Hey everyone we kevin here in this video we're going to talk about when a recession is expected, the odds of a recession and how to prepare. But first i'm going to give you a little bit of extra background information. This morning we got some information that potentially the trucking industry is already in recession. Now this isn't all a bad news, we'll talk about what that potentially means, but here's the information according to transactions between united states truckers and their customers, there's been a quote.

Unexpectedly, sharp downturn in demand from everything from food to furniture and transportation is slowing and has been slowing for truckers since the start of march now this does coincide with. At the same time, energy costs started soaring for transportation, gas, diesel oil. All these energy costs became a lot more expensive, and if you take a look at the chart right here, you can see that you have this very sharp decline really begin right here, where that yellow is which, if we line that up with the date, that's really The beginning of march here, which is obviously right after that starting point of the war right here on february 24th, so entirely possible that you've got a correlation here between this decline in trucking. But the decline in trucking can sometimes be a sort of a leading indicator of uh.

Basically well, if companies are shipping less than that probably means people are spending less money right now. How reliable is this potential indicator well about 50 kind of a coin flip? So not the greatest now we're going to talk about timing for a potential recession with separate data here, but i want to get this trucking info out of the way that since 1972, recessions have followed 6 out of 12 trucking recessions. So that means a real recession. In the entire economy has followed 6 out of 12 of the trucking recession, so it could be by some seen as an indicator of sort of a canary in the coal mine like.

Oh no, we've got issues here. It is worth noting that americans spend about 35 on goods right now and about 65 on uh services. We might see a little bit of a rotation in that where we see goods spending, maybe go down to like 30 and services. Go up to 70.

Expectation is about 32.68 to be a little bit more precise uh, but really uh. If, if trucking prices fall, it could, ironically, actually be a a good thing in the short term, because it could finally take some pressure off of margins for businesses who have to pay for trucking like wholesale businesses or target that has to truck in supplies. For people to buy right, if trucking prices come down because trucking demand goes down, yeah on one hand, it's like. Oh no, are people buying a whole lot less, but on the other hand, finally, trucking prices are going down again.

Margin pressure goes away from businesses who are trying to pass on all the cost increases to the consumers, and maybe you could be in this kind of weird world where wait a minute. If we stop seeing price hikes, we actually stop seeing inflation right because remember, inflation is a year over year measure in order for you to keep having inflation, prices have to keep going up, but if we slow price increases that can actually help dampen inflation, we're seeing That same sort of thing happen in the gpu market: the graphics, uh chips market right. We used to be sitting around a 77 percent markup for let's say: nvidia graphic cards now they're at about a 41 markup. So it's still a substantial markup.

But this is a sign that we're starting to see some of those pricing pressures relax, which is actually kind of good news uh and before we get into the odds of a recession. I want to talk about coca-cola and we've got a quick word from our sponsor and then we'll talk about the odds and timing of recession, but look at coca-cola here. Okay, i thought this was really fascinating, because this is kind of what we're actually trying to prevent. Is this sort of price action look at this here? So coca-cola talked about increasing prices more, but what i thought was really incredible.

Was this line over here we're going to basically overly lean towards increasing prices before a potential recession quote, as i said earlier, not seeing the cost go through and arriving at a recession being behind the curve is less desirable than embarking on price increases and having to Take a hit from greater elasticity, in other words, people spending a little bit less on coca-cola and powder aid or whatever products, while they have higher prices in the short term because of recession. So, in other words, coca-cola is actually telling us hey, um, we're going to aggressively keep raising prices because, as our costs go up, we are going to pass those along and we don't want to be caught with our pants down. So to speak in a recession where not only do we not have higher prices, but now we can't raise prices. So there was a lot of talk about making sure that whatever extra costs they have they push to the consumers, see they even say here quote you definitely, this is a yellow.

You definitely don't want to get to a point where there's been a substantial cost push which would mean like higher high fructose corn syrup prices, higher trucking prices right that has not yet been priced into the market, so in other words, coke is like hey. We're still raising prices because our costs are going up, but this is why it's actually a good thing in my opinion that we're starting to see those trucking costs come down, because that means less cost pressures on companies like coke and then they don't have to feel So aggressive at those price increases, but we're still in this weird teeter-totter zone, where it's like, ah kevin. This feels a little bit like a little bit of good a little bit of bad and yeah. It is because it's kind of like okay cool trucking prices are going down, but if that means people are spending less that's a problem because people spending less could put us into a recession unless, of course, that spending is just moving over to services.

That would be best case scenario, good spending goes down, inflation for goods goes down the spending stays over in services and we don't actually go into recession because the services keep us through. So now we got to talk about timing and the odds of a recession, but first a quick message from our sponsor the motley fool. Thank you to today's sponsor the motley fool. Are you tired of seeing others get rich in the stock market? Well, let the motley fool help you motley fool's stock advisor is a subscription stock, picking service where members gain access to the motley fools library of expert stock recommendations which are carefully aimed at multiplying members net worth members receive stock picks every month from legendary investors.

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That's less than ten dollars per month visit fool.com kevin to access this special offer. They also just released a new article. Five forward-looking stocks under fifty dollars that you can read for free at fool.com kevin, invest better with motley fool stock advisor all right folks. Now, let's talk about when we actually think that a recession could come and kind of look at this graphically so i'll pull this up in a moment, but first bloomberg intelligence just released this information bloomberg intelligence believes that, according to their model, we have about a one Percent chance of a recession within the next 12 months.

That's because the fundamentals of our economy they say are still incredibly strong. However, bloomberg intelligence believes that the peak recession chance will actually be 44 and that 44 peak recession chance occurs before january 2024, so likely in 2023 is when we could potentially face a recession and that's because the federal reserve's interest rates, the discount rate, is expected to Be at its highest level in 2023 and peak out before falling again now, we've got deutsche bank calling for a recession in q4, 2022 and in uh, potentially q1 2023. Remember. We need two quarters of a negative growth to actually hit a recession and uh deutsche bank is calling for that in q422, q1.

2023, but take a look at bloomberg's chart. They really pushed this into later in 2023. Now, who knows who's going to be right right, but take a look at that recession. Probability rising sharply going late into 2023 uh and uh really peaking out there in january of 2024.

So sometime between there very, very interesting, so absolutely incredible! Uh we'll see now. How do you prepare for a recession? Okay, so let's just do a quick look at that. So what i like to do is number one i like to become a tracker look for the fed's u-turn. If we start hitting that recessionary territory, fed's going to u-turn really quickly and the markets right now are pricing in the fact that the fed may make a policy mistake and that companies are raising their prices too slowly, uh and and if companies raise prices really quickly And aggressively, at the same time as rates are going up, then we could see boom a recession.

So what do you want to monitor here? Well, you want to monitor economic data. That's leading not necessarily lagging data right. The best way to find leading data number one inflation expectations, the higher inflation expectations go the more likely the fed ends up making a mistake by tightening too much. There are two types of inflation expectations: consumer sentiment, expectations of inflation, which you can find via the university of michigan survey of consumers or market expectations of inflation, measured by the five-year break-even treasury rate.

When the chart goes down, it's a good thing of the five-year break. Even here is the latest uh five-year break-even a chart right here, and you can see that we're trending down. I like that uh we're recently trending down after the hawkish comments from the federal reserve. So that's a good thing: uh then earnings calls you're now able to take ceo and executive c suite level or c-level executives inputs into the state of the market looking forward and not just looking backwards, people like to say, oh earnings, are looking backwards wrong.

You were actually getting the ceo and executive opinions at that moment in time. Okay, then, personally, as you become a tracker of the market to prepare to be in this market or to potentially buy during the depths of a recession, whether it's real estate or stocks, you got to make sure you get out of debt, eliminate your margin, get your Income up, but also make sure that your income is insulated. It's one thing: if your income goes up, but it's another thing: if you get laid off, then it made you no difference that your income went up right. So you want to have insulated income.

You want higher income, you want to get out of margin and debt, we're already seeing people pair margin down down 14 since october. If the market's cutting down margin and deleveraging the sign right prepare to go shopping for real estate. How do you prepare to shop for real estate, stop taking out consumer debt, pay off credit cards, student loan, debt and cars? All of these things are going to burn you when it comes time to try to buy real estate every dollar of debt. You have means you have to have about two dollars and 34 cents of income to qualify for it, potentially more, as rates continue to rise, and then, of course, when it comes to stocks by paying in quality sectors, etfs or companies.

The safest method, in my opinion, is when there's big pain in the stock market. Buy things like a basket. That's mixed with the qqq spy, maybe the russell 2000. This is not financial advice.

I generally don't recommend stock picking some people like to pick stocks. I like to pick stock, but that doesn't mean you should like to pick stocks, but i would say if your net worth is under 500 000. You should most importantly, prepare to buy real estate. Who knows? Maybe the end of this year, through 2023, could be a great opportunity to finally get into the real estate market.

Thanks so much for watching we'll see you next one bye.