Recession

[toddnjoyce]

......Do people have the extra cash to offset the increases or are they maxing out their credit cards?

This is the $64K question. There’s a lot of pent up cash savings over the last 24 months. On the order of $4.2 Trillion with a T dollars in individual savings accounts more than what was there in December,
2019.

That number is shrinking now, almost as quickly as it grew. Personal debt is shrinking and credit accounts , which were at their lowest about 9 months ago are starting to increase a bit.

But the cost of money is increasing. Just saw where’s the average American homeowner has nearly $185K in equity; the question is how much do people want to borrow if the delta between investing and borrowing is low or zero. In essence, the era of free money is unwinding and we’re watching it play out in front of us.

I think it’s too early to understand what’s going on and I think Christmas time is going to be very interesting.

 

[TexasRedneck]

Those of us who've been through it before are all too familiar with what's to come. One of the reasons I'm socking cash away - as things come apart, a lot of stuff is gonna get cheaper. Guy that lives 2 blocks over has been spending $$ like there's no tomorrow.....just posted a rant on a local FB page about his CC company jacking his rate up to 22% - and he's too damned stupid to stop using the card so they have to honor the old rate. I messaged him on that, and his reply was that "he's gonna MAKE them honor the old rate..." Yeah, no scooter - it don't work that way. BoA did that to us about 8-10 years ago - we stopped using their card and paid it off. Will NEVER use their services again. The CS rep acknowledged we'd NEVER been late or over limit, and admitted that they did it "because they could". There's gonna be a LOT more of that in the coming months.

 

[toddnjoyce]

..as things come apart, a lot of stuff is gonna get cheaper...

Discounted is more appropriate. Cash is king because the cost of money is factored out and the value of liquid capital increases.

Finding the value assets is what’s tough.

 

[Havok1]

Those of us who've been through it before are all too familiar with what's to come. One of the reasons I'm socking cash away - as things come apart, a lot of stuff is gonna get cheaper. Guy that lives 2 blocks over has been spending $$ like there's no tomorrow.....just posted a rant on a local FB page about his CC company jacking his rate up to 22% - and he's too damned stupid to stop using the card so they have to honor the old rate. I messaged him on that, and his reply was that "he's gonna MAKE them honor the old rate..." Yeah, no scooter - it don't work that way. BoA did that to us about 8-10 years ago - we stopped using their card and paid it off. Will NEVER use their services again. The CS rep acknowledged we'd NEVER been late or over limit, and admitted that they did it "because they could". There's gonna be a LOT more of that in the coming months.

I don’t even know what my interest rate is. Does your neighbor know that if he keeps it paid off he won’t be charged interest. If he’s overspending and maintaining credit card debt then he’s probably one of the people who are going to be having a bad time in the near future.

 

[TX OMFS]

I'm canceling a medium size capital purchase and instituting a hiring freeze. I am almost certain I will raise prices by the end of the year.

Good times. Thanks pudding head.

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[TexasRedneck]

I'm canceling a medium size capital purchase and instituting a hiring freeze. I am almost certain I will raise prices by the end of the year.

Good times. Thanks pudding head.

I use a very specific Canadian-made softener resin because it's some of the best available. It's also increased in cost 50% since Jan 1st. Have already made price adjustments....and I'm quite sure there will be more in the near future. Good ol' Joe - he's gonna screw the folks every way he can.

 

[TexasRedneck]

I don’t even know what my interest rate is. Does your neighbor know that if he keeps it paid off he won’t be charged interest. If he’s overspending and maintaining credit card debt then he’s probably one of the people who are going to be having a bad time in the near future.

Nor do I....we pay it off every 2 weeks. This guy is one of those "smart" ones that uses "cheap money"....he drives a six month old Duramax loaded to the gills (borrowed money), and just bought a 5th wheel (more borrowed money) that he justified buying the Duramax for. He's got a 8 month-old bumper pull w/slide-outs and all the goodies...not only borrowed money, but he's trying to sell it. Any guesses on what the APR on THAT pig is gonna be like in a few days?

He reminds me of my 80's me.....my income was good, so I kept borrowing. Then the S&L debacle hit, and things got REAL tight....income dropped - not much, but just enough so that my house of cards started coming apart. That's where I see him in about 6 months.

I learned the hard way that you can't borrow yourself out of a hole, and swore I'd never get there again. If we buy something on credit, it's because we KNOW we can pay it off in 6 months even if my business goes 100% south. I have already seen several competitors getting desparate, advertising like crazy (I'd hate to pay their advertising bill). I'm just gonna keep plodding along, stay outta debt and ride this out.

Those of you reading this with any kind of debt....do yourself a favor - WHATEVER it takes, get it paid off, quick.

 

[V-Tach]

We (the wife and I) were talking tonight and the subject of our being debt free came up...yes retired, limited income but debt free. We are getting real about getting our expenses under better control...do we really need Netflix? Amazon Prime? Direct TV? Cell phone with unlimited everything? I did the year of free Fox Nation and canceled it before the year was up. Not worth what I was going to have to start paying, imho...

I'm thinking we can live without them just fine

 

[striker55]

Cutbacks are real, we are trying to decide if we really need something. Insurance rates going up, cellphone, even Ring wants an increase. Food costs more, forget about gas, we even said maybe we shouldn't go to church (52 miles round trip).

 

[oldag]

People aren't slowing down on spending......yet......tourist dollars haven't dropped yet with sales tax revenues still on the rise for our local tourist towns.....It's a barometer I watch as we get monthly sales tax info reported in the local paper. When I paid sales tax monthly, we would also get the breakdown of who got what %....

Hotels and motels are still full on weekends and the local fishing guides are having no problem with getting customers....restaurants are full, and local annual fundraising events are going strong....

My point is other than things missing off the shelves at the stores with higher prices, gas being higher, people are still spending and not cutting back in a noticeable way......

Do people have the extra cash to offset the increases or are they maxing out their credit cards?

Yet.

Wait until the credit cards are maxed out.

 

[pronstar]

Consumer spending isn’t all that rosy…



We’ve had lackluster growth for a decade…compounded, we’re $5T down from where we’d be with even modest growth.

Full article here:

The Booming Depression

It is the inversion of the seventies. Four now five decades ago, the economy was caught in the grips of an inflationary condition it seemed unable to escape. It just went on and on, and while it was roaring officials up and down the spectrum assured us that they were doing their best,

alhambrapartners.com

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[Havok1]

Nor do I....we pay it off every 2 weeks. This guy is one of those "smart" ones that uses "cheap money"....he drives a six month old Duramax loaded to the gills (borrowed money), and just bought a 5th wheel (more borrowed money) that he justified buying the Duramax for. He's got a 8 month-old bumper pull w/slide-outs and all the goodies...not only borrowed money, but he's trying to sell it. Any guesses on what the APR on THAT pig is gonna be like in a few days?

He reminds me of my 80's me.....my income was good, so I kept borrowing. Then the S&L debacle hit, and things got REAL tight....income dropped - not much, but just enough so that my house of cards started coming apart. That's where I see him in about 6 months.

I learned the hard way that you can't borrow yourself out of a hole, and swore I'd never get there again. If we buy something on credit, it's because we KNOW we can pay it off in 6 months even if my business goes 100% south. I have already seen several competitors getting desparate, advertising like crazy (I'd hate to pay their advertising bill). I'm just gonna keep plodding along, stay outta debt and ride this out.

Those of you reading this with any kind of debt....do yourself a favor - WHATEVER it takes, get it paid off, quick.

I’m a fan of “cheap money” sometimes. But only when I can afford the purchase anyway and the cheap financing isn’t a factor in my decision to buy. I financed a bed not all that long ago because it was the cheapest way I could pay for it. I accidentally paid the whole thing off after like the second or third month so the benefit ended up being lost. But I didn’t originally plan to finance it and didn’t need to so it didn’t matter.

 

[dsgrey]

Cutbacks are real, we are trying to decide if we really need something. Insurance rates going up, cellphone, even Ring wants an increase. Food costs more, forget about gas, we even said maybe we shouldn't go to church (52 miles round trip).

Heck, just realized Ring was going up. Gas, food, electric rates and everything else too!

 

[TheDan]

Any of you young folks want to see where this is going, just look at the economy during Jimmy Carter's administration. Rampant inflation, disappearing jobs, wage freezes, gasoline shortages, out of control spending - it's all happening again but faster with Biden.

Yeah except debt to GDP was ~30% then, and now it's ~125%.

If they raised rates high enough to actually stop inflation, they would also have to completely monetize the debt (instead of the aprox 30% monetization they currently do) to keep the government solvent. If they do that, inflation will keep going up regardless of rates because government spending will be completely decoupled from price signals.

Any serious plan to stop inflation will need to start with big reductions in gov spending, because gov debt is the main source of money creation. What politician is going to do that?

 

[Darkpriest667]

Yeah except debt to GDP was ~30% then, and now it's ~125%.

If they raised rates high enough to actually stop inflation, they would also have to completely monetize the debt (instead of the aprox 30% monetization they currently do) to keep the government solvent. If they do that, inflation will keep going up regardless of rates because government spending will be completely decoupled from price signals.

Any serious plan to stop inflation will need to start with big reductions in gov spending, because gov debt is the main source of money creation. What politician is going to do that?

The easiest way to stop inflation is to cut government spending by 50%. Except we can't do that because 65% of Government spending is Social Security and Medicare. Half this board would be up in arms.

 

[Sasquatch]

I'm on some sales professionals groups on FB and a lot of the people on there love to shit all over Dave Ramsey and his preachings. They all use the "why use your own money, use cheap money and invest your cash because you earn more interest than the loan cost is" nonsense - those same idiots don't acknowledge the writing on the wall that we're headed for another big disaster. Return on investment? How about when those stocks tank, businesses go under, and that money is *gone* and you're stuck with that loan still?

MuH DePrIcIaTiNg AsSeTtS they spout when you talk about paying cash for things like cars and boats and whatnot.

MoRtGaGeS aRe ChEaP - not anymore skippy!

I wonder how many of those same fools will be shitting on Dave in 18 to 24 months, and how many will wind up on his Baby Steps program trying to rebuild something of their life.

Bankruptcy is no fun. BTDT.

Those guys who have gone out and financed themselves to their eyeballs, who bought more house/property than they could realistically afford, who had to have the $100k Covid priced Tahoe or F250 instead of keeping that 4 to 6 year one... I'm going to laugh my ass off at them when it comes crashing down.

Guys like Ryan Stewman may or may not ride out that crash too - there are a few loudmouths in the business space I kind of hope have a rough go when this house of cards falls because they love to shit on people for making sound financial choices instead of financing everything.

 

[pronstar]

There’s a lot of different debt one can take on. Dave Ramsay focuses on consumer debt, and I agree with him that it’s generally bad.

But debt can also be used to purchase income-generating assets…typically by businesses but entrepreneurs and especially real estate guys also do it. Done right, this is good debt.

As an example, real estate guys who own rentals can pull equity and this also can be good debt, because the renters are paying it down. Pulling debt equity isn’t taxable, but selling for a profit is taxable.


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[TheDan]

shit all over Dave Ramsey and his preachings

He's 100% right about debt, but a complete knob about investing. If you only buy mutual funds or stick all your money in a 401k like he says, then you better hope your retirement just happens to coincide with the beginning of a bull market.

 

[TheDan]

As an example, real estate guys who own rentals can pull equity and this also can be good debt, because the renters are paying it down. Pulling debt equity isn’t taxable, but selling for a profit is taxable.

Yeah, but those are just perverse tax incentives, which congress can change on a whim. If the taxes were the same, you'd actually have more profit investing without debt than with.

 

[Sasquatch]

He's 100% right about debt, but a complete knob about investing. If you only buy mutual funds or stick all your money in a 401k like he says, then you better hope your retirement just happens to coincide with the beginning of a bull market.

I don't agree 100% with him - especially on investing, but I also agree that you shouldn't be so reliant upon volatile investments. His goal is for people to have stability - not necessarily be super wealthy upon retirement. If you stick to investing money you can afford to lose, then you're fine. Sticking so much of your money in the stock market that if it tanks you're screwed, then you rolled poorly.

Diversity is good.

401K's are just a poor way of investing in the stock market anyway. Fully fund your IRAs, sock money in your savings account and don't touch it, buy some bonds, buy stocks that you research, buy real estate if you can afford it. Hell, you can even get certain life insurance products that pay you *before* you die.

Dave is about getting people out of debt and living debt free - which is going to be super important for a lot of people real soon. Like you pointed out, Dave focuses on consumers and not businesses. Business debt can be strategic, and businesses get write offs on taxes. We took on debt with our business for the tax advantages it provided. Different ball game.