[JustinD]

Catch 22 on this hypothetical…yes, recession is likely and many people will tell you it has already started. I do not ascribe to that belief and instead see it about a year or more down the road unless we start to aggressively fight inflation with real interest rate adjustments. Don’t look for that to happen till after November as election worries far exceed the destruction of the economy to our political folks. (And if someone wants to complain about that as biased, well it doesn’t really matter the party in charge if the flip is as severe as is likely this year).

My point, it is perspective with aggressive inflation and likely recession combined. Picture your cards continuously gaining value over the next year, you may think this is awesome. The truth more lies in devalued currency just like your groceries. Paying more for less is and will be status quo until we tip the demand balance. Only then will you see a dip.

I’ll compare what I know well as an example and much of the 2008 housing crisis. As we sit interest rates on homes have risen to prepandemic levels and honestly about a few years prior. Home values remain very high…for now.

Consumers most often follow an affordability index that modifies sale values. They take a predetermined amount of monthly income that they can allot to a mortgage much like a car payment. How that payment is broken down is of no consequence to many as long as that amount is followed. Your payment is in simple terms, a combination of the principal amount and the monthly interest on that amount. The lower the interest, the higher of a principal loan amount you can have and still hit your target payment amount. With rates at 30 year lows the past 24 months it has given buyers the ability to far overpay and get in bidding wars for homes. Thus paying higher and higher prices. If I change those rates higher, that monthly payment is now more interest and your principal must go lower to obtain the same payment amount. You can easily see how this affects home values and how the current home values can quickly be affected as soon as the market demands correction as demand lowers as consumers are priced out.

After all that rambling, think of the inflation we have had providing so much discretionary spending and low borrowing rates for buying collectibles. People in many job groups are receiving much higher pay rates which are raising the price of goods exponentially. The same basic economic rules will soon apply. Once the seesaw tips too far and the market is outpacing buyer income it will fold causing prices to settle.

That’s what happened during each of those periods you spoke of and the dynamics of basic economy will dictate it will always happen again to restart the cycle. As a collector I personally love those cycles as I have been holding on major purchases for 2 years and expect my collection value to stabilize much like my home. These cycles do drive the average investor out and drops the dead weight, but you will see the big pieces continue demand as always as those that have been here long know the cyclical nature of these things just like the stock market. It is never the end, only a new beginning.

Again as always, just my personal opinion. Avoid anyone who tells you they can factually predict the future.