Mmd Vibe

[Jesper Sahu]

Alsoa note - I know that there is too much going on to even begin to process what is happening, and I am hoping to talk about *why* some of the stuff feels so weird and bad in this piece. I sincerely hope that you are doing okay.

Recession Rooters: And as I talked about before, there are a lot of people cheering for a Recession because 1) they think they can get ahead 2) they think we deserve (?) one and 3) or they think we are already in one

Reality and Truth: As shown above, there is an element of reality to our existence - policy decisions, manufacturing output, gas prices, etc, cannot be modified by our feeble human minds (at least right now) - it is capital-T-Truth in the Present Moment, whether we like it or not.

However, policy decisions are policy decisions - and consumer expectations can shape those decisions (like how inflation expectations influenced the Fed to hike 75 bps) but there is an element of concreteness to these in the present moment

And How You Feel compounds into How Everyone Feels, and that is consumer sentiment. As I wrote about last time, consumer sentiment is *everything* because consumer spending is such an important component of GDP growth.

So when people are feeling bad (which they are right now) they might pull back on some aspects of spending - which we have seen. Inflation is the bogeyman in the room. As the Wall Street Journal wrote

Expected inflation is, in some sense, a self-fulfilling prophecy. If people expect it to continue, they might raise prices for their businesses or ask for raises at their jobs, fueling continuing price increases.

Markets are a profit-maximizing system. That is the point of All of This - the reason that people feel bad, the reason that the vibes are off, part of the reason that people get fired, companies go under, that McKinsey incentivized the opioid crisis - they knew it would kill people, but it would make *money*.

So when the vibes are off - when we think about how Recessions come about (beyond the technical aspects) it makes sense that we would somehow end up with the vibes of a Recession, but maybe not the economic reality of one (yet).

OPEC is struggling to produce more oil - with uncertainty if they *can* even produce more and US producers are Very Focused on Returning Capital to Shareholders, which prevents them from producing a meaningful amount.

And inflationary pressures are easing - As Derek Thompson highlighted in his podcast with Conor Sen - Companies have significant excess inventory, shortages are easing, shipping rates are recovering. The labor market is still relatively strong. Home prices appear to be rolling over

I am going to write a follow-up piece to this on Saturday exploring more of the intersection of economic badness and bad feelings- there is a lot more data to point to, but I wanted to get this general idea out (also this piece is really long already).

Disclaimer: This is not financial advice or recommendation for any investment. The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.

Covid upset the plans of large monopolies of Big Oil, Big Food. Many other companies chickened out and lost faith in the possibility of recovery and cancelled supplies. Post Covid and seeing the fast recovery, and the money people had saved up, they scrambled to recoup their losses. So they raised prices and placed huge catch-up supply orders.

The shortages they had self inflicted were ironically useful in raising prices. They blamed it on a mysterious "Supply Chain". And of course China and gthe always at the ready excuse of "the loss of American manufacturing".

Big Oil, gambling no one could do anything about it, hyped the word "inflation" and jacked up gasoline prices. Even though Russian oil was barely a ceremonial drop, and the US was the largest oil producer, and the global oil supply was choked full in a glut, they slyly blamed the war in Ukraine for the (price) war in the US.

Further proof this wasn't inflation was the behemoth profits bragged at shareholder meetings by Big Oil and Big Farm. And then Wall Street began selling off the profits causing the market to fall. That's not inflation.

The successful dumbing down of the American consumer by serial dumb social media, rogue disinformative dumb politicians like Trump, and the total collapse of good competent media (present company excluded), left the American populace grasping at the word they were ever told to blame. Inflation.

This is not inflation. And Biden knows it. That's why there was very little attempt to do anything about it. Biden had to let Big Oil and Big Farm feed now, in order to keep the lobbying campaigning funds coming in. He hoped it would end. But when it didn't and the fake inflation began to nip at his own heels, causing his approval to drop below Trump's, he needed a show of effort to curb that which didn't need curbing.

But I keep going back to it's not and never was inflation. Which means the raise in the interest rate will have no effect on cash rich company borrowing. Which will not require cash rich record profit filled companies to cut costs by laying off workers, which will not result in loss of wages, and will not create a real recession.

This kind of incompetent gamesmanship might very well cost Biden his own reelection. And that could result in the restoration of Trump. And a repeat of that kind of real total incompetent gamesmanship will certainly cause a very real recession.

i used to wonder, economics is more about how humans behave, feel, than data. this piece vindicates that thesis strongly, even if things are sunny (which they are, relatively speaking), they might to appear bad (really bad, which also they are). thus, vibes matter. a lot. As of yet, vibes are suppressed & they compound sooner than later which gives a murky, blurry picture of how things are.

All the central banks had a big hangout where they were essentially like - \u201Cwow the entire economic regime is shifting from low-inflation to whatever this is\u201D. Jerome Powell said at the meeting - \u201CWe understand better how little we understand inflation\u201D and I think that encapsulates monetary policy (and a lot of other things) well right now.

There is so much \u2018blame\u2019 to place on all the things going wrong, and YES there should be blame placed on certainty entities. The Fed moved too slow, the Biden Administration seems to prefer moving backwards versus forwards, and the sheer mismatch of supply and demand led to systems crumbling.

Reality: It\u2019s really easy to type out all these words and say \u201Cyeah they were wrong\u201D but it\u2019s much harder to live in the reality of things being wrong. Powell highlighted yesterday that it would be challenging to tame inflation without triggering a recession - which has an element of truth at this point.

All begin to radically differ, and that\u2019s when people can get upset. \u201CWhat do you MEAN economic theory is useless and most of those lines are more art than science! Valuing stocks is just manipulating a multiple?!\u201D - that creates cognitive dissonance, because nothing is how it is supposed to be.

Some of the reasons that the vibes are off are because gasoline and food prices are so high. Energy is the common denominator to everything. When people see high gas prices, they feel bad. It sucks. But as George highlights - there is a difference between \u2018high gas prices\u2019 and a \u2018recession\u2019.

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