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Buyer's Market Coming Soon?

montygz

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If you're anticipating being in the market for a resale timeshare unit in 2019, your timing may be pretty good to excellent. The NASDAQ is now officially in bear market territory, and the S&P 500 and the Dow Industrial Average aren't far behind.

When the timeshare market crashed back in 2008, one of the harbingers was a soft outlook in 2007 from Carnival Cruise Lines. Carnival owns not just its namesake, but also Princess Cruise Lines, Costa Cruises, Cunard Line, and Holland-America Cruise Lines, among others. Today, Carnival released its outlook for 2019, and it wasn't pretty. I tried to find an electronic version of the 2007 report, but could not find one. Regardless, there are eerie similarities.

If it is, in fact, the canary in the coal mine, 2019 could be a chance to go bargain-hunting for some very nice timeshare properties at discount prices.

There could be some bargains, but many timeshares already sell for pennies on the dollar, so not much can be gained.

I'm curious how it will impact the rental market, which has has been stronger over the past few years. The biggest deals could come in renting.
 

pedro47

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Railman83

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I liked your post; maybe if there is no change in the fed rate the stock market will be stable until Jan 1, 2019.
Big upswings like yesterday are more common in Bear markets as oversold short covering rally. A run of mill bear would take S&P to 1200-1300.
 

WalnutBaron

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This is a good history of fed rate changes and significant events in the economy.

https://www.thebalance.com/fed-funds-rate-history-highs-lows-3306135
This is a fascinating chart. Thanks for posting. It's interesting to note how different GDP growth is now compared to the growth experienced under the Reagan, Bush I, and Clinton administrations. The massive debt the U.S. now carries--especially when measured as a percent of GDP--has certainly weighed down the ability of the U.S. economy to grow by those huge leaps we saw back in the 80's and 90's.
 

TravelTime

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https://csbcorrespondent.com/blog/will-rising-rates-cause-our-next-recession

Except for the 1980 recession and the Great Depression, it is hard to show a causal relationship between the actions of the Federal Reserve and recessions. The graph below shows the Fed Funds rate from 1988 in the white line and US recessions in the red line. The pattern below shows that the Federal Reserve is responding to the onset of recessions by cutting interest rates, and not causing recessions by raising rates.

upload_2018-12-27_11-29-4.png


Behavioral economics states that people’s emotions, cognitive errors and other psychological factors influence their decisions and economic recessions are more likely caused by a loss of business and consumer confidence and not by actions of the Federal Reserve.

But like every other business cycle in modern history, confidence will recede, and when it does, so does demand. When overconfident risks pay off, the economy booms, but when the overconfidence leads to losses, consumers and business retract, the business cycle turns, and a contraction ensues. Overconfident people have particularly short memories.
 

DannyTS

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https://csbcorrespondent.com/blog/will-rising-rates-cause-our-next-recession

Except for the 1980 recession and the Great Depression, it is hard to show a causal relationship between the actions of the Federal Reserve and recessions. The graph below shows the Fed Funds rate from 1988 in the white line and US recessions in the red line. The pattern below shows that the Federal Reserve is responding to the onset of recessions by cutting interest rates, and not causing recessions by raising rates.

View attachment 9628

Behavioral economics states that people’s emotions, cognitive errors and other psychological factors influence their decisions and economic recessions are more likely caused by a loss of business and consumer confidence and not by actions of the Federal Reserve.

But like every other business cycle in modern history, confidence will recede, and when it does, so does demand. When overconfident risks pay off, the economy booms, but when the overconfidence leads to losses, consumers and business retract, the business cycle turns, and a contraction ensues. Overconfident people have particularly short memories.

This is another prospective on the FED

https://palisade-research.com/fed-pushing-us-into-recession/
 

TravelTime

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Yes the article I posted mentioned many so called “experts” say this. The question is whether the Fed rate changes are causation or correlation.
 
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DannyTS

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Yes the article I posted mentioned many so called “experts” say this. The point is whether the Fed rate changes are causation or correlation.

so the one you posted is the only one we should read, right?
The author of your link is the real expert unlike all the other ones that are just "experts". Yes, there is not causation between sugar and marriages but the relationship between credit, the stock market and the economy itself is beyond obvious. If you are interested you easily read how they interact.


https://www.investopedia.com/investing/how-interest-rates-affect-stock-market/
 

TravelTime

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so the one you posted is the only one we should read, right?
The author of your link is the real expert unlike all the other ones that are just "experts". Yes, there is not causation between sugar and marriages but the relationship between credit, the stock market and the economy itself is beyond obvious. If you are interested you easily read how they interact.


https://www.investopedia.com/investing/how-interest-rates-affect-stock-market/


I did not say the author of that article is a real expert. Please no more link wars. Once again, if you read what Investopedia says you can see that the reason the Fed increases the fed fund rate is in response to inflation, which can be a signal of an overheated economy. The Fed is purposely trying to slow down the economy so we do not get into a hyperinflationary state. When it causes a slowdown, that is positive. People interpret a rate increase as growth is slowing so they pull back. Stock markets traditionally decline because there are other places to invest. When the fed fund rate is near zero, people need a higher yielding place to invest their money and the stock market tends to improve. This was illustrated perfectly from 2008 until now. Historically, a recession usually follows a boom. The Fed raises rates they worry that a boom may carry risk to the economy over the longer term if they do not slow growth. So it may look like the Fed is causing a recession. That was the point of sugar and marriages. It was simply to illustrate the “causation vs correlation” concept.
 
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DannyTS

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I did not say the author of that article is a real expert. Please no more link wars. Once again, if you read what Investopedia says you can see that the reason the Fed increases the fed fund rate is in response to inflation, which can be a signal of an overheated economy. The Fed is purposely trying to slow down the economy so we do not get into a hyperinflationary state. When it causes a slowdown, that is positive. People interpret a rate increase as growth is slowing so they pull back. Stock markets traditionally decline because there are other places to invest. When the fed fund rate is near zero, people need a higher yielding place to invest their money and the stock market tends to improve. This was illustrated perfectly from 2008 until now.
I think i would normally agree with you. However, at the current level of debt, both government and corporate, steep increases can be very risky especially coupled with the FED reducing the balance sheet from stratospheric levels, never done before.

You may be interested in listening to the so called "bond king" Jeffrey Gundlach

 
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TravelTime

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The major problem now could be the record breaking total debt that the economy is carrying. Although, historically as a percent of GDP, we are not that out of whack but close to a peak and total debt is outrageous.
 

TravelTime

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TravelTime

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upload_2018-12-27_15-42-26.png


Another interesting chart: US federal debt as percent of GDP by presidential party from 1940 to 2015
 

Railman83

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The major problem now could be the record breaking total debt that the economy is carrying. Although, historically as a percent of GDP, we are not that out of whack but close to a peak and total debt is outrageous.
Well it cost a lot of money to beat the Nazis and Imperial Japan, and we emerged with the only intact industrial economy and had a world to sell to with no competition for 20 years.

Today we just have debt in the form of entitlement, particularly State pensions that have insolvency baked in.

One year of bear market bankrupts Illinois, California, Kentucky etc.
 

sharewhereMiMi

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I hope so. I've been waiting to pick up one or two.

Note: Do not tell Mr. Klpca
Sounds like the trade secret is out , just as long as my mr mimi doesnt know neither .. ;)
 

TravelTime

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Well it cost a lot of money to beat the Nazis and Imperial Japan, and we emerged with the only intact industrial economy and had a world to sell to with no competition for 20 years.

Today we just have debt in the form of entitlement, particularly State pensions that have insolvency baked in.

One year of bear market bankrupts Illinois, California, Kentucky etc.

Yes exactly.
 
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