Are The Recession Indicators Piling Up?

Are The Recession Indicators Piling Up?

Posted On August 12, 2022 1:37 pm

There has been a lot of talk of recession lately, and yes I’m aware of the definition. However, I think this may have just convinced me we are definitely in one… 

Last night someone went into my car and removed the cupholder full of change and a pair of  reading glasses. The thief’s total haul was just under $20, but this  sure is a sign that we are in troubled times.

The last time I had something taken from me was during the Covid lockdowns when someone took my bikes off my front porch.

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Of course, I’m only kidding. This incident was certainly not an actual indicator of a recession, but it does validate that times are indeed a bit tougher. I mean, stealing change from the cup holder of a car? I can only hope it helped a little.

After a brief period of workers gaining leverage, we are very much back to inequality where capital gets paid and labor comes under pressure. As inflation gobbles up any wage gains on the lower end of the pay scale, the middle class is feeling the pinch.

For Options360 members, the ability to separate macro economic conditions from trading has paid off yet again. Which was the case on Tuesday when I sent out an alert stating the following:

  • The daily chart looks like hell and suggests this is just another bear market rally with a fake breakout. But there is support at the $410 level. 
  • But the internals have been improving and animal spirits (meme’s are back). 
  • It’s a real mix but I think there could be another jab higher. 
  • Let’s establish a position that reflects the state of flux.
  • It’s a short term diagonal with the opportunity for three rolls.

We closed that position today for a 14% gain; I was too timid in the structure of the strategy, but a win is a win.

The current economy reminds me of the famous President Harry Truman quote,

“It’s a recession when your neighbor loses his job; it’s a depression when you lose yours.”

That’s a bit of hyperbole, but it still may have some truth to it…

The current stock market rally accelerated last Friday when the employment report showed headline numbers of 585,000 new jobs, well above expectations.

But if you dig below the headlines you see, since June, there has been a loss of 141k full-time jobs while the number of multiple jobholders has increased by 263k people.

People in need are doing double duty. And grabbing spare change from random cars while they’re at it.

So while the jobs numbers surprised some, they may not be telling the story of what’s really going on under the hood. Although, if growth slows down in the third quarter there will be no denying it. Full blown recession.

Another measure I’m watching is credit card debt, which surged by $46 billion last quarter, a +13% YoY, the biggest increase in 20 years. At the same time,new cards issued soared to 30 million. Not a great sign as interest rates are likely to keep rising as the main components of inflation, food, housing and energy are likely to remain sticky.

Moral of the story, times are getting tougher no matter how you slice it. Which is why now is the perfect time to increase your income by learning how to trade options. I teach my students how to make some extra cash with little to no experience required. Don’t take my word for it, join and see for yourself!

In the face of all these cross currents, Options360 has cut positions down to only a bearish butterfly on SPY. Let’s see how much longer the market can fight the Fed’s hawkish talk without another sell off.

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About author

Steve Smith

Steve Smith have been involved in all facets of the investment industry in a variety of roles ranging from speculator, educator, manager and advisor. This has taken him from the trading floors of Chicago to hedge funds on Wall Street to the world online. From 1987 to 1996, he served as a market maker at the Chicago Board of Options Exchange (CBOE) and Chicago Board of Trade (CBOT). From 1997 to 2007, he was a Senior Columnist and Managing Editor for TheStreet.com, handling their Option Alert and Short Report newsletters. The Option Alert was awarded the MIN “best business newsletter” in 2006. From 2009 to 2013, Smith was a Senior Columnist and Managing Editor for Minyanville’s OptionSmith newsletter, as well as a Risk Manager Consultant for New Vernon Capital LLC. Smith acted as an advisor to build models and option strategies to reduce portfolio exposure and enhance returns for the four main funds. Since 2015, he has worked for Adam Mesh Trading Group. There, he has managed Options360 and Earning 360, been co-leader of Option Academy, and contributed to The Option Specialist website.