- Why you can absolutely bank on recession…
- The fools are rushing back in…
- Jim Rickards issues an urgent warning for all investors…
Dear Reader,
Today, alas, I bear dire news.
The United States economy will soon plunge into recession.
Of this I am very nearly certain. Why?
The answer reduces to CNBC’s Jim Cramer. The fellow has sworn off all reasonable possibility of recession:
- Recessions revolve around employment, and there are still so many more jobs than we have people to fill them… [The jobs market is] fairly robust, [making it very unlikely to] slip into a full-blown recession any time soon.
Friday’s boffo unemployment report doubtless filled Mr. Cramer with fresh faith.
We were informed that the United States economy posted 177,000 new hirings last month.
The “consensus” expectation had come in at 133,000 new hirings.
The unemployment rate, meantime, held steady at 4.2%.
The Perfect Contrarian Indicator?
Yet I centered my opening comments around Mr. Cramer’s forecasting history.
This Wrong Way Charlie boasts a record of inaccuracy second to few.
You may — if you wish — label this erring prophet the leading contrarian indicator of all contrarian indicators.
Simply note his divinations… and wager upon the precisely opposite outcomes.
I am aware of several individuals who have reaped windfalls following this very stratagem.
They inform me… though I concede they may stretch the facts… that it has yielded them the easiest profits they have ever fished up.
Meantime, the betting markets are waging on recession — and against Mr. Cramer.
Almost 70% Odds of Recession
Reports investor, author and entrepreneur Logan Kane in Seeking Alpha:
- The odds of a 2025 U.S. recession have steadily risen in the offshore and domestic betting markets, hitting ~67% on Polymarket [last] week and even higher on Kalshi…
- In particular, Polymarket has an uncanny ability to be more accurate than the news, and I would take this action very seriously. To this point, the rapid rise in stock prices during the past three weeks looks suspect.
Indeed, the S&P 500 has just posted its lengthiest win streak in 20 years.
And it has made good much of its tariff-tumult losses.
Yet why should you set greater store by the betting markets?
- One key difference between many prediction markets and the stock market is that insider trading is generally allowed. This even came up in the Renaissance-era markets, when the cardinals of the day profited from inside knowledge on who likely would be pope.
- The academic idea here is that trading action will reveal the truth better than the news can. For example, when the news networks made November’s US presidential election look like a close call up until the very end, the betting markets had swung more than 90% in favor of Trump based on early data from various counties up and down the US East Coast.
Three Main Recessionary Indicators
Mr Kane cites three economic straws swaying in the breeze.
They are his central recessionary indicators.
The first is retreating oil prices, indicative of slackening demand.
The second is plummeting consumer sentiment. Not since the dreadful year of 2008 has sentiment guttered at present levels.
The third central recessionary indicator is poor leading economic indicators.
Here he cites Bloomberg:
- Bloomberg did a fascinating piece on traders using high-frequency data like aggregate credit card receipts, shipping volumes, and airline traffic. The conclusion was that a recession has begun and that they’ve been making preparations…
- Many of the great minds in finance seem to be on the same page. Warren Buffett himself heavily raised cash last year…
Concludes Mr. Kane, glumly:
- Given the sophistication of political prediction markets and the signs I’m seeing from hard and soft data on the economy, this seems like more of a selling opportunity for stocks than anything.
Only Fools Rush in
Yet the fools are once again rushing in — as the stock market’s recent effervescence indicates.
I hazard years and years of experience has conditioned them to believe the Federal Reserve stands in back of them.
And they believe the Federal Reserve will remain in back of them.
Thus they barrel forward in the face of considerable uncertainties.
Mr. Tom Porcelli of PGIM Fixed Income:
- With the amount of uncertainty still out there, the equity market rallying back here feels like they’re whistling past the graveyard.
Adds a certain Robert Elliott, asset manager with Unlimited Funds:
There’s zero chance of an economic slowdown priced in.
Possible… But Not Likely
Zero chance of an economic slowdown!
I cannot even claim that Mr. Cramer’s latest prophecy stands zero chance of fruition.
Simply recall the example of the arrested clock with its twice-daily accuracy.
Yet investors — evidently — dismiss all concern of economic slowdown.
I must concede the possibility that events may prove these Pollyannas correct.
I concede even the possibility, with the greatest hesitation, that events may prove Mr. Cramer correct.
I concede further the possibility that the cows may come home, that pigs may take to the skies, that Hell may transform into Antarctica.
I concede even the possibility that a senator of the United States… perhaps on some inconceivably distant tomorrow… may babble one single word of sense.
I concede all these possibilities — and possibly even more.
Yet are they likely?
Brian Maher
for Freedom Financial News
