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January 23, 2024 | Recession Watch: Doom Spending and Frozen Real Estate

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.

Stocks are melting up while government officials claim credit for a soft landing. And yet…

The US Index of Leading Economic Indicators (LEI) continues to predict a slowdown while GDP, which normally tracks the LEI, remains strong. Which one is right?

The December index of business conditions in the New York Fed’s territory plunged to -43, the lowest reading since the depths of the pandemic:

The yield curve’s recession signal just spiked:

Housing Is Already In Recession

December existing home sales fell to the lowest level since 1995 (when there were way fewer people):

To understand why either home prices or interest rates will have to tank, consider what happened to the cost of a $400,000 house between 2021 and today. Spoiler: The actual cost rose by $400,000.

San Francisco, of course, is leading the way down:

(Wolf Street) – The median price of single-family houses in San Francisco dropped to $1.45 million in December, down by 29.6%, or by $610,000 from the nutty peak in March 2022, and below the Decembers in 2022, 2021, 2020, 2018, and 2017, which was six years ago, folks, and same as December 2019, according to data by the California Association of Realtors (blue line in the chart).

Consumers, meanwhile, are in no condition to pick up the slack:

The buy now, pay later holiday debt hangover has arrived, as consumers wonder how they’ll pay bills

(CNBC) – When she started shopping for the holidays late last year, Kelly Andersen was struggling to buy her loved ones gifts. So she turned to a novel solution to get through the season: Buy now, pay later.

The 31-year-old freelance copywriter from Los Angeles used Klarna and PayPal to split a variety of purchases into four interest-free payments spread out over a series of weeks. At the time, her upfront cost was about a quarter of the overall purchase price.

But now that January has arrived and the other installments are starting, Andersen isn’t sure how she’s going to pay them off. She’s never missed a payment before and treats debt seriously but has found herself buried under a mountain of micropayments, wondering how she’s going to cover her bills.

“I’ve definitely been selling clothes … if I have to go sell a pair of shoes to make a payment, I will,” Andersen told CNBC of the roughly $1,700 she racked up in buy now, pay later debt. “I’m definitely worried about [the payments]. It’s definitely a concern and I’m definitely going to have to find a way to come up with the money.”

Andersen is one of many Americans who turned to buy now, pay later to fund their holiday shopping last year to avoid credit card debt but are now having trouble paying off those bills.

Then there’s “doom spending.” From the Collapse Life Substack:

This week, a survey showed that 35% of Gen Z and 43% of millennials are engaging in ‘doom spending’ — mindless shopping as a way to soothe woes outside their control. Many young people say with the cost of living being what it is, home ownership or starting a family is so out of reach they are just spending on travel or luxury items.

It turns out the dejection extends to their desire to procreate as well. In a study of 7,000 people conducted by the University of Southampton, less than one-fifth of millennials, specifically those between ages 26 and 35, were sure they wanted to become parents. Can we add to the lexicon — doom contraception?

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January 23rd, 2024

Posted In: John Rubino Substack

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