Invest Effectively

Wobbling The Wrong Way

I’ve been saying for about a year that the economy seems to be “wobbly”. It hasn’t been clear if the economy is going to improve (see: Bidenomics), or tip toward recession (see: Bidenflation).

Increasingly, it seems like we are tipping the wrong way. This morning, the Dow Jones crashed 1,000+ points – compounding on losses last week. I will note that the Dow remains UP for the year (+2.9%), but it is the latest economic signal that the economy isn’t quite right.

Slow jobs growth is the latest straw pointing to future recession. Jobs growth over the last couple years has seemed strong – although they were overwhelmingly part-time jobs among people currently employed. There was little expansion of the % of people working.

Now slower jobs growth in July (-35% below Administration projections from last week), comes on top of 3 years of high inflation, high interest rates, a stalled housing market, high gas prices, and significant geopolitical uncertainty.

Don’t believe me? The Federal Reserve of New York is showing the highest probability of recession than it has since the early 1980s …

Buckle up. Ugly economic news can cause ugly policy choices during an election year. Politicians love to seem “helpful”. Biden’s recent proposal for national rent controls is an example of that. Ugly policy choices like that could affect all of us for years to come.

Sorry for the negative tone this Monday morning. I’m not doing anything different with my investments right now, but certainly mentally bracing for change. How are you feeling about the economy’s direction over the next 12-24 months?

Images: Apple Stocks; NY Federal Reserve

11 thoughts on “Wobbling The Wrong Way”

  1. The economy is so bad, even legacy media can no longer claim BiDUMBnomics is working. The American Public has been lied to about the true rates of inflation and unemployment for decades.

    An economist I follow, Dr. Chris Kuehl of Armada Corporate Intelligence gave a presentation an estimated ten years ago where the gist was, if the USA measured unemployment using the same methods as Germany the true rate would be in the teens. He described how the unemployment survey by the Bureau of Labor Statistics is made by calling landlines. Who still answers their landline? Who still has a landline? He also cited that the survey does not consider those underemployment or working part-time, who want or need to work full-time as partially unemployed. This group is struggling. Finally, the survey fails to count those who have run out of unemployment benefits and/or having given up seeking work. Those who are doing the worst are not counting.

    Most of the the stock market gains since BiDUMB was installed in office were due to run ups in a half dozen Artificial Intelligence Stocks plays. The rest of the market has not done so well. Everyone is starting to catch on that AI was just another overhyped bubble. I think people are starting to encounter AI plugged into answering the phone at call centers that used to let you talk to real people right away, and they don’t like it. Sticking with boring dividend paying stocks in companies that provide stable growing dividends and provide necessary goods and services still works for me.

    Liked by 1 person

    Reply

  2. We have been in the land of make believe for far too long. The country has been operating on “feelings” rather than facts. The “you can do anything and have everything” hype has led to a sense of entitlement which is bound to come home to roost.

    I think I mentioned how we visited Universal Studios recently. Judging, yes I admit that I judge looks, from the average visitor, most could not afford the admission, food, souvenirs, and dress which included hats and jerseys from favorite sports teams. This is all done on credit with the live for today and worry about tomorrow mentality.

    Some observations from trips overseas:

    1. Tour guide in Olympia Greece who lives in ancestral home and husband works 8 months a year at an island resort. They visit once during that term.
    2. Brother of my deceased “Greek Sister” she was an exchange student with my family he was also an exchange student. He would love to visit the states again but can’t afford to despite owning ancestral home plus three cottages he rents out.
    3. Australian tour guide whose daughter might lose house as adjustable mortgage spiked. All mortgages in AUS are adjustable.

    As far as I am concerned, I do not worry. Will life be more challenging for the next year? Most certainly, we need it, but it should not make much difference for us long-term investors

    Liked by 2 people

    Reply

    1. Excellent commentary about the pitfalls of making decisions based on feelings and wants instead of rational thoughts and needs. The current times, are the time of unreasonable man. I bet there have been times in your life when members of the emotional class have made fun of your rational ideas.

      Most of society including our civil serpents need the simple personal finance class I had my sophomore year in high school. Personal finance literacy will save marriages and our country.

      Like

      Reply

      1. Funny story, for about 15 years I would buy an old Mercedes for $4,000-$5,000 drive it for three years and buy another. Coworkers, line mechanics with IBEW would give me grief until I asked them what they paid for their Harley. $5,000 vs $25,000. I do have to say that they made enough to afford the bikes which they paid for in cash because most IBEW members are not stupid. It was just healthy fun and I got a lot of respect from them because while I wore a suit, I looked out for their safety and made certain that they got the correct care when they were injured.

        Liked by 2 people

      2. I think my wife’s Mercedes is worth about that amount right now! She’s been “due” to get a newer one for some time, but she really likes what she has.

        Liked by 1 person

      3. The Fee article matches the discouraged workers Chris Kuehl described as currently not being counted. Get those who working multiple unbenefited gig jobs and I think the model is more accurate.

        I bet your wife’s Mercedes has been well cared for and since you are both retired, the miles aren’t piling up. Some of the older cars are actually better than new ones from a service life and reliability stand-point.

        Liked by 1 person

      4. Her Mercedes is 12 years old and looks like new. I think it has about 65K miles. It hasn’t been terribly reliable though. It’s the first generation with a lot of superfluous sensors that are expensive to fix. Engine has been fine.

        Liked by 1 person

    2. Agree – I don’t worry for myself (or my son). Still, this country’s monetary policy is atrocious. To your international examples of where we’ll end up, you can add Japan. The yen has fallen 60% against the dollar in the last 15 months. My son was just in Tokyo drinking $2 beers & $5 dinners. He couldn’t believe it. The Japanese he spoke with were miserable. They complained about how hard they were working, but not getting ahead financially. They need tourism, but were frustrated so many were coming to Japan, but so few Japanese could do the same.

      Liked by 1 person

      Reply

  3. This might be a silly question. But, with all of the investments in data and technology, shouldn’t that help mitigate a recession from going too long or steep. I would expect that companies now can react quickly to growing inventories, credit defaults, etc.

    Liked by 1 person

    Reply

    1. I no economist. It should help, but are those improvements enough to offset all of the negative factors?

      Like

      Reply

Leave a reply to 1027dorothy Cancel reply