Mark B Spiegel of Stanphyl Capital predicting a hard landing

Posted on: June 10, 2024 at 12:18:28 CT

https://quoththeraven.substack.com/p/us-economy-is-finally-cracking-mark

{excerpts additional formatting & links on original page}

The consensus is now for either “no landing” or a “soft landing,” yet before even the worst recessions the consensus is nearly always for a “soft landing”; for example, here’s just one headline of many from August 2007:

https://substackcdn.com/image/fetch/w_1456,c_limit,f_webp,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Ffa365120-3232-42ea-aee9-cf2f269b3a8f_438x320.png

In fact, for reasons I clearly lay out below, I still strongly believe that the U.S. economy is headed for a hard landing. Why do I believe so strongly that we face a “hard landing”? For the same reasons I’ve been stating since the Fed started raising rates in 2022:

There’s no way an “everything bubble” built on over a decade of 0% interest rates and trillions of dollars of worldwide “quantitative easing” can not implode when confronted with 5% U.S. rates and quantitative tightening plus tighter money from the ECB (even with a tiny expected June cut), BOJ and other central banks.

And contrary to the belief of equity bulls with short memories, when an asset bubble unwinds, lower inflation and lower interest rates won’t immediately ride to the rescue. When the 2000 bubble burst and the Nasdaq was down 83% through its 2002 low and the S&P 500 was down 50%, the rates of CPI inflation were 3.4% in 2000, 2.8% in 2001 and 1.6% in 2002, and the Fed was cutting rates almost the entire time.

Yes, a nasty recession was delayed due to a combination of interest rate lag effects, leftover “Covid cash” (which has finally run out), and consumers loading up on credit card debt, but a hard landing will soon arrive as household debt delinquencies are now surging while personal savings have collapsed, and shipping freight data is already recessionary. Yet despite myriad lurking dangers—both economic and geopolitical—the stock market is completely disconnected from a scenario involving any landing. Here are a few exhibits that perfectly capture this decoupling…

truck tonnage index vs S&P 500 index
https://substackcdn.com/image/fetch/w_1456,c_limit,f_webp,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fbfcea392-c25c-4354-a5d9-a6abd1623213_806x538.png

Leading economic indicators:
https://substackcdn.com/image/fetch/w_1456,c_limit,f_webp,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F5c4f9703-4c8a-4c58-8655-516ca0861924_649x483.png

Debt delinquencies:
https://substackcdn.com/image/fetch/w_1456,c_limit,f_webp,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fc6546033-63a9-4081-8647-9084b8d78e29_1382x1294.png

Market cap relative to GDP:
https://substackcdn.com/image/fetch/w_1456,c_limit,f_webp,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fc15d8fe9-2a33-4d23-aa9f-6eb7ab64fcbd_640x554.png