It’s impressive how well the U.S. economy has held up during the past year. As early as 2018, leading indicators were suggesting a heightened risk of recession in 2019 or 2020. Then early this year the yield curve inverted, a traditional signal that recession is imminent (the inversion has since reversed, but this typically happens before growth actually goes negative). The trigger for a downturn wouldn’t be hard to identify — a slowing China, combined with President Donald Trump’s trade war. Already, countries such as Singapore and South Korea, which export lots of manufactured goods to China, are slowing down.
This is why you have to tune out the noise that is the useless, hype-driven financial media and instead stick to the narrative/plan, which in my case is the HBD-investing thesis. Hugely profitable, fast-growing, high-IQ companies such as Google, Facebook Microsoft, and Amazon are impervious to pretty much everything and is why I own stock in them.
But despite all the pieces that seem to be in place for a recession, it hasn’t happened. This expansion is now the longest in postwar history, having recently surpassed the long boom of the 1990s. Unemployment remains low and the prime-age employment-population ratio — a better indicator of labor-market strength — continues to increase:
America, economically, contrary to what Vox Day and others other may say, is not in decline and keeps pulling ahead of the rest of the world economically, culturally, and militarily. America is bigger and more relevant than ever under Trump, like it or not.
All the evidence such as economic data, corporate profits, demographics, etc. suggests no reason for America’s dominance to lessen. America’s superior economic and stock market performance can probably be attributed to an economic climate exceptionally conducive to capitalism, combined with geopolitical stability, robust consumer spending, favorable demographics, and the private sector having a lot of autonomy from the public one.
I was right about the tariffs, inversion of the yield curve, trade war, etc., not being a big deal and that there would not be a recession or bear market under Trump. When you understand how the world and the economy works as well as I do then you tend to be right more often than not. But it’s not just about being smart or having knowledge, but about filtering out the noise. Just filtering out the noise will put you way ahead. Not reading the financial section of the newspaper or watching financial TV can help a lot in this regard, but I would take a step further and abstain from the media altogether.
Same in 2016 in regard to civil unrest, in which I predicted there would no increased unrest as a consequence of the 2016 U.S. presidential election. Both sides were predicting that there would be civil war or riots if the opposing side lost, yet three years later, nothing of that sort has happened. Out of the couple of so million people who have taken to the street around the world in protest of Trump, there has only been a single fatality. As far as the US is concerned, with the possible exception of a small uptick in mass shootings, things are also calm, if not remarkably so given how divided the political climate is, at least online. Remember in 2015-2016 when BLM dominated the headlines. How about all those marches in 2016-2017 after Trump won and was inaugurated. But now you hardly hear about them. I think what has happened is the activism-wing of the left has been taken over or eclipsed by woke-capital, which has proven to be far more effective at effecting change than ‘boots on the ground’ activism. The left has the most power in trying to de-platform, de-monetize, and censor, and by taking over the HR departments of corporate America, so those are the areas they are focusing the most on now.
It’s also possible that economic weakness and political unrest in the rest of the world will drive capital flows to the U.S. Downturns in China and in manufacturing superstars like Germany and South Korea, combined with protests in Hong Kong, Spain, Latin America, the Middle East and elsewhere may cause a flight to safety, pushing down long-term U.S. interest rates and giving corporate debt markets a shot in the arm. The respite might be temporary, or lead to bad debts that would cause a larger recession down the road, but it could stave off recession long enough to help Trump win re-election, an event that could alter the trajectory of American politics and society in ways both small and large.
Still sticking with my 8-year target until there is another recession. The US economy won’t go into recession going into the 2020 election, nor in 2020-2024 whether Trump reelected or not. For the past three years these pundits have been predicting a recession under Trump, and they have been hugely wrong. They need to give up trying to time the economy. The have no skill at it. Maybe because the Mueller Report, predictably, was a dud, and that the trade wars and tariffs have not derailed the US economy as so many economists and other experts wrongly predicted, the left’s only hope is a surprise recession in time for the election. Recessions don’t arise spontaneously, but rather need a catalyst. The catalyst to the 2008 recession was the 2005-2007 housing slump, but there is no such catalyst now. A trade war with China due to tariffs was supposed to be the catalyst, according to the media, but yet again the left came up empty handed.
Yesterday I wrote about overrated experts in regard to Bitcoin. Another such example of an overrated expert is hedge fund manger Ray Dalio, who sees a 25% chance of recession in 2020. If you know anything about stats, you will see why this estimate is meaningless, because it cannot be calibrated. The sample size is so small that it is impossible to disentangle this 25% prediction from luck or skill. The reason why Dalio and others are wrong despite being smart and knowledgeable is because they have faulty filtering mechanisms and or an incorrect overarching narrative.
Dalio argues that wealth inequality is economically and socially destabilizing, which has become a fashionable talking point of the chattering class and intelligentsia, but in spite of wealth inequality in America being wider than ever, there is very little unrest in America (and much of the the northern hemisphere). Much of the unrest is concentrated in poorer regions such as Middle East over religious conflict or strife between citizenry and the political elite, not wealth inequality or conflict between corporations and individuals. Wealth inequality only becomes problematic if infrastructure begins to fail and standards of living fall, but that has not happened in America. Even the lower classes have enough disposable income to buy iPhones and have sedentary lifestyles.
Earlier this year Dalio sounded the alarm on flaws with capitalism, saying it has created gaps in education, social mobility and income that threatens the health of the economy. He argued that the wealth and income gap should be treated as a national emergency, and requires better leadership from the “top of the country” and higher taxes on the rich.
Why not lead by example. No one is stopping him from giving his money away right now.
Bridgewater’s main hedge fund, Pure Alpha, has failed to impress this year even while his macro peers have enjoyed a rebound. The fund has lost 6% this year through Aug. 23, hurt by bearish wagers on global interest rates, Bloomberg previously reported.
I guarantee within a year or two when his clients see their poor returns and start demanding explanations, he will put out a apologia about how he was wrong and underestimated the resiliency of the US economy, etc. Or he will memory-hole it or double-down. This happens over and over when these pundits are wrong.