A real estate billionaire is sounding the ALARM that a financial hurricane is brewing! I AGREE!
The issues today are brewing, brewing, brewing...into a category 5 hurricane (financially). The core issues for America are not being resolved. Problems grow daily even as events get delayed. Some of the core issues are the following:
1. Commercial real estate is in free fall (values declining as Cap Rates increase).
2. Residential real estate continues to foster a reduction in 'affordability' for 75% of the buyers.
3. The UAW auto strike is brewing into a clash which will worsen 'affordability' for consumers.
4. The House Budget issues could cause a shut-down of the government within a week (10 days).
5. The southern border issues grow as migrants continue to flood into America (having no resources).
6. The war in Ukraine has no solution (as of today). This could become the #1 issue by the end of 2023.
7. The polarization within our government has no solution as viewpoints are at loggerheads.
A CATEGORY FIVE financial hurricane is brewing/brewing and no-one KNOWS when the landing will occur. My sense is that this landing has started (in some areas) but the manipulations of our central bank may DELAY the seriousness of this landing (for the nation). Money is still available (to most consumers) as prior liquidity is still preventing this Hurricane from Landing. Debt grows and allows this 'landing' to be delayed (temporarily).
When do I think the CRASH will happen? My sense is that it could be within 30 days or it might be delayed for another 90 days. Today, is September 20, 2023. The financial hurricane is obvious to me but my sense is that delay could continue for some 90 days IF our government does not shut down (end of September). If a continuing resolution is agreed to, then we MIGHT witness a delay in this financial HURRICANE. But there can be no solution given our current situation. See the numbers:
www.usdebtclock.org
The issues are MONEY and SPENDING and BORROWING. Borrowing has slowed in our real estate sectors but our builders (Pulte, et al) continue to create speculative housing excess for our markets. I took a drive around Tucson housing developments and noticed huge speculative building continuing. This situation is prevalent in most States. At some point our affordability problems will create this crash in our real estate markets. The exact date is uncertain, however.
There are two scenarios that could happen. If our government budget issues get temporarily resolved in the next two weeks, this could delay this financial hurricane. If the UAW auto issue gets resolved, this also could delay the crash scenario. Our Fed is keeping interest rates at the 7% plus level and this is slowing buying. Sales in Phoenix have crashed some 60% in the last month. Tucson is also crashing. But builders have lines of credit to continue the game for a few more months.
Eventually, the affordability issue will prevail and demand will dry up. It has started now in many areas of our country. Some 45% of buyers are now first time buyers. Most can not 'afford' a mortgage at the current rates. This affordability issue will be primary going forward. Watch the candidates for election start to focus on this issue. It is obvious that this financial hurricane is brewing and growing in intensity. But it is also impossible to predict a PRECISE date when our financial markets will realize this reality.
My sense, as of today, is that we could witness the coming stock market crash (a leading indicator) within the next 30 days. But it also might get delayed for another 60 or more days if certain situations develop. The government shut down issue and the UAW auto issue are key. There are additional issues which are BREWING that will intensify this financial hurricane. Consumer spending is key and government spending is also key. We live with credit/borrowing as core to financial prosperity. It seems to be ending as I write this missive. At some point the stock market will sense this reality.
When our investors sense that the bubble game of stocks is over, then our real situation will emerge. Then the hurricane will LAND and our media and our leaders will sound the alarm. Nothing is solving any of the above issues. The WAR over in Ukraine is another issue which will influence our markets. I see no ending to this WAR as of today. Russia and the West are at loggerheads and this signals DIRE consequences (eventually). Prepare for a CATEGORY FIVE financial hurricane sometime this year or early in 2024. Nothing is solving these issues. Have a great day and continue to HOPE for positive events emerging!
I am: Donald B. Swenson, Economist/Philosopher, donaldswenson.blogspot.com.
http://kingdomecon.wordpress.com
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