this post was submitted on 29 Jan 2024
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As others stated a small portion of that was due to over-hiring, some to follow the layoff trend and some to make the earnings call look good.
But from what some experts are saying; there's also another factor, which is even worse.
There's a looming threat of a recession hitting in a few months (which is said to be a much bigger recession than the post-Covid one). And this recession will be tied to the Commercial Real-Estate Bubble.
They are saying that it will be like the 2009 Mortgage Crisis and will be very disruptive.
There's this theory that companies are reducing their headcount to prepare for this recession by reducing their expenses to the minimum. Which makes sense.
For the companies without savings that is a must but the ugly part is that you see big names with huge amounts of money in the bank laying off people as well.
Well, because they don't want to invest that money on the people, they will use all that money to buy smaller companies when the recession hits. All big tech with enough money in the bank is rooting for the recession to happen so they can buy everything for very cheap and grow even more.
Do you have any more reading on how a looming recession is will mirror 2008?
I didn't mean to say it's going to be as big as the 2008 crisis but the idea was that it's gonna create a similar domino effect.
Here are some stuff about this.
https://www.jpmorgan.com/insights/real-estate/commercial-real-estate/commercial-real-estate-trends
https://www2.deloitte.com/ca/en/pages/real-estate/articles/2024-realestate-outlook.html
https://finance.yahoo.com/news/kevin-o-leary-says-coming-230043170.html
https://youtu.be/YLshGvV0lRo?si=yTpYIyGLFFVv4D6i
https://youtu.be/Jq_6RKHJIIA?si=F43pJoeDv9FvUGCw
https://youtu.be/-V9yPGdubHQ?si=hdrxXJ71g3mwVyO2
I'm not an Economist but from what I understand the argument is like this:
1- Covid changed the work culture and made remote work viable
2- This in turn reduced the value of Commercial Real-Estate
3- There's a lot of investment of Comm. real estate. And investors & owners wanted to keep the value of their assets high.
4- So there was the RTO mandates. Which was initially pushed by the investors.
5- Ukraine war creates inflation and raised interest rates. The time of free money is over.
6- Now investors push for companies to turn profit instead of growth.
7- Companies try to cut costs to please the investors. Mass layoffs happening. Startups going bankrupt.
8- Since the interest rates are still high and investors saw that turning growth into profit wasn't that easy they are shy to put in money into new investments. Especially IT (AI excluded)
9- Investments dried up which means there's less growth potential for companies meaning even less demand for Commercial Real-Estate. Which means whoever invested heavily (with loans) into comm. Real-Estate will go under when it's time to pay back.
10- The banks who are heavily invested in Comm. Real-Estate will get affected meaning there will be even less money for investment causing an economic recession.
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https://piped.video/Jq_6RKHJIIA?si=F43pJoeDv9FvUGCw
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