Educated guess on Wednesday's rate hike by The Fed (9/21/2022)

If The Fed was a BMX jumper, this photo sums up how they're doing right now at their mandates...  #steveemigphotos

This Tuesday and Wednesday The Fed governors meet (officially Federal Open Market Committee- FOMC), to decide exactly how much they want to fuck up our lives further.  I mean, to decide how much to raise interest rates by raising the Fed Funds Rate, to "fight inflation."  The big money is betting on a .5% to .75% hike (50 or 75 basis points).  Their next meeting after that is November 1st & 2nd.  

Here's the problem, The Fed has pretty much lost all credibility with the stock market traders.  Traders know The Fed will have to lower rates again, to bail out Wall Street and corporate America, probably within 6 to 12 months.  The Fed is trying to convince Wall Street traders that they really mean business, and that interest rates will stay high at least through then end of 2023.  Then stocks and real estate will drop, and overall consumer sales will drop, what they call "demand destruction."  If we go into a serious recession, people buy less stuff, prices drop, and that makes inflation go back down.  The Fed wants some inflation, but only about 2% per year.  Right now were officially at 8.3%.  Big difference.  The problem is, the stock markets keep rallying after each rate hike, believing The Fed will drop rates back down in 6 months or so.  In the past 3-4 months, the market falls the week or so before the rate hikes, then rallies back up on the announcment day, and keeps going up.  We might see another market drop on Monday, then Tuesday the markets will most likely be flat.  Then Wednesday, Fed governor Jay Powell makes his official announcement of their decision.  Here's what I see as the most likely reactions by the stock market on Wednesday.  

Disclaimer

.25% rate hike- Not going to happen, we're way beyond the traditional level of interest rate hikes at this point.

.5% rate hike- Stocks soar several hundred points on Dow and Nasdaq- probably a 1% to 3% rise, and continuing rally in coming days and weeks, until October inflation number comes in above 8%, when things drop back some, like they did last week. 

.75% rate hike (most expected outcome right now)- stocks rise, maybe 200-400 points on the Dow, and 100 or more points on the Nasdaq.  Another false hope rally comtinues until October inflation number comes in at 7.8% or higher.

1% rate hike- (Possible, but unlikely action)- The Fed actually, sort of, kind of, looks like they're serious about fighting inflation.  Markets drop a bit Wednesday through Friday, and then another false hope rally begins slowly.  

1.25% rate hike- (Nobody expects this)- The Wall Street traders go "Oh shit, maybe The Fed IS actually serious," and the markets drop a couple hundred points, or more, and The Fed actually gets the results it wants, slowing down the economy enough to actually have some effect on asset prices, and therefore on people's mindsets, and inflation cools off a little faster than it's gradual slowing pace it's doing right now.

1.5% rate hike- Absolutely no chance whatsoever of this happening, but this is how much The Fed would have to raise rates to actually cool things off as much as they say they want to, to actually bring down asset prices quickly, slow down consumer spending, and then slow down inflation, since they are so fucking far behind the curve now.  

That's my view on the possible scenarios possible this next week.  Remember, I'm just a crazy homeless guy (who has been predicting this current recesson since 2019), and this post is for entertainment and education purposes only, and should not be taken as advice.  Click the "Disclaimer" link above for the full disclaimer for this blog and all my financial oriented posts.

Blogger's note- Wednesday 9/21/2022- 4:11 pm Pacific- after The Fed announcement- So... I was right and I was wrong.  Yes, as expected, The Fed raised rates by .75% or 75 basis points.  The immediate reaction was that stocks went down.  I figured that was likely, but I thought that the markets would rise by the end of the day, as they have on (I believe) the last three Fed rate hike days.  

A hour after the announcement, stock markets bounced up, and the Dow, Nasdaq, and S&P 500 were all positive.  I've been calling these "false hope" rallies, with the markets believing The Fed will have to lower rates in 4-6-8 months because of the recession or some major crisis (like the Lehman Bros. collapse in 2008).  Then, the markets dropped back down, which is what would normally happen on a huge interest rate hike day.  But financial markets have been anything but normal since 2008, and particularly since 2020.  The Dow closed the day down over 500 points, about -1.7% lower, with a similar percentage drop in the Nasdaq and S&P.  

Is the reality of dark times ahead finally setting in on Wall Street?  Perhaps.  As I said back on March 22, in my old blog.  This year, 2022, feels like another 2008, and we've had a bumpy downhill ride in stocks since, along with a huge rise in interest rates, both of which I predicted.  We're still a ways from the numbers I forecast in that post (Dow below 27,000, Nasdaq below 10,000, and S&P below 3,500), but those numbers look possible now, by the end of 2022.  

I expect some Black Swan event, or perhaps, at this point, just reality setting in of a severe recession, which will drive markets down A LOT in the end of September or October, and then they'll hit bottom between October and next spring.  That's where it appeared we were heading back in March, and that's where it still appars we are heading, until inflation (official CPI) gets close to 2%-3%.  And that's a long way off.  

I think the recession period experience, for everyday people, will last years.  There will be ups and downs, but we have years of tough economic conditions ahead, for most of the U.S. (and world) population.  That part reminds me of the early 1990's.  Officially, we had two recessions then, a "double dip."  But for most people, the economy was slow from early 1990 through most of 1996.  The 2020's will feel a lot like that.  But the policiy makers live in a bubble far removed from the day to day experience of most Americans.  At their financial level, the recession is a minor inconvenience, and zeros in their investment values.  It's much different for everyday working people trying to feed families during layoffs and rising food and gas prices.  

There's a whole lot of change across society that needs to take place, which I've written about in my Big Freakin' Transition idea, several places.  There's a lot of change in how businesses and organizations operate to take place (out of old Industrial Age models, and into Information Age native models), as well as a massive populist movement, because most jobs today can't sustain a decent standard of living.  There's just a ton of issues that need to get worked out, throughout society, in my opinion.  That will take years, no matter what The Fed does.

I also believe The Fed will overcompensate, again, flooding us with liquidity, new money, in 2023, maybe 2024, which will slow this whole shake out process down, and lengthen the overall economic mess.  Things may move towards some kind of stable new normal by 2026 or 2027, and probably a bit later.  This whole decade will be pretty crazy, and that's if we avoid more major wars.  As I've been saying for quite a while, we are just beginning the craziest couple of years of the 2020's.  Buckle up, now it's about to get REALLY interesting.

My thoughts on financial markets:

White Bear Investment Ideas

A September to remember...

 The CPI inflation rate came in at 8.3% (YoY) this morning (Sept 13, 2022),  .2% higher than the markets expected, which led to a much needed dose of reality in asset prices, which is why stocks are tanking.  

Disclaimer

Welcome to Recessionary Wave #2 of what I call The Phoenix Great Depression.  I've been blogging about a prolonged period of economic downturn since 2018.  This is it, I believe we're now heading into what will be the worst part of the 2020's now.  That's the bad news, a gnarly recession that will be comparable to the Great Recession.  If you lose your job, or have an absurd amount of debt, things will get tough.  But we'll get through it.  We all made it through 2020, and that was an actual economic depression AND a 100 year pandemic, at the same time.   

What does all this mumbo jumbo mean for you, an average working American?

(One) Prices on every day things, will keep rising, in general.  Gas prices have back off, but food, household items, and utilities will probably keep rising for a while. 

(Two) Home prices are beginning to come down in many cites, particularly in the West, Southwest, and the South.  They will probably drop quite a bit more, particularly in cities with lots of  high tech, like the San Francisco Bay Area, L.A., Seattle, and Austin.  The smaller cities that saw huge home price increases during the pandemic (Boise, Denver, Salt Lake City/Provo, Nashville, etc.) will see really big price drops.  The Northeast, Midwest, and plains states will see mild real estate declines.  

(Three) Rent prices MIGHT actually decline in some of the higher priced cities, over the next year. This is iffy, but the potential is there. We'll see.  

(Four) Interest rates will go up more next week, after The Fed's meeting, by .5% to .75%, and will most likely go up .5% more later this year.  Loans of any kind will be harder to get, and charge more interest for a year or more.  Credit cards, new student loans, car/truck loans, business loans, and home loans.  So 30 year fixed mortgage rates should be around 7.5% to 8.5% by the end of 2022.  The Fed can't lower interest rates, even if we fall into a deep recession, until the inflation rate (CPI) is down below 3% or so.  That will probably be LATE 2023.  

(Five) The GOOD NEWS- If you have some money set aside to invest.  Asset prices should drop dramtically over the next 6 months to a year.  We will see some of the best prices for stocks, real estate, crypto, and collectibles in this coming year.  If you're in a position to buy any of these, and you do your homework and proper due diligence and search for great deals, there will be many amazing deals to take advantage of.  I'm talking of long term investments, not day trading gambling.  Some of the best deals of the next couple of decades will happen in the next year, in my opinion.  

Recessions are when everything goes on sale, and almost nobody wants to buy

Here's where we're at right now.  Inflation is historically high, it's been over 8% (annual average) since March, and it was 7.9% in February.  It's been over 6% since last October.  Today's numbers came in at 8.3%.  That means The Fed (Federal Reserve) will keep raising interest rates to slow down inflation.  If they figured inflation that same way they did in the 1970's, today's inflation would be higher today than it was in 1979-1981. (Check Shadow Stats for details)

A good "yardstick" for watching interest rates is the U.S. 10 year treasury rate (chart here).  It was about 1.77% at the beginning of 2020, and is 3.43% today.  That's a HUGE jump in interest rates.  Most people pay more attention to the 30 year fixed mortgage rate, the interest you pay to buy a home.  Using the Google calulator, that's now just over 7% (20% down, $500K loan, 698 FICA score- the US average score).  Those mortgages were about 3% in January.  Home mortgage rates have more than doubled this year, and they WILL go higher.  

Next week, The Fed (F.O.M.C.) meets, and they are expected to raise interest rates another .5% at least, and likely .75%, after today's inflation numbers.  So we know most interest rates will follow that lead, and rise as well.  

Inflation should slowly calm down, and will likely be around 6% to 7% by the end of this year.  But The Fed wants 2% inflation, and that's a long ways away.  

Overall, we're heading into another gnarly recession.  It's always smart to pay down your highest interest debt as much as possible.  It's smart to keep learning new job skills for your current job, to avoid layoffs.  If you do get laid off, figure out what job skills you may need to learn to get a new job, or find a new career.  A LOT of people, MILLIONS, will have to find new careers in the next few years,  that's just the nature of these crazy times we are in, something I've written a lot about.  

Most people, generally, will have to cut back on spending, and just buckle down and work through this, like every other recession we've all lived through.  It's not the end of the world, though it may feel like it at times, for some people.  

I know this is not what everyone wants to hear.  But I'm a futurist thinker looking at what's really happening.  Like I said, there will be a lot of great deals on big assets, and there will be a lot of cool news businesses that start in the next 2-4 years, and grow after that.  So that's my take on things.  If you don't know whether you should listen to me, here are a couple of blog posts from months or years ago.  

The Economy for 2022- March 22, 2022

Predictions: As we head blindly into 2020- January 26, 2020

A Beginner's Guide to the Next Great Recession- August 9, 2019

Recession: What's coming in September 2022?

This is one of the best minds on the economy around, Chamath Palihapitiya.  This talk by him, about 11 minutes, is from a few weeks ago, but goes into the macroeconomic picture in the world today, going back to the Great Recession of 2007-2009.  There are some unrelated photos edited over most of this, but the audio is solid.  

Disclaimer

I've been writing about a long, sticky, major economic downturn for about 3 1/2 years now.  The trends I have been watching for many years, began to merge, suggesting really crazy times ahead.  I've grown to be pretty good at forecasting the coming econmic climate, but haven't been able to build a business to take advantage of the trends I've seen building.  I'm a broke homeless guy now, and it's easy to make the case I have no clue what I'm talking about, despite some pretty solid predictions over the last couple of years.  I've been watching and studying financial markets, and several long term social trends that affect them, for 30 years now.  This, right now, is the biggest part of the downturn we're heading into, in my opinion.  I think the rest of 2022, 2023, and 2024 will be the craziest years of this recession and in business and financial worlds.  But I don't want you to take my word for it.  

In this post, I'm putting several links of talks and interviews by actual, respectable, mostly really wealthy, investors, econmists, and economic analysts.  What they're all saying in the last month or two is getting pretty similar.  Check out any of these that interest you, and their thoughts on this recession.  This will give you a better picture of where we're at, to gain a much better understanding of what's happening now, and what will likely happen in September 2022, and the months and years beyond.  

Mohamed El-Erian- CNBC TV interview August 29th, 2022- 5:43

Summer is Ending, Our Experts are Forecasting a Big Fall- Daniela Cambone/Stansberry Research- edit of several interviews from the summer of 2022- August 26, 2022- 13:55

The Fed Wants to Crash the Markets and Bankrupt Households- Joe Brown/Heresy Financial looks at Jay Powell's remarks from August 26th, and explains where he sees The Fed's stance will take us in coming months, August 26th, 2022

The Housing Crash is Here (50% drop in sales)- Adam Taggart of Wealthion interviews Nick Gerli of Reventure Consulting- August 24th, 2022- 44:05-this is part 2 of this interview, Part 1 is on Nick's channel, and is linked at the end of this video

Fed to Slow Rate Hikes as Housing Market Squeeze Looms- Daniela Cambone interviews Nomi Prins- August 19th 2022- 22:25

Mohamed El-Erian- "The Risk of Recession is High and Getting Higher"- Yahoo Finance, uploaded August 6th, 2022- 33:32

"People don't know what's coming"- Ray Dalio's last warning- August 18th, 2022-32:55

The Crash of a Lifetime- Rich Dad Radio- Robert and Kim Kiyosaki interview Harry Dent- 46:08

"The Scary Truth About the Next Economic Collapse"- Gary Vaynerchuk- edit of several Gary Vee videos- March 12, 2022- 13:03

Jim Rogers on Wealth and the Current Economic Climate- Interview by Michelle Jamriskoat-Bloomberg Live- August 4th, 2022- 19:39

These are a few of the best minds in economics, investing, and business in todays world.  These are only a few of the many people sharing similar ideas, in the last few weeks and months, and are ones I believe really have some solid thoughts to share.  

If you want to get an idea of the future of the financial markets and business climate, look at the best minds looking forward, who actually run a business or have a history of making money actually investing (not trading). Generally speaking, they see asset bubbles and more pain ahead financially.  But that also means there are amazing bargains coming, at some point, when stocks, crypto, real estate, precious metals, and other assets hit bottom.  

But for most people, recessions mean a struggle to pay bills, with credit card, car/truck, student, and home debt, that they owe, becoming a much bigger issue than in good economic times.  Most people struggle through recessions, some worrying about losing jobs, finding a new job when they get laid off, and cutting back on expenses at home.  For some reason, few average people want to think about a coming recession, much less prepare for one, yet there will always be another one before long.  

One huge thing that is different about 2022, compared to previous recessions, is we now have the internet, and in particularYouTube, many popular platforms of social media, and all kinds of people doing research and putting out information about what is happening in the financial and business worlds.  The internet was around in 2007-08, but we didn't have the huge amount of content creators we have now, and social media was still pretty new to most people.  The level of communication between people now means that there are far more smart minds out there, researching, thinking, and talking about what's going on, than during the Great Recession.  

Yes, we had the recession of 2020, technically a short depression, but the pandemic caused downturn, and The Fed's response, kept it from being the recession it should have been.  Things got all out of whack with $5-6 trillion of new money flooding the economy, and millions of people turning into Stimulus Ballers for a while.  So now we get the more traditional recession that should have happened then, with high inflation heading in, as an added bonus.  

The level of good information available, and our hyper-connected level of communcation with each other now will change the way this recession plays out.  Yes, there is a lot of bad information out there, but there is also a lot of good information out there.  When you watch videos or read blogs and articles, look at someone's background.  If they're older, and have been successful at business or investing through several recessions, like Ray Dalio, Jim Rogers, Robert and Kim Kiyosaki, and Nomi Prins, in the videos above, they usually have some solid advice and thoughts.  Don't believe every word they say, but take a successful background as a sign that they have learned a lot over the years.  When several established business people start saying very similar things about where the economy is going, then it's smart to take them pretty seriously.  Then do your own thinking.  Check with other experts, see what they say.  This will help give you a better idea of the Big Picture of the world of investments and business, and hopefully help you make better decisions in your life.  That's the point here.  

This blog post, and all of mine about business, economics, and investments, is for your entertainment and education, and should not be taken as investment advice.  My full Disclaimer for this blog is linked above.  

Joe Brown's 5 Step Plan to Fix America

Joe Brown has an incredible working knowledge of the current economic world that comes through in his videos.  While I would have to see more details to totally back this plan, it's a great place to start the conversation.  I totally agree with the underlying themes of his plan, which is to cut out bloated parts of the goverment, and force people, businesses, institutions, and local/state governments, to be more responsible economically.  

Coming from, me, a guy who has spent a long time homeless, I know that sounds totally hypocritial.  But his plan would defund many of the douchebags of the current system, who live off organizations doing mediocre work for huge government contracts or subsidies.  That would free up trillions of dollars to actually flow through the real world, everyday economy.  That would help myself and all kinds of other people who have run into corruption, red tape, and other bullshit currently alive and thriving in the system, things that have made it harder to make a decent living.  

It would also siphon trillions of dollars away from busniesses, cities, and towns that are highly dependent on government contracts, that are not in the best interest of the country as a whole.  This plan would wind up with a huge part of both businesses and local governments in rural, small town, and small city America going bankrupt.  But those areas would be a bargain then, and attract and embolden the creative and hardworking people in those regions that have new ideas, to rebuild their town, city or area in today's fast changing world.  I firmly believe that the people needed to rebuild every struggling town or city are already in those towns and cities.  In most cases they are simply held back by whatever local, entrenched network runs the show now.  

I've spent 28 of my 56 years in small towns and small to mid-sized cities, in five states, spread across the U.S..  Most of those places are currently run by people working with outdated ideas.  They may or may not be very corrupt, and most are probably reasonably decent people.  But they're running on the ideas and with the small cliques of people that worked 30-40 years ago, and haven't fully adopted to today's technological and social realities.  

And while we're at it, what if the U.S. Senate actually represented the U.S. population, and not arbitrary boundaries from 100-300 years ago.  There are nearly 330 million people in the U.S., so each senator should represent about 3.3 million people.  Here in California, we have 39 million people, a huge state, a huge economy, and two senators.  Across the country, dinky Rhode Island has a tiny area of land, a much smaller economy, and 1.1 million people.  We have multiple counties in California that are larger than Rhode Island in area, some which also have more people.  

San Bernadino County is 8 or 9 times the size of Rhode Island, AND has twice as many people.  Nothing against Rhode Island, they just happen to be the smallest state to use for comparison.  The point is, redstricting the U.S. Senate, as fair as possible, would even out the representation to actual people, and much more accurately represent the U.S. population, which would have enormous positive effects on this country going forward.  

If you watch this video, let me know your thoughts on Facebook or Twitter.  This plan isn't perfect but it's a great place to start the conversation on jumpstarting America as a functional democratic republic again.  

So... the Dow was down 1,000 points today- 8/26/2022

 

CNBC Dow Jones Industrial Average page after close today, August 26, 2022. 

Disclaimer

You guys all sold out of this last false hope rally a week or two ago, right?  Again, here's my March 2022 blog post, on the old blog, with my thoughts on the economy for 2022.  This year, 2022, is the year of big change.  2023 will be the "I'll take Things That Suck for $1,200, Alex" year.  Unless you pay attention to this stuff, and have some cash.  Then you'll be able to get insane deals on all kinds of assets in late 2022 and 2023.  

My March 2022 predictions for stocks were Dow- will drop below 27,000 in 2022, Nasdaq- will drop below 10,000 in 2022, and S&P 500- will drop below 3,500 in 2022.  I'm sticking with the predictions in that post from March.  I also wrote about interest rates, and a couple of other things.  Here's Joe Brown from Heresy Financial with his take on today's remarks by Jay Powell of The Fed, from Jackson Hole, Wyoming, that sent the markets plunging.  Yes, today's market numbers are still quite a ways from my predictions, but they're 3%-4% closer than they were this morning.  

In other financial news, September 6th has been set for the beginning of the Ethereum Merge, which will switch it from a Proof of Work blockchain into a Proof of Stake blockchain.  Ethereum, due to the ability to create smart contracts, and build apps on it (like NFT's, for example), is far more useful than Bitcoin.  With the Merge, providing everything goes well, Ethereum will use something like 99% less energy to operate.  How will this evolve in the future?  That remains to be seen.  But it sets Ethereum up as the top blockchain with smart contracts and other functions.  So The Merge is just something to keep an eye on, if you are interested in crypto and NFT's.  

Where is the real estate market at right now? - August 11, 2022

While he's a bit frantic on screen, Nick at Reventure Consulting keeps making solid, data driven videos, telling where the hot spots and cold spots are, in real estate across the United States.  I found his channel several months ago, looking for real estate trends, to see how they compared to other trends I saw happening.  He has called a lot of what's now happening, months in advance.  

Disclaimer

As I mentioned in a recent video, one day at the grocery store, early in the pandemic, both the guy in line ahead of me, and the cashier, were talking about the "coming real estate crash" here in Southern California.  That was in late April or early May of 2020, and they both expected housing prices to drop dramatically by late 2020, when they each planned to buy a good, 4-6 unit rental property.  I totally agreed with them on where things were headed for L.A. area real estate.  

But then The Fed started creating bailout money, which progams distributed to nearly everyone.  Altogether, 5 or 6 trillion dollars began to wash through the economy, while interest rates were still at historical lows.  The stock market kept heading up, and millennials, in particular, got FOMO fever about homes, and real estate blasted off to the moon.  Nearly two years later, in early 2022, most people in real estate expected the party to keep going, despite some annoying inflation that wouldn't go away.  Then, in March 2022, the official inflation rate jumped above 8%, to 8.5%, freaking out everyone who watches it.  Though it just dropped back in July, it's again at 8.5%, after hitting 9.1%, the highest since 1981.  This caused The Fed to take action, and raise interest rates .25%, to start battling inflation.  Inflation stayed high, over 8%, and The Fed made bigger interest rate hikes this summer, which rippled over, raising mortgage interest rates as well.  

Now, mid-August 2022, 30 year fixed mortgage rates are 5.5% to 6% for most buyers, about twice what they were in January of this year.  Higher rates mean higher monthly payments, which, along with the recession or near recession (depending on who you ask), has had a huge effect on the housing market.  

The effect is much bigger in the cities where prices really soared in the last couple of years, like my old high school era hometown of Boise, Idaho, along with spots like Austin, Tampa, Seattle, Nashville, Sacramento, and several others.  In the video above, Nick shows where the home inventories have soared the most, in recent months, over 150% in some cases.  Real estate in several U.S. cities now have high inventories of homes, and falling prices already.  Spoiler alert, Boise, leads that list.  

It may surprise many people, but California's largest major metro areas, Los Angeles, San Francisco, and San Diego are not in the top ten cities where real estate is slowing down right now.  Neither is New York City or Miami.  This regions are well known for huge ups and downs in real estate in the past cycles  While the biggest California cities are slowing down, the smaller cities, mostly in the West and Mountain region, several with big tech sectors, are leading the way down in real estate right now.  

Meanwhile, the Northeast, most of the Midwest, and the Plains states, overall, have real estate markets that didn't go as crazy in 2020 and 2021, and are much more stable now.  You can see the national inventory heat map at several points in the video above, and get a feel for how real estate is doing in different regions.  You can also sign up to gain access to that data through that video, in his info section below the video (not a paid link).  

What about all of us here in Southern California?  OK, I'm not in a position to even come close to buying a house, but I geek out on watching trends and seeing how multiple economic and social trends seem to be playing out.  If you've read my blogs for a while, you know I've been writing about this big "coming recession" since 2018.  For SoCal real estate trends, I've found that Christian Walsh, below, is a great source to see where the Southern California real estate market stands.

Christian Walsh of Wire Associates comes across like a guy next door, who happens to be a real estate agent.  He's not all hyped up like many YouTubers.  I've been watching his videos for well over a year now, and he puts out solid, straightforward videos, with the latest SoCal data, speaking to trends with his many years of experience.  

Personally, my interest in real estate began when I moved ot Southern California during the late 1980's real estate boom, and in a couple of years, two people I worked with each made $100,000, in a single year, off their homes.  I started learning about real estate, just in time to see the 1990 crash and long recession happen.  My interests moved more to trying to figure out long term fianncial trends at that point, which I've been learning about and watching ever since.  

As you'll see in Christian's video, SoCal real estate is slowing, but it's still in a seller's market for the time being.  Watch the video, and his other videos, to get a fuller picture of what's happening in this region.  

As Redfin, OpenDoor, and other major, tech real estate companies have found out, real estate is a very regional, local, and often neighborhood-based market.  In most of the U.S. right now, the market is still strong, but that's in cities and regions where prices didn't take off to the moon.  In 15-20 cities and areas, the crash is beginning, and in many other major metros, like here in the L.A. area, homes sales are still happening, but things are slowing down pretty quick.  These videos should give you an idea where different regions and cities fall in the spectrum, right now, in August of 2022.  

I'm adding one more link, another real estate agent and YouTuber, Kristina Smallhorn, "The Real Estate Whisperer."  She has a ton of great videos on many aspects of real estate, and does long streaming videos with other real estate professionals, like the one linked below.  She's from Lousiana, where the market is much different than cities like Boise, Austin, or Nashville.  But she interviews and talks with pros from all over the country, so her videos are another great source of info on real estate in today's weird and crazy market.  

Kristina Smallhorn "Housing Market Cooled At Record Rates" 

I have no connection to Nick, Christian, or Kristina, and receive no compensation for plugging them.  I've watched several videos form all three, and find them to be good, solid sources of info on different apsects of the national and regional real estate markets.  

I was wrong

" I Was Wrong," by Social Distortion, my favorite band.  

In this post, from last Sunday, I said "It might be a bad week for the stock markets."  The Nasdaq was 11,834 the Friday before, and as I write this, a week later, it has surged up to 12,390.  What made it surge over 500 points?  Unicorn farts or something, apparently.  Hype.  

Today is Friday, July 29th, 2022.  On Wednesday, we had The Fed raise the Fed Funds interest rate .75%.  That makes every new loan, of any kind, for every American, cost more and harder to get for many months to come.  This will ultimately help slow down the economy to help fight inflation, which is needed.  On Thursday we learned that, yes, we are in a textbook recession, we have now had two quarters of GDP contraction.  We also learned this week that pending home sales in the U.S. dropped 20% in June, year over year.  All hard facts that the economy is slowing down.  That's fine, we have bubbles everywhere, it should be slowing down.  That's a natural part of the cycle.

So the stock markets surged up, dragging crypto along for the ride.  Why?  Because Fed leader Jay Powell hinted that The Fed may... at some point... have to slow down the rate hikes.  Duh.  Of course.  At some point.  It's not like anyone thought they would keep raising interest rates up to 69%.  Yes, of course, they will slow down the rate hikes at some point.

The Fed needs to get the inflation rate to peak, which it may be doing now, and then drop back down to around 2% or 3%, BEFORE they can lower interest rates.  But the traders took that little bit of "good' news and pulled out their crack pipes for another hit.  Enjoy this rally.  The Nasdaq had a good rally in August of 2008, too.  Anybody remember what happened in September of 2008?  Ask a Boomer or Gen Xer kids.  

This year, 2022, feels more and more like 2008 to me.  I'm now about 90% sure we will see a MASSIVE collapse in September or October.  But hey, I couldn be wrong again.  It happens.  We'll see.  I'm sticking with my March 22, predictions for the stock indicies.  That post is linked in the post linked above.  

Meanwhile, I've got other things to blog about.  We are now in the long term, major economic mess, that I have been blogging about since 2018.  I'm more interested in living through it, and finding the opportunities that it will bring, at this point.  You guys can worry about stocks, that's the last place I'd put any money these days, if I had a big chunk to invest.  But that's just me.  Crypto?  Now THAT looks interesting over the next several years.  Cheers!

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Two good videos to watch about the future of stocks and real estate

It's July 27th, 2022, and the stock market is surging up after the The Fed announced a .75% hike in the Fed Funds rate, which sets the pace fo rall other interest rates.  Have stocks hit bottom, and they're going to head back up?  Or is this a bear market bounce?  This video takes a really solid look at those questions.  Check it out if you are wondering about the direction of stocks over the next 6 -12 months.  

What about real estate?  Are we in for a minor correction overall?  Or is there a major downturn coming?  This is a great video, also brand new, that looks into the mid-term and long term demographics affecting real estate.  If you're wondering where it might be headed, check this video out.  

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Could be a rough week for stocks and crypto- 7/15/2022 to 7/29/2022

Mohamed El-Erian is one of the few people you really want to listen to on the direction of the economy.  He's been saying for many months that The Fed was behind the curve on attacking inflation.  That had him worried that they would have to "slam the brakes on" at some point, raise interest rates dramatically, and... here we are, at that point.  

Disclaimer for this blog

The F.O.M.C. meeting (Fed governnors), is Tuesday and Wednesday, July 26 & 27, and they are expected to announce a .5% to .75% hike in the Fed Funds rate Wednesday afternoon.  But the recent, much higher than expected inflation rate, has led to rumors of a 1% interest rate hike.  That would be historic, and the stock markets could react poorly, particularly after this recent rally.  At this point, a .75% hike in the Fed Funds rate seems most likely.  But someone seems to have floated a rumor that The Fed might lower rates, and go back into bail out mode for stocks (and everything else).  With inflation as high as it is, that seems pretty much impossible.  That would just drive inflation much, much higher.  

Then, at close of the stock market on Thursday, July 28, Apple will announce its earnings, followed by its quarterly conference call.  Because of the way both the Nasdaq and the S&P 500 are weighted, Apple has a huge effect on both, and has been holding up both averages during this summer's tech bear market, though down around 14% recently, from the peak.  But signals are that Apple expects lower earnings and slower growth in future months, for multiple reasons.  If Apple's numbers and conference call are worse than the expectations of traders, than that could also have a big, negative effect on the markets.  If stocks take a dive, which is very possible, crypto could do the same thing, and drop back some as well. 

These two things give the potential for a really negative week in stocks, and some carry-over negativity in crypto.   

Blogger's note- 7/28/2022- 2:30 pm, Pacific time, 5:30 Eastern- So...  Stocks dropped some Monday and Tuesday, before the FED (FOMC) meeting announcment.  On Wednesday, The Fed hiked the interest rates by .75%, making loans of all kinds more expensive and harder to get for everyone, and the stock market rallied.  Today, Thursday morning, we found out that, yes, by the actual definition, we are in a recession, two quarters of GDP contraction.  But it doesn't matter, because Uncle Jay and Aunt Janet say that there isn't REALLY an actual definition of "recession."  Stocks rallied again, since the economy will get worse, but we don't call recessions recessions anymore.  

Then after market close, Apple beat earnings, crisis averted, so everybody pile into the rally tomorrow!  Maybe.  If you own stocks, just follow the rabbit down the hole and smoke whatever the worm on the mushroom is smoking, and life will be great.  Just don't try to sell your house for the price they sold for 3 months ago, if you're market was hot last year.  Tragedy avoided, and I feel like I've walked into a rave where everyone is on E but me.  New soundtrack for stock trading...  Hey, it's the end of July, we have five months left in 2022, and I'm sticking with my March 22, 2022 predictions for stocks.  But who cares? Nobody reads these updates.  Time will tell what happens.  And whatever you do, don't listen to Ray Dalio, Jim Rogers, Robert Kiyosaki, or Michael Burry.  And here's Joe Brown of Heresy Financial, making fun of people saying this recession is not a recession.  Absurd, yet flacid.

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The Big Picture: The Big Freakin' Transition, The Phoenix Great Depression, and the Tumultuous 2020's

I know it's hard now, but remember way back, a couple of years ago, when 2020 seemed crazy?  Yeah.  The good ol' days.  By the end of 2020, this dating commercial made complete sense.  

The decade of the 2020's crept in with a yawn.  Uh... yeah, Happy New Year, another year in the 21st century, another new decade.  No big deal.  None of us had a real idea just how quick things would get out of hand.  Then came Covid, and 2020 spiraled into what seemed like another dimension.  "Yeah, everybody, you're grounded!  Stay inside for two months.  Oh, and you're fired."  It just kept getting crazier.  

Then, on New Year's Eve 2020, we all whispered, "Oh, thank God, 2020 is over..."  We didn't realize 2021 was waiting backstage, saying, "Hold my beer."  Apparently that was about the time 2022 started doing shots, and stumbled in a year later, slurring, "That's all you guys got?  What this..."  

Since 2017, I've been blogging about the financial storm clouds I saw brewing, which led me to believe we were in for at least another Great Recession level event, and quite possibly a full blown Great Depression in the 2020's.  Why did I think that?  There are two main ideas I saw building, some long and ultra long term trends.  When combined, I realized, these are not going to be the "Roaring 20's" again, like the 1920's, which many people were predicting then.  It appeared this decade would be really chaotic, to say the least.  So, in late 2019, I dubbed this decade "The Tumultuous 2020's" in a 20 chapter book/blog thing I wrote, called Welcome to Dystopia: The Future is Now.  In it I tried to articulate a whole bunch of big ideas that had been growing in my head, all interconnected with each other, and most focused on th enext 10 to 15 years.  

The Big Freakin' Transition

This is not my idea.  It's my name for an extension of a concept, by futurists Alvin and Heidi Toffler.  This husband and wife team brainstormed together, and Alvin wrote the books with their ideas, from the late 1960's until 2007.  In 1980, he published The Third Wave.  While there were a lot of nuances, the basic idea was that we were leaving an industrial-based society, and moving into an information-based society.  At the time, more than three years before the Apple Macintosh personal computer debuted, that idea was radical.  The Industrial Age was blazing at full steam then, and factories in small, medium, and large cities, acros the U.S., churned out goods.  Those physical items would then be sold at local grocery stores, small mom and pop Main Street stores, discount stores like Kmart and Walmart, and huge department stores in malls.  To most Americans, it seemed the world had always been that way, and always would be.  

But Alvin and Heidi Toffler saw a dramatic increase in information in society beginning.  That led to a need for new technologies to deal with more information, and those new technologies, along with changing social norms, were on the cusp of changing everyday life in ways even science fiction writers couldn't imagine.  The Tofflers saw much of what was about to begin happening, new technologies, new ways to live, work, and shop, and ultimately new social norms resulting from those other changes.  

I've read several of Toffler's books, and have watched every video and interview I can find of him online, multiple times.  In the 2010's, I began to realize that The Third Wave idea wasn't just about factories being shut down years earlier, and good paying American jobs being outsourced.  I began to realize that the Third Wave, the change from the Industrial Age into the Information Age, was happening in different industries at different times, more than 25 years later.  

Telecommunications began the transition from Industrial to Information Age in the 1970's.  Rhen came the closing of factories nationwide, brought on by new technology, industrial robots, and outsourcing of jobs to less expensive countries.  Music went digital in the 1990's, as we also saw the rise of the internet.  Print media began the shift to digital media.  In the 2000's, TV, video, and movies went digital, social media and smartphones emerged, and suddenly everyone could share text, pictures, and videos with half of the world.  We all became publishers, radio stations, and TV stations, in a sense.  

As we headed into the 2010's, the Retail Apcoalypse began, and shopping, the act of consuming itself, shifted from huge brick and mortar stores, to a much more online and smartphone-based model.  These have all been, fundamentally, shifts from the old, Industrial Age models, to new, Information Age models.  The rate of change has been accelerating.  It started slow, but changes in different industries compunded, and change happened faster and faster.  It became obvious to me, that the 2020's would be a time of nearly all remaining industries and institutions being forced to change, from waning Industrial Age models and mindsets, to Information Age models, whether they want to, or not.  It's a matter of survival.

Alvin Toffler died in 2016, but much of what he and Heidi foresaw, and what he wrote about, is still playing out.  The Big Freakin' Transition is my name for the transition period we are in, from the Industrial Age to the Information Age.  It started around 1956, by the Tofflers' reckoning, and will go on until probably 2040 or so.  Just thinking of society as being in this in-between zone, helps all the craziness and chaos today make sense.  At least for me.  But the 2020's will be one of the most chaotic decades, with this transition happening in many different areas of society, all at once, that have been lagging behind, like education, banking, politics, law, the automotive industry, religion, and government, among others.  The Big Freakin' Transition is the 80 or 90 year long transition period we are in, between the Industrial Age and the Information Age.

The Phoenix Great Depression

Another long term trend playing out now is one I read about in a book by economict Ravi Batra, in 1990.  Among other ideas, Batra showed that the U.S. has had an economic depression, or great depression, every 30 or 60 years, going back into the early 1700's.  The only time the cycle didn't fit, was for about 30 years after the Civl War as the country got rebuilt.  Other than that, if we didn't have a depression at the 30 year mark, then we would have a deeper or longer one, often a great depression, at the 60 year mark.  That book was called The Great Depression of 1990, and that's exactly what Batra was predicting.  

We didn't have a great depression (officially, a five year economic contraction) in 1990.  But we did have a 6-7 year stagnant economic period, officially dubbed a "double dip" recession.  The reality of economics today is that even if the Great Depression of  the 1930's happened again, with the exact percentages of decline, unemployment, and everything, it would not be called a great depression today.  It would be a "Triple Dip Recession" over a 7-8 year period, or something like that.  Economists are deathly afraid of usng the word "depression,"  That's today's PR and political economic world.  

All that aside, we could make the case that the 1990's recession was a mild depression.  In any case, it was a long, stagnant, economic period, right when Batra said it would happen.  The rise of the internet helped bring us out of it.  But it wasn't near as deep and catastrophic as he predicted.  As the long recession dragged on, Batra faded from popularity.  But I was fascinated by his ideas, and I started watching the economic markets, pretty much every day, for years.  I would see the markets go up or down, and try to figure out what made them move.  I also read about 200 books in the 1990's, and listened to 150 more on tape, many of them business books.  I began to understand bits and pieces of how trends happen, and what made the markets move.  I stayed pretty broke, working a variety of low wage jobs, while reading like crazy.  I didn't invest any money until the late 90's, and then only bought a few commodity options (oil calls when oil was around $12 a barrel).  I ran out of money, and my options expired worthless, a few months before oil shot up in late 1998.  I had the right idea, but was just six months early.  I had to quit my job because of an injury in 1999, and became a taxi driver.  That soon led to my first bout of homelessness, as I learned how to make money in a cab.   

As 2016 and 2017 came along, I realized that the Toffler's Third Wave, and Batra's 30/60 year cycle of depressions, along with a few other cycles, seemed to be merging.  It looked like we would go into a major recesssion sometime between 2017 and 2020, and that economic downturn would force a lot of businesses to shift into more Information Age business models.  The economy tried to drop in late 2018, but the markets got propped up, and The Fed soon lowered interest rates.  Then, in September of 2019, came the Repo Market crisis, and The Fed started adding much more "liquidity" into the banking system.  Then, six months later came Covid-19, and the shutdowns.  Suddenly things became to change much faster than even I expected.  

In my thinking, the main thing happening, Big Picture, was that we were seeing more and more industries, businesses, and institutions, begin making a shift from an Industrial Age model, to an Information Age model.  This usually was sparked by new technology leading to new players and new business models, which put lots of pressure on the traditional business model.  

Since I was a taxi driver form 2003 through 2007, I'll use my old business as an example.  The taxi industry, which went back to the 1700's and horse drawn carriages, changed overnight, and I mean LITERALLY OVERNIGHT.  This happened when taxi companies pulled out the old CB radios, and put dispatch computers in the cars, to give us fares.  Suddenly, the next day, every driver had to work 7 days a week, and there were soon many more cabs on the road.  More taxis, the same amount of business, and more drivers working 7 days a week.  All that led to each driver making far less money.  I struggled to pay my weekly taxi lease of $550, and put $300 worth of gas in my cab, before I made any money.  I worked up to 18 hours a day, to just survive, and so did many other drivers.  And then, a few years later, came Uber and Lyft, to drive nails in the taxi industry coffin.  New technology, new business models, new players, that brings Big "D" Disruption to an industry.  That is what happened to many industries, and many more have that happening right now. Like so many other workers, I dealt with industry Disruption first hand.  

When we put these two ideas together, The Big Freakin' Transition (Toffler's Third Wave), and Batra's cycle of depressions every 30 or 60 years, they lined up.  Officially, in the Spring of 2020 we dropped into a deep recession (technically, it was a depression, the GDP drop was way over 10%).  Personally, I clock the beginning of The Phoenix Great Depression as September 2019, with the start of the Repo Market Crisis.  

In my thinking, The Phoenix Great Depression is a 5 to 7 year period, from late 2019, to at least late 2024, and more likely through 2026-27.  In that period I see us having multiple "recessionary waves," mixed with periods of rebounding, most likely due to intervention by The Fed.  The Spring of 2020 was the first recessionary wave, and we are now heading into the second wave.  There will probably be three waves of recessions, like in the 1930's.  There could be four.  In addition, we have all these industries and institutions that are going through fundamental shifts in their business model or working model, due to new technology and new social norms.  Many are fighting for the survival of the business, or soon will be.  

The best example is that we used to shop at Sear's and J.C. Penney's en masse (Industrial Age), and now most people do a lot of their shopping online (at Amazon, eBay, online sites for major retailers, and small businesses with online stores), the Information Age.  That type of transition will happen to EVERY business and institution.  Like the mythical phoenix, every institution that hasn't made the shift yet will "burn up and die,"and either completely change its operating model, or go out of business.  New businesses and models will rise up, and replace them.

So The Phoenix Great Depression is the 5 to 7 year period when we have multiple recession waves AND a huge number of businesses and institutions changing to new operating models.  And that isn't going to happen in 12 or 18 months.  It will take several years.  Whatever the reality is, I believe these years from 2019 to 2027 will feel like a great depression, to most people, when they're over.  

There are other trends and transitions happening as well.  Respected investor Ray Dalio talks about the long term "Debt Cycle," which is his analysis of some of these same forces, but focusing on how debt rises, falls, and causes shifts over time.  It's the same basic idea, but he's focusing on different aspects of the change going on.  

So that's as brief as I can explain my concepts of The Big Freakin' Transition, The Phoenix Great Depression, and the Tumultuous 2020's.  They are different apsects of the same crazy decade and major waves and forces playing out.  

Here's the August 2019  blog post (on my old blog) where I called a "Great Recession" level event coming, even before the Repo Market crisis hit.  

The Beginner's Guide to the Next Great Recession

This is the post where I coined the term "The Phoenix Recession."  I was thinkng great depression, even then.  But no one even wanted to hear the word "recession" in October 2019, so I went with this title.

The Phoenix Recession 

Wall Street in July 2022- the craziest street of all?

Drawing I did in 2019, that keeps getting more prescient.  #sharpiescribblestyle

Disclaimer

 This post is to explain why I think the financial markets will tank more in the middle of July.  To start with, let me remind everyone that I think we're about 33 months into what will feel like a great depression, by 2027, to most people.  It might even fit the official definition of a great depression.  I call this The Phoenix Great Depression.  I think there will be a death and rebirth in so many industries, that the word phoenix describes this economic downturn well.  

In my opinion, we are now going into the 2nd, and worst, "recessionary wave" of this long financial mess.  Yes, I realize all of this is arguable.  Again, this is my opinion, just like I said in this blog post and this blog post, both from October 2019.  I used the word "recession" in both of these, because at the time the conventional wisdom was that there might be a minor recession in late 2020.  Maybe.  Conventional wisdom was wrong.  But so was I, to a point.  I didn't expect The Fed to pull $5 to $6 trillion in new money out of their ass in 2020-2021.  That inflated and warped the financial/asset markets dramtically.  So the timeline for things I epexcted, and expect to happen, got moved later.  

My calls for this year, 2022, in the stock markets were in this blog post (March 22, 2022).  I called for continuing high inflation, and rising interest rates, over most of 2022.  I also said the stock market indices would drop below these numbers in 2022:

Dow Jones Industrial Average- 27,000

Nasdaq- 10,000

S&P 500- 3,500

The averages at the time of that March 22, 2022 blog post were approximately: DIJA- 34,861, Nasdaq- 14,169, and the S&P 500- 4,543.  As I predicted, the markets have moved much lower since, and we're only halfway through 2022.  The markets closed yesterday (7/1/2022) at: DIJA-31,097, Nasdaq-11,127, S&P 500- 3,825  Those numbers were off the recent lows.  The Dow has been below 30,000, the Nasdaq below 11,000, and the S&P has hit 3,666.  I don't think we've seen the bottom yet. 

Here's why.  Everything is about The Fed's (the Federal Reserve) actions at this point.  The inflation number that came out in June (May 2022 numbers) had inflation (CPI) at 8.6% annually.  The Fed's goal is about 2% annually.  Uh, yeah, it's a bit high, as your last tank of gas proved to all of you.  To stamp down inflation, The Fed has to raise interest rates, which, in theory, will slow down the economy, as consumers and businesses back off, and spend less money.  BUT... The Fed's actions usually take 12-18 months to really take full effect.  They raised interest rates by 3/4% (aka .75% or 75 basis points) in June, the biggest rate hike in decades.  They did that because the June CPI was so high, at 8.6%, and that it was higher than the May number, 8.3%.

OK hang with me here.  That high, 8.6% inflation rate was the MAY 2022 numbers, the official CPI inflation numbers released are up through the previous month.  It takes a while to collect data and figure it all out.  

On July 13th, the next CPI number comes out, the June 2022 data numbers.  So the CPI was figured almost the same time The Fed raised interest rates.  Inflation seems to still be rising, in general.  So the number coming out on July 13th, which The Fed and every stock trader will be looking at excrutiatingly close, will almost certainly be between 8% and 9%.  It could very likely be over 8.6%.  Nobody wants that.  The Fed has already said it plans to raise interest rates again, 1/2% to 3/4% at the July meeting, held July 26-27.  If the inflation number is even close to 8.6%, they will most likely opt for another 3/4% (.75% or 75 bssis points) hike.  That's like hitting the e-brake on an already slowing economy.  

Here's the really bad part.  The stock markets FREAKED when The Fed raised rates 3/4% in June, since a 1/2% hike was expected.  Since then, the traders have decided that they over-reacted, and the markets have risen back up some.  If the inflation (CPI) rate is still high, or higher (near 8.6% or more annually) on July 13th, the markets will FREAK even more, causing another big drop in stocks (and possibly in crypto, too, and a further decline in real estate, due to another big jump in mortgage rates).  

So that's my thinking.  Again, this is not financial advice, (see my disclaimer for this blog, linked above), these are my thoughts as a futurist/Big Picture/economics geek.  These ideas are for your education and entertainment.  Do your own research and due diligence before making any financial/investment decisions.  

My hope is that my thinking may cause you to do more research, and make better decisions for yourself, your family, and your busniess, in these crazy economic times.  

Blogger's note- 7/13/2022- 

I was right about the inflation rate not dropping much.  The CPI inflation rate today, July 13th, came in at 9.1%, year over year.  That's a full 1/2% higher than last month's number.  As for the stock market, The Dow was down over 400 points at one time today.  That qualifies as "tanked."  But the three main indices have been bouncing up and down all day.  The Dow is down 167 points, as I began to write this, and the Nasdaq is down about 11 points, 20 minutes before market close.  The higher than expected inflation number makes a .75% interest rate increase much more likely at the Fed (FOMC) meeting later this month, July 26-27.  The Dow is down about 300 points, from the close the day before I wrote this blog post, and the Nasdaq is up about 130 points from the close the day before, 11 days ago.

Bloggers note- 7/14/2022- The next morning...  I told you so.

The two best videos to understand rising prices, inflation in general, and the economy right now

This is Joe Brown, of Heresy Financial channel, picking apart President Joe Biden's inflation plan.

If you drive a car or ride a bus, you use gasoline, or natural gas, to create electricity for electric cars, or to power many buses.  Both gasoline and natural gas have gone up a lot in pricein the last two years.  Traveling on the streets is more expensive now, and so are most other things, and this blog is about not only my life on the streets, but also how to survive and thrive in the crazy decade of the 2020's.  Joe Brown, with his Heresy Financial channel (above), gives some of the best overall analysis of today's economy that I've seen.  If you want to understand today's rising prices, the video above is a great place to start.

OK, I'm sick of hearing numbskulls blaming President Biden for the current rising prices.  The president, any U.S. president, by themselves, has very little to do with the economy.  Working with Congress, they can pass laws and programs that affect the economy to some degree.  But the federal Reserve (aka The Fed), really controls our money supply, and influences interest rates, which ripple through the rest of the economy. 

You can blame Biden, if you want, for keeping Jay Powell as the head of The Fed (the Federal Reserve), who caused our current price inflation.  The federal deficit (gap between money coming in from taxes and money spent by U.S. federal government), has gone up since the federal budget was balanced during the Bill Clinton presidency in 1999-2000.  Democrat and Republican administrations have both spent more money than brought they brought in, over the 20 years since.  The Covid-19 pandemic response caused the deficit to soar, first in 2020 under Trump, and now under Biden.  

Nomi Prins was a quant, which means a super math geek, at Goldman Sachs, Bear Stearns, and Lehman Brothers in the 1980's and 1990's, and has been a financial journalist/author since about 2001.  She is one of the smartest people around to explain the financial markets and the how economy works.  This recent interview gives her the chance to explain what she sees happening in today's world with high inflation, falling stock markets, slowing real estate markets, and everything else going on.  

These two videos are a heck of of lot of information to digest, particularly if you don't pay much attention to economic issues in general.  But these are the best to current videos I've seen to understand what's going on, why prices are so high, and why we may need another huge bailout (which will cause more inflation in 2-3 years) at some time.  

Everybody complains about rising gas prices, food prices, and other high prices.  But very few people really want to learn the basics of how the economy actually works, and where things may go from here.  If you're one of those few people, check out these videos.  If not, keep whining as prices keep going up, loans get harder to get and more expensive, and real estate starts going down in the coming months.  

MBS-Mortgage Backed Securities went "no bid" last weekend... NOBODY wanted to buy them

This is one of four videos, by my favorite financial YouTubers, that I watched yesterday, after The Fed hiked interest rates 3/4%.  While the whole video is interesting (if you're into financial stuff), one thing really caught my ear.  He says in this video that MBS (Mortgage Backed Securities) went "no bid" last weekend, and the mainstream media isn't talking about it, because nobody's quite sure what to make of it.  

I found this article this morning, by "Tyler Durden," but naming the longtime bond broker whose thoughts are shared.  This goes way into the nuts and bolts of bond trading, over my head, but basically, last weekend NOBODY wanted to buy the Mortgage Backed Securities offered up, because of all the uncertainty in the financial world.  The broker in the article goes into why this is one of the 5 moments in a 40+ year career that really stands out.  That's not good.  This is the first info I've found on this issue, and I'm not sure what it all means, but it's a sign things will get a lot crazier pretty quick, from the sounds of it.   

The Federal Reserve raised the Fed Funds rate 3/4%, which will raise other interest rates

Here's a Yahoo Finance report on The Fed's interest rate decision, to raise the Fed Funds interest rate 3/4% or 75 basis points, which was announced about an hour and a half ago, as I write this.  

Disclaimer

What does that mean to you, an average American working person?  Interest rates elsewhere also go up, ripples, in a sense, from The Fed's decision.  The average 30 year fixed mortgage rate has gone from around 3% at the beginning of 2022, to 6.1% - 6.2% now.  The Fed also signaled that it plans to raise interest rates at least another 1.75% by the end of 2022.  That means the 30 year fixed mortgage rates should go up to at least 7.85% to 8%, by Christmas time.  The Fed keeps having to do more to combat inflation than it expects, so that 30 year fixed rate could wind up 8% to 10% by the end of this year.  

Debt of all kinds just got a lot more expensive, for businesses, all levels of governments, and individual people.  That means mortgages, student loans, auto loans, credit card debt, and everything else will charge you quite a bit more, in interest, in future months and years.  The plus side is that you should get a little bit more interest on savings, CD's, and interest bearing investments.  But if you get less than 8.6% interest, you're still losing buying power overall. 

The official reason The Fed raised rates is to slow down inflation, which they want to see drop from May's CPI rate of 8.6% officially,   to 2%, or slightly under 2%.  The Fed originally was planning to raise rates y .5% today, but the latest inflation number was higher than expected last week.  That gave them reason to consider either a .75% rise, or a 1% rise, at this meeting.  The Fed has put themselves in a no win situation at this point.  And they caused this high inflation in the first point, by excessive new money creation in 2022-2021, but they won't admit it.  Anyhow, if they did a .5% rate hike, it would look like they were cowing to Wall Street, which they've done for years, until the last couple of months.  

The .75% hike, the highest since 1994, was the safe bet for them, higher than initially expected, signaling they are actually trying to combat inflation.  Since that possibility  of a 3/4% rate hike led to the last several day's stock market losses, Wall Street will celebrate today, and perhaps a few days, with a small rally.  That's kind of a "Whew, glad it wasn't worse" move.  Inflation may very well come in higher next month, and perhaps a month or two after that.  If The Fed did a full 1% rate hike today, it would signal that they are really trying to slow down inflation quickly, but stocks would have dropped more, and we would move quicker towards a serious recession.  I think a serious recession is inevitable at this point, but the "experts" are still arguing that point.  Remember we never officially know we're in a recession until its over, in most cases.    

For you, average working person, all your adjustable rate debt will now become more expensive.  Future debt you take on in coming months, and probably will be more expensive.  The real estate market will continue to slow down, and stocks will, in my opinion, continue trending down, overall all summer.  Interest on savings will go up, but not much.  If you get paid 1% interest on savings now, you are still losing 7.6 cents, per year, on every dollar in buying power.  If you try to refinance any kind of debt, interest rates will be significantly higher, and it will be harder to qualify, in general.  This interest rate rise will slow down the economy overall, driving us harder towards another recession (we might be in it already).  A new wave of layoffs has begun, and there will be plenty more.  The less debt you have, the better shape you're in, generally speaking, for the next 2-3 years.  We are going to start seeing a bunch of bankruptcies, and probably one or more very large businesses, going bankrupt in 2022.  

So that's where we're at, right now, as of June 15th, 2022.  This blog is just getting going, and a big part of it will be looking at ways to survive, and hopefully even thrive, in the crazy decade of the 2020's.  Much more to come.  Thanks for reading.

If you feel like this guy above when your credit cart rates jumps 3/4% in one day, you're not alone...  Get up, cuss a little, dust yourself off, and keep going.  Unknown rider at Boozer Jam 2022, Sheep Hills, Costa Mesa, California. #steveemigphotos, #SEstreetlife

BTW, in 1994, the last time there was a .75% rate hike, Orange County, California went bankrupt.  But that's a crazy story, and it was a long time in the making.  

This week will set the tone financially for 2022....

 I drew this Grey Trash alien about the same time I made some stock market predictions for 2022.  You can read that post here.  #greytrash, #sharpiescribblestyle, #SEstreetlife

Disclaimer

Financially, 2022 and 2023 should be the sketchiest years of this decade.  As I wrote, in the linked blog post, we are heading into the second recessionary wave of this decade, Spring 2020 was the first.  The Fed tossed out about $6 trillion in "helicopter money" in 2020 and 2021, after Covid hit, making us all feel hood rich for a while, and spend a ton of money on stupid shit.  They did this mostly to bail out the banking system, corporate America, and hundreds of struggling small towns and mid-sized cities, but average Americans got a bit of it, too. 

In the rest of 2022, we pay the price for all that newly created money.  The most obvious price we're all paying is rising prices, inflation.  All that new money created this inflation.  It wasn't Trump or Biden, it was The Fed who created it.  The stock market is plummeting again today, in a much needed crash from ludicrous stock values.  Inflation is still rising, according to last Friday's numbers.  Inflation is still getting higher, officially 8.6% a year now, though gas prices, real estate prices, and many food prices have risen much more than that.  Prices on food and many consumer items will keep increasing this year, generally speaking.  Gas prices should back off a bit by mid to late summer, but stay ridiculous, much higher and they were a year ago.  The real estate market is turning, but it turns slow, like a huge ship.  Prices for homes, in most places, should be falling by fall or winter 2022.  This may not be a total collapse in most places, but a decent correction in prices, at least.  Millennials are about to learn how stupid real estate FOMO can be.  There will be a lot of homeowners underwater on their mortgages a year from now. Not near as many as in 2008-2009, but quite a few.   

Interest rates will keep rising for a few months.  The Fed has started raising interest rates, to try and calm down inflation, which it let get completely out of control.  The 10 year U.S. T-bill is a good gauge of interest rates.  It was 1.66% at the beginning of 2022, and is 3.15% today.  More important to working people, the 30 year fixed mortgage rate national average was 3.56% in January, and is about 6.10% today.  The last time 30 year fixed mortgage rates were this high was around Thanksgiving time, 2008, 13 1/2 years ago.  And The Fed will raise interest rates at least 1/2% this week, and will keep raising them in coming months.  What this means is that you can afford less house right now, and a lot less by the end of 2022, as rates go higher. 

By the end of  2022, 30 year fixed interest rates will be 6 1/2% to 8%, at least, and 9% to 10% would not surprise me.  I'm fucking serious.  Simply put, it is going to get a lot harder to get loans, and you will pay a lot more interest if you do qualify for one.  The Fed will have to do another bail out next year, at some point, and lower rates a little, but mortgage rates won't get back down to where they were last year.  

The Spring of 2020 was actually an acute, deep but quick, financial depression.  What we're headed into right now is more like 2008 in the Great Recession, and the long stagnant double dip recession of the early 1990's, put together.  Debt is going to be the killer for most people, businesses, and governments.  Most people who are actually paying their student loans now, will stop paying them, out of necessity.  That will be a hit to colleges and universities' bottom lines.  More important, mortgage, consumer, and auto loan debt will get harder to pay, especially for people who get laid off from their jobs.  

For people who own rental real estate though, where your renters pay off the mortgage, debt will be awesome, as long as you have solid renters.  High inflation means your renters are paying down the rental property mortgages in dollars that are worth less every month.  This will be a great period for savvy real estate investors with solid renters.  Of course, eventually, real estate prices will rise again, though it may be years down the line.  

The layoffs have already started, and we'll see a lot more of those coming, as well.  Like I said, this is the 2nd recessionary wave of the 2020's, and it will be a long, slow sticky one.  From my point of view, as a geek on futurist thinking and economics, this is what I like to do.  Not give people bad news, but give all of you a heads up on what's coming, so you can make better decisions for your own life.  

If you want to listen to the blues after reading this, may I suggest this video of Popa Chubby, live at Daryl's House.  This is what I was listening to while writing this blog post.  Epic blues show.  

If you don't think a homeless guy can shed any light on the economy, here are a few of my other blog posts from the past couple of years.  

"Update: July 16th 2021," July 16th, 2021.

"Predictions: As we head blindly into 2020," January 26, 2020

"The economic collapse of our lifetimes will happen this month.. it's phoenix time," Oct. 1, 2019

"A beginner's guide to the next great recession," - August 9, 2019 

Remember:  Recessions and depressions are when the whole world goes on sale, and almost nobody wants to buy