The End of the World as We Know It... and I feel fine... recession time is here

REM's 1987 hit threw more lyrics at us then most of us could handle.  Doing a BMX freestyle at my sister's 1989 high school graduation after party (Del Mar High in San Jose), I remember this song getting played, and groups of kids singing every word while dancing like maniacs.  Now, 31 years later, this song sums up our U.S. economy, at the moment.  Things are changing in massive ways.  It's the end of the world as we know it... and I feel fine.  But a whole lot of people don't.  It appears "the next recession" is here to stay.

As I write this on February 27, 2020, the U.S. stock market has been plummeting for the last five days.  The Dow Jones Industrial Average, for over 100 years considered a sort of pulse for the U.S. economy, was down 3,542 points this morning, from it's February 12th record high of 29,551.  It's rebounded about 500 points this morning, from today's early drop, but at this moment, at about 26,766, it's still only about 100 points above the high it reached on January 26, 2018... two years ago.  The much hyped U.S. stock market hasn't moved much at all in two years, as of right now.  That's reality.  This recent slide is due to fears of that illness happening in China, and now several other countries.  This disease is having catastrophic effects on business in China, and now supply chains for other businesses worldwide.

(Blogger's note: 1:21 pm Pacific Time, Feb. 27, 2020- I just came back to proofread this post.  The Dow Jones Industrial average closed at 25,766.64 today, down nearly 1200 points on the day, far worse than it was this morning.  By comparison, that's a point it first hit about January 12th, 2018, about two weeks after the Trump Tax Cuts were signed, and about two weeks before the January 26th 2018 peak at 26,616.  The Nasdaq ended today at 8566.48, down from it's all time high, 8 days ago, of 9,817.18.)  

In reality, the U.S. went into a severe financial crisis last September, when a little mentioned part of the economy, the Repo Markets, froze up.  The same thing happened in 2008, while we were already in a recession that hadn't been acknowledged yet, and 100+ year old investment banks Bear Stearns, and Lehman Brothers went out of business suddenly.  That was when the 2007-2009 recession became apparent to most people.

This time, in September 2019, the Federal Reserve started "injecting liquidity into the financial system."  In plain English, that means they basically made money of thin air, and handed it to major banks to prop up the economy (Ok, that's an over-simplification, but close to how things work).  The Fed started pumping 40-50-60 BILLION dollars A DAY into the financial system.  That has happened nearly every day, for 5 months now.  That emergency program was supposed to last a week or two at first, at most.  But the system was so shaky, they had to keep doing it, to keep the stock market from going down hill, which would cause other markets to fall.  So Wall Street took all that money, and they borrowed more, and pumped it into stocks.  Since The Fed's repo market program started, the stock market has surged significantly higher.  But it was already at crazy high levels, and some veteran investors started wondering (and commenting online), about what "black swan" event would come along and pop the stock bubble.  It seems we have our answer.  

So what does this mean for the average person?  To start, it means your 401K, or retirement mutual funds are losing ground.  This econmic downturn will also mean lots more layoffs from major, and smaller companies, in the coming months.  We will see major, well known businesses go bankrupt, and many will go completely out of business.  Good jobs will get harder to find.  Lame jobs will get harder to find.  People with lots of student loan debt, credit card debt, and car debt will really be in tough times, especially if they lose a good job.  For the majority of people, it's a time to buckle down, live more within their means, and struggle through. We appear to be in the early stages of a serious economic downturn, which is already about three years overdue, by historical standards. 

 As the illness effects ripple through countries outside China, including ours, it means we may see some stores shut down temporarily, possibly people quarantined, and some people will get sick.  It will be pretty gnarly, some people will lose their lives, and loved ones to the illness, which is terrible, of course.  But our nation, as a whole will survive this disease. 

But something else has happened, this illness, the one all over the news these days, appears to be the "black swan" that was a tipping point for our stock markets, and that will send a domino effect through the U.S. (and other nations') economies.  A "black swan" is a very unlikely event that most people think won't happen, but has very large consequences if it does happen.  Imagine if actual aliens, from another planet, landed at the Super Bowl with hundreds of millions of people watching, for instance.  Yes, that's ridiculous, but that's the point.  That's something most people think would never happen.  But if it did, in a few minutes, it would change the way we look at outer space, and our planet,and life itself,  forever.  That's a crazy example of  a "black swan event."  That term, "black swan," comes from the 2007 book, The Black Swan (not a paid link), by Nassim Nicholas Taleb, looking at how these low probability events affect our world.

This economic downturn, though, will be different from previous ones.  There are several ultra-long term cycles and trends that are all converging right now, and this economic downturn will see far more change, and far more different kinds of change, than any in modern history.  I'm a weird sort of dork that is fascinated by this kind of thing, and I've been reading and learning about these long term trends for 30 years now.  I've been putting my thoughts on this subject into a free online book, of sorts, published as a blog, called, Welcome to Dystopia: The Future is Now. 

I'm thinking of this economic downturn, which we appear to be visibly entering now, as "The Phoenix Great Depression."  It will be crazy, it will be scary, like all economic downturns.  We will see fundamental parts of our society change dramatically, more than we've already seen.  But... this next few years, this next decade, will also offer more opportunity to build amazing new things, more than any time in modern history.  So while the economic downturn will cause a lot of chaos and destruction, we will also have the opportunity to have a better form of human society rise from the ashes. 

Recession Repurposing: These guys bought a race track

These are the guys behind the Cleetus McFarland YouTube channel.  They bought this abandoned racetrack last month.

Who?  Yeah, that's what I said, I'd never heard of this channel, or these guys.  But that's no big deal, there are thousands of YouTube channels out there I've never heard of.  Here's what caught my attentionm the title, "We bought and abandoned racetrack!!!" 

If any of you have read my personal blog (Steve Emig: The White Bear), you know I tell old school BMX stories, I show my Sharpie art sometimes, and I write about  the economy, the future, and big picture societal issues.  You know, really boring shit no one cares about.  I'm actually most of the way through writing a whole, 20 chapter, mash-up book/blog thing about  the future, and all the crazy shit I see going on.  You can look at all the words you don't want to read here (Welcome to Dystopia: The Future is Now), and then click back here.  I'm into weird stuff, like futuristic thinking, that almost nobody cares about (until it happens). 

Here's why this clip caught my eye, when it popped up on the side of YouTube.  We're going through a whole slew of changes as a society.  A lot of things that once rocked, like this racetrack above, are going out of business.  A lot of amazing properties, even entire shopping malls, are going bankrupt, and winding up abandoned.  When we drop into the next recession, which should be before too long, that process will accelerate.  Yes, a lot of people get into trouble in recessions, and a lot of bad stuff happens, financially, and otherwise.  But the other side of that coin is that there are a lot of really incredible deals on pretty much everything, cars, ATV's, real estate, stocks, businesses, whatever you're into.  So there are a lot of abandoned buildings, bankrupt businesses, and other things that can be had for insane bargains during recessions.  Like this racetrack above.

That's what caught my attention, these guys from a successful YouTube channel were able to buy their own freakin' racetrack.  That's freakin' cool.  Sure, you can blow these guys off as a bunch of crazy, gearhead rednecks... mostly because they are... a bunch of crazy, gearhead rednecks.  But this was a cool and entertaining little video.  AND THEY BOUGHT THEIR OWN RACETRACK!

This is a cool example of things that have faded in popularity, and gone out of business (a local stock car track), and sat abandoned for a while.  Meanwhile, some guys who followed their passion, and build crazy vehicles for a YouTube channel that became financially successful, were able to ante up, and buy a property that's like a dream come true to them, and make it their own.  That's amazing.

If you have some money right now, or can put a cool deal together with people who have the money and other parts of the deal needed, there are a lot of cool opportunities out there.  When the next recession sets in, there will be all kinds of crazy deals, and hardly anybody in a position to take advantage of all the deals.  So keep that in mind, if you have some big dream, like buying your own racetrack.  Or whatever your dream is.  It just might be more possible than ever, in the next few years. 

Just something to think about...

 

The Phoenix Recession

Borrowing this great scene again, this time with the further appearances by Fawkes.  Dumbledore's phoenix, Fawkes, goes up in flames, and is reborn.  In the last post in my personal blog, I predicted a major event will happen this month that will make it obvious that we're in for a serious economic downturn.  I think we're in the verge of a "Lehman Brothers moment," something in the business or economic world to make it obvious things are NOT as they should be.

It is part of the natural order of things that there are times when something old must die, it simply must collapse, it must go up in flames, its time is over.  And then, also part of the natural order of things, that at that point, something new will be born, and will grow in its place.  The mythical phoenix is a symbol of that period of change.  I think we're at a major point like that in Western society as a whole.  Writing that last post, I realized, I see this next recession as the flaming of the phoenix.  While tough economic times are hard for most everyone, I see the potential for something great to be reborn from the economic ruins.

"May you live in interesting times."

-Ancient Chinese curse

If you read my personal blog much, you know I've been drumming on about this coming recession for a couple of years now.  The reason is because I see this next economic downturn as much more than a slow economic period.  Being the weirdo I am, I've been drawn to little known and often overlooked social theories, and ultra long term trends.  There are several long term trends ending right now, in our little piece of human history, and the best way to describe this time is a transition of many transitions.  That's why my overall theory is something I call, The Big Transition.  Not a creative name, but it fits.  We truly do live in "interesting times."

On one hand, we are simply near the end of a bull run in our stock markets, and in the real estate markets of the most vibrant urban areas.  The stock prices and real estate prices (in prime areas) have been going up since early 2009.  The stock markets have been nearly stagnant for the last year ans a half, but hover near the high water mark.  Things are overpriced, and we're heading into a recession that will shake out, prices will drop dramatically, some businesses will collapse or go up in flames (if they have good insurance), and new ones will be born.

On another level, we are still in the long transition from the Industrial Age to the Information Age.  The rise of many new technologies, particularly communications, computers, the internet, and biology, are rapidly changing what's possible in many ways, and changing our everyday lives, the way we interact with each other, who it's possible to interact with, and how business and organizational structures work.  We're leaving an economic model based on factories in nearly every town, making physical goods, and selling those goods in mass market stores nationwide and worldwide.

We're going into an economic model based on nearly every person having a voice in society, a model where every person carries a small device that is a phone, a publishing company, and a TV studio, and a comedy club all in one.  One person can now share funny cat videos with a stranger next door and another in Spain, publish a video or blog post that can be viewed by billions, and can sell a homemade item and ship it to South Africa, or nearly anywhere else.  It's a world of tiny niches of interest, of many and multi-cultural voices, and a world that's extremely scary to a lot of people.  It's a world where old business models from the Industrial Age are collapsing, and where new, tech-enabled business models, are being created, and disrupting the old.  It's a world where the old school power structures are straining to keep control, while many of their long hid secrets come to light.  We're in a period of massive change at a frightening pace.  In a word, it's chaotic.

On yet another level, the United States of America, the grand experiment created unlike any other, where any individual, with hard and smart work, could create a business or idea, and move up in society, has reached a point of peak corruption in many businesses and political scenes.  After a full, generation of seeing the rich get much richer, while the lives of the majority of people have stayed financially stagnant, or have gone down, the common people are pissed off.  The average people have had enough, and we've been seeing the beginnings of a worldwide populist movement.  The people, in the U.S., and everywhere, are remembering they have the numbers, and ultimately, the strength, to change things to a more fair system. It's never pretty, and it can be brutal (like in Hong Kong at the moment), but it will keep happening.

On yet another level, America has been built on the idea of common people as business people.  Originally (after stealing the country from the Indians), Americans were farmers, traders, and shopkeepers, creating their own destiny.  Born in the early stages of the Industrial Age, America saw, and dominated, in the rise of the factories, and reigned as a super power in the late Industrial Age.  But with that came the rise of jobs, and most Americans went from being small businesses in the late 1800's (whether a farmer or shopkeeper), to being workers, punching a time clock ,and relying on a paycheck.  Now, with the rise of new technologies over the last 50 or so years, many Americans are turning back into entrepreneurs again, or trying to.  So that's another major shift that's happening.

Another transition is that we've been a country that looked up to the business people for 350 years.  But now the common people are rising, and standing up to the large scale corruption in many businesses, and other institutions.  As that rise bubbled under the surface, a new mentality has been rising to dominate the American collective psyche.  This is what P.R. Sarkar, philosopher and theorist from India, calls "The Warrior Mentality."  These are people who prize physical abilities and courage, more than the salesmanship and manipulation of Industrial Age business culture.

People doing scary and courageous shit have been slowly and quietly rising up in stature for several decades now.  Some of these people are the obvious, when you think of the core values of courage and physical ability, the soldiers, police, firefighters, and professional athletes.  We all know these jobs take physical ability, and courage, at different levels.  But courage is also needed, and demonstrated, by action sports athletes, activists, artists of all kinds, pioneers of all kinds, and entrepreneurs.

The Warrior Mentality is becoming the dominant mentality, and the wishy washy fence sitters are getting the boot.   This is why nearly all of us hate most of our old school politicians these days, no matter what political party you belong to.  Our long term politicians are schemers who will flip at the drop of a hat, they are not leaders.  As all of this chaos happens, the average people are looking for courageous leaders, or (as we've unfortunately learned the hard way in the last couple of years), people that pretend to be courageous leaders, and can con a large part of society into following them.  But those types show their true colors soon enough, and most people see through them before too long.  Ultimately, the truly courageous, they will become our new leaders, in business, in political circles, and in other organizations.

So, in my geeky, big picture view, all of these forces and changes are coming together to make this next recession a time of incredible change.  And incredibly scary.  That's where the courage part comes in.  I think this next economic downturn, which will be severe, as the major shakeout of our lifetime.  A lot of major change will happen in a short amount of time.

Like the phoenix, one thing after another that we know well, will burst into flames and die off.  That will be catastrophic on many levels, and painful for many people.  But this is all to make way for new things that are, and will continue to be, born.

Welcome everyone, to The Phoenix Recession.

Why the Western world's economy is on the verge of the biggest collapse of our lives...

Yeah, yeah, yeah... massive debt... blah... blah... negative interest rates... blah blah.  $124 TRILLION in unfunded liabilities?  And we have a $20 Trillion economy.  Uh Oh. 

U.S debt clock.   Over $125.6 trillion now.  Bottom right on the debt chart page.

A beginner's Guide to The Next Great Recession: The Trends

What's in store for the world's economy in the next year or two?  Here's a pretty good series of visual metaphors for what I see coming...

This is copied from my personal blog, Steve Emig: The White Bear
I'm going to put the financial oriented stuff on this blog from now on...

People watch weather reports.  Why?  So you can be prepared for the rain, snow, wind, lightning, possible tornadoes, and on a really bad day, a hurricane, in some regions.  We watch the reports, and adjust our plans to work around the lame stuff that's going to inevitably happen.

Yet in the financial world, it's just the opposite.  Home prices go up and down.  Stock prices go up and down.  Bull markets happen.  Recessions happen.  But almost everyone ignores you when you say, "Hey, there's a recession coming pretty soon, I think it's going to get really gnarly."  For some reason, the people who would want to prepare for a hurricane, or close all the windows before a bad thunderstorm, don't want to even hear about an economic storm.  In my opinion, there's a Category 9 hurricane 100 miles offshore right now.

I say this because I've been writing about the serious recession I've seen coming, for a couple of years now.  Hardly anyone takes me seriously.  OK, I'm homeless and broke, so those are legit reasons to be skeptical.  But Robert Kiyosaki is rich, and he's been saying the same thing.  Gary Vaynerchuk is rich, and he's ready to pounce on good deals during the next collapse.  Jim Rogers is rich, and he's been saying the same thing.  Warren Buffet doesn't talk about it, but he's sitting on $120 billion, waiting for the next downturn to find good deals to invest in.

Most people don't even listen to those guys, guys who have been through this before and have made fortunes from the downturns.  Most people just jog along with the other lemmings, completely ignoring all the red flags and warnings, from people who look ahead and watch the economic world.  Remember, lemmings are basically hamsters that follow the crowd and go BASE jumping... without a parachute.  Then they die.  For obvious reasons, I never wanted to be a lemming.


Here are the basic trends I've been watching, many for years, or decades in some cases, that lead me to believe we're in for the financial equivalent to a Category 9 hurricane, and we're just heading into it now.  It will be apparent to everyone within six months, I think.

-Alvin and Heidi Toffler's Third Wave idea- This idea says that we, as a society, began to leave the Industrial Age society in 1956, and are transitioning into an Information-based society. This transition will affect every level of society, and is as big as the change from hunter/gatherer societies to agricultural societies (about 10,000 years ago), or the change from an agricultural society to an industrial society (beginning about 350 years ago).  Except this time, this massive change is happening in the span of a human lifetime, not over hundreds or thousands of years.  No humans, in known human history, have had to deal with a societal change this big.

-P.R. Sarkar's idea of the transition from a society led by the "Acquisitor" (business person's) mentality to a "Warrior" (those who prize courage and physical ability most) mentality.  Only economist Ravi Batra speaks of this, and his 1989 book is where I first heard of this.  It takes a while to explain, but Batra's take on this theory from India is why I was predicting a future populist uprising, back in the mid to late 1990's.

-The Populist Uprising in the U.S. (and western society) actually happening-  It's kicking into high gear now, and it's far from its peak. While the Trump following racists, xenophobes, and business people got the head start, this Populist movement greatly favors the political Left and the Progressive/Socialist side of the equation, over the long term.  Hey, I'm a capitalist, I'm not stoked on this, but that's where the momentum is, and will be for some time, like it or not.

-Demographic shifts- Rich Dad, Poor Dad author, Robert Kiyosaki, predicted a 2017 recession back in about 2003.  Why?  Because 2016-2017 is when the huge Baby Boom generation was mandated to start taking their money out of the stock market, as the first of that group hit age 70 1/2 years old.  This trend of pulling money out of stocks by the Baby Boom will continue for about 20-25 years.

-The Big Transition- This is my personal term for the transition that the Toffler's spoke of in The Third Wave, the change from the Industrial Age to the Information Age.  I don't think we're in either age right now, but the chaotic and messy transition between the two.

During this period, The Big Transition, with the continuing and accelerating rise of new technology, comes Disruption.  Think of the music industry a month before, and a month after, Napster went online.  The whole industry was suddenly toast, thanks to a click of a mouse by a kid we'd never heard of.  A new technology can literally cause a disruption that makes an entire business model obsolete, practically overnight.  Major disruption has happened in music, TV, movies, publishing, and marketing. But Disruption hasn't really hit many other areas.  I believe that every business, industry, organization, or institution, will either intentionally re-invent itself from an Industrial Age model to an Information Age model, or more likely, it will collapse and an Information Age model will be created by someone else.  There's A LOT of Disruption still to happen.

Both main U.S. political parties right now, for example, are in the middle of their disruption.  Trump and Bernie Sanders came out of nowhere in 2016, buoyed by the simmering populist sentiment on both sides, and garnered huge support, because the traditional power structures in the parties had completely lost touch with average Americans.  That will continue, in political parties, and EVERYWHERE ELSE.  I see this period of transition lasting from 1956 (the Toffler's starting date) to about 2040 (my guestimate of when it's all shaken out, and begins to settle, providing humans are still here then).

-The Student Debt bubble- Student debt is now over $1.6 TRILLION in the U.S..  Why is it so high?  That's $300 billion more than the sub prime mortgage bubble that helped spark the 2008 crisis.  Student debt is so high because Wall Street took the sub prime model, and simply applied it to student debt.  The student loans are bought, repackaged as Student Loan Asset Backed Securities (SLABS), and resold in pieces to other investors.  To keep making the wonderfully high fees on all of this, Wall Street needed more and more student loans.  So the student loan bubble is the new sub prime.  Here's a fun fact, according to this recent Nerd Wallet article, about 40% of current student loans, over 10 million loans, are not being actively paid back.  Right now, 5.2 million federal student loans are in default, about 5 million other loans are deferred in one way or another.  Tick, tick, tick...

-What a student loan bubble pop would do to real world ("Main Street") America- Let's say the student loan bubble doesn't crash like sub prime in 2008, but just has a major correction period, and this causes student loan income to colleges and universities to be cut back by 20%.  Where are colleges?  They're in 150 or so cities and towns around the U.S., all over the place.  After the loss of manufacturing plants and jobs, a huge number of those towns and cities are now referred to as "Eds and Meds" cities.  The colleges and the hospitals (often associated with the colleges) are the primary employers in town.  So if student loan income drops by just 20%, what happens to those 150 or so towns and cities?  MASSIVE economic slow down, everywhere.  Now, what happens to those towns and cities, most of America by area, if the student loan bubble actually does burst, and student loan and tuition income drops 40%-50%-80%?  The financial crisis becomes catastrophic, REAL QUICK.  So there's that...

-The Geographic Recession- Most of the United States, by area, is rural area, small towns, and small to mid size cities.  Most of of those regions simply have not recovered from The Great Recession.  Real estate hasn't surged.  Large numbers of people work two or three low paying service jobs to survive.  High tech companies avoid these areas, and entire regions, like the plague.  There are a handful of people who describe the U.S. as actually having been in a Great Depression for the last 10 years.  We've had growth well below the long term trendline that whole time.  Sure, there's money in the big tech companies in the big cities, but the vast majority of the U.S. is ALREADY struggling.  In the next economic downturn, that will intensify.

-Richard Florida's Creative Class and the rise of Tech Hub cities- This is a very complex set of ideas, but here it is in a nutshell.  In a high tech enabled, information-based society, creativity is a main (probably THE main) driver of innovation and building wealth.  Creative people like to be around, actually physically near, other creative people.  Creative people cluster.  So the emerging tech world is now largely clustered in Silicon Valley/The San Francisco Bay Area, Boston, Seattle, Southern California, New York City, Washington D.C., the Raleigh Reserach Triangle, and Austin, Texas, by and large.  In effect, and for a whole range or reasons Richard Florida has laid out in his books and articles, much of the U.S. is a kind of wasteland with little or no large scale high tech businesses.  We have the tech hubs with lots of wealth and one set of urban issues to deal with.  Then we have the vast majority of the country's small cities, towns, and rural areas, trying desperately, and largely unsuccessfully, to attract high tech companies and viable start ups.  The map of these different areas is also the map of our political divide.  We have tech hubs and tech wastelands.  Since his first book on these ideas, The Rise of the Creative Class, in 2002, Florida has been looking for ways to level this playing field out, but the clustering has actually increased in the 17 years since.  This geographic sorting is a major root, but not the only one, in my opinion, to our current political polarization.

-The Retail Apocalypse- In 2017, 2018, and so far in 2019,a total of 20,000 retail stores have closed, or are scheduled to.  Another 20,000 or so closed from 2009 to 2016.  Toy-R-Us is gone.  Radio Shack is gone.  Sears and J.C. Penney's, once the 800 pound retail gorillas of retail, are now circling the drain.  This is the technology rooted Disruption of the Industrial Age retail industry.  Amazon didn't cause this.  The leaders of all those dead and dying companies, who didn't see the future potential of the internet that Jeff Bezos of Amazon saw, caused this.  The Industrial Age goods distribution system of mass marketing, mass manufacturing, U.S. based factories, and hundreds of department stores, malls, and shopping centers, is collapsing, because most of it is not viable in the Information Age.  A new system, including Amazon, but also platforms like eBay, and millions of small, online, niche stores, is growing to replace it.  By watching how the Retail Apocalypse has taken shape, I (and you, hopefully) can get an idea of what's going to happen to colleges, and to every other major industry where it hasn't happened already.  Technology has changed the game.  If you're still playing the mass market Industrial Age game, you're toast.  Or soon will be.

-And now... we get to the actual current economy.  Historically, we have a recession every 4 to 10 years in the U.S..  We're in year 11, so we're due, simply looking at the timing.

-The everyday person, traditional American economy, has decoupled from Wall Street and the Tech world.  Most of America never left, or barely left, the last recession, even as stocks have soared.  A bull market in stocks, in today's world, barely effects most of the everyday economy.  This is the Geographic Recession I mentioned above.  The Wall Street euphoria died a couple months after the Trump tax cuts, and stocks headed down, but that hype has risen again the last couple of months.  The recent cut in the Fed Funds rate shows that The Fed is getting desperate, and doesn't have much left to keep Wall Street growing.

-The ultra low interest rate and quantitative easing economy-  The Fed lowered interest rates just over a week ago, in what was already a historically low interest rate economy.  The interest rates were lowered dramatically, and quantitative easing (buying our own debt and pulling money out of America's ass, basically) was instituted to help bring the economy back after The Great Recession.  It didn't work.  The Fed was never able to raise interest rates back up to traditional, historic levels.  Yes, we've had a 10 year bull market in the stock markets, but it's been absolutely feeble economic growth the whole time.  There's been very little major infrastructure or capital investments.  But there's been a ton of stock buybacks.  We're in this weird financial Never Never Land, a place the economic world has never been, best described by former Goldman Sachs, Bear Stearns, and Lehman Brothers quant, Nomi Prins, in this talk, and her book Collusion.  No one knows a good way out of this mess.

-The Orange County/Southern California real estate market- When I lived here in Orange County from 1986 to 2008, it was pretty easy to see economic downturns coming, because the real estate market here soars up, tops out, and then heads down fast.  When you see housing inventories rising, and then prices begin to decline, things are getting ready to drop, and that's happening now.  In this blog post, we see the housing inventory growing here, which happens right before prices begin dropping.  Also Chinese buyers are pulling out of the U.S. market, which has helped it soar to the current point.

These factors (and many others) are all coming together in a huge convergence.  Some of these factors only happen once in hundreds of years, or once ever.  In addition, all forms of debt; government, business, and consumer, are at or near all time high levels.  All this situation needs to turn into a big financial downturn is a spark.  It looks like Trump's trade war with China is turning into that spark.

So that's why I'm predicting an economic collapse in excess of what we saw in 2008, and a 5-6-7 or more year hangover of little, if any growth, and stagnation all over the place.  We're in new territory in many ways, we've never been here before, and there is no roadmap (or GPS directions for you youngin's) to lead us out of it.  If it's not a textbook Great Depression in the next decade, it will definitely feel like one to most Americans.

But with this dismal economic outlook comes opportunities at a never before seen level, as well. Warren Buffet, Robert Kiyosaki, Gary Vaynerchuk, Jim Rogers, and other business people, are ready to pounce on all the good deals that will happen soon.  You can do that as well, if you're not crushed by your own debt right now.  A new world will be built in this next economic downturn, if we survive it, that is.

Inflection Points: When many different things come together and synch up in a big move

Bethany Hamilton surfing a ginormous wave at Jaws, on the north shore of Maui, in 2016.

Inflection point- (2) (In business): A time of significant change in a situation; a turning point.
- Google dictionary

This video is an inflection point, it captures a very short span of time where many conditions came together to form an absolutely huge wave that had the right characteristics to allow Bethany Hamilton to surf it successfully, changing or enhancing many people's view of Bethany, the surf break of Jaws, women's surfing, and the idea of wave riding itself.  Most people would see this video and think, "Wow, that guy's crazy!"  Then a surfer would respond, "That's a woman!  A woman with one arm."  Then the inevitable response.  "Wait... really?  She's NUTS!" Yeah, and just plain amazing.

All kinds of things had to happen to make the 18 seconds of the ride in this clip above get captured on this video.  The tectonic plate of the crust of the Earth, under the Pacific Ocean, slowly moved over a hot spot of magma, volcanoes formed, and eruptions over millions of years built up those volcanoes from the bottom of the sea, eventually rising above the water level, and formed Maui and the other Hawaiian islands.  A ridge offshore off the north of Maui, the area known as Pe 'ahi to the locals, formed from volcanic activity, and then was worn into a certain shape by ocean currents and wave action over hundreds of thousands of years.

Meanwhile, in 2016, a huge storm, perhaps a thousand or more miles away, sent out pressure waves that travel through the water at 500 miles per hour, in a very specific direction, towards the small island of Maui.  That pressure wave combined with ocean currents, the tides created by the Moon's gravitational relation to the Earth, the local shape of the shore, and the underwater ridge.  Those and many other factors forced the water upwards, into the wave we see in the video, at that particular moment in time.

At that same time, surfer Bethany Hamilton was there, holding a tow rope attached to a jet ski, waiting for the right wave.  Bethany, born and raised in Hawaii, was already a legend in the surfing world.  Bethany was just 13-years-old in 2003, already a hot up-and-coming amateur surfer, when she was attacked by a huge, 14 foot Tiger shark, of Kauai.  The shark bit off her left arm near the shoulder.  With the help of her best friend Alana Blanchard, and Alana's dad and brothers, Bethany got to shore, was rushed to the hospital, survived losing 60% of her blood, and came through the ordeal.

A surfer to the core, Bethany not only got back in the water, she learned to surf again, with one arm, and went on to become a top women's surfing pro.  Her shark attack ordeal was written in the 2004 book, Soul Surfer, and made into a movie in 2011.  The attack made Bethany famous.  What Bethany did after the attack, not only learning to surf again, without one arm, but going on to become a top pro and a big waver rider, made Bethany a legend to surfers and non-surfers alike.

In addition to the legendary surf break Jaws, and legendary surfer Bethany, this short video took the lifetimes of work of the surfers/watermen (and women?) on the jet skis, the photographers on the boats, and the video cameraperson from Shannon Reporting, Shannon Marie Quirk, who captured this moment on video.  All of these things I've mentioned, and many other things as well, came together to create this 18 seconds of action on video, which will raise anyone's opinion of what is possible by a human being.  In other words, this short video is an inflection point, something that enhanced Bethany's surfing reputation greatly, Shannon's video reputation, and even the reputation of the mighty surf break Jaws.

So why am I going into so much detail about a cool clip of amazing surfing?  Because it's a good metaphor for inflection points in the economic and business world.  All my life I've been an amateur futurist, always wondering what would happen in the future, and trying to figure out how to understand the present, in order to accurately predict the parts of the future that were predictable to some degree.  This seems to be where my fascination with predicting the future evolved from.

In late December of 1989, I visited my parents in North Carolina, going there for a week over Christmas.  I bought a book to read that week, because staying there was pretty boring most of the time.  After the initial, "How have you been?" conversation for a couple hours, everyone mostly did their own thing, and reading was a good option to fill my time.  I picked up the book, The Great Depression of 1990 by economist Ravi Batra.  Yes, I know, not the subject matter most people would choose.  I'm an economics geek, making me a geek even among the geeks.  I found the book fascinating, as Batra explained a very obscure social theory from India, added in his understanding of economics, and then predicted am economic Great Depression, like in the 1930's, starting in 1990. I found that fascinating, because I'm weird like that.  After reading the book, I headed back to Huntington Beach, and I began to read the business section of the newspaper every day.

We didn't have a Great Depression in 1990.  But we did go into a recession, then popped out a bit, then back into it.  They called it a "double dip recession."  To me it seemed that most of the reason it was given that name was so they wouldn't have to actually call it a "depression," which has a much darker, and scary, connotation.

The traditional definition of an economic recession, at that time, is an economic "contraction" for two consecutive quarters.  So instead of the total economy growing, it shrinks for six months.  A "depression" is when that happens for three years, and a "great depression" is when that happens for five years.    The "double dip" thing "officially" only lasted 8 months.  But the economy sucked for average people, and the California (and most other places) real estate market didn't rebound until late 1996 and early 1997.  So things largely sucked financially for 6 years, and we happened to have this little thing called the internet being invented (in a widespread way, as opposed to the original military uses) to help bring us out of it.  That was a huge, unexpected, one time economic boom, that almost everyone by surprise.

So from my point of view, most of what Ravi Batra predicted in 1989 actually happened.  It just didn't happen to as deep of a level as he predicted.  I became really interested in the social theory from India, "The Law of Social Cycle," by P.R. Sarkar, as well as many of his thoughts on long term economic trends.

One of those trends was that we have a depression (or great depression) every 30 or 60 years in the U.S., going back to colonial days.  The only exception was the reconstruction era, for about 30 years, after the Civil War.  That period through everything out of whack.  But looking at the historical records, Batra found that if the depression skipped the 30 year mark, it tended to be more intense at the 60 year mark.  So we had the stock crash of 1929, leading into The Great Depression of the 1930's.  There was no depression in 1960, 30 years later.  So he saw a deeper depression looming in 1990.  Guess what 2020 is?  Yep, it's the 30 year mark after 1990.  So that's one long term trend suggesting an economic downturn, a sizeable one, could happen in, or around, 2020.  That's one historical trend in a possible major inflection point for our economy.

By actually watching the economic news, actually reading the newspaper in the early 1990's, and later watching CNBC business news, as it came along and grew, I noticed that many different things would happen, which could be seen in real time, and often in different charts of different economic factors.  The stock market would be doing one thing.  The bond market and interest rates doing another.  The price of gold, the price of oil, the price of agricultural commodities would each be doing their own thing.  But when you looked at several different charts over the same span of time, you'd see spikes at the exact moment, in many different things.  Some spiked up while others spiked down.  Some things would trend up before the spike, while other things trended in a rough parallel, and others trended down.  But many different charts would show the exact inflection points, suggesting there were deeper things, factors, happenings, that affected all of them.  Interest rates being moved up or down by the Federal Reserve was the most obvious.  The effects of The Federal Reserve moving interest rates up or down ripples throughout the economy.  But that's not the only cause of these inflection points.

In the late 90's, I took a home study course on trading commodities, which relied heavily on looking at the different price charts for the 40 or so traded commodities.  That's when I really began to notice these inflection points, in multiple markets, all happening at the same time.  So I started looking up and searching for what the business news was on those particular days, the times when several different markets made big moves, at the same time.  Like I just mentioned, several were when interest rates were adjusted.  But others had different causes, and some I never did figure out.  But I learned that when several markets are heading in the general direction of a big inflection point, its an indicator a big inflection point if coming.

That's where we are in today's economic world.  There are all kinds of trends pointing at a HUGE inflection point, something that will be a massive negative hit to millions of people's lives.  Yet no one wants to know it's about to happen.  That's why I predicted we're in the "prelude" to a Great Depression on my personal blog a couple of days ago.  Many different factors are coming together in a big confluence pointing to that happening.  I've been saying this since 2017, knowing we were heading that that direction.

Here's the ting about inflection points.  If you were in a sea kayak or small boat, not knowing the swell was coming to Jaws, the wave above could easily kill you.  But Bethany spent her life pushing limits as a surfer and as a human, to be able to have a chance to successfully ride this huge wave.  HUNDREDS of millions of people will be crushed by the economic wave I see building.  But some will surf it.  That's why I write things like this.  For those who don't want to be crushed to know to get out of the way, and for those who can "surf" economic waves to surf this one that's building.

There is one more aspect to the video above that I haven't mentioned that played a crucial role.  Someone predicted that there was a huge swell coming, and that it might make Jaws go off in an epic way.  That's how Bethany Hamilton, the guys on the jet skis, the photographers, and Shannon with the video camera all knew to be there.  That was most likely Surfline.com, based in Huntington Beach, California, where I've spent most of my adult life.  Surfline predicts swells around the world, and top big wave surfers regularly fly halfway around the world, on a couple of days notice, to surf a spot Surfline.com predicts will go off in a big way.

When it comes to the big economic waves, I am Surfline.com.  There's a huge crash coming, a "negative" wave that will also create more opportunity for smart businesses, new businesses, and new ideas of all kinds, than any period of time in our lives.  It's about to happen.  Get your board waxed up.