These articles are silly. You'll find them for every time the market sneezes.
October 2015, World Faces a Recession Next Year:
June 2016, The Next Recession is Already Here:
There might be a recession next year, but the Fed might cut rates, Brexit might not happen, the EU might resume easing and the stock market might double in the next 5 years. Nobody knows.
Say I have a coin that I suspect has heads on both sides. Instead of just checking the coin, I flip it ten times in a row and check the result -- ten heads. "Coin flips suggest 'heads' unavoidable."
The article is saying there is some situation in which a recession is unavoidable, and signs point to us being in that situation.
And regardless, to your other point, if you always predict the opposite of the status quo, you'll eventually be right. That guy holding the sign saying "The End is Near", one day, he'll be right too.
So, yes, these articles are silly.
It's hard to buy, or even not sell during the last couple of weeks, but I'll reiterate a quote by Warren Buffet:
"Be fearful when others are greedy. Be greedy when others are fearful."
To what you said above, both can be true. But it depends on the client's business.
I got completely crushed last time. But my clients were primarily in travel and fashion/lifestyle which both got hit hard early. And I was trying to bootstrap a social media startup at the time, which was also in travel. So I got destroyed.
Typically agencies and freelancers are the first to feel a recession. Vendors are more expendable than W-2 employees so contracts get stalled out or cancelled as soon as the warning signs hit the board room.
However... I've known of some people who actually did quite well last time around. Generally they were offering lower rates than the competition and specialized in maintaining software that was essential to recession-proof businesses (like entertainment, education, government etc). They had long-term contracts where they were essential to these businesses, and they lowered their rates to be competitive. This was eventually how I recovered as well.
Basically my advice is - prepare to shift from quality to quantity for a bit, diversify your client portfolio and put effort into building long term clients where you're essential.
This is a really interesting thought that I hadn't considered. I always hear to diversify your investment portfolio, but the thought of diversifying your client list is fascinating. It makes a lot of sense though.
If you look at any of the major consulting firms (ex: Accenture) that have lasted decades, you'll see that they have their fingers in many different unrelated areas and industries. "Niche" in the short term is a great way to build up clients, but stick narrowly to a niche over too long a time scale, and it becomes an anchor.
That said, I've seen companies shed permies over contractors in difficult times, because if you form the view that said difficult times will stick around for a while, the permies look worse as aliability/drain on your projections than having contractors which, although they are higher cost, can be shed trivially. Depends on location though, areas with stronger protections against letting go of permanent employees are the ones where organisations see those same permies as more of a long-term liability. In right-to-work states, for example, it's just as easy to shed either group.
I am sure there is some business angle for freelancers to do well in a recession but I can't come up with one.
In the end you get this game where two or more cars are speeding towards an edge and who breaks first loses.
> Yet, I wonder if it is possible to have a recession when so many people expect one. The worst recessions are the ones that people don’t see coming.
A toaster form BestBuy.com? Finance it for $4/month. New iPhone for $1000? How about monthly installments instead? It's not even the exception anymore, it's the norm.
Even without exorbitant interest rates, the idea that there is supply or demand for financing all aspects of life does not bode well for people's long-term wealth...
I guess if the fed isn’t raising rates then it’s not an issue. Waiting would also allow someone to increase their down payment.
It all comes down to this:
If you are looking at housing as an investment, you are buying into a decades long market aberration driven by super low interest rates and government policies.
Otherwise, if you look at it in terms of the specific supply and demand curve in your geographic area, you can better steer your decision making. My area (northwest of Denver, CO near Boulder) has local government policies which have seriously constrained housing supply. That made me choose to buy despite a less favorable macroeconomic landscape to home ownership.
Also, the yield curves just inverted within the last week, and the average time-to-recession from that point is 12 months. So you may want to wait longer than a year.
Or... just buy something and be done with it, as long as it fits your budget and your income is stable, it's just housing and in the long run it'll probably work out fine anyway. Timing the housing market isn't any easier than timing the stock market.
If your area is already a buyers market, then you should just go ahead, and buy some place you like.
If you really want a safe(r) hedge in this situation, one option is to buy the cheapest property you can live with. That way:
- You're off the rental ladder
- Are building up an asset with mortgage payments
- Are in as shallow as possible if an event occurs that puts your ability to service the morgage in jeopardy
- Are out less if you do lose the property
- Can make a jump to a more expensive/nicer property in due time if market conditions allow
- BUT potentially miss out on capital gains/leverage as a lower cost property will increase, in real terms, less value if property prices rise.
If you're risk averse (I am) it weighs up as a good option. But you miss out on significant potential rewards (not living in as nice a place, not reaping as much capital gains, longer commute or lower wages in the area). Such is gambling.
I'd guess interest rates will rise, hopefully not like they did in the 80s, but I think Trump has been running the economy too hot... meaning inflation and your payments will go up. We want people to save (invest) not spend (consume) to fix this upcoming case (if I understand it correctly). As a result, I doubt lending will freeze since interest rates are likely to rise so getting a loan really shouldn't be too difficult if you've got good credit and a downpayment...
To be honest, I'd say it likely won't matter as recessions of some kind are fairly common and generally relatively benign with even moderately good economic policies. I highly doubt we'll see anything like the 2008 recession...
IMO, The important indicator to keep an eye on is earnings growth, which in the most recent quarter was (from what I recall) sales growth +8% and EPS growth +25%.
One headwind to keep lookout for next year will be tough comparison because of the tax cuts.
Also, like others have mentioned, doomsayers are a dime a dozen. Personally, I like to see what people with skin in the game have to say/are doing to their portfolio allocations.
Like laws designed to encourage forest growth, when the fire eventually comes it burns far brighter than the fire that burns in a forest left alone.
If I were a big pre-IPO company, I'd probably want to go IPO before the recession, in order to get operating capital to survive it.
* defer your capital gains that you owe today
* pay no capital gains on any returns if you comply with terms of opportunity zone investments (10 year holdup of capital requirement)
* earns a 15% discount on your original capital gains taxes owed
I guess that extends the thought expressed in other comments that no one really knows when a recession is about to hit. If they did, it would be preventable.
A good investor knows his risk and his time horizons. Obviously, don't throw thousands into the stock market just before you're about to retire, even if the market looks to be down, if you don't have a very sizable nest egg. Additionally, a good investment should be a good investment even during the hard times -- for instance, I don't think Amazon is going anywhere for a while. Otherwise you're speculating, which is a valid form of investing, but you can't ignore the risk, i.e. you have to have cash and assets that will protect you if you lose all your money or the apocalypse happens.
It's complex. I'm not saying I'm a good investor, but I am trying to learn from the past!
Or it is wise when you allocate 5/95 split to stock/bond but fool's errand when it is 0/100
Personally, I put a certain amount in every quarter.
not just because of the slow growth of the canna industry, but the fear in Trumps trade wars and volatility in commodities is affecting every asset class.
Honestly, I would keep my hard cold cash. sit on it until the opportunity arises.
I probably won't make massive gains but in the long run I'll make ~5% steady.
I think if you value steady returns over wild swings you can do well with Vanguard ETFs - the low overhead offsets the les returns than day trading / active buying and selling
As someone else said, if you have to ask this question it's something to be cautious about doing. But, you have to start somewhere so good luck.
SPXS has been an awful fund to hold since 2009.
over 60? lower risk...it may take longer for riskier assets to recover than you have to live
under 30? higher risk...the markets have always done well over a multi-decade timeframe
Edit. More background on that:
In 2014, after years and years of my parents droning "think about buying a house," I finally decided to teach my parents a lesson, and show them just how bad their investment advice is.
So in the end, I lost around 53 thousand dollars in total from FX, fees, lawyers, drop of property value, and my ability to sleep well at night.
And in 2016, I got kicked out of Canada, as my employer was unable to secure me an LMIA after trying 3 times.
The only thing that prevented me from hitting the bottom was that I was also saving gold since I was 15, when I first bought few crumbs from semi-legal gold prospectors from China.
Also, please paint the full picture: How many percent of all 1980 investments retain halt their value or more today? My first guess would be: A small minority.
To paint a full picture, how many people who invested in physical gold still have it, and how many had it stolen or lost it, or were scammed buying something other than real gold?
Gold is considered a commodity investment, and shares the high volatility that is common in this class. (https://view.ingwb.com/sector-and-volatility-commodities)
Gold does have unique historic status as a currency or a backer of currency. I'm not in 100% agreement, but this does mean some see gold as a hedge against large-scale financial trouble.
However, that same historic status has made this asset in particular vulnerable to investment scams. (https://www.aarp.org/money/scams-fraud/info-2016/gold-coin-i...) This is one caution about this investment that you don't have to worry about as much compared to if you invest in, say, pork futures.
I would argue the "safest investment" is a diversified portfolio, personally.
If this were true, loss-making companies would never IPO. There is such a thing as a normal boom and bust cycle. The "bust" portion is the recession, the hangover after the bull market effects of the US tax cuts have petered out.
He talks about home builders "getting crushed," which means they're trading at levels last seen in 2017. The large tech stock haircuts he refers to means most are at levels they traded at earlier this year.
I'm not saying he's wrong about a recession coming, but if you're looking for some real substance to justify that stance, you won't find it in this article. Just a guy copying Trump's tactic of saying "everyone knows" instead of offering evidence.