Rental Property Investor · Gilbert, AZ · Member since 2020 · 30 posts · 25 votes
It seems like this crises might be over soon, but that doesn't mean anything will return to normal. In fact there are major changes ahead and the chances of a massive Depression are extremely high. In this post I will explain to you why this is the case. But upfront a basic view of the regular economic cycle:
This total cycle covers 100 years. The linear line is the productivity.
We are currently in the last peak before the massive drop, if you overlook history. (last major depression: 90 years ago)! All this is in direct connection with the Case-Shiller-House price index, at an all time high, just like in 1929 and 2008. All this together with exponential growth of US credit market debt, at all time highs, with rising Inflation and stagnating wages, will ultimately lead to a depression.
If you want to discuss more about it, I will be glad to discuss it in this forum!
Real Estate Broker · LA & ORANGE COUNTY CA -Multi Family · Member since 2016 · 374 posts · 132 votes
6y
Whats interesting is last year i remember Ray Dalio had warned about a potential recession. Now he was basing his reasoning on history and the chart trends at the time. However we are moving in that direction now and its primarily due to covid 19. Just thought i throw my thoughts out there since its been on my mind about Ray Dalios prediction. Feel free to share your thoughts on this..
Rental Property Investor · Upstate, NY · Member since 2012 · 3k+ posts · 3k+ votes
6y
I guess a lot of people are oblivious or did not get the memo about an impending depression ...
Carnival Cruise Bookings Surge 600% After Announcing August Relaunch!!!
I doubt if the historical idiosyncrasies of the macro/micro economies of a 'financial' depression 90 years ago will factor into what we are facing in todays's economies. Admittedly there will be a LOT of those deemed 'non-essential' who will suffer financially & fall back to Guv welfare, but there seems to be an uncanny resilience to financial doom for most. But I'd be interested in the argument(s) for an impending 20th Century Depression.
@Pat L. 600% of what? Bookings went down to near zero :)
Google is your friend...
"...Last week Carnival announced that some of its cruises could resume in August. Since that announcement, the Cruise Planners representative says, Carnival bookings shot up 600% compared to the previous three days before news of August Carnival trips were announced.However, what’s really surprising is that Cruise Planners says that August 2020 bookings are up 200% over August 2019 bookings—back when no one had any worries about being stuck on “death ships.”
Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes
6y
Thats cool, and I wish them well. You wouldn't get me on a cruise ship in August this year if you paid me. Worst possible environment for spread and just in time to catch the post opening wave...I wonder what the price differential from last year was? Cruise ship reps have been a little fast and loose with the truth lately...
Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes
6y
@Pat L. Ok you got me on the google! A few caveats though:
From the industry mag:
"As an example, Passengers can book a cruise from Miami in August for as low as $119 for a four-day cruise. And the cruise line even offers an eight-day cruise for $519. Those rates are likely a significant draw for people looking to book a cruise."
And they have a 100% refund policy. So another way of expressing this headline would be that "cruise prices down a horrific percentage from last year"
Rental Property Investor · Upstate, NY · Member since 2012 · 3k+ posts · 3k+ votes
6y
& they can use their stimulus money to book it, much like the rush when Wal-Mart put out all the cheap 65" TV's when the $1200 checks rolled in.
I have a tenant (hair stylist) getting close to $3k/month (plus she got the $1200 & $500 for each child) for being one of the 'stimulated' non-essential un-employed. Much more than she cleared working, after paying for child care, driving to the salon (45minutes each way), paying her 'chair rent' & buying the salon inflated supplies she must use. Some of her clients begged her to come to their homes, (& I bet she did), so she will be back to work doing $400-$500 hair extensions & not feel a thing. I have another tenant (been with us 12 years) who is a house cleaner, that's still working her higher end homes (& has always been cash off the books), she is now getting extra pay to disinfect the premises & their vehicles.
So it may only be the avg W-2 stiffs who will feel the pain as they lose their jobs tied to brick & mortar locations to those with foresight to successfully transition to virtual/mobile work environments.
As I said it will be interesting BUT not like 90 years ago.
Since we only have accurate and reliable housing data going back 130 years and stock market data back to 1926, what have you used to derive your "100 year cycle" hypothesis?
Whats interesting is last year i remember Ray Dalio had warned about a potential recession. Now he was basing his reasoning on history and the chart trends at the time. However we are moving in that direction now and its primarily due to covid 19. Just thought i throw my thoughts out there since its been on my mind about Ray Dalios prediction. Feel free to share your thoughts on this..
History has no correlation here, because it is impossible for that to predict a virus. His prediction is is right in the same way that a fortune teller or a horoscope is right. A recession is always coming. For five years people have been predicting recessions and eventually someone was going to be right. Not a single person said a pandemic would be the cause.
A prediction is only impressive if it is is specific. Saying "I see a recession on the horizon" is like saying "I see bad weather in the future" or "something unexpected will happen next month" or "someone close to you will die". All these things happen regularly enough that of course a prediction will be right.
Investor/Agent/Entrepreneur · Dallas, TX · Member since 2016 · 464 posts · 564 votes
6y
Looking at the Case Shiller index, what is surprising is that real estate (residential SFH's) was not exactly a great investment till the 40's. Maybe it was in relative to other assets, especially during the depression and war. Then again after going stagnant for decades, it was the late 90's to 2020 exponential growth.
I have thought over the years that RE has been getting inundated with new $$, overpriced and too much growth. Everyone made money in RE in the past decade, but I just can't see that continuing, otherwise we'll be seeing million dollar trailer homes before the century is over lol.
Unemployment rate is 15%+, bankruptcies are going up, business not making as much money. Stock is only down 8% YTD and home prices are flat. Yup, we are not in a bubble.
I was chatting online with a friend in late feb and discussing Covid impact. The consensus we both came to was if we were still talking about this Covid thing same time next month, all bets are off.
Then in mid April I felt the same way about Covid in June.
I think with each passing week where we have not gained confidence about Covid and how to deal with and reopening our economy, the problem gets magnified and worse.
We are not too from June so it might be worth pulling out the next worse scenario which is small business bankruptcies, continued high unemployment, huge damage to local and state funds and thereby cuts in basic services, fall in consumer demand and then a cascade that impacts other businesses and eventually rolls into the housing market in the form of foreclosures.
Things are getting bad out there, not so much for housing but more for the broader economy and does that open the door for a depression! Maybe.
Carnival Cruise Bookings Surge 600% After Announcing August Relaunch!!!
Actually I don't agree with you. If you look at how their bookings are made, it is the same as disneyland. Minimal capacity and everything being extremely restricted. I don't see how our economy should continue on as it did before.
Rental Property Investor · Brooke Park Drive · Member since 2018 · 1k+ posts · 2k+ votes
6y
Originally posted by @Account Closed:
"Your" post is nothing more than you letting us know you just discovered Ray Dalio and probably watched his "How the economic machine works in 30 min" video, which is where your graphic comes from.
Property Manager · Indianapolis, IN · Member since 2010 · 1k+ posts · 1k+ votes
6y
“We are currently in the last peak before a massive drop”
How can you say this? How can anyone say this? Then sell all your stuff and move, Right? Get out before the bread line get too long and seed prices surge.
Carnival Cruise Bookings Surge 600% After Announcing August Relaunch!!!
Actually I don't agree with you. If you look at how their bookings are made, it is the same as disneyland. Minimal capacity and everything being extremely restricted. I don't see how our economy should continue on as it did before.
Alexander Roeschmann
I guess investors smarter than the average Plebe have discounted a predicted downturn. Instead they predict a great $$$ opportunity. As in the depression of old, people pursued entertainment as a distraction. Cruises of today maybe just that, regardless of the cost.
Austin, TX · Member since 2019 · 5k+ posts · 5k+ votes
6y
Based on my internal proprietary calculations;
What I am seeing is right now the average SFH home price (USA) is about 35% above where it would be if only owner occupants owned them all (with very few rentals and no flips), (not including the high end trophy home market present in many areas).
More popular SFH rental/flip areas will have higher percentages than less popular areas to average out to the 35%.
So we have price heat (and volume) coming from people owning more than one SFH (speculation) (Tom Vu Seminars, and all the rest) in addition to the SFH market price set by worker demand for owner occupied housing.
To me it looks like a financial shakeout the SFH speculators might (possibly) have more of an effect on the SFH pricing than a workforce issue.
I think if we see only a 2% to 3% price drop in SFH (volume aside), and [IF] we do go into recession, it may be only 3 or 4 years long. But if we see a 9% or 10% drop in the first few years we could be in for more of a longer term 5% or so price correction and a longer term recession.
I also think [IF] there is a recession and SFH prices plummet by 60% or more that might be a rather permanent deep price reset (representing a lot of sorrow, and a lot of opportunity).
So I see 3 possible scenarios [IF] the (USA) falls into a true recession, and I am assigning none of them a percentage of happening.
At this point the possibility for all is 0% and at the same time 100%. It's too early to tell. No one can know for sure. The price of SFH's is not controllable, so I use that variable to estimate the possible severity and length of downturn.
Also, I'm not a SFH speculator, I'm a multi-family guy, but I pay attention to this because it's a barometer of rent potential and vacancies, and my calculations and data regarding this are proprietary.
I'm also NOT predicting a recession, I'm only looking at certain possible length senareos [IF] there is one, based on SFH prices as an indicator of (possible) length. Without factoring in more Federal MAGA actions which could possibly blunt it's length and severity (for a lot of people, but not all).
(and this could all change as new data comes in--nothing is set in stone)
Developer · Jacksonville Florida · Member since 2015 · 57 posts · 39 votes
6y
Major Depression - unlikely. The fed will continue to manipulate the currency to prevent it.
Are we in for some challenges - YES.
The fact is no really knows what is coming. NOT RAY, WARREN OR ANYONE ELSE! Smart, successful, absolutely. Predict the future, not so sure. Someone you have never heard of will emerge out of this mess, having made a lot of money, followed by I told you so. It will not be the same way as the great recession.
Keep an open mind and listen to all points of view and stay flexable.
There are some facts that are not going to change and one of them is people need a place to live. History has proven we are in the right business, Real Estate!
Rental Property Investor · Miami, FL · Member since 2018 · 12 posts · 7 votes
6y
Although, from my limited understanding, this theory of long-term cycles sounds appealing, it is prudent to acknowledge and understand the limitations of any attempt to oversimplify something as complex as the economy with such models.
Charlie Munger, one of the great modern minds in investing, condemns physics envy: the tendency of economists and investors to reduce the the intricacies and complexities of the world to simple formulas and models to resemble the order and predictability of the natural world. One might be able to derive a sense of security and control from these models, but reality will follow it's own, unpredictable and messy course.
Even brilliant minds are not immune to this. One can marvel at the story of Long Term Capital Management. Such gifted minds were in charge of the fund, it even included Nobel laureates (In Economics!) . Yet, with an almost fanatical adherence to their ideas (Risk = Volatility), this group of geniuses lost billions of dollars in a handful of years.
These lessons don't mean that it is futile to attempt to understand anything. It just teaches us to try to understand something as it is, and if it is impossible,hard, or too complex, humbly try to understand that as well.
Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes
6y
@Alexander Roeschmann
I’m busy setting myself up for success. I’m not attempting to help the entire country. I’m not finding any deals I like right now, so I’m paying off some debt (even some low interest debt) and refinancing numerous properties. Even doing some cash out refinanced at record low interest rates so I’m loaded and ready for the next purchases.
2020 may come with zero new purchases, and still be a successful year. Now, my 401k is certainly down, but nothing crippling.
