Author Topic: Upcoming Recession  (Read 6264 times)

nkabbara

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Upcoming Recession
« on: December 18, 2021, 12:20:35 PM »
Hi All!

I'm wondering how ya'll think about this scenario.

Hypothetical: Let's assume we're going to be hit with a hard recession in a couple of a few years from now. This would be due to all the future borrowing we did in order to soften the COVID blow.

Would you save your cash in the interim so you can lump sum it (say into VTSAX or similar) when economy hits bottom? Or would you keep investing now as you've always done?

Some assumptions, you're in your early 40s and you save about 50% of your income.

Roland of Gilead

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Re: Upcoming Recession
« Reply #1 on: December 18, 2021, 12:32:05 PM »
The borrowing isn't what will cause a big drop.

In or about mid Feb 2022 Russia is going to invade Ukraine.  THAT is what will cause the initial drop.   

China is then going to move on Taiwan, and that is what will cause a huge drop.

It should all recover though eventually.

Fishindude

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Re: Upcoming Recession
« Reply #2 on: December 18, 2021, 12:38:49 PM »
Have all your stuff paid for.
Cash is king.

simonsez

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Re: Upcoming Recession
« Reply #3 on: December 18, 2021, 12:39:59 PM »
Would you save your cash in the interim so you can lump sum it (say into VTSAX or similar) when economy hits bottom? Or would you keep investing now as you've always done?
This is for long-term investing, correct?

Keep sticking to your IPS.

@RWD might have some additional resources for you...

Much Fishing to Do

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Re: Upcoming Recession
« Reply #4 on: December 18, 2021, 12:47:35 PM »
So here is (always) the problem with this.  Say it is somewhat easy to predict we're "about" (timewise) to hit a downturn....I think this is actually possible..but not helpful.  If you're wrong, you lose out on many good return years.  If you're right, you could still lose out on that final "irrational" spike in assets before the downturn, that is often so extremely up it actually outdoes the downturn. 

This always takes me back to my boring planning, which was to be 100% (or 90/10 to just get used to bonds) all in equities until a few years before RE.  And then start backing off somewhat with bonds and cash to get you thru really bad years in early RE.  So in other words, adjust your risk downward when you're setting retire dates, whatever they are, so you don't too fake yourself out as to what that date will be.  (Unless you don't mind the most extreme movements, at which point I'd suggest 100% all in all the time as opposed to the reverse)

Mustache ride

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Re: Upcoming Recession
« Reply #5 on: December 18, 2021, 01:35:20 PM »
Did I miss the crystal ball sale on Black Friday? Time in the market, not timing the market.

RedmondStash

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Re: Upcoming Recession
« Reply #6 on: December 18, 2021, 02:30:59 PM »
Did I miss the crystal ball sale on Black Friday? Time in the market, not timing the market.

This.

You're talking about market timing. Generally, that's a nonstarter on this forum.

You don't know when a recession is coming; that's just fear talking. When a downturn hits, you don't know how deep it will be or how long it will last, or how quickly the economy will recover -- or even if it will.

If you treat speculation about the future like facts, you will drive yourself nuts trying to win a game that truly does not exist.

I do believe recessions are coming. And then, likely, recoveries. Recessions are irrelevant over the long haul.

My advice: put money into the market when you have it, according to your AA. Leave it there until you need it. Sell investments when you need the money. And if you find yourself unable to stick to the AA you set because of jitters, adjust it so you can sleep at night, and just let all the speculation about the future go.

This doesn't guarantee success, but historically, has worked better than constant tinkering, and much better than market timing.

Sibley

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Re: Upcoming Recession
« Reply #7 on: December 18, 2021, 02:34:06 PM »
What would you do if you didn't have any idea what might happen in the future?

Do that.

FIRE 20/20

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Re: Upcoming Recession
« Reply #8 on: December 18, 2021, 02:37:25 PM »
Would you save your cash in the interim so you can lump sum it (say into VTSAX or similar) when economy hits bottom? Or would you keep investing now as you've always done?
This is for long-term investing, correct?

Keep sticking to your IPS.

@RWD might have some additional resources for you...

You beat me to it!  I was going to call @RWD as well. 

Freedomin5

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Re: Upcoming Recession
« Reply #9 on: December 18, 2021, 02:56:33 PM »
This story about Bob, the world’s worst market timer, might help you.

https://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/

Moral of the story: stick to your IPS and invest sooner rather than later and don’t try to time the market.
« Last Edit: December 18, 2021, 05:02:38 PM by Freedomin5 »

EvenSteven

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Re: Upcoming Recession
« Reply #10 on: December 18, 2021, 03:03:10 PM »
If by recession you also mean market crash, and using your assumption that I knew ahead of time that it was going to happen, I wouldn't be in cash. I would get as much leverage as I could and short the market.

Same as if I knew the powerball numbers ahead of time, I would buy a lottery ticket. I do not know either of these things ahead of time in real life, so I don't take these actions.

Ron Scott

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Re: Upcoming Recession
« Reply #11 on: December 18, 2021, 03:30:15 PM »
Hi All!

I'm wondering how ya'll think about this scenario.

Hypothetical: Let's assume we're going to be hit with a hard recession in a couple of a few years from now. This would be due to all the future borrowing we did in order to soften the COVID blow.

Would you save your cash in the interim so you can lump sum it (say into VTSAX or similar) when economy hits bottom? Or would you keep investing now as you've always done?

Some assumptions, you're in your early 40s and you save about 50% of your income.

Uh boy…

1. We can’t predict recessions.
2. There is little evidence government deficits lead to recessions.
3. It’d be foolish to think 20th century stock-bond returns can predict the next 40 years.

I am a firm believer that a working democracy with a capitalist economy is a horrible disaster—but the best we can do given available options.

If you are concerned about your financial future, the best approach is to save more than the local cognocenti lead you to believe is necessary and maintain a risk-balanced, highly diversified, low fee portfolio.

The best protection you can have in uncertain times is a job.



PDXTabs

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Re: Upcoming Recession
« Reply #12 on: December 18, 2021, 03:42:55 PM »
Would you save your cash in the interim so you can lump sum it (say into VTSAX or similar) when economy hits bottom? Or would you keep investing now as you've always done?

I don't think that you can know when the next recession will hit and how it will impact the market. I would not keep extra cash which is currently losing a lot of value due to inflation. I would also diversify more than VTSAX to have international exposure.
« Last Edit: December 18, 2021, 06:14:36 PM by PDXTabs »

Chris Pascale

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Re: Upcoming Recession
« Reply #13 on: December 18, 2021, 05:39:29 PM »
I thought the big drop was coming about 5 years ago (not because of Trump the boogeyman, but just because it'd been a while) and thought of taking the max $50,000 loan from my TSP to be paid back from my salary with interest, plus in a best case scenario while riding market gains, but the last I checked, I don't know when this stuff is going to happen, and have lost money on investments I try hard on while making on those left alone.

As such, I'll just keep doing what's been working.

Having said that, I'm under 40 and can hang in there for even a long fall.

Villanelle

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Re: Upcoming Recession
« Reply #14 on: December 18, 2021, 05:51:47 PM »
So what you are saying, more or less is...

Top Is In. 


I'll be sticking with my ISP, which has nothing to do with market timing. 

Roland of Gilead

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Re: Upcoming Recession
« Reply #15 on: December 18, 2021, 06:02:24 PM »
If anything, the product price inflation of the past year will eventually lead to HIGHER stock market prices, not lower.

There is also just a boatload of money floating around (just look at crypto).  I think we might see 6000 on S&P500 within two years.

(assuming there is not a big calamity in the world)

RWD

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Re: Upcoming Recession
« Reply #16 on: December 18, 2021, 07:03:33 PM »
Would you save your cash in the interim so you can lump sum it (say into VTSAX or similar) when economy hits bottom? Or would you keep investing now as you've always done?
This is for long-term investing, correct?

Keep sticking to your IPS.

@RWD might have some additional resources for you...

You beat me to it!  I was going to call @RWD as well.

I might be able to find a few links to previous threads...

1/2013  [SP500 = 1462]
https://forum.mrmoneymustache.com/investor-alley/is-now-a-bad-time-to-invest-in-stock-index-funds/
5/2013  [1583]
https://forum.mrmoneymustache.com/investor-alley/starting-today!/
https://forum.mrmoneymustache.com/investor-alley/$80k-sitting-in-cash-bc-scared-of-high-flying-stock-mkt-punch-me/
10/2013  [1695]
https://forum.mrmoneymustache.com/investor-alley/stock-market-expensive-now-alternatives/
5/2014  [1884]
https://forum.mrmoneymustache.com/investor-alley/stock-market-is-high-am-i-too-late/
https://forum.mrmoneymustache.com/investor-alley/is-the-stock-market-too-expensive-to-get-back-in/
7/2014  [1973]
https://forum.mrmoneymustache.com/investor-alley/current-market-has-me-scared-to-invest/
9/2014  [2002]
https://forum.mrmoneymustache.com/investor-alley/is-it-a-good-time-to-invest-new-money/
10/2014  [1946]
https://forum.mrmoneymustache.com/ask-a-mustachian/stock-market-would-you-buy-now-or-wait/
1/2015  [2058]
https://forum.mrmoneymustache.com/investor-alley/stock-market-should-i-be-concerned/
3/2015  [2117]
https://forum.mrmoneymustache.com/investor-alley/talk-me-out-of-timing-the-australian-market/
12/2015  [2103]
https://forum.mrmoneymustache.com/ask-a-mustachian/where-to-put-a-large-windfall-with-stock-market-near-all-time-highs/
1/2016  [2013]
https://forum.mrmoneymustache.com/investor-alley/about-to-sell-everything-talk-me-off-the-ledge-(or-push-me-off)-please!/
4/2016 [2073]
https://forum.mrmoneymustache.com/investor-alley/here-it-comes-red-dow/
2/2017  [2280]
https://forum.mrmoneymustache.com/investor-alley/does-anyone-think-we-are-in-a-bubble/
4/2017  [2359]
https://forum.mrmoneymustache.com/investor-alley/top-is-in/
6/2017  [2430]
https://forum.mrmoneymustache.com/continue-the-blog-conversation/recession-coming/
8/2017  [2476]
https://forum.mrmoneymustache.com/investor-alley/getting-scared-of-stock-market/
1/2018  [2696]
https://forum.mrmoneymustache.com/investor-alley/nervous-about-the-market/
3/2018  [2678]
https://forum.mrmoneymustache.com/investor-alley/when-would-you-get-back-in/
5/2018  [2655]
https://forum.mrmoneymustache.com/investor-alley/investing-in-a-bull-market/
6/2018  [2735]
https://forum.mrmoneymustache.com/investor-alley/moving-to-cash-market-timing-can%27t-believe-it/
10/2018  [2925]
https://forum.mrmoneymustache.com/welcome-to-the-forum/sell-index-funds-now-for-down-payment-during-recession/
2/2019  [2707]
https://forum.mrmoneymustache.com/investor-alley/welp-i'm-going-to-take-a-stab-at-timing-the-market/
4/2019  [2867]
https://forum.mrmoneymustache.com/investor-alley/buy-vtsax-now-while-its-this-high-or-wait-till-a-drop/
https://forum.mrmoneymustache.com/investor-alley/how-concerned-are-you-about-the-everything-bubble/
5/2019  [2924]
https://forum.mrmoneymustache.com/ask-a-mustachian/scared-of-investing-in-the-stock-market-now/
6/2019  [2890]
https://forum.mrmoneymustache.com/uk-tax-discussion/global-index-tracker-is-so-high!-do-i-just-keep-putting-my-money-into-it-anyway/
7/2019 [3026]
https://forum.mrmoneymustache.com/investor-alley/would-you-106836/
8/2019 [2889]
https://forum.mrmoneymustache.com/investor-alley/vtsax-and-a-looming-recession/
9/2019 [2978]
https://forum.mrmoneymustache.com/investor-alley/recession-in-2-ish-years-scale-and-nature/
10/2019 [2986]
https://forum.mrmoneymustache.com/investor-alley/advice-needed-108726/
11/2019 [3110]
https://forum.mrmoneymustache.com/investor-alley/questions-from-37yr-old-that-very-recently-became-serious-about-fi/
https://forum.mrmoneymustache.com/investor-alley/where-to-invest-my-cash-now/
12/2019 [3169]
https://forum.mrmoneymustache.com/ask-a-mustachian/help!-i-dont-know-where-to-start/
https://forum.mrmoneymustache.com/investor-alley/the-old-excuses-for-down-swings-and-a-reality-yet-we-are-at-all-time-highs!/
1/2020 [3296]
https://forum.mrmoneymustache.com/investor-alley/what-to-do-with-a-large-sum-of-money-bad-time-to-buy-index-funds/
2/2020 [3345]
https://forum.mrmoneymustache.com/real-estate-and-landlording/in-a-pickle/
6/2020 [3125]
https://forum.mrmoneymustache.com/investor-alley/august-is-when-it-all-implodes/
https://forum.mrmoneymustache.com/investor-alley/should-i-move-my-bond-etf-to-money-market-fund-or-cd/
https://forum.mrmoneymustache.com/investor-alley/anyone-else-struggling-to-not-sell/
8/2020 [3360]
https://forum.mrmoneymustache.com/investor-alley/invest-lump-sum-or-wait/
11/2020 [3585]
https://forum.mrmoneymustache.com/investor-alley/little-reminder-just-how-gross-the-valuation-of-equities-is/
https://forum.mrmoneymustache.com/investor-alley/anyone-else-terrified-of-stock-market-right-now/
12/2020 [3703]
https://forum.mrmoneymustache.com/welcome-to-the-forum/i-pulled-my-index-funds-because-fear-of-market-crash/
2/2021 [3935]
https://forum.mrmoneymustache.com/investor-alley/beginner-question-is-it-a-good-time-to-invest-in-stock-etf-now/
3/2021 [3939]
https://forum.mrmoneymustache.com/investor-alley/sky-high-sp-500-pe-ratio/
4/2021 [4129]
https://forum.mrmoneymustache.com/investor-alley/bad-time-to-enter-large-position-into-market/
https://forum.mrmoneymustache.com/investor-alley/advice-121943/
6/2021 [4281]
https://forum.mrmoneymustache.com/ask-a-mustachian/what-to-do-with-a-windfall-122870/
8/2021 [4437]
https://forum.mrmoneymustache.com/investor-alley/the-great-marital-dispute-who-is-'right'-about-how-to-invest!/
9/2021 [4535]
https://forum.mrmoneymustache.com/investor-alley/thoughtshelp-took-crypto-profits-cash-heavy/
https://forum.mrmoneymustache.com/investor-alley/what-to-do-with-large-bonus-123900/
11/2021 [4595]
https://forum.mrmoneymustache.com/ask-a-mustachian/what-to-do-with-an-inheritance-(international)/
12/2021 [4701]
https://forum.mrmoneymustache.com/investor-alley/is-a-7-return-unlikely-without-a-complex-approach/
https://forum.mrmoneymustache.com/welcome-to-the-forum/upcoming-recession/

Miscellaneous
https://forum.mrmoneymustache.com/investor-alley/%27but-right-now-the-market-is-at-an-all-time-high-%27/
https://forum.mrmoneymustache.com/investor-alley/the-great-market-crash-of-2016!/
https://forum.mrmoneymustache.com/investor-alley/how-to-deal-with-losing-$117k-in-stock-market/
https://forum.mrmoneymustache.com/investor-alley/so-we're-basically-on-track-for-a-bear-market-by-tomorrow/
https://forum.mrmoneymustache.com/investor-alley/anyone-else-feeling-depressed-about-global-equities-10-year-outlook/
https://forum.mrmoneymustache.com/investor-alley/stocks-will-only-return-4-annually-for-next-decade-john-bogle/
https://forum.mrmoneymustache.com/welcome-to-the-forum/new-saver-worried-about-future-stockmarket/
https://forum.mrmoneymustache.com/investor-alley/i-tried-to-time-the-market-roast-me-and-tell-me-what-to-do-now/
https://forum.mrmoneymustache.com/investor-alley/help-i-screwed-up/
https://forum.mrmoneymustache.com/ask-a-mustachian/lost-all-my-money-in-the-stock-market-made-it-all-back-and-some-need-advice/

Roland of Gilead

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Re: Upcoming Recession
« Reply #17 on: December 18, 2021, 07:15:40 PM »
And then there is this thread from Feb 2020 https://forum.mrmoneymustache.com/investor-alley/top-is-in/5750/

where I posted:

"I placed a small wager on a local maxima.  I purchased 100 SPY $325 puts for $3.40 today, expiring March 20
Essentially controlling $3,250,000 of stock with $34,000.
Just on a gut feeling that the economic impact from the virus hasn't been priced in (yeah I know everything is priced in, except when it isn't).
I am probably out at a 5% dip in the market, which would make about $70,000 profit."

Those puts went on to be worth over $1 million, so I was write that the virus had not been priced in.  Of course I was chickenshit and got out with a smaller gain than that :-)

Thing I did not know was the sheer amount of money the government can throw at these things.   This is why, barring a war with Russia/China, I think we will see 6000 S&P500 very soon.   I also believe inflation is here to stay, and 5% to 7% a year is the new normal.


calimom

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Re: Upcoming Recession
« Reply #18 on: December 19, 2021, 12:01:52 AM »
What would you do if you didn't have any idea what might happen in the future?

Do that.

I love this.


thesis

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Re: Upcoming Recession
« Reply #19 on: December 19, 2021, 12:31:49 AM »
OP currently only has 1 post, and used it starting this highly contentious topic. I'm calling troll.

Cranky

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Re: Upcoming Recession
« Reply #20 on: December 19, 2021, 05:11:25 AM »
There’s always going to be a recession, so unless you’re planning on retiring in the next two years, don’t even worry about it.

And there’s always going to be inflationary periods, so ditto.

JoePublic3.14

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Re: Upcoming Recession
« Reply #21 on: December 19, 2021, 06:21:22 AM »
Well sure I’d stash cash if I knew the market was going to be down next December. But as noted by everyone, we do not, and will not, know anything about the future.


nereo

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Re: Upcoming Recession
« Reply #22 on: December 19, 2021, 09:31:43 AM »
OP currently only has 1 post, and used it starting this highly contentious topic. I'm calling troll.

I had a similar thought.

If nothing else, OP has done almost no reading of the blog, stickered threads or searched for any of the multitude of threads where similar topics were exhaustively discussed.

Ron Scott

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Re: Upcoming Recession
« Reply #23 on: December 19, 2021, 10:20:43 PM »
What would you do if you didn't have any idea what might happen in the future?

Stop blind faith that the 21st century will look like the 20th, and save more than 25X.

NorthernIkigai

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Re: Upcoming Recession
« Reply #24 on: December 20, 2021, 01:59:37 AM »
What would you do if you didn't have any idea what might happen in the future?

Stop blind faith that the 21st century will look like the 20th, and save more than 25X.

Blind faith in 25X is a mythical creature around here: some people claim to have seen it, but few can point to it.

Metalcat

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Re: Upcoming Recession
« Reply #25 on: December 20, 2021, 06:30:35 AM »
What would you do if you didn't have any idea what might happen in the future?

Stop blind faith that the 21st century will look like the 20th, and save more than 25X.

Oh fuck, not this again.

Who are these people with "blind faith" in saving 25X???

Who? Can you point to them? I've seen more 4-leaf clovers in my life than people who blindly retired with 25X and just trusted in the 4% rule without understanding it.

darknight

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Re: Upcoming Recession
« Reply #26 on: December 20, 2021, 08:02:01 AM »
Maybe this is totally off, and maybe the OP is a troll..

I think some of the biggest upcoming recessions are our poor personal decisions. There are new millionaires made in almost every recession, so learning healthy financial habits, staying out of "liability" debt (cars, credit cards, etc.. or staying out of debt altogether if you can) is one of the best ways to hedge agains the inevitable recession that is going to happen in 1 year. Or 100 years. When you keep options open, you can continue to grow and make money when things take a downward spiral. It's like health and wellness- learning to eat healthy and stay flexible will serve you better than most other approaches - it isn't some mystery big moment, it's building good habits that help you stay comfortable if a big downturn happens

Metalcat

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Re: Upcoming Recession
« Reply #27 on: December 20, 2021, 08:29:41 AM »
Maybe this is totally off, and maybe the OP is a troll..

I think some of the biggest upcoming recessions are our poor personal decisions. There are new millionaires made in almost every recession, so learning healthy financial habits, staying out of "liability" debt (cars, credit cards, etc.. or staying out of debt altogether if you can) is one of the best ways to hedge agains the inevitable recession that is going to happen in 1 year. Or 100 years. When you keep options open, you can continue to grow and make money when things take a downward spiral. It's like health and wellness- learning to eat healthy and stay flexible will serve you better than most other approaches - it isn't some mystery big moment, it's building good habits that help you stay comfortable if a big downturn happens

The biggest money to be made usually isn't by holding cash out of the market and waiting for a crash, it's usually in identifying the unique business opportunities inherent in crashes. That's typically where major money is made by individuals in crashes.

I have friends who went into business and equipment buying frenzy with covid.

That's not as feasible to pull off for your average corporate employee who doesn't know business and only has a few hundred thousand tied up in workplace retirement plans, but it is how a lot of people get very rich as a result of a crash.

When times are tough, people sell all sorts of shit at a steep discount, not just stocks.

I bought part of a large business at a 35% discount by buying in at the very worst of covid, because I could afford to have no incone for 6-12 months. The deal totally fell apart, but that was because I chose a bad set of partners who weren't as financially resilient as I was, not because of the financials. But had it worked out, I would have ended up very rich.

I would NEVER have had that opportunity in good times. The business would have sold well over value, and there would have been ferocious competition for it.

That's just one of many opportunities I've come across. If I were interested in being an independent business owner, I would have been drowning in opportunity because so few other buyers could weather the storm of no income as long as I could.

Roland of Gilead

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Re: Upcoming Recession
« Reply #28 on: December 20, 2021, 08:37:00 AM »
Malcat, reminds me of the opportunities in housing during the 2008 crisis.   I was watching houses being sold for $30,000 that are now worth $300,000.

Metalcat

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Re: Upcoming Recession
« Reply #29 on: December 20, 2021, 08:42:54 AM »
Malcat, reminds me of the opportunities in housing during the 2008 crisis.   I was watching houses being sold for $30,000 that are now worth $300,000.

Exactly. If you have the resources to take advantage of valuable things being on sale, it's great. But they're on such great sale because almost no one has resources at those times.

Hence why the rich get richer and the poor get poorer.

GuitarStv

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Re: Upcoming Recession
« Reply #30 on: December 20, 2021, 09:03:55 AM »
I thought bitcoin was going to save us from all these problems?

Ron Scott

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Re: Upcoming Recession
« Reply #31 on: December 20, 2021, 09:37:31 AM »
The biggest money to be made usually isn't by holding cash out of the market and waiting for a crash, it's usually in identifying the unique business opportunities inherent in crashes.

Agree. Reminds us of Buffet’s “stocks on sale” comments.

There are often better buying opportunities during recessions across many products and assets. For example—for homeowners interested in trading up to a bigger place, a declining RE market helps.

For those who are FI in good times and bad, recessions are interesting.

svosavvy

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Re: Upcoming Recession
« Reply #32 on: December 20, 2021, 10:04:33 AM »
Markets always have and always will be a function of liquidity.  Period.  Whether you are at an auction house or in the "market".  Lots of bidders at the auction with pockets of money, prices will be high.  An outdoor auction in the middle of a rain storm with only a few participants, prices will be lower. 

Trim tabs inflow outflow data at inflection points is usually prescient but its not cheap or easy for regular folks to get.

Add more liquidity markets go up.  Like 2015-16 I was thinking recession there too.  But, add a ton more liquidity and companies will buyback their stock instead of innovating along with the wealthy tax break money will go into stock.  This is not a political opinion just cold fact. 

Take liquidity away markets go down.  The gamble here is our economy will grow organically and be healthy to run without so much gov't gin&juice. We'll see...Nice part about recessions is they tend to cleanse the system of a lot of trash.  Which, long run keeps us healthy as a society.  Not to pick on communist Russia of the 20th century too bad, but, command economies don't undergo recessions.  It's not part of the 5-10 year plan whatever.  So, you look like a genius for the first few global recessions.  Eventually, all those cheeseburger mini heart attacks catch up with you and put you in the ground. 

I don't want to pick on crypto too bad here, but, you watch if the "stock market" catches a cold (or mild case of omicron, haha) crypto will catch the flu.  SPAC's will catch the flu.  When you run money and need to clean up your books these will get tossed first. 

Have fun out there, always be liquid enough so you don't get squeezed and the long term trajectory is generally up and to the right.

darknight

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Re: Upcoming Recession
« Reply #33 on: December 20, 2021, 11:48:59 AM »
Maybe this is totally off, and maybe the OP is a troll..

I think some of the biggest upcoming recessions are our poor personal decisions. There are new millionaires made in almost every recession, so learning healthy financial habits, staying out of "liability" debt (cars, credit cards, etc.. or staying out of debt altogether if you can) is one of the best ways to hedge agains the inevitable recession that is going to happen in 1 year. Or 100 years. When you keep options open, you can continue to grow and make money when things take a downward spiral. It's like health and wellness- learning to eat healthy and stay flexible will serve you better than most other approaches - it isn't some mystery big moment, it's building good habits that help you stay comfortable if a big downturn happens

The biggest money to be made usually isn't by holding cash out of the market and waiting for a crash, it's usually in identifying the unique business opportunities inherent in crashes. That's typically where major money is made by individuals in crashes.

I have friends who went into business and equipment buying frenzy with covid.

That's not as feasible to pull off for your average corporate employee who doesn't know business and only has a few hundred thousand tied up in workplace retirement plans, but it is how a lot of people get very rich as a result of a crash.

When times are tough, people sell all sorts of shit at a steep discount, not just stocks.

I bought part of a large business at a 35% discount by buying in at the very worst of covid, because I could afford to have no incone for 6-12 months. The deal totally fell apart, but that was because I chose a bad set of partners who weren't as financially resilient as I was, not because of the financials. But had it worked out, I would have ended up very rich.

I would NEVER have had that opportunity in good times. The business would have sold well over value, and there would have been ferocious competition for it.

That's just one of many opportunities I've come across. If I were interested in being an independent business owner, I would have been drowning in opportunity because so few other buyers could weather the storm of no income as long as I could.

100%
I know many people who run small businesses that have surged during this recent downturn.

Bateaux

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Re: Upcoming Recession
« Reply #34 on: December 20, 2021, 01:10:48 PM »
Inflation fears could rapidly become deflationary fears.  Great buying opportunities coming.

moof

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Re: Upcoming Recession
« Reply #35 on: December 20, 2021, 01:17:14 PM »
I thought bitcoin was going to save us from all these problems?
Bitcoin fix everything.  HODL forever.

friedmmj

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Re: Upcoming Recession
« Reply #36 on: December 21, 2021, 06:11:53 AM »
The stock market is NOT the economy.  Even if you can predict a recession that does not imply the ability to time the market.

Virtus3

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Re: Upcoming Recession
« Reply #37 on: December 21, 2021, 06:44:53 AM »
The stock market is NOT the economy.  Even if you can predict a recession that does not imply the ability to time the market.

My favorite analogy has always been the market as an excitable dog on a leash. The owner represents a business or the economy as a whole and the dog is the market; the dog may run ahead to chase something or stay behind to sniff but over the long haul the dog and owner will have travelled the same distance at roughly the same average speed.

friedmmj

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Re: Upcoming Recession
« Reply #38 on: December 21, 2021, 08:38:44 AM »
The stock market is NOT the economy.  Even if you can predict a recession that does not imply the ability to time the market.

My favorite analogy has always been the market as an excitable dog on a leash. The owner represents a business or the economy as a whole and the dog is the market; the dog may run ahead to chase something or stay behind to sniff but over the long haul the dog and owner will have travelled the same distance at roughly the same average speed.

Haven't heard that one before, but it is very effective at conveying the point.   Yesterday the dog took a huge smelly dump.

nkabbara

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Re: Upcoming Recession
« Reply #39 on: December 22, 2021, 08:08:26 PM »
Wow! Thanks guys. Some of the responses are extremely helpful.

If it wasn't for COVID, obviously the question would be superfluous. I wanted to see your thoughts given that this is a unique situation.


SwordGuy

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Re: Upcoming Recession
« Reply #40 on: December 22, 2021, 08:48:46 PM »
Wow! Thanks guys. Some of the responses are extremely helpful.

If it wasn't for COVID, obviously the question would be superfluous. I wanted to see your thoughts given that this is a unique situation.

Yep, just as unique as the Spanish Flu epidemic starting in 1918, in which 17 million to 100 million people died...

JLee

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Re: Upcoming Recession
« Reply #41 on: December 22, 2021, 08:57:50 PM »
Have all your stuff paid for.
Cash is king.

Idk, my 2.5% mortgage feels pretty good right now.

Glenstache

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Re: Upcoming Recession
« Reply #42 on: December 22, 2021, 10:27:04 PM »
Does anyone doubt that a recession will occur at some point along their FIRE accumulation or post FIRE path? It is as close to a certainty as anything. If it is predictable, you are also unlikely to time it *in an effective way* better than the market without insider info.

PDXTabs

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Re: Upcoming Recession
« Reply #43 on: December 22, 2021, 11:23:06 PM »
Wow! Thanks guys. Some of the responses are extremely helpful.

If it wasn't for COVID, obviously the question would be superfluous. I wanted to see your thoughts given that this is a unique situation.

Yep, just as unique as the Spanish Flu epidemic starting in 1918, in which 17 million to 100 million people died...

I'm not sure what that is supposed to mean, but there was a recession 1918-19 and then a depression 1920-21, but they are generally attributed to WWI and hyperinflation in Europe. But also, the depression was very deflationary and that probably isn't a mistake that we will make again:
https://en.wikipedia.org/wiki/List_of_recessions_in_the_United_States

EDITed to add that if our economy is going to mirror the 1918 flu pandemic then get ready for a depression and massive deflation.
« Last Edit: December 22, 2021, 11:25:45 PM by PDXTabs »

nereo

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Re: Upcoming Recession
« Reply #44 on: December 23, 2021, 05:32:03 AM »
Have all your stuff paid for.
Cash is king.

Idk, my 2.5% mortgage feels pretty good right now.

‘Cash is king’ is a good sentiment.  However, accelerating payments of low-interest debt does the exact opposite - it reduces your liquid holdings, quite substantially when it’s a six-digit mortgage.

Wolfpack Mustachian

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Re: Upcoming Recession
« Reply #45 on: December 23, 2021, 05:46:17 AM »
Wow! Thanks guys. Some of the responses are extremely helpful.

If it wasn't for COVID, obviously the question would be superfluous. I wanted to see your thoughts given that this is a unique situation.

If you've been paying attention to the market for any length of time,  haven't you noticed that every time fears are stoked, there's always a sentiment of "if it wasn't for (insert unique circumstance), I wouldn't worry"? I mean at some point it could come true,  but we're at 100% for there never being a situation where buying and holding doesn't work so far....

Virtus3

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Re: Upcoming Recession
« Reply #46 on: December 23, 2021, 06:05:31 AM »
Being in the heavy accumulation phase I actually wouldn't mind a recession from an investing standpoint. I was fortunate to start investing during the run-up post 2008/09 and while I know it would be painful to see decreased balances for an extended period it would be far outweighed by continued investments during the market "sale".

MasterStache

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Re: Upcoming Recession
« Reply #47 on: December 23, 2021, 06:46:22 AM »
Would you save your cash in the interim so you can lump sum it (say into VTSAX or similar) when economy hits bottom? Or would you keep investing now as you've always done?
This is for long-term investing, correct?

Keep sticking to your IPS.

@RWD might have some additional resources for you...

You beat me to it!  I was going to call @RWD as well.

I might be able to find a few links to previous threads...

-SNIP-

Wait, so none of those predictions came true? And we shouldn't try to time the markets? Back to more important stuff.

ixtap

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Re: Upcoming Recession
« Reply #48 on: December 23, 2021, 07:01:00 AM »
Being in the heavy accumulation phase I actually wouldn't mind a recession from an investing standpoint. I was fortunate to start investing during the run-up post 2008/09 and while I know it would be painful to see decreased balances for an extended period it would be far outweighed by continued investments during the market "sale".

With the 2018 dip, I had grand visions of another year or two of accumulation, then watch it all sky rocket with the recovery. We've had the sky rocketing, but both that and the 2020 sale were pretty short lived.

Virtus3

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Re: Upcoming Recession
« Reply #49 on: December 23, 2021, 07:12:11 AM »
Being in the heavy accumulation phase I actually wouldn't mind a recession from an investing standpoint. I was fortunate to start investing during the run-up post 2008/09 and while I know it would be painful to see decreased balances for an extended period it would be far outweighed by continued investments during the market "sale".

With the 2018 dip, I had grand visions of another year or two of accumulation, then watch it all sky rocket with the recovery. We've had the sky rocketing, but both that and the 2020 sale were pretty short lived.

Yeah, maybe I should be a little more careful what I say as I've never gone through a true recession as an investor yet. 2020 didn't bother me but I had too much other stuff to worry about to spend any time contemplating it. I'm pretty confident that I can maintain my strategy though as I got a few lessons in what not to do from parents in 08/09.