Juggling Dynamite

Hoisington Management’s latest quarterly review and outlook is available here.  Always worth a mull; here’s a key takeaway:

A long list of pre-recessionary indicators is already present. These include declines in the volume of retail sales in five of the last seven months, a steep drop in new and existing home sales, housing starts, building permits and mortgage applications; vehicle sales at levels quite depressed from the 2019 level, severe erosion in the NFIB small business survey, flat trucking volumes thus far in 2022, and an outright decline in rail freight. New weekly unemployment claims have been working higher since the beginning of April. Manufacturing, at best, has plateaued, but indications of a downturn have been increasing along with signs of moderation in capital expenditures. Inventory investment, the main driver of growth in 2022, could slow and pose a major restraint on economic growth well before year-end. International economic conditions do not always line up with the U.S. business cycle, but conditions are extremely poor around the globe.

…Monetary considerations coupled with these real side indicators point to recession and a reduction in inflation and long-term Treasury bond yields.

The crypto space has seen one of history’s most giant and iconic financial bubbles. The circle of leverage on leverage, interconnectedness and mental illness are all classic, as are the predictable aftermath of missing and frozen funds with fleeing founders and a daisy bankruptcy chain.

Cryptocurrency prices have crashed in the last few months as the industry enters a new “crypto winter.” Crypto has seen this before, most recently in 2018. But things are different this time. CNBC’s Arjun Kharpal reports on the factors that have driven the price plunge in the most recent crypto cycle. Here is a direct video link.

Quote of the year: “One thing we can say is that this cycle has been characterized by poor risk management and some unsustainable business models.”  And how!

Read more about the madness in The ‘crypto winter’ is different from the last; here’s why.

Understanding the link between ultra-loose financial conditions over the past few years and the tech sector boom, jobs, housing, the stock market, and economic growth is key to anticipating the bust contagion. This video segment connects the dots well.

Companies like Tesla, JP Morgan, and Zillow have announced layoffs in the last 30 Days. In particular – the CEOs of the companies think the Recession and Market Crash are going to get worse. Elon Musk predicts that: “the US is already in Recession. And that it could last 18 Months”. He also thinks a lot of companies will go bankrupt. That would be why Tesla just announced layoffs for 10% of its salaried workforce.

Despite this surge in layoffs, the US Unemployment Rate is still at a near record low 3.6%, while Initial Jobless Claims are also low. That means, unfortunately, that the Stock/Housing Market bottom has not yet occurred. And that more job losses/layoffs will be coming in 2022. Here is a direct video link.