Next Recission ?

[gpang827]

Its been 10 years since the last recession hit.  In 2008 it was the mortgage crisis. 

When do you all feel the next rescission will hit?  (Given that recessions roll around every 10 years)

What will cause the next rescission?  ( Trade War?  Student Loan Default?  something else?)

[Kerim]

My guess is that it will be something that nobody is talking about right now. Some country that nobody is worried about at the moment defaults and it cascades unpredictably. Or some other time bomb hidden in the derivatives markets that folks aren't focused on goes off.

But my guess is also that this bull has more room to run. Seems like every headline I read is about how the inevitable downturn MUST be imminent, given how gravity-defying the decade-long run has been. How to protect yourself. How to position yourself to profit from it. I even take you posting this thread as a data point. When everyone is so worried about or sure that something is about to happen in the markets, more often than not the opposite tends to prevail. (Kinda like when my sister the acupuncturist insisted that we HAD to start flipping houses back in 2007 or so...)

Of course, these guesses are worth exactly what you paid for them!

(Edit to add: This is not to say I'm enthusiastically buying at these prices. With this bull so long in the tooth, I'm getting more and more selective and focusing on really boring, really stable, wide moat companies that seem to be trading at fair prices. And not pulling the trigger all that often. Happy to be sitting on some cash for when better opportunities arise.)

[EricL]

I think have another 12 months or so.

My guess is we'll have a few more rate hikes and rising interest rates before then. I think crude prices are headed higher, and between higher rates and higher costs from energy, will lead to another crash when a highly leveraged economy can't take the double-whammy of the two.

[fenders53]

I don't know the date but my biggest fear is the tariff experiment if it escalates.   This in uncharted territory for us (anytime recently), and no economically significant country is blinking just yet.  If it escalates we will start bailing out sectors in mass.  It's already started with 4.7B planned for the farmers.  It wasn't hard to see that one coming when crop prices hit 10 yr lows almost instantly.  I live near Deere world HQ in the corn and soybean belt.  Big deal around here.  IMO the FED has quite a challenge ahead trying to control this if we start throwing money around as if are coming out of a recession that hasn't happened yet.  We shall see.

[rayray]

I would say that a recession occurs once every 5 years on average. With the Great Recession being something of a different animal of the extreme, lasting until Spring of 2009. My buddy bailed 100% out of the market March 2009 just as the Bull began to get up and trot.

I would also ponder, that anyone that has been financially affected by the oil correction in 2014 would say that there has already been a recession, people lost money, people lost employment--two main points of a recession. It might not have affected everyone in a negative way but billions was wiped off the table. So, in essence, if 2014 counts as anything I'd assume something could be around the corner in some form or another. Correction...Recession??? IDK

The future is pretty easy to predict, the answer is....

We don't know other then it will be different then the last one.

[fenders53]

Good post rayray.

I am a GOV retiree and saw so many do exactly what you described. Take a six month beating in their 401K, then when it was too late move oll their money onto short term treasuries so they could feel "safe". Two years later they listen to their friends bragging they made $100K, then they want to move back into stocks. In one particular case an older friend invested in T-Bills for 20 years, then moved it into 100% S&P around 2007. Lost all his money, moved it back and was forced to retired with not much due to his age. It was hard to watch and I spent considerable time trying to get them on a better path. Sat them down one by one (voluntarily), projected out their personal balance in 30 years at various rates of return from 2% to 10%. Some listened, started contributing properly and allocating it correctly. Told them they couldn't cash out scared without calling me, even after I retire. (complete BS of course lol) It's a good feeling when I talk to them about 10 years later. Probably the most important thing I ever did for them in all my years of supervising. Somebody did something similar for me when I was very young.

[rayray]

(10-14-2018, 06:36 PM)fenders53 Wrote: Good post rayray.

I am a GOV retiree and saw so many do exactly what you described.  Take a six month beating in their 401K, then when it was too late move oll their money onto short term treasuries so they could feel "safe".  Two years later they listen to their friends bragging they made $100K, then they want to move back into stocks.  In one particular case an older friend invested in T-Bills for 20 years, then moved it into 100% S&P around 2007.  Lost all his money, moved it back and was forced to retired with not much due to his age.  It was hard to watch and I spent considerable time trying to get them on a better path.  Sat them down one by one (voluntarily), projected out their personal balance in 30 years at various rates of return from 2% to 10%.  Some listened, started contributing properly and allocating it correctly.   Told them they couldn't cash out scared without calling me, even after  I retire.  (complete BS of course lol)  It's a good feeling when I talk to them about 10 years later.   Probably the most important thing I ever did for them in all my years of supervising.  Somebody did something similar for me when I was very young.

We went to the Berkshire Hathaway shareholder meeting last year, and the biggest thing I took from the meeting was that they said most people fail at investing because they have too much emotion, one has to take all emotion out of the equation in order to succeed. Look at the numbers, only the numbers and as long as they're correct and not a lie if you buy based on the numbers a good company and hold for the very long term you can't loose, you'll make a lot of money, over the long term. Investing in the market is not a sprint it's a marathon.

Fenders, what you said, is exactly what my friend did...bailed in March 2009 and I know for a fact by 2013 he was still not in the market. And he has a finance degree from Penn State!! He tried to get me to sell too...I told him what's the point...lol


Oh...there's a good interview with Howard Marks of Oaktree Capital, he talks about emotion being very very bad for investors. I just read it yesterday. in fact, I'll read it again today...good read.

[fenders53]

I will check out the Howard Marks interview. I wish I had picked up a few shares of Berkshire long ago. Buffet and Munger are icons that may not be replaced anytime soon.

Emotion is a problem for most. I watch the market too close and I am sure I too get a little emotional, but learned long ago not to over-react on it. Fear or greed will get you hurt. I see lack of education as a big problem. Pensions went away for most, replaced by 401K plans. We have young people with little idea how the markets work. Many believe they are "rigged", or at least manipulated and there is evidence to support that belief. IMO there are really only a half dozen hard and fast rules to succeed at long term index investing. But many are just clueless, and after they have a few thousand in the market they get scared when the market dips hard. It's in our best interest that the next generation not give up on the stock market.

[Otter]

3-month/10-year yield curve inverted yesterday for the first time since 2007. From the Fed's perspective, that is the yield-curve metric that is most reliable for predicting a recession within a year. Had some dividends sitting around, and instead of putting them back into stocks as I typically do, I purchased a non-callable Ally Bank CD yielding 2.59% through June, 2020.

[fenders53]

This thread was a pretty good re-read over six months later.  Sound views from my friends IMO.  My thesis hasn't changed too much.  The tariffs still concern me and if we misplay this we could harm a fragile economy.  Perhaps I am delusional but I think we can manage a soft landing.  I actually think that is what is going on right now.  What we can't do is manage a soft landing for the global economy, and that could take us down in the end.  Europe continues to struggle, and God help us if China ever sees a real recession.  China growth threatens to fall below 6%.  They treat it like a recession.  The US would be tightening rates every quarter if we sustained much over 3% growth.

Now stand by while the algos go crazy on financial stocks due to the yield curve.  On a personal port note, watching my BAC stock oscillate in a wide band these past few months on no real news seems crazy.  From table pounding buy to get out while you can in the same quarter.  The market has not forgotten the financial crash I guess.

[Kerim]

Also Brexit? A smart colleague of mine keeps going on about how seriously the markets are under-reacting...

[fenders53]

(03-26-2019, 03:17 PM)Kerim Wrote: Also Brexit? A smart colleague of mine keeps going on about how seriously the markets are under-reacting...

Market seems to think we are immune from the world economy.  We are already ticking off Europe.  Let Brexit blow-up and then let's throw some more tariffs on them and show them who's the boss.