This economist makes the case for a possible global recession because of the Russian war, energy crunch, other knock on effects. Also thinks high energy prices will be around for quite awhile.
Does any of this sound probable? I suppose Buffett and Munger think higher energy prices are in the cards for the “foreseeable” future, based on their OXY activity.
I’m certainly not rooting for a global recession/depression, but I’m kind of comforted that WB and CM are here to try to navigate it (take advantage of it?) if it happens.
I remember reading Mauldin going into the 2008-2009 meltdown, when he was advocating for a “muddle through” future. Given he is calling for recession now, I would bet on amazing economic takeoff.
Global recessions are relatively rare, but the ingredients do seem to be laid out on the table.
With or without that, I think we’re about to see chaos in the commodity complex that will make the credit crunch in that sector look like a walk in the park.
Countries banning food and fertilizer exports, food riots in dozens of countries, fun stuff like that.
Beyond the human misery, that’s often accompanied by wild price gyrations in all kinds of things.
Maybe we’ll hit turbulence, maybe we won’t, but I’d recommend fastening your seat belt.
I usually overreact to most everything and you always seems so calm and data-driven, so I find your assessment pretty alarming.
Other than raising a little more cash than I would normally have on hand (to take advantage of a market drop is what I tell myself), what else could one do to “fasten the seatbelts”?
I usually overreact to most everything and you always seems so calm and data-driven, so I find your assessment pretty alarming. Other than raising a little more cash than I would normally have on hand (to take advantage of a market drop is what I tell myself), what else could one do to “fasten the seatbelts”?
Emotional preparedness, mainly : )
I do like a little cash.
For most people there is no crushing need to raise more than 20% cash as dry powder to take advantage of low prices.
That’s enough that, if deployed into a super great deal, will make a big long run difference to your portfolio.
While not being so much cash that you’re losing material long run returns by having that much cash sometimes.
I’m at about 1/3 cash, but I like to trade more than most people do.
As for being alarming forecast, well, it’s not really much of a forecast.
Some of the food exports already being banned https://www.reuters.com/world/food-crisis-grows-spiralling-p…
Those actions take quantities out of the traded market, creating more price spikes and more shortages, often leading to more bans.
Expect problems in Egypt, which runs on subsidized bread and gets half its wheat from Ukraine.
I don’t generally invest in commodities related businesses, so it doesn’t affect my portfolio much directly.
But indirect effects are not to be sneezed at.
Anybody who sells physical products has to buy the materials to make that stuff.
And price chaos can sometimes spread quickly in financial markets.