As good as it gets? (Colorado Springs, Cripple Creek: sales, mortgage, student loans)

[Vision67]

Is the local economy at the top?

Hazlehurst: When will the local economy go bad?

During my decades in Colorado Springs, I’ve seen our city go from boom to bust half a dozen times. I’ve seen banks fail and developers go broke, flee and leave their lenders and investors holding the bag. I’ve see other stricken developers man up, refuse to declare bankruptcy, pay their debts and get back in the game. I’ve had to sell properties for less than I paid, and watch my bank accounts tumble slowly into the red.

I wasn’t smart enough, agile enough or lucky enough to do what many of my contemporaries managed to do — build a portfolio of investment properties that would keep me solvent and prosperous in my dotage.

On the other hand, my failure to do so means that the next recession won’t much matter. My nonexistent tenants won’t stop paying the rent, my nonexistent properties will never need repair, my nonexistent mortgage payments will never be late and I’ll coast through old age. Along with some of my geezer homies, I’ll head up to Cripple Creek on the second Wednesday of every month to celebrate the electronic transfer of that month’s Social Security check.

On the other hand, our other sources of income might suddenly dry up in a recession, forcing me to abandon my occasional forays to the Creek.

So when will the local economy go bad? Here’s a set of predictive indicators derived from experience; ignore them at your peril.

https://www.csbj.com/2019/08/09/hazl...conomy-go-bad/

[DrDog]

Not sure it’s a local thing. Could very well see a nationwide recession soon.

Was Amazon around for the last recession?

[McGowdog]

The only Recession I've seen lately is in society's Will to do work.

[Mike from back east]

It's not a question of "if" there will be a downturn, it's a question of "when" it happens. I see it coming as a slow rolling set of events.

These things rarely happen with the flip of a switch, but you do see the steps as they unfold: mortgage filings slow down; new housing permits fall; marginal eateries close; houses wait longer for a buyer; stock market wobbles; quarterly financial filings show lackluster sales/revenues that fail to beat prior quarters; tourism slows; retail slows; car sales slump (a biggie of an indicator), etc.

Problem with all this is that a recession isn't "called" until two consecutive quarters of declining GDP. The generally accepted "authority" for calling a recession is the National Bureau of Economic Research (NBER). The NBER won't claim the "two consecutive quarters" timeframe as their criteria but it always seems to work out that way.

The topic of recession gets a good explanation on Wiki, here is the key excerpt: "In the United States, the Business Cycle Dating Committee of the National Bureau of Economic Research (NBER) is generally seen as the authority for dating US recessions. The NBER, a private economic research organization, defines an economic recession as: "a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales". Almost universally, academics, economists, policy makers, and businesses refer to the determination by the NBER for the precise dating of a recession's onset and end."


We must remember that by the time the NBER "calls" a recession that we've been in that condition for six months or more, which makes this a "lagging indicator" and not a "leading indicator" to warn us to take steps in advance to protect our wealth. Sometimes a major negative event (aka "Black Swan") occurs, like the 9-11 attacks, and can kick off a recession but mostly it's a slowing of the economy. I saw this in the late 1980s after years of prosperity; everyone's garage had a new vehicle, our closets were full, we had no money left to spend and few needs to spend it on, thus business slowed and we ended a dull boring period of economic activity.

[Willy702]

The tricky part is every recession is a little different in the modern information era. In the past potential investors didn't get such real time data on economic conditions pertaining to their industry or local area of interest. You saw an unmistakable overinvestment develop where everyone was looking at each other hoping the others would blink. If no one blinked, no one got a good return on investment and too much of that led to a recession as everyone pulls back.

I don't know if that will happen to much of a degree any longer. Information is too good. What seems more likely is the central bankers dream of just a modest slow down that develops based on wise investors backing off when the market gets potentially saturated. Of course, there are always risks this doesn't quite follow so orderly, but it needs to be thought about. When everyone is looking out for a recession because of some industry or activity, chances become pretty good that a recession won't happen. Recessions are driven by areas people don't see such fears, such as the belief that housing prices could never go down until they did.

One area I do wonder about is the student loan market. What if the federal government or some of their private industry partners just pulled back harshly on this massive chunk of debt? What if students a year or two into their studies were suddenly unable to come up with tuition? What if all these for profit schools saw their classes decline by 50%? That's a very real disaster lurking, but since everyone feels like student loans are an intractable part of government support there just might be a chance it spirals into a bigger recession that lasts some time.

[DrDog]

Originally Posted by Willy702

The tricky part is every recession is a little different in the modern information era. In the past potential investors didn't get such real time data on economic conditions pertaining to their industry or local area of interest. You saw an unmistakable overinvestment develop where everyone was looking at each other hoping the others would blink. If no one blinked, no one got a good return on investment and too much of that led to a recession as everyone pulls back.

I don't know if that will happen to much of a degree any longer. Information is too good. What seems more likely is the central bankers dream of just a modest slow down that develops based on wise investors backing off when the market gets potentially saturated. Of course, there are always risks this doesn't quite follow so orderly, but it needs to be thought about. When everyone is looking out for a recession because of some industry or activity, chances become pretty good that a recession won't happen. Recessions are driven by areas people don't see such fears, such as the belief that housing prices could never go down until they did.

One area I do wonder about is the student loan market. What if the federal government or some of their private industry partners just pulled back harshly on this massive chunk of debt? What if students a year or two into their studies were suddenly unable to come up with tuition? What if all these for profit schools saw their classes decline by 50%? That's a very real disaster lurking, but since everyone feels like student loans are an intractable part of government support there just might be a chance it spirals into a bigger recession that lasts some time.

I thought the Democrats were going to pay off everybody’s debt?

[Phil P]

Well if the economy in the Springs does head south, regardless of what the national economy does, this 2008-2019 boom wasn't exactly too much of a boom to the area from an employment level (especially when compared to Northern CO). The population sure has influxed, but it's fair to say many of the newcomers weren't economic migrants.

[Mike from back east]

Originally Posted by DrDog

I thought the Democrats were going to pay off everybody’s debt?

Sorry, that trillion dollars was shoveled upstairs to those who didn't need a cent.

[BornintheSprings]

Originally Posted by DrDog

I thought the Democrats were going to pay off everybody’s debt?

I thought Republicans were going to bring back high paying jobs that only require a sixth grade education?

[Westbound and Down]

Sorry, but the writer of the cited article has no insight whatsoever into indications predictive of a local recession looming. Amazon trucks? Good grief...