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.  

Where the housing market is right now nationwide: Adam Taggart interviews Nick Gerli

If you have read my blogs on a regular basis, you know I've been writing about a crazy economic downturn that I saw coming, for 3-4 years now.  OK, now we're almost two years into the craziness, now heading into what I believe will be the worst couple of years of this decade (late 2022 through mid 2024).  

Real estate has been insane for two years, through the pandemic, for several reasons.  It seems to be beginning to head back down, towards some sense of reality now.  This 44 minute video is the best I've seen that shows an overall look where the residential real estate market is right now.  Nick Gerli digs into the realtime data, and explains what that's telling us.  If you have any interest in real estate right now, or over the next year or two, watch this video.  This is part 2 of this interview, here's Part 1, which is on Nick's channel, Reventure Consulting.  In Part 1, they go more into the macro economic trends happening, and this video above focuses more on residential real estate in the various areas of the U.S. right now, late August 2022.  

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.  

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.  

Check out my Pinterest page

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