Hey guys, it's John Stewart here with Bugay Investments. I want to talk to you guys about what's on a lot of people's minds right now. You're hearing Buzz about it all over social media and all sorts of forms and everyone.
Is there a recession coming?
So that's a great question. Obviously, it affects all of us as business people and especially us in the real estate industry eight out of the ten last recessions have been marked by a slow down in the real estate sector. So what is recession? Well recession is the default state of an economy in growth. But that growth is marked by periods of recession or economic slowdown. Usually lasting 24 to 36 months. We all know the last one in 2007-2008 the Meltdown was catastrophic. It was really bad.
So is there another one coming. Well, of course it is. I mean, there's no doubt about it is how the economy works. It booms, it expands, and then it slows down and then it expands again and then it slows down. So what can we expect? Well, the last recession was really bad and I believe that this next one will be really bad as well.
In the 2018 tax spending went up $300 billion dollars, we went down $218 billion dollars in tax revenue... sounds like a recipe for disaster. So what actually happened in 2008 & 2009. Well, the the feds dropped the interest rate down to almost zero and when doing that it spurred investors to borrow lots of money at a very cheap price.
It stimulated the economy and we got ADDICTED. I mean we like to make money here in the United States. Interest rates have been dropping to a historically low. It's about as low as it's ever been. There is more capital in the economy. Then there's ever been people are borrowing people are investing huge amounts of money are being made and lent and borrowed.
Then spent every single year and it's continuing to happen. What does that mean? So corporations are borrowing huge amounts of money. So our investors there is a huge boom right now in the corporate bond market. And actually if you track what has been happening the same sort of thing that happened in 2007 to 2008 is happening now with corporate bonds junk rated bonds are being mixed in with investment-grade bonds and sold off on the secondary market.
What exactly does all that mean? Well, in the future, we'll see what happens. But for right now what it means is money is being borrowed and the truth about the security of the debt obligation is not being lent on terms.
On terms that are not actually equivalent. So as far as what it is going to actually happen, who knows we could have another banking meltdown ...lending meltdown. The truth is that none of us really know we're not fortune tellers it will happen. And the only thing we can do is be prepared for it. Someone really wise once told me that all you can do is ride wave you can't control the ocean?
So we're out here and you just need to keep making wise Investments, making wise business decisions, continue to return money to you through dividends and returns and income.
Other than that, there's there's not much else we can do again this is John Stewart with Bugay Investments.
Just giving our professional inside.