The looming recession & your place in line for a Rivian [WARNING: NO POLITICS]

[yizzung]

Caveats: I work in tech / private equity and have a July 2020 order for an R1T.

While I've been somewhat confident that we might pull off a soft landing, my economic outlook has darkened over the last few months. Pick your poison: war in Europe, Russian oil/gas embargo, China lockdown, 40-year high in inflation, supply chain problems (scarcity AND glut), rising interest rates, stock market sell-off, crypto bubble, housing bubble, pandemic, monkey pox, need I go on?

The inflation numbers out today indicate that the Fed has to get way more serious, which means recession is on the way. I'm seeing lots of companies freeze hiring and a trickle of early layoffs. But out in Silicon Valley, down-rounds, bigger layoffs, and liquidations of the more speculative startups are just around the corner.

To date, we've only heard about a steady uptick in Rivian orders. 90,000 (I think) in the last earnings call. But I'm increasingly convinced that a significant number of these orders are going to vaporize. Somebody placing their order 18 months ago when their stock portfolio was 30% higher than today or when they had access to a dirt cheap home equity loan or (worse) when they were gainfully employed, is in a different position today (or very likely will be in a different position six months from now). Not to mention that many folks seem to be hedging by putting multiple deposits on multiple cars.

I suspect that the recession is going to be uglier than most are anticipating. And when perception catches up to reality, I think a lot of people are going to be dialing back their purchases of boats and ski cabins and electric adventure toys. The good news? Well, I suspect that you might get your Rivian sooner than you expect, assuming you decide keep your place in line...

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[Count Orlok]

Economists have predicted 11 of the 3 most recent recessions.

 

[yizzung]

Economists have predicted 11 of the 3 most recent recessions.

So you think a soft landing is in the cards?

 

[Count Orlok]

rising interest rates are great for savers. Mortgage rates are still at historic lows.

inflation is good for people with fixed rate debt (I fear deflation more than inflation).

soft landing is in the eye of the beholder. If 99% of ones net worth (NW) is tied up in beanie babies and/or bitcoin it may be harder than those with diversity as well as ample liquid NW (LNW).

 

[LaunchGreen]

Ya, I’m with you. In addition to declining asset prices, rising rates will make financing on a Rivian more expensive.

However, with 10% inflation, the price of Rivian is more of a deal than ever, however I suspect we will see the overheated car market calm down as well which might change the comparisons.

 

[mini2nut]

I agree with your prediction. I think we will see a recession starting in Q4 of this year.

 

[LaunchGreen]

rising interest rates are great for savers. Mortgage rates are still at historic lows.

inflation is good for people with fixed rate debt (I fear deflation more than inflation).

soft landing is in the eye of the beholder. If 99% of ones net worth (NW) is tied up in beanie babies and/or bitcoin it may be harder than those with diversity as well as ample liquid NW (LNW).

Savers, like in-a-bank savers? Is that a thing?

 

[Engi_Nerd]

I agree. The truck is already at the very top of what I'm comfortable spending and climbing interest rates look like they may soon price me out of play. Will also obviously make Rivian's survival that much trickier.

 

[Count Orlok]

Savers, like in-a-bank savers? Is that a thing?

sure. plenty of people sitting on cash. We're at about 30% cash, 20% real estate, 50% in a 70/30 investment portfolio, and 50% scotch (we're in our 50s so of course age matters).

 

[NY_Rob]

Both Elon and Jamie Dimon (fellow billionaire and Chairman of the Board/CEO JP Morgan Chase) have both recently been quoted as having very dire outlooks for the near term (8mo+) US and global economy.

Do we simply ignore the opinions of these two sage investors?


Two good things about the extended Rivian delays is later delivery customers get less buggy vehicles and we also get more time to squirrel away $$ for our down payment. If my delivery actually takes place as "promised" in Q4 this year, I should only need to finance less than $20k which is pretty easy to pay off monthly.

 

[yizzung]

soft landing is in the eye of the beholder. If 99% of ones net worth (NW) is tied up in beanie babies and/or bitcoin it may be harder than those with diversity as well as ample liquid NW (LNW).

Sure. The Great Depression may have been viewed a soft landing by the 75% of the population who didn't become destitute but that's probably not the conventional way to perceive soft landings...

My point is that some portion of the people who sit somewhere along the bell curve of Rivian's 90K orders are going to be impacted. I think the ratio is higher than most think. Certainly higher than I thought just months ago.

The "store" that they just rolled out is probably a way to clear their inventory at more scale than they thought they might have to do originally.

 

[LaunchGreen]

sure. plenty of people sitting on cash. We're at about 30% cash, 20% real estate, 50% in a 70/30 investment portfolio, and 50% scotch (we're in our 50s so of course age matters).

Ok, ya, I’m not dissimilar, but rising rates hurts 70% of that allocation and inflation eats at it all. For the cash, a 1% interest rate into 9% inflation isn’t really helpful.

Your only safe bet is the scotch. 100% ROI on that one.

 

[moosehead]

Agree with @ yizzung.

Typically one of three things proceed a recession: tightening Fed, inflation, inverted yield curve. We have all three. Add global conflict, and a hangover from 15 years of wildly accommodative monetary policy which inflated all valuations across the globe.

 

[SANZC02]

I agree. The truck is already at the very top of what I'm comfortable spending and climbing interest rates look like they may soon price me out of play. Will also obviously make Rivian's survival that much trickier.

I think there are many reservation holders where you are.

Based on the responses from the March 1st price hike, many people said they were stretching at current prices and would be priced out with the higher prices.

Unless people have the funds set aside for a cash purchase, the rising prices that eat into available monthly free cash combined with higher interest rates will price people out as well.

I think the longer Rivian takes to convert pre-orders to sales, the lower the conversion rate will be on those pre-orders.

 

[R1Sky Business]

Caveats: I work in tech / private equity and have a July 2020 order for an R1T.

While I've been somewhat confident that we might pull off a soft landing, my economic outlook has darkened over the last few months. Pick your poison: war in Europe, Russian oil/gas embargo, China lockdown, 40-year high in inflation, supply chain problems (scarcity AND glut), rising interest rates, stock market sell-off, crypto bubble, housing bubble, pandemic, monkey pox, need I go on?

The inflation numbers out today indicate that the Fed has to get way more serious, which means recession is on the way. I'm seeing lots of companies freeze hiring and a trickle of early layoffs. But out in Silicon Valley, down-rounds, bigger layoffs, and liquidations of the more speculative startups are just around the corner.

To date, we've only heard about a steady uptick in Rivian orders. 90,000 (I think) in the last earnings call. But I'm increasingly convinced that a significant number of these orders are going to vaporize. Somebody placing their order 18 months ago when their stock portfolio was 30% higher than today or when they had access to a dirt cheap home equity loan or (worse) when they were gainfully employed, is in a different position today (or very likely will be in a different position six months from now). Not to mention that many folks seem to be hedging by putting multiple deposits on multiple cars.

I suspect that the recession is going to be uglier than most are anticipating. And when perception catches up to reality, I think a lot of people are going to be dialing back their purchases of boats and ski cabins and electric adventure toys. The good news? Well, I suspect that you might get your Rivian sooner than you expect, assuming you decide keep your place in line...

Nothing but good news....happy Friday

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