The Recession

There has been a lot of talk about a recession just because for a bit the yield curve flipped over.  Most people don’t know about yield curves, and virtually no one can reliably predict when a recession is going to happen.

There are certainly signs of a recession.  For example, RV sales are slowing down and that is often correlated with recessions.  RVs are luxury goods.  Of course, the correlation is not strong because RVs are for a minority of people.  When the typical person has a windfall or makes a lot of money their first thought is not that they want to run out and buy an RV.  Luxury real estate becoming depressed in price or not moving can be a sign of a recession.  In Chicago, it is certainly not moving and developers are cutting back on projects.  However, that has more to do with the corrupt government, the extremely high taxes, and the high projected future taxes.

I remember back in January of 2001 I had watched the Nasdaq and tech industry rally the market to all time highs. I couldn’t believe it.  You couldn’t short it because it was like getting run over by a freight train.  The only thing I hung my hat on was the earnings reports.  None of those companies made any money and as my friend the later Gies Business College professor Paul Magelli used to say, “if you don’t make a profit it’s a hobby.”

I actually was on Bloomberg television that January talking about the Fed meeting.  When asked where the Nasdaq was going to go, I said 1500.  That day, the market hit its all time high and I looked pretty stupid.  I didn’t look stupid two months later when the market started its descent with eventual crash.

My friend from the trading pits Dean Norris, badge NNN, tweeted this:

How many times can the American public sell low and buy high. Why does the left insist on supporting this recession based myth. It’s incredible that people listen to these guys and keep losing money.

— dean norris (@Deancs5) August 20, 2019

So true. Listen to the talking heads on business channels or any channel and you will always lose money trading.  No one can predict the future with any certainty.  If you are an investor, you don’t worry about picking tops and bottoms.  If you do, you will go broke.  Just toss your money in an index fund and wait twenty or thirty years.  You will have more than you do today.

There is so much “orange man bad” sentiment in the media, people are trying to wish the market lower.  I understand their feelings.  I detested Obama and thought his policies would be pretty bearish for the stock market.  After the shock of 2008, I happened to be in cash, and didn’t reinvest until after the second QE.  It cost me some money.

If you are going to be an investor, you have to ignore all the noise.  Try to tame your emotions.  Especially the emotions of anger, envy, and hate.  Certainly, there are danger signs and canaries in coal mines.  However, it’s awfully hard to know if they are really the harbinger of things to come or if they are one-off instances.

In this case, there are certainly some concerns.  Tariffs are never good.  They do take some time to work their way through the system, just like an interest rate hike or drop.  We live in a 24/7 on demand I want it now news cycle and our tolerance for waiting isn’t what it used to be.  But, incomes are up.  GDP is higher now than it was.  So, like everything the water is muddy.  It’s only clear in the rear view mirror.

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