Fed Cuts Interest Rates for First Time Since 2008 Crisis

[almasty]

Link to NY Times article below:

Fed Cuts Interest Rates for First Time Since 2008 Crisis

“While Fed officials said they expect economic expansion to continue and the labor market to remain strong “uncertainties about this outlook remain.

Mr. Powell, speaking at a news conference after the meeting, said the Fed’s move was “intended to insure against downside risks from weak global growth and trade tensions.”

He said that manufacturing around the world was weakening and that Mr. Trump’s trade dispute was continuing to spook American businesses. “The ongoing uncertainty is making some companies more cautious about their capital spending,” he said.“

I’m just hoping to get one last decent holiday season in before the recession hits. That being said, sales have overall been softer than normal since May 2018. Last Christmas was nothing to write home about.

[Jay]

I also hope we can at least get through Xmas before the economy really slows down.

We’re in a mad dash to pay off debt we’ve built during this renovation. Not too bad. We just like to have zero debt other than mortgages. Big reason why we took on a work contract.
–Plus we’re making sure our expenses are down to the necessities.
–Plus we’re putting away some savings (four months of bills)

It’ll be interesting to see who’s ready and who’s unprepared. I have a feeling there are a number of online sellers who can only make the numbers work when sales volumes are high because they live on thin margins and big expenses.

• This reply was modified 5 years, 10 months ago by Jay.

[Inglewood]

I always wonder if a small .25% or .5% cut ever makes a huge difference – rates are extremely low as they are.

The U.S. is in great shape compared to other countries. Here in Canada (the average Canadian has almost twice the consumer debt of Americans, houses are very expensive here, and 38% of Canadians are $200 or a day of pay away from insolvency), Australia is already crashing, New Zealand is ready to crash, and UK/Europe is a mess. I would assume a recession is coming.

Really thinking about liquidating my assets before a crash – being stuck in Canada, which is now the #1 or #2 country in the world to fail the hardest is scary.

[almasty]

It’s more psychological than anything. Even though normal people know that the economy isn’t right, seeing the FED indicate what we already know is still not good.

The DOW fell more than 300 points as soon as the decision was announced, which actually surprised me because it has been apparent that they would drop interest rates at either meeting this month. Usually they price in announcements like this.

[Jay]

I didnt think anyone had more debt than folks here in the US.

[almasty]

I just finished paying off a $10k Paypal Working Capital Loan TODAY for my outside projects. It was paid off at least 3 months early, took way less than a year to pay off (part of the reason I have been listing like mad these past few weeks). I don’t know how the loan system will work under the new managed payments system, so I’m going to get out another loan just in case so I can continue utilizing it for those projects. Might be my last chance for a loan via working capital. 🙁

A lot of sellers are just treading water in a good economy, so it will be rough when the recession truly hits. Recessions are also the best time to buy stock, so it could work out if you can both sell less and have enough money to buy for when it gets “good” again. I’ve been buying A LOT of stock these past few months and I’m not even actively buying the way I used to at the moment. Definitely feels like we’re in the midst of it. GDP only increased 2.1% last quarter. I wouldn’t be surprised if the numbers are revised down at some point in the future.

Still interested to see how RA/FBA goes. FBA wasn’t around in 2008. How much will people value having brand new items delivered as a “convenience” vs. going to the store themselves and paying half the price?

[Jay]

Sounds like buyers can still use Paypal in Managed Payments. The question will be how many buyers use it. Paypal made clear that Working Capital loans are based on sales inside Paypal.

Managed Payments says you can get loans through Square Capital, but they have a set payback time which means payments could be significantly higher. I like just paying a percentage of my profits each month.

I think there’s a significant portion of Retail Arbitrage, Wholesale, and Private Label sellers who purchase inventory on credit. Its like flipping houses without any assets to back them up. Once sales dry up, there’s no where to go.

[Old Dad]

I have to start taking required distributions this year from my 401K and IRA which are in investment type accounts. If the remaining balances don’t generate as much in earnings as what I’m pulling out, that starts a slippery slide to running out of retirement funds, hopefully not before I’m gone.

[Jay]

Good news is that recessions rarely last for multi-years. A decent 401k account should be able to weather 3-4 years of low returns before things bounce back. Obviously its always smart to live more efficiently and take out just what you need.

[Old Dad]

Thanks for that.

I’m pretty sure I will be OK, but as we continue to live longer the chances of running out of money can become more likely.

I don’t worry much, but being old, poor, and alone is definitely at the top of my short fear list.

[Jay]

I hear you. Being old is impossible to stop. We have a little bit of control over being alone and poor.

[So Cal Joe]

If you have to take out the money, it sounds like you don’t need it to live on yet. You could just reinvest it in similar investments outside of the retirement account. If that means index funds, then the tax implications on future earnings would be minimal, until it’s time to sell.

[scott2]

In my opinion there is bound to be a big downturn in the market in the next year to year in a half. Banks have started playing the same games that got them in trouble last time around as well. The problem now is that alot of the safety devices that were in place last time to save banks have been taken away by the current administration. Take away regulations and sure, the economy will boom, but when it busts it will fall much further without the safety nets.
On the plus side it might be a GREAT time to buy coming up for those with cash…

[Inglewood]

I feel the biggest cause of a downturn is people thinking there is a downturn and slowly preparing for it – it all snowballs from there.

[Retro Treasures WV]

I get the feeling that about a year from now alot of these issues will “magically” resolve. Things have a way of doing that around August/September of an incumbent election year.

[Winchester38]

Rate cut seems terribly unnecessary, but who needs logic.

Hoping to get a bit more time before the next recession hits. We’re in relatively good shape financially, but not completely debt free. A reasonable truck payment with a few years left on it, and we should have the house we’re about to buy paid for in three years (or less). We’ve got a rental property with a hefty mortgage, but have tenants that just signed an additional two year lease that covers all costs there.

Time to push harder and start paying off/squirreling away faster methinks.

[IndySales]

Ah, a recession right before a major election? You don’t say.

[Author]

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