Founder, EPB Research. Business cycle research that helps investors separate economic noise from changes that materially alter recession and market risk.
Joined February 2015
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The stock market is valued at 34.2x corporate profits.
That’s a record, higher than the 33.4x peak in early 2000.
But valuations tell you very little about whether a recession is coming.
What they do tell you is how much damage a recession does...
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And recessions don't spontaneously occur, and they are not caused by high valuations alone.
Recessions are a process that spread from changes in money & credit that ripple through a group of select cyclical sectors like construction and manufacturing.
Unemployment in those early cyclical sectors creates downstream economic and credit stress.
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Job losses are the key, and they begin in a narrow group of highly cyclical sectors.
Every month at EPB, we outline the forward 6-12 month recession risk based on a combination of leading and cyclical indicators, corporate profits, and early-stage job losses.
If you're interested, you can sample the research and get in touch with us during a 7-day free trial.
epbresearch.com/research/
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When money supply growth was between 4% and 8% and cyclical payroll growth was between 0% and 2% (today's conditions)....
A 0.5% increase in core inflation was 2x as common as a 0.5% decrease over the next 12 months.
Eric Basmajian retweeted
Jobless Claims Look Exceptionally Strong. Why Doesn’t the Labor Market Feel That Way? open.substack.com/pub/epbres…
The labor market can feel weak without being recessionary.
For investors, those are different questions.
Someone trying to find a job can have a difficult experience even when layoffs and job losses remain far from recessionary levels.
Jobless Claims Look Exceptionally Strong. Why Doesn’t the Labor Market Feel That Way? open.substack.com/pub/epbres…
AI capex is clearly driving economic activity, but multiplier effects are seen everywhere.
Manufacturing production and utility production are both rising strongly.
Over the last 10 years, AI hardware production is up 135% while the rest of goods production is down 1.2%.
I think the early data clearly shows a measurable impact of AI on productivity.
Adoption is low, so it's not measurable in the aggregate.
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