I hear a-lot of negative sentiment regarding an incoming recession. I hope it doesn't happen, but I don't want to be a sitting duck.
Just want to know how fellow hackers are consuming this news.
- What do you anticipate?
- Do you have plans incase you get laid off?
- Savings? If so for how long?
- Are you sitting on an inflation hedge?
- What business plans may thrive in a recession?
It’s a reflexive system.
Honestly- unless something has demonstrably “broken,” such as Lehman or AIG collapsing, then nothing systemically has actually changed.
There is so much nonsense and speculative Austrian economic discourse every time the market hits a speed bump that you can’t actually rely on anything anyone says.
Here is the real test for you: “have you seen any major institutions fail, implode or go under?”
If not, we aren’t in trouble yet. The stock market and economy have incredible ability to make adjustments, rebalance and repair themselves when provided information and time.
Yes the federal reserve will raise interest rates.
But that doesn’t mean the entire economy will implode. It might just mean that resources are allocated from some sectors to others.
This information is almost entirely priced in now. Unless more surprises occur (unexpected rate hikes or rate hikes happening too fast, or more rate hikes announced or institutions randomly imploding because debt burdens too high, or Russia invades Ukraine) we are probably ok.
And then again; the federal reserve is not a passive actor. They might announce a rate increase, watch what happens, then change their minds if things correct too far.
Suddenly your Peter Schiff scenario changes under your feet as the federal reserve unleashes the flood gates after allowing a calculated cooling off in speculation.
So that’s it: Has anything failed yet? Any imploding banks? Did Russia invade? If not, we aren’t in crisis mode yet so just chill out and watch.
If you are worried about a crisis; watch for institutional failure as your signal that real crisis has arrived. Everything else is just hot air.
You're basically saying that the average state of the stock market and the economy is to be average and not non-average. Ok, that's true by definition. The point is that people who have even marginally better understandings of how it plays out in the tail events can make enormous amounts of money. Even those people would agree that the average case is for there not to be an issue.
Market's are efficient, thinking that that means they are always right is a drastic misunderstanding of what EMH says. Were markets right in mid 2008? Clearly not. And people were specifically calling for and profited off of what happened.
Take your example 2008, how would you use that information from the past to time the stock market today? Unless you have some information the rest of us don't have, you could be sitting on S&P Put options for the next 10 years.
The (few) people who profited in 2008 realized the subprime mortgages were rotten to the core before any media or masses knew what a subprime mortgage was.
This isn't comparable to the information we all have today that covid is here, interest is high, and russia is teeing up the border, which is already priced in.
>This isn't comparable to the information we all have
there's no set of information we all have. plenty of people don't believe covid is real, and that russia is run by reptilian aliens. Markets efficiently value their "knowledge" just as much as anyone else's.
This is the point though. Like what today?
If you have some theory why the Market is mispriced I'm all ears, but saying "plenty of people don't believe covid is real, and that russia is run by reptilian aliens" isn't really an argument.
You are the one making the case that everyone else is wrong, so the burden of proof lies with you.
credit bubbles often pop when some institution can't cover its obligations, but asset bubbles don't seem to need such a failure — and can deflate on their own.
Everybody can see danger if there's a red flashing "DANGER" sign blaring.
The point is to be ready before you see that flashing sign and not get caught up in a mad scramble.
We're seeing the danger signs: inflating currency and families paying far more for living expenses.
Heed the warnings or not, but they exist.
I'm not saying don't do index funds at all, and niehter is morelandjs, but just be conscious of this dynamic.
My personal approach is to invest directly in industries that I know well, like tech, and to find funds to invest in industries that I think are promising but I don't know enough about to make good investment decisions, like ARK Genomics.
And I'd add to the list "get some reputable crypto (BTC, ETH, ETC)".
Do you spend 40 hours a week pouring over the 10-Q’s of any particular company, and its competitors and customers and suppliers, or directly engaging with upper management and bankers?
Then why would you think you have any advantage over the insiders that do?
I’ve followed it for two of my very modest investments and they have all worked out way better than I would have thought. I know there is a big chance that this is all just being lucky and that this is just a side effect of a bull market.
But he means you have an advantage as an insider.
For example, if you saw that you and all your tech friends companies’ were switching to this payroll system that seems light years ahead of the current one. That can be an indication its worth looking into.
Maybe as a radiologist, you know that a certain x-ray machine will be leaps and bounds better than what the current standard is.
It is not simply based on insider information though. There’s a bunch of chapters dedicated to what numbers to look through, identifying if a stock is cyclical.
As a developer, I started using AWS when it was just E2C (or was it S3 first? - whichever), but again, you're seeing things before most people do or before they become big.
It's more about "noticing" than it is about reading prospectus and quarterly reports. Yes, you'll want to look at those as well, but only when you think you've noticed something that looks promising.
I feel this all the time and haven't been able to quite formulate it. I like to think of this as convenience things like subscriptions or fancy items that we can live without.
Over the top example: buying a travel trailer because you think it will save money on hotel rooms, and you have a large SUV already that you like. Now you have pushed your large SUV a step closer to a need, because without it, your rapidly-depreciating travel trailer is worthless to you.
More HN-relevant: you have a bunch of streaming subscriptions because there are series on each of them that you can’t bear the thought of dropping in the middle. You slowly accumulated this collection of subscriptions as you started watching other, previous series that “everyone” was talking about.
The Fed is very conservative lately. Monetary tightening is not likely to be drastic, Volcker era stuff unless things considerably worsen. Keep in mind tightening means reducing open market operations, not even stopping them or selling off the assets on the Fed balance sheet. We are still a long way from objectively tight policy, we are just not going to be as ridiculously loose as we were.
And what would cause other countries to try to attack the status quo of the US global reserve currency? Severe economic recessions and/or strategic plans of their own countries. War could be the only choice the US has in order to defend it's control over the system (and therefore the currency value).
Do I think these types of scenarios are necessarily likely or on a short time frame? No. But they can't be ruled out by anyone who has taken a history course. And it's those types of really severe circumstances where preparation can make the most difference.
A recession may be "incoming", or it may not. People have been sure of one every day since 2011. If you had listened then and liquidated all your investments/overly hedged your bets you would have missed out on the biggest bull market in history. The same could be true today.
You should always have enough in savings to withstand 6-8 months of market turmoil and no income. To be conservative you can even increase that to 12 months. And keep your skills up to date so you have an advantage over the crowd in a bad job market. Beyond that, you don't really have to plan for any specific global economic disaster.
Takes a look at historical ups and downs and gives hard data without too much colour being added.
[1] https://www.amazon.com/Changing-World-Order-Nations-Succeed/...
Either way, my strategy is (and will continue to be) to have a modest payed-off house in a low cost-of-living area. Worst case, I could afford my bills doing e.g. one of the food delivery services (which is how I payed the bills for part of the 2008 recession).
I do think economy is about to slow down rapidly but will there be a recession? It's anyone's guess.
Seeing prices rising everywhere is a pretty scary sight. I earn a decent amount of money, but I can't buy a house, and renting an apartment is so expensive that I would need to look for another job, with a higher salary first. Then I am not even addressing the energy costs or the food prices. It feels like such a hopeless situation. Moving somewhere "poor" (excuse me for using that word), is what feels the easiest way to offset any possible inflation in the short/medium term. In 5-10 years from now, I will move back with savings; unless of course I have grown too fond of SEA
Second, let me answer your questions:
- What do you anticipate?
It depends on geopolitical situation, if Ukraine become a crisis center, it will be much worst for us in the Europe (I live in Croatia, EU member state). We are small 3rd world country in Europe, heavily depending on others recourse, so the first strike will be LNG prices, and yes, gasoline prices.
So, I anticipate chaos.
- Do you have plans incase you get laid off?
I have some savings, I can survive until the end of this year with no income and selling my car. Plan is to work whatever is needed to survive.
- Savings? If so for how long?
As I said, I always have at least 1 year in advance for surviving. Spending side is also adjusted to the income side.
- Are you sitting on an inflation hedge?
I would say.
- What business plans may thrive in a recession?
Any plan that finds the sweet spot of USP. I am economist, not a dev, so, for your business to survive in times of recession, sometimes a good plan is to do the opposite, if you can, this can be a investment for the future.
For example, car prices are going high, and you are selling used cars. You know people are getting less for their money, so you have a whole lot of cars siting in the yard, not selling. You could easily drop your maring to bear minimum, just to start selling, and you start driving revenue. What is here much more important, if all in your industry, start to rise prices, if start lowering, you will win on the market.
People have theories and models when it comes to economic and financial forecasting, not evidence.
A theory means people talking about what they think.
Go read this thread. it's full of theories.
Maybe this time is different. But your default assumption should be that there will be a recession in the next year or two, and you should be prepared for that.
[0]: https://ethz.ch/content/dam/ethz/special-interest/mtec/chair...
If you want an embedded developer job for example, arguably its more complex and closer to silicon, but there are significantly less jobs and from what I've seen webdev pays better anyway
I think it can become a self fulfilling prophecy, recessions dont stop people spending, you all need to eat/sleep but if the fear gets a grip, do more selling, go where there is no recession which could be abroad or across country, find out what companies profit massively and target their customers. Stock markets are good places to look for the most profitable.
There is plenty of money out there for everyone, its just not in your pocket!
To offset fear with customers, offer fixed term contracts, banks love contracts on paper like that, it helps for taking on more debt and if the inevitable occurs just make sure you go out with a massive bang where the banks have no chance of recovering the money.
Also worth diversifying, any new business or income streams can always be sold off in the future, pay attention to the news, demographics, find out where the money is. Alot of boomers have assets, younger generations dont, cater for the needs of those with money.
I dont think I've missed anything?
My 2 cents, It appears that ether along with the other cryptocurrencies are behaving like speculative assets, move in the same general direction as stocks do. Thus I think cryptocurrencies make a bad recession hedge. Additionally the inflation seems to me to be driven by the covid-19 crash recovery. The fear in the markets again seems to me to be that measures to contain inflation are going to harm the recovery and put us in a recession. As such in case the recession does come, I would expect it to come along with lower inflation.