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

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

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

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

Brown, the CNBC personality whose New York-based investment advisory firm manages more than $2 billion, joined his “Compound & Friends” investing podcast Michael Batnick to talk with MarketWatch news editor Joey Wiltermut, at the festival. The three talked about whether a recession is looming, the red flags in the US economy right now — and also why this is an opportunity for investors to buy the market, even if they don’t feel like it.

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

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 uploaded several charts to show 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 numbers were strong. “The data says the consumer is in good shape,” Batnick reiterated.

Brown joked that Fed Chairman Jerome Powell’s decision to aggressively tackle inflation by raising the benchmark federal funds rate by 0.75 percentage point on Wednesday reminded him of a student trying to get extra credit after falling behind all year.

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

MarketWatch

“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’s written a rock opera and he’s going to perform it.” he said, to laughs from the crowd.

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

That’s because housing touches so many different parts of the U.S. economy outside of real estate, including loans and financial institutions, construction and remodeling, and legal work, he noted. “It’s been said that between 15 percent and 18 percent of the U.S. economy has something to do with housing,” he said.

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

Brown added that the housing market frenzy peaked with the Zillow “Saturday Night Live” sketch that compared going through real estate listings to porn. “It was a great skit,” Brown said. “I think they really put their finger on what the zeitgeist was [during the 2020 COVID shutdowns]when there was nothing to do but look at how much better your neighbor’s house was and imagine it, because we were trapped inside those four walls.’

On the other hand, Brown and Batnick suggested that a recession could be bullish for commercial real estate, as anxious workers — especially those in the financial industry — may feel too insecure to quit or demand to stay on. able to work from anywhere. A recession could drive anxious workers back to the office and return some leverage to employers.

“Last year it was an environment where you could give your boss the middle finger if you were in finance. 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 work from now on,” Brown said.

“In times of recession, sing for your dinner again,” he continued. “And you want face to face with your boss and you want to be in the peripheral vision of the executives. Paradoxically, the best thing that could happen to a company, assuming its own balance sheet is OK, is a recession — especially in finance, because then all of a sudden, you’re going to see buildings filling up with employees again very quickly.”

And Brown noted that while many investors and consumers are feeling “unhappy” and spooked by the headlines right now, it’s actually the best time to be in the market, with many stocks priced lower than they’ve been in years. He called it the investment paradox.

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

“You will always feel the best at the worst possible time and you will always feel the worst at the best possible time,” he said. “Just appreciate the moment you’re in. It doesn’t feel great, but opportunities present themselves now.”

“The Reformed Broker” session featuring Brown and Batnick was one of several events at MarketWatch’s inaugural Best New Ideas in Money Festival this week. MarketWatch’s top editors have hosted Q&As with investment legends and entrepreneurs like Carl Icahn and Ray Dalio to hear their financial advice. And there were sessions covering hot topics like crypto and cannabis, workshops on managing your money like a pro, and more.

Get information about investing and managing your finances. Speakers include investors Josh Brown and Vivek Ramaswamy. as well as topics such as ESG investing, EVs, space and fintech. The Best New Ideas in Money festival continues on Thursday. Sign up to participate in person or virtually.

You can also subscribe to MW’s YouTube channel to watch full session videos.

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