The US Economy Will Recover Quickly ??? Think Again !!!
I keep hearing many investors speak of the housing market and stock market as if we are in a normal situation. Everything is great and the stimulus has solved all of the problems that a global pandemic has created. Take advantage of the situation and buy as many deals as you can before its to late. There are great deals in stocks that you should be pouncing on to ride the market to the new highs of 2021 and 2022. Trump looking good to get reelected will take us to places we have never been before with the US economy. Its really confusing and hard to believe that more people aren't sounding the alarm bells and getting ready for whats to come. Run while you can. This is just my opinion and everybody has there own way. I am not trying to offend anyone, and people must do what they feel is the right with there investment plans and strategies. Let me explain why are some of the reasons I think that the US economy is not ok, and we are up for some major pain to come.
Forbearance - Most inventors think that most banks are going to wrap your missed payments to the back end of your loan and you will not have to pay this until the end of your loan. So no big deal just 6 more payments and the loan will get paid off, but that is not the entire story. There are many private lenders who do not have to keep up good appearances in the public eye like the big banks do. They are going to require that the missed payments be paid all at once. With the majority of Americans living paycheck to paycheck this is just not going to be possible for them, and they will end up defaulting which will lead to a huge influx of foreclosures.
Brick and Mortar Jobs - Consumer confidence is at an all time low for going into buildings and doing business. This includes so many types of business' its very hard to name them all. All types of retail, hotels, restaurants, home goods, and small local business', to name a few. Many states have opened then shut down again and will not make the same mistake twice. This shut down will be much worse than the first because politicians will not want to look foolish if they reopen again and the numbers start to climb like they did the first time. With consumers not going out, how many people that are currently unemployed will get there jobs back. How could people think that this will have no effect at all on the US economy and that things will return to normal very soon. As soon as we get a vaccine or the numbers start trending lower everything will get right back to the way it was and business will be booming again in the US. This is a complicated process that will take years to come back from and In my opinion it has change the face of the way we do business forever.
Inventory - With the above mentioned forbearance we are going to see huge amount of defaults. This is going to create a huge amount of inventory and the market will have no choice but to correct. Right now things look GREAT because of low inventory. This is causing a huge demand for housing because people are not selling like they were before covid, but when a flood of foreclosures hit the market things will shift. The banks are already preparing for this and have set aside billions to prepare for the coming flood of defaults and foreclosures.
Stimulus - Its going to dry up eventually, do you think they can keep pumping money into the market forever. When the bonus unemployment runs out and the bail outs stop there is going to be some pain. This is inevitable and the cheering bulls will soon start to change there tune and be heading for the hills.
RMBS and CMBS - this is a long complicated subject in itself, to long to list here and I am no expert, but all of these topics above are connected to mortgage backed securities. The government is not stepping in and helping the private lenders the way there helping Fanny and Freddie and once the banks start to sound the alarm bells the truth will come out and the market will correct.
Thanks for listening to my warning and rant. In my opinion if you can hold off or pass on some maybe marginal deals for the next few moths you should start to see more of the truth of the pain to come. Don't follow the masses. They are running straight off of a cliff and to me the signs are so obvious its hard not to see them. After all we are still in a global pandemic. Even though many people are trying to act like nothing is different, there going to have to face reality sooner or later, things have change and will take years to get back to the way they were before. Thanks Chris Gawlik