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EDIT: Thank you all for generously sharing your time in writing up such thoughtful answers. -- Would love to hear more on your perspective / insight. This is

by warent 4y ago

EDIT: Thank you all for generously sharing your time in writing up such thoughtful answers. -- Would love to hear more on your perspective / insight. This is all intentional, right? My understanding is that the fed is leaning into this particularly hard in order to dislodge the stubborn housing bubble. For an individual (someone who isn't a current business owner), does this basically mean we should continue stockpiling savings, and avoid moving (rent) / avoid buying house / buying a car? Any ideas how long this could last / what the bottom looks like?

ryanSrich 4y ago
2008 lasted nearly 17 months. The hard part is deciding when the recession actually started. The media and government is in denial, so they'd tell you we aren't even in a recession yet. But the rule of thumb is typically two negative quarters of GDP growth, which we hit this summer. If you run a VC backed business my suggestion is 24-30 months of runway is a good starting point. As far as individuals go, it's not a bad idea to mirror this advice. Have essentially 2 to 2.5 years of income saved in the event that you get laid off and can't find a job for a long time. Hopefully it never comes to that, but it never hurts to be prepared.
- kasey_junk 4y ago
  It’s also hard to figure out when the recession ends. The q1/q2 numbers were more than made up by the q3 gdp growth. The numbers for q4 aren’t out yet but the consensus thinks they’ll be slightly positive making 2022 a positive year. That’s after 2021 which was a barn burner. The GDP curve is already nothing like 2008 so it’s hard to use it as a guide.
- themitigating 4y ago
  "The media and government is in denial, so they'd tell you we aren't even in a recession yet." There are costant headlines about layoffs. Also you said that a recession has a defintion, if that hasn't happened how is the media and government in denial?
  - ryanSrich 4y ago
    Like I said in my comment, it did happen. This summer we hit 2 quarters of negative GDP growth. At the time, and even now, the media is suddenly moving the goal posts and trying to redefine what a recession is.
    - themitigating 4y ago
      Because there isn't an official definition of a recession. That two quarter isn't a government metric.
eloff 4y ago
This is all about inflation, not housing. Housing is just going to get caught in the crossfire. If you have a low mortgage, hang onto that! Otherwise standard advice applies, try to keep at least 6 months expenses in cash or cash equivalents. Don’t make big purchases.
grey-area 4y ago
If you'd like more insight on where this is going, I'd recommend looking into Jeremy Grantham. He called this correctly in 2021, before it burst: https://www.livewiremarkets.com/wires/grantham-this-is-a-bubble-this-is-serious https://www.livewiremarkets.com/wires/grantham-this-is-a-bub... He feels there is still farther to fall (and I agree with him there): https://www.msn.com/en-us/money/markets/prepare-for-an-epic-finale-jeremy-grantham-warns-tragedy-looms-as-superbubble-may-burst/ar-AA11kChZ https://www.msn.com/en-us/money/markets/prepare-for-an-epic-... Falling stock prices are really a reflection of real-world problems - while it obviously feels in the US like everything is fine (judging from the many comments saying this here on this thread), everything is not fine, companies looking at their P/L and laying off staff are not fine, and the Fed is deliberately going to cause a recession and cause unemployment to stop inflation, which is a very brutal and indirect tool to do so. This will not be a soft landing.
- abduhl 4y ago
  The Jeremy Grantham interview you cite to for him "correctly" calling a bubble in 2021 was posted on May 28, 2021. S&P was at $420.04. S&P closed today at $395.52. The S&P continued to climb from May 28, 2021 until January 2022. I would not label this "correctly" calling a bubble when he is off by over 6 months and equities remain within 10% of when he gave his interview.
  - grey-area 4y ago
    The peak came after he spoke, in late 2021, and it’s not over yet, bear markets often have rallies. The nasdaq in comparison to s&p has larger losses from peak as it was the epicentre of the bubble this time, hence the layoffs there, but every sector is going to suffer.
qqqwerty 4y ago
> My understanding is that the fed is leaning into this particularly hard in order to dislodge the stubborn housing bubble. They are trying to reduce inflation. The housing bubble certainly played a part, but inflation was hitting nearly everything. A big concern here, is that many smart people think a fair bit of that inflation was due to COVID related supply chain disruptions (which still persist, see China and COVID). So while raising interest rates will help, it may not be the right tool for the job (but it is the only tool that the Fed has, so here we are). > For an individual (someone who isn't a current business owner), does this basically mean we should continue stockpiling savings, and avoid moving (rent) / avoid buying house / buying a car? Definitely build up your savings. The other three are more complicated. Rents appear to be finally going down in some marquee markets. So moving might actually save you money. Buying a house now feels like a bad idea, seems like the market is still carrying on from the fumes of the bubble, but interest rates are definitely having an impact. Based on historical examples, the full impacts will probably take a few years to shake out as housing tends to move pretty slowly. And buying a car, well that is complicated. If you need one, buy one. If not, probably best to avoid it. If you do have savings, might make sense to start looking at CDs, treasuries, and municipal bonds. Interest rates are up and if you have a chunk of cash sitting around those are good ways to put it to use. > Any ideas how long this could last / what the bottom looks like? Watching the Fed is the key here. And the Fed is watching inflation. So as long as inflation stubbornly persists the Fed is likely to keep raising rates, and that is going to impact the economy. I read somewhere that the "market" is expecting inflation to normalize in the summer of 2023. But personally that feels optimistic. I think we still need to shake off the COVID induced supply chain disruptions before things get back to normal, and that still feels like another year or so away.
- AYBABTME 4y ago
  With China dropping its zero-covid policy, I think we're realistically on the way out. However there's no avoiding that we need to pay for 2-3 years of lost global productivity. I mean picture yourself stopping work for 2-3y with zero planning, living on debt and pretending like nothing happened. At some point the bills come due.
  - 4y ago
rcpt 4y ago
> dislodge the stubborn housing bubble. God I wish we could just do a Land Value Tax and be done with it. It wouldn't hurt the economy and might even create more work.
- bogomipz 4y ago
  >"God I wish we could just do a Land Value Tax and be done with it." Can you say what this is and how it would address the housing situation? The housing bubble certainly is a slow moving one at this point. It seems like there's still not a lot of inventory and prices are still at historic highs. Prices haven't come down although price growth has slowed. It's really quite bizarre. We're a mobile a society though, eventually people have to move for various reasons. Maybe people are going to hold on their mortgage and rent the house instead of selling? It's hard to see how all this plays out.
  - rcpt 4y ago
    https://en.m.wikipedia.org/wiki/Land_value_tax https://en.m.wikipedia.org/wiki/Land_value_tax It would eliminate most of the speculation in housing and give strong incentives to build more. Building more would allow more people to move into job centers which would be good for the economy.

by warent 4y ago

ryanSrich 4y ago

2008 lasted nearly 17 months. The hard part is deciding when the recession actually started. The media and government is in denial, so they'd tell you we aren't even in a recession yet. But the rule of thumb is typically two negative quarters of GDP growth, which we hit this summer. If you run a VC backed business my suggestion is 24-30 months of runway is a good starting point. As far as individuals go, it's not a bad idea to mirror this advice. Have essentially 2 to 2.5 years of income saved in the event that you get laid off and can't find a job for a long time. Hopefully it never comes to that, but it never hurts to be prepared.

kasey_junk 4y ago
It’s also hard to figure out when the recession ends. The q1/q2 numbers were more than made up by the q3 gdp growth. The numbers for q4 aren’t out yet but the consensus thinks they’ll be slightly positive making 2022 a positive year. That’s after 2021 which was a barn burner. The GDP curve is already nothing like 2008 so it’s hard to use it as a guide.
themitigating 4y ago
"The media and government is in denial, so they'd tell you we aren't even in a recession yet." There are costant headlines about layoffs. Also you said that a recession has a defintion, if that hasn't happened how is the media and government in denial?
- ryanSrich 4y ago
  Like I said in my comment, it did happen. This summer we hit 2 quarters of negative GDP growth. At the time, and even now, the media is suddenly moving the goal posts and trying to redefine what a recession is.
  - themitigating 4y ago
    Because there isn't an official definition of a recession. That two quarter isn't a government metric.

eloff 4y ago

This is all about inflation, not housing. Housing is just going to get caught in the crossfire. If you have a low mortgage, hang onto that! Otherwise standard advice applies, try to keep at least 6 months expenses in cash or cash equivalents. Don’t make big purchases.

grey-area 4y ago

If you'd like more insight on where this is going, I'd recommend looking into Jeremy Grantham. He called this correctly in 2021, before it burst: https://www.livewiremarkets.com/wires/grantham-this-is-a-bubble-this-is-serious https://www.livewiremarkets.com/wires/grantham-this-is-a-bub... He feels there is still farther to fall (and I agree with him there): https://www.msn.com/en-us/money/markets/prepare-for-an-epic-finale-jeremy-grantham-warns-tragedy-looms-as-superbubble-may-burst/ar-AA11kChZ https://www.msn.com/en-us/money/markets/prepare-for-an-epic-... Falling stock prices are really a reflection of real-world problems - while it obviously feels in the US like everything is fine (judging from the many comments saying this here on this thread), everything is not fine, companies looking at their P/L and laying off staff are not fine, and the Fed is deliberately going to cause a recession and cause unemployment to stop inflation, which is a very brutal and indirect tool to do so. This will not be a soft landing.

abduhl 4y ago
The Jeremy Grantham interview you cite to for him "correctly" calling a bubble in 2021 was posted on May 28, 2021. S&P was at $420.04. S&P closed today at $395.52. The S&P continued to climb from May 28, 2021 until January 2022. I would not label this "correctly" calling a bubble when he is off by over 6 months and equities remain within 10% of when he gave his interview.
- grey-area 4y ago
  The peak came after he spoke, in late 2021, and it’s not over yet, bear markets often have rallies. The nasdaq in comparison to s&p has larger losses from peak as it was the epicentre of the bubble this time, hence the layoffs there, but every sector is going to suffer.

qqqwerty 4y ago

> My understanding is that the fed is leaning into this particularly hard in order to dislodge the stubborn housing bubble. They are trying to reduce inflation. The housing bubble certainly played a part, but inflation was hitting nearly everything. A big concern here, is that many smart people think a fair bit of that inflation was due to COVID related supply chain disruptions (which still persist, see China and COVID). So while raising interest rates will help, it may not be the right tool for the job (but it is the only tool that the Fed has, so here we are). > For an individual (someone who isn't a current business owner), does this basically mean we should continue stockpiling savings, and avoid moving (rent) / avoid buying house / buying a car? Definitely build up your savings. The other three are more complicated. Rents appear to be finally going down in some marquee markets. So moving might actually save you money. Buying a house now feels like a bad idea, seems like the market is still carrying on from the fumes of the bubble, but interest rates are definitely having an impact. Based on historical examples, the full impacts will probably take a few years to shake out as housing tends to move pretty slowly. And buying a car, well that is complicated. If you need one, buy one. If not, probably best to avoid it. If you do have savings, might make sense to start looking at CDs, treasuries, and municipal bonds. Interest rates are up and if you have a chunk of cash sitting around those are good ways to put it to use. > Any ideas how long this could last / what the bottom looks like? Watching the Fed is the key here. And the Fed is watching inflation. So as long as inflation stubbornly persists the Fed is likely to keep raising rates, and that is going to impact the economy. I read somewhere that the "market" is expecting inflation to normalize in the summer of 2023. But personally that feels optimistic. I think we still need to shake off the COVID induced supply chain disruptions before things get back to normal, and that still feels like another year or so away.

AYBABTME 4y ago
With China dropping its zero-covid policy, I think we're realistically on the way out. However there's no avoiding that we need to pay for 2-3 years of lost global productivity. I mean picture yourself stopping work for 2-3y with zero planning, living on debt and pretending like nothing happened. At some point the bills come due.
- 4y ago

rcpt 4y ago

> dislodge the stubborn housing bubble. God I wish we could just do a Land Value Tax and be done with it. It wouldn't hurt the economy and might even create more work.

bogomipz 4y ago
>"God I wish we could just do a Land Value Tax and be done with it." Can you say what this is and how it would address the housing situation? The housing bubble certainly is a slow moving one at this point. It seems like there's still not a lot of inventory and prices are still at historic highs. Prices haven't come down although price growth has slowed. It's really quite bizarre. We're a mobile a society though, eventually people have to move for various reasons. Maybe people are going to hold on their mortgage and rent the house instead of selling? It's hard to see how all this plays out.
- rcpt 4y ago
  https://en.m.wikipedia.org/wiki/Land_value_tax https://en.m.wikipedia.org/wiki/Land_value_tax It would eliminate most of the speculation in housing and give strong incentives to build more. Building more would allow more people to move into job centers which would be good for the economy.