Eric Basmajian, founder of EPB Research, returns to Forward Guidance to share his view on the U.S. business cycle. Basmajian notes that the 2022 decline in economic growth rate turned into a remarkable stabilization of broad coincident indicators of economic activity that began in January 2023 and persisted throughout the spring stresses in the banking system.
However, he remains confident that the U.S. economy will enter a recession soon, and he discusses in detail several of his leading indicators that motivate his view. Filmed on September 7, 2023.
Today’s interview is brought to you by YCharts. For a free trial and 15% discount on new memberships, visit
Link to YCharts’ Webinar on September 22nd:
Follow Eric Basmajian on Twitter
Follow Jack Farley on Twitter
Follow Forward Guidance on Twitter
Follow Blockworks on Twitter
___
Timecodes:
00:00 Introduction
01:10 Pre-Recession Phase Continues
06:50 Housing And Autos Are Not Slowing Down That Much
13:45 Consumer Credit Is Still Somewhat Strong (For Now)
16:42 When Will Recession Come?
23:35 Pushing Back Against The Recessionary Thesis
30:45 How Far Will Unemployment Rate Go?
32:35 Does New Bull Market In Stocks Indicate There Will Be No Recession?
37:05 Debate On Mechanics Of How Higher Interest Rates Constrain Economic Activity
40:20 Banking System And Credit Crunch
53:00 Contraction In Gross Domestic Income (GDI) Is Signalling A Recession
01:00:48 What Is Eric’s Level Of Confidence That U.S. Is Indeed Headed For A Recession?
01:10:10 Outlook on Rates & Bond Yields
___
Disclaimer: Nothing discussed on Forward Guidance should be considered as investment advice. Please always do your own research & speak to a financial advisor before thinking about, thinking about putting your money into these crazy markets….(read more)
BREAKING: Recession News
LEARN MORE ABOUT: Bank Failures
REVEALED: Best Investment During Inflation
HOW TO INVEST IN GOLD: Gold IRA Investing
Recession In The U.S. Is Almost Inevitable, Says Business Cycle Analyst | Eric Basmajian
The United States has enjoyed a decade-long economic expansion since the global financial crisis of 2008. However, the optimism surrounding the nation’s economic growth may be facing a rude awakening as the possibility of a looming recession becomes increasingly more probable. Eric Basmajian, a respected business cycle analyst, has recently expressed his concerns, stating that a recession in the U.S. is almost inevitable.
Basmajian, known for his accurate analysis of economic cycles, has a track record of predicting recessions with great precision. His foresight has earned him a reputation in the field, and his latest remarks have attracted significant attention from economists and investors alike.
According to Basmajian, several key indicators point towards an economic downturn. One aspect he highlights is the yield curve, which has historically been a reliable predictor of recessions. When the yield curve inverts, meaning short-term interest rates rise above long-term rates, a recession often follows. Basmajian emphasizes that this inversion has occurred several times recently, strongly suggesting that a recession may be imminent.
Additionally, Basmajian points out that the current economic expansion is one of the longest in U.S. history. Historically, economic cycles tend to follow a pattern, and extended periods of growth are commonly followed by downturns. This time is likely to be no exception. The business cycle analyst argues that the expansionary phase is reaching its limits and will soon give way to a contraction.
Another factor that contributes to Basmajian’s pessimism is the impact of global events on the U.S. economy. Trade tensions between the United States and major trading partners, such as China and the European Union, have already had adverse effects. Tariffs and trade disputes have disrupted supply chains and increased costs for businesses, which eventually trickles down to consumers. Basmajian believes that if these conflicts are not resolved soon, the pressure on the U.S. economy will increase, ultimately leading to a recession.
Furthermore, Basmajian points out the fragility of the U.S. financial system, which may exacerbate the effects of a potential recession. Despite efforts to strengthen regulations after the 2008 crisis, various vulnerabilities still exist. Corporate debt levels have surged in recent years, reaching record highs, while some sectors, such as tech companies and subprime auto loans, exhibit signs of a potential bubble. In the event of a recession, these weaknesses may amplify the impact on the economy and make recovery more arduous.
It is important to note that Basmajian’s analysis is not shared by all economists, and opinions regarding the timing and severity of a recession vary widely. Many argue that the current indicators are not necessarily conclusive, and the U.S. economy may continue its expansion for some time to come. Nonetheless, Basmajian’s track record and the validity of the indicators he presents make his perspective on an impending recession worthy of consideration.
As investors and policymakers keep a watchful eye on economic indicators, Basmajian’s warning serves as a reminder that economic cycles are inevitable. While the timing of the next recession remains uncertain, it is crucial to proactively address vulnerabilities and potential risk factors to mitigate the impact on individuals, businesses, and the nation as a whole.
Today’s interview is brought to you by YCharts. For a free trial and 15% discount on new memberships, visit https://go.ycharts.com/forward-guidance
Thanks for making this
Don't trust economic perspective from anyone under 50…
The government currently lacks concrete strategies to address inflation. Inflationary pressures are impacting various sectors, including stocks, housing, and commodities, causing their prices to rise. It is not advisable to keep your money idle and wait for a market crash. Instead, it is prudent to put your money to work by starting with cautious investments and gradually increasing your pace as prices decline further. Withdrawing a significant amount of money, exceeding $500K, from my account at this time presents a challenging decision
As long as government spends 2T$ (of 7 T$ total) more than they take in, no recession for now.
As long as regular folks have jobs and expand credit (credit card, car loans and whathave you), no recession for now.
In short, as long as the music is playing the party will go on.
Is it sustainable? We will see.
A falling long-term bond market (rising interest rate). Slowly but surely.
At some point the dam will break.
Banks, insurances and bond investors, especially foreigners, will be forced to realize losses.
Their ability to hide or mask loses will be streched to much.
The the bondmarket will take a nosedive.
Governments will be forced to cut spending. Consumers will be forced to pay back credit.
When the music stops, a rush to the very few chairs will kick in.
This recession is almost certainly the product of an outside force. The United States is losing its clout as a government reserve currency for the first time in decades. They don't have any more economies to employ to control inflation, and people are spending less money on stock and oil trading than in the past. They all lend credence to the notion of a new multilateral world order in the works.
M2 M3 2020-2021 levels are the ultimate source of long term inflation add to that the continued Fiscalflation add to that the slow seperation from China (wich will add the reverse pressures versus what occured post 2001 with China joining the WTO) So you can name that part a kind of Chinaflation finally add the cost of energy transition So long term inflation will be over 5% better productivity is an essential response and optimal reshoring.
Gold is classified as a tier one asset now
"tightening of monetary policy" IS the federal government ruining things.
use accurate terminology.
I'm not sure what kind of infaltion factor this dude is applying but according to multiple public and private sources GDI is up over 9% YoY and appears to be continuing higher into 2024.
More info please, less of "experts" protecting their opinions and viewpoints
Eric is the GOAT
Really enjoying your podcasts!!
Thank you!!
Jack, if you really need to eat grass one day (and I hope you won’t), make sure you get Chinese chive. It looks like grass, is technically grass, but much more palatable and does not have as much fiber.
I was an unexperienced stock trader and i lost over $30K when everything started to tank. Not because I was in an exchange that went belly up. I was just stupid to hold and because that's what everyone said. I'm still responsible. It just taught me to be a better investor now that I understand more of what could go wrong. It took me over two years of being in the market, I'm really grateful I find one source to recover my money, at least $5k profits weekly. Thanks so much Mrs Brittany Utley
Jack falling off
They've never been so willing to print money before, that's the big difference.
This will work until it doesn't, but it could delay a recession by a few years.
Given the current economic difficulties that the country is experiencing in 2023, how can we enhance our earnings during this period of adjustment? I cannot let my $680k savings vanish after putting in so much effort to accumulate them.
this guy is really quite good—very clear and concise explanations and rational thought processes.
ur doing the YTD comparison error once again (instead of comparing quarters)
Bruh, who did the blasphemous edit of this video? Why are you doing this horrendous treatment on an Eric Basmajian interview????
The US economy is grappling with uncertainties, global fluctuations, and pandemic aftermath, causing instability. Rising inflation, sluggish growth, and trade disruptions need urgent attention from all sectors to restore stability and stimulate growth..
I really appreciate the dedication in each video you post. Despite the dip in crypto, I still thank you for the level-headed financial advice. I started crypto and forex investment with $4,345 and since following you for few weeks now, I’ve gotten $18,539 in my portfolio. Thanks so much Mrs Elizabeth Cox
A downgrade in the US dollar's value can lead to higher imported inflation. With inflation running at a four-decade high, the Recession is now the ‘most likely outcome for the economy and I cannot imagine being a victim of circumstances. My portfolio suffered a big hit, holding it further won’t be any good. I've heard of people who have made up to $250K in a matter of months and I'd like to know how.
Why is every video on your channel about the economy crashing? If everything is always crashing, how is this going to be useful?
Equipment Rentals in Effingham, Illinois have dropped off to near zero in August and September, new construction is zero now
So if 2020 had 100 empoyees, 2021 had 110 employees, then 2022 had 118 employees and then 2023 had 116 employees. We see growth and decreasing growth 2020-2022, but outright decline in 2023 is recessionary is what Eric was saying there?
its an inflated recession, weve been in it since covid started…
Obviously this is purely anecdotal, but I recently moved out of a fairly large apartment building in the D.C. area. I can tell you with 100% certainty that I have seen Hello Fresh deliveries drop by at least 50 percent. The guy from UPS used to spend nearly an hour JUST delivering boxes of Hello Fresh throughout the building, and when I asked him about 3 weeks ago he said he finishes in about 20 minutes now. I have also noticed that people have reduced the frequency of cleaning services. On my floor, at least half of the people had cleaning services once per week. Before I left, most people on my floor had reduced it to once per month. These are people will government jobs with essentially no risk of job loss, yet they are still reducing spending. Note, this is prior to student loan payments resuming.
IMO, the soft landing already happened 18 months ago ish. We're on to something new
The thing I feared the most has come upon me. ha
29:30 "It's the level. Not the rate-of-change. As in the level of the rate-of-change. Not to be confused with the rate-of-change of the level, which would be a rate-of-change not a level. Oh, wait, they're the same thing." 🙂
After I graduated, I realized school taught me nothing about money. So I began trying to educate myself. When I found the book ‘the Richest Man in Babylon’, I learned everything about money that I was not taught. Also started watching videos like this. Thank you for making this! So much to learn!
The government has really called things more difficult for its citizens, and we can't sit back and bear all the consequences of the bad governance. It's obvious we are headed for hyperinflation,it is always the poor who take the hit.
The only reason we haven't already seen a recession is the absolutely insane and unnecessary criminal fiscal abuse and country bankrupting deficit spending by the senile ole joe admin and the demcorats over the last 3 years in direct opposition to the Fed's efforts to slow the demand side of the economy in order to give the supply side normal free market time to catch up…..
…to quell inflation,…
(the inflation caused by the absolutely insane and unnecessary criminal fiscal abuse and country bankrupting deficit spending by the senile ole joe admin and the demcorats over the last 3 years)
For first-time investors, it cannot be stressed enough how important it is to invest hard-earned money in the stock market rather than a bank where interest is guaranteed! The market appears out of control, the times are unpredictable, and the banks are deteriorating. Could there be a chance for a boomer like me? I'm working on a rough estimate of $5M for retirement, and I have a healthy six figures saved up for this. I'm almost 60.