[jmaccallum]

Recession or No, Where do We go?

Inflation is up to 9%. The Fed is hiking rates to slow the economy and slow demand. Unemployment is down to good levels. Wages are up significantly after the Pandemic. Supply chain deficiencies continue to plague, yet many corporate sales numbers are up, though profits are squeezed or gone. Consumers still have cash in their pockets from various stimulations. So, where do we need to go?

In the 70’s, inflation ran wildly free to mortgage rates of 18%. Nixon enacted his wage and price freeze only to have both jump dramatically when the freeze ended. Nobody wanted a recession, and so politicians were like a deer in the headlights. Paul Volcker, chairman of the Fed at the time, finally drove the country into not one, but two, major recessions at the time in order to break the cycle of inflation. Probably one of the biggest reasons Jimmy Carter never saw a second term.

The Fed, today, is seeking fiscal management that will result in a “soft landing.” An admirable ambition, but is it possible?

After the Pandemic, labor shortages were acute, requiring hiring incentives to include higher wages and bonuses. Where would this increase in business expense come from? Nowhere but higher prices. It has to. Unlike the government, businesses must make a profit in order to survive. We all know that, or do we?

Economics is complicated, but also simple. Supply versus demand drives a free market economy. However, manipulations are entirely possible. Hence the price of gas today.

Americans were handed a lot of money, in the form of Pandemic stimulus, with really no where to spend it. Everyone was locked down at home. So some remodeling was done, a dishwasher here and refrigerator or washer and dryer there. Things that could be ordered online and delivered with assurances of sterilized delivery. But the bulk of the on-hand cash sat pent up waiting for the “great re-opening.” And society re-opened. Consumers wanted to spend the cash burning a hole in their pocket. The only problem was, that as consumers had been locked down, so had businesses. Employees were gone, factories sat idle. Raw material orders had been put on hold or even canceled. Nobody cared to think that as long as it took to shut things down, it would take that long or longer to revamp the supply chain.

A perfect storm. And not many saw it coming. Higher wages, hiring bonuses, ample cash in the hands of consumers, people ready to get out and spend, shuttered supply chains that couldn’t supply goods to spend the money on. How could there not be inflation? Economics is complicated, but also simple. Demand outstripping supply. Inflation.

So what do we do now? Inflation is rearing it ugly head. Consumers have cash to spend. The fickle stock market is crying that the sky is falling, and the inverse yield curve for bonds is a reality. It does hurt that our portfolio that was worth $1.5 million is now worth $1 million, or less.

I say, let there be a recession of sorts. Cool the market and cool demand. Raise interest rates and slow the whole thing. Slow the housing market now and slow all other demand. It’s the only way to bust inflation. Sales will decline, wages will drop, unemployment will increase somewhat, and maybe consumers will continue to save rather than spend, just a little. But as with the other 37 recessions our economy has survived, we will survive this one, too.

The biggest question will be fuel prices. That’s a hard one to bust. Prices will probably never return to pre-level prices. Consumers will either absorb or look for alternatives. Hello, electric cars! Which brings a whole new fuel supply need and resulting debate. But maybe we’ll see Long Haul Truckers begin to be a dinosaur of a career that grandparents tell their grandkids about, as we look toward more communal distribution systems such as high efficiency rail, and local off-loading. Anyway, if it happens, it will happen in the background with few consumers involved nor aware. All of us just want the shelves filled at Walmart.

Any thoughts, and given the parameters, how to invest?

[Two Bills]

Recession? Inflation?
Very similar to the Common Cold.
Lots of remedies to ease the problem, but no definitive cure.
Goes away in its own good time!

[Two Bills]

Duplicate.

[Blueblaze]

This is a manufactured storm of your own government's dumbassitude. The LAST thing we need is more interventions. If we're ever going to get out of this hole, we just need the FED to quit digging.

How to fix it? Repeat this mantra until it finally sinks in:

"Everything the Government does works in reverse".

[Bogie Shooter]

What is the source of OP……copied from?

[Djean1981]

Exactly.

[Tvflguy]

Originally Posted by jmaccallum

Recession or No, Where do We go?

Inflation is up to 9%. The Fed is hiking rates to slow the economy and slow demand. Unemployment is down to good levels. Wages are up significantly after the Pandemic. Supply chain deficiencies continue to plague, yet many corporate sales numbers are up, though profits are squeezed or gone. Consumers still have cash in their pockets from various stimulations. So, where do we need to go?

In the 70’s, inflation ran wildly free to mortgage rates of 18%. Nixon enacted his wage and price freeze only to have both jump dramatically when the freeze ended. Nobody wanted a recession, and so politicians were like a deer in the headlights. Paul Volcker, chairman of the Fed at the time, finally drove the country into not one, but two, major recessions at the time in order to break the cycle of inflation. Probably one of the biggest reasons Jimmy Carter never saw a second term.

The Fed, today, is seeking fiscal management that will result in a “soft landing.” An admirable ambition, but is it possible?

After the Pandemic, labor shortages were acute, requiring hiring incentives to include higher wages and bonuses. Where would this increase in business expense come from? Nowhere but higher prices. It has to. Unlike the government, businesses must make a profit in order to survive. We all know that, or do we?

Economics is complicated, but also simple. Supply versus demand drives a free market economy. However, manipulations are entirely possible. Hence the price of gas today.

Americans were handed a lot of money, in the form of Pandemic stimulus, with really no where to spend it. Everyone was locked down at home. So some remodeling was done, a dishwasher here and refrigerator or washer and dryer there. Things that could be ordered online and delivered with assurances of sterilized delivery. But the bulk of the on-hand cash sat pent up waiting for the “great re-opening.” And society re-opened. Consumers wanted to spend the cash burning a hole in their pocket. The only problem was, that as consumers had been locked down, so had businesses. Employees were gone, factories sat idle. Raw material orders had been put on hold or even canceled. Nobody cared to think that as long as it took to shut things down, it would take that long or longer to revamp the supply chain.

A perfect storm. And not many saw it coming. Higher wages, hiring bonuses, ample cash in the hands of consumers, people ready to get out and spend, shuttered supply chains that couldn’t supply goods to spend the money on. How could there not be inflation? Economics is complicated, but also simple. Demand outstripping supply. Inflation.

So what do we do now? Inflation is rearing it ugly head. Consumers have cash to spend. The fickle stock market is crying that the sky is falling, and the inverse yield curve for bonds is a reality. It does hurt that our portfolio that was worth $1.5 million is now worth $1 million, or less.

I say, let there be a recession of sorts. Cool the market and cool demand. Raise interest rates and slow the whole thing. Slow the housing market now and slow all other demand. It’s the only way to bust inflation. Sales will decline, wages will drop, unemployment will increase somewhat, and maybe consumers will continue to save rather than spend, just a little. But as with the other 37 recessions our economy has survived, we will survive this one, too.

The biggest question will be fuel prices. That’s a hard one to bust. Prices will probably never return to pre-level prices. Consumers will either absorb or look for alternatives. Hello, electric cars! Which brings a whole new fuel supply need and resulting debate. But maybe we’ll see Long Haul Truckers begin to be a dinosaur of a career that grandparents tell their grandkids about, as we look toward more communal distribution systems such as high efficiency rail, and local off-loading. Anyway, if it happens, it will happen in the background with few consumers involved nor aware. All of us just want the shelves filled at Walmart.

Any thoughts, and given the parameters, how to invest?

Don’t mean to be crabby in the morning, but I dislike when a Poster either does their diatribe or copy/paste such loooonnnngggg things.

I’m retired and have time on my hands, but personally not for this. Unless the topic is of great interest I pass right thru. I’m done.

[retiredguy123]

I have no idea what the stock market will do. But, I just want to point out that, historically, the stock market has often bottomed out before the start of a recession, and continues to rise during the recession. That is because the stock market goes up and down based on predictions of future events, not based on current events. It is important to understand that concept.

[manaboutown]

Some people seem to be doing fine. I am taking a break from the heat over in Orange County, CA, staying cool in 72 degree ocean breezes for a couple more weeks. Midmorning Friday as I was driving on PCH in Newport Beach I noticed a brand new Rolls Royce Cullinan with temporary plates in the lane to the left of me and a Lamborghini Urus in the lane to my right. It feels to me the rich have been getting richer.

[gatorbill1]

Originally Posted by retiredguy123

I have no idea what the stock market will do. But, I just want to point out that, historically, the stock market has often bottomed out before the start of a recession, and continues to rise during the recession. That is because the stock market goes up and down based on predictions of future events, not based on current events. It is important to understand that concept.

Inflation will come down as inventory gets back to normal at suppliers, which it is.
Both parties probably gave us too much extra money to spend, but I am not giving it back. Increased interest rates will help along with increased inventory.

[RICH1]

The Stock Market will collapse like we have never seen before! Invest in America buy Land! Technology has ruined us…..

[coralway]

The Market has been very profitable since mid-July to those who pay attention. You could have a bundle by just shorting TSLA since early May, or buying AAPL calls. Heck, the technology sector as a whole is up over 11% in the last month.

[OrangeBlossomBaby]

MOST of the "inflation" has been the rising cost of gasoline. There's your storm right there. Take a look at Exxon and Chevron's RECORD profits this past quarter.

They jacked up the prices because they could, and reaped the rewards while you were all too busy whining about politics to notice.

Prices have been coming down, they're still high but you can get a gallon of gas for just over $3.50 now, compared to the high of $4.85 a month and a half ago for the same octane level at the same gas station.

[jmaccallum]

Originally Posted by Bogie Shooter

What is the source of OP……copied from?

Not copied. All my own words from the tipity tapity typing of my own fingers.

Sorry it was sooooo loooong.

[ElDiabloJoe]

Originally Posted by manaboutown

Some people seem to be doing fine. I am taking a break from the heat over in Orange County, CA, staying cool in 72 degree ocean breezes for a couple more weeks. Midmorning Friday as I was driving on PCH in Newport Beach I noticed a brand new Rolls Royce Cullinan with temporary plates in the lane to the left of me and a Lamborghini Urus in the lane to my right. It feels to me the rich have been getting richer.

PCH through Newport, Laguna and north Dana Point (Monarch Beach) has always been a Saturday afternoon parade of high end cars making their way to and from Fashion Island. I've watched it for many years from various locales in those three areas.