The last recession in 2008 was spurred by excessive debt in the private sector, mostly in the housing market. But this time, it’ll be worst and much more difficult, as the problem will be caused by corporate debt, according to several leading investors.
The ensuing downturn could be immediate and sharp, once the bull market ends. But some, such as Peter Schiff, already believe we are in a bear market. “Stocks are expensive. The bull market is over. It’s now a bear market. People want to get out. People are allocating out. Growth is slowing whether people want to acknowledge it or not,” said Schiff.
But others still think they have yet to hit the top. “Once we peak, our work shows that we should expect maybe a 40% decline in equities from their peak,” Scott Minerd, chairman of Guggenheim Investments, told Yahoo Finance. “I’m talking about a recession, possibly in early 2020. Stocks tend to do well two years before a recession. But in this rally, it’s the opportunity to sell.”
At the Milken Institute Global Conference in Los Angeles, the world’s top investors are asking how much longer the good times can last. They claim the current bull-market rally began in 2009, making it one of the longest on record. But others, such as Peter Schiff, said it’s a false recovery because of the money printing scheme employed.
“When we do all that [print money to recover from a recession], the dollar is going to implode because everybody is going to know that the [money printing scheme] experiment failed. Everybody is going to know there is no way out of this box. There is no normalization of rates. That is ever going to happen. Their [The Federal Reserve’s] balance sheet is never going to shrink. The balance sheet is going to grow permanently, which means this banana republic debt monetization. They can no longer pretend that they’re not doing the same things as South American banana republics. It’s a pure ‘we just print money to finance government spending,’ which is going to explode,” said Schiff. –SHTFPlan
The good news, if there is any to be had, is that the tax cuts President Donald Trump signed in 2017 could juice markets a bit longer by leaving more money in American’s pockets. But some investors gathered at the Milken Conference also feel that the corporate forces are now swirling that will trigger the next downturn.
Because the tax cuts didn’t offer a decrease in the size of government, they will add to US government debt. Spending, not taxation, is the problem and will be until the government is reduced. And while the Federal Reserve is gradually raising interest rates, they may still not be high enough to allow for aggressive monetary policy by the time a recession hits and the Fed needs to cut interest rates. “We’re in danger of having a collision between monetary policy and fiscal policy,” Minerd says. Once interest rates rise, the amount owed on the massive amount of debt corporations hold will increase along with the debt owed by the federal government.
We are in for a rough ride, everyone.
If Minerd is right, some of the riskiest investments include high-yield bonds, other fixed-income securities, and eventually stocks. But some investors will undoubtedly hold on, hoping to squeeze out the last gains before the market turns.
Yahoo‘s suggestion? Keep a parachute handy. But we prefer you actually prepare and store things that are of use. Prepping can be difficult and it’s often hard to take that first step, but if you’re new and interested in learning, it’s never too late to start preparing for any potential outcome. The book titled The Prepper’s Blueprint offers a simplistic and easy to follow guideline for those who would like to take that first step.
If raising interest rates in the attempt to bring them into normal, “supply & demand” will cause a catastrophe why would the central banks not just continue kicking the can down the road?
“I’m talking about a recession, possibly in early 2020. Stocks tend to do well two years before a recession. But in this rally, it’s the opportunity to sell.”
2020 ??? Really ??? That’s two years away. Lots of time to make money in the markets if you believe a Recession in 2020.
In the year 2525, if man is still alive, if women can survive ….. well you get the picture. The profile of your portfolio will have little consequence. 🙂
DK
That can very well may be true but the question still stands. If raising interest rates, in the attempt to set forth a path to normalize them to market value will cause such a catastrophic effect why would they do it unless they desire the catastrophic effect?
K2: Because the BIG money is flush with tonnes of cash looking to buy real assets on the dirt cheap, is the easy answer; and at current prices the BIG money can’t find any bargains.
The real answer is that 10 year bonds above 3% are not going to collapse the economy. That is fear mongering from Institutional Bond Holders would will lose a lot of money discounting their bonds in the Secondary Market to provide the same yield to new coupon holders who buy their older bonds.
Apple is re-investing its repatriated offshore cash windfall for a new stock buyback plan. TRUMP should have linked those cash repatriations to a Federal Infrastructure Tax Free Bond purchase.
I can remember a time (early eighties) when rapidly rising interest rates couldn’t slow down the economy: it was running away from them. Even bankers make mistakes so they learned from that experience and want to get a head of the curve now.
More than that, rapidly rising interest rates actually SPURRED the economy into higher gear as consumers wanted to buy, buy, buy before mortgage rates at 13% went to 15% or more. And buyers wanted to lock those high rates in for 30 years !!! In those days prices were going up even as rates were going up. The same thing will happen again but at a milder rate as many will move to borrow as much “Cheap Money”at fixed rates while it is still “Cheap”.
Currently, I see serious erosion in demand across the board in the real estate markets and a significant drop in prices as a consequence; despite LSM focused reporting on NYC, DC, VA, LA/BH, SF & Seattle. But even these markets are showing a top.
There is as much propaganda out there to support home buying for those who may be able to qualify as there is to induce gold purchases opr bitcoin. Both can’t be right. In this case, neither is right.
Need evidence to support that claim ??? Just look at the recent 3% NO QUAL GOVT LOAN, with no restrictions on income, location, etc. You can buy the home of your dreams if you have 3% of the purchase price down. They don’t care where or how you come up with payments.
That’s a sign of desperation presented to you in sticks & bricks. 🙂
If you study history a collapse is inevitable. We are on track for a whopper. The problem is predicting it.
The same as with “the big one” earthquake in California.
Which will come first? The ‘chicken or the egg?’. Will it be the economy or will it be WW3? For one major collapse seems to usually bring about or associated with it the other. Let it all just happen. As so many say anymore, nothing but time til it breaks. Might as well rip this band-aid off quick and get it over with.
The future belongs to those who prepare for it. – Ralph Waldo Emerson
The End Of Our Empire Approaches
“History is clear on where we’re headed.”
“We now live in a world of, by and for bankers, and other financial elites. Where once it was your royal lineage, or direct connection to the sun god Ra that assured your place at the top, today it’s your proximity to the temples of money.
But what happens when the economic pie is no longer expanding, yet the keepers of the system seem unable to turn off their own desires to grab more, more and yet more from that same pie?
That is where we find ourselves today. The economic oxygen is being sucked from the middle and lower classes and the social and political pressures are building.
Meanwhile more and more claims (currency and debts) are being piled on top of this stagnant economic pie thereby increasing the pressure on a creaking system. Someday that all gives way rather spectacularly and ends very badly. History says it ends with a lot of social anarchy and quite possibly another world war.”
“As we progress from here, the disparity between the haves and have-nots is only going to intensify, with debt (and our debt-based money system) being used as the primary weapon for controlling an increasingly dispossessed public.
Are you prepared?”
https://www.zerohedge.com/news/2018-04-28/end-our-empire-approaches
It will eventually blow and blow HARD but of course we have no idea When that will happen but for what it is wroth, I think it is much sooner than later…everything is genuinely out of control. . .
In Venezuela, 5 years of severance pay now buys a coffee
CARACAS: “When Yolanda Abreu got her check for severance pay after five years working as a cardiologist, she let out a laugh of sheer disbelief: it was barely enough for a cup of coffee.
Like her, millions of Venezuelans have seen their salaries decimated by rampant hyperinflation that is expected to drive prices up by 13,000 percent this year, IMF figures show.”
“If she had received the check when she resigned in January 2017, it would have been worth $45.
But her severance pay was decimated by the country’s chronic hyperinflation and the accelerated collapse of the bolivar.”
http://www.france24.com/en/20180501-venezuela-five-years-severance-pay-now-buys-coffee
Debt grows and shrinks with the stroke of a pen, but you keep trying to attribute that to logical causes.
US debt (the bond market) is essential to facilitate the cash of the NWO multinationals until they can deploy that cash into attractive real assets for pennies on the dollar when everyone else goes broke.
Yes some corporate debt will fail. Corporations have been taking on excessive debt to buy back their stocks at ridiculously low interest rates. This is the phenomena that has elevated the markets.
The real trigger is consumer debt. As consumers curtail their spending to repay their debt, it initiates a vicious cycle of contraction leading to a crash when investors read the handwriting on the wall. No, not THAT WALL.
Wall Street. 🙂
DK
Thank you for that explanation. It answers my question at the beginning of this thread.
I am going long pussy. All this debt will have the same outcome it had in Russia when the Soviet Union collapsed: the quality of pussy for sale on the market went WAY up and the price went WAY down. All those fat women will have to sculpt their butts if they want to eat and get back out there in the sexual marketplace. Ironically, it will be better for their health having to go skinny. “Nothing ever tasted as good as skinny feels!”: Kate Moss.
Rather than having whiny women stuffing their faces in front of box sets of The Good Wife, hashtagging the latest #metoo scam, we will have skinny bitches hanging around hotels in designer wear waiting to pick up a horny Chinese businessman.
Don’t believe me? Take a look at Venezuala to see the future.