The Recession That Will Erase Generational Wealth is Almost Here

The bears vs. the bulls

The Garden of Earthly Delights (Wikipedia)

If the economy were a car, it would be on fire and careening off a cliff.

This is a tough macro environment: the yield curve is inverted (meaning long-term interest rates have become lower than short-term ones); several indicators say the stock market is overbought, and the housing market is getting skull fucked by rising mortgage rates.

I'll keep this brief—it’s Friday, you should be having fun— and lay out a few key factors that will directly impact your money and investments.

But first, a little stat for you: in the 93 years since 1928, stocks have increased in value 73% of the time, while bonds have had a bump in 82% of those years. So, stocks have only had 8 more years in the red.

As the old saying goes, "Bulls make money and bears sound smart being pessimistic ... but don't make money." The economy must keep flourishing with so much at stake.

That said, here are five factors that should worry you.

1. Student Loans & Credit Card (Ticking Time Bomb)

Allow me to explain:

• Student loans reactivate

• Average payment is $440

• 40% already confirmed not to be able to afford first payment back with cancellation off the table. The average American has $6270 in credit card debt

• Compounding $100 a month in interest every month from credit card debt

Something funnier (sadder?) to account for is that student loans are being securitized via the Student Loans Asset-Backed Securities (SLABS) program. Hm. Securities. Sound familiar?

If a significant number of Americans stopped paying their student loans altogether, then the economy would be buck broken 2008 style. Honestly, I wouldn't care about Republicans not wanting to bail out students if they didn't always capriciously change their tune anytime banks, farmers, the auto industry, the airline industry, the luxury cruise industry, etc. needed a bailout and got it almost instantly no questions asked.

2. Commercial Real Estate Collapse

50% of commercial real estate is vacant and coming up for renewal, with investors likely to liquidate them due to sunken costs.

By 2026, one-third of all office leases will expire, leading to either more empty spaces, much cheaper rents, or both. 

The rise of remote work is a genuine game-changer.

What will happen to New York City, Berlin, London, Dallas, and Chicago? IDK. Maybe they'll turn into Toronto condo-style dystopias, with up to 12 people living in one tiny space.

3. Housing Unaffordability crisis

Housing prices are beyond unaffordable to the average American, much less starting to become sunk costs for builders and investors.

What's odd about this is the housing market has done gangbusters in the stock market despite the negative sentiment.

What it seems to be is that new homes are more affordable than pre-existing ones.

The problem is that new homes also cut corners to remain profitable and are shit-tier. I'm starting to think one of the main factors for this housing crisis is the commodification of housing combined with anti-nationalist policies, combined with people's houses being a form of wealth transfer generationally.

Last week, I made a bold statement on Medium about how the middle class is being slowly and mercilessly forced out of the American dream.

It's sad, but as George Carlin said, “ You gotta be asleep to believe it!”

4. The Unemployment Lie

A jaw-dropping 497,000 jobs were added in June, smashing the predicted 220,000 estimates by payroll processing firm ADP.

In the annals of history, however, recessions have often sprouted from the fertile soil of low unemployment. Since the 70s roughly six recessions began in times of lower unemployment (the shaded bars represent recessions):

Source

5. Car loan/car financing bubble

There are absolute maniacs out there who finance their vehicles for 7-10 year terms at 12% (or more) and they’re paying the equivalent of a fucking mortgage payment for a mid-range vehicle.

I don't honestly know how this corrects.

The current trajectory leads to: You will own nothing and be happy

The “free market” leads to: A Chinese company stepping in and selling cheap disposable cars. There are millions of people who just want a dependable car to get to work and don’t need a $90,000 car to do that.

Final Thought

Put that all together, this is 2008 on steroids

• Student Loan crisis

• Credit Card crisis

• Housing Unaffordability crisis

• Commercial Real Estate collapse

• Unemployment indicator

• Car Market = You'll own nothing and be happy

When you consider everything, it becomes clear that this macroeconomic situation is sketchy and central banks do not know what is coming, diluting their credibility as forecasters. We're now in more of a Fed reactionary market based on policy decisions and not much else. 

It's tantamount to scolding your kid for bad grades when all you've done is buy them Penthouse magazines and Pabst Blue Ribbons. You fucked up.

As I said at the start, however, the bulls always win — but these five risk factors are something you should keep an eye on. Good luck out there. Stay safe.

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