Here's a real fight between male gorillas, in the wild, in Rwanda. We're humans, male silverback gorillas can weigh up to about 600 pounds (270 kilos), and are much stronger than us. There's a reason we have a saying "the 800 pound gorilla in the room," about huge issues we all ignore. This post is not about gorillas, it's about the economic realities of the next few years in the United States of America. But I'm starting this post with the economic "800 pound gorilla in the room."
We have far too much debt in our economic system. That's the huge issue everyone ignores on a daily basis. Nearly all average people have far more debt than they can handle. Home mortgage debt, student loan debt, auto loan debt, credit card debt. Businesses large and small also have huge debt loads in many, if not most cases. Local governments, villages, towns, cities, and counties, have debt issues. States have huge loads of debt. And yes, the United States of America now has over $36 trillion in debt, it just crossed to $36 T recently, according to the U.S. National Debt Clock, as I write this.
Not all debt is bad debt, debt allows us to buy houses we could never afford buy paying cash for, it allows us to buy newer and better cars, go to better colleges, and businesses routinely use short term debt to buy merchandise, while giving their buyers terms to pay for items sold, allowing a smoother flow of goods and services all around.
More important, the U.S. dollar is backed by debt, not gold, since 1971. We're over 50 years into the largest fiat money experiment in human history. Our entire economic system runs on debt. Our system NEEDS debt to keep functioning. But there's an amount of debt where things function smoothly, and an amount of debt where nearly everyone struggles to pay their bills, month to month, and everything slows down to a breaking point. We're in the latter, right now.
This country has an amount of debt that is dramatically slowing down consumer spending. Consumer spending makes up about 70% of the economy. This is the huge, underlying issue everyone is ignoring as we head into a new presidential administration that wants to make massive changes in many areas. Their game plan has largely been created by Right wing, highly religious, "conservatives." I put that word in quotation marks because they don't believe in conserving money like decades ago, they definitely aren't for conserving the environment, "conservative" in today's world seems to imply fundamentalist Christian social beliefs. Conservatives aren't really into "conserving" much of anything, except the status quo.
On January 20th, 2025 Donald Trump will be sworn in as president, a 78 1/2-year-old man who quite admittedly loves McDonald's French fries... and salt. But this post is about what life will be like for Americans in the next few years, not fundamentalist social views or Trump's health. In less than two weeks since the election, the stock indices hit new highs, and then dropped back quite a bit, and now are climbing higher. Gold dropped over $200 per ounce from its recent all time high, and is now bouncing back a bit. The U.S. dollar has surged higher, compared to other major currencies, which makes life and business harder for many other countries, including our allies. Despite having The Fed lower their Fed Funds rate 3/4% in the least couple months, overall interest rates have been trending up. The 10 Year U.S. Treasury, a common bookmark for interest rates is at 4.41% as I write this, a much higher return than through all of the 2010's.
While small and mid-sized business owners tend to lean Republican, and believe the economy will take off in a Trump presidency, in reality there are all kinds of mixed signals in the financial world, contradicting each other. Here are the major trends I see playing out now, and into the future months and years.
Inflation- Inflation has been trending down, from a high 9.1% CPI, to around 2.5% recently. Truflation, a wider, nearly realtime inflation indicator, got down to 1.01% annual inflation rate on September 13th, 2024, but has surged back up to 2.84% since. The investment world, the big players, see a Trump presidency likely to push inflation back up. That's a recent trend change, and has kept going up since the election, about two weeks ago. But there are major trends pushing overall inflation downward at the same time, particularly stagnant or dropping values in both commercial and residential real estate in some areas.
Consumers are broke-Advanced Auto Parts is the latest large business to announce mass store closings and layoffs because consumer sales are slowing, and everyday people are broke. McDonald's, Starbucks, and several other major corporations have been saying the same thing for about six months now. As I mentioned above, most consumers are saddled with high levels of debt these days, and working hard to pay day to day expenses and keep current on their various debt payments. Consumers spending is about 70% of the U.S. economy, and I see nothing coming in the next couple of years to change this issue. To increase consumer spending, either wages have to increase by an unprecedented amount, quickly, or TRILLIONS of dollars of some forms of debt need to be written off. I don't see either of these ideas as having a chance in Hell of happening anytime soon. This issue alone, broke consumers, makes the strongest case for a recession that has either started, or will start soon. We have been slowly, steadily dropping into a recession, and it would have happened either way, under a Harris or a Trump presidency. But how the government reacts and responds would be quite different.
Commercial real estate collapse- The collapse in prices of commercial buildings, across the U.S., has been going on for around a year now. Buildings worth tens of millions or hundreds of millions of dollars have been selling for up to 90% discounts, in some cases, for several months now. This is happening nationwide, to these large office buildings, along with many vacant retail stores and malls, which have been struggling for the last decade or more. Here's a 20 story building in Denver that recently sold at an 80% discount. One of the tallest buildings in Texas sold in May for more than a 90% discount. Here's an office building in San Francisco that sold for nearly 80% off of it's peak value. You get the idea, this isn't just happening in the few biggest major cities. The overall values of many retail stores, malls, and office buildings are dropping all over the country. Lower values mean lower tax incomes for cities, which means those cities will ultimately have to reduce services somewhere, to compensate. Like broke consumers, there is no quick fix to this problem, and it is a part of our transition out of the fading Industrial Age era and into the building Information Age society, which needs different types of buildings in different places. This trend will just have to play out over many years, probably two or three decades, just like the closure of factories did in the late 1970's through the 2000's.
Residential real estate slowing down- In this video by Nick at Reventure Consulting (from mid-November 2024), he shows multiple homes that have dropped tens of thousands in value, to a $400,000 loss in a home's value in one case, over the last two or three years. Much of Florida's residential real estate, in particular, is turning down quickly right now. I think most of us know that home prices vary tremendously across the United States right now. For example, the median home price is now $1.2 million in Los Angeles, California. Yet, there are cities that have gone downhill in recent decades, mostly from the loss of factories and high paying manufacturing jobs. There are many areas where homes are for sale for incredibly low prices.
I won't pick on the well known cities of Detroit, Michigan, Gary, Indiana, or Youngstown, Ohio, which are known for these issues. Here's a house for sale for $59,900 in Mansfield, Ohio, where my grandparents lived until I finished 8th grade. I spent a lot of time in Mansfield as a kid, going to the now closed Richland Mall, playing on my grandparents' swing set, and getting yelled at by my drunk German grandpa. Mansfield was a thriving Midwest industrial city when I was a kid, in the 1970's. Now, like most of rural, small town, and mid-sized city America, it's struggling. There are probably 150 or 200 mid-sized and small cities in the U.S. that have been struggling since the early 1980's, and Mansfield is just one of them. If all these towns and cities really had the potential for large numbers of people move in and live really well, Americans would flood back into those cities. If that happened, new businesses would rise up in those towns and cities, and the overall real estate prices would rise in those places, and even out across the country. But that is not what's happening, over the long run. Though the pandemic reversed the migration flows for two or three years, the long term trend is that Americans, overall continue to migrate to the larger metro areas.
These are just three of the really big, long term trends, that are playing out now, and will continue well into the future, regardless of what President-elect Trump, or any other politicians do. Trump's much trumpeted ideas for tariffs could easily lead to higher prices and more inflation, or a full blown trade war with China, neither of which helps working Americans.
Yes, stock prices, and particularly crypto prices, are rising right now, which helps the relatively small number of Americans who own large stock portfolios. But stocks are largely overvalued overall by long term standards, which is why people like Warren Buffet, one of America's best investors, have been selling large quantities of stocks, and is now sitting on over $320 billion in cash. He is waiting for good opportunities to invest large sums, and can't find them at this time.
There are huge negative trends economically right now, and some very positive trends in some markets, and these mixed signals will most likely continue well into the next year or two. Future actions by the new administration will have some effect on the economy, and we'll have to see how the overall picture plays out. But it's not going to be smooth sailing, or the unbounded upward trend that most Republicans are now expecting. Finding true organic growth in the economy at a large level has been a problem since the Great Recession (aka the GFC) of 2008. It's going to be a weird and tumultuous road ahead economically, and some actions by the Trump administration could make it worse for average Americans.
There are no paid links in this post.
I've been doing most of my writing on a platform called Substack for the last year, which is designed specifically for writers. Check it out:
This 60 Minutes segment, from February 2024, gives a pretty good overview of the basic idea of this post, the current state of cities. There's a HUGE crisis brewing right now in commercial real estate. Anyone who follows financial markets or real estate knows about it. There's no "if" about it, it's something that will wreak a lot of havoc on many levels, at some point. It's happening now, and the biggest crisis moment hasn't hit yet. Everyone knows it's coming, it will affect the whole economy, and every single person's life in some way. And no one really knows what to do about it, this issue is that big
Black Swans and White Swans
What is a "White Swan" event? In 2007, Nassim Nicolas Taleb wrote a book called The Black Swan. The basic idea of a Black Swan Event is something that has a very low probability of happening, but has a huge impact if it does happen. A meteor 100 yards wide hitting your city is an example of a Black Swan Event. The chances of it happening are very, very, very low. But if a meteor that size did hit your town, it would leave a crater several city blocks wide, and cause massive devastation for miles in every direction, on people, businesses, infrastructure, and the local economy. It would be catastrophic to a city. By its very nature, a Black Swan Event is unexpected, it's something almost nobody sees coming.
His basic idea concerning investing, as I understand it, is to protect yourself (and your investments) against potential black swan events. Having fire and flood insurance on your house, because of the tiny chance those things might happen, is an example of protecting yourself, and your house, against the small chance of a fire or a flood. If those things happen, the insurance covers the value of your house, so you can rebuild. So that's the "Black Swan" idea in a nutshell. The Covid-19 pandemic is a great example of a Black Swan event. Yes, a few virologists, and Bill Gates, knew something like that would happen eventually. But to almost everyone, it was completely unexpected, and had devastating consequences, killing over 7 million people worldwide, and over 1.2 million in the U.S. (source: Worldometer). That's the largest recent example of a Black Swan Event.
By contrast, a "White Swan Event" is something that has a high probability of happening. It will still be catastrophic, but we see it coming, we have time to prepare, if we want to. The commercial real estate crisis is happening, slowly, steadily, and the whole business and economic world sees it coming. But no one really seems to know what to do, other than slow the process down as much as possible. But it's still going to be a major crisis at some point. Soon.
This is a huge issue, it will affect your bank, maybe even your own checking account, and it will affect the value of the home you own, or the home or apartment you rent. It's big, it's complex, and the crisis is moving really slowly, which makes it easy to ignore in our busy, everyday lives. But, like it or not, it is going to happen, we know it's coming. How will it affect your life? How can you either deal with your part of this crisis, or maybe even profit off of the chaos? That's the question a lot of smart people in real estate, banking, economics, and finance are trying to figure out these days.
This is a blog post, not a book, and commercial real estate a complicated, complex issue, so I'm going to try and explain the big picture in as little writing as possible. I'll start with the really big picture, and work down to how this affects the offices and apartment buildings in your own city or town, in your own neighborhood. As I'm writing this blog post, there's a junk hauling truck across the street, and a few guys have been carrying the fixtures and "guts" out of a recently vacant, second floor office, and throwing them in a truck, while I've been sitting here. This is happening in every city and town across the U.S., and many other parts of the world as well.
The Big Picture. If you have read any of my economic posts over the last 5 or 6 years, you know I have this Big Picture concept that I call The Big Transition. The basic idea is simple, The Big Transition is the concept that our society is in a long transition phase, we're moving out of the Industrial Age, and into the emerging Information Age. That's it. The basic idea is that simple, the Industrial Age began to fade about 65 years ago, very slowly at first. This idea was first explained well by the late futurist Alvin Toffler, in his 1980 book, The Third Wave. You can click the link for more detail on that. But let's keep it simple right now. The Industrial Age society began to break down many years ago, slowly, and the Information Age began to emerge. We are in a long transition phase between the two, at least 80 or 90 years total. That's where this crisis begins.
The Spatial Fix
The next part of the commercial real estate crisis is called the Spatial Fix by geographers. This is another big concept most people are not familiar with. But here's the simple, underlying idea. Every type of society, over decades, builds the types of buildings and infrastructure it needs to function. The Industrial Age began 350 or 400 years ago, emerging from the Agricultural Age, where most people lived and worked on farms. Over those 350+ years, factories were built, smaller businesses rose up around the factories, and around the mines, and the natural resources the factories needed. Small towns, and cities of many different sizes, emerged. Houses were built in those towns and cities, and eventually the suburbs, where factory and office workers lived. In the bigger cities, lots of large office buildings were built as well, forming the skyscrapers of the downtown districts of the larger cities. That was the Spatial Fix out of the Agricultural Age, into the Industrial Age. The Spatial Fix is the changing from one set of buildings and infrastructure to another. In our case, the Spatial Fix is the shift from the buildings and Infrastructure needed for the late Industrial Age to the buildings and infrastructure needed for the early Information Age.
In our late Industrial Age, the 1970's, for example, people lived in houses and apartments, worked in the factories and offices, shopped in grocery stores, shopping centers, and malls for their goods, and drove on local streets in town, and larger, interstate freeways between the cities and states. Every town, even small ones, had at least one factory, often more, and these were spread across the country, in towns of many sizes. Cities built the basic infrastructure and services needed, like electricity, water, and sewage systems. They also hired people for local government jobs, like police, firefighters, city workers, and trash collectors, that were needed to keep the city going.
This Industrial Age version of the United States peaked in about the 1960's and 1970's. Then, a whole range of new technologies came into play, big mainframe business computers, data processing, satellite and cable TV, wireless phones, industrial robots, cell phones, personal computers, the internet, and so on. Technology began to take over a whole bunch of human jobs, and change the way we worked and lived our day to day lives.
Because of all this technology, we were able to live much different lives. This is the key point here. We could communicate with millions more people, much cheaper and easier, with cell phones, the internet, and social media. We could share information in talk, text, photos, and video. We could move digital money around much faster than gold bars, dollars bills, or checks in previous eras. Our entire ways of life began to change as one technology after another became operational in our lives. This allowed all kinds of different types of new businesses, jobs, and work to emerge.
But there is a huge problem with this. We still had the basic buildings and infrastructure for Industrial Age life, but much of the technology of the emerging Information Age. When the factories began shutting down across this country, in the late 1970's and early 1980's, many cities became much less functional, they lost their main employers of many residents. We, as everyday people, had some of the technology of the coming Information Age, but we didn't have all the needed technical and physical infrastructure of the Information Age built yet. We had a new system with old hardware, in a sense. Our society and our way of life has changed much faster than our physical buildings and infrastructure. High technology became one of the best paying industries, but tech companies tend to cluster in a small number of large cities, they are not evenly spread out across the nation, like industrial factories were. That complicated the transition even more.
This led to two very different types of urban problems. The initial tech hub cities, originally Silicon Valley (San Jose/San Francisco Bay area), Boston, Seattle, Los Angeles/SoCal, Austin, Texas, Raleigh/Durham/Cary, and the Washington D.C. area, they saw huge growth in tech businesses, and had lots of high paid workers rise up in their regions. These high wages caused home prices and rents to soar. All those tech businesses used a lot of office space as well. Over time, more tech grew up in New York City, as well. So these regions struggled to find enough qualified tech and creative workers and good office buildings. Home prices and rents rose to levels that were hard for workers making average levels of pay to afford. So we had cities with thriving tech business, a thriving office real estate market, and high home prices and apartment rents.
Then there's the rest of the country. Most cities and towns across the U.S. had the opposite problem. Most of the factories that people worked at shut down, or their jobs were taken by industrial robots or other technology. Millions of low and medium skilled workers lost good paying factory jobs. Real estate prices dropped in those cities, and many residents left to find jobs in larger metros. Many places became "Eds and Meds" cities, with the local colleges or universities (education), and hospitals (medical), becoming the largest employers in the area.
Some cities lost tens of thousands of residents over a decade or two. Extreme cases, like Gary, Indiana, for example, wound up with over 10,000 empty houses, high crime, and plummeting real estate values. Why? Gary was built around a single huge steel mill, and the mill shut down. The thriving Industrial Belt of the Great Lakes region, where I grew up as a kid, has turned into the Rust Belt. Now 20-year-old UrbEx explorers make YouTube videos, wandering around the remains of the crumbling factories. Those were factories that I remember being busy, often working two or three shifts, when I was a kid. This change has already wreaked havoc on most of these towns and cities.
There are probably 150 or 200 American towns and cities struggling to re-invent themselves, bring in new employers, and create good paying jobs for their residents. They have reasonable rents and home prices, but they haven't been able to create large numbers of high paying jobs for 30 or 40 years. As people moved out, less people went shopping, and more people shopped online, aided by the internet, digital banking, and other technologies.
This combination of factors led to the Retail Apoclaypse, with somewhere around 30,000 individual stores closing down, between 2010 and today. All of those stores closing led to dead malls and dead shopping centers. I was born a few miles from the site of Rolling Acres Mall, in the video linked., and the first dead mall to really get famous back in about 2014. Remember The Big Transition idea? We're moving from the fading Industrial Age into the emerging Information Age. More people shop online now, and we don't need as many brick and mortar stores, so lots of stores started closing down. Not all stores are closing, but a lot of them are, particularly in the towns and cities that lost factories years ago. Following the closure of the factories, and outward migration of hundreds of thousands of people from former industrial cities, retail business slowed down in those towns and cities. Yes, this is an over-simplification, but it's a major factor in most of those store closures.
This is all part of the Spatial Fix. In the 1970's, we had all the basic infrastructure needed for the late Industrial Age. But we didn't have the infrastructure needed for the Information Age that we were about to head into. We had factory buildings that were no longer needed. We now have malls and shopping centers that are no longer needed in many places. We have tens of thousands of houses in small towns and mid sized cities that are no longer needed.
At the same time, we needed to build cell phone towers so our cell phones would work. Those got built. Also at that time, we needed to build huge data storage centers for computer systems and the internet. Those got built. The Spatial Fix is the process of old buildings (houses, factories, office buildings, government buildings, colleges, urban infrastructure) becoming obsolete, while new types of buildings and infrastructure get built in the places where they are needed and make sense. This is a very slow process, it takes decades to happen. We needed cables laid for cable TV, and later, we needed fiber optic cable networks for the initial internet. Those got built. Huge tech campuses for tech companies like Apple, Microsoft, and others, got built. Now we are getting thousands of satellites launched to fill in the blank spots of internet service. Those are part of the Spatial Fix, new types of infrastructure getting built, so the Information Age can keep growing and evolving.
We need LOTS of affordable housing in the tech hub regions. Not just apartments for growing number of homeless people, at least 90% of the population needs "affordable" housing, at many different levels of affordability. Not many people want unaffordable housing. So we need types of housing, from apartments for a few hundred dollars a month, to big, $600,000 houses for growing families of people working high paying jobs. We have huge mismatches in where houses are, that are no longer needed, and where we need lots more houses and apartments at reasonable prices. For example, right now, you can find a 3 bedroom, 2 bath house in Gary, Indiana for sale for under $25,000. I'm not kidding. It's not just Gary, Indiana. Here's another 3 bedroom 2 bath house for sale, for under $25,000, in Mansfield, Ohio. That's the city where my mom grew up, and where I visited a lot as a kid. On the other end of the spectrum, you can find a 3 bedroom, 2 bath house in Cupertino, California, close to Apple Headquarters, for just under $3,000,000. This is the difference between a once thriving Industrial Age city, and a current tech hub, Information Age city in today's world. We have lots of houses in places we don't need them anymore, and not enough affordable houses in places where we do need them.
Part of The Big Transition is the old buildings and infrastructure becoming obsolete for its original purpose, and the transforming or building of all the new types of infrastructure needed, IN THE RIGHT PLACES for the growing and emerging Information Age. This is a time of huge mismatches. We see it in those three homes linked above, and we see it in the job market. It takes decades for a society to sort out these mismatches, and work through all the underlying issues. Part of the problem is that civic leaders, read politicians, don't think long term at all, as a general rule. These underlying issues never even hit their radar. They may try to start jobs programs or get federal funding for a place like Gary, Indiana (or the 150-200 cities with similar issues), and then promote homeless programs in Cupertino (the San Jose, CA region). Politicians allocate money to deal with the symptoms of major problems, but rarely deal with the real, underlying issues. In most cases, they don't really understand the true, underlying issues for long term problems. They are too busy campaigning and fundraising to read a bunch of 400 page books on complex issues. You never hear politicians mention the deep, long term, underlying issues, because it's not good political fodder. Talk about negative issues doesn't get them votes and campaign donations.
As a society, we've dealt with closed down factory buildings for about 45 years now. We've been dealing with dead malls, dead shopping centers, and dead retail stores for about 10-15 years now. You see where this is going? The commercial real estate crisis we are facing right now is just the next step in the overall, nationwide, Spatial Fix. The pandemic accelerated the work-from-home idea, which had been progressing slowly for many years. Now, with a lot more people working from home, another major shift has occurred. Which means we have too many office buildings, and too many industrial buildings, and even too many luxury apartments, in some regions. Like the factory buildings of the 1980's, and dead malls of the 2010's, we need to see how we can adapt as many of these office buildings as possible to different uses going forward.
Office buildings, in general, are hard to turn into apartments, because there are not enough water lines, sewage lines, and other, similar issues. What else can older offices, particularly the smaller and mid sized buildings across the small and medium sized cities of the U.S., be re-used for? If we don't find good answers to this question, then there will be a hundreds more buildings that will become abandoned across the country, in Red States and Blue ones. This will hit cities of all sizes, all backgrounds, and on all levels.
But commercial real estate, the current crisis part of the Spatial Fix, between Industrial Age buildings and Information Age buildings, creates a bunch more issues. This is where the real crisis comes in. First of all, the value of a commercial real estate building depends on how much money the building earns, and less about its physical location, like in residential real estate. When an office building goes from a 5 % vacancy rate to a 20% vacancy rate, the value of the building drops dramatically. Next, office and commercial buildings are usually bought with short term loans, and the owners just pay the interest of the loans, then roll the loan over in 3 or 4 years. They never pay down the principle, like people do with home mortgages, so they have no equity, unless the value of the building goes up. Now, we have buildings with less offices rented out, so the value is going down. The loans are made mostly by the small and mid-sized regional banks. In addition interest rates on loans have risen by about 3% to 4% in the last two years.
So now we have hundreds of office buildings worth less than they were a couple of years ago. Some of these are worth less than the loans now on them. Those 3 and 4 year, interest-only loans are coming due. Since the vacancy rates are up, the owners have less money in general. The banks want more money put up, perhaps millions of dollars, since the buildings are worth less, AND they have to make the new loans at higher interest rates, which means the interest payments on the loans will double or triple in many cases. This means office building owners are going into the bank, which is asking them for more money up front, AND much higher payments on the new loans. The building owners, who are already struggling because the they lave less businesses paying rent in the buildings, often can't afford to run the building with the new higher loan payments.
Now we get to another aspect of modern commercial real estate. Usually each building is set up as its own corporation, and if the building owner stops paying their commercial mortgage payments, all the bank can do is take the building back, they can't go after any of the building owner's other assets to make up the money they lost on the loan. So hundreds of office buildings are now worth much less, maybe 40% to 80% less, since fewer offices are rented out. The current building owners can't come up with more money to create equity in the deal, and they can't run the buildings with the new, higher loan payments. And, in many cases, these building owners, even huge corporations like BlackRock, Brookfield, Vanguard, and similar major commercial real estate businesses, can just hand these big buildings back to the banks. "Here's the keys, we're out! Good luck!" This is already happening, and will happen to hundreds of billions of dollars worth, maybe even trillions of dollars worth, of current commercial real estate over the next few years.
We will soon have banks owning buildings that were worth $10 million in 2021, and may be worth $3 million in 2025. Or buildings that were worth $100 million in 2021, and are worth $25 million in 2024. Banks are in the business of making loans, not running large, complex office buildings, except their own headquarters. So we will get to the point where banks take over these huge buildings, and have to write down losses on those loans, and a many other loans, since most of their other buildings they have loans on will also go down dramatically in value. The banks across the U.S. (and most other major countries), are already struggling. These huge losses will make dozens, probably hundreds, of regional banks insolvent. Even the Big 5 banks will get hit with huge losses, because they have a lot of exposure to huge REIT's (Real Estate Investment Trusts). So a bunch of banks are on the verge becoming insolvent, even if they've been running their banks well, generally speaking. These losses WILL be too much for the system to handle, and we will have another major banking crisis, like we had back in 2008. It's coming. We know it's coming. This has been slowly playing out for over a year already.
Now we get to the point of how this will affect you. If you own several of the types of commercial real estate, there's a good chance it will go down in value, at least for a few years. If you own a business, these bank losses and higher interest rates could lead to higher rent on the building you rent. If you're just an average working person, your bank might become insolvent, and get shut down. Now, you are covered for up to $250,000 by the FDIC. But there's a chance many accounts may be frozen, temporarily, as banks go under, and as each banks issues get worked out. Having your bank account frozen for a week or two would be tough for most people, even if they lose no money. This whole commercial real estate crisis is happening. It's a super low-motion train wreck. And it will stress the already struggling economy, causing a deeper, and most likely, a longer recession. We see this crisis coming, a big White Swan event. It's not going to be easy for anyone.
Now, the final major ripple effect. Cities and towns of all sizes get a big chunk of their revenue from commercial real estate taxes. When buildings go down in value, or sit vacant, they pay less taxes or no taxes at all. So this crisis will lower the money coming into cities, of all sizes, to handle all of their day to day businesses. Yes, cities like New York, Los Angeles, and Chicago will have the biggest losses in value, and will have to furlough or lay off the most workers. But these huge cities have a wide base, and many other sources of tax revenue and stronger political backing. They will struggle, but will, ultimately, be able to survive this crisis better than many of the small and medium size cities and towns across the country.
So far, most of the action to deal with this crisis has been behind the scenes. Banks have been extending loans on buildings, keeping the building owners in business, hoping that the economy would take off, and interest rates would drop back down to near zero, so the buildings would have more space rented out again. That's not going to happen. Not in time to avoid this mess.
Again, this is all part of the Spatial Fix, The Big Transition from the Industrial Age society we're leaving, into the Information Age we're heading into. The late futurist Alvin Toffler dubbed this The Third Wave, and wrote about the various aspects of this issue, from 1980 until 2007. We are moving into another type of society, both technologically and socially, and there's no one group of people that made that happen. This transition began slowly, way back in the 1950's. But now we're in the critical mass part of the transition, where change happens much faster, and on many more levels at once.
There are tough times ahead for almost everyone. That's "baked into the cake" at this point. But, this huge transition period also opens up all kinds of new opportunities, as well. Do you have ideas on how to create more affordable housing in the major metro areas? We need lots of it. Do you have ideas on how to transform old factories, malls, retail stores, or office buildings into new uses for the 21st century? There are huge opportunities for anyone who can figure those issues out. Do you have ideas on how to revive the small and mid sized cities, many of which have been struggling since their factories shut down, 30 or 40 years ago? More opportunity. Do you know how to train out-of-work workers to learn new skills to earn a living in the 2020's? There's a huge number of opportunities there. This whole mess we're heading into is riddled with opportunities to build a better future. That's important to keep in mind.
There you go, this is my best take on the White Swan Event that is the commercial real estate and banking crisis, that we are now facing, as a nation, and as a world. Yes, it seems overwhelming. But it's also the grounds for a lot of future potential to build a better world going forward.
I'm doing a lot of writing on a platform called Substack these days, which was designed specifically for writers. Check it out:
Yeah, that's right baby... uh huh... make it rain. OK, hopefully it's raining money for someone out there. Times are tight, and getting tighter, financially, for most people. I think the recession is already here, and is just in stealth mode for now. We'll see. Here are a couple of the financial blog posts I've written in the last year and a half about money and investing.
Life is full of ironies. I'm a homeless guy who's been fascinated by the dynamics of the financial markets for over 30 years now. Way back then, starting when real estate was surging in Southern California in the late1980's, I started trying to understand the dynamics of the real estate market cycles. Then I started watching stocks, and it just kept going from there. From time to time I write a blog post about things I think will happen in markets, or where I think we are in a particular cycle. This post is about two of those blog posts.
This post was sparked by a video I saw on YouTube, of CNBC TV show host, and stock market legend, Jim Cramer. In the embedded video, Cramer talks about how the mega cap tech stocks, the stocks now known as The Magnificent 7, completely cratered in 2022. After giving excuses for why they all tanked, he tells investors/speculators to "pare back" on those stocks the next time they rally. "We want cheap stocks now," he says in that clip. As a homeless guy who had been watching, studying, and learning about long term trends on my own for 30 years, I was laughing. To me, that looked like the perfect time to buy all of those stocks.
So I wrote that blog post talking about Berkshire Hathaway's legendary investors Warren Buffet, and the now late Charlie Munger. Those guys made their own fortunes, and fortunes for many Berkshire investors, by doing just the opposite. They called it "value investing." They studied businesses, and waited for good businesses' stocks to get beat up, and be underpriced in the market. That's when they would buy, when everyone else hated those stocks.
I said in this blog post that I wasn't interested in buying stocks then, even if I would have had money at the time. I was learning about the crypto world, and watching it's peak to trough cycle play out. But if I had to buy a handful of stocks to hold, and not touch them for 5 whole years, these are the stocks I would buy: Apple, Google (Alphabet), Amazon, Microsoft, and two companies I just liked as businesses: Pinterest and Shopify. Those were my "going to go live on a deserted island and just let them ride" stock picks on that day, December 28, 2022.
All of those stocks are way up, as of right now (March 4, 2024). Apple is up the least in 14 months, 39%. Shopify, surprisingly, is up the most, 130% in 14 months. Shopify has actually tanked for a while. At its peak, it was up 412% from the day of that blog post. The other ones I picked are now up between 30% and 130%.
Now, I fully expect these stocks to tank in the coming months of 2024. I'm surprised they haven't already. I expect Jim Cramer to make another show like the one in this blog post at some point in 2024. And I still think those six companies are solid bets for the next four years. But I wouldn't put my money in any of them. The Magnificent 7 stocks are absurdly high priced at this point, and I think there are much better places to put money as an investor right now.
Yes, I'm a broke homeless guy. But I'm a broke homeless guy who makes some interesting investment calls from time to time, because I've studied the dynamics of the markets, and learned about them, for a really long time. I expect up and down cycles. I don't expect stock prices to defy gravity (and common sense), forever. So that's a few thoughts about my December 28, 2022 blog post on this blog.
There's a weird difference between the mostly older stock investors, and the younger Millennial and Generation Z people who are many of the investors in crypto. Crypto investors expect downturns. They expect crashes to happen. "Crypto winter" is a widely used term in that world. But stock market investors (actually most are speculators), always seem to get caught up in the late cycle hype, and think prices will go up forever. We're at that point in the stock market right now, as the vast majority of all stocks are actually down over the last year or so, and even a couple of The Magnificent 7 may have peaked.
Crypto's different. The whole FTX and Sam Bankman Fried scandal in late 2021 led to a crash of the whole crypto world. The Trad Fi world, traditional financiers, said, "See, we told you so, it's all a scam. Worthless internet money." The crypto world faded from public view for the most part, and went quiet. But crypto coins didn't die off, and even NFT's kept selling. The hardcore crypto people bought the lows over the last two years, quietly. New ideas kept coming up, and some new crypto/DeFi/Web 3 businesses started up as well.
Bitcoin dropped from it's November 2021 peak of over $64,000 per Bitcoin, to a little under $16,500 per Bitcoin in the trough. Then it slowly began to rebuild, and to rise back up in price. In the summer of 2023, word that Blackrock planned to start a Bitcoin spot price ETF came out. That would open up many traditional finance players to get some exposure to Bitcoin's price, without actually have ing to buy the crypto. People argued whether that was good or bad for the crypto world overall. But the majority expected the ETF to happen in early 2024. The price of Bitcoin began to rise even more. Another big milestone, the next 4 year halving, programmed into the code of Bitcoin, was set to happen in the spring of 2024. Those two things seemed to spark talk that the next big Bitcoin cycle, which would lead crypto overall in to a big bull market, was beginning to happen. When Bitcoin goes up over time, other cryptos follow.
On November 14th of last year, 2023, I wrote a blog post, and explained this case that many people in the crypto world were talking about. The ETF and the halving should send Bitcoin back into another bull market cycle that would last from 12 to 24 months, or so. Bitcoin was at 36,366 the day I wrote the post. It had already climbed more than 100% in price from the low after the 2020 crash.
In early January, several Bitcoin spot price ETF's were approved, and opened up for business. Bitcoin had risen from 36,366 to over $40,000. Then it backed off a while, and eventually started climbing again, as we head into the halving in mid April of 2024. Today Bitcoin reached a new high of over $68,000 per Bitcoin, and was at $68,386 as I wrote down numbers to get the info for this post.
Bitcoin, the original blockchain crypto token, is up over 314% from the low in the 2022 trough, about 14 months ago. Bitcoin is up 88% since I wrote that post in November of 2023, about 3 1/2 months ago. I personally think it may back off around the halving, take a breather, then start climbing again. When the halving happens, Bitcoin miners get 1/2 as much for each time they solve a problem, and get Bitcoin through mining. This means that the price tends to double within a few months, to compensate for the reduced payments to miners. The overall consensus I've heard is that Bitcoin is expected to top $100,000 per Bitcoin in this next bull market.
After working out the numbers of how much it has climbed in price in the last two bull cycles, I personally think we will see Bitcoin hover in a range between $120,000 and $150,000 per BTC, for a little while. I think we will likely see some spikes up to maybe $180,000 per Bitcoin, probably in the first half of 2025. And then, like before, the hype and FOMO will fade, and it will crash significantly.
But there will be a lot more institutional money in the ETF's and much more money in Bitcoin, and other cryptos, and the next trough will almost certainly be higher than this past one of $16,500. This is all a mixture of educated guesses, looking at the previous two bull cycles, and pure speculation on my part. Nobody knows for sure what will happen. But Bitcoin, and many other cryptos, are in a bull market right now, before the halving, and there are fundamental reasons it should go quite a bit higher, eventually, than the new high set today.
So there are thoughts on two of my previous posts about investing in stocks and crypto, and how things have played out so far. I personally think that we are already in a recession, and that will become obvious in the next two to three months. This should cause a major correction in stocks. But I think Bitcoin and crypto have a lot of fundamental reasons to keep going up, even in a major recession. We'll see what happens.
I've been doing a lot of writing on Substack lately, check it out:
As the "not a recession" economic malaise continues in the U.S., drug stores are struggling. In this CNN article today (10/17/2023), we learn that Rite Aid went into chapter 11 bankruptcy this past Sunday. Hmmmm... I didn't see that on the news over the weekend. Nothing like a televised war and genocide to keep people from thinking about the U.S. economy. In the article, reading down a bit, we learn that Rite Aid plans to close 400 to 500 more stores, CVS plans to close 900 more stores, and Walgreens plans to close 150 more stores. I say more stores, because these chains closed a lot of stores in 2015-2020, and some stores since. That's a lot of stores.
I'm doing most of my writing on Substack now, check it out:
Just about everyone, individuals, businesses, and governments, have way to much debt today, more than ever in history. In this video, Joe fromHeresy FinancialYouTube channel gives a lot of great advice on how to get out of debt, as quickly as possible. This is one of the best things Americans can focus on right now, heading into a major recession.
My best educated guess now is that we see the coming stock crash in September. That will lead to big downturns in asset prices, and the visible stock crash is when most everyday people finally look up and say, "Oh crap, I think we're in a recession." That's when it gets real, for the vast majority of people. That's when home prices begin to drop in more cities, and that's when a lot more layoffs happen, outside the tech world. Again, this is my educated guess, but as you'll read below, I've been writing about this recession for about four years now. It's coming at us, but it's been slow, like a glacier. Slow but sure, but it'll get here.
Some of you, who have been following my blogs for years, know that I've been harping on about this "big recession that's coming," since early 2019, maybe earlier. Why? Because it is a part of some ultra long term, and mid term, cycles that I've been watching, for 30 years. I won't go into all the details, I've written about them many times online (Welcome to Dystopia: The Future is Now). I've been writing about this for so long because multiple trends and cycles point to a major recession, or possibly a depression, in 2020, or in the years after soon after. That recession will also usher in all kinds of other changes already happening in our world. The main one is that we are still leaving the old, Industrial Age, and still moving into the emerging Information Age. But we're not fully there yet.
Now I know most people have been hearing people talk about a possible recession for a year or more. It's getting old. But there's a big difference between 2023 and 2007, leading into the Great Recession. For one, YouTube is now mainstream, and social media has allowed people to connect more than ever in human history. There are a lot of really intelligent people in macro economics on YouTube, giving their own take on what's happening, and where things are heading. There is also a ton of bad information on YouTube, social media, and across the web, on the chances of a coming recession.
So we have the normal mainstream business media telling people everything is wonderful in the economic world, because that's their job, to keep you happy, in an attempt to keep a recession from happening. So we have far more people available to listen to or watch, on economic issues and business news these days, than ever before. We have the broadest, and best, and worst, information leading up to this recession, of any recession in history. You can do research yourself, and compare different sources, and see what makes sense. That's why this recession feels old already, even though it probably hasn't officially started yet. There's far more information out there, and far more people talking about it, than any other time in history.
This recession tried to happen in late 2018, when the stock markets in the final months of the year. But The Fed lowered interest rates in the following months, to buy some time. Then this recession tried to happen again in early 2020, sparked by the unexpected pandemic that we're all trying to forget. But that was followed by The Fed creating about $6 trillion in new money, basically out of thin air. That's how fiat currencies work... near the end of a long cycle. Yeah, we were all Hood Rich for a while, and a lot of people bought stupid stuff with much of that money from PUA, PPP and other programs. Then, in 2021, the inevitable inflation wave from that huge jump in new money began, and surged upward, and didn't go away. Many months later, The Fed, who created the inflation to begin with, started raising interest rates, faster than ever in history, to fight inflation. Interest sensitive parts of the economy, like real estate, hit the brakes soon after, in the booming areas.
Now I'm a macro economics and futurist geek, and I actually enjoy trying to figure out long term trends. Most of you aren't, I get that. Here's where I see things headed (most likely) in a nutshell. All kinds of economic indicators (yield curve inversions in the bond market, among them, are flashing red. There is a major recession coming, there's not a doubt in my mind of that. We've seen real estate slow down in many places already, interest rates have soared, it's much harder to get loans now, for many businesses and individuals. We've seen tens of thousands of layoffs in the tech sector in recent months? Why have there been so many layoffs in tech? Because those are the smart people. They know something dark is coming, and they laid off people early on, rather than waiting six months or a year, like many other businesses have.
We've been through recessions before, what's the big deal about this one? There are several, much deeper issues happening in society now (see "Dystopia" link above), and this recession (possibly a depression) will dramatically change nearly everyone's lives. There's a lot of change that's going to happen outside the financial world, as well. That's why I think this one is a big deal.
I could ramble on for hours here, but I'll keep it somewhat short and sweet. I think we have about three months before things really hit the visible downward spiral. For most of you out there, getting out of as much debt as you can, is one of the smartest moves right now. If you've kept debt to a minimum, and have a pretty recession proof job, hey, more power to you, carry on. But if you're like most Americans, you probably have a bunch of debt that's gotten harder to pay as interest rates went up. Listen to the video above, it's about 15 minutes. Look at your situation, and see if any of his ideas make sense.
Here are some of my favorite YouTube channels for financial information. If you're interest, check them out, they all have lots of videos, and a ton of information on different aspects of the economic world, personal and business finances, and investing. Check them out if you want, see if they have some info helpful for your situation.
There are no paid links in this post. I don't agree with everything all of these people say, but I've found all of these channels to be pretty solid information, over all, depending what you are interest in.
I've started a new blog, about side gigs, and ideas and info for small businesses. Check it out.
Nick Gerli, of Reventure Consulting, is a financial YouTuber I found last summer, looking for more info on wear real estate was heading. He's been calling things ahead of time, trend by trend, by looking at the actual real time data, and just using common sense. Which should be called "uncommon sense" since so few people seem to use it. This video explains where we are now, mid-April 2023, and where things appear to be heading, better than any of the 30 or 40 videos I've watched recently about the economy.
I've been blogging about "the next Great Recession" (or depression) since 2018-2019. Looking at obscure ultra long term trends that most people either have never heard of, or simply dismiss, it looked like we were heading for either a bigger Great Recession,or a full on Great Depression (a recession for 5+ years), starting in 2019-2020. The recession tried to begin in December of 2018, but The Fed dropped interest rates and calmed things down. Then the pandemic hit in 2020, tossing the economy off a cliff into the recession. But The Fed responded by creating $5 to $6 trillion in "helicopter money," throwing money at banks, Wall Street, corporate America, near bankrupt states, cities, and towns, and eventually to us lowly, average citizens. That was like buying 5 kegs of beer at 2 am at a high school or college party. "Hey! More beer (free money) keep the party going!" The new money propped things up from late 2020 into early 2022.
But that eventually caused inflation, which soared, finally forcing The Fed to raise interest rates faster then ever in history, to fight the inflation they caused with all the newly created money. Now a bunch of factors are pulling money out of the economy, and the financial roller coaster is headed back down into recession. A BIG recession. Nick explains the mess in this video above far better than I can. So just watch the video to get a good idea where things are headed economically this year.
Bridges, like most things humans make, are built to withstand much more stress than what they will endure on a day to day basis. Time wears down the steel, concrete, and components slowly. Accidents can damage to them. Extreme levels of wind and water can create higher levels of stress than usual. Still, by and large, bridges just stand there, most of us use one of more of them daily, but we never think of them. Bridges just stand there and do their job. Until they don't. Sometimes it's a visible event, a massive flood, high winds, or maybe a landslide nearby, that leads to a collapse. Other times, they look fine, but years of wear finally hit a breaking point, and they just collapse, unexpextedly. Everything I see in the economy points to a "bridge-style collapse" at some point this year, in 2023. Things look normal, and then some unseen event pushes it to the breaking point.
As I wrote in the last post, 2022 was a pretty easy year to make economic predictions for, there were big moves (inflation, interest rates, stock market, crypto, real estate) getting ready to happen. I could see the pressure building for these, as did several other people. Then they happened. Inflation was going up. After basically ignoring it for months, the Federal Reserve (aka The Fed) raised interest rates to slow down the economy, and eventually help lower inflation (that they caused by creating too much money in 2020-2021). The Fed also stopped buying "assets," which decreases the total money supply, which also helps slow down the economy. Stocks and crypto went down dramatically last summer and fall, and real estate topped out, and began its descent to slowing sales and lower prices in places. Investors didn't know where to put money, it seemed everything was losing ground. For a bunch of reasons I won't get into, we are now in a financial Never Never Land, unlike most any time in memory.
Now we are in the barrage of the ripple effects of the fastest interest rate increases in U.S. history. The thing about these kinds of actions, like The Fed raising interest rates, generally, they take 12-18 months to really show up in the everyday economy, and the economic data. The Fed dramatically increased the money supply, creating $5-$6 trillion out of thin air in 2020 and 2021. That money went to major banks first, then bailouts of the banking system, major corporations, cities and towns, and eventually us everyday people, through stimulus checks and PUA, PPP, and similar programs. We all got high on The Fed's supply... of free money.
I have a new blog called Adaptive Reuse SoCal... about finding new uses for old, unused, and abandoned buildings, as well as the economy and commercial real estate in general. Check it out!
Then in March 2021, close to a year after the first wave of newly created money, inflation began to go up. That new money spread through the economy, and began to drive prices up. Increasing the money supply devalues every dollar (or euro, yen, kronor, yuan, etc.), making them worth less buying power. Eventually prices rise to compensate for the lower buying power of each dollar. But it happens in different places, bit by bit, unevenly, not all at once. So while stocks, crypto, and real estate values have gone down quite a bit, rebounding somewhat, overall, inflation is still high. It's officially over 6% per year. Unofficially, it's probably still around10% per year, overall.
The Fed started raising interest rates in March of 2022, to fight inflation. That began to affect new home loans very quickly. But most other effects happen under the radar, slowly. We should see the first big effects of the interest rate increases in May-June-July of 2023, about a year after the first large interest rate hikes. Those effects will keep getting stronger as the year goes on, as people, businesses, and local and state governments, start paying much higher interest rates, as they roll over, or refinance their debt. The big problem is, there is more debt than everat all levels... in human history. Paying back debt, all kinds, has been getting more expensive, for everyone, for almost a year. Interest rates are still being raised by The Fed, as of their last meeting. So lots of payments, at all levels, are being missed now, everyone's personal, business, and government debt is getting harder and harder to pay. The pressure is building, minute by minute, day by day, like the pressure on those bridges in the video above.
Something, somewhere in the system, will reach the breaking point, and that collapse, of some major corporation, some non-bank lender (mortgage or auto loan companies), a foreign bank (Credit Suisse and Deutsche Bank are being watched closely by many investors), the junk bond market, or perhaps a small country, will not be able to pay its debt. Something big will go bankrupt. That collapse will seem to come out of nowhere, it will be in something we don't expect, and it will spread quickly. At this point, there's far too much debt to be paid back in tough times, and now too much pressure, for a collapse not to happen. Something big, economically, will break this year. Then we won't be wondering "are we in a recession?" It will be obvious.
When that happens, we will see big drops in stocks, crypto, and lower quality bonds, very quickly. Gold and treasury bonds will be where major investors head for safety, for a while, during the turmoil. Central banks and smart investors have been buying up a lot of gold in the last few years. When there's a big enough collapse, The Fed will have to pivot, and begin to lower interest rates again. That's what they usually do when we are heading into a recession. Raising rates into a likely recession, like they've doing for almost a year, is very unusual, and part of why we're in a Financial Never Never Land, unlike previous downturns.
The Fed has said several times in recent months that it plans to keep interest rates high, and not lower them at all, in 2023. If there's one thing we can count on these days, it's The Fed changing its mind.
I believe they will pivot, and begin to lower interest rates, in 2023. If it's a really extreme crisis that makes this necessary, they will soon begin to create more new money, to bailout the banking system and corporate America. Since we have a Decomcratic White House, and a Republican House and Senate, they probably won't pass major stimulus money for us regular people. They'll throw money at Banks and Big Business, but don't expect stimulus checks this time around. They'll argue about it, but it won't happen, most likely.
Then the real, gnarly part of this recession hits us, and it hits hard. There tens of thousands of more layoffs, more small, medium, and large business bankruptcies, and some major troubles for many countries (already struggling in many cases, because of a strong dollar), and local and state governments across the U.S., particularly in rural, small town, and small city America. It will probably be something like the Lehman Brothers collapse in 2008, but worse, overall, in the beginnings.
So everything, investment-wise, should tank, right? Not necessarily. The stock markets are looking for any reason to rise, yearning for another late 2020/2021 boom to happen again. I think we will see a big stock drop, in mid to late 2023. But the S&P 500 and the Nasdaq may not go lower than last years lows. The Dow might drop lower than the 2022, but it's a tough call. Because the coming bailout will mean more money in the financial system, and lowering interest rates. Stocks will drop, but they will want to rise back up very quickly afterwards, because the bailouts will mean more new money into the economy. This will push inflation to begin rising again, before long. Then we will have a crazy recession, and a rising stock market, like after March 2009. Except, there will be much more new oney being created, and inflation already, so stocks will go up much faster than in 2009. It will be choppy, but when The Fed begins creating new money, stocks will start climbing, overall. This could be late 2023, or early 2024.
I think crypto has seen its bottoms, in late 2022, the major cryptos, anyhow, like Bitcoin, Ethereum, and the top 10 or so most popular coins. Unlike the stock market, crypto is a major new technology realm, and it is innovating, and has incredbile organic growth potential, while most large, major corporations are now either low growth, or full on "zombie corporations" at this point. I think the big gains in the next 2-5 years will be in the blockchain/crypto/Web 3/DeFi/NFT world. We're heading into recession right now, but crypto and NFT's are innovating, and trending up again. This current trend will stall, but there will be a solid rebound after the big crash.
Normally, in a major recession/depression, people flock to gold and silver. Gold has kept its value over pretty damn steady for over 5,000 years. It's said that an ounce of gold would buy a top quality men's suit of clothes in ancient Rome, and in 1800 or 1900, and that's true today. But the ancient world, or even in the 1930's Great Depression, didn't have Millennials and Gen Z digital natives, and we didn't have crypto and MMORP games and multiple emerging metaverses.
Here's what the economists, policy makers, and big players in today's economy don't see. Digital assets DO HAVE INTRINSIC V ALUEto people under about 30-35 years old. Millennials and Gen Z adults and teens won't buy a bunch of gold when the recession hits, they'll be betting on crypto, mem stocks, NFT's and online gaming, and cool metaverses. Like I said in the last post, we are heading into the Information Age people, these technolgies are today, in 2023, what the internet was in 2001.
Today's younger adults grew up playing video games, often huge, online multi-player ones. Building on The Sims, games like World of Warcraft, and Grand Theft Auto, and Minecraft and Roblox, and Fortnite, are the first metaverses. Younger people, now up into their 30's and even 40's, are used to wandering those cyber universes, buying skins, in game weapons, and attributes. So even in the depths of the recession, I think there will be some growth in the blackchain/crypto space, online gaming, and the emerging metaverses, like Sandbox, Decentraland, Minecraft, and Yuga Labs Otherside. Mark Zuckerberg/Meta's metaverse looks like a fucking cyber shopping malls, and shooping malls have been dying in the real world for 20 years. I wouldn't bet on that one, personally. My point here, the Millennials are the largest U.S. generation ever, they're in their high earning years of life, tech savvy, and 72 million strong, edging out the Boomers by 2 1/2 million people, or so. The Millennials, Gen Z, today's smartphone, social media tech, and blockchain/crypto will make this recession much different than previous ones, including the Great Recession of 2007-2009.
Yeah, the governments want to outlaw crypto. They won't be able to, it's already a major part of society, worldwide. When The Fed puts new money into the system, a lot will find its way into crypto, because that's where the huge returns will soon be. There will be lots of losers in crypto, like all other investments, those who ape in and don't do their due diligence. But there will be huge wins as well.
Another thing the older generations haven't figured out about Millennials and Gen Z. They grew up in a world where working traditional jobs for 40 years isn't even a thing, and jobs under $80-$100K a year don't make you a good living. If you're not in tech, making at least $100K+ a year, you're struggling, if not actually poor. These 72 million+ young people are gamblers, the rise in Gamestop, AMC, and other meme stocks in 2020, 2021, showed us that. Lots of young stock and crypto "traders" (gamblers) made a year's income at their old job, in a month or two, from stocks or crypto, in 2021. They remember that. As the economy goes down, millions and millions of people under about 35 will go looking for big scores, like in 2020 and 2021.
If The Fed begins to create new money again, those opportunities will come back. Fed money creation is THE THING that leads to stock market increases (like October 2019- Repo Market "liquidity" led to stocks rising, then the stimulus money later in 2020-2021).
This will be a recession like no other. Real estate will be tanking, new cars and higher value used cars will still be out of price range, because that whole industry got fucked by easy credit and people buying cars they knew they couldn't afford. But the big collapse will lead to a Fed bailout, which will lead to rising stocks (The top Ten of Tech should lead the way), and soaring crypto, soon after stocks take off. NFT's are already rebounding, and it will lead to millions of low wage jobs STILL not being filled. There are millions of jobs in the U.S. that are simply not worth working anymore, even in a recession, because the compensation just won't pay rent and bills. In the 2020 shutdowns, millions of people learned alternative ways to make money. They haven't forgot those, even if they are harder during a big recession.
So... in review. There's a big crash, a "bridge collapse" moment coming. Late Spring to mid Fall 2023, is the most likely timing, in my opinion. There will be a big crash, stocks and crypto will drop. Real estate continue to drop more, and keep dropping. This is starting in the West, Florida, and some Southern cities. Other parts of the country will see smaller drops, or a long period of stagnation.
Then comes the banking and corporate bailout, and lowering interest rates and new money being created by year end, 2023. Stocks will probably be near where they are now by year end, after a big drop, but it's tough to make a solid call. Gold will rise, but I don't think it will spike like in 1980 and 2011. I could see $2,000 or $2,100 an ounce gold, and maybe $35-$40 an ounce silver. But not $3,000 gold and $100 silver. Soon after the crash (2-4 months) stocks begin to seriously rally, after the crash, and then crypto will really take off. Old School investors will dive into Treasury bonds, like Titanic passengers into lifeboats. So bond prices go up, driving yeilds down, early in the crash. All of this will be going on around the later months of 2023, or into early 2024. That's the best call I can make. It'll be nuts, but a different kind of nuts than 2020, 2021, and 2022.
OK, no hard numbers this year, there are too many effects of last years big moves rippling back and forth around the economy. But these thoughts are my best educated guess as to how the economic world will play out for the rest of 2023, and into early 2024. We'll see what happens. Thanks for reading.
Wealthion founder Adam Taggart interviews Nick Gerli from Reventure Consulting in January of 2023, about the state of U.S. real estate in 2023. I think Nick has, by far, the best overall grasp on U.S. real estate these days. I've been following his YouTube channel since last Spring, and he's been calling where things are going incredibly well that whole time.
If you follow my blog(s), you know I have a geeky interest in economics, and consider myself an amateur futurist. Since I was a little kid, I've been trying to predict where society would be in the future. The late futurists Alvin Toffler, and his wife Heidi, are the people I look up to the most, in that repect. I've written quite a bit about my idea of The Big Transition, which is basically an extension of the Toffler's Third Wave theory, extended into our current time period.
I have a new blog called Adaptive Reuse SoCal, about finding new uses for old, abandoned, and unused buildings, as well as the economy and commerical real estate in general. Check it out!
I'll go more into my Big Picture concept of where I believe society is in the next post. I began writing this post two days ago, and the original version is now a 1,000 word+ behemoth. I realized I needed to turn this into three or four posts, so here's the first. These are the main people I look at to get more detailed info on different aspects of the economy, to fill in the Big Picture concept I have. Check out any that seem interesting to you.
New meme. This is kind of a sarcastic middle finger to all the lawyers in society who help shady people make screwing Americans legal, or more legal. 1913 is when the Federal Reserve was created, who blessed us with high inflation, and then this current recession that's just getting going, to fight their inflation. Uh... yeah... thanks guys.
Here's a really good look at where the bike industry is, as things slow down going into 2023. Recession? We're probably in one. Maybe. But this guy from Top to Bottom MTB channel does a really solid job of explaining the wild ride of the whole bike industry since the beginning of 2020, how it got to where it is today, and where things seems to be heading. It's a 7 minute video, well worth checking out if you ride any bike on a regular basis.
As a Generation X, middle-aged geezer now, I remember being part of the BMX/skate industry in early 1989. I was working at Unreel Productions, the video arm of the Vision Skateboards and Vision Street Wear empire. Yep, kids, "street wear" happened about 35 years ago. Anyhow, I was basically a production assistant at a company that sponsored skateboarders, snowboarders, and BMXers. I used my business card to get into the big bicycle industry trade show in Long Beach, in January of 1989. At that time, BMX freestyle had peaked in its first big wave of popularity, BMX racing was peaking in its 2nd big wave, and skateboarding was peaking in its 3rd wave of popularity.
As I walked around, I literally heard the same mantra over and over, in several booths, and in small talk between industry people. "BMX is DEAD! Mountain bikes are the new thing." I was a hardcore, if not that great, BMX freestyler, riding every night, just for the fun of it, at that point. I kept thinking, "What are all of you talking about? BMX IS NOT DEAD!" It wasn't dead to all the hardcore riders around the U.S., and some parts of the world. But it was dead to the major bike companies, and to the corporate sponsors form outside the sport. They declared BMX dead, and money drained away from the sport. The fad was over as far as they were concerned. Almost every BMX freestyle brand dropped their teams that summer. Top pro riders were left without sponsors. All of the hardcore riders, regardless of what level our riding was at, went, "What the fuck, dudes?"
The bad news was that it was really hard to get paid to ride a freestyle bike, even for many top pros. GT and Haro kept their teams going, and toured their guys all the time, to sell bikes where they could. This is what causes the waves (roughly ten year cycles) in BMX and skateboarding. The major bicycle corporations that ride fads pulled their money out, along with corporations that sponsor from outside the bike and skate industries. They are about profit only, and they ride the "fads" like surfers ride waves. When one wave is over, they're on to the next one. In 1989-1990, that meant money flowing out of BMX and skateboarding, and into the new things, mountain bikes (BMX bikes for "adults") snowboarding, and inline skating.
The good thing about these downturns in the waves, only the hardcore people are left, in the sport aspect, and in the indsutry. Vert skating was still ruling skateboarding in 1989, but street skating had been slowly rising in popularity. In the down years, the long economic recession of the early 1990's, World Industries rose up, sponsoring street skaters only. Many skater-owned companies popped up, like New Deal, Black Label, Blind, Birdhouse, Plan B, 101, and others. In the BMX world, S&M Bikes was just really getting going as the downturn hit. Soon after came Standard, Hoffman, Eastern, FBM, Kink, and other rider-owned companies. In both BMX and skateboarding, the riders and skaters took over their industries.
Riding and progression didn't slow down, it sped up. Contests became local events, the big glam events ended. The main sponsors of BMX and skateboarding in the early 1990's were ramen (23 cents a pack), Del Taco (49 cent tacos), Taco Bell (59 cent tacos), and in the Huntington Beach area, What-a-Lotta Pizza, with $4 cheese pizzas and $5 pepperoni pizzas. We ate so many of those pizzas at the P.O.W. House, that when no one ordered a pizza for three days, the manager of the local What-a-Lotta Pizza called us up to see if we were alright. Seriously, that actually happened. We promptly ordered 4 or 5 pizzas.
If you read my blog on any regular basis, you know I'm an amateur futurist, I write posts about economics, recessions, and shit like that. (Thank you to the 7 people who read each of those posts). I think we are now going into a Big World recession, and it will last a while. A lot of action sports companies will downsize, some good riders and skaters will lose sponsorships, some will get smaller deals, and some industry people will be laid off. This is already happening in the high tech world.
But these sports are like a fungus, they never really go away. They go underground. Events like Steve Crandall's DIY comps, and Trey Jones' Swampfest will probably be the norm for two or three years. All the sports will continue to evolve, and a lot of the idiots will wash out of these sports (sorry, not me, I keep blogging from way outside the industry). The people who really love action sports, athletes and industry people, will stick around. A lot of crazy ideas will be tried, and really cool new shit will emerge on multiple fronts. But you might have to get a day job. Or flip stuff on eBay to help survive. When you run out of food, ask one of us geezers who survived the 90's, we all have at least 7 different recipes for ramen meals, most that can be made for under a $1 each.
In a surfing metaphor, the big set of waves has passed, in the business world. Now we wait, and try new ideas using very little money. In a year or two, things pick up some, in 3-4 years, big money will probably flow back in, much more than before. That's a rough timeline, The Fed is pumping and dumping the economy these days, and they set the time schedule. Generally, every wave of these sports gets bigger than the last. Except inline skating, fruitbooting just kind of fizzled.
This is a BIG recession in the Big World, like nearly all of the world, the big shots who run political parts of the world, and the financial world, are battling it out, and all of us regular people get sloshed around in the meantime. The world will look quite a bit different in 5 years. Those of you who try out new ideas, and build some good new shit, will be rewarded down the road, most likely. All of these sports are much, MUCH larger than they were in the 1990's, so BMX, skateboarding, and other action sports can't totally die, like they nearly did back then. But things are slowing down. This happens about once a decade. Now is when it gets fun. Learn to live cheap, and think about where you would like to see things at in 5 years. Then do some DIYing and make something cool happen. Ride on!
