I’m no macro-economist. Nor do I claim to understand that subject well. But, as I’ve mentioned in the past, I do get daily updates from several sources, to try to remain somewhat informed of the larger economic picture. Because it affects us all.
Let’s just say a few conflicting signals right now could leave one’s head spinning.

First, regarding the prospects for the economy over the next few months or a year: Last week, apparently, there was a definitive signal that a recession is in the offing. The definitive signal? An inverted yield curve in the bond market.

What the heck does that mean, you ask? It means that the interest rates on long term bonds (like, 5-year), dropped below those of short term bonds (like, 1 year). This is highly unusual, short-term bonds almost always being lower than long-term bonds. Experts are telling us that this “inversion,” is a virtually fool-proof predictor of a coming recession.

Now, no one likes a recession (and certainly Mr. Trudeau will not, if it comes just in time for the fall election.) But, there may also be a positive side to this. Interest and mortgage rates are tied to the bond market, not the stock market (the bond market being far larger and more stable.) So, we can likely park any expectations of further interest rate hikes. In fact, they may actually drop, though I wouldn’t hold my breath.

Second, have investors in high tech gone completely mad? Did big money investors not hear the news of a projected recession in the offing? .

To wit: Uber and Lyft are the latest craze. But they are bleeding gobs of money.
Last Year Lyft lost $911 million on revenues of about $6 billion. Uber lost $1.8 billion on revenues of about $50 billion. In the midst of these financial “disasters,” both are going public.

Lyft went first, last Friday. Their shares went on for a starting price of $72, which valued their money-losing company at $24 billion. Huh? You have revenues of $6 billion (Lyft’s 26.8% of the revenue they get from the fares, the drivers getting the rest), on expenses of $6.9 billion, and the company is worth $24 billion? By the end of the day, those shares were at $78, for a valuation of $26 billion.

Uber is not yet on the stock market but preparing for it, and is expected to be valued at about $120 billion when they go public. Meantime, they’re in the midst of acquiring a competitor for over $3 billion, to take out competition and to get into some of the countries they are not yet in. So, let’s see–They lost $1.8 billion last year but have $3 billion in funds to buy up the competition?

In fairness, the high valuations of the ride-hailing companies are not due to their sorry financial history but because of investors’ expectations that they will lead the way in driverless technology, own the cars themselves, and get most of the revenue they now give to the owner/drivers, not just 25-26.8%. And they expect, once driverless technology takes over, people will stop owning their own vehicles and will use their services instead. But, it’s a pretty big gamble, if you ask me.

Third, there’s this whole crypto-currency development that is freaking out the big banks and governments. If it becomes mainstream in financial transactions–and it is rapidly gaining strength–then the government and the big banks will lose considerable control of the financial industry. It’s still quite secretive, but the largest companies—Facebook, Amazon, Google, and many others—are working hard at developing their own cryptos, to compete with mainstream currencies. Some governments have already entered this space, as well.

I think the intrusion of crypto-currency as a major economic force is inevitable. It will radically alter how we do business and affect the market forces that trigger economic trends.
We’re in for some radical changes, and a roller-coaster ride, in the way money and technology affect our economic well-being. It will affect every one of us. As little guys, is there anything we can do about it?

I think the best we can do is probably educate ourselves at least a little about these trends.

It’ll cushion us for the future at least a little better than the purchase of a lottery ticket.

At least, that’s how I see it .

Award-winning* Fraser Valley Rent 2 Own is a founding member of the Canadian Association of Rent to Own Professionals (www.CAROP.ca)
* winner of all-star awards, 2012, 2014, 2015 at the Rent 2 Own Summit.