While the economy seems to still be growing, our media-based recession indicator says it will soon be in recession.
Note that when the media begins to beat the drum on an impending recession, a self-fulfilling prophecy may kick in as businesses hunker down in anticipation of the event. In this chart we show in blue the net references to "economic growth" vs "economic contraction".
When the references to Growth vs Contraction fall below 1 standard deviation of their historical average, this has always preceded an actual recession since at least 1968 in the U.S.
A depiction of U.S. real estate sentiment since Jan 2019.
The blue bars are the Russell 1000 stock index. The purple line is average commercial real estate sentiment, which is higher now that workers are going back to the office post-COVID. The green line is residential real estate sentiment, which is as low as it has been since 2011 due to rising mortgage rates.
Sentiment is measured in the U.S. business news and social media from references to each asset class.
“We are not makers of history. We are made by history.”
~ Martin Luther King, Jr.
2021 was the Great Acceleration of technology and society: Memes, Anti-aging, mRNA, CRISPR, AI, Sustainable Finance, the Electricity Economy, Metaverse, DeFi, NFTs, Flying cars, and to cap it all off – surprise! – inflation.
As investors it helps to know the dominant narratives driving the market, and where we are in each cycle. In 2021 media narratives dominated the conversation and passed on silently in COVID-like waves. The contagiousness of memes, and the bold meaninglessness of many, imbued 2021’s financial markets with a beautiful insanity.
An article summarizing a few of the year’s memetic winners is here. The pace of change will slow (some mini-bubbles are popping), but markets will be forever changed. It’s an amazing time to be alive, with the Acceleration of Everything.
For generations, U.F.O.s have been in the purview of late-night call-in radio shows and supermarket tabloids, not the Department of Defense. Now the government is publicly acknowledging that mysterious sightings can no longer be dismissed, and a major report is due in June.
~ “Are U.F.O.s a National-Security Threat?” April 30, 2021. David Remnick. The New Yorker Radio Hour.
In December 1998, on a dark snowy road in southern Sweden, I glanced above the trees and saw a small glowing oval object moving in parallel to our car. The road was straight, the sky was cloudy and black.
I pointed it out to my girlfriend, who was driving. We stared at it silently for about 10 seconds. The object moved in front of the car, hovering over the road a few hundred meters ahead. It maneuvered in perfectly straight lines – vertical then horizontal, far then near, side to side. I looked around for an explanation – was it a reflected dashboard light, a helicopter?
After a minute of silence I reluctantly asked, “Are you seeing this? What is it?”
She nodded but stayed silent.
I offered, “Is that what they call ... um ... a UFO?”
She peered at it thoughtfully, shrugged, “Mmmm, yeah, I guess so ...”
After another minute of hovering and a few perfectly straight sideways and vertical movements, and it darted away. I filed it under "Head Scratchers."
As a young investor in the late 1990's the conventional wisdom was that "sin stocks" (gambling, alcohol, and weapons stocks) outperformed others. Investors could choose to either be greedy and profit or be principled and underperform. The narrative fit the transactional "greed is good" nature of the times. But it turns out the story isn't so simple.
Inflation spotting, meme stocks (see our Jan newsletter), cryptocurrencies, and the green transformation – lots happening in markets. Today we focus on the latter.
With a our new ESG dataset, we see that the performance of ESG investments is more often the opposite of the conventional wisdom - invesors can both do good AND outperform.
BALI
This week's GameStop battle was the latest in a smoldering revolution - a revolution embodied in a cute Shiba Inu (and a few rainbow ponies).
Dogecoin. wow
Dogecoin is a cryptocurrency started as a joke, and it is worth $6.7 billion (as of Jan 29, 2021).
Dogecoin is a meme that resonates widely perhaps because it has no “fundamental” value. It’s human - or canine - whatever. The point is, it isn’t useful. It has no tangible value, yet it has grown to a market cap of $6.7 billion.