Josh Brown: ‘If people aren’t misled, it’s not a recession’

Josh Brown: ‘If people aren’t misled, it’s not a recession’

“You can’t have a recession if people still have their jobs and have no problem getting the next job. So I don’t care what the NBER says. … If people don’t quit, it’s not a recession.”

That was Josh Brown, chief executive officer of Ritholtz Wealth Management, who was on stage at the MarketWatch Best New Ideas in Money festival on Thursday.

Brown, a CNBC personality whose New York City-based investment advisory firm manages more than $2 billion, joined his “Compound & Friends” investment podcast co-host Michael Batnick to speak with MarketWatch news editor Joy Wiltermuth at the event. The three talked about whether a recession is in store, the red flags in the US economy right now – and also why this is an opportunity for investors to buy into the market, even if it doesn’t feel like one.

“It looks like there’s a slow-motion recession that everyone knows is coming, but it hasn’t shown up in the data yet,” Batnick said.

Batnick, who is a managing partner at Ritholtz Wealth Management and runs the blog “The Irrelevant Investor,” said, “The consumer is in good shape.” He pulled up some charts to show that most Americans are still paying their bills on time, and that many people’s personal balance sheets are better now than they were before the pandemic. Both men also noted that the number of employees was strong. “The data is saying that the consumer is in good shape,” Batnick reiterated.

Brown joked that Fed Chairman Jerome Powell’s decision to be aggressive against inflation by raising the benchmark federal funds rate by 0.75 percentage points on Wednesday reminded him of a student trying to get extra credit after delaying throughout the year.

MarketWatch Editor Joy Wiltermuth (left) with Michael Batnick (center) and Josh Brown of Ritholtz Wealth Management.

MarketWatch

“Jerome Powell is like the guy who missed all his homework for the whole year, and then as a treat to the teacher, he comes in on the last day of school and writes a rock musical, and he will it,” he said, getting a big laugh from the crowd.

But on a more serious note, both men agreed that the housing market is currently “flashing red”. “If you’re worried about housing, you’re worried about the right thing,” Brown said.

That’s because housing touches on so many different parts of the US economy outside of real estate, including lending and financial institutions, construction and renovation, as well as legal work, he noted. “It has been said that between 15% and 18% of the US economy is related to housing,” he said.

“If you’re worried about housing, you’re worried about the right thing.”

Brown also said the frenzy in the housing market culminated in the Zillow “Saturday Night Live” sketch that compared scrolling through real estate listings to watching porn. “It was a great skit,” Brown said. “I think they really put their finger on what the zeitgeist was [during the 2020 COVID shutdowns]when there was nothing else to do but see how good your neighbor’s house was and admire it, because we were trapped inside these four walls.”

On the flip side, Brown and Batnick suggested that a recession could be strong for commercial real estate, as worried employees—especially those in the financial industry—may be too uncertain to keep or “quit.” demand that they be able to continue. work from anywhere. A recession could cause worried workers to return to the office and return some leverage to employers.

“Last year was an environment where you could stick the middle finger at your boss if you had financial issues. A lot of people were like, ‘Hey, you know what, really, I’m going to be in the Hamptons this summer. This is where I do my job from now on,’” Brown said.

“In a recession, it’s sung for supper again,” he said. “And you want face-time with your boss, and you want to be in the peripheral vision of the executives. So, paradoxically, the best thing that could happen to a company, assuming its own balance sheet is fine, is a recession — especially in financial terms, because then suddenly, you’ll see buildings filling up with employees again very quickly.”

And Brown noted that while many investors and consumers are feeling “dissatisfied” and overwhelmed by the headlines right now, it’s a great time to invest in the market even though many stocks are overpriced lower than they have been in recent years. He called it the investment paradox.

“Be grateful for the moment you are in. It doesn’t feel great, but the opportunities are coming now.”

“It will always feel the best at the worst possible time, and it will always feel the worst at the best possible time,” he said. “Be grateful for the moment you are in. It doesn’t feel great, but the opportunities are coming now.”

“The Reformed Broker” session with Brown and Batnick was one of the many events at MarketWatch’s Best New Ideas in Money Festival this week. MarketWatch editors-in-chief are hosting Q&As with investment legends and entrepreneurs like Carl Icahn and Ray Dalio to hear their financial advice. And there were sessions covering hot sectors like crypto and cannabis, workshops on managing your money like a pro and more.

Get insights into investing and managing your finances. Speakers include investors Josh Brown and Vivek Ramaswamy; as well as topics such as ESG investment, EVs, space and fintech. The Best New Ideas on Money Festival continues on Thursday. Register to attend in person or virtually.

You can also subscribe to MW’s YouTube channel to see full session videos.

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