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Is Rideshare Recession Proof? Part 3

MW-HP402_yield__ZH_20190814101008.png


In this post I'm not arguing if rideshare is recession proof, it isn't as most of you my fellow drivers responded and I agree.

This time I'm just sharing what I see that's happening to our "Boom and Bust" economy.

Please understand that I'm not making any predictions,suggestions or recommendations. Neither, it's a political statement one way or the other. Again, I'm just sharing my observations.

Couple of weeks ago, all major indexes, Dow Jones Industrial, S&P 500 and Nasadq Composite were at all time highs. At the same time, quality treasuries such as US, Japan and German 10 year notes and gold prices started climbing to multi years highs as well, which consequently reduces their interest earnings or the yield. The German and Japan treasuries are yielding negative interest, with other words; you pay a premium to own those treasury notes.

Gold and highly rated treasuries are usually sought as safe havens by investors to limit their exposure to losses in the event of a market meltdown. It also signals the investor's uncertainty which may be reasonable.

Today (8/14/19) we got an ugly signal; The U.S. Treasury 2-10 year yield curve inverted for the first time since 2007!! Also, Dow Jones Industrial dropped 800 points.

There are couple of interesting articles about this in MarketWatch
https://on.mktw.net/2Z3RL8O

https://on.mktw.net/2TDMy6B

Again, this signal hasn't been seen since 2007!! This doesn't necessarily mean a crash in near future and may take some time to show it's effect. But it could also indicate the unreasonable, unfounded fear and overaction to political and economical landscape in overseas and here at home.

Traditionally, Federal Reserve reduces interest rates when markets are struggling. Two weeks ago, they dropped the rate by a quarter presntage point while markets where flying at all time highs! The Federal Reserve has been using Quantitative Easing (buying government notes to inject more money into economy)

Plenty of money at very low interest rates creates leveraged borrowing. Over a decade ago, it contributed to mortgage-backed securities and housing crises.

This time around, the leveraged borrowing is taking a more dangerous path. Corporate Leveraged Borrowing

In an exclusive interview with MarketWatch on June 25, 2019, Sheila Bair had this to say: ‘there are just so many of these companies that are just up to their eyeballs in debt"

Potential economic pain from a corner of the corporate-debt market could hit the economy more quickly than the crisis that ravished Wall Street in 2008, Sheila Bair, former head of the Federal Deposit Insurance Corp, has warned.

As head of the FDIC, Bair was on the front lines of the subprime-mortgage bubble which rocked the global financial system more than a decade ago. The FDIC was one of the key policy makers which oversaw a wave of bank busts in the aftermath of the 2008-09 financial debacle.

Now, the former bank regulator worries that too little is being done to stave off another crisis, which could be sparked by leveraged lending, or risky loans made to companies with less-than-stellar credit.

The outspoken 65-year-old thinks that if debt-laden companies can’t repay their loans, the economic impact on the economy could hit jobs and economic growth faster than the slow-rolling mortgage crisis did a decade ago.

“I do think that we are going to see distress in the corporate market, which can have a very strong and significant impact on the real economy,” she told MarketWatch in an interview.

“With subprime, at least you had a bit of a flow-through,” she said. “It took a while. There was a market shock. But in terms of the real economic impact, it was more gradual.”

Subprime lending giant Countrywide Financial started to feel the pain of falling home prices and rising defaults in early 2007, but it still took months before the credit-rating firms acted and slashed billions worth of AAA-rated mortgage bonds to junk status. It was not until March 2008, that Bear Stearns, teetering on failure, was snapped up by JPMorgan Chase & Co. with the help of the Federal Reserve"

I personally hope all of this is just unnecessary fear and we will enjoy the prosperity or at least our little share of it for a long time come. Let's be positive.
 

Comments

The Gift of Fish

Well-Known Member
This time I'm just sharing what I see that's happening to our "Boom and Bust" economy.
All capitslist economies are cyclical. And the cyclical nature is just a consequence of the way we humans operate in such a complex system as an economy.

We know for certain that no economic expansion, this one included, can go on forever. The first question is when it will end. I think the signs are pretty clear that this one is ending soon - Trump's trade wars and isolationism, Brexit, Germany already in economic contraction, the bond yield inversion etc etc.

The next question is soft landing or crash. There is some sign of asset bubbles ($80bn valuation for Uber - prime example) but I don't think we're in for Great Recession II.
 

Tom Oldman

Well-Known Member
Author
  • Thread Starter Thread Starter
  • #3
All capitslist economies are cyclical. And the cyclical nature is just a consequence of the way we humans operate in such a complex system as an economy.

We know for certain that no economic expansion, this one included, can go on forever. The first question is when it will end. I think the signs are pretty clear that this one is ending soon - Trump's trade wars and isolationism, Brexit, Germany already in economic contraction, the bond yield inversion etc etc.

The next question is soft landing or crash. There is some sign of asset bubbles ($80bn valuation for Uber - prime example) but I don't think we're in for Great Recession II.
Unfortunately, I do not see a "soft landing." This bull market has been going for over a decade, long and fast. If you think of it as a pendulum; the further you pull the pendulum to one side, the harder it hits the other side when it swings back.
 

Coastal_Cruiser

Well-Known Member
+1 to the poster.

It is unfortunate that when you "do the math" it says were screwed, and that there is at the very least the potential for the next downturn to be far deeper than "Great Recession II". There are a number of economic dislocations (money spent on unproductive assets) that were not cleared 10 years ago when they should have been. Instead they were leveraged further. Politicians were either in debt to the investment banks and/or did not have the stomach to support legislation that would have lengthened the recession but would also have cleaned house prior to the next generation coming of age.

Moreover, the laws put into place after the 2008 crash ended up further protecting the "too big to fail", and actually lessened consumer protection rather than strengthening it.

The future is impossible to predict, but still it seems wise to keep ones options open. I have followed this pretty closely over the years, and my best take is that it would be wise to keep an eye out for that recession resistant business. Think in terms of the things that people always will need.
 

losiglow

Well-Known Member
Everytime I try to time the market, I lose. So I'm not pulling anything out of the market and I'm not changing my RS tactics or habits. Although there may be a need to adjust things a bit if things crash. Who knows....
 

doyousensehumor

Well-Known Member
If the economy is considered "good" now and we are still struggling, imagine the next resession... Big takeaway here is have an plan B or alternative plan. Be prepared.

Sometimes it feels like we never recovered from last recession. We just adapted. Too many of us are paycheck to paycheck.

The longer the bubble is propped up, the harder the crash.
 

Crosbyandstarsky

Active Member
View attachment 345040

In this post I'm not arguing if rideshare is recession proof, it isn't as most of you my fellow drivers responded and I agree.

This time I'm just sharing what I see that's happening to our "Boom and Bust" economy.

Please understand that I'm not making any predictions,suggestions or recommendations. Neither, it's a political statement one way or the other. Again, I'm just sharing my observations.

Couple of weeks ago, all major indexes, Dow Jones Industrial, S&P 500 and Nasadq Composite were at all time highs. At the same time, quality treasuries such as US, Japan and German 10 year notes and gold prices started climbing to multi years highs as well, which consequently reduces their interest earnings or the yield. The German and Japan treasuries are yielding negative interest, with other words; you pay a premium to own those treasury notes.

Gold and highly rated treasuries are usually sought as safe havens by investors to limit their exposure to losses in the event of a market meltdown. It also signals the investor's uncertainty which may be reasonable.

Today (8/14/19) we got an ugly signal; The U.S. Treasury 2-10 year yield curve inverted for the first time since 2007!! Also, Dow Jones Industrial dropped 800 points.

There are couple of interesting articles about this in MarketWatch
https://on.mktw.net/2Z3RL8O

https://on.mktw.net/2TDMy6B

Again, this signal hasn't been seen since 2007!! This doesn't necessarily mean a crash in near future and may take some time to show it's effect. But it could also indicate the unreasonable, unfounded fear and overaction to political and economical landscape in overseas and here at home.

Traditionally, Federal Reserve reduces interest rates when markets are struggling. Two weeks ago, they dropped the rate by a quarter presntage point while markets where flying at all time highs! The Federal Reserve has been using Quantitative Easing (buying government notes to inject more money into economy)

Plenty of money at very low interest rates creates leveraged borrowing. Over a decade ago, it contributed to mortgage-backed securities and housing crises.

This time around, the leveraged borrowing is taking a more dangerous path. Corporate Leveraged Borrowing

In an exclusive interview with MarketWatch on June 25, 2019, Sheila Bair had this to say: ‘there are just so many of these companies that are just up to their eyeballs in debt"

Potential economic pain from a corner of the corporate-debt market could hit the economy more quickly than the crisis that ravished Wall Street in 2008, Sheila Bair, former head of the Federal Deposit Insurance Corp, has warned.

As head of the FDIC, Bair was on the front lines of the subprime-mortgage bubble which rocked the global financial system more than a decade ago. The FDIC was one of the key policy makers which oversaw a wave of bank busts in the aftermath of the 2008-09 financial debacle.

Now, the former bank regulator worries that too little is being done to stave off another crisis, which could be sparked by leveraged lending, or risky loans made to companies with less-than-stellar credit.

The outspoken 65-year-old thinks that if debt-laden companies can’t repay their loans, the economic impact on the economy could hit jobs and economic growth faster than the slow-rolling mortgage crisis did a decade ago.

“I do think that we are going to see distress in the corporate market, which can have a very strong and significant impact on the real economy,” she told MarketWatch in an interview.

“With subprime, at least you had a bit of a flow-through,” she said. “It took a while. There was a market shock. But in terms of the real economic impact, it was more gradual.”

Subprime lending giant Countrywide Financial started to feel the pain of falling home prices and rising defaults in early 2007, but it still took months before the credit-rating firms acted and slashed billions worth of AAA-rated mortgage bonds to junk status. It was not until March 2008, that Bear Stearns, teetering on failure, was snapped up by JPMorgan Chase & Co. with the help of the Federal Reserve"

I personally hope all of this is just unnecessary fear and we will enjoy the prosperity or at least our little share of it for a long time come. Let's be positive.
Um no. It’s not even day proof
 

rkozy

Well-Known Member
Unfortunately, I do not see a "soft landing." This bull market has been going for over a decade, long and fast. If you think of it as a pendulum; the further you pull the pendulum to one side, the harder it hits the other side when it swings back.
Not only that, but there's so much more global instability now compared to 2007-08. When Lehman Brothers collapsed, it was just a big company. What happens to the global markets when an entire country (like England) collapses? A No-Deal Brexit is going to produce economic damage to a major Western economy like we've never seen before.

There will be a cascading effect from that, and the deadline is less than three months away.
 

Tom Oldman

Well-Known Member
Author
  • Thread Starter Thread Starter
  • #10
+1 to the poster.
Think in terms of the things that people always will need.
Thank you for thoughtful response and sharing your views which are pretty much inline with my thought process.

I also like your strategy of "things people always need" which are the "staples" just the opposite of "discretionary"

I'm still struggling to classify the "Rideshare" as discretionary, it's becoming a day to day need and hence, it may become a staple.
Post automatically merged:

Well said @doyousensehumor
"The longer the bubble is propped up, the harder the crash."
That's exactly what I think !
 

The Gift of Fish

Well-Known Member
What happens to the global markets when an entire country (like England) collapses? A No-Deal Brexit is going to produce economic damage to a major Western economy like we've never seen before.
I don't think the UK will collapse because of Brexit. The US isn't in the European Union and they've done ok. Australia isn't in the EU either and they're fine.

It was predicted that the UK economy would go into recession soon after the brexit vote. Didn't happen. There will be a hit to economic growth in the UK because of Brexit, but the medium and long-term results depend on the trade deals that the UK can now make for itself.
 

The Gift of Fish

Well-Known Member
The UK won't be in a very strong position following Brexit to dictate terms that give them an upper hand in trade.
Not with the EU, no. Not initially.

The EU right now is behaving like the jilted ex-partner that it is. The EU has indeed been rejected, and as with many breakups, the rejected party will need to go through a healing process. They will eventually stop being butthurt that we said we want a divorce and come to the negotiating table with a more pragmatic approach. Remember, the UK is one of the world's largest economies and it would be foolish of the EU to impede trade with the UK.

What Brexit does of course is open up trade with the rest of the world where the UK will be unhindered by what any EU country wants.
 

tohunt4me

Well-Known Member
I think that over the years organized crime has convincingly demonstrated that the only things that are guaranteed to be recession-proof are drugs, alcohol, gambling, and prostitution.
Grow weed.
Distill alcohol !


( you get these 2 down, the other 2 will come to you)
 

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rkozy

Well-Known Member
The upside to a downturn is that banks stop lending money to people with borderline credit. Those folks won't be able to afford even a basic set of dependable wheels. That means more pax looking for rides than during a booming economy, when banks are happy to lend.

Sure, there's going to be more drivers on the road (since many people will be under-employed) but I suspect a large number of people now will soon be just one expensive repair away from having to junk their car and use the bus or U/L to get around.
 

tohunt4me

Well-Known Member
The upside to a downturn is that banks stop lending money to people with borderline credit. Those folks won't be able to afford even a basic set of dependable wheels. That means more pax looking for rides than during a booming economy, when banks are happy to lend.

Sure, there's going to be more drivers on the road (since many people will be under-employed) but I suspect a large number of people now will soon be just one expensive repair away from having to junk their car and use the bus or U/L to get around.
LAY OFFS MEAN MORE UBER DRIVERS.
FULL TIME.
EVEN IN RENTAL CARS.

IF THEY HAVENT AUTOMATED THE GARBAGE TRUCKS YET WHERE YOU LIVE . . . THAT IS OPPORTUNITY.

Garbage collection is Recession proof.
 

mbd

Well-Known Member
Market just resting in a small correction mode... low volume, summer doldrums...next leg up will be after September
New highs will be hit in the next 6 months( imho)
If slowdown happens, getting drivers will not be the problem , but rides, premium rides will suffer a slow down . Instead of getting 50$ a day to spend on Uber, it might be 40.

Sams announced today they will have stores with no checkouts, Or checkout clerks( amzn style )
 
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