These Signs are Ominous
The global economy isn’t well, but the problem is that no one has been truly able to diagnose what the problem is.
On one hand, the London airport is so busy that authorities have capped at 100K visitors a day (that’s insane), but on the other hand, people are making their concerns felt about record-high gasoline, food and shelter prices.
It’s hard to figure out what type of recession are we in, when the restaurants are packed, the flights are full and the shopping malls are bombarded by customers, all while unemployment levels remain suer-low and healthy.
It almost seems like we’re cutting the fat from the economy, the froth, the excessiveness and the euphoria and getting back to normal… As the FED calls it “a soft landing.”
The problem is that it’s not that soft at all.
In fact, if anything, it feels like a hard and painful landing and I want to show you why this reset may take another year to fully resolve itself in the financial sectors and the real economy.
Let’s start with the fact that the yield curve screaming that we’re reaching maximum pain, as the interest rate spreads between short-term and long-term are getting upside down, which is a clearcut sign that the BREAKS ARE ON!
Courtesy: Zerohedge.com, Bloomberg
Secondly, when we measure hardship and how things are, when it comes to the real feeling of people, I think that the misery index is one of the best ways to understand that a recession is certainly happening in many industries and crushing profits and margins for others, but they’re not laying-off yet…
Running a business, while prices are rising and you’re fully-staffed is a surefire recipe for bankruptcy.
The only comforting thing about this is that the last time misery was this high, the creativeness of the free market solved the situation and we entered the biggest bull market in history (1982-2000).
You, me and everyone else are simply waiting this out and doing our part to adjust. When the market is satisfied that the reset is complete, not only will markets begin to revert back and push higher, but also businesses will be able to catch their breath.
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Nothing exemplifies this confusion as much as the variance index, which asks people to name a price of an item in the future. If we all think a certain way, then expectations are set and it’s easy to run an economy. The fact that no one is sure how 2023 will look like is horrible.
It makes it difficult on employers to know whether or not to hire or fire, cut prices or jack that up more, what to invest in (growth or R&D), increase marketing or hold It back, launch new products or shelf them, take a business loan or wait on it and so forth.
I think that because of the healthcare restrictions governments slapped on the global population for two years, it will take another 1-2 years to fully exit from this mess.
Where I live, the construction company built the high-rise with many deficiencies. The tenants sued them and won a $20M reparation claim and the building, where 100 tenants live, has become a construction site again and everybody is complaining, but also biting their lip, because they know it is for a good cause.
Yesterday, it was decided that the parking lot would need to be vacated for 90 days and that was the straw that broke the camel’s back, with tenants cursing and screaming on the group chat.
The pain is hard, but the end result is a great building. Right now, the building is up in arms, but soon it will be the envy of the city.
This is very similar to what’s happening with the global economy.
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