I’m Sticking By My Call for an Economic Downturn
A few days I posted entitled The Canaries in the Coal Mine are Telling Us To Take Notice indicating that we may be in for a rough economic patch ahead. From the responses in comments, via email, and in stores around down I can tell FEW PEOPLE share my view. It was almost as if I posted that “Your kid will never play for the Black Diamond Soccer Club.”
The truth is I don’t have a crystal ball. I don’t have an economics degree from Princeton. I don’t host Mad Money with Jim Cramer. I only report what I see and what I hear from people.
So, I very well may be wrong. I appreciate the respectful comments I have received from people trying to educate (me and) our community (even if they disagree with my point of view). There are definitely people smarter than me saying there is nothing to worry about.
I tend to think that the wealth effect from a down stock market will impact Park City (just like it did when the stock market rocketed from 2009). I think low oil prices will cause further pressure on the U.S. economy. I think the strong U.S. dollar will cause fewer tourists to come to Park City. I think the drop in the Chinese Stock market (Down 16% YTD) and economy will both decrease visitors from Asia and Australia/New Zealand.
If interest rates rise four times this year as the Federal Reserve has stated they will do, that will put pressure on what people can pay for houses. If the Federal Reserve does not raise interest rates four times this year, it will be because the economy is weaker than expected.
Again, I could be wrong. I very well may be. Many people seem to think so.
Let’s check back in during January 2017 and see how our community is doing. If our economy is booming, I’ll be the first to admit I was wrong.
The old joke is that economists have correctly predicted 8 out of the last 4 recessions.
Unfortunately, no amount of smarts or education helps much. The business cycle is inherently unpredictable with regard to timing. You have just as much chance of being right as any TV pundit or Ivy league professor, and just as much chance of being completely wrong. As do I!
To be totally fair, too, you basically called the same thing last year:
Jan 2017? Wager a hoppy sixpack that there is/isn’t a recession in 2016?
Now don’t be bringing up past posts against me. That isn’t fair. 🙂
Yeah, I had to go back and look at those previous posts.
In the one from May I said that GDP had been down one quarter and if it happened again, we would be in a recession (which is one of the definitions of a recession). That said, I don’t believe we ever got the second, confirming, reading. At the end of the post I said the end of 2015 and the beginning of 2016 could be rough. If we judged the world by the stock market, I think that statement was spot on… in the real world, probably not so much.
In the one from January, I said economic indicators were flashing that there were issues… which was confirmed by the second quarter negative GDP. However, the question is what was the impact to Park City. I’d say Park City proper did OK. Summit County saw building down. That said, I believe both Park City and Summit County had positive sales tax growth.
Anyhow, so in my own defense, I don’t think I called a recession in 2015. I also don’t think I did that in any of the more recent posts. That said, I was DUMB enough to say recession and the word imminent in a comment. So, there I have tied myself to a time frame. Rule #1 of forecasting is to never give a timeframe ;-).
So, I guess that leaves me defending a call for a recession in 2016 (damn). Do I think we will get two consecutive quarters of negative growth? That’s a hard one. Do I think our local economies will do worse in 2016 than the 2012-2015 period. Yes.
Either way, though, I accept your challenge. That said, I’m more of a stout sort of guy… so, I’ll be happy to buy you a 6 pack of IPA if there is no recession … if you’ll buy me a 6 pack of a stout should we get two quarters of negative GDP. My only requirement is that if QE4 arrives, all bets are off.
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