Bullseye: Special Edition

Special Edition Bullseye

Recessions in Perspective

Scott Lee, president of Tauro Capital Advisors, Inc. Advisory Services, shares his insights on the current uncertainty in the CRE market and possible recession. Scott’s observations and advice are grounded in his experience of 5 real estate cycles. Scott utilizes a chart from Wikipedia to illustrate all the recessions starting from the Great Depression, showing how long each lasted, time between each one, peak unemployment rates, GDP declines, and the 10-year treasury rates.

The Great Depression was the longest economic downfall in history and was followed by a much shorter recession just four years later. It was undoubtedly the worst, with peak unemployment reaching nearly 25% in 1933. The 10-year treasury is the benchmark used to decide mortgage rates across the US and is the most liquid and widely traded bond in the world. It is seen as a sign of investor sentiment and tracking of it started in 1962 charting its fluctuations daily. In the 80s, it rose to nearly 14%.

Scott experienced his first recession in the early 90s, after an eight-year gap from the Energy Crisis Recession that ended in 1982. Luckily, the Gulf War Recession only lasted eight months, and the GDP decline was not significant. The early 2000’s saw a brief recession caused by the dot-com bubble.

The Great Recession of 2008 was the longest recession post WWII and is one most over the age of 21 experienced, and felt for many years thereafter. At the start of the COVID-19 pandemic, a two-month recession hit, resulting in over 20 million job losses due to the uncertainty caused by the pandemic. Today, there are opposing viewpoints as to whether we are currently in a recession or not. It has been three years since the last recession, and unemployment stands at a low rate of 3.5%. The 10-year treasury rate is similar to that during the Great Recession, and both are lower than anything before then but not as low as during the COVID-19 recession. The GDP decline is similar to that during the COVID-19 recession.

Scott advises that, with few exceptions, recessions are over quicker than realized, and it is essential to anticipate and prepare for the disruption they cause. He advises against fretting, encourages perseverance and that it is crucial to keep learning throughout. There have been 20 recessions since the Great Depression, and our human nature is to get caught up with the potential turmoil. Unemployment has real implications, and most job losses are junior positions, meaning people with staying power are surviving unlike in 2008. It is essential to stay alert for opportunities.

In conclusion, Scott’s presentation offers valuable insights and advice on the history of recessions, the current state of the economy, and how to navigate it. It is essential to
remain vigilant, stay on top of the changing economic landscape, and look for opportunities. In Tauro’s consulting business, Scott along with Karen Stager, and Jack Carroll are already seeing new opportunities for restructuring and workouts of loans, which will likely continue. Scott’s experience is a valuable guide for anyone seeking to weather a
recession and emerge stronger.

Special thanks to Wikipedia “List of recessions in the United States” for content and to ChatGPT-4 by OpenAI for assisting in the creation of this article.