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Three predictions: 1. We are very close to the bottom in stock prices. 2. We should plan for a recession. 3. Bargains are appearing — specially in real estate. Cash is king.

1. We’re close to the bottom in stock prices. Today, however, is another miserable day in stockmarkets. But it’s only semi-miserable. (You like that?)

Look at prices of our stocks, some of them have actually been lower in recent days and seem to be trying to bounce.

This is not scientific.

But it’s clearly not time to panic and sell. Maybe it’s actually time for a little nibbling of your favorite stocks. Look at these five stocks —  Apple, Nvidia, Chevron, American Express (AXP) and Alibaba (as a pure short-term spec).

2. We should plan for a recession. More about that below. But meantime…

3. Bargains in real estate will appear soon. Everyone buys real estate on margin. When things go awry, the bank grabs it and sells it. If you’re in the right place at the right time, you may find yourself with a bargain. So, stay  in touch with your bank manager. Real estate is not sold online, available to everyone with a $100 smartphone or a $200 laptop. The bank is motivated to get rid of its disaster (aka “non-performing asset), not necessarily to get the best price. Hence you’ll need cash to grab the bank bargains when they appear.

Recessions: They say that economists have been great at predicting 12 out of the last five recessions.

I’ve been mulling. Last time I instanced “Reasons”:

+ The Russia “Special Military Operation” in Ukraine.

+ Slowdown in the second largest economy, China, caused by their virus “ideas” — like mass lockdowns and lousy (homegrown) vaccines. They have their own dumb ideas — all dictatorships do.

+ Supply chain problems, made worse by China. I have satellite maps of Shanghai harbor. There are a lot of ships waiting (and waiting) to bring Amazon (and others) stuff you and want (but don’t need).

+ Strong U.S. inflation and the “need” to ease it back, also called clobber the economy.  The last time the Fed started to undertake such “quantitative tightening” in 2017, what ensued was “a liquidity crash” in which nearly $7 trillion was wiped off global stocks in 2018.

The weekend reading brought me a piece by Kenneth Rogoff, a Harvard Professor.  Here’s the piece. See what you think:

The Growing Threat of Global Recession
With luck, the risk of a synchronized global downturn will recede by late 2022. But for the moment, the odds of recession in Europe, the United States, and China are significant and increasing, and a collapse in one region will raise the odds of collapse in the others.

CAMBRIDGE – Is the global economy flying into a perfect storm, with Europe, China, and the United States all entering downturns at the same time later this year? The risks of a global recession trifecta are rising by the day.

A recession in Europe is almost inevitable if the war in Ukraine escalates, and Germany, which has been fiercely resisting calls to pull the plug on Russian oil and gas, finally relents. China is finding it increasingly difficult to sustain positive growth in the face of draconian , which have already brought  to a screeching halt and now threaten Beijing. In fact, the Chinese economy may already be in recession. And with US consumer prices currently increasing at their fastest rate in 40 years, prospects for a soft landing for prices without a big hit to growth look increasingly remote.

Private and official economic forecasts have recently started to highlight growing regional risks, but perhaps understate the extent to which they multiply each other. Widespread lockdowns in China, for example, will wreak havoc with global supply chains in the short run, raising inflation in the US and lowering demand in Europe. Normally, these problems might be attenuated by lower commodity prices. But with no clear end in sight in Ukraine, global food and energy prices are likely to remain high in any scenario.

A recession in the US, especially if triggered by a cycle of interest-rate hikes by the Federal Reserve, would curtail global import demand and trigger chaos in financial markets. And although recessions in Europe normally radiate globally mainly through reduced demand, a war-induced slowdown could radically shake business confidence and financial markets worldwide.

How likely is each of these events? China’s growth trajectory has long been slowing, with only a combination of luck and mostly competent macroeconomic management preventing a severe downturn. But no amount of careful macroeconomic stewardship can save the day if the Chinese leadership has made the wrong call on COVID-19.

Most Asian countries have now exited zero-COVID strategies and are moving on to regimes that manage COVID-19 as an endemic threat, but do not treat it as a pandemic. Not China. There, the government is spending massive sums to convert empty downtown office buildings into quarantine centers.

Perhaps the new quarantine centers are a brilliant idea, providing a way to redirect China’s bloated construction sector toward more socially useful activities than piling more new projects on top of years of overbuilding (something that the International Monetary Fund economist Yuanchen Yang and I  of in 2020). Perhaps China’s leaders know something their Western counterparts don’t about the urgency of preparing for the next pandemic, in which case the quarantine centers could look positively visionary. More likely, however, China is tilting at windmills in trying to tame the increasingly contagious virus, in which case the centers will prove to be a vast waste of resources, and the lockdowns futile.

The risk of a US recession has surely skyrocketed, with the main uncertainties now being its timing and severity. The sanguine view that inflation will decline significantly on its own, and that the Fed will therefore not have to raise interest rates too much, is looking more dubious by the day. With savings having soared during the pandemic, the more likely scenario is that consumer demand will remain strong, while supply-chain problems become even worse.

True, the US government appears to be scaling down its stimulus policies, but that will increase recession concerns even if it helps mitigate inflation somewhat. And if stimulus programs continue full throttle – and, in an election year, why would they not? – it will make the Fed’s job even tougher.

As for Europe, blowback from economic slowdowns in China and the US would have threatened its growth even without the war in Ukraine. But the war has greatly amplified Europe’s risks and vulnerabilities. Growth is already weak. If Russian President Vladimir Putin resorts to using  or tactical nuclear weapons, Europe will be forced to cut the cord decisively, with uncertain consequences for both its economy and the risk of further escalation, which might mean imposing sanctions on China as well. Meanwhile, European governments are under considerable pressure to increase significantly their spending on .

Clearly, emerging markets and poorer developing economies will suffer mightily in the event of a global recession. Even energy and food-exporting countries, which until now have benefited economically from the war because of high prices, would likely have problems.

With luck, the risk of a synchronized global downturn will recede by late 2022. But for the moment, the odds of recession in Europe, the US, and China are significant and increasing, and a collapse in one region will raise the odds of collapse in the others. Record-high inflation does not make things any easier. I am not sure politicians and policymakers are up to the task they may soon confront.

Rogoff’s piece is here.

Charlie Munger on bitcoin:

“In my life, I try and avoid things that are stupid and evil and make me look bad in comparison to somebody else – and bitcoin does all three. In the first place, it’s stupid because it’s still likely to go to zero. It’s evil because it undermines the Federal Reserve System… and third, it makes us look foolish compared to the Communist leader in China. He was smart enough to ban bitcoin in China.”

Bad news

From today’s Washington Post.

Good news

From today’s Washington Post.

From a talented artist, somewhere:

The best health advice

Don’t get covid. Too many of my friends have “long covid.” It’s not only miserable. It’s not getting better.

I won’t describe their symptoms. They’re too gruesome. Suffice, you don’t want hem.

Wear a mask.

The best financial advice

I was away last week in Anguilla with sun, tennis and salt water. It was wonderful.

I’m back in New York City.  I’ll have some travel tips tomorrow. See you then. — Harry Newton