COVID was not a recession. COVID was a self induced economic and cultural experiment and has no relevance to where we are now. Neither does 2008/2009. That was a black swan financial recession that started in real estate and banking. What we have now is more classical inflation that will lead to a recession created by the Fed.. It is indeed the 1970's. but we will have no way out. The Reagan way out was to both solve both inflation (by raising rates) and recession (by energizing the private sector). Both efforts brought supply and demand into equilibrium. That's when things took off again. Sadly, we don't have that caliber of leadership now. We are being ruled by the HR department of a mid-sized company. The company is going bankrupt and HR thinks it's important to talk about pro-nouns while sales drop every year. Hopefully President DeSantis and a R House and Senate can get us out of this mess in 2024.
Fair play that the stock market is not yet a crash and is slowly, but decisively repricing itself. OK.
What is happening is a perfect storm at all other points of the compass. This is something that did not happen back in the Carter debacle.
1. The Gov't is pissing gasoline on the inflation fire with excess spending and withdrawing money from the market via higher taxes. This does not solve itself. This is self-inflected and stupid.
2. We have only begun to see the impact of higher interest rates and they are going way, way higher. The Volcker Rule that interest rates have to be 1.5X the inflation rate is a good frame of reference.
3. Mortgage rates have doubled for the 30-year in the last 6 months and will continue to rise thereby killing the American dream of home ownership and kneecapping the home building industry. This gets much worse.
4. Energy prices are still double what they were when Biden came into office and there is no plan -- selling off the strategic oil supply to China, et al, is not a plan -- to solve this important problem.
5. The US may have it much better than other countries as measured by an insanely strong dollar v both the pound sterling and the euro. Look at these exchange rates, the strongest USD in 40 years.
Stating the obvious -- an insanely strong dollar is death to US exports. Good time to spend time in Paris.
6. There is a war that can get a lot shittier and is headed that direction. This war is both armaments and energy particularly European energy.
7. The combination of the current POTUS and the Sec Treas is the weakest combo in recent history. Their economic intel and resourcefulness is transitory to non-existent.
8. The earnings predictions going forward are all signaling a massive contraction of economic activity, lessened profits, and hiring/employment chaos. This does not bode well for the near or mid-term future.
So, the market is not in crash mode, but the global and US economy is in free fall and nobody is minding the store or doing anything about it. This gets very ugly and begs the question - WTF do you do when nothing works?
COVID was not a recession. COVID was a self induced economic and cultural experiment and has no relevance to where we are now. Neither does 2008/2009. That was a black swan financial recession that started in real estate and banking. What we have now is more classical inflation that will lead to a recession created by the Fed.. It is indeed the 1970's. but we will have no way out. The Reagan way out was to both solve both inflation (by raising rates) and recession (by energizing the private sector). Both efforts brought supply and demand into equilibrium. That's when things took off again. Sadly, we don't have that caliber of leadership now. We are being ruled by the HR department of a mid-sized company. The company is going bankrupt and HR thinks it's important to talk about pro-nouns while sales drop every year. Hopefully President DeSantis and a R House and Senate can get us out of this mess in 2024.
Fair play that the stock market is not yet a crash and is slowly, but decisively repricing itself. OK.
What is happening is a perfect storm at all other points of the compass. This is something that did not happen back in the Carter debacle.
1. The Gov't is pissing gasoline on the inflation fire with excess spending and withdrawing money from the market via higher taxes. This does not solve itself. This is self-inflected and stupid.
2. We have only begun to see the impact of higher interest rates and they are going way, way higher. The Volcker Rule that interest rates have to be 1.5X the inflation rate is a good frame of reference.
3. Mortgage rates have doubled for the 30-year in the last 6 months and will continue to rise thereby killing the American dream of home ownership and kneecapping the home building industry. This gets much worse.
4. Energy prices are still double what they were when Biden came into office and there is no plan -- selling off the strategic oil supply to China, et al, is not a plan -- to solve this important problem.
5. The US may have it much better than other countries as measured by an insanely strong dollar v both the pound sterling and the euro. Look at these exchange rates, the strongest USD in 40 years.
Stating the obvious -- an insanely strong dollar is death to US exports. Good time to spend time in Paris.
6. There is a war that can get a lot shittier and is headed that direction. This war is both armaments and energy particularly European energy.
7. The combination of the current POTUS and the Sec Treas is the weakest combo in recent history. Their economic intel and resourcefulness is transitory to non-existent.
8. The earnings predictions going forward are all signaling a massive contraction of economic activity, lessened profits, and hiring/employment chaos. This does not bode well for the near or mid-term future.
So, the market is not in crash mode, but the global and US economy is in free fall and nobody is minding the store or doing anything about it. This gets very ugly and begs the question - WTF do you do when nothing works?
Vote.
JLM
www.themusingsofthebigredcar.com
How is the federal reserve balance sheet taper coming along ? You don’t hear about that as much but is one of the most crucial variables out there.
One antidote to gloom is champagne. Remember Churchill: In victory you deserve it, IN DEFEAT YOU NEED IT. (my caps).
The water will not clear up until we get the hogs out of the creek!