How does this decline compare to previous recessionary ones?

[copyright1997reloaded]

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Originally Posted by aja8888 My bold above. And if we don't have the stomach, what are the choices? Hyperinflation? Loss of Reserve Currency status? Additional Wealth Effect for the top 0.01% and poverty for everyone else?

I think you answered your own question as to a possible outcome.

Worsening inflation (I'm just avoiding using the "hyper" term, at least for now)
Loos of Reserve Currency status - Right now, the "Best house in a bad neighborhood" (but eventually even the king will fall)
Additional Wealth Effect for the top/poverty for everyone else? Instead of "Let them eat cake" it will be "Let them eat bugs". Haven't you heard? It is our fault by wanting a big house, by wanting meat, by having the audacity to want to travel or use an evil dinosaur juice vehicle!

And the "everyone else" will be DEMANDING it (i.e. printing money and "help")

[Born2Fish]

Quote:

Originally Posted by aja8888 My bold above. And if we don't have the stomach, what are the choices? Hyperinflation? Loss of Reserve Currency status? Additional Wealth Effect for the top 0.01% and poverty for everyone else?

I think this is most likely. Been doing so for as long as I can remember.

[Rocky mtn high]

Fed says we have a long ways to go. That’s all I need to hear. Usually don’t like Cramer but he is right the Fed wants to take our net worth away!

[Gearhead Jim]

The posts above seem to be saying that "this time it's different", and the US (and the world) will experience disaster instead of be unable to muddle through with just some serious pain.

There are good reasons for the doom and gloom scenarios, but I'm expecting that this time won't be much different, and in 2-5 years life will have changed, as it always does, but most of us in the US will still be doing OK.

Please check back in 2027.

[jldavid47]

Quote:

Originally Posted by Rocky mtn high Fed says we have a long ways to go. That’s all I need to hear. Usually don’t like Cramer but he is right the Fed wants to take our net worth away!

Nah, Cramer is full of crap as usual.

If you follow his "logic" then all the net worth you have accumulated has been given to you by the Fed and, if so, your net worth has been unjustly "earned." Do you believe that?

[Northforker]

Quote:

Originally Posted by Rocky mtn high Fed says we have a long ways to go. That’s all I need to hear. Usually don’t like Cramer but he is right the Fed wants to take our net worth away!

To take all of our net worth away, the fed will have to bankrupt corporate America that we are all invested in, and they will have to bankrupt the FDIC that insures our cash savings and fixed income investments. There will be a lot of pushback before that happens.

[W2R]

Quote:

Originally Posted by jurgs01 There is an extreme amount of debt worlwide that needs a constant fuel of cheap money growth and real economic productivity growth to feed it. The fiat money system and euro-dollar markets have created this extreme inbalance. We have entered the point of decades of bad monetary and fiscal policy where we now have the choice of breaking things and causing a debt collapse or accepting systemic inflation. A lot of people think central banks will first break something, and use that as an excuse to turn back on the money spigots which will cause a loss of faith in fiat. I don't know how this ends (or when), but there is no easy solution. The best solution is to tighten monetary policy and suck all the speculation and debt out of the system, and rebuild an economy on investment, savings and capital. I don't think we have the stomach for that transition.

Quote:

Originally Posted by aja8888 My bold above. And if we don't have the stomach, what are the choices? Hyperinflation? Loss of Reserve Currency status? Additional Wealth Effect for the top 0.01% and poverty for everyone else?

I think things may be considerably more difficult in the years to come, but we are up to the challenge. My guess is hyperinflation, but who knows? Anyway, with whatever choices are made by TPTB, most of us will manage somehow. (Others will whine and demand freebies).

But as a group we can do amazing things, and we always have. Our ancestors survived the Great Depression and two World Wars, and still maintained a decent attitude after going through all that. Previous ancestors before that settled, civilized, and upgraded the wilderness. We can not only get through whatever gets thrown at us, but survive and thrive.

[Gumby]

Quote:

Originally Posted by Rocky mtn high Fed says we have a long ways to go. That’s all I need to hear. Usually don’t like Cramer but he is right the Fed wants to take our net worth away!

I was talking to Jerome Powell. He doesn't want everyone's net worth. Just yours. Sorry to be the bearer of bad news.

[Koolau]

Quote:

Originally Posted by Northforker To take all of our net worth away, the fed will have to bankrupt corporate America that we are all invested in, and they will have to bankrupt the FDIC that insures our cash savings and fixed income investments. There will be a lot of pushback before that happens.

Nope, the easiest way to take away net worth is to inflate the currency. You still have the same dollars but they are worth less - thus net worth is taken from you silently. YMMV

[Koolau]

Quote:

Originally Posted by Gumby I was talking to Jerome Powell. He doesn't want everyone's net worth. Just yours. Sorry to be the bearer of bad news.

Yeah - just the rich folks NW (and guess who that is?)

[GravitySucks]

I consider all the growth from 2020 to 2022 as artificially manufactured by the Fed and Government policies. And I'm glad they did it, rioting and bankruptcy was kept to a minimum.

Looking at the S&P from January 2020 to now and it's about even considering inflation. Hoping the raising rates stunts inflation growth and ends the "War on Savers"

[Freedom56]

You guys are too pessimistic. The situation today is nothing like 2008/2009. What we have is a supper bubble caused by stimulus to the tune of $4 trillion in 2020 and another $2 trillion in 2021. The reality that there is no further stimulus coming to support the bubble is one of the primary reasons why the market is falling hard. Short sellers are focused on four stocks now that are overweight the S&P 500 and NASDAQ - Apple, Microsoft, Amazon, and Tesla. Easy money has caused massive bubbles in these four stocks. They are no means bad companies, but they are massively overpriced. You will know when the market has bottomed when those four stocks trade at normalized valuations and near bankrupt companies like GameStop, AMC, and Bed Bath and Beyond stop leading market rallies.
These are times you should be putting your emotions aside and getting your shopping list ready for tax loss selling season that will start in about 30 days. Well managed companies will survive and prosper, the bad ones in the end will burn investors as they always have. The "war on savers" is no on pause for the moment.

[acronymous]

Quote:

Originally Posted by jldavid47 Nah, Cramer is full of crap as usual. If you follow his "logic" then all the net worth you have accumulated has been given to you by the Fed and, if so, your net worth has been unjustly "earned." Do you believe that?

Nobody knows nuthin, however ...

ZIRP (negative in Europe), QE and various fiscal policies (TJCA, pandemic stimulus) flooded markets with cheap money, some of which was used for stock buybacks. This inflated a massive asset bubble.

Now, that is all unwinding due to inflation fighting policy.

I don't know to what degree asset price appreciation can be attributed to the above (as opposed to fundamental growth) but it seems significant IMO.

[DJRR]

Quote:

Originally Posted by Freedom56 You guys are too pessimistic. The situation today is nothing like 2008/2009. Well managed companies will survive and prosper, the bad ones in the end will burn investors as they always have.

People seem to forget that corporate profits are at an all time high. Raising the discount rate and causing a recession will cause price adjustments, but it is nothing like 2008 or 2000 when people were investing based on "burn rate". My guess is the most pain will be felt in crypto, art, collectibles, real estate and other assets that have no cash flow or appreciated far above historical cash yields.

[Car-Guy]

Quote:

Originally Posted by Gumby I was talking to Jerome Powell. He doesn't want everyone's net worth. Just yours. Sorry to be the bearer of bad news.

Quote:

Originally Posted by Koolau Yeah - just the rich folks NW (and guess who that is?)

I know you guys are joking (I hope) but I'm afraid you may not be to far off target. Good thing about being as old as I am, I won't have to deal with it that long.

[milford]

Quote:

Originally Posted by Freedom56 You guys are too pessimistic. The situation today is nothing like 2008/2009. What we have is a supper bubble caused by stimulus to the tune of $4 trillion in 2020 and another $2 trillion in 2021. The reality that there is no further stimulus coming to support the bubble is one of the primary reasons why the market is falling hard. Short sellers are focused on four stocks now that are overweight the S&P 500 and NASDAQ - Apple, Microsoft, Amazon, and Tesla. Easy money has caused massive bubbles in these four stocks. They are no means bad companies, but they are massively overpriced. You will know when the market has bottomed when those four stocks trade at normalized valuations and near bankrupt companies like GameStop, AMC, and Bed Bath and Beyond stop leading market rallies. These are times you should be putting your emotions aside and getting your shopping list ready for tax loss selling season that will start in about 30 days. Well managed companies will survive and prosper, the bad ones in the end will burn investors as they always have. The "war on savers" is no on pause for the moment.

The "super bubble" isn't caused by only the stimulus, there are many other factors such as supply chain disruption, energy crisis, war in Europe, sticky inflation, that are still on-going without a clear resolution and keep in mind we were already in a bubble in 2020 because of a decade plus of loose monetary policy.

Its nothing like 2008-09 because this is just the beginning nothing has been "broken" per se yet. Nobody knows exactly what will collapse, but things are brewing in the background. The only saving grace right now is US is the best of the worst among other countries.

[daylatedollarshort]

Quote:

Originally Posted by milford The "super bubble" isn't caused by only the stimulus, there are many other factors such as supply chain disruption, energy crisis, war in Europe, sticky inflation, that are still on-going without a clear resolution and keep in mind we were already in a bubble in 2020 because of a decade plus of loose monetary policy. Its nothing like 2008-09 because this is just the beginning nothing has been "broken" per se yet. Nobody knows exactly what will collapse, but things are brewing in the background. The only saving grace right now is US is the best of the worst among other countries.

+1. I don't see how the stimulus in the U.S. would cause inflation in other countries. The current inflation issue is world wide. Interest rates are being increased in many countries to combat it.

To add to your list, a lot of people world wide died from Covid. Many more have long term symptoms and are unable to work, or are caregivers to those with long term symptoms. Others retired early to avoid Covid. That has to impact the labor supply and costs world wide.

The Fed is just trying to curb inflation. Raising rates is the tried and true way of doing that. So unless they suddenly come up with some other novel approach all the Nobel economists over the last century haven't thought of before, we're going to see interest rates go above the inflation rate or inflation at 2%, whichever comes first.

[audreyh1]

Quote:

Originally Posted by jldavid47 Nah, Cramer is full of crap as usual. If you follow his "logic" then all the net worth you have accumulated has been given to you by the Fed and, if so, your net worth has been unjustly "earned." Do you believe that?

Exactly! Assets inflated a great deal over the past two years. Ultra low interest rates had a lot to do with it.

People cry about the Fed “taking away the punch bowl”. But doesn’t that indicate that the Fed brought out the punch bowl in the first place?

[Koolau]

Quote:

Originally Posted by audreyh1 Exactly! Assets inflated a great deal over the past two years. Ultra low interest rates had a lot to do with it. People cry about the Fed “taking away the punch bowl”. But doesn’t that indicate that the Fed brought out the punch bowl in the first place?

Certainly the FED paid a role, but they didn't vote $4Tril in stimulus. YMMV

[Freedom56]

I have been watching the market close and earnings reports after the close (about 10 PM local time here) on CNBC. All CEOs are reporting the same issue, excess inventory and the need to discount to clear it. This puts pressure on margins and future earnings and has been causing overpriced stocks to tank. When companies have to discount to sell products and services, it is deflationary. Listen to the conference call from Nike and Carnival and hear for yourselves. Inflation is yesterdays news. The market is forward looking and is discounting the loss of pricing power, higher rates, and higher labor costs of major corporations. Corporations were gouging consumers in 2021 and 2022 and created their own demand destruction. The 6 trillion dollar punchbowl is empty and demand is starting to revert back to pre-pandemic trends with the backdrop of massive amounts of inventory.

Sept 30 (Reuters) - Shares of Nike Inc (NKE.N) hit 2-1/2 year lows on Friday and rattled those of other athletic gear makers, after the company's warning of a margin squeeze from widespread markdowns sparked worries of sector-wide contagion of ballooning inventory.

The world's largest sportswear maker on Thursday became the latest in a line of consumer brands and retailers to underscore the pressure on margins from ramped up discounts, as companies rush to get rid of excess inventory amid slowing demand.

https://www.reuters.com/business/ret...ar-2022-09-30/

If you really believe that the need to discount inventory due to a lack of demand is inflationary, then you need some remedial courses in economics.

The bond market has priced the Fed funds rate at 4.25% from the 3.25% today and traders are betting that the Fed will pause after that. If they are really serious about fighting inflation, they should hold it at 4.25% for an extended period of time which would be great for savers.