The Ultimate RECESSION INDICATOR: Financing Fast Food...

The other day I saw a funny comment that said, Michael I'm disappointed in you. This video is not depressing enough. Well don't worry, I got you covered with this one because there's lots of depressing stuff in this video. You know, the goal is never to make anybody depressed by sharing this information with you. But, I can see how some people would interpret it that way because a lot of it isn't really that good. But, it is the reality. So, how I handle reality is live in it and try to navigate it as best as possible rather than run away from it and pretend it's not happening and let it make me sad. But anyways, it was funny nonetheless. Here's something for you guys. Klarna, which is the Buy Now Pay Later company, they just decided to do an integration and a partnership with DoorDash. Well, if anybody knows what DoorDash is, DoorDash is a food delivery service kind of like Uber Eats. So, what this is going to do is it's going to offer DoorDash customers options to be able to pay for their food deliveries and installments. And it will increase the convenience of people who are using these services. You know, that's just what we've all been waiting for, isn't it? Like, we've all just needed this for the longest time. How did we ever order food and get it delivered to our house without even lifting a finger or leaving our front door? How did we ever do that without installment payments? This signals two things. One, that people who are going to use this are likely going to abuse it and spend even more recklessly than they already are now. And two, it signifies how much financial difficulties most people already have. Because why else would they need to offer something like this, right? You can already pay on all these food delivery apps with a credit card, so why do you need to do something like Buy Now Pay Later? Well, according to Klarna, and they actually do have somewhat of a fair point on this, which I'll get to in a minute, is that using Buy Now Pay Later is actually cheaper and better than using a credit card. But the reason why this matters is because more and more Americans are already struggling with soaring credit card balances, which increases the risk of defaults, and the defaults on all kinds of debt have been on the rise. And so what this is doing is it's giving DoorDash customers basically a couple options. You can pay with four interest-free installments, or you can postpone payments to a later date. So here's a newsflash, guys. If you are ordering $40 worth of food on DoorDash, and you need to put it on Buy Now Pay Later, you are so far away from being able to afford that. And that is just really sad, to be honest, that people are even resorting to this. But, on the other hand, which is kind of one of the points that Klarna makes, isn't it better to use a service that's not going to charge you interest because it's four interest-free installments versus, you know, you put it on the credit card and you miss the payment or you have a lot of other debt racked up on the credit card, and now you're getting charged 25% interest each month on that $40 worth of food. So from that point of view, I actually agree with Klarna. It is a more consumer- friendly way to pay, but it's not a good habit or trend to get into. But the reality is, guys, if you need to put your meal on layaway, then things aren't doing too good right now, both for you and for a lot of others, because otherwise why would they be implementing this? Clearly they see a need for this in the marketplace. DoorDash and Klarna are seeing that, oh yeah, we can probably increase our sales volume if we do this because we're just going to make it so that more people who can't really afford to be ordering food are able to do so. Somebody wrote on X that this isn't even a recession indicator, this is we're about to have a second Great Depression indicator. And I think a lot of people who watch my channel agree with that sentiment. But here's what Klarna has to say about it. Because there is no interest, our business model relies on customers repaying us on time unlike credit cards, so we conduct a thorough eligibility check before approving a purchase. And if a customer misses a payment, we restrict their use of our services, something credit card companies don't do as they profit from late and revolving payments. Now I don't know if that's true because I have never used a buy now pay later service ever in my life. So anybody out there who has done this, you can tell me if that's actually how it works. But if that is the case, I would have to agree that it is better than using a credit card even though the idea behind it is still just as sinister. You're still buying things you can't really afford. But if Klarna is serious and they actually restrict their use of Klarna services if people miss payments, then that's an incentive to have good behavior and continue to make your payments on time and you're also not racking up interest on those payments. So those are two actual big benefits over a credit card if you ask me. That doesn't mean I endorse that you should be doing this or condone people performing this type of behavior. But if you have to choose one or the other, I guess this is better. According to Klarna, they say that 99% of our lending is repaid and our losses are far below credit card industry standards. Customers who use buy now pay later owe less and repay more than credit card users. The average Klarna customer owes us about $100 and for credit cards it's $7,236. So fair point. I agree. Maybe buy now pay later is just getting a bad rep. Maybe, you know, just the idea like the way that it sounds doesn't really sound very good, right? If you have to buy something now and pay for it later, that implies that you don't actually have the money. And honestly, I don't really understand why anybody would do this if you did have the money. It doesn't really make any sense. And I actually find it very rare that I agree with any of these corporations and their business models of how they kind of prey on people to make money. But from everything I've read here, this does sound good. But like I said, guys, I have no first-hand experience with it. I almost feel like trying it just as an experiment here on the channel just to show you guys. Although I'm not going to miss a payment on purpose. So that's not me. That's what I would like to do. I would like to make a purchase and miss a payment and see what happens if I try to use Klarna again like two or three days later to buy something else. Would they approve that purchase or would they deny me? Are they going to charge me an extra late fee? Whatever. I don't know. Let me know what you guys have seen with this. Because generally, I have agreed with this sentiment. This is a barometer of true desperation. People who are paying for their next meal and installments have reached the end of the line. And that may be the case. Maybe people who are using this, like Klarna, is omitting the fact that the average credit card user owes over $7,000. But maybe those people are one and the same. That average credit card user is no longer putting money on the credit card because they're either maxed out or they can't afford the payments to go any higher. So they're using Klarna instead. They could be the same person. That's something that they didn't disclose here. But obviously, these companies stand to make money. How are they making money if no one pays any interest or no one pays any late fees? They're making money from somewhere. Obviously, DoorDash is probably giving them a cut of every transaction that people use Klarna for. And I'm sure that Klarna does charge people something for not paying on time or being late or whatever. But the fact that people are needing to do this now just to be able to get a meal delivered to their house is pretty depressing, if you ask me. I've been finding it very fascinating to read these different stories that finally people are waking up and realizing and looking at different signs around the economy that, yeah, we are in a recession or heading towards one. And there was a recent one that came out that was pretty interesting. They said that, according to a March survey of Bank of America fund managers, 55% of them said they saw a global recession triggered by a trade war as the top risk for the market right now. And the number of consumers who expected a recession in the next 12 months has spiked to a 9 month high, according to the conference board's latest consumer confidence survey. And as you can see here, the recession expectations is starting to climb back up. And it was actually much higher back in 2023. The interesting thing is you can look at this graph and see that those expectations came way down when supposedly the recession never materialized. But what really happened is the recession started back in 2022 when we had those two negative quarters of GDP. But the government has been doing an excellent job of disguising the situation ever since. But now it looks like they're at the end of the road and the Trump administration is just going to rip off the band-aid and expose everything for what it is. So the next sign that we are in recessionary times is that household finances are deteriorating. Kind of in line with the story we just talked about, huh? Households are struggling to keep up with inflation. Consumer spending also makes up two-thirds of U.S. GDP. So as the spending continues to slow down, so will the GDP numbers. And also the fact that you have only 63% of American households that can cover a $2,000 emergency right now. Also not very great. In fact, take a look at this chart right here. This is kind of revealing. This red line on the top is the likelihood of somebody being able to come up with $2,000. It has kind of been on a slow decline recently. But the blue line at the bottom is the number of people saying they may need $2,000 for an emergency is slowly on the uptick. So little by little, the amount of people who can afford that emergency is deteriorating while simultaneously the amount of people who say they might need that money is increasing. Not a great sign. You throw that in with the fact that the CPI today is 35% higher than it was in 2015 and that's just the CPI lie. So the real inflation numbers have gone up well over 50% for most people and what they buy in their everyday life. And households in general have higher debt burdens than ever because the total household debt rose $93 billion over the fourth quarter of 2024 hitting a record $18 trillion. Now the next sign that we are in a recessionary time is small and mid-cap stocks are doing poorly. Those types of stocks have been struggling and the reason why that is a sign of a recession is because small to mid-cap stocks are highly sensitive to economic changes. The iShares S&P Small Cap 600 ETF is down 16% from its peak in November and the S&P Mid Cap 400 is down 13% from its high in November. The next sign of recession, more companies are warning of weaker earnings. I have done several dedicated videos on these topics in the last few weeks. Domino's was a big one, Target was a big one, FedEx just got hit with weaker earnings, their stock price went down. In fact, about 70% of companies that have reported earnings this season have cited uncertainty around new policies and the tariffs as one reason the outlook could be negative this year. Now here's the next reason we could be facing recession. The bond market is pricing in more risk. Credit spreads, which measure the difference between the yield on corporate bonds over a benchmark like the U.S. Treasuries have risen substantially in the last month. This reflects investors pricing in higher risk that a corporate borrower could struggle to pay back debt. As of the end of 2024, U.S. firms had a 9.2% chance of defaulting on their debt which is the highest risk of default since the great financial crisis. Well that's pretty alarming and obviously companies shouldn't be at risk of defaulting on their debt unless they were doing pretty poorly, right? Unless their earnings were down, their sales are down business is not good. Am I getting depressing enough for you yet? Just let me know. I can dig deeper if I need to. In fact, the worry of corporate default on debt right now is so large. Take a look at this chart guys going back to pre-pandemic that the corporate default risk is actually higher today than it was at the peak of the pandemic. How is that even possible? When we had a global shutdown the entire economy was completely in an unknown state. Nobody knew what was going to happen tomorrow. And actually the risk of corporate debt default is higher today than it was then. That is mind-blowing. And some of you guys really listen to the things I say on this channel because one of my viewers remembered that a few weeks back I mentioned that I went up to Palm Coast here in Florida so that way my wife could get a new driver's license because we tried to do it here in Miami and this was back in January that we looked for an appointment at the DMV here and the next available appointment wasn't until the end of March. So at least two months later two and a half months later in order to get an appointment at the local DMV here in Miami. Absolutely ridiculous. And they won't do walk-ins. Well now the new Miami-Dade tax collector just uncovered the reason for this and they are kind of pulling the same scam as the ticket master scams. So just like when you go to buy concert tickets you know concert tickets they come out they just got released at 12 noon right and then by 1201 all of them are sold out or 90% of them are sold out. How is that possible? Because all of the bots are buying up all of those concert tickets and then putting them up for resale for a profit. Which should be illegal. And why that's not illegal yet I have no idea. Well it turns out they're doing the same thing here now with DMV appointments. At least in South Florida. I haven't heard of this happening anywhere else. If you guys have let me know. But this is a new thing because the last time we had to go to the DMV here in Miami it was a non-issue. You could just go. You didn't even need an appointment. But what's happening is people can't get appointments at the DMVs down here in South Florida and companies and people are scooping up time slots and then selling them for up to $250 a piece. I mean that is just so wrong on so many different levels. And the Miami-Dade Tax Collector they discovered this because their software reportedly showed that single phone numbers were linked to multiple appointments and those phone numbers were linked to various companies. And when you run the report you see that one phone number has like 100 appointments booked up with the DMV. So they started looking into that and the system red flagged it. So why does the system even allow people to make 100 appointments with the same information or phone number? I have no idea. That's a loophole that needs to be fixed on their end as well. But also people like this need to be punished. Because as of right now holding multiple appointments with the DMV is not illegal. But now that people are taking advantage of others by doing this they're proposing an ordinance that would actually fine people or put somebody in jail who's doing this and the next hearing on this is supposed to be April 1st. So we'll see if this passes. I don't see why it wouldn't. But you know it's absolutely insane guys to be in a situation where you can't get a DMV appointment for two and a half months and we had to drive 300 miles away or whatever it is to get an appointment. So hopefully they fix this soon but also just because they implement a new law enforcing it is a whole other thing so we'll see. Luckily I don't think either one of us is going to be having to go to the DMV anytime soon again. Here's something depressing if you own a Tesla because one of my other viewers sent me this story saying that if you own a Tesla it could soon be uninsurable. I remember a year or two ago there was another type of vehicle that was a really hot item that was being stolen left and right I can't remember what kind of car it was but basically insurance companies were dropping people that own these cars because they were such a hot ticket for car theft. Well now Teslas are in the same position because people are damaging Teslas left and right on purpose, they're spray painting them they're setting them on fire, even shooting at them. So the increase in vandalism towards Tesla vehicles is causing insurance carriers to increase premiums on people that own these vehicles and this is happening in Germany the UK, other places like that as well. And this is coming at a time when Tesla vehicle values are also dropping. We talked about this a couple of weeks ago where you know you can see a 16% drop in searches for used Teslas right now and a 28% increase in demand for non-Tesla EVs. And also the Tesla Model 3 is the car that has lost the most value out of all the EVs over the past year. And they say that Teslas are already one of the most expensive vehicles to insure just behind brands like Bentley, Lamborghini and Rolls Royce. So they're up there with expensive insurance premiums and this is actually going to make it worse. They say that the average annual cost for full coverage Tesla insurance on a Tesla Model 3 rose by 30% in 2024 to $4,362 which is 25% higher than a comparable Mercedes-Benz A-Class. The Cybertruck annual estimated insurance on average is about $3,800 so not much better. And I'm not going to say anything else about it. I'm just reporting the facts guys. People don't like to hear the facts. People get all upset. People get offended with brand loyalty because you're a Tesla driver or whatever. They don't want to hear these stories. But the reality is these things are happening. People don't want the cars. People are upset with Elon Musk. People are damaging the cars on purpose. And now just driving one makes you a target. Which I think is wrong. I'm not even happy to hear that. I'm not a fan of electric vehicles. But I don't think people should be vandalizing other people's cars that have nothing to do with the situation. It's not fair to the people that own the vehicle and obviously it's going to hurt everybody because it's not just going to be Tesla insurance rates that go up. It's going to be insurance rates in general that are going to rise in areas where the vandalism is prevalent. That's how insurance companies work guys. They will increase premiums for the entire neighborhood or the entire zip code if there's a lot of incidents. So really all people are doing is hurting themselves and everybody else around them by doing shenanigans like this. If you're not happy with Tesla, you're not happy with Elon Musk, don't buy the car. You don't have to punish somebody else that decided to get one. And all these depressing stories were pretty much inspired by you guys because almost everything I'm sharing with you today was sent to me in an email by at least somebody who watches. Here's another one. Scott sent me this story from Reddit about this real estate agent that believes that they are entitled to all of this money for a house that went unsold. Take a look at this. This guy listed a property for sale eight months ago with this real estate agent and they both agreed on what the selling price should be after the agent ran her analysis which is usually kind of rare because most of the time the seller wants it to be higher than what the real estate agent says it will be. At least that was my experience. So now fast forward eight months later we have not had a single offer on the house and the real estate agent wants him to either take a loss to sell the property or she wants to cancel the contract and she was going to send him a bill of $26,000 for her cost and her time everything that she's poured into this property and she's billing him at $280 an hour. This guy says I'm not canceling the contract and I'm not paying you anything since the contract is for a commission job and now she's insulting the property saying how it's not worth much and the owner fought back and said listen you did your analysis and you agreed with the price and you listed it at this price saying that this was a good deal and the owner says he's already cut the price on the house once and now she wants him to cut the price by another 30% and he says the contract expires in July and does not contain anything that mentions me paying her anything if the property does not sell. Now the owner of this house is correct. He doesn't have to pay her anything. So what she's doing is trying to extort the owner and kind of like you know use scare tactics of some sort to try to get him to pay which clearly is not going to work and honestly any agent that's caught doing something like this should lose their license because this is wrong on so many levels. You're not even allowed to do stuff like this and yes in our listing agreement contracts there are cancellation fees that are clearly outlined in that contract but that only applies if you cancel. If you don't cancel the listing and you just leave the house for sale and run it until the contract is over you're not going to be liable for anything as the owner. So you never want to cancel a listing especially if the cancellation fee is high because then you could be on the hook for paying that and if you don't pay it then the broker can actually sue you and take you to court for that money. The likelihood of that happening probably pretty low. But this story is very interesting, not really that depressing, more funny than anything mainly because the seller and the real estate agent were so far off base on what they believe the house is going to sell for. I mean look at what she said at the end there like we want to lower your house price now by an additional 30% to get it sold. Think about it guys 30% that's pretty much by how much the entire housing market is overvalued by right now. In general the U.S. housing market is overvalued by about 30% and if prices just came down tomorrow 30% then that would mean home prices are pretty much fairly valued compared to what people make and what incomes are today. So the fact that they both missed that and the fact that they were both that far off base of how much the house was worth is a joke. It's one thing for the owner to think that the house is worth a lot more than it is because they don't do real estate for a living. They're not out there seeing what every single house is selling for and seeing what buyers and sellers are saying but for the real estate agent to miss that is extremely unprofessional and this person should never work again. So feel free to send me all your depressing stories they just might make it into the next video and if you enjoyed this video make sure you are subscribed to the channel and if you don't want to wait for my next video to come out check out this one on the screen right over here and I'll see you in the next one.