2017 Finance Trends

[james.hendrickson]

Hey Guys,

Okay - so I am at a finance bloggers conference here in San Diego. The smart finance publishers are saying that the following issues are going to be important for 2017:

1. Increased possibility of a recession. Most pundits/advisors have come up over the past few years and missed the recession of 2008, thus their ability to advise on economic downturn issues is going to be limited.

2. "Hunt for yield". Interest rates are going to be low for the immediate future. So, savers (like us) will need to take on alternatives to get a decent return on investments. Obvious places to look for yield are peer to peer lending and crowd-sourced real estate deals.

3. The student loan crisis will be an ongoing issue. In some cities in the United States the amount of student loans owed is actually greater than the average incomes. This is fine for high earning professions, but less so for people who have blue collar jobs and less ability to pay.

[kork13]

1. Increased possibility of a recession. Most pundits/advisors have come up over the past few years and missed the recession of 2008, thus their ability to advise on economic downturn issues is going to be limited.

I see that and respond with an outrageously exaggerated

Is a recession possible? Certainly. Is a boom just as possible? Sure. My 2¢ opinion: continued slow-to-moderate growth.

The best counterpoint I can offer is the most recent minutes from the Fed. Although they left the Federal Funds Rate steady for now, there was a strong expectation that the rate would adjust upward soon. The FFR is one of the most flexible tools available to the Fed in managing the American economy, by raising or lowering the cost of money for institutional lenders. Adjusting the FFR up (as they've somewhat-recently done, and as soon-expected again) would tend to lead the economy more toward recession.

But wait, that doesn't make any sense! Why would they INTENTIONALLY send us into a recession!?!? Because they don't see us headed in that direction. Indications point toward a trend of expansion, not contraction.

....unless, of course, one is:
a) given to hysterics
b) a firm believer that the Fed governors are all simply a bunch of decrepit imbiciles
c) a conspiracy theorist, and know without a shadow of a doubt that the Obama administration and all of his lackeys are going about effecting the intentional dismantling of American society from its very foundations.
.....in which case, I can totally understand why someone would see a recession as likely.

[james.hendrickson]

Kork,

I believe the argument regarding the possibility of an economic meltdown is a statistical one. Its been nearly 7 years without a major economic downturn. So...from a probability standpoint every year of growth without a recession increases the chances that a recession will occur in later years.

Assume a recession has a 50/50 chance of occurring in a given year. Then the chance of three recession free years is .5*.5*.5 = or .125. Similarly, the chance of four recession free years is .0625. Of course the chances that a recession in a given year AREN'T 50/50 - but that's the logic of the argument.

More importantly, the argument is that younger investor who don't have any experience with economic downturns won't be prepared in the event a recession does occur. They just don't have experience with it.

[GoodSteward]

I see that and respond with an outrageously exaggerated

Is a recession possible? Certainly. Is a boom just as possible? Sure. My 2¢ opinion: continued slow-to-moderate growth.

The best counterpoint I can offer is the most recent minutes from the Fed. Although they left the Federal Funds Rate steady for now, there was a strong expectation that the rate would adjust upward soon. The FFR is one of the most flexible tools available to the Fed in managing the American economy, by raising or lowering the cost of money for institutional lenders. Adjusting the FFR up (as they've somewhat-recently done, and as soon-expected again) would tend to lead the economy more toward recession.

But wait, that doesn't make any sense! Why would they INTENTIONALLY send us into a recession!?!? Because they don't see us headed in that direction. Indications point toward a trend of expansion, not contraction.

....unless, of course, one is:
a) given to hysterics
b) a firm believer that the Fed governors are all simply a bunch of decrepit imbiciles
c) a conspiracy theorist, and know without a shadow of a doubt that the Obama administration and all of his lackeys are going about effecting the intentional dismantling of American society from its very foundations.
.....in which case, I can totally understand why someone would see a recession as likely.

My concern here is many areas have not fully recovered from the last recession. Remember, the increase we have been under was due to printing a ton of extra money, so it's really more like borrowing a large loan to continue as normal instead of declaring bankruptcy. Eventually, it will catch back up. I've heard the next bubble to bust might be bonds according to some, and others say student loans. Either way, we are obviously only increasing our debt as a whole, and countries around the world are also slowing down/never recovered. China has even slowed down on oil and iron needs, which is a bad sign. Just saying.

The truth is, recessions are normal and needed. It's like an economic reset to help against inflation, and since the last one didn't actually run it's course (based on what I've read, I'm no pro here) it's likely to come back soon. I'm expecting it.

As for the Obama thing. I was watching a video today showing trains full of army vehicles and gear being shipped around the country to police stations. In January of this year a new bill was signed into law(quietly) that enabled the president to have full war power globally. Meaning he can send troops anywhere in the world for any reason without anybody else having a say. The constitution will be null during this time. Apparently, they took the law Lincoln was able to use and increased the power given to the president. If he declared martial law, he would stay in office indefinitely(until martial law was over). News reports are warning the west coast to prepare for a possible large natural disaster. Just think, with the racial issues stirring, then a major earthquake hits the west coast and we have riots and looting due to loss of power and water...it wouldn't be hard to declare martial law and all this other come to pass. I know it sounds crazy, but it is interesting to watch what is going on.

[scfr]

2. "Hunt for yield". Interest rates are going to be low for the immediate future. So, savers (like us) will need to take on alternatives to get a decent return on investments. Obvious places to look for yield are peer to peer lending and crowd-sourced real estate deals.

A less-risky avenue is to pursue bank bonuses.

[feh]

Is a recession possible? Certainly. Is a boom just as possible? Sure. My 2¢ opinion: continued slow-to-moderate growth.

+1

The "reasoning" that a recession has not occurred in 7 years therefor is going to occur soon is illogical. Recessions do not occur on a schedule, nor are they random events.

[feh]

As for the Obama thing. I was watching a video today showing trains full of army vehicles and gear being shipped around the country to police stations. In January of this year a new bill was signed into law(quietly) that enabled the president to have full war power globally. Meaning he can send troops anywhere in the world for any reason without anybody else having a say. The constitution will be null during this time. Apparently, they took the law Lincoln was able to use and increased the power given to the president. If he declared martial law, he would stay in office indefinitely(until martial law was over). News reports are warning the west coast to prepare for a possible large natural disaster. Just think, with the racial issues stirring, then a major earthquake hits the west coast and we have riots and looting due to loss of power and water...it wouldn't be hard to declare martial law and all this other come to pass. I know it sounds crazy,

Yes, crazy is the perfect word for this kind of hyperbole.

[james.hendrickson]

+1

The "reasoning" that a recession has not occurred in 7 years therefor is going to occur soon is illogical. Recessions do not occur on a schedule, nor are they random events.

Feh - even if recessions aren't random events, the are cyclical...and its been a while.

[kork13]

My concern here is many areas have not fully recovered from the last recession. Remember, the increase we have been under was due to printing a ton of extra money, so it's really more like borrowing a large loan to continue as normal instead of declaring bankruptcy. Eventually, it will catch back up. I've heard the next bubble to bust might be bonds according to some, and others say student loans. Either way, we are obviously only increasing our debt as a whole, and countries around the world are also slowing down/never recovered. China has even slowed down on oil and iron needs, which is a bad sign. Just saying.

The truth is, recessions are normal and needed.

This (highlighted red) is exactly why I don't see a new recession as an impending threat. I completely agree that recessions are very normal phenomena which are to be expected. However, in nearly all cases, they occur when the floor drops out of a high-flying market, or when a vital global market becomes tightly constricted.

Historical examples: Military spending plummeted in 1945, and again in 1953, following WWII & the Korean War, shortly followed by recession. OPEC strangled the oil markets in 1973 while the US was knee-deep in Vietnam, leading to another recession, with similar results from the 1979 Iranian Revolution. 2001 saw another recession following the dot-com bubble burst alongside the 9/11 attacks. Of note, this occurred a full 10 years following the previous (brief) recession in 1990/91. Finally, the 2007 mortgage/sub-prime lending crisis, which lasted a record 18 months (longest duration since the Great Depression).

Looking around today, I see no major market which is either wildly inflated or deeply constricted. Money markets are acting with restraint (though building reserves & awaiting future opportunities), and oil markets are slightly depressed, but both are showing mild-to-moderate growth from their minimums of the last couple years. Same goes for the real estate market. Unemployment is slowly reducing, and consumer income & spending are relatively steady (only very slow growth). These are all indicators that say the economy is slowly but steadily expanding, and these are also the indicators (among MANY others) that the Fed is monitoring.

As for the Obama thing. I was watching a video today showing trains full of army vehicles and gear being shipped around the country to police stations. In January of this year a new bill was signed into law(quietly) that enabled the president to have full war power globally. Meaning he can send troops anywhere in the world for any reason without anybody else having a say. The constitution will be null during this time. Apparently, they took the law Lincoln was able to use and increased the power given to the president. If he declared martial law, he would stay in office indefinitely(until martial law was over). News reports are warning the west coast to prepare for a possible large natural disaster. Just think, with the racial issues stirring, then a major earthquake hits the west coast and we have riots and looting due to loss of power and water...it wouldn't be hard to declare martial law and all this other come to pass. I know it sounds crazy, but it is interesting to watch what is going on.

This is grand. Could you please point out the name of the supposed bill that was "quietly signed into law"? The nice thing about Congress is that it's designed to be transparent. You can look up any bill passed into law online, so I'd love to take a look at this... I highly doubt that it exists, at least in the form that you are describing.

In the whole, this is merely hysteria of the uninformed. Read the Constitution -- there are very clear limits & allowances given to the executive. The President has held the authority to act globally for a long time, which was actually restricted by the 1973 War Powers Act. Even still, that is the same authority that G.W. Bush used to send us (myself included) to Iraq & Afghanistan. Bush & Obama have both used the same authority to project power into Africa, the Mid-East, and South-East Asia to fight terrorism & piracy.

However, the president has ZERO emergency powers granted to him except as expressly provided by Congress. Have presidents made use of "implied" emergency powers? Yes. Lincoln, FDR, and Truman each attempted to make use of emergency war powers. Note: each instance was during a time of war/rebellion. Also note: In 2 of 3 instances, the courts struck down those uses of emergency powers.

Bottom line: Keep Calm and Carry On.

/soapbox

Seriously, I just hate hysterical doom-and-gloom claims that don't have any real basis in fact. There's alot of unknowns in the world. As such, I've always appreciated the phrase: "God grant me the serenity to accept the things I cannot change, the courage to change the things I can, and the wisdom to know the difference."

[kork13]

Feh - even if recessions aren't random events, the are cyclical...and its been a while.

Any investment advisor's favorite fine print: "Past performance is no guarantee of future results."

Yes, past recessions have typically occurred between 3-6 years after the previous one. However, sometimes those recessions are quite mild, and often only identified after the fact by economists studying trailing data. Recessions have occurred as soon as 1 year after the last one, or as much as 10 years after the previous. They have lasted as short as 6 months, as long as 18 months. What I'm trying to say is that you never know, and recessions are defined by the data, not the calendar.

[Fishindude77]

I'm no economist, but this being my 40th year employed with the same company, I can tell you that we have seen a pretty serious downturn in business every 7-10 years. When it will happen, and how bad it will be is anybody's guess. We will see some kind of a "bleep" in the economy in next couple years.

The 2008 recession reduced our business by nearly 70% in just a couple months time. Don't get badly leveraged and keep a healthy savings account and you will get through those times, and come out stronger.

[DaveInPgh]

As such, I've always appreciated the phrase: "God grant me the serenity to accept the things I cannot change, the courage to change the things I can, and the wisdom to know the difference."

[feh]

Feh - even if recessions aren't random events, the are cyclical...and its been a while.

Depends on your definition of cyclical...if you mean they recur, then I agree. If you mean they happen with regular frequency, I do not.

If somebody says there is an increased risk of recession over the next 15 months, I need to hear a reason other than "it's been a while since we've had one". That argument doesn't hold water.

[GoodSteward]

This (highlighted red) i
This is grand. Could you please point out the name of the supposed bill that was "quietly signed into law"? The nice thing about Congress is that it's designed to be transparent. You can look up any bill passed into law online, so I'd love to take a look at this... I highly doubt that it exists, at least in the form that you are describing.

http://www.teaparty.org/code-red-military-martial-law-bill-sneaked-senate-140424/

That is just a link I did in a 10-second google search. The video I saw showed an actual meeting with officials and when one was asking about this new law the chairman said they are not going to talk about that, twice he responded this way. Youtube a great a source to see news articles (not just made up stuff) that you may miss. I'm not getting into it all since it is speculation, but it's fun to mention. If it happens you know I was first to show it!

Just for laughs here, do remember our constitution is being "rewritten" constantly based on the sways of lawsuits. Free speech is being shot down over and over by giving minorities the freedom to critize, yet majorities are being called "haters" and sued for "hate speach" if they speak against it. Right now there is a big push for citizens to be relieved of their rights to own guns. Just as a history lesson, this very thing happened to Germany all in the name of "national security and safety" just before Hitler started the holocaust, and the jews had no defense. Say what you would like, there will always be people who want absolute power, and there has never been a nation fully immune to avoiding it. Dun dun dun...lol. I"m not making videos warning the world. I'm just not closed minded on this and understand(from history) that it does happen, and could again. I have a lot to say, but this is a financial site so I'll refrain.

[DaveInPgh]

http://www.teaparty.org/code-red-mil...senate-140424/

That is just a link I did in a 10-second google search. The video I saw showed an actual meeting with officials and when one was asking about this new law the chairman said they are not going to talk about that, twice he responded this way. Youtube a great a source to see news articles (not just made up stuff) that you may miss. I'm not getting into it all since it is speculation, but it's fun to mention. If it happens you know I was first to show it!

Just for laughs here, do remember our constitution is being "rewritten" constantly based on the sways of lawsuits. Free speech is being shot down over and over by giving minorities the freedom to critize, yet majorities are being called "haters" and sued for "hate speach" if they speak against it. Right now there is a big push for citizens to be relieved of their rights to own guns. Just as a history lesson, this very thing happened to Germany all in the name of "national security and safety" just before Hitler started the holocaust, and the jews had no defense. Say what you would like, there will always be people who want absolute power, and there has never been a nation fully immune to avoiding it. Dun dun dun...lol. I"m not making videos warning the world. I'm just not closed minded on this and understand(from history) that it does happen, and could again. I have a lot to say, but this is a financial site so I'll refrain.