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
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.