Recession in 2025? Here’s What No One’s Telling You…

[00:00:01] Everybody is asking the same exact question right now. Are we headed for a recession? I know a lot of you guys are trying to figure this out. There's tons and tons and tons and tons of videos on this, right? But I think what's happening, the moves that are being made right now, especially with the tariffs and kind of what we're starting to see with the European Central Bank.

[00:00:24] So some of you might know that, you know, when our dollar gets weak, which it's low right now, it affects other currencies. It affects other central banks. And I think, you know, a lot of times people are looking at this like centrally and locally. It's really a perceptual thing that hits globally. And I think that's the bigger issue.

[00:00:49] We have a trust issue. We have a safe haven issue around our dollar. And I think it's going to start affecting. So we can look at today, which we have to look at today, of course. And Powell just got, Powell just said he thinks we're at maximum employment and we're actually fairly stable on prices. That's what he just said. So the question is, this is why him and Trump are going at it in the news, right?

[00:01:16] Yeah, because the Fed basically monitors two things. They monitor unemployment and they monitor inflation. And it's confusing for Powell because he's in a tough spot because right now inflation is calming down, but it could easily go back up. And unemployment, while increasing, is still within the bounds of considered a healthy amount of unemployment. So right now it seems pretty easy to focus on inflation.

[00:01:43] If unemployment continues to go up, you know, the Fed then is in kind of a tough bind because they have to then decide. And he basically said they're going to monitor both. And if both are going in the wrong direction, they're going to see which one's going in the worst direction. Is unemployment worse or is inflation worse? So I think, you know, what's interesting is, I mean, if you just focus on, let's say, China and all this stuff going on there, there are some things on YouTube. I would encourage you guys to look at this. I've looked at a bunch of them.

[00:02:12] I watch a bunch of them where people are actually posting on YouTube, even though the Chinese government is trying to keep everything down. Right. And what we're what we're seeing is things are severely slowing down because us as a consumer isn't buying like like we were because of the pricing. So we do think that initially, at least this is going to stall growth. And I think it's actually going to it's going to create job loss here in the U.S.

[00:02:42] It has to. Right. You know, we're already seeing I know corporate we're going to talk about corporate profits and those are up. But corporate profits are going to go down if things, you know, are priced differently from these tariffs. So before we dive into kind of what we're seeing in the economy right now, let's maybe discuss what a recession is, because I think in a lot of people's mind, a recession means 2008. Like 2008 recession. This is the only thing people think of.

[00:03:09] And the truth is, is that there's been a lot of other recessions that weren't as extreme as 2008. 2008 was a major, major recession. Well, that was really different. I went through that. That was based on people losing their homes and, you know, all kinds of things. We're not in this scenario here. Basically, a recession means two two negative quarters of negative GDP. That's what that's essentially what that's the technical word.

[00:03:37] And and so I think like anything, you know, we are going to see, especially with these tariffs, a significant change in GDP. Yeah, absolutely. But just keep in mind that it's not all or nothing. It's not, you know, 2021 where everything's booming or 2022 or 2008. You know, it's not like you're only two options. Right.

[00:04:01] There can be dips and highs that just aren't as extreme as that, as we're talking about whether we think there's going to be a recession and then what we think you should be doing. Right. I think this is like the. You know, like, you know how quiet it gets before a storm or a tsunami, you know, like when the tide kind of goes out and we don't see the the the you know, the wave offshore. That's where this is headed. You know, these tariffs are creating massive disruption.

[00:04:30] Like I said, you know, if you go back and just take a look at some of these YouTube, just look, there's there's a number of them out there. I don't know how quickly they're getting pulled down, but I looked at a couple actually this morning. And, you know, this is a this is a big thing. Obviously, there's a huge, huge trade war going on between China and the U.S. But but we are a huge, huge consumer.

[00:04:51] And so now they're forced with taking all these products that they made and pushing them back into their domestic economy as opposed to sentiment internationally. So there's all these all these dots that are being connected as a result of this.

[00:05:04] And I actually think that, you know, while the goal here is to is to get manufacturing back to the U.S., this is in some ways the weaker dollar is some ways could be a tool where the U.S. is trying to reindustrialize, you know, by keeping our dollar weak. Yeah, maybe we'll see if that works. It certainly is. I mean, it's the lowest it's been in three years. The X, Y is like 98.

[00:05:34] It's gone down eight or nine percent. And so so if we're paying for paying dollars to somewhere else, it doesn't really matter who they're holding our dollars and we're using that, you know, we're manipulating that. The value of what we gave them has gone down eight or nine percent. Right. And they do care about that. Correct. Yeah. Right. That's kind of the point. The dollar has always been there's a there's been an inherent trust and a safe haven with the U.S.

[00:06:01] dollar like that, you know, and there's usually a flight to safety for currency. Doesn't matter where you are. And and so what's really been interesting is the ECB, the European Central Bank, they've lowered their rates seven times that they just lowered them again. Yeah. By a quarter point. You know, we're going to be there in two weeks. Right. We're going to be in London. But I will tell you, what does that mean? What that means is is that the economies are starting to react.

[00:06:31] You know, the only one that hasn't is is Japan and Japan actually increased their rates. But there are basically zero already. Right. So but it's really, really interesting to see. One of the things I'm telling you, you've got to watch is what's going on with with the central banks around the world, because we are a global economy. Everybody kind of looks at this as as, you know, you know, we're on an island on ourself. We're not. Everything we buy typically is from somewhere else.

[00:06:59] And of course, we're selling things abroad as well. So everything's pretty connected. But it's interesting because, you know, we have this additional responsibility because we are the world's currency that Powell can't necessarily just drop rates when everybody else is dropping rates, because if it inflates our money supply, that's not good either. Right. And that's why you guys may know we have a webinar today with George Gammon because this is a extremely complicated topic.

[00:07:28] The reason I bring this up is this is this is today, actually, just a couple hours, because, you know, whether it's the dollar we're talking about, whether it's interest rates. So George believes that interest rates are going to go down. Yeah. And I think that's an interesting perspective, because if you take a look at what potentially could happen with inflation here, rates, you know,

[00:07:57] last time we had inflation, guys, in June of 2022, they increased rates. And so it's going to be interesting to see whether tariffs create inflation. And if the if the rates go down, it's just going to fuel it even more, in my opinion. Well, so let's look at the actual warning signs that we could have a recession. Right. So to your point that you already made, we are seeing a slow slowing in growth and the tariffs are not helping that currently.

[00:08:26] There might be some kind of long term play on the tariffs. I don't think any of us really know. But right now they're slowing growth. Yeah. And by the way, guys, this is like a lesson in economics. Like if you go back and take a look at when we've imposed tariffs, what's supposed to happen is other currencies are supposed to get weak. You know, and what's happened is the U.S. has.

[00:08:50] So I'm telling you, you know, it's going to be really, really interesting to see, you know, the lag here. And I think that's actually what we're all, you know, ready to brace for is is the lag. And and one of the reasons I think that Trump is pissed at Powell is because the the last meeting, they didn't do anything. They basically held the held the line.

[00:09:18] And Powell said because the he felt like we're at maximum employment. That's what he said. And he also felt that prices were stable. Now, yes, they're a little bit over the two percent mark, but that is their goal. And while all while that the other central banks like the ECB are lowering rates, most of the most of central banks are lowering.

[00:09:41] Yeah, they are. But we have this, you know, inflation impacts everybody and our dollars the world currency at the moment. So we do have this responsibility where inflation of our currency is a bigger deal than other currencies. But we're also paying people in it. That's the issue. They're they're getting our money right. They're getting the U.S. currencies. And so they're they're not happy if if our dollars weak. Correct. Right. So it's just like you.

[00:10:09] If I gave you if I gave you rent money from last month and this month is 10 percent less or three months later, let's say you'd be you wouldn't be happy. It buys you less. But when we print more of it, then it also buys you less. Potentially, I guess. Yeah. Yes. Yes. There's a whole right. That's where Brent Johnson comes in. Right. With his milkshake theory. But yes, I get it. And what it is is what according to him, if you if you guys follow Brent Johnson and I would Google the milkshake.

[00:10:39] OK, there. What he's saying is when we print, others print. And so everybody's printing at the same time. So, you know, when sometimes when we look at printing, like the stuff that you're going to see on YouTube, they're going, oh, my God, we're printing. The dollar's going to crash. Well, the the other central banks are actually responding at the same time because they're trying to manage their own currencies. And I think that's kind of the point. Yeah. Normally we do what they do.

[00:11:06] Normally we lead and they follow. Right now we're not leading. We're doing something totally different. That's why I think Trump's all over Powell. That's very, very interesting. I think it is. It is. The Federal Reserve is Trump's next target. It's to you watch. I'm telling you, it's just starting to come out now. Two male egos fighting against each other. It's supposed to be independent. So another warning sign to your point is inflation is still above the target. Inflation just came in at two point eight percent.

[00:11:34] Powell wants it at two. He's dead set to get it to two. Yeah, it's still good. I mean, I don't think everybody's bitching. But he's not happy that he keeps doing what he's doing. Well, the problem, though, is, is this increase in rates. It's really put pressure on the housing market, people starting new businesses, anybody that needs to borrow money for a car loan or anything because rates are so high. So it's really stalling the economy. Him outlawing rates is stalling. I'm going to challenge you a little bit there. Are they high? No.

[00:12:04] Or are they just higher than they were a couple of years ago? They're higher than they've been in a long time. Yeah, I get it. So everybody got used to these low rates. But if you look at history, right, we're not that high as you take a look at where we've been. It's just disruptive as to the last many years. But it is pretty crazy when you compare it just in the housing market alone to prices, right?

[00:12:27] Because right now you can rent in a lot of markets for about half of what it would take to have a mortgage at 8% almost. Exactly why we're in the rental business. So, you know, so it's not – it definitely is stalling people wanting to buy homes because it doesn't work for investors wanting to cash flow, and it's priced out for a lot of people that are renters looking to buy. Right, and that's showing up in the new home sales.

[00:12:52] Like I think we did something about Lennar Homes recently where they're spending, what is it, $30,000, $40,000 on these rate buy downs because people are still solving to that monthly payment. So their marketing cost went up significantly just to try to sell these new homes. So that's why we're starting to see the listing – amount of listings grow because, I mean, you technically can do that if you've got your own listings,

[00:13:19] but it's tough to compete with some of these big home builders that are traded publicly. You know, and they have these programs where they're getting people into brand new homes at these low rates, which makes it harder for them to make a choice because let's say you've got a home in the subdivision next door priced about the same. You know, given the two choices, they're going to go to the one that has the lower payment.

[00:13:44] So, you know, we're starting to see that, but historically I still think rates are low, even though they're not low enough for people, right, to get things going. And home prices are not really being disrupted like they were in 08. I think that's the big difference. When we went into that recession, there was people – today they have equity in their homes. Back then they didn't. That's the big thing.

[00:14:12] If you take a look at your own personal net worth, back there in 08, a lot of people got wiped out. It didn't matter what you were in. Today it's true. The economy slowed down. Rates are up and all that kind of stuff. And it would be great to have them come down a little bit, but the reality is that people are still sitting on a fair amount of equity. And there's not a lot of disruption because if there was, it would show up. And mortgage delinquencies and credit card delinquencies,

[00:14:41] even though those are up a little bit. Don't get me wrong. So, you know, it's interesting. I don't see, you know, I don't see, at least right now, any signs of a recession. But the real kind of misnomer is going to be what's going to happen here in the next six months. So we're continuing to go, though, before we say that. So the labor market is showing cracks, right? So you have to look at that. So unemployment is now at 4%.

[00:15:10] It's projected to rise to 4.4% later this year, which is still historically low. It's still a good number for unemployment. But the issue is, is the layoffs are kind of happening in more higher end industries. Sure. Like technology, finance, those kind of things that are pretty high paying jobs. So they're more impactful to the economy than lower wage jobs because people that make more spend more. Well, I also think there's another point here to be made.

[00:15:37] And that is, you know, who needs those jobs now with AI and all this stuff? So let me just explain it. You know, you guys probably don't remember this, but there was a time where you would have to use like travel agents. There was a time where you have to use insurance agents. There was a time where you'd have to use real estate agents. As technology starts to replace a lot of these, you know, I guess technically white collar, you know,

[00:16:06] and we're talking specifically about the insurance industry. We're talking about the wealth management, wealth planning industry, things that are commodities that can be, you know, kind of traded. That's a lot of a lot of the colleges are focused on this kind of stuff. These are white collar, a lot of middle management. And as inflation starts to hit corporations, you start to take a look at those middle management cuts.

[00:16:32] And so I think that the winner of all this is going to be the blue collar and the lower, you know, the service jobs, because you can't replace those people with tech. Right? Yeah, absolutely. So another reason that, you know, we're still looking that maybe we could have a recession this year is the yield curve is still inverted. And that's a big indicator for a recession.

[00:17:00] And by the way, guys, I'm not going to go there today on the yield curve, but we're definitely bringing that up with George this afternoon. Yeah. So for those of you who want to watch this George Gammon video, our webinar today, actually, it's going to be about that because that is something that everybody's watching. Absolutely. So let's look at reasons we might avoid a recession, right? Because there is an argument that we're going to see a recession. There's an argument that we're going to avoid a recession.

[00:17:29] So one of the reasons we might avoid a recession is because consumer spending is still resilient. And Jerry, if you can bring up slide four. Yeah. This is interesting to me. Yeah. This is really interesting. But consumer spending is not really down because most people, as Jerry pointed out to me, don't pay in cash. So they're usually paying with their credit or debit card, which then is going to be showing in this chart. So you're really not seeing a decrease there. That is a really interesting chart.

[00:17:57] What that shows is stability, right? Right. Yeah. If people, you know, what would make a recession is if people stop spending money. And if people are still buying things, that's going to help. And people are going to argue, well, they're buying things because they're not buying things like houses. So they're shopping and they're doing this. And that's all true. But that still moves the economy. It doesn't really necessarily matter what they're buying. As long as consumer spending is still going, we are not in a recession. We are seeing a few things emerge, though, and I think it's worth noting.

[00:18:27] That is we are seeing people finance stuff that they've never financed before. So that's making it. They're financing groceries. They're financing rent. Like those are things that are getting financed. You know, there's we use a company called Flex where we get paid and then the tenant actually pays Flex over a period of time. And I know there's there's Apple Pay and there's Apple Pay later.

[00:18:54] And there's other kinds of these programs out there. And so so I think that's something to watch because so good because people are financing things that they don't typically finance. And I think that is something that, you know, that could be fire before there's smoke or smoke before there's fire. However you say it. Mm hmm. Well, and I think it's interesting, too. You know, people are commenting on here.

[00:19:23] You know, the tariffs are a big part of all of this. Right. That's a big part of the unknown. Like people are saying that, you know, people are getting laid off, you know, at higher amounts. We talked about the job, you know, the unemployment. You know, tariffs or any kind of uncertainty that hits the market can create a recession. Right. Because it's changing things up.

[00:19:46] The Great Recession in 2008, like it wasn't all just housing, but housing is what started the ripple effect. A really good point. And that could be what's happening now. I think, you know, if you look at what is a recession, obviously it's a decline in gross domestic product. You know. So. Tariffs will mean slowed growth. Period. That's what it means. So slow growth.

[00:20:15] Potentially there's a lag to that. And I do believe that we're going to start to see that. Right. And I think one of the reasons Trump's so pissed at Powell is that they said we're not going to have a rate cut. Right. And so Powell's holding the line because he's trying to get that inflation down to the 2 percent mark. And so that, I think, is something to watch over the next month or two because he's going to come straight at the Fed.

[00:20:45] Well, that's another thing, though, is we might avoid a recession if the Fed cuts rates. Like if the Fed starts cutting rates, it's going to hurt inflation. But it might it would boost the economy. Or kick the can down the road. Yeah. Because what it does is there'll be a whole new wave of. By the way, you know me. I'm a real estate guy. I would love to have lower rates. But, you know, I think this is precisely why.

[00:21:11] Because the ECB, European Central Bank, lowered by a quarter point. And they lowered seven times. And we have, I think, what, twice, Jerry, is that right? Twice, two or three times? Something like that. So we're way, not that we need to measure up to them, but it is something to watch. And I think that, to your point, lower rates would fuel things, right? Create consumer spending and all those things, right?

[00:21:39] Because the one thing that you need to keep the GDP up is consumer spending. So, you know, the jury's still out as to, you know, what's going to happen. But I do think these tariffs, they're starting to, we're starting to see a lag here. We're starting to see a lag. We're starting to see some job loss. And for sure, we are going to see more of that. Because I don't think that, I don't think Trump's done playing in a sandbox.

[00:22:07] Well, here's the thing, too, is something that could avoid a recession or cause one is corporate earnings. So right now, corporate earnings ended the end of the year really good. And even in Q1, they continue to be fairly good. But tariffs were introduced. Yeah, this is pre-tariff. Or two. So we don't really know yet, you know, the effects on corporate earnings. We do know there's been more layoffs, you know, and there's been a lot less growth.

[00:22:34] The thing, whenever you bring something into the economy, when people don't know what's going to happen, businesses aren't hiring, they might be letting go of people. You know, there's just, people aren't going to buy a house. There's just a lot of uncertainty. People get scared to move forward. So they just wait. They're like, we'll just wait. Well, the problem with that is if the economy starts to just wait, you are going to see a recession. So that's precisely what the videos say from these Chinese manufacturers.

[00:23:01] Every single one leads to the story over there is if you have a job, you know, or you have good savings, make sure that you're maintaining, you know, a safety net personally. That's precisely what the videos that we're starting to see in China. And so basically what that means is that there are factories that are slowed way down. There's more days off.

[00:23:31] They're not making as much stuff. All that stuff that would normally come here. That's kind of part of the lag is what I'm saying. And so it's important to kind of take a look at what is actually going on there and see how it might affect what's going on here. Yeah, absolutely. And I think, too, you know, I believe that there's going to be some kind of recession.

[00:23:56] I don't believe at this point it's going to be a major recession, but I do think we're going to see a slowing down because I think this tariffs, part of the plan is to slow everything down. Whether it's a good plan or not, we'll see. But I think that is part of the plan. Well, it's interesting because I read a bunch of articles on this. Could the weakening of the dollar be strategic? Right?

[00:24:21] Like that is something to think about because what that does is it makes the manufacturers in the U.S. more competitive. That's essentially what it does. So, you know, is it a tool for reindustrialization? Right? Like, you know, it could be a strategy. Maybe. Yeah. Well, we're the world currency because, you know, you said we pay people in dollars, right?

[00:24:49] So, you know, we buy things from them in dollars, whatever. So if we're trying to weaken our dollar so that they buy more stuff from us, then that kind of negates the point of us paying everybody in dollars, right? Yeah. But at this point, they have to, right? But to your point, there's a couple things that happen. One, as we pay them in dollars and our currency gets weaker, then all of a sudden that inflates their currencies. Right. That's what it does, right?

[00:25:18] As ours get weaker, let's say. And so what does that do? That makes them move toward rate cuts. And that's exactly what's happening. If you took, I took a look at the central banks. What's going on with all the central banks, right? And all of them, except for Japan, have lowered rates. And we're holding the line. And I think that's actually, so, you know, the central bank issue and the rate cuts

[00:25:45] and the stuff that's going on globally is important. And let's keep in mind, this is only 8% or 9%, but it's still a lot. If we're paying somebody in those dollars, they can't be, you know, they can't be happy with that. But I think the real point here is the dollar historically has been trusted. It's been a safe haven.

[00:26:09] And potentially, this could also lead to digital assets, you know, like crypto, that kind of stuff. You know, as, you know, there's a lot of, a lot has to happen for the dollar to lose its world reserve currency. But this, it is a very interesting thing that's happening right now. So somebody commented on YouTube. I'm sorry, I can't find it.

[00:26:35] But they were saying that Lenar, they were in a contract to buy a home. And Lenar raised all the prices on the homes due to tariffs. So, you know, you are, tariffs are going to create, that's right, it was Nemo. So tariffs are going to create inflation, right? And inflation is going to put pressure on Powell to not lower rates. However. However. Right.

[00:27:00] You know, tariffs could also put, you know, a lot of people out of a job because if businesses slow down, it's not going to just move right away, everyone's like, oh, the businesses have just come to the U.S. Well, that takes a lot of planning. It takes a lot of time. It takes a lot of, you know, infrastructure to get them here, right? So there's definitely going to be a lag where people lose their jobs. And that's going to put pressure on the Fed to then lower rates.

[00:27:24] So I think, you know, if you boil this all down to whether we're going to see a recession or not see a recession, it really comes down to Powell and his decision whether or not he's going to lower rates. Well, right. Right. So that was a very astute observation that that person posted about the Lenar house, right? So I think we all know those kinds of things are that is inflationary, guys, period, right? That's exactly what that is.

[00:27:51] When somebody increases the price of something as a result of something else, price go is went up. That's inflationary. The question is, does that put the home further out of reach for the consumer? The answer is yes. Right. And will that stall growth? I believe the answer is yes.

[00:28:14] And so that's exactly the fight, to your point, where Trump is going to be coming after Powell and the Fed, I think. In fact, I think he even said he wanted him to resign or something like he came out with that. You know, that's how big this argument is, because if Powell holds the line, but if he doesn't, he's going to be fighting inflation again. Because that Lenar price of that home, that's inflationary, period. And so Powell didn't create that.

[00:28:44] But it's funny because, you know, this goes back to what you and I have been talking about when we have people that are renting, sitting on the sidelines, waiting for a crash to buy a home and everything else. And we always tell them that, you know. Get in the game. Get in the game because there is a chance that Jerome Powell caves to the pressure, lowers rates, and inflation goes up and people are going to start buying again. And the thing is, is like there's this window right now where it is a buyer's market, but I don't know how long that window is going to last if rates start going down.

[00:29:14] And two, Lenar is raising the price of their homes they're building. Why? Because of tariffs, which are costing more money for them to build a home. So if the prices of new homes go up, then the prices of used homes go up. You know, they move together, right? Because so you have to look at all these things when you're sitting there and you're debating on, well, I'm just going to wait. This just seems overwhelming. I'm just going to wait. Either way, it's overwhelming. It is. I mean, there's a lot here.

[00:29:42] And so if you guys are feeling that way, you know, that's OK. But the Daniel's correct. You know, in times of inflation, you want to be in hard assets. Right. I can assure you of one thing. The housing market is not going to crash. Mm hmm. Right. Prices are actually going up month after month. Right. Just go look at the National Association of Realtors.

[00:30:10] The the red is a red fin. Zillow. They're all short. They're all going up. Not a lot. But they're they cracked the 400 mark, as you know, on the average, of course. I'm sure you might have a housing market near you that that's not the case. But the reality is, is nationally prices have actually gone up. This tariff thing could make them go up even more. And so if you're looking to get into the landlord game like, you know, like like we are.

[00:30:38] And I told you guys our aggressive plans to buy properties right now. We are doing that specifically because the gap between the rent and mortgage has never been wider. I mean, it's been a long time since it's been that been this much so that if somebody wants to jump from a rental to a homeowner, it's a significant jump. One, because the prices are going up. So they have to down payment.

[00:31:03] But two, if rates stay where they are and prices go up, their mortgage payment goes up. So you all of those things matter. And all that does is force people more into the into the rental market. And so either way, I think we have inflation. We have inflation now because of tariffs. We're already starting to see it, as we just explained with this Lenar example.

[00:31:30] And then if and only if if rates go down, what you're going to see is a temporary lag. That would be the time, guys. If the Fed starts lowering rates, load up, man, because you're going to start to see another asset bubble. Exactly. Yep. And that's what happens when rates go down. You see asset bubbles because historically hard assets, gold, real estate. Everything trades when the price of money goes down. Yeah.

[00:31:58] Like cars, electronics, houses, you name it. Right. Lines of credit for people, all that kind of stuff. People starting to renegotiate all that stuff. The other thing. There's so much money sitting on the sidelines with this. Call it trapped equity of people that are have locked rates in the force, let's say. So if rates go down that much, which is a lot, I don't think it's going to happen anytime soon. Um, you'll unlock all of that too.

[00:32:26] So C Smith said, I think 401ks are called 301ks now because they're going down. That's funny. Um, well, I'm going to end with this. Lyle says, don't wait to buy real estate. You buy real estate and wait. Ah, good one. Yeah. But remember, don't forget when, if you buy something and your tenant pays it off, wow, it's really just your down payment that you're out. So, all right. See you guys next week.

[00:32:55] And we hope to see you at the webinar later today. Jerry, if you want to put that link back up. Yeah. Hope to see you guys here. This is going to be fun and get your questions ready too. Cause I'm confused on a lot of stuff just like you and, and, and George believes rates are going down. Um, so I, I'll give you that. Uh, so that was one of my first questions to hear is why would rates go down when inflation is up? All right. See you guys next week.