Are we entering another recession?

[SoaringHigh]

Watching the news this AM, the stock market has had its worst quarter since 2008. Are we looking at entering a similar recession?

Any input would be appreciated... Will the good times we are experiencing in aviation come grinding to a halt?

[7ECA]

Shhhh! But the price of oil is just about to skyrocket and help Alberta throw off the shackles of confederation!

[dhc#]

A recession is when the economy affects someone else's job....a depression is when the economy affects YOUR job...

[Heliian]

No. We are not.

However, due to poor political practices, the usa is dragging us down with them and we rarely try to stand on our own.

The financial fortune tellers want you to believe a recession is coming, only to save their own bacon. Once everyone has been bilked there will be a "miraculous" turn around. My guess is by spring we won't hear any more of this nonsense.

But, if enough people keep saying we're going that way and start panicking like lemmings then we will.

[hithere]

The only mitigating factor this time is the retirements that will sustain pilot hiring even if every airline in Canada were to completely stop growing due to a recession

[fish4life]

Recessions are based on GDP not the stock market although they do tend to go hand in hand.
I have a concern that the next recession will be far far worse for Canada than 2008 for the following reasons;
A) oil recovered really quickly and Alberta helped power Canada through the first few years
B) the government spent a ton of money for “stimulus” which unfortunately has left Canada with more debt than before
C) A lot manufacturing jobs that we were trying to save have left Canada during the last 10 years during our so called recovery we aren’t going to have the ability to recover there because we aren’t getting those jobs back from Mexico.
D) Canadian debt to income ratio has increased from about 145% in 2008 to about 175% now which has eliminated the ability of the consumer to “borrow their way to growth”
E) housing was a big economic driver during the last 10 years and all signs point to it only having one way to go and that’s down, also the unheard of price increases of homes won’t happen again due to our extremely high debt loads and house price to income ratios being at all time highs.
F) despite interest rates slowing rising lately the room to cut for the next downturn is very small so it’s tough to stimulate the economy that way.

Retirements or not anyone better make sure they enjoy the seat they are in because it could get really ugly, keep in mind most of the growth over the last 5 years at Air Canada has been overseas flying as well as 6th degree freedom traffic from the US which can be crushed by a policy by our Twitter raging friend down there. All that growth can turn around and shrink if there is a large scale recession which will counteract any retirements coming.

[GhostRider6]

I think it’s coming...

What goes up must come down...

I agree with the above poster.

I’ll also add that automization is starting to reduce jobs, on top of union busting, outsourcing, globalization etc.

As pointed out above, people have huge debt to income ratios. However, the other piece is that wages aren’t keeping up with inflation. In fact, wages are going in the opposing direction. It’s the perfect storm really.

To make matters worse, we have a concentration of wealth and corresponding political power at the top which seeks to get richer off the backs of the serfs. A depression / recession only furthers this accumulation of wealth at the top. Look at the corporate/ government bailouts last time and the fact that major profit taking occured...

This being said, I don’t want to see a recession/ depression happen and would love to be proven wrong..

[SoaringHigh]

Recessions are based on GDP not the stock market although they do tend to go hand in hand.
I have a concern that the next recession will be far far worse for Canada than 2008 for the following reasons;
A) oil recovered really quickly and Alberta helped power Canada through the first few years
B) the government spent a ton of money for “stimulus” which unfortunately has left Canada with more debt than before
C) A lot manufacturing jobs that we were trying to save have left Canada during the last 10 years during our so called recovery we aren’t going to have the ability to recover there because we aren’t getting those jobs back from Mexico.
D) Canadian debt to income ratio has increased from about 145% in 2008 to about 175% now which has eliminated the ability of the consumer to “borrow their way to growth”
E) housing was a big economic driver during the last 10 years and all signs point to it only having one way to go and that’s down, also the unheard of price increases of homes won’t happen again due to our extremely high debt loads and house price to income ratios being at all time highs.
F) despite interest rates slowing rising lately the room to cut for the next downturn is very small so it’s tough to stimulate the economy that way.

Retirements or not anyone better make sure they enjoy the seat they are in because it could get really ugly, keep in mind most of the growth over the last 5 years at Air Canada has been overseas flying as well as 6th degree freedom traffic from the US which can be crushed by a policy by our Twitter raging friend down there. All that growth can turn around and shrink if there is a large scale recession which will counteract any retirements coming.

Great info, thanks for the input. You've obviously analyzed this into detail.

They're all quite valid/true points, which is ever scary... I've been saying it more and more lately. We need to refine our crude oil ourselves and get our product to the global market. That would have a MASSIVE stimulating effect on our economy as a whole...

[schnitzel2k3]

No. We are not.

However, due to poor political practices, the usa is dragging us down with them and we rarely try to stand on our own.

The financial fortune tellers want you to believe a recession is coming, only to save their own bacon. Once everyone has been bilked there will be a "miraculous" turn around. My guess is by spring we won't hear any more of this nonsense.

But, if enough people keep saying we're going that way and start panicking like lemmings then we will.

In economic circles it's called a self fulfilling prophecy. And you are spot on Heliian.

S.

[rk1996]

I was going to start my flight training... RIP I guess

[Eric Janson]

rk1996

There will always be reasons not to do something.

In 30+ years in this Business I've seen it all. I've always had a job.

Even when 2 companies I worked for went bankrupt I had alternatives.

If you really want it - then go and do it.

[iflyforpie]

Great info, thanks for the input. You've obviously analyzed this into detail.

They're all quite valid/true points, which is ever scary... I've been saying it more and more lately. We need to refine our crude oil ourselves and get our product to the global market. That would have a MASSIVE stimulating effect on our economy as a whole...

That won’t work.

First, not many people realize it, but oil is a pretty small part of our economy. The Canadian economy is primarily service based. Sure lots of services are driven by the resource sector, but an awful lot of it is in a circular economy where wealth is generated by adding or creating value.

Second, Canadian oil is expensive to refine. You need massive bitumen improvers just to move it, and then you need to refine it. The heavy fractions of oil like tar and asphalt the world already has in abundance even from light crude. So you need expensive and energy intensive catalytic crackers to break those heavier fractions into lighter ones for diesel and gasoline. The end result is that not only does it take a lot of investment to be able to refine it, but a lot of energy as well—I’ve been told it takes a barrel to make a barrel.

Third. The world does not trade in refined petroleum products. There are no gasoline supertankers or 40 foot long containers full of 1 quart cans of motor oil. Oil is shipped in crude form and then refined to local needs. The heavier the oil, the less it’s worth since it takes more to refine it.

I suppose that since we import oil from Saudi Arabia and import gasoline from the US there is room for Canada to refine oil for our needs—and there is—but we enjoy our relatively cheap gas prices because of wonderful Capitalism where Canadian companies have to compete with global markets. It will be a cold day in hell before I’ll ever support the boycotts or tariffs required to have a captive Canadian oil economy paying $2.30/l for gas and $2.00/l for diesel... watching inflation jump and the cost of groceries skyrocket just so we can turn a few more millionaires into billionaires and create some more no skill required $100k+ per year jobs that will still be shed in the inevitable recession.

[iflyforpie]

Oh, and I’d say we’re headed for a recession. A booming US economy starting to overheat because of low taxes financed by structural government debt without the job creation or wage increases required to sustain it and the threat of tariffs and the ruse of war just waiting to make investors jittery. Ironically, it was a similar situation which pushed the current POTUS off the Fortune 500 a quarter of a century ago.

[lostaviator]

I think we are nearing another recession, and like stated above, I think it is going to be way worse than the last one.

Some of my reasons for thinking this:

- Canada's GDP is very much correlated to the price of oil. (Look at graphs side-by-side)
- We entered the last recession with a budget surplus and wiggle room in the budget to inject money into the economy. Not the same this time.
- Household debt is at an all time high
- Political uncertainty with US / China
- A prime minister more concerned with how something will make him look on instagram vs actual economical affect.
- Our provincial and federal governments are at war with each other.
- Bond yield inversions (that have predicted all of the last recessions this century)
- We have been in an incredible bull market for years now.

I'm a pilot, not an investment advisor. But even if I was an investment advisor, I still wouldn't trust me. Financial advisors will always show you the sunshine because they need to in order to make money themselves.

I read the papers daily, and even if you don't agree with my points/reasons above, the fact we are talking about this means something is going on. I don't get a warm fuzzy feeling in my tummy anymore when I read the market, business sections.

If the markets and economy could be accurately predicted, we'd all be rich. It's all a game of roulette.

[pianokeys]

Great info, thanks for the input. You've obviously analyzed this into detail.

They're all quite valid/true points, which is ever scary... I've been saying it more and more lately. We need to refine our crude oil ourselves and get our product to the global market. That would have a MASSIVE stimulating effect on our economy as a whole...

That won’t work.

First, not many people realize it, but oil is a pretty small part of our economy. The Canadian economy is primarily service based. Sure lots of services are driven by the resource sector, but an awful lot of it is in a circular economy where wealth is generated by adding or creating value.

A small portion yes, but its a portion everyone needs and pays for. Unfortunately, with recessions, typically the price of oil climbs prior to, driving up the cost of consumer goods and overall effecting everyone and the economy. Look at what happened in the 70s when OPEC drove up the price of oil, it triggered a recession. And all but one recession (Ronnie Reagans second recession) had oil prices sky rocket just as they happened.

Second, Canadian oil is expensive to refine. You need massive bitumen improvers just to move it, and then you need to refine it. The heavy fractions of oil like tar and asphalt the world already has in abundance even from light crude. So you need expensive and energy intensive catalytic crackers to break those heavier fractions into lighter ones for diesel and gasoline. The end result is that not only does it take a lot of investment to be able to refine it, but a lot of energy as well—I’ve been told it takes a barrel to make a barrel.

The heavier the oil, the less it’s worth since it takes more to refine it.

In my previous life I worked at an oil refinery doing Homer Simpsons job. The issue with oil from the oil sands is it has a high, high asphaltine content which needs to be stripped out prior to refining. Oil sands companies like Suncor, Syncrude, CNRL, etc... do this prior to shipping the oil to market through the use of an upgrader (also known as a coker). After they remove the coke, it can be processed like any other oil available. Cat cracking is apart of the refining process for any type of oil. Its how you get higher refined and spec products. Oil price is based off of heavy/light ends and its sulphur content. One time we refined some nice, light and sweet American oil until it was time to swing crudes to this light and sour garbage we bought from Nigeria for pennies on the dollar. Took about a week to swing the plant to be able to take such a feed change. Any of that African oil is garbage and cheap for good reason.

I suppose that since we import oil from Saudi Arabia and import gasoline from the US there is room for Canada to refine oil for our needs.

Gas in Canada is made in Canada. Some plants may buy that sour Arabian crude, but once its refined we reap the benefits of it. Gas, propane, diesel, kerosene, etc is all refined and used in Canada. We have the refining capacity to do so. Interesting to note, jet fuel processing, youre obligated to keep or retain a 1L sample of it for about five years.

The recession is coming, there are lots of signs its starting. High unemployment rates, interest rates are going up because the government thinks the economy can handle it and they jack the rates too fast, second longest business cycle in history, bond yield curve inversions, tariffs and trade uncertainty. Im just worried about things that could exacerbate it like high consumer debt, real estate market bubble, high student debt, higher government debt.

[gustind]

Now is the time to be bullish on some stocks, buy into the dip and wait. Lot of stuff is in extreme oversold conditions amongst a lot of other things. Today is "fed day" so we'll see what happens in the next little bit.

[complexintentions]

Here's a couple of prescient quotes:

Paul Martin, the former prime minister, thinks we’re “living a throwback” to the worst era of modern history.

“One could say that we are going back to the turn of the century, which led to two world wars and a major depression,” Martin said at an event hosted by the University of Ottawa’s Institute of Fiscal Studies and Democracy. “It did that because it was impossible for governments, for parties, for political people to get along and to compromise and to understand what was required.”

Hmm. Kind of sounds familiar.

And here's the BOC Governor Stephen Poloz, who in spite of being an idiot in an idiot's government, states the obvious truth:

“There is a risk there that we have rising inflation at the same time as slowing economies. There are no macro-economic tools to fix that combination,” he said.

I do agree that the best time to buy equities is on sale. But you better have a strong stomach and a long timeline.

[rookiepilot]

The fact that a group of pilots are so actively talking about a recession means to me, we probably aren't quite there yet.

Actually amusing thread to read.

[BigQ]

BlackRock placed global recession risk to 19% in 2019, 36% in 2020, and 54% in 2021.

NOW, it all hinges on the US.

I have no idea where y'all think that we have global headwinds (fake news maybe?). The US economy is on fire. It has, essentially full employment. Corporate profits are up by a ton. The reduction in corporate tax rate was a huge boost to their economy, and by association but to a lesser extent, us. Yes, other G7 economies are suffering, but again, the US is the biggest economy and the way the US goes, so does the rest of the world

Trump strong-armed Canada and Mexico into the USMCA.

He was then successful into getting Japan to the table.

Next target: China.

^This is your recession indicator. If they announce a deal between China and the US in 2019, there won't be any recession for a while to come. Isolationism of China will only allow them to be successful into creating their "New Silk Road" network. The US knows this, and also know to keep them on a short leash (keep your friends close and your enemies closer). Remember, the Trump method into getting anything done is to say something outrageous, in order to get the opposition to accept something less outrageous, which is what he wanted all along.

Now, onto Canada...

Not looking good here. I'd expect strong headwinds for us this year. Oil price will be held too low for oil patch profitability for decades to come (thank US fracking for that). NIMBYs opposing any innovation or major oil-backed projects (Québec). Ford in Ontario will probably cut a lot of red tape, but collectively Ontarians are such statists and dependent on government services that to them it will be The End Of The World.

If Sheer (intentional) doesn't wake up and go on the offensive in time for the elections, we will see our Virtue Signaller in Chief re-elected, and the TSE will drop 1000 pts the next day. X-Factor Max Bernier and the PPC could eat enough of that duopoly, one can only hope that PPC strategists know to go after the Liberal base more than the PC's. As an insurance policy, so to speak.

Canadians are over-extended, hold record amounts of debt, have all their "wealth" in illiquid houses (that are slowly dropping) and still live beyond their means. Ask Canucks on the street, and most are ok with the huge deficit spending. In fact, many want more. THAT, should scare you.

I'd diversify into the US Stock Market and Emerging Markets right now. Instead of XIU, CPD, VRE, and XEG, shift into XSP, XPF, ZDY, and CBQ. Full disclosure, I hold XPF right now.

[pianokeys]

BlackRock placed global recession risk to 19% in 2019, 36% in 2020, and 54% in 2021.

Of course they will say that, theyre the biggest asset manager in the world and its in their best interest to say "everything is fine!" so they dont lose money.

I have no idea where y'all think that we have global headwinds (fake news maybe?). The US economy is on fire. It has, essentially full employment. Corporate profits are up by a ton. The reduction in corporate tax rate was a huge boost to their economy, and by association but to a lesser extent, us. Yes, other G7 economies are suffering, but again, the US is the biggest economy and the way the US goes, so does the rest of the world.

Everything you just said, economy is hot, and full employment, are two of the three biggest things that indicate a recession is near, especially the full employment. Preceding every single recession is full employment and a raging economy, to which the government believes to be stable and decides to increase interest rates up and up to retard inflation. More often than not this has an adverse effect by increasing corporate costs on debt and borrowing, further increasing debt loads on consumer and government. Currently, if you look at the effects of that corporate tax cut in the US, it just encouraged more borrowing which is unsustainable if the interest rates continue to rise.

Dismissing these facts as fake news is a pseudo-intelligent way to say that you refuse to believe the warning signs. This is the second longest business cycle in history, consumer debt to income ratios are way off, oil price has been erratic and inching up, corporations are taking on more debt, interest rates are on the rise, very low unemployment, and the bond yield ratio has inverted on 3 to 10 year bonds with 2 to 5 year now flat. All of these are signs that precede recessions for the last sixty years. There is so much uncertainty in the markets, the DOW dropped 550 points yesterday.