An investor, software developer and lover of financial technologies.
Recession is Coming
For the average novice or retail investor recession can be a very scary thing, but for the well informed investor it is a great opportunity to become rich if poor or middle class and richer if already rich. One other factor of consideration are the banks, bankers are not savvy investors, they always react to recent information and for that reason during recession they do not lend money to market players like investors and buyers that easily. Therefore due to the lack of money in the market to buy investment instruments like real estate and stocks the price goes down easily in such a panic.
Recession sometimes brings new good things in society. For example people lose their jobs and they start new business in the sectors of their skills. Good example for instance is Tesla, the company was founded in 2008 at the peak of the global economic recession and the money used by Elon Musk to take over the company was from the sale of Paypal at the time.
What are the Obvious Signs of Recession
Layoffs at Companies: Businesses are seeing slower business growth with no good prospect in sight yet labor cost and the price of raw materials due to inflation are increasing therefore the common goto reaction by the CEO of any company is to cut the labor force and it has already started in some companies. Here are the ones we know.
- Robinhood will lay off 9% of full time employees.
- Netflix announced Layoffs.
- Ford motors will make labor force layoffs.
- Reef Technologies is laying off 5% of their workforce - the CEO says they need the job layoff to meet up with the challenging economic environment.
- Carvana is cutting 12% of its workforce.
The mortgage Industry is also suffering a bigger setback due a big slow down and this affects both the big banks all the way to smaller startups.
- Wells Fargo will layoff employees in the mortgage related division
- Better.com has announced the layoff of 4000 employees to save on much needed funds for operation
Wherever layoffs are not to be made there are hiring freezes.
- Meta, Facebooks’s parent company that is very notorious for constantly hiring software engineers all the time has in an unexpected rare move froze all hiring.
Supply Chains: Another critical yet constantly ignored warning sign are the supply chains. From December 2021 to March 2022 the situation improved but the global supply chain pressure index that measures the supply chain improvement during the aforementioned 4 months says that there was improvement but it all fell apart and the situation has been degrading for the past two months. The lockdown in China and Russia’s Invasion of Ukraine are the key causes. Delivery times from China to the United States, China and Europe have significantly increased both by sea and air transportation mediums.
The Stock Markets: The S&P 500 is down approximately 90% from its high the NASDAQ is down by 30% down from its. Bonds, cryptocurrencies and Order financial assets are naturally struggling in this type of environment when the money printing has been turned off. The Direct consequence of this downward stock market is that us consumers see their brokerage account and other investment programs like 401 k decline and everyone becomes spendthrift increasing inflation.
Warnings from corporations and their CEO’s to the Investors: Walmart and target good morning about Noah profit Cost by Inflation(Increase in the cost of Labor and raw materials), You know most said that the United States is already in a recession and Bush IT companies will go bankrupt, The senior chairman of Goldman Sachs said where is a very very high use of recession, the CEO of Wells Fargo said it is going to be hard to avoid a recession. the conference board latest survey interviewing 133 TV tunes mostly publicly traded (Companies that are listed on stock exchanges in the United States) Indicate 60% of the ceo's third they expect the economy in the United States to get more over the next six months, only 19% things that any kind of improvement is on the way. The conference board cheap economics third the economic future is bleak, the gauge felt bucket if it's below 50 that represents a negative outlook: this indicator started The year at 57 and it fell to 42 therefore the decline was very rapid.
Americans Relies More on Their Credit Cards: Publicly available information shows credit card debt is now on the rise. According to the federal reserve’s quarterly reports on household debts in credits in the first quarter of 2021 credit card debt was $770B and it is at $841B, the United States consumer Borrowing soared In the month of March of this year mostly spent on basic necessities like food and gas for the vehicles. Equifax says that subprime credit cards that are at least 60 days late are rising faster than normal. Its delinquencies have risen for eight consecutive months.
GDP reports: we begin by agreeing that a negative outcome of two consecutive quarters is a recession. The first quarter of 2022 America's GDP is -1.4%. If the GDP report for Q2 that is for the month of April May and June is negative then We Will officially be in a recession. Then what We will be discussing is how long will the recession last.
Yield Curve: taking a look at the United States treasuries for example 2-year and 10-year treasury bills in a combined way is an economic indicator, if the yield Curve inverts then it is a recession signalAnd on March 28 2006 before the great recession when the real estate bubble got busted the yield Curve got inverted on April 1st of 2022 therefore reception is someone's already at play but Theory says it will come 6 to 18 months later.
Decline in Real Income: Workers around the world experiencing negative real wage growth. inflation in the United States according to the bidens administration is 8% but the beer is at 5% therefore in reality Americans are making less money. inflation would have been at 12% if it was calculated with the same formula used 30 years ago.
Unemployment: it is true that the United States economy has started adding jobs but note that at the beginning of this article the layoffs have begun. In the months ahead a net loss in jobs is expected.
How to Benefit from Recession
Recession gives the opportunity to buy better assets at better prices. We have been in an everything bubble-like real estate, stocks, cryptocurrencies, non-fungible tokens, etc have been in an uptrend for no known fundamental value. In a recession the Investor must understand how to value things and think the opposite of what the general public is Stinking as the Warren Buffett cliche says “ be fearful when others are greedy, be greedy when others are fearful”. You can accurately mention the needed fear when people start saying don't buy stocks anymore you will lose your money in the stock market and that is exactly when not to panic and buying more stuff real estate cryptocurrencies and businesses at a premium price.
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.
© 2022 Chukwunonso Jude Aneke