Mike Minutes Mastermind 07/28/2022 (Don't Be Fooled, We Are in a Technical Recession)

Good morning, Augusta Nation. Hope you're all doing super well. Let's go ahead and kick things off. I didn't have any questions that came in on the form. If you have questions, feel free to put them in the comments. But I just wanted to go ahead and talk a little bit about educational side this morning and that is this article right here. Boom.

GDP fell 0.9% in the second quarter. The second straight, straight decline and a strong recession signal. Okay, so as anticipated.

There would be a second quarter of GDP shrinkage. No one likes shrinkage. Okay. Gdp. So for a long time that has been the not just the rule of thumb, but the standard for what a technical recession is is 2/4 of GDP decline. And so feel free to read this article. I think it's pretty hilarious how this is being spun politically.

But this is the over the course of the past couple years, you can see the quarterly change in US Gross domestic product. Let me zoom in a little bit. You can see here last quarter we were down negative 1.6. This quarter we are down 0.9. And so this is obviously the quarter of when Covid took over. So that was negative 30%. And then we rebounded relatively quickly. And so two things to take away from this. Number one is what I talked about yesterday, I'm kind of sticking by and that is that I don't think this is going to be a long term, you know, three year recession. You can see here with this negative 1.6, negative 0.9. I would not be super surprised if Q3 or Q4 are positive. Again, I just wouldn't be surprised.

Especially if the war in Ukraine ends and stuff with China kind of eases up in terms of trade. But.

So again, what I talked about yesterday, I still think that. But what's kind of funny is that this is now being spun as like an indicator of a recession, that it could be looming when we've always used 2/4 of negative GDP growth as the indicator for what a technical recession is. But politically it's not good to be in a recession. So what we're going to do is we're going to say this is not really a recession because we, we know why we are having a recession. We know why. It's because we are changing our rules on quantitative easing and we are raising interest rates. So we expect there to be negative GDP growth, which is fine. But just because you expect there to be a recession does not mean the recession is not there. And so this is being spun. Hilarious. Hilariously. I don't even know that's the word. But I was looking at some of the news headlines this morning. It's rather hilarious.

So, yeah, feel free to look through this. It's very interesting in terms of like gross private domestic investment tumbled 13.5% for this quarter. That's interesting. Whereas consumer spending increased still by 1%. So this consumer is still pretty strong. And spending on services actually accelerated during the period by 4.1%. So very interesting. But then it was offset by declines of non durable goods of 5.5% and durable goods of 2.6%. So service spending is still strong.

Very, very interesting stuff. So all of that to say what I talked about yesterday, I. Oh, sorry, I wasn't showing you my article. As I was showing, talking about that. Where was it? Here you go. Gross private domestic investment tumbled 13.5%. We can see here spending on services accelerate during the period by 4.1%. So pretty interesting stuff. I think that the big takeaway from this, in my opinion is reinforcing what we talked about yesterday. That is we're going to see, in my opinion, a short term, very acute recession. And I actually think the worst was in June, May and June. And I think the thing that's going to be slower to catch up to that is going to be employment. And that might happen later this year as we're starting to already see a lot of layoffs and things like that. So the reason I'm talking about this is usually I say, like I said yesterday, a technical recession, if you look at when this happens, is typically after the worst of a recession. So for example, if we go back to this chart, which only I wish this chart showed all the way back to like the 1980s. But you can see here, when we were in a technical recession in the middle of 2020, the worst was over. Right? So when we hit the second end of Q2, like, that was like if you would have invested or done anything in July of 2020, you'd be fantastically ahead. So typically when everyone is freaking out and everything is at the trough is actually the time when you're behind the worst, when you're already past the worst of things. So like I said talked about yesterday, I believe that's already happened in terms of the recession because the fear of interest rates being hiked. And based upon yesterday, the Fed chair, Jerome Powell made it pretty clear that they don't really have an intention of raising interest rates massively. We don't have another Fed meeting until September and I feel like there's going to be a Lot of indicators economically that are weak and they're not going to raise interest rates a whole bunch. They're not going to do another 1% increase in September, in my opinion. If they did that, that would be, we'd go, we keep going into recession. But if they don't, which I don't think they're going to, I think they'll do like a half point, maybe 0.75 in September and then probably very little beyond that because we're already at 2.25, which is considered typically around what was considered a baseline. But what their, their new flexible average interest rate thing is that what's called fate is they're going to raise interest rates above this stability point, which is usually around two, two and a half. They're going to raise it above that and then over the course of 10 years they want to average around 2%. So for a very, very, very long time we were at 2, 2 and a half percent, the 10 year treasury and that was like what we considered the baseline for keeping interest rates stable. And that's what we've seen for the past 10 years approximately. Now they're going to go above that. They're probably going to three and a half percent is my estimate, three to three and a half percent. And then that will hopefully slow down the economy. And that's why they're saying that hey, this recession, we expect this, we expect because we were raising interest rates, that there's going to be a slowdown in the economy. And so.

I really do believe I said yesterday and that is that we've seen the worst is behind us in terms of the recession. And I feel like we're going to have a delay in that when it comes to employment because employment is always slower and then real estate is even slower. So those things will still kind of trickle off in the end of the year in my opinion. But I think this is a great time to start going back into the market that is spending and taking advantage of some things that are on discount. And I think it's going to continue throughout the end this year. So that is my opinion, just my wild ankle guess of what's going to happen. But that's all I had for today. There were no questions. So I know I saw one question in the Facebook group about Zooper, the Buy Now, Buy now pay later feature. We will get more details on that. It is enabled and they are testing it inside of Augusta from Zooper, which is really cool because it's all on the back end to where we would get paid right away and then the buy now, pay later option will be given to the client for like projects to be able to pay the know buy it now to pay their invoice, pay for the project and then pay for it later and the financing will be taken care of outside of us. So an option to be basically sell those projects that people need immediately and they can't necessarily afford, and we don't want to deal with the financing, but then also ability for us to down the road, really charge for projects 100% up front and then allow them to pay it whenever they want using the buy now, pay later feature. So some cool stuff, but we'll have some more information on what Zooper is doing and that new feature here next couple days so you all can take advantage of it inside of Zooper. Awesome. Take care everyone and we'll see you tomorrow.