was car lots, still decimated new car inventory, but used seems to be building. $60k F150's aren't going to be moving soon, so I suspect new inventory will build fast.

Employment is still a problem tho...working level jobs. We booked a hotel in Scotts Bluff, SD and when we got there, they told us the room wasn't ready and our reservation was cancelled because they didn't have enough house keepers to clean all the rooms. Wow, thanks. Same thing happened to us when the truck broke down just outside of Sioux Falls. We learned to be flexible and nimble. Tons of restaurants and 24 hr gas stations were closed with signs blaming staffing issues, which got SKETCHY driving in the middle of nowhere needing gas. Gas light on, pull off the highway for a gas station, just to find the only one is closed.

So that unemployment piece still doesn't seem fake to me. Not sure how that's going to evolve, but it's not good for the economy. I suspect small business will start going under, then it's a domino effect.

[max225]

+Convert 401ks into stable things like commercial paper etc... for the next 6-12 months at least

Can you elaborate on this?

Sure. Currently most 401Ks will have you in something like this
Fidelity® 500 Index Fund FXAIX (ticker) i.e most accounts just move with market averages. So down 8-15% YTD/1 year
I would get into treasures which yield around 2-3.5% and are far safer and reduce your exposure to the stock market.

I currently have 50% of my net worth in stocks, 25% in my house and 25% in cash... I want to reduce my market exposure to 25%... as I expect that overall total to significantly decrease. Ideally I would have also sold my house in march which I was advocating to but she refused... So here we are.

[max225]

We just drove 1,500 miles through the middle of nowhere, and man...retailers are HURTING out there. We went in this one farm store (which just basically carries everything you can imagine) in Blue Earth, MN and it seemed like EVERYTHING was on sale. We picked up a $300 Yeti cooler on sale for $150 (these are traditionally NEVER on sale), they had a ton of DeWalt tools on sale 25%+ off, so I picked up some screwdrivers and whatnot I've been waiting to buy. Shelves were literally overflowing.

Even in tourist towns, tons of trinkets, art, knick knacks were on clearance/sale also overflowing inventory.

Only thing not overflowing was car lots, still decimated new car inventory, but used seems to be building. $60k F150's aren't going to be moving soon, so I suspect new inventory will build fast.

Employment is still a problem tho...working level jobs. We booked a hotel in Scotts Bluff, SD and when we got there, they told us the room wasn't ready and our reservation was cancelled because they didn't have enough house keepers to clean all the rooms. Wow, thanks. Same thing happened to us when the truck broke down just outside of Sioux Falls. We learned to be flexible and nimble. Tons of restaurants and 24 hr gas stations were closed with signs blaming staffing issues, which got SKETCHY driving in the middle of nowhere needing gas. Gas light on, pull off the highway for a gas station, just to find the only one is closed.

So that unemployment piece still doesn't seem fake to me. Not sure how that's going to evolve, but it's not good for the economy. I suspect small business will start going under, then it's a domino effect.

What I mean to say is that the 3.5% is artificially low given all the fundamentals. It is in fact real and people "can't get help". That's 100% true.

However, the economy will NOT be at 3.5% unemployment in the future. Think of it this way... You're rolling in a 1K a month Ford F150 platinum and you missed 3 payments... the repo man is coming... yes you still have your F150... but you also won't in the future. The labor market will adjust accordingly. It just takes time.

[D Griff]

So how do we think 300 billion plus of student loan write-offs will assist with inflation issues? How are the feds even doing that math internally? Just burning the IOU's?

Dude. On the one hand, yes I think things need to be done re: student loans... like maybe educating high schoolers on understanding the debt they're signing up for, making community college free for access to basic education/training for trades, regulating tuition increases, stuff like that. I am so by this 'we should just pay off all student debt' idea though. I had to pay mine back, why shouldn't others. Mine was far from insurmountable and I'm lucky that I was smart enough to think about that and my parents helped me understand. Still though, I survived being poor in my early/mid twenties, paid it off early, and think it's unreasonable that I as the tax payer should be responsible for the burden of Suzie Q's private school art history degree.

[D Griff]

We just drove 1,500 miles through the middle of nowhere, and man...retailers are HURTING out there. We went in this one farm store (which just basically carries everything you can imagine) in Blue Earth, MN and it seemed like EVERYTHING was on sale. We picked up a $300 Yeti cooler on sale for $150 (these are traditionally NEVER on sale), they had a ton of DeWalt tools on sale 25%+ off, so I picked up some screwdrivers and whatnot I've been waiting to buy. Shelves were literally overflowing.

Even in tourist towns, tons of trinkets, art, knick knacks were on clearance/sale also overflowing inventory.

Only thing not overflowing was car lots, still decimated new car inventory, but used seems to be building. $60k F150's aren't going to be moving soon, so I suspect new inventory will build fast.

Employment is still a problem tho...working level jobs. We booked a hotel in Scotts Bluff, SD and when we got there, they told us the room wasn't ready and our reservation was cancelled because they didn't have enough house keepers to clean all the rooms. Wow, thanks. Same thing happened to us when the truck broke down just outside of Sioux Falls. We learned to be flexible and nimble. Tons of restaurants and 24 hr gas stations were closed with signs blaming staffing issues, which got SKETCHY driving in the middle of nowhere needing gas. Gas light on, pull off the highway for a gas station, just to find the only one is closed.

So that unemployment piece still doesn't seem fake to me. Not sure how that's going to evolve, but it's not good for the economy. I suspect small business will start going under, then it's a domino effect.

I should hit a rural store and get some tools. Working on projects last weekend I realized it's about time I bite the bullet on some decent cordless tools.

[D Griff]

Can you elaborate on this?

Sure. Currently most 401Ks will have you in something like this
Fidelity® 500 Index Fund FXAIX (ticker) i.e most accounts just move with market averages. So down 8-15% YTD/1 year
I would get into treasures which yield around 2-3.5% and are far safer and reduce your exposure to the stock market.

I currently have 50% of my net worth in stocks, 25% in my house and 25% in cash... I want to reduce my market exposure to 25%... as I expect that overall total to significantly decrease. Ideally I would have also sold my house in march which I was advocating to but she refused... So here we are.

And done what? Lived with the PDT owners? man, you have to live somewhere even if its value ebbs a bit in down times. Kind of wild though, you made me wonder and I looked, per Zillow, our value has dropped 3% ($15K) in the last 30 days!

[max225]

Sure. Currently most 401Ks will have you in something like this
Fidelity® 500 Index Fund FXAIX (ticker) i.e most accounts just move with market averages. So down 8-15% YTD/1 year
I would get into treasures which yield around 2-3.5% and are far safer and reduce your exposure to the stock market.

I currently have 50% of my net worth in stocks, 25% in my house and 25% in cash... I want to reduce my market exposure to 25%... as I expect that overall total to significantly decrease. Ideally I would have also sold my house in march which I was advocating to but she refused... So here we are.

And done what? Lived with the PDT owners? man, you have to live somewhere even if its value ebbs a bit in down times. Kind of wild though, you made me wonder and I looked, per Zillow, our value has dropped 3% ($15K) in the last 30 days!

Yea, I am expecting my house to "drop" 200k this year and 300k next year... that buys a lot of rent my dude... not to mention 80k mortgage/taxes annually that would essentially be worthless.

[golftdibrad1]

So how do we think 300 billion plus of student loan write-offs will assist with inflation issues? How are the feds even doing that math internally? Just burning the IOU's?

Dude. On the one hand, yes I think things need to be done re: student loans... like maybe educating high schoolers on understanding the debt they're signing up for, making community college free for access to basic education/training for trades, regulating tuition increases, stuff like that. I am so by this 'we should just pay off all student debt' idea though. I had to pay mine back, why shouldn't others. Mine was far from insurmountable and I'm lucky that I was smart enough to think about that and my parents helped me understand. Still though, I survived being poor in my early/mid twenties, paid it off early, and think it's unreasonable that I as the tax payer should be responsible for the burden of Suzie Q's private school art history degree.

Hey, no politics, I was asking about inflation

But yes, your sediment is exactly what most people feel. This is just plain un fair and does nothing to address underlying issues, whatever you think they may be.

I personally think the underlying issue is lack of education on how loans work, and since they are secured by feds we have had huge ballooning of cost b/c there is no limit to what will be lended. Also art history should be a lot less of a dollar value loan the bank is willing to write vs say doctor. But again, the thing this really rubs me the wrong way about is that its being done without trying to fix ANYTHING. Its just printing more money.

The extended repayment & forgiveness terms are shit too, turns college into a subscription service where the cost dont matter. 5% of income for 10 years, and if that does not cover interest principle does not increase.

[golftdibrad1]

We just drove 1,500 miles through the middle of nowhere, and man...retailers are HURTING out there. We went in this one farm store (which just basically carries everything you can imagine) in Blue Earth, MN and it seemed like EVERYTHING was on sale. We picked up a $300 Yeti cooler on sale for $150 (these are traditionally NEVER on sale), they had a ton of DeWalt tools on sale 25%+ off, so I picked up some screwdrivers and whatnot I've been waiting to buy. Shelves were literally overflowing.

Even in tourist towns, tons of trinkets, art, knick knacks were on clearance/sale also overflowing inventory.

Only thing not overflowing was car lots, still decimated new car inventory, but used seems to be building. $60k F150's aren't going to be moving soon, so I suspect new inventory will build fast.

Employment is still a problem tho...working level jobs. We booked a hotel in Scotts Bluff, SD and when we got there, they told us the room wasn't ready and our reservation was cancelled because they didn't have enough house keepers to clean all the rooms. Wow, thanks. Same thing happened to us when the truck broke down just outside of Sioux Falls. We learned to be flexible and nimble. Tons of restaurants and 24 hr gas stations were closed with signs blaming staffing issues, which got SKETCHY driving in the middle of nowhere needing gas. Gas light on, pull off the highway for a gas station, just to find the only one is closed.

So that unemployment piece still doesn't seem fake to me. Not sure how that's going to evolve, but it's not good for the economy. I suspect small business will start going under, then it's a domino effect.

I should hit a rural store and get some tools. Working on projects last weekend I realized it's about time I bite the bullet on some decent cordless tools.

home depot has been having epic ryobi sales

[D Griff]

I should hit a rural store and get some tools. Working on projects last weekend I realized it's about time I bite the bullet on some decent cordless tools.

home depot has been having epic ryobi sales

I've been quite satisfied with my Ryobi lawn equipment.

[D Griff]

Dude. On the one hand, yes I think things need to be done re: student loans... like maybe educating high schoolers on understanding the debt they're signing up for, making community college free for access to basic education/training for trades, regulating tuition increases, stuff like that. I am so by this 'we should just pay off all student debt' idea though. I had to pay mine back, why shouldn't others. Mine was far from insurmountable and I'm lucky that I was smart enough to think about that and my parents helped me understand. Still though, I survived being poor in my early/mid twenties, paid it off early, and think it's unreasonable that I as the tax payer should be responsible for the burden of Suzie Q's private school art history degree.

Hey, no politics, I was asking about inflation

But yes, your sediment is exactly what most people feel. This is just plain un fair and does nothing to address underlying issues, whatever you think they may be.

I personally think the underlying issue is lack of education on how loans work, and since they are secured by feds we have had huge ballooning of cost b/c there is no limit to what will be lended. Also art history should be a lot less of a dollar value loan the bank is willing to write vs say doctor. But again, the thing this really rubs me the wrong way about is that its being done without trying to fix ANYTHING. Its just printing more money.

The extended repayment & forgiveness terms are shit too, turns college into a subscription service where the cost dont matter. 5% of income for 10 years, and if that does not cover interest principle does not increase.

Yep, education would be key. You'd think that understanding borrowing $100K is a bad idea would be pretty damn simple, particularly for a career path that doesn't directly lead to big pay checks (like doctor)... but doesn't seem to be the case.

[D Griff]

And done what? Lived with the PDT owners? man, you have to live somewhere even if its value ebbs a bit in down times. Kind of wild though, you made me wonder and I looked, per Zillow, our value has dropped 3% ($15K) in the last 30 days!

Yea, I am expecting my house to "drop" 200k this year and 300k next year... that buys a lot of rent my dude... not to mention 80k mortgage/taxes annually that would essentially be worthless.

You're making me tempted to take my 45% profit and run Rent is steep too though, like $3K/month for something comparable to our house.

Funny that made me come across this - my old Povmahal dick grabber paradise: https://www.zillow.com/homedetails/530- ... 2037_zpid/

I think we paid $825 for this shit box in 2015.

[max225]

So how do we think 300 billion plus of student loan write-offs will assist with inflation issues? How are the feds even doing that math internally? Just burning the IOU's?

This spit in the bucket won't matter. 10k is meaningless and making less than 125k seems like a shitty position to be in and likely wouldn't have resulted in any sort of repayment anyways.

Most degrees are around 100-500k nowadays depending on what sort of school you go to. So this won't move the needle in a meaningful way IMO.

I am curious about the car loan bubble however.

[max225]

Yea, I am expecting my house to "drop" 200k this year and 300k next year... that buys a lot of rent my dude... not to mention 80k mortgage/taxes annually that would essentially be worthless.

You're making me tempted to take my 45% profit and run Rent is steep too though, like $3K/month for something comparable to our house.

Funny that made me come across this - my old Povmahal dick grabber paradise: https://www.zillow.com/homedetails/530- ... 2037_zpid/

I think we paid $825 for this shit box in 2015.

you have to weigh potential downside in your home value vs rent. The run up in prices is completely All the leading indicators are signaling a MAJOR correction. You can't be focused on this monthly payment. If your house is dropping by 100k a year... you can "afford" to pay 6k a month in rent and still be ahead.
Inventories UP
mortgage demand down
interest rates UP
Defaults/foreclosures UP

Also rents are going to tank soon enough also. They have turned stratospheric.

[max225]

that said there is always a factor in everyones life... I want to the house I DGAF. Same like I did with the tesla. I have no qualms being a bum renter.

[golftdibrad1]

So how do we think 300 billion plus of student loan write-offs will assist with inflation issues? How are the feds even doing that math internally? Just burning the IOU's?

This spit in the bucket won't matter. 10k is meaningless and making less than 125k seems like a shitty position to be in and likely wouldn't have resulted in any sort of repayment anyways.

Most degrees are around 100-500k nowadays depending on what sort of school you go to. So this won't move the needle in a meaningful way IMO.

I am curious about the car loan bubble however.

bruh, outside cali 100k a year is good frekin money. Also Im sure they are talking about AGI in all this so real salary if your AGI is 125 is more like 150+.

anywho, came across this and i bet you especially will enjoy it re: the student loan thing. Lots of insights there.
https://boriquagato.substack.com/p/cont ... he-schools

[max225]

This spit in the bucket won't matter. 10k is meaningless and making less than 125k seems like a shitty position to be in and likely wouldn't have resulted in any sort of repayment anyways.

Most degrees are around 100-500k nowadays depending on what sort of school you go to. So this won't move the needle in a meaningful way IMO.

I am curious about the car loan bubble however.

bruh, outside cali 100k a year is good frekin money. Also Im sure they are talking about AGI in all this so real salary if your AGI is 125 is more like 150+.

anywho, came across this and i bet you especially will enjoy it re: the student loan thing. Lots of insights there.
https://boriquagato.substack.com/p/cont ... he-schools

Oh I am quite acutely aware of the inflation in the costs of college. Look no further than professors making 500k at Berkeley per year teaching for 5 hrs a week.