#1063 Darius Dale Gives The Truth On How Bad The Economy Is

Darius Dale is the Founder & CEO of 42 Macro, the leading macro risk manager adviser. In this conversation, we discuss the macro economy, the changing definition of recession, the Feds 75 basis point raise, the strong employment numbers, and we debate if we are actually in a recession. Darius joins us every Thursday on "The Best Business Show." To see the video with the corresponding charts that Darius references throughout the interview, go to "The Best Business Show: LIVE" YouTube Channel ======================= BCB Group is the leading payment services partner for the digital assets industry. BCB Group provides payment services in 30+ currencies, FX, cryptocurrency liquidity, digital asset custody and BLINC, which is BCB’s free, instant settlements network for the BCB client ecosystem. Find out more by visiting bcbgroup.com/pomp ======================= Exodus is leading the world out of the traditional financial system by building beautiful and user-friendly blockchain products. With its focus on design and user experience, Exodus has become one of the most popular and loved cryptocurrency apps. It’s supported on both desktop and mobile, allowing you to sync your wallet across multiple devices so you can have access to your funds anywhere. You can instantly exchange around 100 different cryptocurrencies straight from your wallet. Interactive charts let you view an asset’s price history and your portfolio’s performance over time. And maybe the best part, Exodus is integrated with the Trezor hardware wallet - making advanced security easy for everyone. Visit exodus.com/pomp for your free download or search Exodus on the App Store or Playstore. ======================= The Pod Pro Cover by Eight Sleep is the most advanced solution on the market for thermoregulation. It pairs dynamic cooling and heating with biometric tracking. Even better? Eight Sleep recently launched the next generation of the Pod. The new Pod 3 enables more accurate sleep and health tracking with double the amount of sensors, delivering you the best sleep experience on Earth. Go to eightsleep.com/pomp to start sleeping cool this Summer and save $150 on the Pod. Eight Sleep currently ships within the USA, Canada, the UK, select countries in the EU, and Australia. =======================

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:02Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Darius Dale is the founder and CEO of 42 Macro, the leading macro risk management advisor. In this conversation, we talk about what's going on in the macro economy, what's happening in the financial markets, how Darius is looking at various metrics, and also what you at home should be thinking about as you invest your capital. I really enjoyed this conversation with Darius, and I hope you do as well. Before we get into this episode, though, I want to quickly talk about our sponsors. This episode is brought to you by BCB Group. With a dedicated focus on institutional payment services, BCB Group provides business banking, cryptocurrency, and foreign exchange market liquidity for many of the world's largest crypto-engaged financial institutions.

• 0:47Anthony Pompliano?

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• 1:29Anthony Pompliano?

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• 2:12Anthony Pompliano?

  Go to exodus.com/pomp today. This episode is brought to you by Eight Sleep. Eight Sleep is the single best product that I have purchased over the last three years. It completely changed my life. I'm not joking. Pay attention. The Pod Pro cover, which goes over your mattress by Eight Sleep, is the most advanced solution on the market for thermal regulation. It pairs dynamic cooling and heating with biometric tracking. You can go to eightsleep.com/pomp to check out the Pod Pro cover and you save $150 at checkout. They currently ship within the United States, Canada and the UK. And I told you, it changed my life. It helps me sleep deeper, helps me sleep longer. I feel much more refreshed and I have better energy. You want to know how I have relentless energy every single day?

• 2:55Anthony Pompliano?

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• 3:00Speaker 01

  Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only.

• 3:24Anthony Pompliano?

  Darius, how are you?

• 3:25Speaker 02

  I'm doing well, man. It's a lot going on in markets, a lot going on in the economy, man. This is a fun time to be in macro.

• 3:31Anthony Pompliano?

  Let's start first with yesterday, because I, or on Wednesday, I'm sorry. 75 basis point hike from the Federal Reserve, Darren Tyre Talk Track, all their talking points. A recession is not here. We do not see a recession. We do not believe the United States economy is in a recession. First, why are they raising interest rates at 75 basis points and being so aggressive? If the last one didn't work?

• 4:00Speaker 02

  Well, give the guy some credit. Monetary policy, at least according to them, and I would tend to agree with this, takes time to filter through the economy. It doesn't impact everyone because there's a lot of debt that's not on floating rate basis. There's a lot of debt that's obviously on fixed rate, including most mortgages. So it takes time for, you know, for incremental consumers and incremental sort of people who are tapping debt markets to really feel the impact of that. So ultimately, what the policy choices that they're making today are intended to have an impact on the economy, let's call it. The general consensus on this is somewhere between two to three to four quarters down the road.

• 4:35Anthony Pompliano?

  As we look at 75 basis points, 50 was kind of the general thought process a couple of months ago. Then they jacked up to 75. Could they go to 100? Do you think 75 is kind of the upper bound of what is possible?

• 4:48Speaker 02

  Yeah, in fact, I mean, it's probably the last 75 basis point hike we're likely to get. If you think about sort of, so 100 basis points was sort of, that was shot for dead really quickly. On the other side of that inflation report, the, we sent out, and that we, the FOMC sent out Bullard and Waller to sort of tap that down. But as it relates to, you know, the continuation of 75 basis points, we're probably going to have to see inflation pressure continue to build from here. Now, it's not necessarily likely to continue to build, particularly on the headline side, because we have seen a pretty significant decline in energy and agricultural prices that should start to feed through into headline CPI. We do, however, see core CPI pressures continue to build. This is something we talked about last on the show with the new acceleration to

• 5:33Speaker 02

  an all-time high median CPI on a three-month annualized basis. Sticky CPI accelerated to 40 year high on a, in terms of on a three-month annualized basis as well. So we are seeing a kind of a push higher in core inflation, but it might be overwhelmed by declining food and energy prices as it relates to headline.

• 5:51Anthony Pompliano?

  As we begin to look at some of those inflation measurements, they continue to talk about 9.1%. In, I don't know, a couple of weeks ago, you and I were talking and you were talking about the acceleration of kind of the three-month annualized inflation. Do you think that that plays into kind of their continued aggressiveness, even though they only talk about Europe also?

• 6:10Speaker 02

  This is the problem, right? Like, we all know that inflation should eventually come down on a year-over-year rate of change basis, just due to base effects. We don't need to unpack base effects here. That's probably not the right audience. But, but the problem with, you know, kind of anchoring on base effects to get inflation down, which I think a lot of investors are making this mistake, which is if you only rely on base effects to get inflation down, you're going to wind up with a structurally higher kind of a base rate, a base level of inflation by the end of that process. And so it's my belief, and I think, you know, just based on the kind of the tea leaves we continue to hear out of Fed or out of Fed heads and obviously out of Powell yesterday is that the annualized the momentum, the sequential change in inflation is really what's driving the boat from a policy standpoint.

• 6:53Speaker 02

  And the most recent data points we were getting, you know, if you look at on a three month annualized rate of change basis, like pretty much everything in the entire inflation basket is accelerating to the upside with the exception of energy. So I mean, that's, um, that's an issue for the Fed is really an issue for markets, quite frankly, because it means, you know, that inflation is likely to continue being a problem for longer than the sort of, you know, the growth dynamics in the economy would appreciate.

• 7:18Anthony Pompliano?

  Let's talk about the labor market. And you've got this chart here that shows the labor market is too strong for the Fed to stop tightening. That seems to be one of two things they continue to point to, even though GDP growth is negative now for two consecutive quarters. They say, hey, employment looks strong and consumer spending still looks pretty healthy. What's going on in the labor market?

• 7:38Speaker 02

  Yeah, great question, man. So the reason I sent you a bunch of charts, most of them are all around the labor market. The reason I sent I sent those charts is because we can unpack all of them. The Fed is now shifting its sort of focus back in the direction of its dual mandate. You know, obviously it has the price stability mandate, but it also has the maximum employment mandate. So yesterday it gave the investors sort of a kind of a tipped its cap and nodded to investors who are increasingly concerned about growth and the possibility of what we call a hashtag actual recession, which is different than the technical recession that was reported today. So going back to the labor market, the strength of the labor market, Powell effectively said very clearly and cogently, hey, look, the labor market is too strong for us, you, anyone to be worried

• 8:19Speaker 02

  about recession right now. And so this is going putting up that chart, slide 82 from our macro scouting report just shows, you know, kind of three main indicators that I think the Fed is anchoring on to give them to give them confidence that the labor market is really strong. So the first, the plot in the upper panel just shows the ratio between total job openings and total unemployed people. And at 1.9x, which is where we are today with the red dotted line, you know, we're, you know, more than double that, you know, sort of the pre-COVID trend of 0.9, which is the blue dotted line and that chart. The middle panel shows the Private sector quits rate. So this is the percentage of of people who have jobs uh that are quitting uh in any given month. And obviously, when you quit your job, it's usually to go find a

• 9:03Speaker 02

  a better job or a higher paying job, et cetera, like that. So it's an indication of how tight the labor market is. Uh, that number is at three point one percent, coming off an all time high last fall. Relative, and that's much higher than the uh, you know, pre-COVID trend of two point four. And then lastly, the bottom panel, we show the employment cost index, which is the broadest measure of of wages, of of broadest measure of, you know, sort of wages in the, in the economy. Uh, and that number at four point five percent is is effectively a double of the two point five percent pre-COVID trend. So when the Fed looks at these statistics, it's seeing a labor market that is way too hot to stop tightening. If they're going to, um, if they're looking at growth as a sort of indicator that they can slow down on tightening

• 9:44Speaker 02

  and anchoring that the that segment of growth indicators on the labor market, labor market is not going to give them any signals anytime soon.

• 9:51Anthony Pompliano?

  As you think about this labor market, how do you measure, we're seeing at least headlines, layoffs, hiring freezes, like I kind of think of it as uh, there's a wall and there's cracks in the wall now. And sure, the dam hasn't bust yet. We're not at, you know, four and a half, five percent unemployment or anything like that. But it does feel like we're kind of starting to see the cracks. We're seeing it tick up just a little bit. Is that something that you worry about? Or do you think that we'll have such a uh, kind of multi-month, you know, uh, headway uh, or runway to actually see that market changing and it'll give them enough time to kind of change their mind?

• 10:33Anthony Pompliano?

  Uh, cause it won't happen overnight where we just go from, you know, three point six to four point five percent unemployment.

• 10:37Speaker 02

  Yeah. So uh, to be clear, it could happen overnight. It's just very unlikely to happen overnight. Um, and the reason I say that is that, you know, we have not seen a significant enough decline in sort of aggregate income, consumer spending, you know, cons uh, and and sort of a non-residential fixed investment, business investment to really kind of get you kind of concerned about a s- a jump condition lower in the total employment and and and jobs market. Um, the reality is going back to the headlines we're seeing, we certainly are starting to see. Cracks in the dam. I mean, you know, you can start to piece together all these different companies telling you that, hey, we're laying off, I don't know, 10,000 people or 10% of our workforce or we're freezing hiring and all that stuff's going to get worse and worse and worse.

• 11:16Speaker 02

  On an extended period of over extended period of time because again, the labor market is lagging with respect to the economic cycle with respect to the market cycle. You know, when you look at the labor market and one, we're going back to some of these headlines, right? You know, the headlines make the news, right? The headlines are what gets you to click on the article, but no one's going to put out a headline that says. Company XYZ is increasing hiring by 10,000 or company ABC is actually increasing his workforce by 10%. But that's actually what's been happening. If you go to slide 83, that next chart pump where we show, I think we talked about this chart after the jobs report. A few weeks ago, but it's important to sort of reiterate for those who missed that show, which is. Labor market is overheating by double. I mean, we kind of alluded to that in the previous chart, but this next chart, slide 83.

• 12:00Speaker 02

  Where we show private payrolls growth, that's the first cluster of bars. The light blue bars, the, the pre-COVID trend, the fiber trend through 2019. The dark blue bar is the most recent month. June is the most recent jobs report we have. And so. At 3.4% in private payrolls growth on a three-month annualized basis, that's literally more than double. And where we, you know, what we saw in the, in the pre-COVID trend, average hourly earnings, that's second cluster of bars. 5.8%, you know, basically double the pre-COVID trend as well. And then lastly, the last cluster of bars, we show aggregate labor income. You know, growing at 8%, I mean, versus a pre-COVID trend of 4.4%. I mean, it's telling you that, you know, the media are doing a very poor job of actually reporting the labor market from a balanced perspective.

• 12:43Speaker 02

  You know, the reality is labor market continues and again, because it's a lagging indicator, it's lagging all the growth that we had last year. It's lagging the all-time highs we saw in January. The reason those things continue to be very robust is because again, it's a lagging indicator.

• 12:56Anthony Pompliano?

  As we then go and we look at this next chart that you sent us, this, a whole idea of the depressed labor supply might delay the economy's natural response to declining corporate profitability. One thing I continued to go back to is the free market. I would think would be smarter than central banks or central planning. What you're talking about here is this depressed labor supply and the economy's natural response. Unpack that a little bit so that we can understand, kind of, what do you mean by the economy's natural response? And then how does things like the depressed labor supply and corporate profitability play in?

• 13:30Speaker 02

  Hundred percent, man. I think this is one of the most important and underrated kind of aspects of the labor market right now, which is, you know, so you kind of alluded to like, how long will it take for the sort of dams in the system, the cracks in the dam to really start to, you know, give way to a bigger flood? And the reality is it might actually take longer in this cycle than in previous cycles. Which the key takeaway from what I just said is the Fed is likely to keep its foot on the brake for longer. But let me unpack this chart. So what we show on the chart in these four panels, the first panel is the overall labor force participation rate in the economy. This is the sort of percent of people, you know, who are non-institutionalized, not in jail effectively. Or, you know, jail, Mooney Man, or whatever you want to call it.

• 14:10Speaker 02

  Those are, those are, um, the proportion of people who are actively engaged in the labor market, looking for jobs, et cetera, et cetera. Then you have the 25 to 54 year olds in the, in the second panel, 55 plus year olds. So people nearing retirement in the third panel, and then last is the female labor force participation rate. And what you can see is that we've seen a broad-based decline in labor force participation rate. You know, the headline is off 120 basis points from where it was at pre-COVID. The prime working age, 25 to 54, people who should not, should be working by all stretches and all stretches of the imagination. Or it's down 80 basis points from the pre-COVID high. 55 plus year olds, the great resignation, you know, people finally retiring, the baby boomers retiring.

• 14:53Speaker 02

  That's down 170 basis points from its pre-COVID high. And then we also have female labor force participation rate down 110 basis points. So you take all these different sort of pockets of the labor market together, these different cohorts. It's telling you that companies, there's a real scarcity of workers out there that may make companies a little bit reluctant at the margins to shed, you know, some of the hires that they've accumulated in the last, it's just called six to, six to 18 months. And so that may actually, again, with the title of the chart being what it is, it may slow, you know, the, the natural sort of hiring and firing cycle, may slow the firing cycle in this cycle relative to previous cycles, which again, keeps the Fed actively engaged in tightening policy because they're looking at the labor market to give them clues to stop.

• 15:37Anthony Pompliano?

  And then you've got this, it may be quite a while before the Fed is freaked out about the labor market chart. What is this showing, Gus?

• 15:43Speaker 02

  Yeah, this one, yeah. So no, this, um, the blue line in this chart shows, uh, the conference board's, uh, labor differential survey. So that within the consumer confidence index report, uh, we get from the conference board, they have sort of two questions, which is, you know, uh, what's the percentage of respondents who think jobs will be plentiful six months hence? And then what's the percentage of respondents who think jobs will be, uh, less plentiful six months hence? And they take the differential of those surveys as a, as a sort of proxy for how robust the labor market is. And as you can see, you know, going back to Q1 of this year, we're effectively coming off an all time high in consumers' perception of the labor market. You know, even and even with the decline we've seen since then, we're still in the 95th percentile of all readings of this survey going back to, I want to say

• 16:26Speaker 02

  the 60s or 70s. I mean, it is a lot, it's a long time series history of telling you how tight or weak the labor market is, and we're coming off, you know, the all time tights. And so it's telling you that, hey, look, there's a lot of downside to go before the Fed is probably concerned about the labor market. Like us market participants, we care about the rate of change, the direction of travel, how fast is it going, moving. The Fed cares about, is this good or bad? And it's going to take a while before it to actually get bad. And that may actually keep the Fed, uh, engaged in tightening monetary policy, rate hikes, quantitative tightening for longer than it probably otherwise should, because we're likely to head into a recession, let's call it sometime by the end of this year, maybe even beginning part of next year.

• 17:07Anthony Pompliano?

  When you start to look out at the market more generally, does the Fed care about asset prices? Like those have fallen. They seem to have been somewhat immune to caring, but what's your general read?

• 17:20Speaker 02

  Yeah, no, that's a great question, man. Um, so yes, but not in the price level sense. They care about asset prices in the sense that if we're seeing sort of, you know, sloppy trading in the treasury market, like wider bid act spreads, um, you know, inability for corporations to sort of, uh, place debt, to issue debt, and you're seeing sort of dysfunction in the, in the repo market, uh, which is used to sort of capitalize, uh, shadow bank participants. You know, if we're seeing dysfunction there... Then you know, then yes, the Fed is really going to be concerned because usually dysfunction there translates to higher volatility in the actual asset prices and ultimately usually higher volatility is is leading to lower prices. And so, yes, the Fed does care, but they only care in the sense that we're seeing real confirmed signs of financial instability.

• 18:05Speaker 02

  And some would argue, we're starting to see that. You're seeing things like REBO fails, which is probably too sophisticated a subject to talk about here. But you're seeing things like REBO fails. Obviously, the move index, which is a bond, the VIX for the treasury market, has been elevated all year. So there's, there's definitely some elements of financial instability, but but nothing like what we've seen even in 2019, even in 2018, even in 2015, 16. So I don't think the Fed is that particularly concerned about it here and nor should they be, right? Again, inflation is at 9.1% year over year, annualizing at 11%. They should, they don't have the, the, the ability to be concerned right now.

• 18:39Anthony Pompliano?

  And what about the data? One of the things that Jerome Powell said yesterday, uh, which I'm still processing because I, I couldn't believe it when I saw that he said it. But he said something to the effect of like, the labor market is strong, which makes me question or makes us question the GDP data. And it seems like we're heading into taboo, you know, kind of land where it's not very often you see a central banker mention that they may not believe the data. Because it seems like they usually they're pointing to like, just believe the data, believe the data. And it's the market who's like, we don't believe the data. Do you read into that? Or is that just maybe he just said kind of offhand comment and, and we shouldn't really take it, uh, anything more than that?

• 19:21Speaker 02

  Uh, you know, I, so it, I don't know if it was an offhand comment. I think he's correct in the sense that, you know, the Fed is not, they don't have a GDP mandate, right? Like, so the Fed is, at the end of the day, really doesn't care what GDP does unless it's really giving them a clear indication that there's something about the break in their employment or inflation mandates. So, but, and he's actually right. In fact, he called this out, which is something, you know, I was dealing with for a while earlier in my career, which is, uh, this residual seasonality effect, which is, you know, after the go, go financial crisis, you know, every Q1 of every year, Q2010, 2011, 2012, and all the way up through like 2015.

• 19:56Speaker 02

  I want to say we saw like a contraction in GDP that wasn't really real. It was just a function of the seasonal adjustment being so messed up from the uh kind of the height of the financial crisis. So there's some noise in GDP statistics. There's noise in today's GDP statistics. I mean, we have a minus ninety um basis point contraction on an annualized rate of change basis. But you know, two hundred to two hundred basis points of that is inventory swings. I mean, like, does that really impact the economy? I mean, no, not really. I mean, don't get me wrong. It's not a great GP report. Um, you know, you got um, you know, goods consumption contracting, you know, fixed investment contracting. So it's not great. But it's definitely not necessarily as bad as you might see in terms of seeing, oh, my God, two back to back um negative GDP reports. So um what really matters ultimately to the Fed as their proxy for growth.

• 20:42Speaker 02

  It's just monitoring developments in the labor market because that's at the end of the day, that's what they care about. That's their mandate.

• 20:47Anthony Pompliano?

  We've seen Bitcoin and cryptocurrencies. They're still down significantly off the all time high, but they're up uh in some cases, you know, twenty, thirty, forty percent off the bottom.

• 20:56Speaker 02

  Eighty percent off the low, right?

• 20:59Anthony Pompliano?

  Depending on what you're looking at. Uh, and so again, could that be the bottom? Maybe. Could it go lower? Sure. But just the recent price movement over the last forty eight, seventy two hours has been very positive. How do you read something that I think many people look at Bitcoin specifically as like the most free market asset that we have? It responds positively to Fed hikes. It doesn't necessarily get punished when the GDP numbers come out. What's your takeaway from that?

• 21:25Speaker 02

  Yeah, no, great question. So yesterday was a step in the direction of of of positive news from the Fed, from the news from the Fed. We just don't necessarily believe that it's sustainable in terms of the market reaction, but we can unpack that later. In terms of what's happened the last, you know, kind of, let's just call it forty eight hours, you know, the Fed removed forward guidance from its, you know, kind of um, you know, policy communications, which means that they're going to be a lot more sort of dated. And not that they weren't already, but they will be expressly data dependent as it relates to getting into each incremental meeting. You know, they're not going to be guiding towards seventy five or fifty basis point rate hikes. It doesn't mean we're not going to get incremental seventy five or fifty basis point rate hikes. It's just that they're not comfortable guiding to it because they understand that we're.

• 22:06Speaker 02

  Finally, in the part of the process where we are starting to see, you know, some significant economic deterioration that may ultimately, you know, assist in their fight against inflation. So they don't, they don't want to overdo it. Powell definitely said that very expressly. But he also acknowledged that he's comfortable overdoing it if inflation does not behave on the timetable which with with which they they want it to behave.

• 22:27Anthony Pompliano?

  And as you see some of this playing out, obviously, housing is just being destroyed.

• 22:34Speaker 02

  The wooden stick.

• 22:35Anthony Pompliano?

  Yeah. What, what, what's your read on the housing market? And it just feels like that's not coming back anytime soon until they, you know, put us back sub two percent or even sub, sub one percent interest rate. Like, what's your read?

• 22:47Speaker 02

  I mean, housing's toast for this economic cycle, right? Like, you know, you're not going to get a significant decline in rates until you get through recession. And you don't want to be like, housing is not a place that people go speculate on or even, you know, you know, consume from a capital good perspective in a, heading into recession. So we probably have to wait till we get to the other side of the real recession to really think about housing. But, you know, you, you know, few statistics, I'll throw at you, like, you know, the leading indicators for housing are literally like falling off the map. I'm serious. Like, the, the NAHB, the National Association of Homeowners splits out this housing market index survey. It's basically like the PMI for the housing market, more or less. And the rate, I forget the, the level it landed on, but the, the, the rate of change, the month over month decline in the, in the series

• 23:29Speaker 02

  was the biggest month over month decline in the time series ever, going back to 1985, excluding April of 2020, which was the lockdowns. You got the other leading indicators like housing starts and building permits are contracting at down 40% annualized rates of change on a three month annualized basis. So like, I mean, literally, the housing market is like, light switch, click, it's dark. I mean, it's serious. It's falling off the, the bottom of the page.

• 23:53Anthony Pompliano?

  The last question I have for you is recession. Two negative quarters of GDP growth. A lot of people say it's a recession. Beats technical definition. President of the United States, he claims it doesn't. Federal Reserve, Treasury, they say that it doesn't.

• 24:10Anthony Pompliano?

  I haven't heard anyone yet ask explicitly, if two negative quarters of GDP is not a recession, then can you please define? Recession because it sounds like their answer right now would be, uh, yeah, sure. The NBER will, uh, tell you when it's a recession and when it's not of which I don't know a single person at the NBER. I don't think anyone else in the world could name someone there. It seems to be this like fictional organization that just like makes shit up. Kind of the Ministry of Truth for Economics.

• 24:42Anthony Pompliano?

  I mean, that's what I, let's just call it what it is, right?

• 24:45Speaker 02

  Honestly, like, when you, when you talk about it, it's like, I think of like seven or eight, like very old, no offense to anybody who's, who's not young, uh, very old people wearing like baggy suits from like the 1990s, you know, with like pocket protectors and like, you know, very ill colored shirts and ties. And they're like, they've got like ruled line paper. Like, is this a recession? Smoking cigs and cigars.

• 25:09Anthony Pompliano?

  Do you want to know the funniest part about this? I'm going to say something that most people don't know and they're going to be like, wait, what? When the President of the United States, Federal Reserve Chairman, the Treasury Secretary all say, two negative quarters of GDP growth is not a recession. A recession is defined by the National Bureau of Economic Research. It makes you, me and everyone else believe that's a government organization. The National Bureau of Economic Research is a private nonprofit. At what point does the government say that someone in the private market gets to decide when there's a fucking recession or not?

• 25:48Speaker 02

  I, I, I normally would be right there with you. You and I agree on 99.9% of things. The only reason I disagree with you here is because if the, if you allowed the government to determine what a recession was, then there'd never be any recessions. Because no government is ever going to indict itself and say, hey, yeah, we, we fucked up so bad in the economy and it turned into recession. Like, you know, Biden is a bit, he's been doing sort of like, um, you know, he's been backtracking on this and trying to prepare people for this print for, for weeks now, right? Like, you know, no, no, no sitting, uh, Congress or, or White House is ever going to say we're in recession. So I think this came up back in the, you know, maybe in the 50s or the 70s, you know, when the, we kept having like, you know, intermittent recessions and whatnot. And they were like, look, we got to put this to the private sector

• 26:31Speaker 02

  because if we allow the, the government to tell you, they're going to continue lying.

• 26:35Anthony Pompliano?

  There's been over 30 different edits to the recession page on Wikipedia allegedly in the last week.

• 26:46Speaker 02

  Wait, what?

• 26:48Anthony Pompliano?

  Again.

• 26:48Speaker 02

  That's wild.

• 26:49Anthony Pompliano?

  Let's say that that number is wrong, it's only 10. Why are we editing it in the middle of a recession?

• 26:55Speaker 02

  Yeah, why are we editing it at all? I mean.

• 26:57Anthony Pompliano?

  If you go to the.

• 26:58Speaker 02

  We haven't had a real business cycle recession since 2008, 2009.

• 27:02Anthony Pompliano?

  If you go to the National Bureau of Economic Research Wikipedia page, in it, there's a section that says recession markers. It's like kind of a whole section that talks about it. And this is my favorite part. The second sentence of this section says, "The MBER has come to serve the role as an 'official,' and I'm putting that in air quotes, but it's literally in quote marks on the page, 'arbiter of whether the US is in a recession or not.'" How do you say official, but then put it in quote marks? Like, what? Is it official or is it not?

• 27:37Speaker 02

  Oh, it's, I mean, again, it's, the silver lining in all this is that we have people like you, we have people like me, who can analyze the data, and we don't need to sit around and wait for the MBR to tell us we're in recession or not, right? I mean, you know, we'll be faithfully with you, you know, in many forms and formats, you know, certainly your 42 macro, to tell you, hey, look, this looks like a recession, you know? We know what to look for. It's a decline in income, decline in employment, decline in output, spans across sectors of the economy, lasts for multiple months. And again, I wish you could see my screen up, literally, probably 200 data points that I'm looking at right now. You know, I could tell you if it was a recession. I wouldn't need to wait on the MBR.

• 28:14Anthony Pompliano?

  I think that that's the big thing. The last thing I'm going to say is, somebody tweeted at me today when I was tweeting about monetary policy mismanagement, allegedly, and they said, "What makes you, what makes you think you're an expert at monetary policy?" And my response to them was, "The premise of your question insinuates that you think they're an expert at monetary policy."

• 28:34Speaker 02

  Totally. No one is an expert.

• 28:36Anthony Pompliano?

  And I think that's what we're finding out now, is that you have, similar to what you've seen in other industries, where the barrier to analysis has dropped to near zero, and now people have access to the data. Doesn't mean that anyone is right, doesn't guarantee anyone's success, but you have more voices evaluating the data, and that should be a positive. I think that it's a positive. I think that it's driven more of a conversation. But when you think about recession, are we in a recession? Like, would you classify this as a recession?

• 29:11Speaker 02

  No, but I think we'll be in one by the end of the year.

• 29:14Anthony Pompliano?

  What needs to change between now and the end of the year for you to say yes, we're in a recession?

• 29:18Speaker 02

  Uh, to get you into a recession, you need to have a legitimate corporate profit recession that causes companies to really start to pull back on hiring and then start firing people. Um, I don't think we're going to get to negative, um, non-farm payroll prints on, on terms of job creation by the end of the year. But you might actually get to the peak, you know, sometime in Q4, Q1 of next year. Um, and then ultimately the NBR will look back and say, well, this process might've started in September or December. Again, I don't think the purpose of, of, of risk management is not just to be specific with the actual date. We will learn what date they decide to choose, um, you know, after the fact. What we're trying to do here is get markets right, right? And make money in financial markets. And so ultimately you need to be positioned, you know, if the market is not fully priced in recession, which we do not believe it has, uh, then you need to be positioned accordingly.

• 30:03Speaker 02

  Um, and if you, you believe that the market's priced it in, then you then, uh, as, as you position accordingly for that. But then there, you gotta make a call, you gotta have position on if you want to make money in financial markets.

• 30:13Anthony Pompliano?

  I think that's a very great place to, uh, to end, my friend. Thank you so much. Where can we send people to find you on the internet or find out more about 42 Macro?

• 30:20Speaker 02

  Yeah, appreciate you, bro. Thank you so much, man. Uh, we're at 42macro.com. Come check us out. We got research for everybody. Uh, it's consumable and we made a lot of cool changes here. We did put out a nice little survey a couple of weeks ago. Got a lot of good feedback and, uh, so made some nice, uh, improvements to our research. So come check that out and then, uh, follow me on Twitter at, uh, 42macro D Dale. Having some fun out there. Cheers, man.

• 30:40Anthony Pompliano?

  The best macro research in the world. I appreciate you very much. We will, uh, we will continue to have these conversations for everyone who's worried about it. We're going to figure out which, uh, which format and how we're going to do it. But, uh, I appreciate everyone tuning in.

• 30:51Speaker 02

  Looking forward to that.

• 30:52Anthony Pompliano?

  You, I know you're doing a good job because somebody said that you're making them nervous with your, uh, information, so.

• 30:58Speaker 02

  I don't want to make them nervous, man. I want to make them money, that's it.

• 31:02Anthony Pompliano?

  All right, well, let's talk soon.

• 31:03Speaker 02

  Be good, man, be good.

• 31:05Anthony Pompliano?

  Thanks so much for listening to today's episode. I really hope you enjoyed this one. Make sure you're subscribed on Apple, Spotify, or your favorite podcast player. And if you're looking to transition into a brand new job in the Bitcoin or crypto industry, we've got you covered. Head over to thecryptoacademy.io. My team and I have been working with the top HR teams in the industry to develop an intensive three-week training program with over 50 live events. We teach you exactly what you need to know to break into the industry, including live interview prep and resume review. Our students have been hired at over 75 of the world's best Bitcoin and crypto companies. Go to thecryptoacademy.io to learn more. Again, that's thecryptoacademy.io. If you enjoyed today's episode, make sure you share it with your friends, and I'll see you all for the next episode.