Mish and a lot of his readers seem primarily focused on calling a recession, and blaming the fed for everything wrong in the entire world. It seems that focusing on being “right” about a recession is more important to them than focusing on how to improve their own life. And focusing on the negatives of blame is more important that the positives in your own life. They are welcome to focus on these negatives but I prefer to focus on the positives that can improve my life.
Regarding the consumer: those of lower income will focus their spending on basic needs (food, shelter, energy), rather than wants. So I find it unsurprising that they are still buying brand name detergent, toothpaste and diapers. If prices keep rising, they will eventually switch to off-brand, but they must still purchase these necessities (as apparently they have already done in Europe).
But not all consumers are in bad shape. My experience is similar to others here. Restaurants, concerts and sporting events are packed. Airlines and travel are booming and overwhelmed. A lot of industries are still understaffed and desperate for more workers.
Some consumers may feel like its a recession, but most do not.
As always, I bring the discussion back to energy. Unlike some here who continue to expect a massive recession and collapse in demand for energy, I see something different. Continued growth in demand for energy worldwide, including oil and gas, for the rest of this decade (even if there is a recession in the US). And continued tight supplies, due to a decade of underinvestment by oil and gas firms.
The oil and gas firms I own have breakevens that range from $28 WTI to $50 WTI. Most are already debt free and generate free cash flow of 15% at $70 WTI. Add 5% FCF for each $10 increase in WTI. Some are already paying 10%+ annual dividends. And most have 15 to 30 years of reserves or more. The future looks bright for the rest of this decade, at least.
Many of the oil stocks I own have run up a lot over the last few years, but most are still bargains compared to other sectors of the market. Particularly since they have paid down or paid off debt while prices were good and cash flow was great. So now, with little or no debt left to pay down, their excess cash flow is focused on dividends and stock buybacks. As I have stated before, at $70 WTI, free cash flow is about 15% on average. Add or subtract 5% for each $10 change in the price of WTI.
My range for WTI in 2023 is $70-$120. Average WTI will be around $90. As demand continues to increase this year, and supply tightens, I expect higher prices in the second half of the year.
And I expect oil to average over $100 WTI for the remainder of the decade due to rising demand and tight supply.
In our area, we are seeing a slow down. Not down much at the moment but noticeable in the sales pipeline. High rents are the big problem forcing some with the inability to jump up their income to move out of town. Trades do not have as much side work and are hungrier for side jobs. Restaurants are not at full capacity and count is still down by 20% or more from pre-Lockdown days. Hard to say what the dine-out spend is doing from a macro perspective but seems a little less than last year.
vanderlyn
1 year ago
seems like the deflation call you made a year ago was dead wrong. inflation is raging. and it IS CUMULATIVE. i still do not know anyone who knows anyone who cannot find a job. we have stagflation potentially, but more like a raging inflationary period thanks to record currency creation with the computer cursors at the FED and Treasury debt and currency helicopter drops to plague years, SS and military industrial complex world wide dreams of dominance.
We are in a recession with inflation, lots of jobs, government spending, and people feeling wealthy – however they complain and feel poor every time they buy something.
amerikans are so wealthy we throw out mountains of trash in our lifetimes. i have always thought maybe cut out the middleman and have the chinese just send their junk to our landfills.
sabaj_59
1 year ago
did quick ‘inflation’ analysis from fed inflation numbers from 2000-2023
provided by fed as they see it – ie not even close
so if you had $1.00 in 2000
in 2023 you would need $6.76 to have same VALUE
hope your wages kept up
along with net worth of assets you own
MPO45v2
1 year ago
I can give you my personal experience from three different cities that I’ve visited recently: Chicago, Austin, Houston.
Austin – Was there recently and the town is booming. Our hotel restaurant was so busy (and understaffed) that the maintenance man was put into service bringing dishes from the cooks. Our waitress admitted that they were shorthanded, normally had 3 waiters for our section but only had 1. At least our room got daily service which was a plus.
Chicago – The place is dead, at least the downtown area. The Viagra triangle (boomers) and Fulton market area (tech workers) was booming but the rest of Chicago, especially downtown central district was dead.
Houston – Overall most of the city is bustling except it is turning into Chicago with youth crime exploding. The “feral” young criminals from chicago are likely moving down to Houston is my best guess. There are pockets like Austin and Chicago where things are really booming and areas that look like the next Detroit.
I am now onboard with the “rolling recession” theory that certain industries will continue to boom and likewise certain areas/states will boom while others will be bust. We need to move away from the ‘one-size-fits-all’ economic model and “recession for everybody” theories. You can’t take a billionaire’s salary and a minimum wage worker wage and divide by two and say the economy is fine because the average income is half a billion across the measured population. I think this is the core reason so many forecasts here and elsewhere have been off. We are entering new paradigms with 40 million boomers getting relatively free money and health care and very few people to make goods and do services. Add de-globalization and green policies and there is going to be huge demand for labor all across the board and the few labor resources will demand better pay and benefits otherwise no soup for you!
For the most part, the vast majority of GDP and money generation is concentrated in big cities and in certain states, the rest is really just noise and largely irrelevant to me as an investor so I focus where the profit potential is going to be.
Add insult to injury….Many of the Millennial Generation trying to get paid while doing nothing….. Tick tock stars..
8dots
1 year ago
The dual income millennial have plenty income. Over 50% of them bought a house when mortgages were between 2.5% and 4.5%. Large
inheritances are waiting for them from their multi divorced parents and grand parents. They have no kids in college. The fly, spend money on hotels, rentals, restaurants, buy EV, because the trend is up. Their groupthink get news from googl. Tick is more fun than Mish.
I look forward in future when they need to sell and cannot
to take over their nice LOW MORTGAGE and give them cash to equity
HippyDippy
1 year ago
Seems like not adjusting for inflation is just a happy coincidence for the spin doctors as they try and convince Joe Sixpack that everyone else is ok, it’s just that he’s a loser for not stepping up.
I want to build a storage business. Great future. Too many need space to put their seasonal junk.