Any guesses on a correction? Timing and severity?

[wash11]

Everyones 401k/IRA's are smoking hot. House values are borderline insane. Even with the high materials costs, building and remodels/upgrades are only held back by a shortage of materials and available contractors to jump right on stuff.

I'll be honest, I'm not smart enough to understand why things are like this. But I'm experienced enough to know, "what goes up, must come down".

Anyone care to guess at what the future holds?

 

[2Driver]

With 4 interest rate hikes likely this year I think the biggest effect will be when they start to unwind the Fed balance sheet, all 9 billion worth.

Look no further than Nov/Dec 2018 and what happened. Now add ramped inflation, supply chain issues and labor issues that weren't there in 2018 with higher interest rates and reduced market liquidity.

My concern is that raising interest rates is used to stop normal inflation. We have labor and supply chain inflation. How are increased rates supposed to help stop this type of inflation. It wont, unless they are just looking to kill the economy at all costs

 

[rivermobster]

With 4 intrest rates hikes likely this year I think the biggest effect will when they start to unwind the Fed balance sheet all 9 billion worth.

Look no further than Nov/Dec 2018 and what happened. Now add inflation supply chain with higher interest rates

Yep. When interest rates go up, everything will start to change...

I heard 3 are Predicted for this year. Supposedly at least one will happen for sure.

NGE should be along shortly with his Nostradamus impersonation.

 

[Your ad here]

I'm seeing similar spending trends like mid 2000's was. Only thing I see different is most people have a fix low interest rate on their mortgage and custom choppers haven't made a come back.

 

[DWC]

With 4 interest rate hikes likely this year I think the biggest effect will be when they start to unwind the Fed balance sheet, all 9 billion worth.

Look no further than Nov/Dec 2018 and what happened. Now add inflation supply chain with higher interest rates and reduced market liquidity.

Where does the smart money go? Biggest difference between this and other corrections seems to be inflation. Brutal to push everything to cash, wouldn’t buy crypto with more than I’d bet a Super Bowl, real estate is at record levels. Tough situation for sure.

 

[Singleton]

After the second interest rate hike.
But just like everything else, this administration will F up reversing the current super inflation we are experiencing and cause more pain to those living paycheck to paycheck

 

[530RL]

What if the bulk of these price increases are not real increases in price but nominal increases in price?

In 04, 05 and 06 the price increases resulted in higher profits as costs were not rising. Now costs are rising as quick or quicker than pricing delivering the same or lower margins as opposed to higher margins.

Higher cap rates will certainly slow things down, but unlike past recent times profits to builders and contractors are not higher, just pricing and costs. Is this more like the 70’s stagflation as opposed to the more recent bubbles?

Beats me?

 

[LargeOrangeFont]

I'm seeing similar spending trends like mid 2000's was. Only thing I see different is most people have a fix low interest rate on their mortgage and custom choppers haven't made a come back.

So you are saying it is totally different

It literally is a totally different scenario. People are going to do everything they can to stay in their low interest rate homes because it is cheaper than other alternatives.

 

[Havasu blue label]

havasu Will be hit hard then it comes to the calif .

 

[pronstar]

With 4 interest rate hikes likely this year I think the biggest effect will be when they start to unwind the Fed balance sheet, all 9 billion worth.

Look no further than Nov/Dec 2018 and what happened. Now add ramped inflation, supply chain issues and labor issues that weren't there in 2018 with higher interest rates and reduced market liquidity.

My concern is that raising interest rates is used to stop normal inflation. We have labor and supply chain inflation. How are increased rates supposed to help stop this type of inflation. It wont, unless they are just looking to kill the economy at all costs

The Fed’s balance sheet is over $8.3 Trillion right now

The Fed has two options:
1. Continue QE and let inflation run wild.
2. Stop QE and raise interest rates.

Neither is very good for us.

 

[SixD9R]

Record inflation, government handouts incentivizing able bodied Americans to not work, energy DEPENDENCE all mean a perfect storm is brewing. I don’t know when it’s going to happen but it will and it will be severe when it does.
Let’s go Brandon!

 

[zhandfull]

Hard to say what the future holds. So many companies that don’t make any profits in the stock market. Easy money stops and there will be some pain there.

I don’t get crypto and would not gamble with it. Definitely looks like it’s in a bubble. Down almost 30% but yet only at a three month low.

Real estate seems way over valued. It’s affordable based on payment if you can find the twenty percent down. But damn property taxes are high and forever. They can be a significant percentage of the monthly payment now with high sales prices.

Heard 89 percent of new vehicles are being sold at 5% or more over msrp.

I tend to think a correction is in order for all markets including real estate. But based on car and housing sales, people are still paying over asking prices. Maybe a while but there’s going to be pain if the Fed ever tightens.

 

[OldSchoolBoats]

havasu Will be hit hard then it comes to the calif .

How? A ton of high earning Californians have moved there permanently and the high end developments are insane.

I know some people don't want to accept change, but this Havasu isn't even the same as it was in 2018.

 

[2Driver]

The Fed’s balance sheet is over $8.3 Trillion right now

The Fed has two options:
1. Continue QE and let inflation run wild.
2. Stop QE and raise interest rates.

Neither is very good for us.

LOL I meant trillion. Whats a few zeros

 

[c_land]

Government intervention has pumped an asset bubble larger than any time in history along side record inflation and a sputtering supply chain.

Don’t fight the Fed is more applicable today than ever before. Record high risk asset prices have been completely influenced by unnecessary ZIRP and QE.

Multiple rounds of stimulus in the form of helicopter stimulus money drops, PPP loans, and other freebees drive saving rates and demand through the roof.

Then rent moratoriums, mortgage forbearance, student loan payment pauses, and back door bailouts have impacted our situation even further.

NOW all these influences are coming to a stop in a relatively synchronized fashion. I have a hard time denying that these factors will fail to have a significant economic impact in the very near future.

 

[Gonefishin5555]

I don’t see them turning off the spigot and with high inflation you won’t necessarily see declines happen more like a period of no or really slow growth. A correction needs a trigger and interest rates could be one except I suspect they will tap the brakes on those after everyone freaks out on the first one

 

[Activated]

I tapped on my 401k a few months ago and moved my investments in to “safer” funds. I am happy with my returns over the last few years and have zero idea what is going to happen next. I feel like I walked away from the black jack table with my winnings and went to my room.

 

[pkbullet]

Company profits are forecast to continue to be high through 2022. Even with three or four rate hikes they will still be incredibly low historically. Supply will most likely not meet consumer demand for the foreseeable future. I feel like 22 is another year of opportunity. In my industry buyers are paying record blue sky multiples. This leads me to believe at least in the auto industry the belief is pretty widespread of continued returns. I think it’s a great time to make some dough and solid up your position for the inevitable correction.

 

[Orange Juice]

We are all waiting on the big pull back. There’s a lot of cash out there.
I don’t see it happening, in any scale similar to 2008.
I expect pockets will get hard, as it gets tougher to attract labor to those areas.

 

[Roosky01]

I just can’t see this administration allowing any rate hikes till after the mid-terms, IMO.

 

[CLdrinker]

It’s always rainbows and unicorns don’t worry.

 

[EmpirE231]

The Fed’s balance sheet is over $8.3 Trillion right now

The Fed has two options:
1. Continue QE and let inflation run wild.
2. Stop QE and raise interest rates.

Neither is very good for us.

Stopping QE and raising interest rates would be a dream come true for me lol

 

[EmpirE231]

Everyone has crystal ball theory, mine says after the midterms... the slide downhill begins.

 

[pronstar]

Here’s some food for thought:
This year, half of our GDP is an illusion, because it’s government spending. This isn’t sustainable. And paints the picture of an economy that’s not as strong as folks may think.

QE is a large part of the demand-side of the stock market. Without them buying nearly $9 trillion in market/mortgage-backed securities (over a hundred billion per month), how strong is market demand? We’ll soon see if/how much the market deflates when QE

Stated interest-rate hikes of a quarter percent over several years - “coincidentally” set to rise all the way up to the next potus election - will do little, and that’s by design. If tates rise too much, we won’t be able to pay interest on the national debt.

If rates rise too much, the economy is crippled.
If they don’t rise enough, inflation will be the word of the day.

 

[brianwhiteboy]

I’m hoping my 2022 future holds a 1/4 slab of beef from @wash11

 

[LuauLounge]

Time in the market is more important than timing the market.
It goes up and down. Amazon had a bad year and has taken a hit in the last week. When you are in at 19 a share, lots of room.

 

[zhandfull]

Time in the market is more important than timing the market.
It goes up and down. Amazon had a bad year and has taken a hit in the last week. When you are in at 19 a share, lots of room.

Think that is a good point.

Being Amazon was at 1,900 two years ago and had nearly doubled before falling a little. Should anybody be concerned it could fall back to 1,900?

Same question applies to all investments including real estate. All these investments saw unbelievable gains over a two year period. Is it really unthinkable they could fall back to pre pandemic levels?

 

[DWC]

We are all waiting on the big pull back. There’s a lot of cash out there.
I don’t see it happening, in any scale similar to 2008.
I expect pockets will get hard, as it gets tougher to attract labor to those areas.

How many people have had money sitting in cash since the beginning of the year?

 

[Ace in the Hole]

I have a group chat with 4 of my classmates from college that we pretty regularly participate in... (we’re all Econ grads). Three thoughts are common.
1. If democrats lose midterms they will burn it down to make it look like the republicans fault starting immediately after loss.
2 . Our old trade professor thinks October the shit hits the fan with 15-20% market correction but not a massive drop in housing immediately unless interest skyrockets.
3. Consumer debt is getting sketchy...credit card debt is huge again...as are shaky loans on toys and cars...bottom falls out of that once 1 or two happens.

Limited on what I can type since I’m driving back to Texas (stopped at the moment on my phone lol)

 

[bonesfab]

customers are bringing in cash now. Pain in the ass is the bank has been closed with covid. Yea I know don't put cash in the bank. But the checks got to clear. Both branches of B of A in Camarillo have been hit or mis all through covid.

 

[HBCraig]

It will suck. I have about 4 very large cranes out to 2023. If the shit hits the fan these will be cancelled.

 

[Orange Juice]

How many people have had money sitting in cash since the beginning of the year?

2022?

There is definitely a divide between the savers and spenders. I don’t see the downside at the moment in the credit markets. Jobs are plentiful.

when 30 year interest rates hit 7-8 %. That’s when economic pain becomes real. Until then, downside will be more local if it happens.

 

[Paradox]

Since it’s a guess, I’ll go with early 4th quarter of this year for the beginning of the fall. I‘ll futher go with with a guess of a minimum of 20% and a max of 40% by the time it is done.

Prime rate will be going up and the extent (for the year) should be known by then, shortages should be stabilizing, new vehicle costs will likely go down (based on a glut of them due to chips becoming widely available), mortgage rates will be up by 1 percent or more, employment and employment wages will stabilize, inflation will drop and the political unknown will start to become evident.

 

[530RL]

Current 30 year fixed is below 4. Even at 6 it is historical lows. Cash buyers now make up 40 to 57 percent depending upon who one believes.

My first mortgage was 12.5.

I am at a loss on how 6 percent mortgages would significantly impact the housing market, like a drop in 08 - 10 given housing demand far exceeds supply?

Would it just be an opportunity for hedge funds?

Demand in most industries exceeds supply significantly. Does a drop in demand cause a significant drop in pricing of most goods or just subdue price increases which would be helpful?

Beats me?

 

[Havasu blue label]

Havasu is a 3 day stay and go home we own 2 homes and 2 condos since 1999 my son owns to condos he paid 2 years ago 120 and 180 the 120 is valued at 240 not real it’s fake money . Be smart

 

[Havasu blue label]

Exactly my first mortgage rate was 9 percent property taxes is a lifetime investment

 

[Havasu blue label]

Just keep working and having fun on a day to day lifestyle

 

[c_land]

So you are saying it is totally different

It literally is a totally different scenario. People are going to do everything they can to stay in their low interest rate homes

I have a group chat with 4 of my classmates from college that we pretty regularly participate in... (we’re all Econ grads). Three thoughts are common.
1. If democrats lose midterms they will burn it down to make it look like the republicans fault starting immediately after loss.
2 . Our old trade professor thinks October the shit hits the fan with 15-20% market correction but not a massive drop in housing immediately unless interest skyrockets.
3. Consumer debt is getting sketchy...credit card debt is huge again...as are shaky loans on toys and cars...bottom falls out of that once 1 or two happens.

Limited on what I can type since I’m driving back to Texas (stopped at the moment on my phone lol)

Yesss. Consumer credit exploded at the end of 2021.

Sorry @LargeOrangeFont Didn’t mean to quote you too.

 

[farmo83]

The fed can only do so much to take money out of the economy. Raising rates on the 23 ish trillion dollars national debt cost the country a massive amount in interest payments.

Another thing not being discussed is margin in the stock market is at an all time high. As margin gets more expensive and forbearance ends etc you'll see a pull back.

In inflationary times the safe plays are anything asset heavy. Tech will.have value compression due to the rate hikes.

 

[LuauLounge]

My first house was $36k, payment was $306/month including taxes and ins.
Property taxes alone are now $400/month

 

[wash11]

I’m hoping my 2022 future holds a 1/4 slab of beef from @wash11

Hands down the best answer in this whole thread.

 

[pkbullet]

One thing I wonder about is the 16-35 trillion in wealth that is held by 70 plus year old Americans that has started to transfer. How will this effect both government revenue and the beneficiaries spending?

 

[wash11]

One thing I wonder about is the 16-35 trillion in wealth that is held by 70 plus year old Americans that has started to transfer. How will this effect both government revenue and the beneficiaries spending?

One of our customers is a big ticket item broker. Jets, insanely priced watches, yachts, collectables etc. He's been at it for 20+ years and says the generational wealth transfer has been very good to him. Guys in their early 50's landing a parents IRA's routinely cashing a portion out, covering the tax hit and writing a check for overpriced classic 911's is the new norm for him.

 

[c_land]

One thing I wonder about is the 16-35 trillion in wealth that is held by 70 plus year old Americans that has started to transfer. How will this effect both government revenue and the beneficiaries spending?

As that occurs, there’s also something else to consider.

Declining Population looks ugly for the US as the large generations begin to pass. Birth rate has been declining since 2007. Legal Immigration has essentially halted since the pandemic as well.

 

[monkeyswrench]

As that occurs, there’s also something else to consider.

Declining Population looks ugly for the US as the large generations begin to pass. Birth rate has been declining since 2007. Legal Immigration has essentially halted since the pandemic as well.

And yet our population has seen a significant increase given to us from the border, and "humanitarian" imports from sketchy countries. I'm not very bright either, but I know the money needs to come from "somewhere"...

As for homes and such, here I have seen 3 young contractors buy homes in the past several months. All 3 have already refinanced, pulled funds and bought cars, trucks or SxS's...I don't get it. All 3 are also too young to remember what happens when work slows, and the piper calls his mark. Going to be some stuff for sale at some point...

 

[Mandelon]

I hope for a gentle slow down. But who knows.

 

[Dalton]

Current 30 year fixed is below 4. Even at 6 it is historical lows. Cash buyers now make up 40 to 57 percent depending upon who one believes.

My first mortgage was 12.5.

I am at a loss on how 6 percent mortgages would significantly impact the housing market, like a drop in 08 - 10 given housing demand far exceeds supply?

Would it just be an opportunity for hedge funds?

Demand in most industries exceeds supply significantly. Does a drop in demand cause a significant drop in pricing of most goods or just subdue price increases which would be helpful?

Beats me?

2k dollar mortgage at 3% = 600,000
2k dollar mortgage at 6% = 420,000

 

[Mandelon]

China takes Taiwan
Russia invades Ukraine
Iran is reportedly only a month or two away from having a nuke. Then they blow up Tel Aviv.
Russia shuts off the gas supply to Europe.

So many things that can happen to destabilize things on a major scale..

 

[4Waters]

China takes Taiwan
Russia invades Ukraine
Iran is reportedly only a month or two away from having a nuke. Then they blow up Tel Aviv.
Russia shuts off the gas supply to Europe.

So many things that can happen to destabilize things on a major scale..

^^^^This^^^^

All it will take is one of these, hell a major natural disaster like "The Big One" could do it

 

[Xtrmwakeboarder]

Bring it. I've got cash and am ready for some deals.

Half kidding. Hate to see people hurting, but it's a zero-sum game, and being responsible pays off eventually.