Ann and Nancy Wilson of Heart, with Jason Boham on drums, lead a huge ensemble in Led Zepplin's "Stairway to Heaven," when the band was honored at the Kennedy Center in 2012. I love Jimmy Paige's reaction to this performance.
As I begin to write this, 32 minutes ago, the Federal Reserve just reduced the Fed Funds interest rate by 1/4 of one percent, or 25 basis points, as they usually say. What does that mean? That means the people in charge of the U.S. economy lowered the interest rate that most other interest rates are guided by. The last time The Fed did this, was late August 2007, 3-3 1/2 months before the official start of The Great Recession. You can see that on this historical chart of the Fed Funds rate. The Fed Funds rate is already near historical lows, which is one problem leading into this coming economic downturn. The last time the Fed started to lower interest rates (to "stimulate" the economy) before 2007 was in early 2001 (the Dot Com Bubble recession), and before that was in 1998 (the Asian Currency Crisis), and the time before that was in 1990 (right before another recession, and a six year long downturn/stagnation of the real estate market here in Southern California). The Fed ONLY lowers interest rates in time of extreme distress. We've just "officially" entered one of those.
The Southern California real estate market is topping out, before turning downward. Over 30% of the $1.5 trillion in student loans are not currently being paid back. The U.S. stock markets have just hit new highs, but those highs are only 3% to 4% above the highs hit 18 months ago, in January 2018, after the Trump Tax Cuts were signed. By comparison, the price of gold, that boring investment that old guys like, is up about 9% to 10%, three times as much, in the same18 months.
When The Fed reduces interest rates after a long period of steady or rising rates, it means they think we are either entering a recession right now, or we will enter a recession in the next several weeks. Basicially, them lowering interest rates is like pulling the ripcord on a parachute to soften the landing of an otherwise dangerous crash. That just happened this morning.
So what does this have to do with Led Zepplin's "Stairway to Heaven?" You know that long, mellow, beautiful acoustic guitar melody at the beginning of the song, that riff so iconic you're not allowed to play it in a music store? The economy has entered that type of period, where nothing much different will seem to happen right away. But like "Stairway to Heaven," the economic craziness, over the next year, before the 2020 presidential election, will crank up to epic proportions as we go forward. Enjoy this beginning part, before things get really gnarly financially. Hell, about 2/3 of the people in the U.S. feel like the last recession never really ended. Every bubble eventually bursts, and every period of economic growth eventually ends and markets go down for a while, sometimes quite a while.
On the bright side, as I have said before:
Recessions are when the whole world goes on sale, but hardly anybody wants to buy.
They are also one of the best times to start a new business, because nearly everyone else, all the "Big Boys" (and "Big Girls"), are struggling, too. This Great Recession (or very likely Great Depression, which lasts longer) will probably really be set off by more trade war actions by President Trump. Instead of sub prime mortgages being the thing everyone blames, it will be student loan debt this time around that becomes the larger trigger and will drop considerably, or completely collapse. But that opens up great opportunities for people who have solid businesses, people with no debt, or people with a lot of money to work with.
I'm not the only one looking forward to the economic downturn. Here are some very successful business people also looking forward to the opportunities that will be popping up as the financial world goes down:
"How to Get Rich in the Next Crash" - Rich Dad Radio Show, March 2019- Robert Kiyosaki (and wife Kim), owners of thousands of rental properties, oil drilling businesses, and author of financial bestseller, Rich Dad, Poor Dad, and several other best selling books.
"Jim Rogers: The Coming Global Financial Crisis will be the Worst in Our Lifetime" -Geopolitics & Empire- April 5, 2009- Jim Rogers (along with Geroge Soros) was the co-founder of the legendary Quantum Fund in the 1970's, and is semi-retired, living in Asia (the future), and head of Rogers Holdings today.
"How to Prepare For the Next Economic Collapse"- DailyVee- 501 - November 2018- Founder/owner of VaynerMedia, guy who took his dad's liquor store from $3 million to $60 million by drinking wine on You Tube, internet/social media expert, guy who's going to buy the New York Jets and try to win lots of Super Bowls.
"Jim Rickards Exclusive: The Aftermath of the 2008 Crisis is what we never really escaped" (part 1)- Kitco News- April 18 2019- Jim Rickards is a lawyer, precious metals expert, and financial author.
Even though The Fed did exactly what the stock market wanted it to do, because chairman Powell insinuated that he doesn't plan to keep lowering interest rates this year (he probably will anyhow), the Dow Jones Industrial average is down 333 points (1.2%) in the last two hours, and the Nasdaq is down 98 points (nearly 1.2%).
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