The Recession *WILL* Come | Puck Fowell

okay folks what about this recession

will recession come well according to

the bank of england a recession

will come

laugh because it's like

why do we care about the bank of england

going oh no no there's going to be a

recession well we care about that

because a slowdown or recession in china

and in europe could lead to a slowdown

or recession in the united states now

janet yellen doesn't doesn't think so

she believes that while we are going to

face a slowdown in the united states

we're not going to fall into that

recessionary territory and this is

despite the fact that she says inflation

is too high and we've got to work harder

but what's happening in europe well

three of the nine members of essentially

their central bank voted today for a

half point increase in their sort of fed

funds rate if you will uh and the rest

voted for 25 basis points so they ended

up getting a 25 basis point but the big

thing came out of what they were talking

about and they talked about how they are

unable to prevent inflation and this

makes sense because they're citing

things like gas and electricity prices

which ilan and

jerome powell yesterday told us the

federal reserve can't affect commodity

prices we can't change top line

inflation we can only affect demand for

things that are measured by core

inflation so the essentially fed the

bank of england in england they are

telling us hey we are sorry we're not

going to be able to control inflation to

the point where we think we're going to

be over 10 inflation by the end of the

year and we don't think we can engineer

a soft landing we'll have a recession

and this is why the bank of england now

forecasts a recession by the end of

2022. this means and and look

well

sorry sorry uh xi jinping sorry china

but

i kind of think china's already in

recession and

europe's about to fall into recession

maybe there's a chance the united states

can soft land and get by if you listen

to j-pal from yesterday if you believe

what he says hey it's possible the bank

of england nowhere near as confident

they think it's essentially going to

take a recession to get to their two

percent inflation target this is pretty

gloomy and this really led pre-market to

have a little heart palpitations this

morning in addition to this

germany warns that eu consumers should

basically batten down the hatches and

brace for a big economic hit because

these these higher energy prices are not

going away in addition to the fact that

germany is now willing to bark an

embargo of russian oil to punish moscow

now this is bad because if that happens

and and germany relies on nearly half of

their oil imports uh from russia

they're

you're going to see gas prices and

heating costs substantially increase

substantially more than the increases

that we've already seen and

unfortunately for germany and

unfortunately for uh the well

the entire eurozone given that germany

is the eurozone's largest economy it's

likely that the entire eurozone

will fall into a recession by the end of

the year

this is why the european central bank

executive board member fabio panetta

this morning said that the economic

expansion has almost ground to a halt in

the euro era like this is this is like

i'll just like tear like we thought

jay pal yapping after the fed meeting

was bad and then it's like but no

problem he did that in march okay we got

over it you know right around april when

stocks started falling now we get to

deal with europe yapping after the fed

meeting it's someone's always yapping

but anyway uh

vera

believes that we are already in europe

facing quote de facto stagnation and

that's like the worst thing you want to

hear nobody wants to hear stagflation

because again central banks can't do

anything against stagflation when the

economy's stagnating usually central

banks like to stimulate by lowering

rates but that just increases inflation

right the inflation part and in order to

deal with inflation you need to raise

interest rates which continues a

stagnation or decline and you're already

seeing that in fact germany factory

orders came out this morning demand was

expected to drop 1.1 percent this is

because of war

obviously in ukraine

causing disastrous implications not only

for

energy costs and transit costs and

shipping costs but also making it

virtually impossible to get certain

supply products that were

that were came from regions around or in

ukraine or even russia

this is a problem

and so what happened well german

manufacturing actually plunged 4.9 the

expectation was for a one point one drop

they got a four point seven so right now

four point four point seven percent drop

and so all of this ecb talk

in addition to the fact that turkey just

this morning reported an annualized

inflation rate remember annualized means

they multiply it by four right an

annualized inflation rate of

69.9

i don't know why they had to pick 69

maybe that was actually what the number

was but you look at europe you look at

turkey this is a complete disaster and

so you've got this disaster that we're

not being told about in china although

the consumers in china know about it

we've got this disaster happening in

europe where the ecb

the the german folks and the bank of

england all of them are like

yeah this year's gonna suck

okay oh that's happening

and then here in america what do we do

we look at our lord and savior jerome

powell and we're like oh gosh this is

all we got

so i ran a poll yesterday and said uh

would you support

uh investing in twitter if elon musk

appointed jerome powell as ceo

and 51 of you said yes and 49 of you

said hell no

and so it shows you that trust for jay

pow is literally at like 50 50. i mean

it's not as bad as like biden's approval

ratings but it's still pretty bad like

if 50 percent of people are hell no to

to you that's bad and so that's probably

some of the pain that we're seeing in

the market now on top of the fact that

you've got folks like this lady nancy

davis founder of quadratic capital

management quote we see inflation as

driven by massive government spending

supply chain disruption more recently by

russia's invasion of ukraine and

therefore we are puzzled why the market

thinks that the fed rate hikes are

actually going to stop inflation because

in her argumentation the fed rate hikes

are not going to fix supply chains

they're not going to fix the fact that

the government spent all this money and

they're certainly not going to fix or

end the in russian invasion of ukraine

again we've got janet yellen who's

optimistic that inflation is not

ingrained and therefore it'll go away

this is the same thing that jerome

powell told us yesterday essentially

that inflation expectations are stable

and as long as we walk the walk now and

prove that we're willing to fight

inflation inflation should come down and

by some measures it's already come down

use car prices freight and rail you look

at uh core cpi over the last couple

months as long as that trend continues

we could have a soft landing in the

united states unless of course we get

other bad numbers like oh no really bad

productivity numbers which is kind of

exactly what happened this morning see

job productivity is really important but

in q1 productivity fell by

7.5

and see when you have negative

productivity plus high labor costs

you equal really high

unit costs for labor you think about

it's like

people already cost you more

you hope that they're going to be more

productive but if like they cost you

more and they're way more like

unproductive and you're just getting

screwed and gdp weighs under that

terribly in addition to that we had a

little higher than i expected print for

jobless claims this morning 200 000

jobless claims thursday we get jobless

claims fridays we get the actual job

reports that's tomorrow

and we had a big adp miss on wednesday

yesterday morning because of small

businesses being unable

uh to actually hire talent and losing a

lot of talent lots of people quitting a

lot of job openings though so it's kind

of a really mismatched economy but are

these signs of potentially cracks in our

labor market in the united states

and gee don't look at e-commerce because

shopify dropped as much as 16 etsy

missed guidance wayfarers down like 10

these are rough issues now we already

we've known and i've been saying this

for for months that e-commerce is going

to be a problem but i'll tell you there

are serious concerns that the federal

reserve is not going to be able to pull

off a soft landing that's what we're

seeing priced in right now that's why

we're seeing the market turn red people

just are not believing the fed and you

know what you can't blame them because

what did they do to us in march well

in march they gave us a story and then

two weeks later as soon as the market

started going up they're like just

kidding we are going to change the

script

anyway those are my thoughts on

everything that's going on in terms of

why the market's turning red this

morning