To understand whether this fateful combination— high debt plus a cooling housing sector—could produce a sequel to the Great Recession, I reached out to Bill McBride, a famously prescient economic analyst and the author of the Calculated Risk blog. “I do not see any signs of a recession in the next six months,” McBride said. “I think the economy is pretty solid. Recently new home sales have slowed due to several headwinds, mostly higher mortgage rates and the new tax policy.” As the Millennial generation continues to pay down student debt and move into its peak-earning years, he predicted “further increases in new-home sales and single-family starts over the next couple of years.” His verdict: a slowdown, perhaps; but not a downturn.
If you’re going to worry, you should worry about three things: exports, China, and maybe the looming shadow of corporate debt. But nothing in the economy seems to predict an imminent recession.
Exports will continue to weaken because of rising USD and weak economies in emerging countries. But this can be supplanted by domestic demand using tariffs on trade.
Corporate debt is at its highest. Rising rates and equity pull back will make it worse. Plus it also depends on where this debt is actually invested.
China: Nothing conclusive. The economy has strong stress due to huge credit bubble but may sustain.
We are having or will have a slowdown, but not a deep recession. It could be like 2015 but much worse. It could be as scary as the Asian financial crisis but unlikely. But international problems will be worse than domestic.
Any international issues would bring lower interest rate and more liquidity, it’ll provide support to housing. I think housing market doesn’t have too much downside nationally.
I’m still worried about international black swans. China, Brexit, other weaker emerging economies. But these problems will be bad to stocks and good to housing.
Selling stocks to buy houses seems to be a safe strategy now. The question is where to buy houses.
There is an over saturation of education. Too many economists are simply echoing what their brain was conditioned from too many years of schooling where grades and career pressure are forcing them to obsorb established theory and their thinking ability is lost in the long grueling process. We need great thinkers who are not concerned by making a living in academia. Maybe only the rich people or people who don’t care about grades or tenure or personal career will provide real wisdom to the world.
I read somewhere that about 40% of current jobs will be eliminated in the next decade due to advances in AI. So wealth will be even more concentrated than before. Packages worth million dollars a year are being offered to engineers with right skills. I am sure routine programming jobs will be gone soon. All of this makes it difficult to bet on other states. Forget other states, companies are not even going as far as Pleasonton. They are all buying up land in south bay. I don’t understand why that is but that’s the root of the problem.
This has huge implication for US politics. Money and brain power are increasingly concentrated in a few super metros like Bay Area, but political power is diffused over a huge land mass by design. For example hell hole states like North Dakota each has 2 senators and California also has 2 senators. Just in the last 20 years two presidents came to power despite losing popular votes.
This tussle between urban and rural is the biggest challenge facing America in the next 50 years.
Nobody here is making 2M from a paycheck. I’m sure there are a few in the 500K range. Someone mentioned six figure daily swings in their stock accounts. They should be adding 7 figures a year to their net worth easily.
It seemed like tomato had a huge appetite for risk. Maybe he hit the jackpot and we failed to get the invite. Who knows.
Yes, but it doesn’t need to be. Consider Bavaria. On paper, just another German state. In practice both more rural and more industrial with a lower population density than the rest of the country. More religious and conservative as well. They have their own political parties, separate from the rest of the German parties although they often align with them. It all works because the regional differences are recognized, a large degree of autonomy granted and not every edict is crammed down their throats. If the Dems ever figure this model out they can get power back and hold it. If they cling to fantasies like getting rid of the electoral college or the two senator per state system their only hope is for the Reps to elect more Donald Trumps. And even then, as the recent election shows, they’ll still struggle to make gains.
