I Sense an Economic Chill in the Air

[Sensei]

Something tells me that we are headed into the recession that was forecasted last year to hit right around this time. It may have been accelerated a bit by trade policies, but the tech and oil sell offs tell me that 2019 is going to hurt. We’ll know more in the next 5-6 months.

[RoyGBiv]

Economy is strong. More jobs than people looking. Market is correcting, not crashing. Divided government is historically good for the stock market.
Nobody's done their 2018 (new regs) taxes yet. Once they do, we'll see what that does to consumer confidence.

YMMV, of course. ;)

[Mark D]

deleted

[RevolverRob]

10-year and 2-year treasury notes are yielding nearly the same. If 2-year notes get ahead of 10-year notes? The recession is more or less an absolute. FED will have to raise interest rates to correct this, not good news for heavily endebted or creditors.

Other indicators, consumer retail spending is high, unemployment low - two great signs of economic progress. But the problem is - spending is high and unemployment low, because interest rates are low. When FED raises the interest rates, corrections will occur.

Now is a good time to consider buying into 2-year CDs or Treasury notes. The yields will be lower, but the risk will be much lower too. Some CDs are as high as 3% yield, which is a half point higher than expected inflation. You’ll come out the otherside in good shape. I don’t expect this recession to last as long as the last one.

[JHC]

Something tells me that we are headed into the recession that was forecasted last year to hit right around this time. It may have been accelerated a bit by trade policies, but the tech and oil sell offs tell me that 2019 is going to hurt. We’ll know more in the next 5-6 months.

Think we could weather an EU recession without going into one officially? Italy is being watched with concern.

I haven't seen anything on bond yields lately to know if they are close to inversion.

[GuanoLoco]

Trump said that it is not 'interesting' to talk about the economy right now.

I suspect it will remain uninteresting until we see a rebound ... and I'm not holding my breath.

I am pretty sure that some of my aggregated investments are lower than when he took office - need to go check.

[blues]

Having been through a few major market drops, bear markets, and corrections over the past 35 years or so, my philosophy remains a simple one:

Keep your portfolio aligned with your ability, willingness and need to take (additional) risk to meet your goals...and re-balance, (%equities / %bonds / %cash), once they get out of kilter by 5% or more. Then, as John Bogle would advise: sit tight and stay the course.

[Tom Duffy]

Financial markets and private citizens prefer stability. Neither group is feeling warm and fuzzy about now.

[Will_H]

I wouldn't get too excited about oil prices. A lot of that aspect is drummed up fear in the current market. OPEC plans aren't working out to their benefit. Domestic oil production is both high and profitable, even at $45/bbl. I mean hell, Oil got hammered in 2014 and did it REALLY damage the economy? It certainly didn't send us into a recession. There's some concerning trends with the Fed and interest rates. That's the kind of thing I would be more concerned with.

[OnionsAndDragons]

Having been through a few major market drops, bear markets, and corrections over the past 35 years or so, my philosophy remains a simple one:

Keep your portfolio aligned with your ability, willingness and need to take (additional) risk to meet your goals...and re-balance, (%equities / %bonds / %cash), once they get out of kilter by 5% or more. Then, as John Bogle would advise: sit tight and stay the course.

Yup.

I’m of the chilling opinion myself, and my 401k lets me rebalance 1/qtr, so I’m planning to move most of my account into bonds and a few conservative funds after December 13.

I’m trying to figure out what potential aggressive moves I want to make with my gambling fund within my IRA come January.

I’m not rosy about the next year or so, but not doomy either. But, after being the only member of my family that went with my instincts before 2008 cut them all in half, I’m willing to leave a little on the table to avoid that outcome whenever I start to smell a stink.


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[MickAK]

Forecasted by who exactly? Economic illiteracy is one of the most difficult problems to combat because no one can even tell who knows what they're talking about.

[Greg]

Forecasted by who exactly? Economic illiteracy is one of the most difficult problems to combat because no one can even tell who knows what they're talking about.

Paul Krugman's cat.

[MickAK]

Paul Krugman's cat.

Well, that's a pretty good source. Cats have been right about 78% of internet recession predictions.

Anyone who's curious can look up who predicted the 2008 crash. And who didn't.

Anyone who's smart can look at the correlation between more than a week out weather predictions and more than a week out economic predictions.

[Cheap Shot]

Something tells me that we are headed into the recession that was forecasted last year to hit right around this time. It may have been accelerated a bit by trade policies, but the tech and oil sell offs tell me that 2019 is going to hurt. We’ll know more in the next 5-6 months.

Source?

[farscott]

So far, the indicators I watch are a bit of a mixed bag. Interest rates are increasing, which is a sign that the Fed is trying to work against inflation. Auto sales are at or past the peak, and the OEMs are starting to worry. Both of these suggest we are at the end of the "good times".

Then I look at these (S&P/Experian credit defaults) for credit quality, and things look okay. https://us.spindices.com/index-family/specialty/consumer-credit-default

Crystal ball result: foggy. That being said, I made the move to mostly cash in July.

[blues]

Source?


https://proxy.duckduckgo.com/iu/?u=http%3A%2F%2F2.bp.blogspot.com%2F_4DzLbV79i7g%2 FTCC-ddBWkHI%2FAAAAAAAAiT0%2FFl5klMyNQTs%2Fs1600%2FOld% 2BPhotograph%2BWasherwomen%2BRiver%2BClyde%2BScotl and.jpg&f=1

"I'm tellin' ya, this time it's gonna be different. I feel it in me bones."

[MickAK]

32559

[Sensei]

Source?

Larry Kudlow.

[Yung]

I knew about three months ago that November was going to be our busiest month. Nearly all of our customers are involved in some sort of fuel application and between distributors, EPC, and end-users for most of our products, all of them had extra budget at the beginning of the quarter to spend on more projects, with enough work to last everyone until at least March if not until summer. Two of the biggest operations are based out of Illinois and Texas with terminals spread throughout the country, including development on joint projects with some big names, i.e. BP.

[Sensei]

Interesting article about 2019:

https://www.google.com/amp/s/amp.businessinsider.com/trump-tax-cut-trade-war-2019-gdp-goldman-sachs-baml-2018-11

Granted, economic growth cooling to 2ish% percent isn’t a recession. Let’s hope some geopolitical event doesn’t drive that down more.

[willie]

Some talking head said that tech stocks are heavily weighted. Thus a downturn there skews reported figures. I don't know enough about it to critique the statement.

[Sensei]

Some talking head said that tech stocks are heavily weighted. Thus a downturn there skews reported figures. I don't know enough about it to critique the statement.

Big Tech is probably going to have a rough year.

https://www.weeklystandard.com/irwin-m-stelzer/facebook-apple-amazon-netflix-and-google-may-get-government-regulation

I’m an Apple guy with an iPhone 7 that could be replaced. However, none of the newer models excite me, and I’m going on 2+ years with the same phone. Normally, I’d be looking at a new model by now...

[olstyn]

I’m an Apple guy with an iPhone 7 that could be replaced. However, none of the newer models excite me, and I’m going on 2+ years with the same phone. Normally, I’d be looking at a new model by now...

Pffft, that's nothing. I still have a 4S, and I'm not even slightly interested in any of the new models, especially not purchased new, because $750+ for a phone is just dumb. I'm actually looking at upgrading to a used/refurb 7 because my 4S is about dead, and even the price of those is too much IMO. I'm running out of time, though; the 4S's dock connector and battery life are both getting sketchier by the day.

Same deal with the new Mac Mini. I've been desperately wanting to replace mine for a long time, but when they finally came out with a new one recently and the price was 1.6X what the old one would run you, I was deeply disappointed. Apple seems to be making a return to their old marketing MO where they thought they could charge absurd money for everything they produce, including RAM and disk upgrades at triple the price you'd pay to buy the components in question from *anywhere* else.

Of course, I suppose it's possible that I just need to be less poor. :(

[OnionsAndDragons]

I’m just glad I’m no5 the only one.

I’ve still got a 5s because I prefer a damned phone that is phone-sized.


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[blues]

I’m just glad I’m no5 the only one.

I’ve still got a 5s because I prefer a damned phone that is phone-sized.


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I still own and use a 5c. There goes the neighborhood!

[spinmove_]

I still own and use a 5c. There goes the neighborhood!

I’ve found that the XS is roughly the same size as my previous 6s, but the screen real estate is a welcomed change. Yes it’s bigger than a 5s/5c/SE, but it’s so much more useable.


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[blues]

I’ve found that the XS is roughly the same size as my previous 6s, but the screen real estate is a welcomed change. Yes it’s bigger than a 5s/5c/SE, but it’s so much more useable.

I just don't use the phone enough to justify purchasing an upgrade. Phone calls, the occasional text and streaming music in the 4Runner is 99% of its use. Occasionally I might read a book on it if I'm stuck in a waiting room.

Plus, I got it for free on a Verizon promotion back when and it still works great. So...

Apple's just gonna have to wait. Though I wouldn't mind an iPad to replace some of my older Kindle / Fire tablets.


Hey, the market is up...(at the moment).

[spinmove_]

I just don't use the phone enough to justify purchasing an upgrade. Phone calls, the occasional text and streaming music in the 4Runner is 99% of its use. Occasionally I might read a book on it if I'm stuck in a waiting room.

Plus, I got it for free on a Verizon promotion back when and it still works great. So...

Apple's just gonna have to wait. Though I wouldn't mind an iPad to replace some of my older Kindle / Fire tablets.


Hey, the market is up...(at the moment).

I mean, if it works for you then who am I to disagree? Up until when said device isn’t getting security updates anymore, which for those devices, that day is coming up VERY soon. Will the device still work? Sure. Will it be protected against malware that is malicious and/or data mines you? Probably not.

This is why I’ve stuck with Apple’s iPhones. Longest device life in the industry thanks to their ongoing device support and updates. Buy one and run it as long as you possibly can. The comparable cheaper Android counterparts get 2 MAYBE 3 years of updates and then they’re dropped. iPhones are getting 4-5 years of support now.


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[BehindBlueI's]

I'm short term nervous. Went ahead and paid off my car instead of investing more. Picked up a 22 month CD at 3.5%. Rebalanced a bit, not buying any more dividend stocks at the moment.

[Leroy Suggs]

I still own and use a 5c. There goes the neighborhood!


I use an SE. Guess we are in the same hood.:cool:
And I am very happy with it.

[RevolverRob]

Big Tech is probably going to have a rough year.

https://www.weeklystandard.com/irwin-m-stelzer/facebook-apple-amazon-netflix-and-google-may-get-government-regulation

I’m an Apple guy with an iPhone 7 that could be replaced. However, none of the newer models excite me, and I’m going on 2+ years with the same phone. Normally, I’d be looking at a new model by now...

I'm in the same boat, I have a 7+ and it's now paid for and Verizon is pushing an upgrade. I took one look across the line and thought, "Nah, I like my lower payment and my phone currently."

It's ~2 years old currently and doing great.


The comparable cheaper Android counterparts get 2 MAYBE 3 years of updates and then they’re dropped. iPhones are getting 4-5 years of support now.

Some Android devices don't even make it 12-months with proper support, in my experience. I know I've said it before in other phone threads here, I've got a serious beef with the lack of quality control and support for 90% of Android devices. In particular the complete lack of QC on Android apps makes them very susceptible to security issues and software bugs. The cut rate hardware used to under-price them doesn't help either.

I appreciate that competition exists out there to keep the market fresh. But my family is all iPhones only now simply due to the reliability and support for the devices.

[LockedBreech]

This forum got me into the whole Boglehead thing (I read the two books over a few night this holiday weekend) and I have a bunch of pending orders in switching my actively managed funds to the 3-fund Bond/Total Market/International system of low-expense index funds and a few supplementary index ETFs.

That said, I remember a line from the book that barring cataclysmic circumstances like the Great Depression, recessions only last about 18 months typically. I agree we're headed into one, but it's not going to be a disaster like 2008, no big catalytic event like the subprime mortgage collapse. Just a market correction.

I intend to pour as much as I can possibly afford into my index funds while things are stagnant and lower. I also liked a tip I read about (if individual equities are your thing) investing in things people will always need, even during recessions, like toiletries and cheaper food.

[farscott]

While I have index funds in my 401k, I am fundamentally uneasy about them. The logic is a bit convoluted, but here is the gist.

1) Index funds are designed to mirror the performance of the underlying index. The truism is one cannot consistently outperform the market, so buy index funds.

2) Index funds have either zero or very low fees, so the fund manager cannot be constantly buying and selling all of the equities that compose the index to handle net inflows and outflows of cash. For example, I do not believe any one S&P 500 index fund owns all 500 companies in the index. Let alone the Russell 3000 or any "Total Market fund".

3) So the index funds only buys the equities that comprise some percentage of the index. In other words, the index performance is not perfect; it is some approximation.

4) This tends to concentrate buying in and selling of limited number of equities. Perhaps the index buys only 100 companies -- or only 20.

5) This concentration tends to lead to more volatility in those targeted equities as the demand is focused on those equities.

6) The underlying equities that are being bought and sold tend to have higher highs (net inflows) and lower lows (net outflows).

7) The index consumer underperforms the index.

8) Because index funds are imperfect mirrors of the underlying index, one can actually beat the market if one focuses on the companies not bought by the funds OR if one moves opposite of the index funds (arbitrage the volatility). Beating the market is all about identifying and exploiting market inefficiencies, and the above identify one.

9) I am also wary of concentrating so much money in index funds as other market distortions can result from the concentration. Getting into the S&P 500 usually drives the share price up as some percentage of the index funds will buy the shares. Getting kicked out of the S&P 500 will drive down a share price as index funds usually will not hold shares of a company not in the index.

[JclInAtx]

Farscott, regarding #2
I believe the purpose of an index fund is to invest in all the companies in the index.
https://investor.vanguard.com/mutual-funds/profile/overview/VFINX/portfolio-holdings

I believe this is an example from a vanguard index fund.

[farscott]

Farscott, regarding #2
I believe the purpose of an index fund is to invest in all the companies in the index.
https://investor.vanguard.com/mutual-funds/profile/overview/VFINX/portfolio-holdings

I believe this is an example from a vanguard index fund.

Thanks for the information. That is interesting as I am aware of other funds that do not hold all of the companies in the index. Perhaps my data is obsolete.

It is interesting that the top ten holdings in the Vanguard Russell 3000 fund (VRTTX) comprise more than 18% of the funds holdings. That may mirror the index, but it forces me to wonder how different funds can perform when ten companies (out of 3000) comprise so much of the index. In the S&P 500 fund (VFINX), the ten largest holdings are 22.8% of assets. So not much difference than the Russell 3000.

[olstyn]

I’ve still got a 5s because I prefer a damned phone that is phone-sized.

Yeah, I was desperately hoping that one of Apple's new phone offerings this fall would be an "SE 2" of some sort - modern-ish guts in as small a case as reasonably possible, but apparently Apple doesn't want my money, or yours, or anybody else's who prefers that form factor.

[Baldanders]

Something tells me that we are headed into the recession that was forecasted last year to hit right around this time. It may have been accelerated a bit by trade policies, but the tech and oil sell offs tell me that 2019 is going to hurt. We’ll know more in the next 5-6 months.

I am merely an ignorant English major, but my "gut" agrees with you. I feel like the wave we have been riding has been born from an insanely timed tax cut (what do you do when the economy really hits the skids when you already used your "big gun" during a slow, but OK time?)and irrational exuberance from Wall Street about Republican domination of all Federal branches of government. The later is of course over as Wall Street braces for the Democrats to "destroy everything" with some likely very minor tax increases. But it will be enough to provide a great narrative for Fox and the usual suspects to blame the inevitable slowdown on "Democrats crashing the Trump train." Which will bring us another Trump term, another Republican dominated federal government that will double down on tax cuts, leading to another short boom, followed by a truely nasty recession/ depression as the many countries realize China will be a much more malleable entity to do business with than the "economic warfare is how we like to twist your arm" US.

But I`m probably overreaching. 🤡

[Ed L]

Thanks for the information. That is interesting as I am aware of other funds that do not hold all of the companies in the index. Perhaps my data is obsolete.

It is interesting that the top ten holdings in the Vanguard Russell 3000 fund (VRTTX) comprise more than 18% of the funds holdings. That may mirror the index, but it forces me to wonder how different funds can perform when ten companies (out of 3000) comprise so much of the index. In the S&P 500 fund (VFINX), the ten largest holdings are 22.8% of assets. So not much difference than the Russell 3000.

This is the way that stock indexes work. They are weighted toward market capitalization. That means companies with a high price per share and high number of shares outstanding (like Apple) make up a larger part of the index price. Here is an explanation that is better than I can give: https://www.investopedia.com/terms/w/wamc.asp

And here is another one, even though the stock it lists as the top stocks by market cap are not current: https://www.investopedia.com/ask/answers/05/sp500calculation.asp