Recession 2020

User Forum Topic
Submitted by FlyerInHi on July 25, 2018 - 11:26am

All the signs point to a recession coming.
Since it takes 2 quarters of negative growth before a recession is declared, I'm thinking one will be announced sometimes in 2020. We will see....

Submitted by The-Shoveler on July 31, 2018 - 12:03pm.

Recent Talk of RE slow down maybe over hyped

See note below from Contrarian Smead Capital Management

The flattening of the yield curve and fears of a U.S. recession are creating stock-picking opportunities in banks, builders and entertainment. While the economic recovery is proving to be the nation’s second-longest on record, those expecting an end to this cycle look "foolishly premature," CEO William Smead wrote in his latest letter to investors.

The best days are still ahead, he said, as "this recovery really started two years ago," when home building began boosting growth. The money manager’s optimism stems largely from U.S. demographic data, which suggest to him that an increase in the number of 30 to 39-year-old Americans and an uptick in babies per household should fuel demand over the next five years.

Smead, which managed about $2.2 billion as of June 30 and is known for its contrarian views on tech, owns home builders NVR Inc. and Lennar Corp., and sees "a favorable entry point as they satisfy under-built home markets nationwide."

Smead owns Bank of America Corp and American Express Co.

Submitted by phaster on August 4, 2018 - 8:51am.

carlsbadworker wrote:
What signs?

news report(s),...

Quote:

State Supreme Court orders appeals court review of San Diego pension overhaul

San Diego Mayor Kevin Faulconer did his best to put a positive spin on a California Supreme Court ruling that may force the city to pay millions of dollars to workers who lost benefits under the city’s 2012 pension reform effort.

“San Diego pension reform remains the law of the land and today’s Supreme Court decision keeps Proposition B in full force and effect,” Faulconer said in a statement. “While the court’s deference to an earlier ruling means the debate over this issue is not over, it does not change the fact that voters amended the City Charter to bring fairness to city pensions.”

Some 66% of San Diego voters approved the pension reform initiative in 2012, according to the mayor's office.

The state’s highest court ruled on Thursday that the placement of San Diego’s pension cutbacks on the ballot was invalid because city officials failed to negotiate with labor unions before pursuing the measure.

https://www.bondbuyer.com/news/state-sup...

Quote:

San Diego's pension mess just got a lot messier. Now what?

...the court sent the case back to an appellate court for “judicial remedy,” raising huge questions about whether the reforms — approved by two out of three San Diego voters in 2012 and unique in the state — would survive and how much — $20 million? $100 million? — the city might have to cough up to remedy the violation. No one knows.

http://www.sandiegouniontribune.com/opin...

basically taxpayers lose again,.... all because the public pension portfolio as structured and operated is DISHONEST and DUMB

nothing will be done (until its vary obvious the system is about to crash or has crashed, 2020 timeframe???), because in the meantime politicians who voice support for the existing pension setup get to keep their office along w/ tacit union support AND retired public employee union members get to keep various benefits like the 13th pension payment (the nonsensical justification being EXCESS EARNING),... so seems its inevitable things are destined to end badly

www.TinyURL.com/ExcessEarningsBS

the only loser w/ the status quo is the taxpayers who have to endure fewer services AND are expected to pick up an ever increasing tab due to the "California Rule" (basically an understanding that taxpayers are suppose to make up any shortfalls)

a news report about the SD county, shows,...

Quote:

Transparent California, a research group that is critical of excessive government pensions and salaries, says in a new study that benefits promised by the San Diego County Employees’ Retirement Association (SDCERA) jumped 1,237 percent from 1986 to 2016 — a rise that was four times more than the 372 percent increase of personal income in the county.

https://www.sandiegoreader.com/news/2018...

the chart tells me this trend is unsustainable AND given another "sign"

Quote:

Joe Nation (Stanford University "conference") on California's pension system

starting @ 2 min 56 sec

"let's get a sense of how things [PUBLIC PENSIONS] are at the local level,... the share of payroll that those entities will need to pay in order to cover pension and OPEB unfunded liabilities as you see the worst one is the city of SAN DIEGO"

https://drive.google.com/file/d/0B66GMOh...

the future does not look too bright,... as I see things, unfunded public pension debt is akin to stress slowly building up between tectonic plates,... so when there is too much stress on a fault line that has built up over time, in other words when the forces are too great to hold things together, the result is a "sudden" and "violent" earth quake event (2020 timeframe???)

BTW public pensions have no other back stop other than taxpayers, and existing troubled pension systems are using up existing pension insurance at a pretty alarming burn rate

http://www.crfb.org/blogs/pension-insure...

https://www.nytimes.com/topic/organizati...

to give you some idea of the magnitude of just the "public pension" problem, consider a group out of stanford puts the "market basis" of the pension debt in the TRILLION$

http://us.pensiontracker.org

(note the "market basis" implies using the "risk free rate" or the rate of return of a hypothetical investment with no risk of financial loss, over a given period of time)

https://www.investopedia.com/terms/r/ris...

BOTTOM LINE the amount of public pensions promised is much greater than the ability of system to deliver,...

When TSHTF (2020???) what is going to prevent economic recovery is the "California Rule" because its implied tax payers are on the hook for the self inflected $hit that happened (caused by politicians AND public employee unions),...

PS

Quote:

...states that also use a contract rights approach to public pension benefits have chosen to follow the principles of the California Rule. Those states are:

Alaska
Colorado
Idaho
Kansas
Massachusetts
Nebraska
Nevada
Oklahoma
Oregon
Pennsylvania
Vermont
Washington

https://protectpensions.org/2018/05/21/c...

PPS the final nail that is going to kill off the economy is derivatives (basically this is going to freeze money in big banks since these instruments have senior status over ordinary bank deposits)

https://www.thebalance.com/what-is-a-bai...

Submitted by FlyerInHi on August 8, 2018 - 8:57am.

So the trade war escalates.

Will we lose more overall sales than the Chinese. We will see.... as Trump likes to say.

BTW, lost sales aren't good for either one. And bad for human standards of living. I really fail to see how this is good policy. But maybe someone can elucidate.

Submitted by Myriad on August 8, 2018 - 10:56am.

I think this is a multi-decade cycle of de-globalization. Borders and major power competition is back.

Not sure the point of piece meal tariffs. Just tariff everything from China and get it over with. The politicians are just dancing around the issue that a national strategic policy to challenge China is needed (economic, education, investment, military, diplomatic, etc)

Submitted by The-Shoveler on August 8, 2018 - 12:01pm.

Actually IMO the end goal is to end up with "zero" tariffs (on both sides).

We will see I guess.

Submitted by FlyerInHi on August 8, 2018 - 10:37pm.

The-Shoveler wrote:
Actually IMO the end goal is to end up with "zero" tariffs (on both sides).

We will see I guess.

That would be a huge win for China. It might work with Europe, but not China.

China confounded all experts in that it was able to globalize, become capitalist and still keep central planning, even doubling down on planning in certain areas while liberalizing in other areas.

We are not yet sure if the China model has long term staying power. But we are already very worried that it does.

Submitted by FlyerInHi on August 8, 2018 - 10:44pm.

Myriad wrote:
I think this is a multi-decade cycle of de-globalization. Borders and major power competition is back.

I think it’s only a setback due to nationalist anxiety in the West.
the world will move on with or without us. Look at the growing China-Africa trade. Ethiopia growing over 10%.

I’m surprised that, at this stage of human development, people still don’t understand that trade means wealth and prosperity.

Submitted by The-Shoveler on August 9, 2018 - 6:36am.

FlyerInHi wrote:
The-Shoveler wrote:
Actually IMO the end goal is to end up with "zero" tariffs (on both sides).

We will see I guess.

That would be a huge win for China. It might work with Europe, but not China.

China confounded all experts in that it was able to globalize, become capitalist and still keep central planning, even doubling down on planning in certain areas while liberalizing in other areas.

We are not yet sure if the China model has long term staying power. But we are already very worried that it does.

It will be an even bigger win for the USA.

Submitted by FlyerInHi on August 9, 2018 - 8:45am.

The-Shoveler wrote:

It will be an even bigger win for the USA.

Please explain the math. What products will be sell to China?
The trade deficit will widen unless we lift the export ban on high tech.

Perhaps you’re talking regulations of services such as google and facebook and banking. But those are not tariffs. btw, Chinese companies are already big customers of American internet companies to reach customers outside of China.

But I doubt the Chinese wll cave. Actually google is already now planning a return to China. They will have to place servers in China and allow the same, or more access to authorities that the NSA has in USA. The Chinese will never allow extra territorial access to their market by US internet companies. That’s where we have the competitive advantage, for now.

Btw, something Trump declares a win maybe a win for Trump, but not for the US of A, eg North Korea.

Submitted by The-Shoveler on August 9, 2018 - 11:05am.

Cars, Robots, etc...

Making things in the USA is actually a lot more efficient due to energy cost etc..., once you subtract the labor costs.

Robots are bring manufacturing back
https://www.recode.net/2017/5/26/1565612...

IMO things like High Speed rail are a waste of time and resources as tech will soon make it obsolete, Tech actually enables independence from infrastructure (more off grid etc..).

Submitted by spdrun on August 9, 2018 - 11:53am.

Tech makes things like high-speed rail more useful, not less. Basically, app-based electric rental cars (self-driving or driven) solve the "last mile" problem nicely. And, computers or not, it's a lot safer to travel 150-200 mph on rails or some other hard guideway vs on a road.

If the rental cars only need a range of 50-100 miles, they can be more efficient, since they don't need to lug around a heavy battery pack. Also, making fewer batteries is better for the environment. The trains can pick up power en route from a wire, of course.

Also, if trains can also be "self driving", you can make them shorter and more frequent since you're removing the fixed cost of a motorman.

Unless we end up with flying cars, which would be terrible energy-wise, we'll need some kind of surface infrastructure, whether it's roads or rail. Might as well pick the kind that's easiest to electrify and least environmentally wasteful.

Submitted by FlyerInHi on August 9, 2018 - 12:12pm.

The-Shoveler wrote:
Cars, Robots, etc...

Making things in the USA is actually a lot more efficient due to energy cost etc..., once you subtract the labor costs.

Robots are bring manufacturing back
https://www.recode.net/2017/5/26/1565612...

IMO things like High Speed rail are a waste of time and resources as tech will soon make it obsolete, Tech actually enables independence from infrastructure (more off grid etc..).

China is a race to innovate. They are buying high tech as fast as they can from USA, Germany, etc. but we won’t sell for national security reasons. Tariffs from China are not hindering sales.

China is also wanting to buy our companies and increase FDI. But we won’t let them. Protectionism, anyone?

As far as density goes.... I will let time prove me right. The top 10 metros are densifying and real estate appreciation is outpacing the second tier and third tier cities. More knowledge actually causes people to want to live in or near the centers of knowledge and culture. Then the economies of scale build on themselves. That’s China why is betting big on urbanization and creating mega metros. See the Hong Kong-Macau-Zuhai bridge.

Submitted by FlyerInHi on August 9, 2018 - 12:35pm.

Shoveler, here’s an example for you.

Next time you visit Vegas, stop at the new Lotus luxury apartment complex in Chinatown. A 2-bedroom 2-bath is $2500 per month. Right at the entrance to Chinatown for all tourists to drive by.

In comparison, a $350,000 3/2 1600sf house in Summerlin (the Carmel Valley of Vegas) rents for $1600. Go figure why people are willing to pay more to live in the City (if you can call Chinatown or Vegas a city, haha). Because suburb is so damn far. What people call a 20 min drive is really a 50 min drive with traffic, door to door.

You are seeing the same in Phoenix, Columbus, OH, etc....

Submitted by The-Shoveler on August 9, 2018 - 1:46pm.

All I can say is the future is not here yet.

Self driving cars, flying taxis buses etc..
Telecommuting, these are the future.

Submitted by spdrun on August 9, 2018 - 1:58pm.

Flying taxis/buses/etc. Vehicles capable of vertical takeoff don't tend to be safe or efficient -- physics is a real pain in the ass. Keeping something in the air at slow speeds takes a shit-ton of energy. Unless it's a dirigible, then it's just huge and fairly unsafe. (Helium supplies are limited, good luck with hydrogen or methane as lifting gases.)

Telecommuting? Maybe if you're a paper-pusher or code-monkey. Some people have jobs that require actual human interaction, manipulation of physical objects, or lab work.

Submitted by Myriad on August 9, 2018 - 2:21pm.

Wasting $10s of Billons on HSR between LA and SF when what we really need is reliable regional commuter transit.
SF-Sacremento/Fresno; LA to Palmdale/LV/SD.
The Chinese model would have built that, would have been done in 5 years. I do admire their efficiency, just not the rampant corruption, exploitation of rural residents, ignoring all local considerations, and not caring about economic sustainability.

Submitted by FlyerInHi on August 9, 2018 - 2:29pm.

The-Shoveler wrote:
All I can say is the future is not here yet.

Self driving cars, flying taxis buses etc..
Telecommuting, these are the future.

Time will tell whose vision is correct. It’s all being right at the right time.

All I can say is that my investments in urban neighborhoods, with some remodeling work, are doing much better than my friends’ in the suburbs.

Another example — at the bottom of the market a house in North Park, compared with the same purchase price in Temecula is doing better appreciation wise and cash flow wise. The free market gives you the answer.

Telecommuting wise, people telecommute from downtown to Sorrento Valley. They don’t telecommute from Bakersfield.

Submitted by FlyerInHi on August 9, 2018 - 2:55pm.

Myriad wrote:
Wasting $10s of Billons on HSR between LA and SF when what we really need is reliable regional commuter transit.
SF-Sacremento/Fresno; LA to Palmdale/LV/SD.
The Chinese model would have built that, would have been done in 5 years. I do admire their efficiency, just not the rampant corruption, exploitation of rural residents, ignoring all local considerations, and not caring about economic sustainability.

It’s always naysaying of some kind when there is jealousy and fear. First it was “oh the Chinese can’t build. Their engineers suck, the corruption will cause the concrete to be substituted for sand and the bridge will collapse, blah blah”. I too fell into that trap because I read too many biased Economist article. I could have bought an apartment in central Shanghai in 2002 but didn’t (it was like under $200k at the time) . Stupid mistake.

Anyway, fast forward 10 to 15 years and China’s train safety is better than ours.

It’s our system, and business model. Not the technology.

The Chinese know that cash flow from operations are not necessary. They can support public transport to build economies of scale.

In the USA, If we made telecom, electrification, post and parcel deliveries to, and federal supported airports in remote areas user fees self-sufficient, the people living out in far flung areas would be in a world of hurt.

Submitted by spdrun on August 9, 2018 - 2:39pm.

Why look to the Chinese, Myriad? Look to the French -- they managed to roll out HSR at 1/4 of the cost of what the US pays per mile.

Submitted by FlyerInHi on August 9, 2018 - 2:53pm.

spdrun wrote:
Why look to the Chinese, Myriad? Look to the French -- they managed to roll out HSR at 1/4 of the cost of what the US pays per mile.

Interesting observation. And I honestly wonder why.

Economically, the Chinese have an advantage. That’s higher purchasing power for the same dollar equivalent.

Submitted by The-Shoveler on August 9, 2018 - 3:51pm.

Metro Rail has a future,

HSR is very likely to disappoint (underwhelm) in CA if it ever gets built, California is not Flat, most places where HSP works are flat and straight.

Anyway IMO it is a big Waste (in CA), I still think by the time you get to and from stations, From where you are coming from to where you want to go, self driving cars will be much more convenient 90% of the time.

Also where HSR works it goes though un-populated areas, not through 12 -13 major metros.

Submitted by spdrun on August 9, 2018 - 4:30pm.

France, Germany, and Japan aren't terribly flat. Their HSR also goes through populated areas between major cities. If anything, the problem is too little population in CA, not too much.

Robo-cars can't travel at 150+ mph and pick up power while they're moving. Not to mention that a fixed guideway is safer at high speeds and metal/metal friction is lower than rubber on road.

The best solution would be HSR and rail with short-distance rental cars at the endpoints.

Submitted by The-Shoveler on August 9, 2018 - 4:53pm.

I doubt very much HSR in CA will ever reach that speed consistently IMO.

I don't know, by the time you get everything you want to take with you and pack up the kids etc...

single guy with a back pack maybe.

Think like a soccer Mom.

Submitted by spdrun on August 9, 2018 - 5:01pm.

IDK, I see plenty of families on the Boston-NY-DC trains in the Northeast. I think kids even get a 50% discount on tickets.

Not all parents become overpacking bovines the moment they squirt out a kiddo.

Submitted by Myriad on August 9, 2018 - 5:59pm.

spdrun wrote:
Why look to the Chinese, Myriad? Look to the French -- they managed to roll out HSR at 1/4 of the cost of what the US pays per mile.

http://documents.worldbank.org/curated/e...

"China HSR with a maximum speed of 350 km/h has a typical infrastructure unit cost of about US$ 17-21m, (RMB 100-125m) per km, with a high ratio of viaducts and tunnels. The cost of HSR construction in Europe, having design speed of 300 km/h or above is estimated to be of the order of US$25-39 m per km (see table 4 & 5). HSR construction cost (excluding land, rolling stock and interest during construction) is estimated to be as high as US$ 52m per km in California."

I think the biggest problem of HSR in CA is not necessarily cost, distance, or speed. The biggest blocker to sustainable rail is the low population density and limited regional mass transit.
If you look at the Chinese cities connected in the article, those inland secondary cities are as big as SF or LA and probably have higher population density.
Take Nanjing (11.7M) , just NW of Shanghai (34M)
2600 people/mi2 and 9900-20k/mi2, respectively
Let's look at SF and LA
SF 4.7M - 1341 people/mi2
LA 18.7M - 550 people/mi2 (https://en.wikipedia.org/wiki/Greater_Lo...)

So basically you have higher cost/mi of rail, with higher operating cost, over longer distances to service fewer people (total and by population density). It just doesn't make sense. it's only really useful to go from downtown to downtown - Anyone that's been to LA know's that it only services a tiny fractional of the metro area since there's limited mass transit once you get there.

Submitted by FlyerInHi on August 9, 2018 - 6:19pm.

Myriad, I agree with you in many ways. That’s why we need to overcome nimbyism and promote density over auto traffic concerns. But it will not happen

Joseph Stieglitz, famous economist wrote about how urbanization leads to higher efficiency and wealth. That’s why China is betting on mega cities.

We run the risk of becoming a country of stupid country bumpkins while the world becomes cosmopolitan. Look at any high tech company for the percentage of scientists born abroad. There is no guarantee that the USA will keep on attracting the majority

Tiny Israel is becoming a tech center and they are highly urban. Tel Aviv is nicer with better weather than San Francisco (except for possible war, of course).

Our policies are driven by a nationalist base of country bumpkins who have not been anywhere. Sounds like Mao’s China in many ways.

Submitted by Myriad on August 9, 2018 - 6:28pm.

FlyerInHi wrote:
That’s why China is betting on mega cities.

To be fair, I don't think China planned megacities. The planned on urbanization because massive proportion of people lived in rural areas (basically 50-80 years behind the west). The habitable land area is much less (basically the eastern side). Megacities is what resulted - for many years they had a constantly moving migrant population of over 100M.

At the same time though, I don't think the US transit problem will be fixed by slightly increasing overall density. Before that happens, we'll likely have autonomous vehicles - which will likely change dramatically how suburbs and cities will interact -especially if people stop taking personal vehicles to work. It's pretty hard to foresee what AV will do vs other types of transit.

Submitted by FlyerInHi on August 9, 2018 - 6:33pm.

Myriad, your same argument would apply to the cost effectiveness of highways also. We have many empty freeways too. And empty airports. And underused telecom networks in low population areas that urban dwellers are subsidizing. I mean why the hell is the federal government paying billions for highways in Alaska, a place with shit weather that requires lots of upkeep.

Submitted by Myriad on August 9, 2018 - 6:46pm.

I'm not saying there's not waste (there's plenty of that in China too), but roads are way cheaper to build and maintain than rail (and the roads are already built). In CA, it's usually more realistic to assume incremental changes that don't require massive infrastructure changes. If you decide to build a greenfield new city in the central valley connected by HSR, then yeah, plan for high density core with mass transit.

An updated 2016 Reason Foundation study shows California spent about $420,000 per mile in 2013 compared with the national average spending of about $160,000 per mile in the same year.
https://www.politifact.com/california/st...
I don't understand why it costs $56M/mile to lay down 2 parallel pieces of metal.... it should be way cheaper.

Submitted by FlyerInHi on August 9, 2018 - 7:14pm.

I agree.... but why not oppose highway by the same principle. Don’t build anymore highways anywhere where there are few drivers. I don’t mean you specifically, but generally speaking.

Don’t build new cell towers where there are few subscribers.
Do away with all subsidies to the boondocks. Concentrate innovation where there are economies of scale and rentability. Invest more where there are more people, at least on a per capita basis. Just live by consistent economic principles.

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