Well, we gotta talk about a mid-cycle slow down slash recession? And is it possible? Is it possible that we could actually be facing a type of slowdown that isn't that bad? And the answer to that is, well, what we're going to talk about in this particular video. and in my opinion, it's actually quite remarkable. So there's this argument that perhaps just maybe 1995 is 2023. All well, basically today.

And so what does that mean? Well, in 1995, we had what was known as a mid-cycle Slowdown See, we came out of this 89 recession, which really didn't take hold until 1990.. So either crash in 89, we got the Recession the official recession designation. In all August of 1990, the recession technically was over by March of 1991.. Now, what's really interesting about this is it was one an eight month long recession.

So you had your crash in 89, your official recession about a year later in August of 90.. the recession ended in March of 91. And guess when unemployment peaked 15 months after the recession? Well after the recession started. well.

so which that's pretty remarkable because the recession started in August of 90. But it wasn't until June of 92 that you ended up getting to 7.8 percent. Uh, unemployment. Which is pretty remarkable.

That's that's a pretty high level of uh. Unemployment Uh, and so uh, a lot of people believed that. Okay, well, if unemployment can take that long to Peak then obviously unemployment is a lagging indicator. And that is absolutely true.

We know that unemployment is a vastly lacking indicator. One of the things that we also know today is that there really hasn't been an official recession without the unemployment rate skyrocketing. Like when you look at the St Louis Fed and you look at the charts on the unemployment rate every time it takes up and hockey sticks up. You have a recession.

Now that's interesting, but it has nothing to do with the mid-cycle sort of slowdown other than the fact that it was relatively close to when you last had a recession. So think about that, you had to crash in 89 And then you had a recession. Uh, in 90 to 91.. Okay, great.

So then you started going into recovery mode. And in recovery mode, you actually started seeing the stock market start doing quite well. And not only did it do quite well, it started doing very well. Specifically starting in 1995.

And if you look up the S P 500 and like you look up like a 90-year history on a logarithmic pattern or whatever, you'll really see, uh, what, what we're talking about. But in 95, you started seeing a skyrocketing of the stock market going all the way into the 2000s era. And then of course you had the.com crash and some nightmares over here. But what was really remarkable was the conditions of 95 that led to the stock market rally.

And it's wild because think about how similar it sounded, you ready for this? I Went to a 1996. New York Times article and here's what they said: While there's talk of a possible recession, the conversation leans towards a mid-cycle Slowdown rather than a full-blown recession as indicators such as consumer sentiment and spending remain relatively strong. It's very interesting, mostly because what led to the mid-cycle slowdown in the mid 90s? Listen to these conditions: The Federal Reserve raised interest rates several times in the early 90s in an effort to control inflation. The dollar had also risen strongly after the 89 crash and 90 recession, making it expensive for American businesses to export goods and services.

On top of that, you had a decline in business investment. Those three conditions are exactly the same three conditions that are going on right now. Literally, they're exactly the same things you're seeing. right now.

You have the rising interest rate environment. Not only do you have the rising interest rate environment, but but you have a dollar that has already substantially strengthened. and then on top of that, you're seeing this slow down in business fixed Investments uh, as well as uh, just businesses. Overall, being most likely to be affected by the credit crunch from the banking crisis.

Which makes sense because when businesses take out loans, they usually don't take out a 30-year fix like a consumer does. They take out these revolving lines of credit that slowly adjust up in interest. and that's painful for businesses. It's actually more painful for businesses than it is painful for consumers.

And then listen to this from the 1996 piece from The New York Times What do they have to say? They have to say the U.S economy grew at a meager annual pace of just 0.9 nine percent in the final three months of 1995.. And guess what, you didn't end up having a recession, which that was. The really exciting part is that you could grow at point nine percent. I Think for the year, GDP in 1995 was about 2.6 percent when they finally did the math on the full year.

Uh, but uh, what's Wild Here is you had GDP really slow under higher rates, a strong dollar unless business fixed investment. And this came after a recession just a few years before which we had a 2020 recession remember. And on top of that, you had, uh, the consumer spending levels start stabilizing. They didn't really fall off a cliff, but they started getting quote restrained.

Also, you saw total output somewhere around the 2.1 percent, which was quote back then. the smallest gain since 1991. Basically, right around after that recession ended, you started coming out. you had the Clinton Administration Anticipating economic weakness might continue for another year ahead, but expected growth to Rebound in the spring of 1996..

Alan Greenspan The chairperson of the Federal Reserve described the economy as going through a significant soft patch, but predicted the higher likelihood of a rebound than a recession. Builders broke ground on new homes at a solid Pace in January 1996, offsetting previously the previous declines in December. That's literally really the same thing that just happened this year, by the way. same thing with housing starts and then personal spending while it climbed 0.8 percent in the first quarter or the fourth quarter in 1995..

it, uh, it was substantially slower than that 2.8 percent climb they saw in the summer before that. Uh, so you saw businesses really slow down. consumers slow down a good amount. but you didn't end up going into recession for the entire year.

You ended up Rising uh with a GDP level of somewhere around 2.63 percent. Uh, and you avoided a recession. But when people look back at 1995, they're like, dude. 1995 was one hell of a soft patch in the economy, but it was a great year.

Why was it a great year, folks? Look at the stock market. ready for this. I'm going to show you a logarithmic chart of the S P 500 and it's scary. Go back.

Well, look at. look for a moment. Where on this chart do you see the biggest skyrocketing? Uh, and this is a logarithmic chart? Uh, and look for the biggest skyrocketing outside the decade going into the pandemic. So in other words, ignore this part.

which is the decade going to the pandemic. Where is the biggest rise in this logarithmic curve? Well, it's actually right here. and let's see where that begins. Oh, look at that right here.

February of 1995. yo boy. Kevin was three years old Anyway, February of 1995. during the soft patch during the mid-cycle slow down during everybody freaking out about their potentially being in a recession after you already had the recession just a few years before that.

during all of this freaking out, the stock market absolutely went ape. I Mean it went to higher levels, uh, than than we saw until uh, basically 2014 on. you know, on nominal levels here. Now some say, you know.

Well, of course I mean once you got to the late 90s, you had the.com era, which was just a massive period of excess and speculation. This is true. I mean it all ended up in the poopy Doopies over here, right? You ended up with double recession.com recession in the Great Recession driven by housing. But the point is, if today we're at February or March of 1995, you got another five years, bro.

and that's consistent with the nice Nike Swoosh recovery. Just say, now it's not just me who's talking about this potential idea that today's cycle could be somewhat similar to 1995. it's actually uh, Texas instrument. Uh, this is uh, this is where I was inspired by the idea because I've always looked at.

you know the Federal Reserve has regularly talked about this idea of a soft landing and uh, the soft Landings that we've previously had have been far and few between. It's basically mid 80s, mid 90s, those are your soft Landings and this, the mid 90s soft Landing just happens to be somewhat eerily scarily similar. uh to to you know, some of the conditions, some of them, not everything. uh, that we're seeing.

Now you know, history doesn't repeat itself, but it tends to rhyme and uh, the chair Chief Executive Officer of Texas Instruments was at a banking conference with uh, City, the City Conference and I want to read you what he says So he said the following: I know you're a historian in terms of keeping track of this stuff. To me, potentially the cycle you may want to go back and look at is 1995 to 96. because 2000 to 2001, the Y2K cycle emerged into a pretty weak personal electronics Market. But and so did the 2008 to 2009 cycle which emerged into a pretty weak global economy because of, well, the real estate crisis.

But between 1995 and 1996, you had, in the words of the CEO of Texas Instruments quote what turned out to be an eight, seven or eight year secular run with the growth of PCS and cell phones. Well, it isn't going to be PCS and cell phones in this run. Guess what it's going to be. It's going to be industrial and automation because of semiconductor.

Toccata In other words, AI Now the City Conference was happened Before you know all this AI stuff was going crazy and Kevin's like hey, all right well let me show you as an entrepreneur or as an employee, how to be more productive using AI via my course Sun building your rev link down below how to make more money and get Sh90 done faster. It's actually a free upgrade for existing members of that course, but uh, we're going to be doing all the AI releases here on June 1st I encourage you to join. We'll have another large price increase. uh once June 1st rolls around.

so check that out! You can bundle up with any of the programs like down below. but listen to that quote for a moment. you had an eight, seven, or eight year run where from 95 to 96 the stock market blew up because of cell phones and PCs Well now we have these conditions in the market that are super similar to what we saw in 95. And the stock markets not, you know, just getting potentially started on its run.

So it's actually a really exciting period to look back to that. Maybe just maybe this is not going to be a recession. Maybe we we had a technical recession I mean Q1 Q2 of 2022 was a recession Technically right. we had negative GDP uh but beyond that it makes you wonder: Is it possible that Ai and productivity can can swing us out of this? And then this is of course where people say but Kevin the consumer they're gonna roll over right? This is what all the Bears say and I get it because the Bears are like Kevin Okay, we agree, inflation is going to come down, but the consumer is going to roll over.

Really? where are the indications of that? Well, let's just analyze exactly that. for a moment. let's go press. Uh, let's see.

I'm supposed to be able to press that button. It didn't work Okay, hold on. I Pressed that button. Here we go.

Okay, so I press this button and then I need to press this button and then that button. Oh that's not the right button. Oh dear. this is what happens when I bring back the Me Kevin report and it just has some battle tests.

It hasn't been battle tested. Okay, you just have to bear with me here for a moment. One of these buttons is gonna, uh put me in the right spot. Oh, this is terrible.

Uh well. you know what? Whatever, You'll just have to deal with me where you'll have to deal with me. Yeah, I can't I can't get it up Boys and girls, you can't get it up today. Uh, that's all right.

We'll just, uh. we'll just, uh, go with Kevin right there. All right. So what do we have here? Look at this: America runs on consumer spending and consumer spending continues to run.

Oh, hold on. I'm in the weird corner. There we go. America runs on consumer spending and consumer spending continues to run.

in the right direction as this week's strong April Sales report confirmed retail sales report. The strong start for consumer spending should support another moderate increase in GDP in the second quarter. In aggregate, the household sector is a net recipient of monetary interest, while non-financial business sectors are net payers of Interest. As businesses gradually reset into higher interest expenses over time, this will be an added headwind.

Okay, then they talk about how businesses are starting to reach a Breaking Point and how you know last week's seven went bankrupt. This is a recent report. By the way, it's from May 19th. There we go.

Oh, it's so weird being in the top left corner there. Uh, anyway, May 19th. This is from when this JPM reports from and what they're really telling you is hey, look, businesses might be the ones who roll over. As we talked about earlier, it's businesses just like in 1995 that started slowing down their Investments because it was getting more expensive to do business because rates were going up, not the consumers.

The consumers didn't roll over in 1995 either. And yes, while some things slowed in 1995, we didn't actually go into a recession. Uh, and and really, we're seeing similar things happening right now. In fact, look at this: uh oh.

First of all, they talk about the credit tightening and how the Fed's probably done this cycle. Okay, we talked about that earlier. but look at this. after a sluggish end to Q1, real consumer spending might be off to a good start with the April Retail Sales report.

Even though retail sales growth was below expectations with a point four percent increase in April the sales of the control category Rose 0.7 percent. So what is control Well Control takes out the volatile gas segment, the volatile, the used autos and new auto segment. it takes out building materials. and Food Services which is like restaurants now I Understand that takes out a lot of stuff.

What does it leave in there? Well, it leaves in there. You're getting your hair cut, your CPA your dentist. Medical Services You're buying uh, groceries? You buying see not Food Services right? You buying? Uh, you know I don't know. Um I I If I didn't already say well here like tax, prep, services, financial services, courses on building your like, all those things are excluded or or are included.

Rather, the only things that are excluded Auto's gas, building materials and Food Services these are generally the volatile ones. And when you actually look at that segment, retail sales Rose 0.7 percent in April of 2023 And what's it being driven by? You won't believe it. Online retailers. Dude, you know how long online retailers were a big sandbag? Well, for a very long time, they were a massive sandbag because everybody's like, oh my gosh, you know I'm done buying stuff online I Want to go out and spend money at an actual store again because you know I'm so used to buying stuff online because of covet.

Well, now all of a sudden, retail online retailers are actually driving retail sales again. This is crazy. So uh, you know. And then of course you could look at industrial production data coming in stronger than expected.

There is a lot of noise in this. You know, some reports are strong, some reports are weak. You've got the New York and Philly feds coming in strong. Uh, you had Empire State coming in a little bit soft.

You had some other business surveys uh, like ISM moving up Institute for supply side management. So a little bit of of mixed data here, but when you're actually looking at manufacturing output, it seems like you're seeing at least somewhat of an inflection point up in April Which is just weird because I I Think most of the bear argument is that oh well. okay, inflation will go down, but the Fatal have squeezed us into an earnings recession because people are going to stop spending. but it's just that's just not what we're seeing in the data right now.

Uh, not only is manufacturing data ticking up again after the banking crisis, but consumer spending is sticking up again like the second quarter is starting to look just fine. And it's scary to some extent because it's like there's no way Jerome Powell could really pull this off, is there? I mean there's there's no way he could pull off this soft Lane it has happened before. It is very rare and you know I'm not here to be like a J-pow shell. I Mean we know they've been wrong in the past here pretty significantly, but it's kind of remarkable to think that.

wow, that's weird Kevin maybe this could potentially be like 1995. now you know I'm not saying with certainty. that's what what I think it is I still believe in my volatile Nike Swoosh which we've been talking about for like six months. Sorry to sound like a broken record, but I mean I was blown away yesterday when I looked at the S P 500 over the last you know, 90 years or whatever on on a log curve and I'm like, well, what did it do in 95 and I look and see it Skyrocket I almost lost it I'm like oh my gosh, near soft Landing in 95 in the stock market skyrockets which we kind of started setting the you know foundations for in the last five months.

The Market's done very, very well and if you look at the the Atlanta feds real GDP Now cast which is basically this forecast of what GDP is going to be for the second quarter, it's rising. They keep revising it up. First, they thought it was going to be 1.9 They thought it was going to be 1.9 Just uh, three weeks ago. Then they raised it to 2.7 Then they raised it to where it is now at 2.9 percent.

Oh, it's almost three percent growth. That's for the entire United States Right now, we're projecting Q3 to be uh, sorry Q2 to be on Pace for almost three percent growth? That's wild. I mean that's knocking on the door of what we saw in 95 when we had 2.63 growth for the entire year. So I know everybody's talking about the recessions coming in.

Q3 Q4 You know everybody's gonna suddenly magically run out of money and stop spending. Uh, and it's possible I mean businesses could roll over. uh, maybe consumers don't have to. It could be businesses that roll over.

I Actually think this. this piece, uh by JPM was pretty reasonable. where where they suggest yeah, like hey man, if if we do roll over on, uh, on the on the business side, maybe that's all you need to go into recession. but this is just not as as bad as uh as as thought.

uh so uh, pretty pretty remarkable. Pretty remarkable. So um anyway, uh, let's see. let's take a quick look at some of the comments here.

Uh, 1995 was due to dance Mix 1995 on CD You know whatever enthusiasm it takes Welcome redis being another member of the Uh Channel over here Steve says time for that Dell Step bro. Uh yeah, it was a little bit of a dumb butt. I uh I uninstalled over the weekend like three Wi-Fi access points I have in the house I usually have five I'm down to two right now so uh yeah, that was uh, that was my oopsies. mostly because they're old and I'm upgrading them.

but I didn't install the upgraded part yet and then I'm like let's have this great idea of going live. Uh, anyway. okay, well so so look at this. A lot of people on Twitter are showing the explosion and Consumer loans and the end of the student loan pause.

Okay, first of all, let's make this very clear: Guess what people paid before their Pan the pandemic? Okay, think about that for a moment. What did people pay before the pandemic? I'll give you a moment to think about it. Okay, they're debts. They paid their student loans.

Oh my. God Radical idea. Holy crap, people paid their student loans and what did we not have? All right? Maybe because students are kind of broke. He's anyway, it's unfortunate, this is true.

Uh, but um, yeah, yeah, you know. I I don't I don't know that. This idea that oh yeah with certainty uh uh. once.

Uh, once people have to pay their student loans again, the economy screwed is probably just as strong of an argument as people were making or like, oh well, just wait as soon as China reopens, every commodity is going to go to the moon and we're going to have another wave of inflation and I'm like, okay, dude, just like we had all that inflation last time, China's economy was open. What happened? China's economy opens up. Everything's fine. like sorry that not a good way to drill Fear: Uh, now you know this.

This other idea we could look up. we could go: St Louis Fred uh. Household spend Uh, Debt Service Payments Disposable income. So all we have to do is pull up a chart of what's going on with household.

Uh, Debt Service payments as a percentage of personal income. So I'm gonna grab that chart and then we can also grab Consumer Debt Service payments as a percentage of personal income and we can go all the way to Q4 2022 on this data. We'll pull this data up on screen in just a moment. Here, Let's go and run this over to the iPad uh and then we can look at some of the data because I think it's going to give us a good indicator of what we want to pay attention to and it's not that the nominal number of debt is going up I Think that's something that a lot of people really miss.

It's sort of like and look, I get it, You know I said it too, You've heard me say and it's true. Oh, this banking crisis is already larger than the banking crisis of 2008. Well, yeah, but you know the dollar. We've had a lot of inflation since then.

Okay, I'm not saying that there hasn't been a lot of inflation. I'm definitely saying that. And I'm not saying that's a good thing to say is problematic. It is a problem.

Uh, but what's crazy is when. uh, when we remember that nominal numbers matter When we bailed out the economy and covid with trillions of dollars and the bailout, you know what was tarp like 1.2 and I think we were like six trillion dollars in covid? It's a crazy difference in terms of the numbers. Uh, but anyway, so take a look at these numbers here. We'll pull this up.

Let's see here. Um, we're gonna go here. It's here. So what do you have here on screen? You have household Debt Service payments as a percentage of personal, uh, disposable income.

And what you have here is really an indication that we're nowhere near to the levels that we saw in 2007 or eight in 2007. And eight. we were around 13. up to 13 Right now.

we're all the way down there. at the bottom, right at Nine Point Seven percent. So in other words, Nine Point Seven percent. That's how much money we're spending on debt as a percentage of our disposable income.

Now, if we jump on over this is household Debt Service Payments right? Then you jump on over here to Consumer Debt Service payments. Okay, so this one's a little higher. Right In Fairness, it's a little higher. Oh, but wait a minute.

It's just on par with what we saw in 2017 18 and 19 and it's actually a fraction of what it was. Uh, in the mid 2000s. Uh, you know, in the mid 2000s, you were sitting around six percent. early 2000s, you were knocking on the doors seven percent.

Uh, and we're down over here at 5.7 percent I Know the numbers don't sound like they're that horribly far off, but when you look on the chart you can see we're not seeing any kind of like explosion or or runaway. uh, of something that's horribly concerning. So yes, on a nominal value, debts are going up. people are taking on more loans I get it.

But people are also making more money. So so this idea idea that oh, but people I mean Max Max You're right to bring this out. I Actually think it's great you bring it up so thank you I'm not I'm not saying you're wrong I think it's great you bring this up because it's good to address the issue. but this idea of people on Twitter complaining about the explosion of student loans or the explosion of Consumer loans in the end of the student loan pause I Hate to say it, but that's absolutely what I despise about Twitter is the level of depth you get on Twitter is zero because it's just what's the what's the sexy? like provocative? uh, a chart that you could throw up on screen and it's that's going up and that gets likes and shares and retweets.

Now don't get me wrong, there's some really cool things about Twitter You know I don't want to poop on Twitter that much because I do like Twitter But that's one of the things that grinds my gears is that the level of depth on Twitter is like negative. Man, it's because it's almost like I Think people who really do well on Twitter they have to look for those charts that evoke a lot of emotion and rather than you know, potentially argue why that chart is. Actually, you know why you have to adjust the chart. not to be relevant to our times today.

it's so much easier to just go way up and then everybody's like oh, that can't be good. You know it's like Kevin McCarthy on Fox News We spent too much money on our credit card. It's like we gave a teenager the credit card. We spent too much money and and now we gotta rein in the budget because we're in tough times.

It's like oh, okay, I mean the government is different from a household in many regards. Uh, most of the fact that we could print our money and inflate our money away. and technically we never have to repay our debt as long as the economy grows stronger. But that's not to argue that we shouldn't have a balanced budget.

We should. Our government's highly failed that, and they're highly inefficient at spending money. But the point is, there's a lot more than making a simple analogy that goes into the complexity of a situation. and every time I look at these bear arguments I'm like I don't see it I don't see it.

It's that's not that scary and to me, that's what makes me dare I say the b word. but it's true. It's what makes me bullish. Uh, there was this, uh, there was this guy on Twitter oh who was he, uh, there was this dude on Twitter he had this uh long a rant and he's like a super bear.

Uh, super bear and so this super Bears on Twitter and he puts together this chart. It was something. it was um I think it was the credit impulse. That's what it was.

It was the chart on credit impulse. So he puts up a chart on credit impulse and I tried to recreate his chart and I couldn't do it and so I tweeted at him and I'm like bro I can't recreate your chart. How did you make this? Did you rig the data? Because the only way I could remotely and potentially get a chart that looks like yours is if I rigged the data and then I get something that looks like what you did. Maybe I missed something here.

Can you just like help me understand how you made your bear chart and uh, never reply, never reply, just tote. Never brought it up again, never brought up credit impulse again, just I can totally ignored it. It's like okay, fine, but like why? why why do the Bears have to resort to that? You know it's like uh, it's like Mike Wilson the more frustrated he gets that the bear case isn't playing out for him. uh the more he starts talking about nonsense like oh, the the Academy and the Stack might get her.

you know they're they're they're in thin air, they're climbing Mount Everest and it's thin air up there. They're gonna suffocate eventually and but we you know we just looked at consumer data. it's like it's not that bad and then you get out of these other people again on Twitter uh and they're like but Kathy Have you seen the P E ratios of all these companies? This is clown world and then I look and I Go bro. you're using 20 22 numbers and when you use 2022 numbers especially of the tech industry when the earnings were in the hole because you're comparing to 2021.

we know the chip companies had a nasty earnings recession that's already behind us. That's why Nvidia went to 120 bucks because of the earnings recession and so you're going to use trailing 12-month EPS to tell me what the P E ratio is and and to somehow suggest that we're in clown world today because you're using EPS From the whole like, who's the Clown look, use realistic data. it's a whatever but I don't know I don't know. maybe maybe just maybe Kevin has Rose Colored Glasses on no I really do my best every day to try to see what the bear argument is what I'm potentially missing.

But I'll tell you so far, this really this idea of whether or not we have a 1995 recovery or not? It really feels a lot like we are actually on the Nike Swoosh recovery and I'm very optimistic about it. I'm very optimistic about buying real estate later this year. I'm very optimistic about being in stocks and I'm very optimistic about these courses, especially the AI release coming out on June 1st foreign.