“Don’t Call It a Recession!”

  • Another fateful step toward an epic market crash
  • Don’t call it a recession until…
  • Two Big Tech players clear the “Wall Street limbo”
  • Has the whole “ESG” fad jumped the shark?
  • A glitch in the used-EV market
  • Readers on yesterday’s digital snafu… “Juicy” consequences of a cashless society… And more!

As is becoming our custom every six weeks, today’s edition of The 5 arrives earlier than usual — as the Federal Reserve takes another fateful step toward an epic market crash.

At 2:00 p.m. EDT, the Fed’s Open Market Committee issues its latest “policy statement.” Barring any surprises, the FOMC will raise the fed funds rate another 0.75 percentage points to 2.25%.

As a reminder, the rate was zero less than six months ago. The Fed is scrambling to catch up with the inflation it didn’t see coming last year… and in so doing is touching off a recession it doesn’t see coming this year.

Our Jim Rickards has warned about the Fed’s missteps all along, with each of the previous three Fed rate increases. Today brings the fourth — as Jim sees it, the fourth horseman of market doom.

We’re leaving the replay of Jim’s “4th Horseman Summit” online for only a few more hours. Any longer and it might be too late to act on his warning. So we’re taking it offline tonight at midnight.

Click here to watch the replay immediately — you can always come back to the rest of today’s 5 later.

Presumably Fed chair Jerome Powell will be peppered with questions this afternoon about that incoming recession — assuming it isn’t underway already.

Tomorrow morning the Commerce Department delivers its first guess at GDP for the second quarter of 2022. If the figure is negative — and that’s not a sure thing — that will mark the second consecutive quarter of economic contraction.

“Two quarters of negative growth” is one of the common definitions of a recession. Depending on who you believe, it originated in 1974 with an economist named Julius Shiskin.

“There is no universally agreed definition of a recession,” said a 2019 Barron’s article — and it’s hard to take issue with that.

As noted here yesterday, the White House is acting out of self-preservation and pushing back hard on the Shiskin standard — prompting no shortage of online mockery.


The White House statement said the Shiskin standard is too simplistic in contrast with “a holistic look at the data — including the labor market, consumer and business spending, industrial production and incomes.”

Translation: “Don’t call it a recession until the National Bureau of Economic Research calls it a recession.”

The NBER is not a government agency. It’s a nonprofit based in Cambridge, Massachusetts — a few blocks away from the Harvard campus.

The NBER has a “Business Cycle Dating Committee” consisting of eight economists. Per a recent CNN article, “There are no fixed-term dates and the final determination of who gets to serve on the committee is made by one man: NBER president and Massachusetts Institute of Technology economist James Poterba.”

Every one of them is over age 60; two are married to each other. CNN is quick to remind us none is a person of color.

But the problem isn’t the NBER’s insular culture: It’s that the NBER doesn’t declare recessions until many months after the fact — and that’s by design.

“A committee member told me they often know months, or a year before, a recession has begun/ended,” tweeted Bianco Research chief Jim Bianco recently. “They wait for the final data to get the exact start and end dates correct. They view their job not to call recessions, as that is often known, but to get the dates correct.” [Emphasis ours.]

Because of the extreme care the NBER economists exercise in this regard, their recession calls often come off looking like Captain Obvious: They didn’t declare the “Great Recession” was underway until December 2008 — three months after Lehman Bros. blew up and 12 months after the economy started turning south.

And there are other oddities. By the NBER’s reckoning, we experienced a mild recession for eight months in 2001 — even though GDP did not experience two consecutive quarters of decline.

So the White House is being disingenuous with its insistence on a “holistic look at the data.”

For the moment, the White House can still fall back on one argument: But… but… the job market is still strong!

True, going by the Labor Department’s narrow definition of the number of new jobs each month.

But the White House and its media lackeys are falling victim to recency bias.

Yes, every recession going back to the early 1990s was presaged by a downturn in payrolls. But that was an era during when inflation rates were falling steadily.

During the inflationary 1970s, however… payrolls continued to rise during the first few months of NBER-defined recessions. Those are the green lines on the gray recession bars in this chart…


We won’t bore you with the whys and wherefores. Point is, in the current inflationary environment, we could easily be in a recession right now even with monthly job numbers holding up all right.

Still, all of this recession-definition talk feels like angels dancing on the head of a pin. There’s a much more fundamental problem with the whole enterprise… but we’re limited by the constraints of our 5 Mins., so we’ll dig into that tomorrow.

As the hour approaches for the Fed announcement, Wall Street is reversing many of yesterday’s losses — perhaps on the back of upside earnings surprises.

At last check, the Dow is up a half percent and back within 100 points of 32,000. The S&P 500 is up nearly 1.5%, less than 25 points away from 4,000. And the Nasdaq is up 2.5%, less than 150 points away from 12,000.

The two big earnings numbers come from two of the biggest tech players. Microsoft logged its slowest earnings growth in two years. Google parent Alphabet, meanwhile, reported its slowest revenue growth in two years.

But both numbers beat the vaunted Wall Street analyst expectations, and so shares of both companies are rallying 5–7% on the day.

Precious metals remain stuck in the mud, gold at $1,719, silver at $18.66. Bitcoin is back above $21,000, Ethereum comfortably above $1,400.

Crude is rallying strong after the weekly inventory numbers from the Energy Department — up nearly $2.50 as we write to $97.42.

All of this could be thrown into a cocked hat this afternoon. Yes, a 0.75-percentage-point rate increase is in the bag. But traders will parse the Fed statement and Jerome Powell’s news conference for clues about the final three Fed meetings this year — the next one in mid-September.

There’s one big economic data point preceding the Fed announcement today, and it’s deceptive: Durable goods orders shot up 1.9% during June, in contrast with expectations for a 0.5% drop.

But the jump was driven mostly by an 81% leap in orders for defense aircraft — a category that’s notoriously “lumpy” from month to month. Elsewhere, the figures are “consistent with a sharp slowdown in private equipment investment growth in the second quarter,” warns economist Andrew Hunter in a client note.

Dare we ask so soon? Has the whole “ESG” fad jumped the shark?

As you might know, ESG stands for “environmental, social and governance” — a sort of social-justice-warrior standard to judge companies’ conduct. A prime mover behind the ESG movement is BlackRock, the giant asset manager run by Larry Fink.

Through its iShares ETFs, BlackRock wields control over a meaningful quantity of voting shares in many publicly traded companies. (You, if you own iShares ETFs, are merely along for the ride.)

But the energy crisis of 2022 has delivered a clue-by-four to Fink and company. “BlackRock’s support for U.S. shareholder proposals on environmental and social issues fell by nearly half in this year’s annual meeting season,” reports the Financial Times, “as the world’s largest money manager voted for just 24% of them.”

Last year, BlackRock supported 43% of such initiatives.

“Many climate-related shareholder proposals sought to dictate the pace of companies’ energy transition plans with little regard to the disruption caused to their financial performance,” said a BlackRock statement. “Others failed to recognize the progress made. These factors made these proposals less supportable.”

Heartening as this development is, it’s much too soon to say ESG is dead and buried.

ESG remains part and parcel of an ambitious climate-change agenda among the control freaks and power trippers of the world. Incredibly, it is hostile to both fossil fuels and to nuclear energy — and nuclear is the only way to sustain a transition to a “green” electrified economy in which we’re all supposed to plug our cars into the wall at night.

The failure of this transition is why Germany is in dire straits right now: Having shuttered its nuclear plants and seeing its natural gas supply from Russia being slowly squeezed, Germany is restarting coal-fired power plants just to keep the lights on.


Amen. That comes from the still-anonymous blogger who goes by the name “Doomberg.”

He elaborated this weekend during an interview with the Financial Sense podcast: “We think, like everything, these things come in cycles. As people see their standards of living drop, they know the real story. The political upheaval will be real, and hopefully the political changes needed to put us back on the right path are peaceful.”

In this regard, Doomberg actually has more hope for the United States right now than he does for Germany. We’ll chalk up BlackRock’s rethink in the plus column…

Speaking of electric vehicles, we’re seeing yet another glitch in the used-EV market — above and beyond the one we’ve mentioned about no replacement batteries being available for older models.

It came to the attention of the world through a tweet storm by Jason Hughes, a fellow who services Teslas in North Carolina.

One of his customers recently bought a used 2013 Tesla Model S. A previous owner took advantage of a warranty offer to upgrade the battery from 60 kWh capacity to 90 kWh. More capacity, more range between charges.

“In other words, it was still technically a Model S 60, but with the battery and range of a Model S 90,” explains the Futurism website. “The latest owner then had the onboard computer upgraded at Tesla — and that’s when the problems started.”

The owner drove home, and while the car was parked in his driveway, Tesla called to inform him they made a “configuration mistake” — which they fixed remotely.

The fix entailed disabling the battery’s extra capacity. If he wanted it re-enabled, that would cost him $4,500. For real.

So far, the owner has had no luck pleading his case with Tesla.

This development is way more outrageous than BMW disabling heated seats unless you pay an $18-a-month subscription… but neither makes us inclined to own any sort of “internet-enabled” vehicle, that’s for sure…

To the mailbag: “Emily has been working with Dave for so long that she’s starting to look like him!” a reader quips.

Writes another: ”Emily, are you OK? Something seems a little off about your picture. If you’re working too hard or stressing about things, I’m sure many of your loyal readers, myself included, would be happy to lend a helping hand.”

So yeah, some sort of digital gremlin struck yesterday, and we didn’t catch it before hitting send. The “banner” at the top of the issue featured Emily’s name and title, but with my photo next to it. First time for everything!

The second reader pivots to another topic: “I’ve mentioned before the perfection with which our elected officials are able, time after time, to draft and implement the law of unintended consequences in its many forms.

“A cashless society provides too juicy an opportunity for them to resist, I assume. What could possibly go wrong? Let us count the ways…”

The 5: True enough. As with the no-fossil-fuel-but-also-no-nuclear obsession… one wonders when the torches-and-pitchforks moment will arrive…

Best regards,

Dave Gonigam
The 5 Min. Forecast

Dave Gonigam

Dave Gonigam

Dave Gonigam has been managing editor of The 5 Min. Forecast since September 2010. Before joining the research and writing team at Agora Financial in 2007, he worked for 20 years as an Emmy award-winning television news producer.

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