A great visual depiction of the idea of a phoenix, burning up then being reborn from the ashes, courtesy of Harry Potter. That phoenix, Fawkes, gave a feather that is the core of Harry's wand.
It's October 1st, 2019. For a couple of years now, I've been writing and talking about the coming recession. Back in early 2018, when the financial market thought the economy was going to surge for 3 to 5 more years, because of Trump's massive tax cuts, I disagreed. I predicted that the stock market would start to turn down a month or two after the tax cuts were signed, because the promise of that massive windfall to corporate America, and the super rich, was the main force driving the markets up (here's one post, January 2, 2018). President Trump sign the tax cuts on December 22, 2017. Almost a month to the day, January 26thm 2018, the stock market turned downward, you can check the chart.
What I got wrong was the incredible manipulation that was going to take place to try and keep the market moving up, mostly to make the economy appear vibrant, and get Donald Trump, and a lot of Republicans in other offices, elected again. Nomi Prins and her explanation of the collective central banks actions after 2008 helped me, and others, understand this weird financial Never Never Land we find ourselves in now. There are trillions of government bonds paying negative interest rates, for example. Are wealthy individuals and institutions really going to keep investing in bonds that cost them money? I doubt it.
As I write this, the Dow Jones Industrial Average is only 26 points above where it was on January 26th, 2018. Overall, the Dow is up 26 freakin' points in 20 months. Not 26%, 26 points! Healthy and vibrant economy? Nope. The bond yields have been dropping, and are now below the dismal inflation numbers, by and large. And that's the strong part of the economy.
Across rural, small town, and mid-size city America, things have been pretty dismal economically since 2008. There are some exceptions, of course, but much of this country has missed out on the 10+ years of expansion that did happen. For many rural areas and small towns, they've basically been in a great depression, a geographic great depression, for 11 years now.
I've been interested in futurist thinking since I was a kid. I've been interested in economics since high school, and I'm 53 now. This is my geek zone, long term social dynamics and economic trends are the weird stuff I find fascinating.
So now, I think we'll see this recession's "Lehman Brother Moment" happen this month, during October 2019.
I think we are very likely already in "the next recession." But recessions are officially labeled months, maybe even years, after they actually happen. So it's always arguable that we're in a recession, while we're in one. But I think we're due for the big moment, a Lehman Brothers-style moment, this month, that will make the economic downturn obvious to everyone. It may be a collapse of GE, based on the allegations from about 6 weeks ago. Or it could be the impeachment, the trade war, or something else. But I think the big moment will happen in October 2019. And yeah, that's going to suck for most people. That's the bad news.
The good news is that the long term forces in play here are the collapse of the remaining parts of the Industrial Age infrastructure, and our long, messy, sticky transition into a functional Information Age world. That's the phoenix part.
Things like our education system, particularly the college system, largely held up by $1.6 TRILLION of student debt, will meet the Disruption Monster. College as an institution will collapse, much in the way we see the Retail Apocalypse now. And then it will have to be rebuilt. Colleges won't go away completely, we need them for certain jobs and career paths. But many colleges will go under, or be absorbed into larger, more viable ones.
A perfect example is that Mount Ida College, where hardcore entrepreneur Gary Vaynerchuk went to school, is now out of business. But Gary Vaynerchuk isn't, he's not only thriving, he's looking forward to this economic downturn, and the incredible amount of opportunities it will bring about. Rich Dad, Poor Dad author Robert Kiyosaki is also looking forward to the coming opportunities, and talking openly about it. Warren Buffet is too, I imagine, but he doesn't say it, although he drops a little hint here and there.
This economic downturn will be much more than a typical recession. This is the Phoenix Recession, a collapse of much of the obsolete parts of the Industrial Age world, businesses, power structures, and systems, and new, Information Age businesses and systems will be built, taking their place. That's the long term Big Picture that I see, and have been writing about as I have been able. My question for each of you is, do you want to ride the collapse down and be crushed, or do you want to look ahead and help build a viable future, using today's technology, platforms, and opportunities?
Personally, I'm in a really down and out place financially, and there's a long story about that, a story I won't get into. But I'm looking to build something cool with some of the opportunities this economic downturn, this Phoenix Recession, will provide. We're at the top of the roller coaster hill, are you ready for this ride?
A day later... 10/2/2019- The markets were down a couple hundred points yesterday, and I didn't expect a huge drop right away. But as of close of the stock markets today, the Dow Industrial Average was down over 800 points. It's a really rough start to Quarter 4 of this business year, and a lot of traders and investors are feeling a recession is more likely. But this post was to predict that I believe the big event no one can deny, the "Lehman Brothers Moment" of this economic downturn will happen this month. The markets will rebound a bit tomorrow or the next day, but the think the big economic bomb will drop later this month, and we'll be on our way down do about Dow 17,500, and similar percentage rate declines in the other averages.
What's in store for the world's economy in the next year or two? Here's a pretty good series of visual metaphors for what I see coming...
People watch weather reports. Why? So you can be prepared for the rain, snow, wind, lightning, possible tornadoes, and on a really bad day, a hurricane, in some regions. We watch the reports, and adjust our plans to work around the lame stuff that's going to inevitably happen.
Yet in the financial world, it's just the opposite. Home prices go up and down. Stock prices go up and down. Bull markets happen. Recessions happen. But almost everyone ignores you when you say, "Hey, there's a recession coming pretty soon, I think it's going to get really gnarly." For some reason, the people who would want to prepare for a hurricane, or close all the windows before a bad thunderstorm, don't want to even hear about an economic storm. In my opinion, there's a Category 9 hurricane 100 miles offshore right now.
I say this because I've been writing about the serious recession I've seen coming, for a couple of years now. Hardly anyone takes me seriously. OK, I'm homeless and broke, so those are legit reasons to be skeptical. But Robert Kiyosaki is rich, and he's been saying the same thing. Gary Vaynerchuk is rich, and he's ready to pounce on good deals during the next collapse. Jim Rogers is rich, and he's been saying the same thing. Warren Buffet doesn't talk about it, but he's sitting on $120 billion, waiting for the next downturn to find good deals to invest in.
Most people don't even listen to those guys, guys who have been through this before and have made fortunes from the downturns. Most people just jog along with the other lemmings, completely ignoring all the red flags and warnings, from people who look ahead and watch the economic world. Remember, lemmings are basically hamsters that follow the crowd and go BASE jumping... without a parachute. Then they die. For obvious reasons, I never wanted to be a lemming.
Here are the basic trends I've been watching, many for years, or decades in some cases, that lead me to believe we're in for the financial equivalent to a Category 9 hurricane, and we're just heading into it now. It will be apparent to everyone within six months, I think.
-Alvin and Heidi Toffler'sThird Wave idea- This idea says that we, as a society, began to leave the Industrial Age society in 1956, and are transitioning into an Information-based society. This transition will affect every level of society, and is as big as the change from hunter/gatherer societies to agricultural societies (about 10,000 years ago), or the change from an agricultural society to an industrial society (beginning about 350 years ago). Except this time, this massive change is happening in the span of a human lifetime, not over hundreds or thousands of years. No humans, in known human history, have had to deal with a societal change this big.
-P.R. Sarkar's idea of the transition from a society led by the "Acquisitor" (business person's) mentality to a "Warrior" (those who prize courage and physical ability most) mentality. Only economist Ravi Batra speaks of this, and his 1989 book is where I first heard of this. It takes a while to explain, but Batra's take on this theory from India is why I was predicting a future populist uprising, back in the mid to late 1990's.
-The Populist Uprising in the U.S. (and western society) actually happening- It's kicking into high gear now, and it's far from its peak. While the Trump following racists, xenophobes, and business people got the head start, this Populist movement greatly favors the political Left and the Progressive/Socialist side of the equation, over the long term. Hey, I'm a capitalist, I'm not stoked on this, but that's where the momentum is, and will be for some time, like it or not.
-Demographic shifts- Rich Dad, Poor Dad author, Robert Kiyosaki, predicted a 2017 recession back in about 2003. Why? Because 2016-2017 is when the huge Baby Boom generation was mandated to start taking their money out of the stock market, as the first of that group hit age 70 1/2 years old. This trend of pulling money out of stocks by the Baby Boom will continue for about 20-25 years.
-The Big Transition- This is my personal term for the transition that the Toffler's spoke of in The Third Wave, the change from the Industrial Age to the Information Age. I don't think we're in either age right now, but the chaotic and messy transition between the two.
During this period, The Big Transition, with the continuing and accelerating rise of new technology, comes Disruption. Think of the music industry a month before, and a month after, Napster went online. The whole industry was suddenly toast, thanks to a click of a mouse by a kid we'd never heard of. A new technology can literally cause a disruption that makes an entire business model obsolete, practically overnight. Major disruption has happened in music, TV, movies, publishing, and marketing. But Disruption hasn't really hit many other areas. I believe that every business, industry, organization, or institution, will either intentionally re-invent itself from an Industrial Age model to an Information Age model, or more likely, it will collapse and an Information Age model will be created by someone else. There's A LOT of Disruption still to happen.
Both main U.S. political parties right now, for example, are in the middle of their disruption. Trump and Bernie Sanders came out of nowhere in 2016, buoyed by the simmering populist sentiment on both sides, and garnered huge support, because the traditional power structures in the parties had completely lost touch with average Americans. That will continue, in political parties, and EVERYWHERE ELSE. I see this period of transition lasting from 1956 (the Toffler's starting date) to about 2040 (my guestimate of when it's all shaken out, and begins to settle, providing humans are still here then).
-The Student Debt bubble- Student debt is now over $1.6 TRILLION in the U.S.. Why is it so high? That's $300 billion more than the sub prime mortgage bubble that helped spark the 2008 crisis. Student debt is so high because Wall Street took the sub prime model, and simply applied it to student debt. The student loans are bought, repackaged as Student Loan Asset Backed Securities (SLABS), and resold in pieces to other investors. To keep making the wonderfully high fees on all of this, Wall Street needed more and more student loans. So the student loan bubble is the new sub prime. Here's a fun fact, according to this recent Nerd Wallet article, about 40% of current student loans, over 10 million loans, are not being actively paid back. Right now, 5.2 million federal student loans are in default, about 5 million other loans are deferred in one way or another. Tick, tick, tick...
-What a student loan bubble pop would do to real world ("Main Street") America- Let's say the student loan bubble doesn't crash like sub prime in 2008, but just has a major correction period, and this causes student loan income to colleges and universities to be cut back by 20%. Where are colleges? They're in 150 or so cities and towns around the U.S., all over the place. After the loss of manufacturing plants and jobs, a huge number of those towns and cities are now referred to as "Eds and Meds" cities. The colleges and the hospitals (often associated with the colleges) are the primary employers in town. So if student loan income drops by just 20%, what happens to those 150 or so towns and cities? MASSIVE economic slow down, everywhere. Now, what happens to those towns and cities, most of America by area, if the student loan bubble actually does burst, and student loan and tuition income drops 40%-50%-80%? The financial crisis becomes catastrophic, REAL QUICK. So there's that...
-The Geographic Recession- Most of the United States, by area, is rural area, small towns, and small to mid size cities. Most of of those regions simply have not recovered from The Great Recession. Real estate hasn't surged. Large numbers of people work two or three low paying service jobs to survive. High tech companies avoid these areas, and entire regions, like the plague. There are a handful of people who describe the U.S. as actually having been in a Great Depression for the last 10 years. We've had growth well below the long term trendline that whole time. Sure, there's money in the big tech companies in the big cities, but the vast majority of the U.S. is ALREADY struggling. In the next economic downturn, that will intensify.
-Richard Florida's Creative Class and the rise of Tech Hub cities- This is a very complex set of ideas, but here it is in a nutshell. In a high tech enabled, information-based society, creativity is a main (probably THE main) driver of innovation and building wealth. Creative people like to be around, actually physically near, other creative people. Creative people cluster. So the emerging tech world is now largely clustered in Silicon Valley/The San Francisco Bay Area, Boston, Seattle, Southern California, New York City, Washington D.C., the Raleigh Reserach Triangle, and Austin, Texas, by and large. In effect, and for a whole range or reasons Richard Florida has laid out in his books and articles, much of the U.S. is a kind of wasteland with little or no large scale high tech businesses. We have the tech hubs with lots of wealth and one set of urban issues to deal with. Then we have the vast majority of the country's small cities, towns, and rural areas, trying desperately, and largely unsuccessfully, to attract high tech companies and viable start ups. The map of these different areas is also the map of our political divide. We have tech hubs and tech wastelands. Since his first book on these ideas, The Rise of the Creative Class, in 2002, Florida has been looking for ways to level this playing field out, but the clustering has actually increased in the 17 years since. This geographic sorting is a major root, but not the only one, in my opinion, to our current political polarization.
-The Retail Apocalypse- In 2017, 2018, and so far in 2019,a total of 20,000 retail stores have closed, or are scheduled to. Another 20,000 or so closed from 2009 to 2016. Toy-R-Us is gone. Radio Shack is gone. Sears and J.C. Penney's, once the 800 pound retail gorillas of retail, are now circling the drain. This is the technology rooted Disruption of the Industrial Age retail industry. Amazon didn't cause this. The leaders of all those dead and dying companies, who didn't see the future potential of the internet that Jeff Bezos of Amazon saw, caused this. The Industrial Age goods distribution system of mass marketing, mass manufacturing, U.S. based factories, and hundreds of department stores, malls, and shopping centers, is collapsing, because most of it is not viable in the Information Age. A new system, including Amazon, but also platforms like eBay, and millions of small, online, niche stores, is growing to replace it. By watching how the Retail Apocalypse has taken shape, I (and you, hopefully) can get an idea of what's going to happen to colleges, and to every other major industry where it hasn't happened already. Technology has changed the game. If you're still playing the mass market Industrial Age game, you're toast. Or soon will be.
-And now... we get to the actual current economy. Historically, we have a recession every 4 to 10 years in the U.S.. We're in year 11, so we're due, simply looking at the timing.
-The everyday person, traditional American economy, has decoupled from Wall Street and the Tech world. Most of America never left, or barely left, the last recession, even as stocks have soared. A bull market in stocks, in today's world, barely effects most of the everyday economy. This is the Geographic Recession I mentioned above. The Wall Street euphoria died a couple months after the Trump tax cuts, and stocks headed down, but that hype has risen again the last couple of months. The recent cut in the Fed Funds rate shows that The Fed is getting desperate, and doesn't have much left to keep Wall Street growing.
-The ultra low interest rate and quantitative easing economy- The Fed lowered interest rates just over a week ago, in what was already a historically low interest rate economy. The interest rates were lowered dramatically, and quantitative easing (buying our own debt and pulling money out of America's ass, basically) was instituted to help bring the economy back after The Great Recession. It didn't work. The Fed was never able to raise interest rates back up to traditional, historic levels. Yes, we've had a 10 year bull market in the stock markets, but it's been absolutely feeble economic growth the whole time. There's been very little major infrastructure or capital investments. But there's been a ton of stock buybacks. We're in this weird financial Never Never Land, a place the economic world has never been, best described by former Goldman Sachs, Bear Stearns, and Lehman Brothers quant, Nomi Prins, in this talk, and her book Collusion. No one knows a good way out of this mess.
-The Orange County/Southern California real estate market- When I lived here in Orange County from 1986 to 2008, it was pretty easy to see economic downturns coming, because the real estate market here soars up, tops out, and then heads down fast. When you see housing inventories rising, and then prices begin to decline, things are getting ready to drop, and that's happening now. In this blog post, we see the housing inventory growing here, which happens right before prices begin dropping. Also Chinese buyers are pulling out of the U.S. market, which has helped it soar to the current point.
These factors (and many others) are all coming together in a huge convergence. Some of these factors only happen once in hundreds of years, or once ever. In addition, all forms of debt; government, business, and consumer, are at or near all time high levels. All this situation needs to turn into a big financial downturn is a spark. It looks like Trump's trade war with China is turning into that spark.
So that's why I'm predicting an economic collapse in excess of what we saw in 2008, and a 5-6-7 or more year hangover of little, if any growth, and stagnation all over the place. We're in new territory in many ways, we've never been here before, and there is no roadmap (or GPS directions for you youngin's) to lead us out of it. If it's not a textbook Great Depression in the next decade, it will definitely feel like one to most Americans.
But with this dismal economic outlook comes opportunities at a never before seen level, as well. Warren Buffet, Robert Kiyosaki, Gary Vaynerchuk, Jim Rogers, and other business people, are ready to pounce on all the good deals that will happen soon. You can do that as well, if you're not crushed by your own debt right now. A new world will be built in this next economic downturn, if we survive it, that is.
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.
"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 SuperBowls.
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%).
If you don't recognize the face above, Gary Vaynerchuk pioneered the idea of selling wine online in about 1998. In about five years he took his family's New Jersey liquor store from $3 million to over $60 million in annual sales. He actually kicks himself for not building it bigger then. He did that by using the fledgling internet for marketing in ways most people thought were stupid. Then he took off with his brother and started a digital agency, what was once called a marketing agency. In about six years, that's doing $200 million+ in sales annually. Now he tries to get Fortune 500 companies to market in a 21st century way. Not bad. Oh... AND Gary is one of the the top keynote business speakers around the world, AND he puts out more content, across multiple platforms, than anyone on the places where business, the internet, social media, and marketing intersect. Simply put. He knows his shit.
People give me grief at times for writing about economics and saying there's a sizable recession coming in the near future. I'm broke, currently homeless, and they say that's why I have no business having an opinion on this, much less expressing my opinion. I even got physically threatened for this writing this blog, bordering on death threats, and told to stop writing it by many people. That's not gonna happen.
I've been an amateur futurist my whole life. I've watched the markets since buying an ounce of silver as a kid during the 1980 surge. I actually enjoy reading, thinking, and projecting all these ideas into the future to see what it may look like. I called the 1993-1994 interest rate rise ahead of time, while working part time, telemarketing for a mortgage broker (Dundee Mortgage in Santa Ana, CA). I shared my ideas with the owner of the company one night. He liked my enthusiasm, but told me I was wrong, that he'd been in the business for 25 years, and that's not how things worked. He was out of business two months later. I called the last two recessions a couple of years before they happened, as well. Right now, there's a lot more time for me, and data for everyone, to get a sense of the next economic downturn. So I'm looking a lot closer at things this time around.
The simple fact is, the big blocks are stacked and ready for a pretty gnarly recession. I'm not writing this to scare people or piss off Republicans, Conservatives, Industrial Age company management, or any other group. This is what I see happening, I've showed in previous posts why I see it happening, and it makes sense to acknowledge that there's some kind of downturn likely soon, and prepare for it. That's all.
Thanks to the work of super brain quant (from Bear Stearns, Lehman Bros., Goldman Sachs) turned journalist, Nomi Prins, I've realized just how much money is being created and flowed to Wall Street and financial markets worldwide to help us keep the next collapse at bay. It's kind of like playing blackjack in a casino with $100 chips, but having a debit card with $10 million in the account. Every time you lose your all your money, you just hit the ATM and get some more. Eventually that account will run out, but for now things look fine. That's an oversimplified way to think about our economy right now, but it gives you the basic idea. We should have had a recession start in 2016-2017, but there's a sort of rolling bail out keeping it from happening... for the moment. But that can't last forever.
Gary Vee, as most of his fans (including me) know him, sees it from the businessman's standpoint. Shit happens, another recession will come at some point, might as well work it into the long term plan. He's actually COUNTING ON the coming recession as a businessman. He's been through a couple serious ones, he knows there will be massive turmoil, but there will also be a ton of opportunities for people who do have steady cash flow and assets when the next one hits. He's betting on that.
So in this video, part of which I've seen in another, longer version, he tells you his thoughts on this coming economic downturn. But in this video, he also mentions, for the first time I know of, that colleges will go out of business. In fact, HIS college, Mount Ida University, is now gone. I've been saying that colleges will go under for several months, after learning that much of the $1.5 TRILLION in student debt has been repackaged and sold as Student Loan Asset Backed Securities (called SLABS). That's very similar to the way subprime mortgages were sold and rebuilt as CDO's, which helped trigger the Great Recession of 2007-9.
After learning about SLABS, it was apparent that many would fail, and it will most likely cause a collapse like in 2008. BUT, this time, it will be the money that's going into colleges and universities that slows down to a trickle. Which means sketchy colleges will likely go under, and even major, well known schools, could really struggle. When you add to that the way technology has made most information available to just about anyone, for free, then things look bad for the college system as a whole. I think we will ultimately see a big collapse of many schools, and a complete restructuring of the whole college system, eventually. Virtually EVERYONE thinks our education system sucks now, so this shouldn't be a big surprise.
I've been saying this for quite a while, but nobody wants to hear it. Since I'm busy on other things, like surviving, I haven't looked into it deeper. But hearing Gary Vee finally talk about colleges going under, including the one he went to, I just did a quick search to see if others had. Holy crap! Dozens of small colleges have shut down in the last 2-3 years or so. The college meltdown IS ALREADY HAPPENING. But it's not from a collapse of the SLABS yet, these colleges are closing down for other reasons. It's just small colleges and it hasn't garnered mainstream attention yet. At some point, it will.
There's a ton more to be said here. But I'll save that for later posts. At this point, adding in thoughts from Nomi Prins in a very recent interview, it seems this economic downturn has already started as a kind of slow motion car crash. The Central Banks are working to keep a crash from happening, and it's working to some degree. But there are stress cracks in their plan, and a serious recession is looking much more likely to mainstream financiers and average investors. Ms. Prins sees it happening in bits and pieces, not on massive market crash up front. When investors and financiers lose faith, and start getting really worried, things go down hill faster.
In any case, here are a couple of articles about colleges that have already closed or merged with someone else. There are over 100 in two years. Freakin' wow.
I'm a big fan on betting on the inevitable, because it will eventually happen. Gary Vaynerchuk has built a $200+ million digital (marketing/ad) agency in the last 5-6 years, and he knows a financial meltdown is coming, too. He's actually built it into his long term plans. How 'bout you?
I watched this consulting session, the full length video that this clip comes from the other day. Another recession is inevitable, it WILL happen at some point. And it looks like we're real close to that point now. Gary spells out how this will launch his business to another level, not destroy it. Don't bet against gravity people, it works.
Like many other people out there, I've been saying that we're headed into another recession soon. At 4:50 in the podcast above, Jim Rogers talks about Deutsche Bank right now. I think the best thing now is to prepare for tough times and watch that bank for bad news.
Historically, we have a recession every 4 to 10 years, and we're into year 10 since the Great Recession of 2008. In this clip above, legendary and longtime investor Jim Rogers has been saying for quite a while that we're headed for the biggest economic crash in his lifetime. And he's not a young guy. Mr. Rogers is one of many intelligent people who see a huge recession (or worse) ahead.
If you're old enough to remember the 2008 collapse well, you remember that a big investment bank, Bear Stearns, collapsed, seemingly overnight. A large amount of their investments were sketchy and highly leveraged, and very quickly a huge amount were virtually worthless. Days after that, as the collapse rippled outward, another big investment bank, Lehman Brothers, also became insolvent, again seemingly overnight. Those two were the big events that got the whole world's notice that things were really, really bad in the global economy.
I was was homeless after the taxi industry took a dive in 2007, and I wasn't paying super close attention then. But just from watching the Southern California real estate market, I knew a big recession was coming.
This time, I'm paying a lot closer attention. Almost a month ago, I predicted that April 4th was the start of this recession. I could be completely wrong, but that's the day I became convinced that the stock market was not going to surge to new highs again. But I don't know just what will trigger the coming collapse. So yesterday I looked around the interwebs to see if I could find a major bank that might turn into this recession's Lehman Brothers.
In short order I found that Deutsche Bank, the biggest bank in Germany, is struggling in a big way right now. They somehow have $60 Trillion in derivatives. A trillion dollars is a thousand billion. There's only $280 Trillion dollars worth of wealth in the whole world. Derivatives are investments like stock or commodity options, Collateralized Debt Obligations, SLABS (Student Loan Asset Backed Securities) and a whole host of other investments that art based on the performance of something else. When these investments pay off, they make huge amounts of money. But when the collapse, it's a really really bad day.
If you look in the news, you'll see Deutsche Bank has recently had their own debt downgraded by the ratings agencies, they've suddenly laid off 400 people, got a new CEO, are talking about dropping most worldwide operations, and laying off another 1,000 people or more. That's all signs that things are really bad there. So, at this point, it looks like Deutsche Bank could be the Lehman Brothers of this next economic crash, the "canary in the coal mine."
So, keep an eye on the big German bank. If it's suddenly all over the news, things will get sketchy soon after. We weathered the last recession, and we should be able to weather this one. But it's going to be really, really tough on a lot of people. Think of this news as a weather report. There's an economic hurricane coming at some point. Get ready to hunker down.
You know this feeling? So does the stock market. That damn huge recession I've been rambling on about in this blog... it started Monday. Enjoy.
Big, 700 point bounce back in the Dow 30 today, but it's going to be a roller coaster. The reason roller coasters don't have engines is because they're powered by gravity, and gravity eventually brings them down. The same will happen to the stock market in the coming weeks or months. Then all hell will break loose and the recession will be obvious. The first six months or so of every recession start with the financial media telling everybody that nothing is wrong, until they can't hide it anymore.
Remember this:
A RECESSION is when the whole world goes on sale, and nobody wants to shop.
Would you go parachuting without a parachute? Unless you're name is Travis Pastrana, the answer is, "no." Well, that's what it appears the stock market (and a huge chunk of the wealth in this country and world) is about to do. From my very limited understanding of technical trading, it alreadylooked to me like we were getting really close to the major economic crash that all kinds of people have been predicting (but most people ignoring) for years now.
Looking at random videos on these ideas, I just came across this video, which shows the precedents to what's happening now. This clip is two days old, and we've just crossed the threshold that usually precedes these major collapses. So it looks like we're now within a matter of days to a HUGE collapse of the stock market, which will be like the late 2008 collapse... on steroids.
What's likely to happen? If you have a 401k or mutual funds in a retirement account, you're likely going to lose a huge chunk of it, probably in the next several days (or weeks). If you have a pension you rely on, it's probably about to disappear. If you get a government check that you rely on, be prepared for it to show up late, maybe really late. We might see big banks go belly up soon. Another video I just watched said Morgan Stanley is the sketchiest major bank right now, but I can't personally confirm that. Will it be the Bear Stearns or Lehman Brothers of this time around? Time will tell. The stock market has been making huge moves up and down in recent weeks, since the peak, which also happened in 2008, though not for this long. Once the big drop comes, things will happen fast.
If you own gold, that will help. If you don't, figure out who your nearest paranoid Republican prepper is, that's who you can steal gold from. OK, just kidding on that one, though that will happen somewhere, I imagine.
Then come the longer term effects. Some banks may go under. Businesses will stop hiring pretty quickly, and start laying off within several weeks or months. People will freak.
Who will be the most affected? If you live in the hood anywhere, it's still going to suck. But you're used to that. So just keep hustling.
The "Red States" in the U.S., like North Carolina, where I currently live, will be DEVASTATED. Not because they're primarily Republican or conservative specifically, but because the smartest and most tech savvy people have been leaving these areas for years, and moving towards the tech hub cities. So rural, small town, and small city America has lost its smartest people, and most of these places are being run by second and third rate "leaders" who are way behind the technology curve, and still playing with old, obsolete, Industrial Age ideas. These areas, many of which have been struggling since the Great Recession, will get worse.
The tech hub cities and regions include the San Francisco Bay Area, New York City, Boston, Seattle, Austin, Los Angeles, Washington D.C., and the Raleigh Research Triangle (here in NC). These will take huge hits and a lot of paper wealth will be lost. Most tech start-ups will go under, just like in 2001. Venture capital will dry up quickly. There will be a lot of layoffs. But if you have tech skills, you can likely find a job somewhere, though probably for less money. The crazy real estate in these regions will drop a lot, but not enough for working class mortals to afford. These areas will rebound the fastest (or least slow), because that's where most of the highly creative and highly motivated people are. They will find the places to get creative and use current tech and being out more emerging tech. Creativity is big time in today's world. Never more than in the next couple of years.
Yuppies with high incomes and high spending habits, like always, will get decimated. Living a lifestyle right at, or above your means (paying on credit) makes you look cool to stupid and superficial people, but all those mortgages, high rents, fancy car payments, and toys will turn into huge financial anchors dragging you down if your income decreases. Fast.
Because a big chunk of the recent financial growth has been made on $1.3 to $1.5 TRILLION in student debt, colleges will take a huge hit. Within a couple of months, going to college, AT ALL, will seem a lot less attractive. We will see nearly all colleges and universities, big and small, struggle financially. WE WILL see well known colleges collapse and go out of business. Really. This will be a big difference from the Great Recession of 2008. Those of you with college debt who have borrowed more money to buy a house, car, or run up your credit cards, you're going to get reamed like the cute new guy in prison. Re-read the paragraph above, that includes you.
The Retail Apocalypse, the closing of thousands of major chain stores, will accelerate. Last I heard, 9,000 to 11,000 MORE retail stores are already expected to close this year. We could see that number double. When it comes to shopping malls, 400 (out of 1100 to 1200 total) are already expected to close by about 2021. When major old school retailers like J.C. Penney's and Sears go under (virtually a certainty), other malls shops will bail like amateur mountain bikers at the Red Bull Rampage. ( I had to get a bike reference in here, you know me). I would not be surprised at all to see 400 to 600 entire shopping malls close by the end of 2019.
So that's a quick look at what's very likely to start happening any time now.
People in the socially conservative (there are no financial conservatives anymore) and diehard Republican world have been sold the Apocalypse story for decades now. Many own guns and gold, which they think will protect them. They may help. But probably not as much as they think these will.
The very best things to have in this coming crisis WILL NOT be gold and guns. The best things to have will be courage and creativity. But then, those are always the best things to have.
We're now at the edge of the tipping point of this crisis. It could happen tomorrow, two weeks from now, or maybe a couple months from now. But my feeling is we'll see the first really big stock drop in a matter of days.
I've spent my life watching the economic markets, reading about macroeconomics and future thinking, and looking at the dynamics of the big picture of society. This is the stuff I geek out about. I've said my piece. Get ready to throw your hands in the air as the roller coaster heads down the first big drop.
This is not an April Fool's joke. Really, it's not.
What about crypto? The powers at be will probably get us to put our money (what's left of it) into crypto of some kind. Which one? I have no idea. I'm not sure those in power have an idea either.
Honestly, I was really hoping this wouldn't happen for another six months. But things are coming together in a bad way quick. Oh well.
* For those of you that are metaphorically challenged, and that's a lot of you, I'm referring to the "average" investors and retail investors losing a ton of their wealth in the title. I'm not talking about any kind of violence, though, I'll understand if you kick your broker's ass when your nest egg disappears. In average times, retail investors, the "sheep" in the stock market, get sheared by handing money over to financiers, traders, and big firms. But in times like these, like 2008-2009, the "sheep" just get wiped out. Don't be a sheep.
