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October 9, 2023 | Recession Watch: Red Flags Everywhere You Look

John Rubino is a former Wall Street financial analyst and author or co-author of five books, including The Money Bubble: What to Do Before It Pops and Clean Money: Picking Winners in the Green-Tech Boom. He founded the popular financial website in 2004, sold it in 2022, and now publishes John Rubino’s Substack newsletter.

The hardest part of writing this kind of post is sorting through all the red flags. There are just too many these days.

So here are the handful that look scariest at the moment:

Interest rates are above 2007 levels in a world with twice as much debt. This shouldn’t have been possible, but here we are. Real estate usually implodes when mortgage rates spike and this time is no exception. As rates rise, mortgage applications crater.

Commercial real estate is in even worse shape than housing and the related bonds are looking at a default-driven bust (CMBS stands for commercial mortgage-backed security):

Banks, which own a lot of government and asset-backed bonds, now have massive embedded losses, which many of them will be forced to take in the near future:

Banks obviously get this, and they’re tightening their lending standards in response. Note that a reading above 40% tends to coincide with a recession:



But, but, what about the rocking jobs market? Well, it seems that all (not most, but all) the recent growth in employment is coming from part-time jobs, while the number of full-time jobs is shrinking. That’s a sign of distress, not strength.

And here’s a “life is hard” litany from the Kobeissi Letter:

The average payment on a new home is now at a record $2,900/month.

The average house is now renting for a record $1,900/month.

The average new car payment is now at a record $740/month.

The average used car payment is now at a record $530/month.

The average student loan payment is now $500/month.

The average gallon of gas is now nearing $4.00 again.

The average household credit card balance is now at a record $7,300.

The average household will have $0 of excess savings by the end of this quarter.

How can the average person afford to live?

This is not a world where broke consumers with growing credit card balances drive positive growth into the indefinite future.

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October 9th, 2023

Posted In: John Rubino Substack

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