“You can ignore reality, but you can’t ignore the consequences of ignoring reality.”
– Attributed to Ayn Rand
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July 8, 2024 — “You don’t think you should mention the name of María Elvira Salazar, R-Fla?” writes Grey Swan reader Jeff B. “Why not? ‘cause she’s a Republican. You guys are so pretentious.”
Jeff, you’re clearly not reading very closely. We don’t have a horse in the race in November.
Your comment: “On to Fascism!” makes little sense in the context of the petty disagreements between Democrats and Republicans during this election year. The U.S.,an aging empire, has much bigger worries than sound-byte, back-room politics that pass for governance today.
Unless, of course, you subscribe to the theory that a nameless faceless “deep state” of entrenched bureaucrats truly run the government in collusion with international corporate interests who spend billions to get their puppet and party in office.
Oh wait… hmn.
Anyway, the short holiday week gave investors cheer, as it often does. There’s just something that feels downright unpatriotic about markets declining the week of Independence Day.
Friday’s job data should have been a splash of cold water. The labor market continues to slow.
On its face, that’s bad news. But under today’s investment calculus, a weakening economy is more likely to get rate cuts off those pesky 15-year highs. So bad news is good news, at least for now.
But the reality is, bad news is always bad news. It just sometimes faces a long period where investors don’t want to face reality.
Looking at the latest data from the labor and real estate market, Grey Swan contributing member John Rubino gives us a much-needed post-holiday dose of reality about the economy. Enjoy ~~ Addison
Recession Watch: Jobs and Real Estate Head South
John Rubino, John Rubino’s substack
US financial headlines remain in Goldilocks territory (prompting all those “Why don’t Americans know how good they have it??” diatribes from the MSM). But under the surface, the drumbeat of negative data continues. Today, let’s consider jobs and real estate:
Jobs
Official reports of plentiful jobs and low unemployment are possible because the government is on a hiring binge. But over here in the private sector, job openings have been falling steadily since 2021.
And full-time employment is actually contracting. According to economist David Rosenberg:
The YoY trend in full-time jobs is running at -1.2%, a big swing from +1.7% a year ago and +5.1% two years back. This not only represents a significant loss of momentum but is a fool-proof recession indicator. There is nothing soft about this landing.
As the past few years’ inflation forces more people to put day-to-day life on plastic, credit card defaults are spiking, especially for the young.
Real Estate
The commercial real estate bust is proceeding toward its inevitable firey end. Office vacancy rates now exceed Great Recession levels, with about half a trillion dollars of unrealized losses currently marooned on bank balance sheets.
And the bust is spreading beyond offices.
Banks, already on the hook for so much of the above, are increasingly reluctant to throw good money after bad.
Last but not least, housing is frozen. From prolific chart maker Game of Trades:
BEWARE: Buying conditions in the US housing market have collapsed, reaching levels only seen 2 times since 1960:
– 1974
– 1981
Both instances ended in a recession.
The housing market is a key leading indicator of the business cycle. And it tends to react very quickly to interest rate changes.
Are We Already There?
The start date of a recession is usually recognized after the fact. So it’s possible that the above — and the many other negative trends — are saying that we’re already there. ~~ John Rubino, John Rubino’s substack
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So it goes,
Addison Wiggin
Founder, The Wiggin Sessions
P.S. “Thank you for bringing light to our economy,” wrote member Cindy M. last week while we were taking a short break. “God Bless America and hoping you all had a Happy 4th of July.”
Meanwhile, a more urgent request from member Hans K. “the pay-out is in fast-depreciating US $$$?” asks member Hans Kerr. “Before I stake fast-fading fiat on UDN, I need to clear this doubt up — or find a less doubt-ridden escape tool.
“Thank you in advance for clearing the fog!”
No worries, Hans. We’re on the case. We address portfolio and investment concerns in the paid Grey Swan Investment Fraternity publications!
P.P.S. How did we get here? An alternative view of the financial, economic, and political history of the United States from Demise of the Dollar through Financial Reckoning Day and on to Empire of Debt— all three books are available in their third post-pandemic editions.
(Or… simply pre-order Empire of Debt: We Came, We Saw, We Borrowed, now available at Amazon and Barnes & Noble or if you prefer one of these sites:Bookshop.org; Books-A-Million; or Target.)
Please send your comments, reactions, opprobrium, vitriol and praise to: addison@greyswanfraternity.com
