[Tony Ciotti]

It looks like this was posted almost 2 years ago. The recession hasn’t officially come yet, but I do believe it is still on its way.

Consumers have finally burned through their pandemic cash and are now racking up consumer debts at historic levels. It appears the rich still have plenty of cash, but the middle class is borrowing to survive.

Considering the United States’ GDP is 68% driven by consumer spending, it seems inevitable that this house of cards will come tumbling down soon. How long can consumers live debt-fueled lives?

Consumers will eventually reduce spending, due to high debt –> Corporate profits decline –> Layoffs come –> More consumers reduce spending –> More layoffs come –> Due to layoffs more consumers can not afford their mortgages and/or rents –> Landlords see declining rents –> Landlords are unable to meet their loan covenants due to higher interest rates and declining rents –> Distressed deals become more prevalent à Investors with cash scoop up discounted deals with the potential of shifting wealth…all depending on how deep the recession runs and for how long.

Or, the government can drop interest rates, turn the money printers back on, bailout the consumers, bailout the investors, bailout the economy and punt the problem down the road for several more years.

I think either outcome is possible. As investors, how do we profit while also protecting ourselves from the inevitable risks?