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When easy money goes away…

61K views 1K replies 53 participants last post by  Rampante21 
#1 ·
The fed will be raising interest rates another 6-7 times in the next 12 months.

inflation at 7.9%

mortgage rates in one year will be around 6-8%

loan rates will be brutal

what’s your opinion of what happens when the hot potato game ends(skyrocketing lambo prices) and the easy money is gone?

will the flippers get nailed? Forced into liquidation? Are they hooked on a second mortgage to finance their Lambos?

should be fascinating to observe
 
#2 ·
In the short run luxury asset prices and home prices cease to increase or increase at a much lower rate.. In the long run, unemployment goes up (because it's more expensive for companies to do business, issue debt, etc) and luxury asset prices can tank. If there is a large negative effect on crypto (sell crypto buy credit with much higher returns than today) this could all be accelerated.
 
#4 ·
I'm not sure if in Canada it's going to be so drastic. Inflation is at 5.1%. Mortgage rate expected to go up.25% which is one less pizza a month.

Gas however is crazy, got my car out first time this year and I went to fill it up, 107$! I used to take rides all the time and filling up 2-3 times a week, I think I'm going to drive it a little less this year.
 
#8 ·
Lol, please don't be like the average Canadian sheep. The BoC is hiking the rate 6-7 times this year, do the math. RE has gone up by almost 50% since the pandemic started, there's actually places that have gone up almost a 100%. This is not normal for any market especially for the RE market which goes hand in hand with interest rates.
 
#12 · (Edited)
In my locale, real estate taxes have gone up 20-30%
That equates to thousands in the pocket book that will NEVER be given back.

Heck, just the principal alone makes me want to get rid of my health club membership, cable TV, extra phone, etc. all to make a point.

I think Elon had the right idea… liquidate everything and own nothing
 
#18 ·
History is doomed to repeat itself. Funny people have short-term memories don't remember 2008.

January 2008

Sold a bunch of stocks to buy my first home got a firesale deal from my friend who was relocating his family to Vancouver. Saved 6% straight up as a FSBO transaction.

Bought my first Porsche 997 C2S that was 5 months old with 2000 miles for 20% off MSRP original owner lost his pants in the stock market.

Remember Scuderia's at my dealer going for firesale prices. Dealer had to park cars outdoors on the roof due to overstocked inventory

Friends over reached on their dream homes with ARM's then lost their pants when interest rates ballooned and banks wanted their coin.

2022-23 looks a lot like 2008 and may end up being worse.
 
#19 ·
History is doomed to repeat itself. Funny people have short-term memories don't remember 2008.

January 2008

Sold a bunch of stocks to buy my first home got a firesale deal from my friend who was relocating his family to Vancouver. Saved 6% straight up as a FSBO transaction.

Bought my first Porsche 997 C2S that was 5 months old with 2000 miles for 20% off MSRP original owner lost his pants in the stock market.

Remember Scuderia's at my dealer going for firesale prices. Dealer had to park cars outdoors on the roof due to overstocked inventory

Friends over reached on their dream homes with ARM's then lost their pants when interest rates ballooned and banks wanted their coin.

2022-23 looks a lot like 2008 and may end up being worse.
So knowing what you know now, what sort of stuff are you doing to prepare for this? any recommendations? I'd love to see some recommendations and advice in this thread.
 
#24 ·
For me, I'm not so much concerned about another cycle of cookie cutter advice, such as buy this, sell that and keep this. I'm more concerned about the state of World affairs and where all of this takes us. Here's what I've been doing:

In the last two years I've ran the gamut from back up generators, solar generators, a greenhouse, chickens, freeze dryer, security, sewer back flow valve (super important and overlooked), EMP protection for home, solar generators and other important electronics and my SUV. Stocked up meds including real antibiotics and pain pills, O2 generator and CPAP for emergency ventilation, medical and dental. Also bought a lot of booze, kratom and smokes if needed for barter. There's more but I can't remember everything right now and of the course the obvious like food, water, gas, propane, first aid etc..,

Last year I got concerned about a possible nuclear exchange with China because of the virus blame game. I ordered IOSAT potassium iodide tablets, a Geiger counter and radiation dosimeters. Family thought I was nuts when I went down the nuclear rabbit hole last year. As it turns out now, I look like a genius at my house. Am currently finishing the build out of two three person nuclear fallout shelters at my house.

I've learned a lot about nuclear and have found it very interesting researching it for the last year and a half. I can tell you this. You need to take the threat seriously. Between Russia, China and the US combined they hold 90% of the World's nuclear weapons stockpile. Not to mention there are approximately 440 nuclear powered reactors in the World as well. Although the chance is small just like a bomb getting through TSA and a plane blowing up the threat exists nonetheless. There is no denying that. Therefore, I take it serious and am prepared to the best of my ability for it. To me wondering what luxury watches and Hermès bags are going to be worth is the last thing on my mind right now.
 
#26 ·
I can't lose on investments I'm afraid on that gambling stuff.

I can no longer be fired or laid off, I work for myself.

My niche is recession proof, pandemic proof. I remember being almost all alone on the road driving in a ghost like city when everyone else was on mandatory lockdown.

Still I'm not over spending. I did buy a quick jack and just finished fabricating some wheels to move this beast around because I repair my own vehicles and I need to get this 3 3/4" off the ground car up in the air so I can swap out the starter.

Knock on Carbon Fibre, I hope not to have any trouble. I'm "impatiently" saving up when car prices come down.
 
#64 ·
Yea, we actually have two houses and an outbuilding (man-cave with bathrooms showers, bedroom, kitchen, cars, etc) all within 1,000 feet of each other. but one house is in the city and the other house and outbuilding are outside the city limits with septic, rural water, different everything. Have fiber internet at the main house and SpaceX Starlink at the second house and wireless at the outbuilding. So we can walk to different water, different sewage, different internet, etc.. I wasn't trying to be a prepper, but its nice that we are so close to so many different systems if need be.
 
#41 ·
@Luzifer -

I give you much credit in asking questions and learning more about finances.

With regards to your statement that “there are many millionaires where you live”, I would caution you that sometimes these people are living in a virtual house of cards and are often times on the cusp of financial ruin.

One thing I have learned is to never ‘Judge a book by its cover’.

Some of the biggest blowhards and showboaters I encounter are the ones who have the least. Their life is based on smoke and mirrors. It’s pathetic.

On the other end of the spectrum are those that are quite successful and modest. As an example, my good friend and neighbor dresses as if he purchased his clothing from the Salvation Army and drives an eight year old pickup which he bought used. To look at him on the street you would assume he was just a regular guy. His NW is ~ $300M.

Remember that you are already living someone else’s dream.
 
#44 ·
The real estate markets are in a major state of flux, driven via these inputs…

1.) governments poor response to covid pandemic. Locking down inner city residents to their apartments. Closing all small businesses. This caused a mass exodus from major liberal cities(NYC, Chi, SF, etc) and created a big demand for suburban/country living.
2.) governments poor handling of George Floyd riots(defund the police BS), once again causing a mass exodus from major liberal cities(NYC, Chi, SF, etc) and created a big demand for suburban/country living
3.) feds giving out way too much free money(low interest rates). Reversal of this policy will slam shut new home construction in 2-3 years.
4.) housing/apartment rentals have shot up 20-30%. Landlords have to pass inflation/tax costs on to tenants.
5.) remotely working from home, has enabled people to relocate to their dream location. Once again, it mutes centralized living, especially city and apartment living.
6.) inflation, primarily driven via energy costs. Is driving up the costs of everything. Especially the costs of new home construction. Supply chain constraints are a contributing factor. New home construction now costs 40-50% more than prepandemic.
7.) home owners will get punished via skyrocketing real estate taxes
8.) renters will get punished by landlords trying to break even.

Makes me wonder if homeless people have the right idea 😜

in conclusion… people reduce discretionary spending when their rent or mortgage is in doubt. If our current economic trajectory remains, look for a recession.
 
#45 ·
#'s 1 and 2 have already reversed in 2022. Manhattan real estate rental and purchase prices are at all time highs because of the return of residents. Much of the suburban areas around here have levelled off unless you go out to places where people are looking to buy second homes.

I don't see a crash in real estate prices; prices should level off though. Housing inventory will continue to be low as most of America is underbuilt when compared to population.
 
#68 ·
Also, i think this is a one-generation phenomenon. The even younger people seem more structured. Millennials have kids later, they have more college debt, they basically get "established" in life 10 years later than previous people did. They are a product of really really bad parents, which were created by abnormally "easy" times in the American economy over the last 20 years. The younger generation will hit the real world sooner. It's only the millennials who can't tell a male from a female anymore, for example, and their mothers. The rest of mankind i think will be a bit more rational and better off. A recession may be good for the health of American development at this point. we are due for some real world hardship.
 
#69 ·
What's with all the talk of mortgage rates going to 8%+ in a year? If that happened, a big portion of the population would go bankrupt. Do you guys really think politicians would let that happen? There's been a 0.25% hike in rates and people are already talking about a recession. Im speculating like everyone else but a rate increase of a few percentage points would severely slow down the economy to the point that rates will have to come back down for the economy to keep going
 
#72 ·
Powell and other fed officials have inferred at least 6-7 more rate hikes within the next 12-18 months. Each hike between 0.25% and 0.5%
Do the math. Interest rates currently at 4.5%
some finance gurus(I personally don’t think any exist) predict interest rates will go higher than 10%

at that point all wallstreet experts will have to take out their abacus and run the numbers(models). Magically they will all say buy! Buy! Buy!
 
#100 ·
Here we go...

Hawkish Bank of Canada speech puts half-point rate hike in play

And BoC few months ago said they weren't interested in raising rates, last month they scuffed at the idea of a 50bps hike in April but here we are. Canada is probably heading towards the highest rates prior to the 2008 financial collapse but yet the household debt levels are the highest in Canadian history. This is not going to end well.
 
#108 ·
Already millennials only hold about 4.8% of wealth compared to boomers who held 21% at the same age. We are a very poor generation, and I don't think it will ever get better. We are the poorest generation maybe ever. It is unbelievable how poor we are. What happened??

Things weren't always so bleak, when the first millennials were graduating in the early 2000s all we ever heard was how we were the future and this generation would change the world someday. Well I guess we did change the world but it was through the invention of social media and probably changed it for the worse.

It's true many of us focus on experience more than equity building but I don't think it's entirely irrational. Many millennials don't see much hope for the future and every year we question if there will even be a future worth living with the myriad problems the world faces and that continue to go unsolved. It seems no matter what they do, some people will never escape debt, will never own homes, will never be stable enough to afford children. For them equity can't be built fast enough and some are so far behind they will probably not catch up. They have to rely on getting lucky with some kind of moonshot investment or government schemes.

If Gen Z is any better off, it will be because our generation served as a warning.
 
#109 ·
Already millennials only hold about 4.8% of wealth compared to boomers who held 21% at the same age. We are a very poor generation, and I don't think it will ever get better. We are the poorest generation maybe ever. It is unbelievable how poor we are. What happened??

Things weren't always so bleak, when the first millennials were graduating in the early 2000s all we ever heard was how we were the future and this generation would change the world someday. Well I guess we did change the world but it was through the invention of social media and probably changed it for the worse.

It's true many of us focus on experience more than equity building but I don't think it's entirely irrational. Many millennials don't see much hope for the future and every year we question if there will even be a future worth living with the myriad problems the world faces and that continue to go unsolved. It seems no matter what they do, some people will never escape debt, will never own homes, will never be stable enough to afford children. For them equity can't be built fast enough and some are so far behind they will probably not catch up. They have to rely on getting lucky with some kind of moonshot investment or government schemes.

If Gen Z is any better off, it will be because our generation served as a warning.
Don’t worry, millennials will increase their wealth by just breathing since boomers are leaving millions to millennial beneficiaries upon passing.
 
#113 ·
I realize that some of my comments about future economic indicators look dire… so I want to alleviate some concerns…

…. it could be even more dire 😎

Avian flu is starting to cripple the poultry industry. I believe 27 states have confirmed cases of the bird flu.

fyi, what’s bird flu? It’s a virus that kills wild birds. That virus can jump into farmed poultry, such as turkeys and chickens.

what’s the solution? They have to cull or kill the entire colony of chickens/turkey. It spreads like wildfire. Entire poultry farms literally lose their entire flock.

Besides the wheat crisis stemming from Russias war in Ukraine, we could be seeing severe poultry shortages.

let’s pray that China’s swine flu does not spread to the world or we will all be vegans.
 
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