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Market Moves Suggest a Recession Is Unavoidable
- malvosenior 8y agoIf this is true, where is the best place to invest 10k-100k USD today?
- baybal2 8y agoInto a piece of yellow metal. 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.
- interfixus 8y agoNo idea why you are downvoted. Indisputably the safest investment for several millenia running.
- bytematic 8y agoDuring periods of fx doubt, even more so. This includes recessions and right after them
- rfinney 8y agoInflation adjusted price of gold is down almost 50% from 1980: https://www.macrotrends.net/1333/historical-gold-prices-100-year-chart https://www.macrotrends.net/1333/historical-gold-prices-100-...
- interfixus 8y agoHow many 1980 investments are at fifty percent or better today?
- gnopgnip 8y agoSince 1980, after adjusting for inflation Gold lost 50%, the S&P 500 is up 600%, or 1700% with reinvesting dividends in the S&P 500.
- interfixus 8y agoCompletely beside the point. The question was safety, not potential profitability. 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.
- gnopgnip 8y agoLooking at safety, investing in individual stocks or precious metals like gold is a poor choice. Index funds, or bonds have much less volatility. 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?
- chimpburger 8y agoGold is extremely volatile. You can lose 50% or more in the medium term if you buy when its at an all time high.
- soundwave106 8y agoDepends what you mean by "safe". 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 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-investment-scams.html 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.
- nodesocket 8y agoGold isn't as invere to the market as people think. In the last month it is only up 1%[1], while the market has tanked. [1] https://yhoo.it/2Uptpoy https://yhoo.it/2Uptpoy
- RyanShook 8y agoDepends on your time horizon. If you have over 20 years before retiring the broad stock market is still likely going to outperform pretty much any other investment but it will be a bumpy ride.
- Flavius 8y agoWhy would you invest just before a recession? Keep your cash and invest when the market is down.
- rohit2412 8y agoSo bonds, or money market funds
- bytematic 8y agoThere are some indexes that go up on market volatility, as well as some "reverse" indexes
- docker_up 8y agoThose are meant for day-trading and now for long-term or even medium term investment.
- alttab 8y agoYou should always be investing because timing the market is a fools errand. The question is how much?
- rohit2412 8y agoIsn't that timing too? Or it is wise when you allocate 5/95 split to stock/bond but fool's errand when it is 0/100
- alttab 8y agoConsistently invest an amount that you are comfortable with. It's called dollar cost averaging. I'd personally keep dry powder for when the market is far beyond the standard deviation of historical records. 2008 and 2018 would both be years this is true. Shorting though is only for the brave or stupid. Personally, I put a certain amount in every quarter.
- techopoly 8y ago
- robertcorey 8y agoif you think the market will go down you should short it...
- rootusrootus 8y agoPretty much this. Market trends change how you invest, but they certainly don't prevent you from profiting either way. The last couple months have been particularly lucrative if you're shorting the market.
- malvosenior 8y agoWhat would be the best way to do this? Is there an index fund or something that is based on shorts? Sorry for the lack of knowledge.
- nemo44x 8y agothere's inverse ETF's. SPXS is a leveraged "bear fund" that gains value as the S&P500 decreases in value. SPXS is particular will move 3X the movement of the S&P500 so a loss of 1% in the market is a gain of 3% in SPXS. SPXS has been an awful fund to hold since 2009.
- matwood 8y agoBe careful with leveraged ETFs because of decay. They are really only good to hold short periods. https://seekingalpha.com/article/1864191-what-you-need-to-know-about-the-decay-of-leveraged-etfs https://seekingalpha.com/article/1864191-what-you-need-to-kn...
- vannizhang 8y agoI have n account with Charles Schwab and it's pretty straightforward to short a stock or etf: https://www.schwab.com/resource-center/insights/content/what-is-short-selling https://www.schwab.com/resource-center/insights/content/what...
- smogcutter 8y agoI'm pretty ignorant here, how do you short "the market"?
- claydavisss 8y agoinvesting should always be based on your age, not market conditions 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
- cenal 8y agoIf you are in the USA and have capital gains look for an opportunity zone investment. Incredible new upside of the Tax Cut and Jobs Act of 2017. * 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
- ctjackso 8y agoIf you're investing for the long term, why not just find a spot you're comfortable with on the way down and invest money in an index fund while the market is down? A recession is the perfect time to invest, isn't it?
- deleted 8y ago[deleted]
- faramarz 8y agoI'm playing the cannabis market right now and i'm bleeding. 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.
- briandear 8y agoMaybe I am ignorant, but how does a trade war affect cannabis stocks? Is there some China connection I am missing?
- nine_k 8y agoIn the spring of 2008 I bought gold. It worked quite fine.
- gnopgnip 8y agoThe bond market, and international stock market are less correlated with US large cap stocks. Historically though you are still better off investing in the S&P 500 or similar, it is virtually impossible to know what the market will start falling and when to sell, or when it is at the bottom and to start buying again. Time in market beats timing the market.
- briandear 8y agoIf it were my money, I’d be all in with stocks that have exposure to China trade war fears. When the current strife passes, they’ll rocket back up. I tend to buy the fear and sell the joy (if I sell at all.) But that’s just me.
- clubm8 8y agoIf you have a good long term strategy you shouldn't be worried about timing the market. I invest in a few ETFs, 80/20 stock to bond ratio, a mix of domestic USA / international. 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
- deleted 8y ago[deleted]
- wil421 8y agoWould it be wise to wait a year before buying a house? If a recession hits it might turn my areas buyers market into a fire-sale. 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.
- TACIXAT 8y agoInterest rates rising will lower prices a bit (in the end, a buyer taking out a loan will likely be paying the same, because what ever drops in house prices goes to the bank in interest). I dropped my home's price (undesirable neighborhood) pretty aggressively in the last 6 months before hiring a property manager to rent it out. I would recommend just keeping your eye out for deals. Right now is off peak season (in the US) so you might find someone desperate and get a bargain.
- deleted 8y ago[deleted]
- rootusrootus 8y agoLots of factors in play, you'd need to bet correctly that the recession will actually affect prices that way in your area. 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.
- nemo44x 8y agoThere was a slight inversion but it wasn't on 2-year and 10-year. The recession indicator is from when the 2 and 10-year yield inverts and yes, it's about a year lag.
- rootusrootus 8y ago
- kolbe 8y agoHis main justification: "Just about everyone I talk to in the capital markets, including erstwhile bulls, acknowledges that things are slowing down." And "everyone knows it is coming." And "everyone knows that inverted yield curves are the most reliable recession indicators." 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.
- aliston 8y agoHow can something "suggest" a recession is "unavoidable." If its a suggestion, then by definition it isn't unavoidable. These articles are silly. You'll find them for every time the market sneezes. October 2015, World Faces a Recession Next Year: https://www.cnbc.com/2015/10/13/citis-buiter-world-faces-recession-next-year.html https://www.cnbc.com/2015/10/13/citis-buiter-world-faces-rec... June 2016, The Next Recession is Already Here: https://www.cnbc.com/2016/06/21/the-next-recession-is-already-here-and-there-isnt-much-the-fed-can-do-commentary.html https://www.cnbc.com/2016/06/21/the-next-recession-is-alread... 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.
- negativegate 8y agosuggest - cause one to think that (something) exists or is the case.
- mikeash 8y agoI agree that the attempts at prediction are fairly silly, but this specific phrase is perfectly reasonable. “Suggest” talks about the state of our knowledge. “Unavoidable” talks about where we actually are.
- IB885588 8y agoExactly. Every market correct feels like it's going to be the big one as its happening, and most of them pass.. By the time people start to feel like maybe it's over, market levels are usually well off the bottom and so everybody who wanted to "wait on the sidelines" miss their chance..
- sh33mp 8y ago"Evidence suggests that the heat death of the universe is unavoidable."
- nodesocket 8y agoWhile the last couple of days have been particularly painful for me in the market, CNBC, Bloomberg, and financial news networks are the biggest pusher of fear out there. Fear sells, and they peddle fear better than anybody. 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."
- cwperkins 8y agoGiven the projected IPOs next year (Lyft, Uber, AirBnB) I think this is a little pre-mature. I think the bull market has another year in it. That being said I'm shifting some of my assets out of the market.
- ceejayoz 8y agoA handful of IPOs won't stave off a recession. (It's entirely possible to cancel an IPO, too.) 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.
- cududa 8y agoA few tech IPOs does not make a strong stock market. Seems a bit silly to judge market health on tech having a few IPOs next year
- cwperkins 8y agoI'm not, but its one of the things I track. A mixture of unemployment, yield curve us2y10y spread, deal activity are all things I look for to signal the end of a cycle. Tomorrow's job report will be interesting, but given all the other indicators I still think we're looking at a sideways to up market next year. Caveat being the risk of a recession elsewhere in the world and the contagion effect.
- ErikAugust 8y agoI think it's interesting to note that those companies were born out of a recession, and their IPOs could mark the end of a boom.
- maxxxxx 8y agoIsn't them rushing to an IPO a signal that they think there will be a downturn?
- cwperkins 8y ago
- Symmetry 8y agoIf you could know a recession was inevitable some time soon from publicly available information then that recession wouldn't happen in the predicted time frame. Everybody would see it coming, take their money out of the market, and it would happen instantly.
- mandelbrotwurst 8y agoMy hypothetical ability to predict the future does not mean that you're able to do the same.
- Symmetry 8y agoOccasionally people do discover ways to predict future market behavior in ways others cannot. If they keep it secret than can make huge amounts of money. If they blab about it in articles it stops working. Well, mostly. There's are a couple of regularities that are published but exploiting them takes investment time frames of most of a century for returns not that much more than market average and nobody is willing to do that.
- harshulpandav 8y agoAnd with this mindset most people will not take any action until the big guys have taken an action. The timing could be the predicted time frame. But it is only too late by then and middle and lower class suffer. Top 1% controls around 40% of America's wealth.
- Symmetry 8y agoSmall players who try to time the market are going to lose out to the big players. You seriously should not try unless you feel like donating a portion of your retirement savings to Goldman and Sachs bonuses. Just invest not thinking you know the future and let the Jötunn try to outsmart each other.
- nine_k 8y ago(Nit-picking: jötnar, since it's plural. But I like the image.)
- jamestimmins 8y agoThings that keep me up at night as a software contractor/freelancer: if there's a recession, are contractors the first to go? One counter-argument is that contractors can be a cheaper way for companies to build products (since it's not full time), which might mean companies favor contractors. On the other hand, companies who are reluctant to lay off full-time staff may start by canceling contract relationships.
- iscrewyou 8y agoI would assume contractors are first to go. Work moves in house. In house staff gets cut. The remaining staff gets to work on what the contractor did and what the employees that left did. The company is not beholden to contractors as much as they are to their left over employees. Everybody has got to pay bill. The company will usually look out for their employees.
- briandear 8y agoA company will usually look out for those generating the most value. Which is the point of a company in the first place.
- vlucas 8y agoYou cannot assume this to always be true. The company could have a directive from C-levels to cut all contractors plus 10% of staff and retain the rest. You never know. Sometimes there are competing interests that effectively "tie the hands" of managers to make the most logical choice.
- maxxxxx 8y agoIt's more about budgets and survival politics. The people who are setting the budgets have no idea who is generating most value.
- tunesmith 8y agoIn my experience, contracting has been a leading indicator with both contraction and expansion. Contractors get cut before full-time, but when things are still shaky later, contractors get brought on first before the company is willing to increase full-time headcount.
- reasonablemann 8y agoRecessions are a necessary part of the business cycle. A lot of people would argue that global central banks have gone too far trying to avoid a recession and thus the next recession will be particularly brutal. 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.
- tomjakubowski 8y agothose laws (actually policies, I think) are meant to keep homes and other property from burning, not to encourage forest growth. wildfire suppression is rarely practiced in true wilderness areas in the US
- FooHentai 8y agoSo it's a pretty good parallel, really :)
- 2bitencryption 8y agoWhat scares me is how everything nowadays is available to purchase through financing. 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...
- ry4n413 8y agoIMO, market is down because of increase discount rate (risk), not a decrease in earnings (fundamentals)
- rchaud 8y ago> "We have lost sight of the fact that a recession has cleansing properties, helping to right the wrong of the billions of dollars allocated to bad businesses while getting people refocused on investing in profitable enterprises." 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.
- 40acres 8y agoI was in high school during the last recession so I have no idea of what to expect, but how does one take advantage of a recession? Do you invest in blue chip stocks that you assume will ride out the recession and bounce back? (Apple in Google in 2008 would've been solid investments), do you take advantage of rising interest rates and buy bonds in addition to boosting your savings account? Do you buy a house? What's the m.o?
- agumonkey 8y agoYou gather with friends and find solutions together
- ryansmccoy 8y agoOnly a portion of the yield curve inverted, and based on recent history, its predictive ability for the US economy is not what it used to be. 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.