Welcome to Wednesday bites, folks. The business newsletter helping you not look clueless when someone says ‘interest rates’.

We’re putting the intro banter aside to welcome a bunch of new subs to the email. So….Welcome!!

We hope you’re just as disappointed as the people who’ve been here since our launch date.

Kidding, of course.

So we’ve had this note slapped on our wall for the past month, and while we were gonna write a thoughtful Sunday piece, we’ve decided to say ‘screw it’ and share what we have and speculate wildly (not wildly).

ONTO THE EMAIL

A recession in 4 stories this week

So there’s typically 4 big narratives at play signaling a recession:

1. Slowdown in spending

2. Unemployment spike

3. A decrease in manufacturing activity

4. Inversion of the yield curve (this is hilarious that people would know this means but it’s basically when short term interest rates are higher than long term rates)

We’re gonna talk about 3 of these things.

1. Slowdown in spending

Remember when we talked about interest rates? That affects spending too. Higher interest rates and limited inventory is finally starting to kick in when it comes to home sales.

2023 saw a sharp decline in home sales, but predictably, it’s a repeat of ‘05-’07 pattern.

2. Unemployment Spike

That means layoffs. When interest rates rise, and there’s a slowdown in spending, that means businesses make less money, and you see stories like these.

Obviously, we’re seasoned enough to know that companies will take advantage of any economic narrative out there to trim excess fat, so there’s always a domino effect with these events. Plan to see more expense-trimming this year, especially if a company is signaling heavy M&A vibes.

3. Robots!

Okay, we know this one isn’t one of the factors. But remember when there was a huge labor shortage surrounding the restaurant industry in the early part of this year/last year? Robots failed to come to the rescue then, but we’re not sure if that investment was a total failure.

SweetGreen has a kale shooting robot, whatever that means. Although this is still a long term trend, look for fast food restaurants to invest heavy in robotics over the coming months/years to replace jobs that definitely won’t come back.

4. Inversion of the Yield Curve

We’re not even going to pretend to know what this means (Peter does, and still won’t tell Ahmed). But it looks like the Federal Reserve might be done raising rates for now. That means rates will start tapering off eventually, and you’ll be able to re-finance that student loan (you’re never paying them back anyway).

But there’s a lot of factors behind this. If you want to know more, just read the damn article.

Okay, so what? Recessions suck, though.

Yeah they do, but if you’re under the age of 45 you should be salivating for one. Fortunes are made in the down market and collected in the up market.

That means we’re coming up on a window of opportunity to buy premium stocks at a discount, and real estate at an affordable price. It also goes beyond that. Wanting to start a coffee shop? Leases will be cheaper as pricier chains close down stores as landlords will want to fill empty spaces to avoid cashflow disruptions. Rents go down as property values decrease.

etcetera etcetera…

Yes of course this sounds a little heartless without talking about jobs lost. It’s the price of a free-market economy (ew that sounds so gross, but you know what we mean).

What AI made this week

The fact that he’s holding coffee cup….

Have a great week!

Ahmed and Peter