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Stocks To Surge & Bonds To Sell Off Before Recession Hits By Early 2024 | Market Analyst Darius Dale. Sep 22, 2023
15:16 If you look at corporate profits as a percentage of GDP now versus past decades they're much higher now. and there's a lot of padding inside corporate profits right now where they could absorb a lot of the increase in wages right without having to pass it on to the customer.
Corporate America has really gotten a really good deal and they've really had all the bargaining power or all the market power here and labor has really been squeezed. And the pendulum might be swinging back here now where labor is going to demand a fair share and the consumer is not necessarily going to be able to take that on with higher prices. I don't think corporates are going to willingly take the pain (of tightening their belts.)
So we are very much in the camp that labor has bargaining power in this business cycle and that's very clearly evident by sort of the spread between labor demand and labor supply.
17:14 There's a lot more cash circulating around the economy to demand goods and services but we don't have as many people to create those goods and services and you can see that reflected in terms of labor demand versus labor supply.
So by the way this is the credible path to a soft landing that Powell outlined in May or March of last year when they first started hiking which is we're going to take some pressure out of the labor market through the lens of JOLTS down here we're going to hopefully keep the employment growth continuing to grow and that's been exactly what's happened thus far.
Ultimately we still believe that there's probably going to come a period of time where corporates feel a lot of pressure to shed some labor, shed some fat from their business operating expenses.
19:01 The reason we say that is because when you look at projected sales and earnings growth particularly on the earnings growth side, this is the Russell 3000 index so it's the broadest measure of corporate, of public companies that we have in terms of indices here in the US economy and we're effectively projected to go from down five percent which is the most recent quarter respectively going from down five percent to up like 15 to 20 percent in the span of the next 24 months.
19:29 So there's a hockey stick recovery expected in terms of corporate profitability but there's not necessarily a real credible path to getting there in terms of growth likely slowing, inflation maybe stabilizing in a bad way in terms of cost push inflation back on producer price or balance sheets as opposed to being able to push price to consumers.
This is a great chart uh showing these lofty estimates. Those forecasts there may not materialize the way that the analysts are expecting them.
20:43 We do believe the 10-year three-month treasury yield curve is the best leading indicator for yield curve. It's predicted eight of the last eight recessions and as far back as we have data it's only got one miss in terms of missing in the mid 1960s.
21:53 So we know that based on this the data of the inversion from October of 2022 we know that a recession is the highest probability of commencing of starting sometime between November 2023 through April 2024.
25:44 All I know is the interval that has the highest probability of seeing a recession commence is sometime between November 1st of 2023 and April 30th of 2024 and I happen to believe it's going to be closer to the latter end of that particular cycle. But we don't have to guess, we have plenty of statistics that we can analyze on a consistent basis day after day week after week month after month to give us an indication.
42:27 I'm still bullish because the markets are telling me to be bullish irrespective of that expectation for recession to come in sometime between November and April. The recession may not commence sometime between November and April remember that's a forecast.
https://www.youtube.com/watch?v=wp0LQOX7Ppc
Stocks To Surge & Bonds To Sell Off Before Recession Hits By Early 2024 | Market Analyst Darius Dale. Sep 22, 2023
47:00 Navigating the deepening fourth turning crisis over the next decade will be the greatest challenge we face in our lifetime as investors. The fourth turning is basically a period in society usually measured in 20ish years or so where the status quo falls apart and is replaced by a new cycle.
49:26 There's a lot of bad stuff's going to happen but I think you have to be extremely bullish because of it and the reason you have to be extremely bullish because one of the key takeaways from this deep dive analysis of empirical evidence taking data back to the 1800s and trying to understand how these cycles have evolved throughout fourth turnings and relative to the baseline of non-fourth turnings. And one of the key conclusions of that that deep dive study is that government's going to get a lot bigger, like a lot bigger way bigger than the CBO (Congressional Budget Office) thinks way bigger than Stan Druckenmiller thinks way, way bigger. And as a function of the how much bigger the government's going to get we are going to struggle to capitalize the fiscal coffers of the United States of America if we don't see some change in Fed policy or see some change in regulatory policy.
We do believe those are very high probabilities investors should expect financial repression.
We're probably looking for something that looks like a permanent move towards yield curve control and just permanent large scale asset purchase programs by the Federal Reserve in my opinion. You're talking about Venezuela, you're talking about Argentina, you're talking about Turkey, Zimbabwe there's so many historical corollaries of what happens to stock markets, to currency markets, to fixed income markets when you cross the point of no return from the perspective of burgeoning public debts and public deficits and we are very much headed towards that in terms of the key conclusions of that analysis. The U.S will do aggressive yield curve control on its debt and basically sacrificing the purchasing power of its currency in the process. They have no choice, we have no choice, this is all part and parcel of the fourth turning.
55:16 I think you got to be extremely bullish on stocks, you got to be extremely bullish on bitcoin heading into this fourth turning and a lot of folks will see this presentation and think the opposite is true until they realize Uncle Sam has to get his money somehow and the only relief valve, the only escape valve is ultimately they'll lever up and buy financial assets.
Equity markets tend to generally tend to move higher and nominally at least in periods of inflation. Bond investors are going to demand higher rates to compensate for that inflation.
Think about the UK gilt crisis last September in my opinion that's a precursor to what we're likely to experience as probably the one of the final catalyst to getting the Fed to get off its high horse. We are going to have to implement yield curve control at some point in this decade.
Mixed messages overnight.
Oil smashed with seemingly speculative longs getting out.
Gold has held now for a couple of days at a key support level.
US markets choppy but ended net positive.
Suggests to me that there are mixed views out there on where to next.
Non farm payrolls will be key.
Daytr - I DO NOT WANT YOU TO CONTACT ME VIA THE REPUTATION SYSTEM.