The Coming Depression Crash could be -50%

hey everyone me Kevin here boy oh boy if

Goldman Sachs is right things might

actually be getting a whole lot worse

not only in the stock market but in the

real estate a market now this is quite

scary I read this report yesterday at

2AM while I was on a walking treadmill

in this hotel that I'm in in Spokane

Washington and I'll tell you this sucks

so Goldman Sachs wrote this article and

the title is Market outcomes if the

Hawks are right so basically they're

going to give us their sort of

prediction in the event that hawkish

folks are correct so this isn't their

overall prediction it's just that if the

hawkish folks are correct via either a

moderate scenario of tightening or a

more severe scenario of tightening and

in this report they give us both how

much they think equities like the S P

500 will fall but also they give us some

insights into interest rates and that's

exactly where I want to start because

many of you know obviously we're

launching a real estate business at

househack.com if if you're an accredited

check it out read the PPM and we have

courses on building your wealth through

real estate investing zero to

millionaire check those out with the

coupon link down below and I want to

start with real estate because take a

listen to this The Five-Year treasury

right now has a yield of 3.6 that means

if you bought a five-year treasury bond

and just held it to maturity you would

basically get 5.6 per year it's sort of

a lump sum at the end of it often now

what's interesting about this is 3.6 is

already pretty substantially High

compared to what we've been used to but

3.6 in the moderate scenario according

to Goldman Sachs is expected to go up to

4.5 almost an entire one percent

increase now the five year and 10-year

spreads tend tend to move together but

both of them consider the longer term

five to ten years and mortgage rate

rates really follow these yields very

very closely another one percent

increase in mortgage rates in the

moderate scenario could lead to another

10 percent reduction in buyer purchasing

power we're already down 35 percent in

buyer purchasing power that's because

somebody who gets a loan for or got a

loan for five hundred thousand dollars

in December could now only afford the

same kind of payment at five sorry three

hundred and thirteen thousand that's

about a 35 to 37 percent decline in

purchasing power remarkable massive

decline right and add to that another 10

drop in purchasing power folks the real

estate damage that we see to the market

could be even worse than I'm expecting

I'm already expecting that come March

and April of 2023 when we look back at

Peak prices of March of 2022 that is

we're in 23 we look back to 2022. we're

going to go oh man home prices are down

10 in this city 15 in this city 20 in

this city maybe like the Zoom towns

right uh San Francisco keep in mind

already today in September is down eight

percent year over year Boise is expected

to be down like 20 25 by q1 of next year

we'll see sort of the opposite effect of

the zoom towns happening but folks

that's the moderate scenario where we

could potentially see mortgage rates at

seven percent and now a 45 reduction in

buyer purchasing power combined with

year-over-year negatives leading to real

fear in markets this is scary that's

that's not the worst part though because

the moderate scenario suggests that the

S P 500 could fall an additional oh man

an additional 15 from levels where we

sit right now which means we would be

rivaling and potentially hitting new

lows compared to what we hit in June of

this year which we thought would be the

bottom because June of this year

somewhat aligned with potentially Peak

inflation that's when I was on a beach

in Germany doing the July inflation

report going oh my gosh these numbers

are terrible we have over nine uh 9.1

percent inflation absolutely ridiculous

but what's more ridiculous is the fact

that when you take out the big

categories all of the small categories

of that that are measured by inflation

are rising we have very broad based

inflation and that's scary but it's also

scary because it means the moderately

hawkish scenario as Goldman Sachs has

provided us with might not not be enough

to actually cool inflation down in fact

they suggest we could have to go to a

substantially more hawkish stance which

would have some severe impacts to both

housing and the stock market and they

believe that the declines that they

mentioned here while all they are large

are not unprecedented that these have

happened before and so this severe

version sees the five-year treasure

yield rising to

5.4 percent that is nearly two percent

higher than where we sit now that means

buyer purchasing power in real estate

would go from negative 35 to negative 55

and by all accounts at least according

to companies like Lowe's who study this

and other real estate companies the

excess buyer demand that we had for Real

Estate was somewhere around 25 to 27 at

the end of last year right you always

hear like oh there's a lack of inventory

there's so many more buyers so that

excess by your level was deemed to be

about 25 for simple math let's just say

25 well if buyer purchasing power is now

down 35 then if we subtract those two we

would see about a 10 decline in prices

to get to an equilibrium right if we get

to their moderate scenario rates go up

another one percent now we have another

10 decline well now instead of a 10

decline real estate we're at twenty

percent we go to the severe example we

could see a 30 percent decline in real

estate pricing if the five-year treasury

does move to approximately 5.4 percent

as Goldman Sachs believes is possible

but now they also give us a suggestion

of what can happen with the stock market

in the severe scenario and when you look

at these scenarios both of them just

straight up suck they both suck because

they suggest it's possible that the S P

500 could fall below

2900 with five-year yields around 5.4

percent that would represent an

additional 27 that would be like having

a correction on top of a correction

that's very very bad and very very dirty

now this is Goldman Sachs suggesting

that there's a debate around this that

whether or not can we resolve the

inflation problem without a recession

and I've frequently been the believer of

you know eventually prices are not going

to be rising anymore right we're going

to see commodity prices come down which

we have seen already whether it's copper

it's iron both Industrial Metals which

we see a lot of responsibility for that

probably because of China along with oil

corn and wheat prices coming down right

a lot of Commodities are coming down so

we're seeing disinflation in Commodities

shipping costs have come down

substantially although they're still

higher than where they were remember

higher than where they were does not

mean inflation it just means prices went

up they inflated and then it's over

right but what we really want to see is

that we we just don't have prices

continuing to rise and at the moment on

a month-over-month basis we're still

seeing prices rise and so that's weird

because it just goes against the thesis

that we should actually start seeing

some negative month-over-month readings

in inflation where it's like oh things

actually got a little bit cheaper this

month than they were last month now it's

possible that we're just getting

impatient right and it takes a long time

for the federal reserve's actions to

actually take hold in the market

sometimes six to 18 months are the

general expectations old school thought

is 18 months before monetary policy

actually affects inflation so that would

put us at starting tightening in March

of 2022 it would take until Q3 of 2023

to actually see the tightening but by

then if we keep raising rates the way we

are now we could be in the depths of a

real and serious recession or even

depression which is typically defined as

four or more quarters of negative GDP

growth right which very very possible so

that's the old school thought current

School thought is that oh it only takes

about six months for monetary policy to

really hit the market but that's now

that's September so maybe in October are

we going to see some negative a month

over month declines and inflation

hopefully but the whole opium that

inflation will end up being transitory

just ain't looking very very good right

now and so again I just want to read you

this line here a critical debate has

emerged between those who think that the

current High inflation problem can be

resolved without a recession the Goldman

Sachs research Central forecast and

those who think is sustained rise in the

unemployment rate will be needed uh is

okay so so the contrasting two groups

here and they say that we think both

views are legitimate but we have to

understand stand the potential downsides

the risk that we face if the more

negative scenarios take hold so that's

what this is a report on right it's the

more negative two so if we sort of have

a bell curve this is kind of like maybe

the the first standard deviation to the

right and then the second standard

deviation to the right of like pain

right so we're not talking about the

best case scenarios here this is the

worst case scenario uh either way I do

think

this does create some substantial a

cause for pause that is get out of debt

don't it's not time to margin if this is

a potential downside that we face right

we want to be out of debt limit debt as

much as possible and increase our income

as much as possible especially because

we could face a layoff so we want to

make sure we're increasing our skills so

that way if we were ever laid off maybe

we have more education certifications

licenses whatever to easily get a job

somewhere else we want to become more

irreplaceable in an organization right

but also we want to increase our income

and lower our debt so that way we can

actually go shopping for Real Estate uh

everybody's always said oh I I wish I

could go buy real estate back in 2010

and 11 again well I'm not saying we're

going to have the kind of Crash that we

had then when we saw a single and

multi-family houses drop anywhere

between 40 to 50 percent in value some

condos dropped as much as 60 of value I

don't believe we're going to have a

foreclosure and short sale crisis like

we did then but I do think there's a

substantial potential that when buyer

purchasing power plummets like this

inventory stagnates some on the market

when inventory stagnates on the market

people get fearful especially as they

see prices dropping and when people

combine fear with seeing prices fall

then the they start doing what's known

as shooting ahead of the Running Deer

that is Imagine The Running Deer is

running down a chart down if you price

your property up here you kind of have

to look on screen for this one if you

price your property up here and prices

are actually right here then you're not

going to sell right and then what

oftentimes happens is the market Falls

to like over here and then you drop your

price from here to here then it's like

uh wait a minute you're still behind the

curve right you actually have to drop

your price ahead of where the market is

to sell that kind of fear is something

that I have not seen in sellers since I

became a real estate agent back in the

2010 and 11 Market where I had to deal

with that all the time we had to shoot

ahead of the Running Deer to actually

sell listings because there was so much

stagnant inventory on the market now

again all of this while it will be very

very painful in my opinion creates

substantial opportunities I'm not a big

fan of sitting on the sidelines of all

cash in this sort of Market although

that does seem desirable if we get this

pessimistic outlook for the stock market

however I am extremely interested in

buying real estate when this peer this

fear really starts peaking which I

believe that is going to be in 2023 a

lot of people are wondering Kevin when

when are you going to buy homes when are

you going to start where are you going

to buy them and I don't actually have

the answer for that yet I'm keeping that

flexibility open especially for house

hack remember this is not a solicitation

if you're an accredited investor go

apply at housesack.com you can invest

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valuation no dilution until IPO which is

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forgetting you and I'm doing my best to

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so that way we can help you participate

with us as well we're already at over 13

0.8 million raised which we're extremely

excited about uh but anyway in the

meantime if you want to learn and get

educated courses down below met

kevin.com join use that coupon code be

part of the daily live streams with me

when the market is open so that way we

can talk about what we actually think is

developing and we can analyze real

estate deals together because we're

going to be doing a lot of over the next

few years especially analyzing markets

but anyway Goldman Sachs report kind of

scary it's definitely fod for your

uncertainty a doubt it causes fear

uncertainty now but that doesn't mean

it's fake news right we don't remember

it's very important that if you are a

logical person you don't want to just

call something fun and discard it you

want to discard fake news but you want

to understand a fud uh or uh yeah you

want to understand fud and you want to

analyze that oh my gosh yeah there is a

very real potential that the FED

continues to be hawkish and smacking the

hammer here for the sake of and desire

of getting inflation down especially

when we see inflation so broad-based

that we could be in a situation where we

have these unprecedented yields that we

haven't seen for the last 30 plus years

so this could be uh quite a remarkable

uh time in our lifetimes where I

wouldn't be surprised if in uh you know

40 years 30 years you know after a

mortgage we look back and we say oh my

gosh those were some of the most painful

years following some of the most

glorious years I mean talk about how the

pendulum has swung very very weird

anyway thanks for watching folks we'll

see in the next video goodbye and hello

from Spokane Washington