While predicting recessions might be a fool’s errand, a generally reliable rule of thumb is that they come and go once a decade, and unlike in 2016, I do think right about now (next 12 months) is the time.
1. You have the trade war with China, which is going from bad to worse now that the US has set to forcibly dismantle Huawei, a national champion of its hi-tech sector.
China is also now at basically the same the point as at which Japan and Korea experienced shocks during their equivalent stage of economic development.
2. Stock market valuations, especially in the US, are near record highs. Now would probably be the least ideal time to go in.
In particular, while I am not one of those people who claims that search engines and social networks have no value. But I really don’t think Apple, Alphabet, Amazon, Microsoft are worth in the $1 trillion range – well beyond the likes of Exxon or Boeing. Soaring valuations + near stagnant technology = tech bubble as in late 1990s.
3. Other possible danger points: Chinese deleveraging; Europe’s PIGS, Turkey, Ukraine; shale oil bubble?; US student debt.
4. Trump is toast if recession starts within the next year. He doesn’t fare well against Biden (rising in the polls) as is, will be unsalvageable if a recession comes down on top as well. If no recession, might be able to scrape out a win against Biden, and has a good chance against someone like Kamala Harris.
5. I am bullish on crypto (note the date: 1BTC = $5,030 then, now north of $8,000):
Incidentally, now might not be the worst time to make a longterm crypto investment, since nobody is currently talking about Bitcoin.
— 🇷🇺 ANATꙮLY 🤔 KARLIN (@akarlin88) April 15, 2019
China – US trade war makes this particularly attractive. In London, I met a BTC trader who thinks it will hit $20k in 1-2 years, and a major US-based BTC miner who estimates $100k within 5 years.
6. Bearish on oil/resource prices. China is going to be slowing down as it readjusts to the trade war, and we’re approaching the point at which new inductions of electric vehicles are starting to have a noticeable impact on demand.
7. Russia. On the one hand, having already spent 2014-16 in recession implementing reforms and rationalizing its banking system, it’s well prepared for another one. OTOH, it is a “high beta” economy that is especially sensitive to trends in the global economy. I am not particularly glum, but not particularly positive, either.
8. However, there’s no big mania like you had in the mid-2000s, so I think this recession will be pretty mild.
I do think crypto is the best deal atm, even if one missed the ramp up from $5,000 to $8,000. Bearish on pretty much everything else: Stocks, oil, China, Moscow property, etc.
Dollar should be safe, as everyone flees to US Treasury bonds in a storm (assuming the eternal prophets of petrodollar collapse finally get it right).
*** Usual disclaimer that I am not qualified to give financial advice, that this is written for entertainment purposes, etc., etc. ***