We've Been In Recession Since 2008

Depending On How You Define "Recession"

I know I can be a permabull prick sometimes.

Both together and separately.

The funny thing is that I wasn’t always this way. I actually convinced my Dad to pull his money out of the market during 2016.

What an idiot!!!

I don’t know who made the dumber decision there. Was it me for predicting a bear market crash in 2016, or was it my Dad for listening to his 23 year old bone-head son who read a few stock trading books and had 1.5 years of experience in Financial Markets at the time?

I think I have to say my Dad on that one. Sorry Dad. I know he reads these.

I didn’t know any better but you should have! Heck, you raised me. There’s no one who knows more about how much of a bone-head I am than you!

It took that man less than 10 years to change the country he lived in, learn English as a second language, and graduate cumlaude from WPI with a Masters in Civil Engineering — but for some reason he listened to me who he watched get suspended 3 times in the 6th grade just about 10 years prior.

I mean, come on!

That’s what you call book smart but not street smart right there. Or, maybe it’s just believing in your kid enough to give him a shot. Thanks Dad.

I love him (and you Mom) very much. They always supported me, even as a bone-head 22 year old worth $5,000 yapping about all the millions I was about to make trading penny stocks.

My parents came to America, worked hard, and spent a lot of time and money on me to provide a strong foundation to succeed in life.

And how do I repay them?

I helped their retirement account miss out on the 10% return the S&P 500 had in 2016. I told them I would pay that money back to them someday, but truth be told it’s still sitting on my tab with them today.

My mom loves to remind me about it, and she also hasn’t listened to me or my dad about a stock market opinion since 2016 now.

They fortunately only stayed out of the market for one year though.

Their Financial Advisor talked them into getting back invested to start 2017. It was hard for me to accept defeat but that Financial advisor was right… and ever since then I have had a personal vendetta against Financial Advisors all over the world.

I also became a baby bull.

But yeah, that was me — the biggest bear around circa 2014 give or take.

Why was I a big bear? The answer is simple. Once I started engaging myself more with markets I started consuming more media — this happens to all of us.

The media has figured out that fear sells — fear is the way to get more views, and I was reading a whole lot of fear.

We stop scrolling when we read a headline full of fear, and most of the time we click on it even if we know it’s a bit exaggerated.

A recent post of mine titled “The Recession Right Around The Corner” got more views than the other posts around it. The doom and gloom in that titled lured readers to click and read it more than the others.

In fact, my best performing post to date, from a number of views and a subscriber’s gained perspective was titled, “The Big Short Is Coming.”

You can’t make this stuff up. I thought it was good writing and all, but nothing much better than a lot of other things I’ve written!

We love fear, doom, gloom, and stories about how the market is going to blow up tomorrow.

We listen to it year after year and we literally become brainwashed to think that the end of the world is right around the corner. That in turns leads us to hanging on to these brainwashed narratives for decades while we miss hundreds or thousands of percentage point gains in different assets along the way

I received this comment from someone on Substack this week.

There’s really people that believe this. Maybe it’s a semantic thing as we try to argue over the definition of “recession,” but whatever it is it’s absolutely asinine.

Absolutely.. fucking.. asinine. Yeah, I said it.

We’ve been in a recession since 2008? So what should we be doing, buying more tin food and less assets? Making statements like that doesn’t do anyone any good.

Now, I agree that the economy has completely changed since 2008. I tend to think that 2008 was actually the “Big Reset” that people talk about as Armageddon.

2008 was the big “Dollar Default.” Every Central Bank in the world reduced interest rates down to 0% and the money machines started working overtime.

I’m no macroeconomist but I learn from a lot of them and I play one behind a keyboard every now and then.

Here’s a chart of the Federal Deficit below, courtesy of Bianco Research.

Focus on the bottom layer, which is the Federal Deficit As A Percentage Of GDP.

It’s essentially our debt relative to the things we produce. More red = more government debt relative to what our economy produces.

You can see that as the Dot Com bubble popped in the early 2000’s we ran the deficit up a bit, but it never exceeded periods like the 1970’s or 1980’s where we saw a couple economic recessions and market corrections.

The Dot Com Bubble was “easier” for the government to deal with. That market event just consisted of a group of overhyped tech companies with no real value created yet.

It wasn’t exactly global systemic risk.

In 2008 it was a different story. It’s termed “The Great Financial Crisis” for a reason. We had no choice but to inject the most liquidity in history into our economy if we wanted to save the entire system.

Well, we did have a choice I guess. The choice was to inject massive liquidity or to let a group of the biggest banks in the world go bankrupt.

Either devalue the dollar severely or let the biggest Financial Giants in the world go bust and take the hard economic implications that come with that around the world.

The choice is obvious, I would think.

What would you do… honestly?

We even had choices within that choice. We let Lehman Brothers go bankrupt but we bailed out AIG, why is that?

Simple. The risks at AIG were more widespread than the risks at Lehman, so they could let Lehman be the sacrificial lamb of the bunch and pump the liquidity where it was absolutely necessary.

You would do the same, right?

It’s absolutely necessary when the alternative is to induce widespread hurt and panic by letting it all go bust.

It didn’t end there though, because then the world was hit with a Global Pandemic in 2020. What choices do we have when almost all businesses around the world shut down for the foreseeable future during a global lockdown?

Print money to inject liquidity and stimulate the economy or let it all go bust?

Drill baby drill? No — it’s print baby print. That’s something both parties can agree on. That’s the blueprint, and that’s why 2020 saw an even bigger historical increase in the Federal Deficit relative to GDP.

Now look at us, it’s 2024 and we are running Fiscal Deficits as a percentage of GDP that are larger than any other time in history except for 2008 and 2020.

We’re not all that far from 2008 either, in fact, we almost reached those levels in mid 2023 after the Regional Banking Failures that we’ve all forgotten about now.

What’s the craziest part there? The craziest part is that we’re not currently in any “recession” by the actual definition or metrics we have used over history.

Also, our soldiers aren’t fighting in a war that we have to fund, though I guess that one is a bit debatable as well just like the “recession” definition.

Wars and recessions are typically when we tend to increase Fiscal Deficits to help stimulate the economy and/or stop the stock market from crashing.

Right now we’re at the peak of “tightening financial conditions” as we’ve raised interest rates and reduced the FED’s balance sheet and that typically doesn’t translate to a stock market at All Time Highs, but we’re running one of the largest Fiscal Deficits in history alongside of that so now it does.

This is what macroeconomists much smarter than me refer to as “Fiscal Dominance.”

When we run deficits at this level of GDP this “fiscal dominance” becomes a bigger influence on markets and economic conditions compared with other things like monetary policy for example.

In other words, it’s hard to tank the S&P’s much more than -20% and for a sustained several year period even during the fastest rate hiking cycle in history next to the 80’s — because of that strong Fiscal Dominance that exists.

The 1980’s had a couple recessions and big market corrections, and we are currently running larger levels of Fiscal Deficits as a percentage of GDP here today in 2024 as we were during those 1980’s recessions.

And times are BOOMING right now.

You can say we’re in a recession all you want. Whatever pronoun you choose is your choice and I support whatever pronoun resonates with you most.

But what I won’t accept is ignoring how booming the stock market (and economy) has been since 2008, which is when we seemed to figure out this playbook. Or maybe we knew this playbook all along but we just didn’t need to use it until we HAD TO.

Well, 2008 came and we had to. 2020 came and we had to. The Regional Banks started failing and we had to. Nobody wants to take the other choice.

You wouldn’t either.

Devaluing the dollar is better than letting the system go bust. Why is that? Because letting it go bust means a lot of rich people lose a lot of money and that is detrimental for them, the people they employ, and the global economy at a whole — hence the “let it all go bust” part.

The US government can get away with this playbook for a very long time so long as the US Dollar remains the global reserve currency. Said another way, gradually higher inflation over time is better than massive rapid deflation right now.

As the old saying goes, the rich get richer.

That is true now whether we are talking about people or companies.

The chart above shows assets and revenues for the top 1% of companies growing larger over time.

The top 1% own over 95% of the assets.

The top 1% make over 80% of the revenues.

These are astronomical exponential trends that are almost impossible to reverse at this point, and not only that, it seems like the trend is essential to maintain if we don’t want it all to go bust.

We can either shake our fists to the heavens about this and change the definitions and rules to whatever makes us feel more comfortable saying, or we can just accept the facts and find ways to ride the trend like a drunk alpha male on a mechanical bull at the bar.

The recession permabear from above told me to invest in “water technology, quantum tech, and advanced manufacturing technology.”

Okay, I know what quantum tech means (kind of). I think I know what advanced manufacturing technology is, or I at least could write some BS down and fake it on a test.

But.. water technology!? What the F^<# is water technology? I don’t know how to invest in that — I don’t know how to invest in any of those suggestions for that matter.

If I underperform against the Water Technology sector over the next decade I am going to be pretty pissed.

I had to google “water technology stocks” and I found this article titled, “7 Best Water Stocks And ETF’s To Buy.”

I don’t know any of them but for what it’s worth, some of these tickers have actually performed pretty good over the last 16 years since 2008.

Most have underperformed the S&P 500 and the Nasdaq since 2008 by multiples though, meaning hundreds of percentage points. A couple have kept general pace with the index returns though.

Maybe the recessionary permabears are on to something with this water technology stuff, I don’t know.

For some reason I can pull the trigger on buying Bitcoin because I think (and have watched) the Fiscal Dominance era we are in is helping it become the fastest horse in the race of dollar debasement, but a big “water technology” bet sounds a bit crazy to me.

Maybe it’s not though. You can’t eat Bitcoin, as the saying goes, so what’s the worth?

You can’t eat water technology either but at least you can drink it right — haha, get it?

I always wanted to be a comedian but I think I might hang that dream up on the shelf.

I’m just a washed up permabear born again permabull playing macroeconomist behind a keyboard in the metaverse now.

To think I actually have an accounting degree picking up dust somewhere too.

Thanks a lot Dad, that one was his idea.

That one is still on my tab with him too, I’m the drunk alpha male riding that bull-tab as long as I can.

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Disclaimer: These are not recommendations and I am not a financial advisor. These are just my two cents, or two satoshis as the kids say. Remember to do your own homework before making any financial decisions. Also, keep in mind I usually have some personal investments in the things I discuss.

Photo by Spencer Platt/Getty Images, Shown on pbs.org article