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Recession?

If you’re not confused by the stock market, you haven’t been paying attention."



​​The Portfolio Performance

The portfolio is UP +8.90% YTD

The S&P 500 is UP +3.97% YTD



Recession Fears

The durable goods orders report for January was just released; here's what I think it means for investors and recessionistas.


Durable goods orders are a monthly economic indicator measuring the orders placed with manufacturers for goods expected to last at least three years, such as cars, aircraft, and machinery. The data is compiled by the U.S. Census Bureau and is used to track changes in manufacturing activity, which is an essential driver of economic growth.


The durable goods report provides information on the number of new orders for durable goods placed during the month. This information is broken down by industry and type of goods, such as transportation equipment, machinery, computers, and electronic products.


Economists and investors closely watch the durable goods report as a critical indicator of the health of the manufacturing sector and the overall economy. It can also provide insights into future business investment and consumer spending.


The January report showed solid strength in nondefense capital goods orders, except for aircraft. This report is used as a measure of business spending.


- January orders were up 0.8% vs. December 2022.

- The shipments component of the report is used to calculate gross domestic product (GDP) expectations.

- January shipments were up 1.1% vs. December 2022.

- New machinery orders were up 1.6% vs. December 2022.

- New orders for fabricated metal products were up 0.1% vs. December 2022.

- New orders for computers and electronic products were up 0.5% vs. December 2022.


I find it hard to join in on the imminent recession narrative when job growth, wage growth, and a hot economy continue to drive inflation. Any recession will be short-lived and created by the Federal Reserve as a reaction to consumer spending. The Atlanta Federal Reserve GDPNow model increased its rolling GDP estimate for the current quarter to 2.8% from 2.7% on Friday and 0.7% on Feb. 1.


So, what does all this tell us as investors? The data suggests that inflation may stick around longer than expected and that the Fed may need to raise interest rates more in future meetings. Higher rates tend to hurt stocks, so the outlook for growth in equities may not be as rosy in the short term. Investors shouldn't worry too much about long-term holdings in good companies with strong balance sheets. The high Beta and Price/Sales companies with no clear road map to profitability are where the big risk exists. With interest rates back to normal levels, I think investors would be wise to put money into short-term treasuries, money markets, and even CDs. An investor can earn 4%-5% over six months without risk in these places. Most of the value names in stocks have become overpriced, and expect to see some selling in the large-cap value names. Watch for bargains to present themselves. Ultimately growth will come from growth stocks; in particular, I'm most bullish on tech stocks that can deliver higher productivity. Apple, Microsoft, Nvidia, ServiceNow, Snowflake, and a host of others.


The conundrum that we’re facing is that the type of inflation we’re experiencing now is not like every other inflationary period. As the Fed raises rates, they are trying to do one thing, kill demand. There will come a tipping point where the Fed’s rate increases will break the economy and force a recession. The combination of higher wages, higher consumer spending, higher credit usage, new business growth, and higher Federal government spending drives inflation beyond anything the Fed can control with interest rates alone. The U.S. economy has a supply problem. We have a labor supply problem, a transportation supply problem, a materials supply problem, and a productivity problem. Inflation will continue until all these supply problems turn in the right direction.


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Keep Me Honest 2023




"Markets don't go to zero, Portfolio's do.

Buy quality, be patient...and look twice for motorcycles."

- Clay Baker

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Clay Baker

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Rule #3: Portfolios go to zero, markets don't, Stay Invested

Rule #4: When good stocks you own drop 10% below your cost basis, add shares

Rule #5: Bull markets aren't sustained without the Transports

Rule #6: When Forward P/E is lower than TTM P/E, expect earnings to increase

Rule #7: When an investment bank sells below book value, buy it

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RULE #10: Being early and being late is the same as being wrong...move on.

Rule #11: Investing is easy. Waiting is hard; waiting is the hardest part.

Disclosure: I am personally invested long in some or all of these stocks or funds that appear in the Stay Invested portfolio and may purchase or sell shares within the next 72 hours. I am also invested in other stocks and funds that do not appear in the Stay Invested portfolio but may be mentioned or related to this article. It is not my intention to advise or encourage the purchase or sale of any security. I am invested long in these securities mentioned in this post:

AMD, AMRN, AMZN, AAPL, ARKK, ARKG, CNRG, ENPH, FB, GNRC, GBTC, GLD, HRTX, HD, IPOD, MSFT, NVDA, PSTH, TWLO, VBIV

I am invested short in these securities mentioned in this post:

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. This article is not intended to offer investing advice, guarantee 100% accurate predictions, or to be interpreted as providing a personal recommendation.

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