Prepare for a massive recession.

[fskimospy]

Guys like him wouldn't be able to run a business like that if they weren't resonating with a certain portion of the population. I think its something intrinsic, people either get it or they don't.

I've had similar feelings like "2014 seems all recession-y" but I don't really act on it. The way of life we have now versus how the way of life will have to be in the future is totally mismatched. Its going to cause alot of people to lose their shirts unfortunately by being in the wrong line of business at the wrong time. Going after the wrong certifications and getting the wrong degrees. Its bad. This stuff takes time to really come to light. You can make pretend everything is going swell for a long time, IE baby boomers taking from retirement or equity to pay for their kids degree and such. Bottom line though is that alot of wealth is being decimated and it'll catch up to us eventually. Recessions always happen, we're just totally unprepared for the next one. We were totally unprepared for the last one too but the whole "Avoid a great depression emergency measures" I believe is a one-time trick. It won't work twice.

Way of life in the future... much more conservation. Much less social flair. Meaning by historical standards people have extravagant weddings, have an extravagant extended adolescence, have very little social/family network, and just in general consume quite a bit more than they need for no good reason in terms of luxury cars and such. People are misallocating money on a rather large scale. Maybe its always been this way who knows.

People aren't really investing, saving, or understand the role of capital in capitalism. I guess thats what you'd expect with policy that accommodates borrowing at the expense to savers. Meaning people are going to be completely tapped out on the main street level for the next recession, whenever it happens. Generally every 7-15 years. People are just plain over-extended. Some parts of the economy are totally isolated and everything is going perfectly well. They are completely isolated and don't know how bad it is for many people. I've had the pleasure of dipping feet in both worlds. The bifurcation in values among different socioeconomic classes is becoming staggering.

Why would households be less prepared now when there has been a massive deleveraging over the last 8 years?

 

[sm625]

It is very simple to predict a recession. There are only 5 indicators you need to look at, any 3 of which signal a recession.

1. The Philly Fed state coincident index drops below 30.
2. Real PCE growth drops below 0% yoy.
3. An inversion of the yield curve.
4. Industrial Production drops below -2% yoy. (Currently signalling recession)
5. Retail sales growth falls below 2% yoy. (Currently signalling recession)

We are still waiting on 1,2,or 3.

 

[zinfamous]

Then you know how it works. The buyer often pays more in payments the last year than the car will fetch when paid off, particularly at 96 months. Compound interest works that way.

If you can't afford to pay it off in 4-5 years then buy something cheaper. Grant Cardone won't tell you that nor will the salesman, bet on that.

I hate this mindset.

Me: If you can't afford to buy it now, then you can't afford it. Especially with cars. Car loans are just plain stupid. (I once had one, and yes, I was a sucker once.)

(Houses are different, obviously.)

 

[soundforbjt]

I hate this mindset.

Me: If you can't afford to buy it now, then you can't afford it. Especially with cars. Car loans are just plain stupid. (I once had one, and yes, I was a sucker once.)

(Houses are different, obviously.)

Agree, I've only had one car loan myself. If i can't afford something, I wait until I can.

 

[fskimospy]

I hate this mindset.

Me: If you can't afford to buy it now, then you can't afford it. Especially with cars. Car loans are just plain stupid. (I once had one, and yes, I was a sucker once.)

(Houses are different, obviously.)

Well I think that works up to a point as car is a necessity for gainful employment in a lot of the US. I would agree that car loans should be avoided if possible and if not then they should be as small as possible though. Car depreciation is horrifying.

 

[Londo_Jowo]

I hate this mindset.

Me: If you can't afford to buy it now, then you can't afford it. Especially with cars. Car loans are just plain stupid. (I once had one, and yes, I was a sucker once.)

(Houses are different, obviously.)

I'm seeing more and more people going the car lease route. This to me is worse than a car loan as in the end the person has nothing and if they exceed the mileage allowed in the lease they have pay out more to satisfy the contract.

 

[Jhhnn]

I hate this mindset.

Me: If you can't afford to buy it now, then you can't afford it. Especially with cars. Car loans are just plain stupid. (I once had one, and yes, I was a sucker once.)

(Houses are different, obviously.)

If everybody did that the new car market would vaporize into thin air.

Whether it makes sense to buy a new car & make payments is highly situational. The only new car I've ever owned is the one I'm driving & it's 10 years old.

 

[Jhhnn]

I'm seeing more and more people going the car lease route. This to me is worse than a car loan as in the end the person has nothing and if they exceed the mileage allowed in the lease they have pay out more to satisfy the contract.

Lots of people end up buying the car for such reasons. They don't get new car interest rates, either.

 

[Londo_Jowo]

Lots of people end up buying the car for such reasons. They don't get new car interest rates, either.

My Lexus was previously a leased car, I got a great deal on it and have the remaining warranty plus 2 years free service. Once the original warranty is up I get a 2 year unlimited mileage warranty. Could have gotten new car interest rates but chose to borrow the money from myself.

 

[shady28]

You think vehicles are designed to last 7 years and only 100-120k miles?

http://www.rita.dot.gov/bts/sites/r...ortation_statistics/html/table_01_26.html_mfd

http://business.time.com/2012/03/20/what-you-only-have-100k-miles-on-your-car-thats-nothing/

In my experience, the drivetrain will last a long time on a modern car but the other parts will not.

Some examples :
Chrysler Pacifica, bought at 78k miles, no issues until ~110k.
At 110k - 134k (where we sold it) :

Both motor mounts replaced, one of them twice
Both front rotors warped
Both front tie rods replaced
Radiator leak, replaced
Rear end shock leak/fail - $800 to fix this due to "Mercedes" rear end on these cars.

2008 Mustang v6 Convertible -
Bought at 80k miles, currently at 143k
No issues until ~100k, after 100k -
Plastic coolant valve leaked, replaced ~$200 (did it myself)
Harmonic balancer and water pump fail, ~$700
Rotors on front replaced, ~$500
Alternator failed, ~$400 to replace

The car currently needs the front end suspension and linkages replaced, tie rod ends etc, probably ~$1000 in work. The rear end also clunks going into gear, meaning it probably needs to have the rear end gears replaced, another $500 or so most likely.

The engines and transmission are mostly good up over 200k these days, or were anyway. The rest of the car? Not so much.

The engines are getting a bit questionable thanks to tricks to meet EPA / CAFE regs. Specifically the VVT / Cylinder deactivation. Below is a link to where Honda's 3.5L v6 Accord cost them a lawsuit, but GMs 5.3L apparently has similar issues as does the Ford 5.4 Triton - they are both known to burn oil, just like the Honda, and it all goes back to cylinder deactivation.

God only knows how long something like the 2.7L V6 turbo in the new F150s will last.

Class Action Settlement Reached Over Honda Accord Oil Defect


Just IMO, if buying a new car make sure you pay it off before the warranty is up.

 

[zinfamous]

I'm seeing more and more people going the car lease route. This to me is worse than a car loan as in the end the person has nothing and if they exceed the mileage allowed in the lease they have pay out more to satisfy the contract.

I used to think that way, but I see better arguments for leasing (which I still think is dumb)

--The new car is going to depreciate significantly in value. Putting a lot of money into owning something whose value you will never recover
--specifically, for industries that sort of "require" a certain type of false prestige, say a douchy real estate agent or business dude, you need to stay relatively current and fancy. Leasing makes way more sense than buying a new car every 3 or 5 years.
--It's kind of like renting vs owning a home. I think both have their positives and negatives but wholly depends on the needs of the individual.

I took out a meager 5 year loan for a used (30k mile) 1.5 year-old car back in 2009 ($7k, I think? after $5k down on a Mazda3). I paid it off in about 3.8 years. I went from a budget of ~$5k for something way more used, to reminding myself that whatever car I buy, it is going to be driven into the ground and brought to its knees, hopefully after a long life of 20 or more years of general maintenance and relatively low use (I'm a sub-4k miles/year person) and a healthy 200k+ miles.

For me, going newer and more spendy on something that should have lower costs in earlier years and longer life span makes sense. I even talked myself out of buying an older and cheaper Audi A4.

 

[zinfamous]

If everybody did that the new car market would vaporize into thin air.

Whether it makes sense to buy a new car & make payments is highly situational. The only new car I've ever owned is the one I'm driving & it's 10 years old.

Luckily, plenty of people like me confidently understand that we can thrive well into the future exploiting better savings and index funds while profiting off the hubris and shitty math skills of the typical American consumer raised on Saturday cartoons and clever marketing, thinking they need a pile of new shiny things every year and can magically beat the market playing with a handful of papers.

 

[Jhhnn]

Luckily, plenty of people like me confidently understand that we can thrive well into the future exploiting better savings and index funds while profiting off the hubris and shitty math skills of the typical American consumer raised on Saturday cartoons and clever marketing, thinking they need a pile of new shiny things every year and can magically beat the market playing with a handful of papers.

Luckily for you, you're making enough money to not live hand to mouth like ~half the families in America.

They don't buy shiny new stuff every year & they don't play the market at all. Lots are lucky to save up for Christmas for the kids. They're two paychecks away from living on their credit cards.

That's what makes the whole thing so fragile & why looting sprees like the Ownership Society are very bad for America. We're a high overhead society very dependent on credit at every level. When the banksters over extend credit so that they can reap 10 years' honest profits in 5 years the whole thing is bound to fall down because the debt can't be supported. The reason it fell down so bad the last time was that they necessarily invested in each other's voodoo bullshit MBS because they couldn't stuff them all into the GSA's & middle class retirement accounts. Couldn't borrow against them in the repo market, either, which is how they maintained cashflow. When investors wised up they all had their butts hanging out in the breeze together.

 

[OverVolt]

Why would households be less prepared now when there has been a massive deleveraging over the last 8 years?

Lol why do you ever bother talking to me in the first place.

My opinion is that household savings are terrible as is household leverage. Many people have already bet the farm and have thin budgets.

 

[3chordcharlie]

Seen on a truck yesterday: "New roof from $59/month".

 

[fskimospy]

Lol why do you ever bother talking to me in the first place.

My opinion is that household savings are terrible as is household leverage. Many people have already bet the farm and have thin budgets.

Okay, so if households are going to be totally tapped out when the next recession happens as compared to the last one, how do you explain this?

 

[Hugo Drax]

96 month refi.

Most of the 'everybody drives' radio ads around here are to put you in a 6-7 year loan on a used car.

It may not signal the end of days, but it ain't good.

It is not a problem as long as credit is allowed to expand to infinity.

 

[Hugo Drax]

In Miami lots of people are buying used 7 series BMWs to look rich. its funny to watch them driving them. they probably borrowed for 7 years to buy a used 7 series for 23-28K

Whats interesting is you do not see this in Manhattan.

 

[fskimospy]

In Miami lots of people are buying used 7 series BMWs to look rich. its funny to watch them driving them. they probably borrowed for 7 years to buy a used 7 series for 23-28K

Whats interesting is you do not see this in Manhattan.

That's because in Manhattan if you aren't actually rich you probably don't own a car.

 

[OverVolt]

..

 

[fskimospy]

I'm going with charts that show GDP being propped up by government deficit spending for $1000.

Government deficits as a percent of GDP are below modern historical averages, so that doesn't make sense either.

 

[1prophet]

This one says things are bad

Luckily for you, you're making enough money to not live hand to mouth like ~half the families in America.

They don't buy shiny new stuff every year & they don't play the market at all. Lots are lucky to save up for Christmas for the kids. They're two paychecks away from living on their credit cards.

That's what makes the whole thing so fragile & why looting sprees like the Ownership Society are very bad for America. We're a high overhead society very dependent on credit at every level. When the banksters over extend credit so that they can reap 10 years' honest profits in 5 years the whole thing is bound to fall down because the debt can't be supported. The reason it fell down so bad the last time was that they necessarily invested in each other's voodoo bullshit MBS because they couldn't stuff them all into the GSA's & middle class retirement accounts. Couldn't borrow against them in the repo market, either, which is how they maintained cashflow. When investors wised up they all had their butts hanging out in the breeze together.

This one says things are good

Okay, so if households are going to be totally tapped out when the next recession happens as compared to the last one, how do you explain this?

Stay tuned for the next recession and we will know who the winners are, who the losers are, and those who just like to disagree with everyone because they are special.()

 

[Mai72]

In Miami lots of people are buying used 7 series BMWs to look rich. its funny to watch them driving them. they probably borrowed for 7 years to buy a used 7 series for 23-28K

Whats interesting is you do not see this in Manhattan.

You can buy a $35k C-Class Mercedes new. The thing is it's not really a Mercedes. It's cheap. Many of the parts have been stripped. Why would anyone buy a cheap looking Mercedes when they could have bought a fully stocked Nissan Altima is beyond words.

My uncle drove a GLE Coup class Mercedes. The car cost $75k. Now that's a frekin Mercedes. He also drove a S-Class Sedan. That car cost $95k. Paid both out of pocket.

I hate fake people. If you don't have money that's fine. But, don't try to be a baller when you're not even close to being one.

 

[Jhhnn]

This one says things are bad

This one says things are good Stay tuned for the next recession and we will know who the winners are, who the losers are, and those who just like to disagree with everyone because they are special.()

I didn't say things are bad. I said we should restrain the exuberance of the banking lootocracy. We seem to be accomplishing that with Dodd-Frank & regulators actively doing their jobs.

I don't see debt levels as dangerous but rather as an inhibiting factor for the economy. They're still high enough to hold us at the zero lower bound wrt growth & interest rates.

 

[Linux23]

84 month auto loans are kinda dim for consumers given that they'll likely spend more in payments the last year than the vehicle would fetch on the market.

At 7 years old, the average vehicle mileage is 100-120K miles which is basically the limit of how long they were designed to last.

my car is 7 years old with 70k miles. so i only should expect 30-50k miles more out of this car?