Recession predictions

Timing belt

Wanderer78 wrote: »

unfortunately im expecting a financial sector wobble very very soon, particularly globally, of which we re complexly intertwined with, a very similar set of circumstances is currently at play in the sector, compared to pre 07/08

07/08 was predominantly a liquidity crises and I can’t see this being the cause again as enough work has been undertaken and there is loads of liquidity out there.

If there is a wobble it will be in the shadow banking sector e.g. funds.

Wanderer78

Timing belt wrote: »

07/08 was predominantly a liquidity crises and I can’t see this being the cause again as enough work has been undertaken and there is loads of liquidity out there.

If there is a wobble it will be in the shadow banking sector e.g. funds.

i understand that alright, but we re experiencing a dramatic drop in the demand for new credit and an increasing likelihood of defaults and non performing loans, the longer this goes on, this could be a big problem for the sector

Timing belt

Wanderer78 wrote: »

will they be willing to take the risk! i think it could be, i think it would be best to blow out deficits, and push it into the public domain, less risky

They have already cut the capital buffers on the banks which should give the bank’s capacity to lend to customers. Whether it is enough is the question.

If countries blow out deficits then we could easily see another sovereign crisis a few years down the road when gov debt is rolled over.. very big risk to take

Wanderer78

Timing belt wrote: »

They have already cut the capital buffers on the banks which should give the bank’s capacity to lend to customers. Whether it is enough is the question.

If countries blow out deficits then we could easily see another sovereign crisis a few years down the road when gov debt is rolled over.. very big risk to take

who will be willing to take on these debts, while heading into such uncertainty?

as we ve learnt yet again from 08, growing private sector debt is far more risky and dangerous than growing sovereign debt, plough on with the sovereign debt!

Timing belt

Wanderer78 wrote: »

i understand that alright, but we re experiencing a dramatic drop in the demand for new credit and an increasing likelihood of defaults and non performing loans, the longer this goes on, this could be a big problem for the sector

Yes I fully agree but the drop in demand for new credit Particularly retail has been there for a while and to counter act this banks have undertaken more corporate lending to the likes of funds. This is why this sector has grown so fast. The approach by the ECB with there negative interest rates and QE encourages lending. as banks got burned by mortgages and cre lending at the last crash they have a reduced risk appetite to lend to this sector. Instead they have lent to funds sector who along with investors cash have invested in CRE to take up the slack in the market and this is where I see the risk

Wanderer78

Timing belt wrote: »

Yes I fully agree but the drop in demand for new credit Particularly retail has been there for a while and to counter act this banks have undertaken more corporate lending to the likes of funds. This is why this sector has grown so fast. The approach by the ECB with there negative interest rates and QE encourages lending. as banks got burned by mortgages and cre lending at the last crash they have a reduced risk appetite to lend to this sector. Instead they have lent to funds sector who along with investors cash have invested in CRE to take up the slack in the market and this is where I see the risk

...and we all benefit from share buy backs!

Timing belt

Wanderer78 wrote: »

who will be willing to take on these debts, while heading into such uncertainty?

as we ve learnt yet again from 08, growing private sector debt is far more risky and dangerous than growing sovereign debt, plough on with the sovereign debt!

If the sovereign debt is used to improve infrastructure or something tangible then yes but if it is just used to pay running costs then that spells disaster

Wanderer78

Timing belt wrote: »

If the sovereign debt is used to improve infrastructure or something tangible then yes but if it is just used to pay running costs then that spells disaster

completely agree there, you have to do something of benefit with the debt, there has to be a return, in order to service the debts, it could be easily used to support infrastructure projects, stimulating the private sector in the process

Timing belt

Wanderer78 wrote: »

completely agree there, you have to do something of benefit with the debt, there has to be a return, in order to service the debts, it could be easily used to support infrastructure projects, stimulating the private sector in the process

Yes but EU law stops us from doing it before ..with France and Spain in the same boat this time they will probably let everyone crack on and do it.

Sorolla

Once the vaccine is available around March 2021 and the world gets immunization there will be a feeling of euphoria and hope among the nations of the world.

The world economy will experience economic growth as never seen before - it will be the most beautiful thing

Our futures will be brighter and we will have wealth not imaginable at this present time

Currently I think there is too much pessimism and people should take a daily dose of 25 ug of Vitamin D or eat oily fish like tuna to make us feel better

This pessimistic outlook is already priced into stock markets

The roaring 20’s are just about to begin

Wanderer78

Timing belt wrote: »

Yes but EU law stops us from doing it before ..with France and Spain in the same boat this time they will probably let everyone crack on and do it.

i think so to, stupid law anyway, even though im sure there is some sort of good reason for it, but pushing majority of debt out to the private sector is lethal, its disturbing we havent figured this out from the past, from even a few years ago!

Wanderer78

Sorolla wrote: »

Once the vaccine is available around March 2021 and the world gets immunization there will be a feeling of euphoria and hope among the nations of the world.

The world economy will experience economic growth as never seen before - it will be the most beautiful thing

Our futures will be brighter and we will have wealth not imaginable at this present time

Currently I think there is too much pessimism and people should take a daily dose of 25 ug of Vitamin D or eat oily fish like tuna to make us feel better

This pessimistic outlook is already priced into stock markets

The roaring 20’s are just about to begin

maybe, maybe not, nobody knows, we cant keep going with soring debt levels though, particularly private debt

Timing belt

Wanderer78 wrote: »

i think so to, stupid law anyway, even though im sure there is some sort of good reason for it, but pushing majority of debt out to the private sector is lethal, its disturbing we havent figured this out from the past, from even a few years ago!

The rule is there to protect all countries with the Euro without the value of euro could weaken by one country taking out a load of debt.

one of the precondition for countries joining euro was debt cannot exceed x% of gdp But even that got fudged by countries taking out public-private debt as it wasn’t counted. If it wasn’t fudged Italy and Greece would never have been allowed join euro

Wanderer78

Timing belt wrote: »

The rule is there to protect all countries with the Euro without the value of euro could weaken by one country taking out a load of debt.

one of the precondition for countries joining euro was debt cannot exceed x% of gdp But even that got fudged by countries taking out public-private debt as it wasn’t counted. If it wasn’t fudged Italy and Greece would never have been allowed join euro

yea im aware of that, but its crippling the euro zone now, it has to change, or the whole thing could collapse. by having this rule, it also forces the money supply out to the private sector, we know what happens then!

Timing belt

Sorolla wrote: »

Once the vaccine is available around March 2021 and the world gets immunization there will be a feeling of euphoria and hope among the nations of the world.

The world economy will experience economic growth as never seen before - it will be the most beautiful thing

Our futures will be brighter and we will have wealth not imaginable at this present time

Currently I think there is too much pessimism and people should take a daily dose of 25 ug of Vitamin D or eat oily fish like tuna to make us feel better

This pessimistic outlook is already priced into stock markets

The roaring 20’s are just about to begin

A recession has been due for a while covid is only the trigger. Markets run on fear and greed. And there has been a long run of greed.

Wanderer78

Timing belt wrote: »

A recession has been due for a while covid is only the trigger. Markets run on fear and greed. And there has been a long run of greed.

there is greed of course, but i think its a lot more complex than that, i do think its more complex human behavior more than anything, such as 'Gresham's dynamic' etc

StevenToast

Sorolla wrote: »

Once the vaccine is available around March 2021 and the world gets immunization there will be a feeling of euphoria and hope among the nations of the world.

The world economy will experience economic growth as never seen before - it most beautiful thing

Our futures will be brighter and we will have wealth not imaginable at this present time

Currently I think there is too much pessimism and people should take a daily dose of 25 ug of Vitamin D or eat oily fish like tuna to make us feel better

This pessimistic outlook is already priced into stock markets

The roaring 20’s are just about to begin

Donald Trump speak

Timing belt

Wanderer78 wrote: »

yea im aware of that, but its crippling the euro zone now, it has to change, or the whole thing could collapse. by having this rule, it also forces the money supply out to the private sector, we know what happens then!

Yes but the only reason that eu sovereigns have access to cheap funding is because they are pushing it out to the private sector. They are caught in a dangerous cycle

Timing belt

StevenToast wrote: »

Donald Trump speak

Lol

Timing belt

Wanderer78 wrote: »

there is greed of course, but i think its a lot more complex than that, i do think its more complex human behavior more than anything, such as 'Gresham's dynamic' etc

It’s always more complex because there are always unforeseen consequences but at the heart of it is greed and fear

Wanderer78

Timing belt wrote:

Yes but the only reason that eu sovereigns have access to cheap funding is because they are pushing it out to the private sector. They are caught in a dangerous cycle

To be honest, I think we re all caught in dangerous cycles, in regards the running of the EU, we urgently need dramatic changes of its operations, or it could all go down, it's looking like Italy could very well be the next canary, covid could push things to the limit again, very worrying time for the union.

Timing belt wrote:

It’s always more complex because there are always unforeseen consequences but at the heart of it is greed and fear

Again, I think its far more complex than just this also, but again, there are elements of this to, I truly do believe it's more complex human behaviour than anything, fundamental institutional changes are required, urgently, and probably the creation of new institutions also, it's time we steeped up to it, rather than our usual can kicking approach

Wanderer78

might give some a giggle here

https://twitter.com/i/status/1307243693749960705

Roger the cabin boy

Timing belt wrote: »

A recession has been due for a while covid is only the trigger. Markets run on fear and greed. And there has been a long run of greed.

It isn't just an economic swing coming.

Covid has brought forward permanent changes to society.
WFH is a huge hit to economic output and it is not going away.
Working in an office will never be the same again. Ever.

That's a massive change in itself. The amount of industrial effort it takes to get to an office 5 days a week is significant.
Clothes, food, transport, fuel, infrastructure, time, are all required just to get to and from. Even if WFH is a fraction of the total hour worked, it will still be a big hit to economies.

Then you have the rapid shift from bricks and mortar stores to online.
Again, the economic footprint of a shop is so much bigger than that of a warehouse business.

These are just two if the consequences of Covid. You could look at every part of life it is affecting and see similar huge change.

This time it is different.

brisan

Sorolla wrote: »

Once the vaccine is available around March 2021 and the world gets immunization there will be a feeling of euphoria and hope among the nations of the world.

The world economy will experience economic growth as never seen before - it will be the most beautiful thing

Our futures will be brighter and we will have wealth not imaginable at this present time

Currently I think there is too much pessimism and people should take a daily dose of 25 ug of Vitamin D or eat oily fish like tuna to make us feel better

This pessimistic outlook is already priced into stock markets

The roaring 20’s are just about to begin

I am not sure weather to read this in a normal voice or a sarcastic voice
I pray to God the OP meant it to be read in a sarcastic voice because from the first sentence on none of that is happening.

brisan

Roger the cabin boy wrote: »

It isn't just an economic swing coming.

Covid has brought forward permanent changes to society.
WFH is a huge hit to economic output and it is not going away.
Working in an office will never be the same again. Ever.

That's a massive change in itself. The amount of industrial effort it takes to get to an office 5 days a week is significant.
Clothes, food, transport, fuel, infrastructure, time, are all required just to get to and from. Even if WFH is a fraction of the total hour worked, it will still be a big hit to economies.

Then you have the rapid shift from bricks and mortar stores to online.
Again, the economic footprint of a shop is so much bigger than that of a warehouse business.

These are just two if the consequences of Covid. You could look at every part of life it is affecting and see similar huge change.

This time it is different.

Some people seem to think when we get a vaccine we will go back to normal
There will be no normal left to go back to
I hate the phrase but we all best get used to the NEW NORMAL because it is going to around till the next pandemic hits

Timing belt

Roger the cabin boy wrote: »

It isn't just an economic swing coming.

Covid has brought forward permanent changes to society.
WFH is a huge hit to economic output and it is not going away.
Working in an office will never be the same again. Ever.

That's a massive change in itself. The amount of industrial effort it takes to get to an office 5 days a week is significant.
Clothes, food, transport, fuel, infrastructure, time, are all required just to get to and from. Even if WFH is a fraction of the total hour worked, it will still be a big hit to economies.

Then you have the rapid shift from bricks and mortar stores to online.
Again, the economic footprint of a shop is so much bigger than that of a warehouse business.

These are just two if the consequences of Covid. You could look at every part of life it is affecting and see similar huge change.

This time it is different.

Yes but these changes have a bigger impact on the financial stability of the economy. If for example you look at a normal retail shop the rent from the property has probably been securitised and off the back of this there has probably been a CLO Which has done an issuance which has probably been subscribed to by some fund Which has used the cash to make an investment either in shares or real estate. If the retail shop can no longer pay rent then the whole thing falls apart which has an impact on the stock market or on the property market. It just takes time for changes to flow down the pipes till we see the real impact.

brisan

Timing belt wrote: »

Yes but these changes have a bigger impact on the financial stability of the economy. If for example you look at a normal retail shop the rent from the property has probably been securitised and off the back of this there has probably been a CLO Which has done an issuance which has probably been subscribed to by some fund Which has used the cash to make an investment either in shares or real estate. If the retail shop can no longer pay rent then the whole thing falls apart which has an impact on the stock market or on the property market. It just takes time for changes to flow down the pipes till we see the real impact.

Thats why commercial ,property (ie retail, hotel ,office ) mortgage holders are becoming increasingly worried
This article was published on Feb 8 2020
A lot of these projects will have financed the purchase of sites
A lot that started building will have no option but to complete and never open
Of all of these how many will be built and how will existing debt be repaid

https://www.irishtimes.com/life-and-style/travel/ireland/100-new-hotels-for-dublin-is-that-too-many-or-too-few-1.4162692

Timing belt

brisan wrote: »

Thats why commercial ,property (ie retail, hotel ,office ) mortgage holders are becoming increasingly worried
This article was published on Feb 8 2020
A lot of these projects will have financed the purchase of sites
A lot that started building will have no option but to complete and never open
Of all of these how many will be built and how will existing debt be repaid

https://www.irishtimes.com/life-and-style/travel/ireland/100-new-hotels-for-dublin-is-that-too-many-or-too-few-1.4162692

The question is who is the mortgage holder.

If the investments are being made by cre funds then who has invested in these funds and who has provided lending to the fund. If you dig deep enough you will probably find a fund of a fund has invested and at the end of the trail a bank has lent to that fund.

At the last financial crisis it was probably easier to see where the exposure to the lending was as it was probably directly in the banking sector. But as regulators clamped down on banks it moved into the shadow banking sector but ultimately it is still financed by the banks just not as easily visible because of the structures in place. And the risks are hidden by the structures which means the banks don’t have to hold as much capital as if they lent directly.

The other issue is that the exposure is global and not just on the domestic market so impacts from the changes brought about from covid in another country could have an impact.

wassie

Roger the cabin boy wrote: »

It isn't just an economic swing coming.

Covid has brought forward permanent changes to society.
WFH is a huge hit to economic output and it is not going away.
Working in an office will never be the same again. Ever.

That's a massive change in itself. The amount of industrial effort it takes to get to an office 5 days a week is significant.
Clothes, food, transport, fuel, infrastructure, time, are all required just to get to and from. Even if WFH is a fraction of the total hour worked, it will still be a big hit to economies.

Then you have the rapid shift from bricks and mortar stores to online.
Again, the economic footprint of a shop is so much bigger than that of a warehouse business.

These are just two if the consequences of Covid. You could look at every part of life it is affecting and see similar huge change.

This time it is different.

Added to that, I do fear we have passed the greatest era of globalisation in terms of travel and trade, at least for the medium term.

Air travel is going to take many years to recover and get back to pre-covid capacity & pricing. Its not just business & tourist travel affected, there has been massive disruption to the 'just in time freight' via commercial airlines.

And global trade will take a hit as supply chains are shortened and the US & China seem destined for a digital divide which will also inhibit trade.

brisan

Timing belt wrote: »

The question is who is the mortgage holder.

If the investments are being made by cre funds then who has invested in these funds and who has provided lending to the fund. If you dig deep enough you will probably find a fund of a fund has invested and at the end of the trail a bank has lent to that fund.

At the last financial crisis it was probably easier to see where the exposure to the lending was as it was probably directly in the banking sector. But as regulators clamped down on banks it moved into the shadow banking sector but ultimately it is still financed by the banks just not as easily visible because of the structures in place. And the risks are hidden by the structures which means the banks don’t have to hold as much capital as if they lent directly.

The other issue is that the exposure is global and not just on the domestic market so impacts from the changes brought about from covid in another country could have an impact.

Thanks for that insight
So it will not take much for the whole house of cards to collapse again
Add Brexit into the mix and it does not look good