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DEPRESSION, RECOVERY, INFLATION...

AND WHY YOU EVEN CARE?

“Mark Twain said that there are three kinds of lies—“lies, damned lies, and statistics”

What a perfect way to start a conversation where I inundate you with numbers, predictions and my take on the economy. (Click on my goofy looking face above to see what I said on Yahoo Finance today on the same subject).

Remember here – we question everything, including me. So, this week I have some big hairy non-consensus opinions for you on the economy amidst this rollercoaster that is 2020 AND more importantly, what to do about them.

I find most economists and futurists are giant walking If/Then statements. Aka – let me try to say as much as humanely possible while telling you nothing. That’s not my cup of tea.

Despite absolutely being worried about the long-term viability of unprecedented spending by the government, of social unrest and firmly believing that it will take YEARS for us to fully recover from this experiment of an economic lockdown, my thoughts on the economy are much rosier short term.

Here’s the Skinny:

#1 Stimulus: The Opposite of the Great Depression
In the Great Depression the government was slow to respond, actually raising interest rates to curb speculation and didn’t put in stimulus for years.

- Fast forward to 2020 – the US government has issued $3 trillion in stimulus between the varying bills (more to come IMHO).

- The US Economy is about $20 trillion a year so that is a 15% kicker to GDP.

- The Fed is also using trillions in monetary policy to support the economy and they say they will keep stimulus coming for years.

- This isn’t baked in yet, with many companies holding cash, $4.7 Trillion on the sidelines and much of the stimulus not fully extended.

2) V-Shaped Recovery Coming
- This massive stimulus, paired with the opening up of the economy will lead to a V-shaped recovery, First Trust’s Wesbury says, “The recession that started in March is the sharpest downturn since the Great Depression. As it turns out, it was also the shortest.” I tend to agree.

- Where I differ is I am not saying the stock market is at fair value, it still looks expensive to me vs the opportunities in the private market where businesses have been eviscerated.

- Most recent employment report showed non-farm payrolls (most common way to track employment) was up to 2.5MM. That’s still 13.3% but a major drop from almost 20%.

Anecdotally, I was in ski town this weekend in Crested Butte speaking to small business owners who told me they would have hired back more people, they are stretched extremely thin but can’t get workers to come back who are taking unemployment. So my suspicion is that number would be higher without stimulus checks.

- Initial jobless claims fell for the 9th consecutive week and haven’t retouched the peak since May 9th.

- Tax receipts are up -11.8% week over week. Basically, signaling that workers are earning more and that the economy is turning.

3) Hyperinflation: Not Going to Happen in Short Term
Hyperinflation – or what happened in Venezuela, Cuba, North Korea, Iran, Argentina (notice a communist/socialist/govt controlled trend here?), is when inflation is typically higher than 50% a month. You buy a soda for $1 one month, then $1.50 the next, then $2.25 the next. Nothing kills an economy faster. However, we are nowhere near inflation in general, more or less hyperinflation.

They say, how do you know an economist has a sense of humor… they use decimal points.

All to say – long term trends who knows, short term here are my thoughts.

Inflation will stay in check. Commodity prices at all-time lows and decreased consumption demands will keep inflation at bay.Inflation is often correlated to high employment, not the case today unfortunately.Too much supply or velocity of currency – (aka bankers throwing around money like confetti circa 2007-2008), none of that is happening now.Friedman talks about the M2 measure of money… which is how much money is going into the system and being spent, it’s up 86%. That’s a lot. Unprecedented. So, something to watch but give complete pause on spending not hyperinflation triggering.

What to do about it? How to take advantage?

2008 was a housing crisis, this is a small business crisis. NOW is the time to try to buy into small businesses, to align with boomers looking to retire and to leverage the 2.5M small businesses that are up for sale or transition in the US. I'm going to put out some content on how to do that. Diversify your income streams. Expect more protests, more corona-virus related issues, more uncertainty. That will mean some businesses don’t survive and have more disruption in them. It’s time for a side hustle, or to a buy in to varying other business opportunities. Next week I'll have a post on 28 ways to do just that. For instance did you know you can make a guide in 5 minutes on Gumroad upload and sell it, they handle everything? You can do the same with Blurb for journals, the same w/ Amazon for t-shirts. You upload e-design they do EVERYTHING else. Wait until you see this list. I created a get into cannabis guide using this, I'm going to do a journal as well. Expect more uncertainty. Invest in companies that are focused on essentials and can handle more shutdowns and shocks to business(aka essential services a la cannabis). I read a great quote saying, “Feed the masses and live like the classes.” Non-politically correctness aside – great investment advice.

The moral of this here story, the world is much better than the news wants us to believe. Now is our chance to capitalize on it.

Just one contrarian’s view.

Codie

Cannacurious? Here's our contrarians' guide to investing and getting a career into cannabis, or find out more information below:

IG: @codiesanchez

EEC: www.entourageeffectcapital.com

CS: www.codiesanchez.com

This article is presented for informational purposes only, is an opinion, and is not intended to recommend any investment, and is not an offer to sell or the solicitation of an offer to purchase an interest in any current or future investment vehicle managed or sponsored by Entourage Effect Capital, LLC or its affiliates. Any such solicitation of an offer to purchase an interest will be made by a definitive private placement memorandum or other offering document.

DEPRESSION, RECOVERY, INFLATION...AND WHY YOU EVEN CARE? “Mark Twain said that there are three kinds of lies—“lies, damned lies, and statistics”

DEPRESSION, RECOVERY, INFLATION...

AND WHY YOU EVEN CARE?

“Mark Twain said that there are three kinds of lies—“lies, damned lies, and statistics”