Josh Brown: ‘If people don’t get fired, then it’s not a recession’

“You can’t have a recession if people still have their jobs and have no problem getting their next job. So I don’t care what the NBER says. … If people don’t get laid off, there is no recession.”

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

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

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

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Batnick, who is a managing partner at Ritholtz Wealth Management and runs the blog “The Irrelevant Investor,” added, “The consumer is in good shape.” He pulled out several charts to illustrate that most Americans still pay their bills on time, and that for many people, their personal balance sheets are better now than they were before the pandemic. Both men also noted that employment figures were strong. “The data shows that the consumer is in good shape,” Batnick reiterated.

Brown joked that Fed Chair Jerome Powell’s decision to act aggressively on inflation by raising federal funds rates by 0.75 percentage points Wednesday reminded him of a college student trying to get extra credits after procrastinating all year.

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

Market overview

“Jerome Powell is like the guy who missed all his homework all year, and then as a treat for the teacher, on the last day of school he comes in and he wrote a rock opera, and he’s going to perform it,” he said and got a big laugh from the crowd.

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

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

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

Brown added that the housing market frenzy peaked with Zillow’s “Saturday Night Live” sketch that compared browsing real estate listings to watching porn. “It was a great skit,” said Brown. “I think they really put their finger on what the zeitgeist was [during the 2020 COVID shutdowns]when there was nothing to do but see how much better your neighbor’s house was and fantasize about it, for we were locked in between these four walls.”

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On the other hand, Brown and Batnick suggested that a recession could be bullish for commercial real estate, as concerned workers — especially those in the financial sector — might feel too insecure to “quietly quit” or demand that they be able to. continue to work from everywhere. A recession could drive concerned workers back to the office and give employers some leverage again.

“Last year was an environment in which you could raise a middle finger to your boss in the financial world. A lot of people said, ‘Hey, you know what, actually 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 singing for dinner again,” he continued. “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 can happen to a company is a recession, assuming their own balance sheet is in order, a recession – especially in the financial world, because then you see buildings fill up with employees very quickly.”

And Brown noted that while many investors and consumers are currently feeling “unhappy” and shocked by the headlines, it’s actually an excellent time to invest in the market, when many stocks are priced lower than they’ve been in years. He called it the paradox of investing.

“Just appreciate the moment you’re in it. It doesn’t feel great, but the opportunities are here 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. “Just appreciate the moment you’re in it. It doesn’t feel great, but the opportunities are here now.”

The ‘The Reformed Broker’ session with Brown and Batnick was one of several events at MarketWatch’s inaugural Best New Ideas in Money Festival this week. MarketWatch’s top editors held Q&As with investment legends and entrepreneurs like Carl Icahn and Ray Dalio to hear their financial advice. And there have been sessions on popular sectors like crypto and cannabis, workshops to manage your money like a pro and more.

Subscribe to MW’s YouTube channel to watch full session videos from the Best New Ideas in Money Festival.

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