How Bad Will The Recession Be in 2023?

[Parsad]

Gas prices here in Vancouver have dropped by 1/3rd over the last few months.  Literally dropping from $2.30 CDN a liter to $1.50 CDN a liter now.

 

That matches up with the drop in U.S. barrel oil since March:

 

https://www.cnn.com/2022/12/06/business/oil-prices-gas-russia-embargo/index.html

 

Should continue to have a negative effect on inflationary pressure. 

 

Cheers!

 

 

[Gregmal]

Yup. Inflation story is dead. Its all too predictable that of course now they begin screaming recession as loudly as they can. 

[zzzyx]

2 hours ago, Parsad said:

1 in 6 American households are behind on utility bills!  Cheers!

 

https://finance.yahoo.com/news/expect-tsunami-shutoffs-20-million-173000860.html

 

There is no frickin' way this is true.  Just laughable, really.

[zzzyx]

 

-------------------------

Ah....now I get it

[zzzyx]

Jean Su, Energy Justice Program Director, Senior Attorney, oversees and develops the Energy Justice program’s campaigns, dedicated to hastening the clean, democratic energy future so urgently needed to protect wildlife, communities and the climate. Jean also works to challenge wall construction in the U.S.-Mexico borderlands and serves on the boards of Climate Action Network International and SustainUS. Before joining the Center, she worked as a renewable energy project finance attorney and in the climate change and international development fields in Africa and Asia. She’s an inaugural class member of the UC Irvine School of Law and holds a master's degree from the London School of Economics and Political Science and a bachelor's degree from Princeton University.

-------------------

 

LOL...a real economic and energy expert here.

[Parsad]

34 minutes ago, zzzyx said:

 

-------------------------

Ah....now I get it

 

It's not always about agendas and politics.  This one is from Bank of America...I would imagine the truth is relatively close to that.

 

https://www.cbsnews.com/news/bank-of-america-consumer-report-energy/

 

Cheers!

[zzzyx]

Well this one says that 1 in 6 have made a late payment....a bit different from 1 in 6 being delinquent.

 

With unemployment being virtually nonexistent, the claim that any significant portion of the population can't pay their utility bills is pretty silly.

[james22]

37 minutes ago, zzzyx said:

Energy Justice

 

When I hear Energy Justice, I reach for my revolver.

[Parsad]

3 hours ago, zzzyx said:

Well this one says that 1 in 6 have made a late payment....a bit different from 1 in 6 being delinquent.

 

With unemployment being virtually nonexistent, the claim that any significant portion of the population can't pay their utility bills is pretty silly.

 

A debt becomes delinquent the day after you miss a payment.  So late payments are delinquent.  Cheers!

[Parsad]

3 hours ago, james22 said:

 

When I hear Energy Justice, I reach for my revolver.

 

I agree.  But most changes in society's behavior usually starts with the annoying preening from progressives. 

 

Most of us change our behavior once it is forced upon us, guilted into it, or it simply becomes easy to do...think recycling, driving electric cars, emission testing, energy efficient appliances, heating with natural gas instead of coal or oil, reducing water consumption, reducing garbage, eating organic foods, better farming practices, etc. 

 

Maybe the revolver at times should be aimed at ourselves for being late to action!  Cheers!

[Spekulatius]

13 hours ago, Parsad said:

 

It's not always about agendas and politics.  This one is from Bank of America...I would imagine the truth is relatively close to that.

 

https://www.cbsnews.com/news/bank-of-america-consumer-report-energy/

 

Cheers!

It is correct that the median US household is FCF negative meaning it spends more than it has income. The overall savings rate is 2.3% ( a 10 year low and I think we were only lower pre GFC once)  and the saving rate is heavily skewed by high income households. So there is some truth to above.

 

Edited December 7, 2022 by Spekulatius

[Investor20]

It can be true because in real terms wages and investments are down this year

From October 2021 to October 2022a 2.9-percent decrease in real average weekly earnings over this period

Real Earnings News Release - 2022 M10 Results (bls.gov)

 

https://www.reuters.com/markets/europe/global-markets-flows-urgent-2022-10-14/

"60/40" portfolios are facing worst returns in 100 years: BofA"

 

Global Wage Report: Rising inflation brings striking fall in real wages, ILO report finds

estimates that global monthly wages fell in real terms to minus 0.9 per cent in the first half of 2022 – the first time this century that real global wage growth has been negative.

 

From Real (inflation adjusted) Annualized S&P 500 Return (Dividends Reinvested):  -20.048% for 2022

(screen shot attached)

 

Warren Buffet on inflation:  Inflation swindles almost everybody.  

 

To me a big drop in investments and negative wages is a recession...whatever official definition may be and we are already in one.

 

Edited December 8, 2022 by Investor20

[ERICOPOLY]

On 12/6/2022 at 6:48 PM, Parsad said:

 

I agree.  But most changes in society's behavior usually starts with the annoying preening from progressives. 

 

Most of us change our behavior once it is forced upon us, guilted into it, or it simply becomes easy to do...think recycling, driving electric cars, emission testing, energy efficient appliances, heating with natural gas instead of coal or oil, reducing water consumption, reducing garbage, eating organic foods, better farming practices, etc. 

 

Maybe the revolver at times should be aimed at ourselves for being late to action!  Cheers!

 

Natural gas!!  OMG!!!  I can feel the sea levels rising as I read those words.  SMUD (in Sacramento) is giving away $3,500 HVAC rebates to households who install variable speed heat pumps to replace their natural gas systems: 

 https://www.smud.org/en/Rebates-and-Savings-Tips/Rebates-for-My-Home/Heating-and-Cooling-Rebates

 

California moves to ban natural gas furnaces and heaters by 2030:   

https://www.latimes.com/business/story/2022-09-23/california-moves-to-ban-natural-gas-furnaces-and-heaters-by-2030

[Parsad]

49 minutes ago, ERICOPOLY said:

 

Natural gas!!  OMG!!!  I can feel the sea levels rising as I read those words.  SMUD (in Sacramento) is giving away $3,500 HVAC rebates to households who install variable speed heat pumps to replace their natural gas systems: 

 https://www.smud.org/en/Rebates-and-Savings-Tips/Rebates-for-My-Home/Heating-and-Cooling-Rebates

 

California moves to ban natural gas furnaces and heaters by 2030:   

https://www.latimes.com/business/story/2022-09-23/california-moves-to-ban-natural-gas-furnaces-and-heaters-by-2030

 

Haha!  Not that I think natural gas is the long-term solution...just better than coal and oil.  Cheers!

[Ulti]

Dalio interview

 

https://www.businesstoday.in/magazine/bt500-indias-most-valuable-companies/story/competing-in-markets-is-tougher-than-the-olympics-says-market-maestro-ray-dalio-355359-2022-12-07

[bizaro86]

On 12/6/2022 at 7:42 PM, Parsad said:

 

A debt becomes delinquent the day after you miss a payment.  So late payments are delinquent.  Cheers!

 

Fair enough, but on the other hand I made a late payment on one of my utility bills this year. I was on vacation and forgot to pay it. The vacation cost like 5 years worth of my electricity bills, and I'm still not in any way in need of "ENERGY JUSTICE!!!!"

[james22]

On 12/6/2022 at 8:48 PM, Parsad said:

 

I agree.  But most changes in society's behavior usually starts with the annoying preening from progressives. 

 

Most of us change our behavior once it is forced upon us, guilted into it, or it simply becomes easy to do...think recycling, driving electric cars, emission testing, energy efficient appliances, heating with natural gas instead of coal or oil, reducing water consumption, reducing garbage, eating organic foods, better farming practices, etc. 

 

Maybe the revolver at times should be aimed at ourselves for being late to action!  Cheers!

 

Sure, the thing is even pushback creates economic friction:

 

[changegonnacome]

Answer: BAD

 

I think its clear that the US consumer is going to hit a wall sometime in H1 2023 - various money centre bank CEOs (Jamie Dimon et al) have alluded to what they can see in their proprietary data and I can see it in public data......consumers are running down cash balances, driving up credit card/loan balances and the other metric I came across recently is that emergency 'hardship' withdrawals/loans from 401k/IRA's have increased to levels last seen before the GFC.

 

Its also clear that the Fed is prepared in 2023 to prioritize its inflation mandate over its employment mandate (for a time), and certainly in the early stages of demonstrable weakness in the economy/labor market/stock market, to do something it hasn't done in perhaps 30+yrs.......absolutely NOTHING. Zilch.

 

This moment of 'why aren't they doing something?' will be the point of maximum opportunity in markets I believe. Things will get hairy and its why I think we'll break the lows seen in 2022.

 

The two unknowns are the actual level of pain required to quell inflation & the other unknown is the intestinal fortitude the Fed will show.

 

I don't envy their job....its hard/impossible to know how much disinflationary momentum is required to 'get back to 2' sustainably and while your unsure how much is required all your stakeholders & constituents are screaming at you to STOP and STIMULATE. 

 

It's why my base case now is that they likely stimulate too early, inflation re-emerges and they have to go back again later and do another hiking cycle possibly in 2024. In this respect then a double dip recession is very possible if past is prologue....obviously better if its one and done.

 

Edited December 10, 2022 by changegonnacome

[Cigarbutt]

On 12/10/2022 at 10:08 AM, changegonnacome said:

Answer...

"The two unknowns are the actual level of pain required to quell inflation & the other unknown is the intestinal fortitude the Fed will show."

The trouble is that there are more than two unknowns, many of which are unknowables so why bother?

-----

-Potential food for thought

"I think its clear that the US consumer is going to hit a wall sometime in H1 2023 - various money centre bank CEOs (Jamie Dimon et al) have alluded to what they can see in their proprietary data and I can see it in public data......consumers are running down cash balances, driving up credit card/loan balances..."

What you describe here is well illustrated below:

As a result of MMT-like policies, there has been excess real income which is still showing up as excess savings but real income growth has been moving to a lower trajectory and demand, going forward, should go back to 2019 trend except that debt levels have risen significantly since then.

Wage growth across levels is interesting:

Anyways, an interesting aspect is that the excess real income (as shown in red above in the first graph) growth that happened since 2020 is matched fairly well by the expansion of US commercial banks' balance sheet expansion to hold US government debt, similar to what happened during WW2; resulting in no net private wealth but resulting in increased money supply per GDP, increased deposits etc

Comparing 1945 to 2022,

-federal debt to GDP: similar post-war-type levels (+ or - 100%) although state and muni debt levels significantly higher now

-corporate debt to GDP: 20% vs 50%

-household debt to GDP: 10% vs 75%

i know, an argument could be made that private debt levels were too low in 1945..

[changegonnacome]

7 hours ago, Cigarbutt said:

Comparing 1945 to 2022,

-federal debt to GDP: similar post-war-type levels (+ or - 100%) although state and muni debt levels significantly higher now

-corporate debt to GDP: 20% vs 50%

-household debt to GDP: 10% vs 75%

i know, an argument could be made that private debt levels were too low in 1945..

 

Thanks for the charts. Interesting.

 

The important factor with comparing 1945 to today and when thinking about debt, inflation and the money supply is that in 1945 the US was sitting in the middle of the golden age of its productivity growth curve that was sloping upwards with high YoY real (not nominal ) GDP/income gains the period ~1920 - 1970......the US through immigration, industrialization, innovation, increases in female labor force participation (& post-world war boom where it wasn't wrecked! like Europe) was making more and more 'stuff' each year in effect its REAL income was rising.....the incremental goods and services that you could sell to the world and each other meant in effect the nation was getting wealthier for real & more able to support its federal debt (which was falling as percentage of growing GDP).....real wages were rising as a result too....as discussed in other threads money is just a claim check on goods & services changing the amount of money doesn't change the amount of goods & services......in effect you don't get rich by printing more money or indeed borrowing money (which are claims on future productivity)....you actually get wealthier/increase real incomes by producing more & more goods and services over time....but also by under spending your income and investing in your productive capacity (infrastructure etc.)

 

Today but really since 2015 the US has been in the opposite of the above - a productivity trap....over spending incomes, borrowing, not investing in infrastructure/productive capacity......its been lousy, it was good for financial assets but the underlying economy didnt perform quite as well as SPY would suggest......and so when both the fiscal and monetary authorities opened up the flood gates in 2020 with direct stimulus to consumers they did too much, in an economy which in 2018/19 was already operating at historically low unemployment (in effect the US was already at full output)......the incremental nominal increases in incomes (via stimulus/credit creation) couldn't change the amount of goods and services being produced only their quoted price so we got monetary inflation (mixed with supply shock/energy inflation)....real output & productivity growth have remained lousy since....who by 2021 was left to entice off the couch? Didnt help that the boomers started quitting in droves. The incremental nominal income/spending just resulted in higher prices.....real output/productivity growth remained lousy.

 

Whats knowable is whats actually required to bring inflation down.....its productivity growth and nominal spending/income growth converging with one another.....we know productivity growth is stuck & aint going higher YoY......so I'm afraid its income/spending that needs to adjust downwards to bring back price stability....how get there via a 'one and done' recession next year.....or double dipping recessions across the next 24 -36 months is the question IMO. Lets see.

[Xerxes]