In 2018, while in New York for work, I was invited to a party that ended up being a pretty unique experience.
The rules were that for the first hour it would be first names only, no discussion of what you do, etc. Part of the fun was figuring out who was there and why they were special. And, there were a lot of pretty impressive people in the room. As I was wondering who was able to bring all these experts and thought leaders into one home for a house party, I found it was Nouriel Roubini - the infamous Harvard economist known as Dr. Doom.
Nouriel Roubini's predictions have earned him the nicknames "Dr. Doom" and "PermaBear" in the media. He predicted the housing bubble crash in 2007-2008, and has extensively studied the collapse of emerging economies.
So, after a tumultuous few years for the global economy, I thought I'd check back in and see what he was saying.
It turns out he's less pessimistic than you would guess. He's pretty optimistic about 2024 growth and not particularly worried about a recession—though he is expecting a downturn.
He also thinks there's a possibility that growth remains above potential, and inflation remains sticky. That would be good news for the economy, but bad news for markets – as the Fed likely wouldn't cut as much or as soon as people are hoping for.
Now, Nouriel has been wrong before, and I don't trust any singular pundit. My mindset is to listen to voices that don't already believe what I do. I tend to be optimistic as a rule, and I've been optimistic on things like blockchain, whereas Nouriel has been staunchly negative.
But, he's a smart and educated voice who can justify his opinions. And I end up more educated - and often modifying my stance a little bit - based on the context he's able to give.
By the way, as I was editing this post, I saw that Chase CEO Jamie Dimon and billionaire hedge fund founder Ray Dalio admit they got warnings on the US economy wrong — for now.
Are you listening to voices outside of your preferred channels?
House Prices Versus Income in America
As we discuss the economy, I also think about my youngest son, who is looking at houses right now.
In countless ways, today's youth have it easier than we did. Access to opportunities, the internet, capital sources, etc., has gotten more accessible, yet there are a few things that have gone the other way, such as buying a house.
via visualcapitalist
The chart above does not show interest rates or inflation. For example, in 1984, the 30-year fixed rate was close to 14%, over double what it is now.
But, to put things in perspective ... I moved to Texas in 1986. Part of my rationale was that I could buy a "nice" home for a little less than my initial starting salary as a lawyer.
Recently, policy decisions have vastly increased house prices. How much? Median house prices are nearly 6x the median household income in America. Meanwhile, the economics of renting are significantly better than buying. According to the WSJ, it's 52% more expensive to buy than rent due to mortgage prices.
When housing costs are this high, consumer spending and mobility are reduced, making individuals less likely to relocate for job opportunities.
We live in interesting times. Sometimes, I miss the good old days.
Posted at 03:59 PM in Business, Current Affairs, Healthy Lifestyle, Ideas, Market Commentary, Trading, Travel | Permalink | Comments (0)
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