Comment by ericabiz | Hacker News Reader

Comment by ericabiz | Hacker News Reader

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Hey rbliss, article author here. I've been out of pocket all day. I was getting ready for bed when I saw my article on the front page of Hacker News!

Your comment is fair. It's late here, so I don't have the mental energy right now to write the 1000+ words I would like to on this matter.

It's totally worth writing another followup blog post explaining in more detail, which I'll aim for next week.

But, in brief:

-- Flattening yield curve

-- Ridiculously low unemployment ("full employment" is the term that's floating around)

-- Record high housing prices

-- Public corporations sinking profits into stock buybacks instead of acquisitions or capital investment (I find this a highly dangerous trend for the economy)

-- Consumer debt levels now higher than they were in 2008

-- Subprime auto loans being "tranched" and sold to investors much like subprime housing was in 2005-7 (and this is even worse, since cars are depreciating assets): https://www.bloomberg.com/news/articles/2018-07-16/riskiest-...

And I saw this one yesterday: https://www.feld.com/archives/2018/07/early-stage-vcs-be-car... -- specific to the startup/tech field.

If anyone has any more questions, please feel free to ask me here, and as I said above, I'll aim to write a more detailed followup next week.

Thanks ericabiz for the follow up. These are definitely the interesting points I was searching for in the article given the headline.

It certainly seems there are indicators that the market and economy could turn south. On my personal list, I also have the structural instability created by the current tariffs and escalating trade war, geopolitical weirdness, and the long term increase of inequality.

I look forward to reading your next article on this.

Ever increasing personal debt and decades long stagnant wages are themselves a warning sign. It doesn’t take long for debt payments to outgrow stagnant wages - and a new round of large scale bankruptcy.

There’s also the bit of wisdom I got from a professor: “The peak has come when the last hold out buys into the notion of permanent growth.”

Tariffs threaten to ignite a sequence of events leading to the dethronment of the US. If the worlds base currency changes from USD be ready for the US to quickly look like Greece or worse.

Lighting a fire under a hot market through continued low interest rates, increased government spending (even in the form of lowered taxes), and removing market stabilizing regulations (ala the consumer protection bureau or allowing large business mergers, and undoing net neutrality) leverage the market up to almost assure a breaking point.

The last I checked, the underlying issues that contributed to the 2008 recession were also still intact - ARM mortgages, seemingly inexplicable real estate price growths, lack of bank regulation, mortgage backed securities, etc. Wellsfargo even created millions of fraudulent accounts to prop up their valuation.

Just stagnant wages and increasing prices can pop a market. Here’s hoping this time the US takes on New Deal style projects to right itself. We need healthcare corrections, consumer protection, trust busting, and infrastructure. Fiber to the people.

Even the opioid crisis contributes to this. Heroin addicts don’t easily keep work and their spending gets pretty ... singular. It’s having a destabilizing affect on whole populations.

The last paragraph of your article is the most important. Positioning yourself well financially (i.e. limited debt, access to liquid capital) will allow you to really build wealth during the next downturn. 2008 - 2010 were windfall years for me. A little luck and bold, aggressive moves played a big part but if I was not financially positioned to take advantage of the underpriced assets, I would have been stuck on the sidelines.

You are correct that right now is the time to start getting your financial house in order. But, if you're considering investing (rather than paying down debt), I don't believe you should sit in cash. It would be better to invest in a solidly performing asset today than a cheaper asset 3-5 years from now. If the investment is solid, this will just add to your balance sheet during the downturn.

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