One Year Ago: 100% Probability Of A Recession Within Twelve Months -- Bloomberg -- October 21, 2023

Locator: 45781ECON. 

The Fed: to move from 3% to 2% inflation, the Fed will kill the housing sector, the auto industry and renewable energy.  

JPow's memoirs title: Doing It My Way: The Operation Was A Success But The Patient Died.

Mester's memoirs title: No Regrets: How We Stopped Renewable Energy.

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The Economy

One year ago, Bloomberg Economics predicted with a 100% probability a recession within 12 months.

100% probability.  

100% probability.  

So, what happened?

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The Blog

The area under the curve:

This, the area under the chart, without a doubt, the largest ever in the history of mankind.

My favorite chart.

Link here.

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Transfer of Wealth -- Already in Play

Now, let's add another data point: the greatest wealth transfer in the history of mankind. Link here.

My parents' generation transferred to me and my generation: $16 trillion.

My generation will transfer to the next two generations, our children, Gen X and Gen Y: $53 trillion.

First off all, I can't get my mind around one trillion dollars, much less $15 trillion, much less $60 trillion.

This transfer has only just begun.

My generation, the baby boomers: 1946 - 1964.

Today: ages 77 years of age - 59 years of age.

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RMDs

Baby boomers: first generation with tax-deferred (and tax-exempt) IRAs.

IRS changed the rules and now inherited tax-deferred IRAs must be exhausted in ten years.

The phenomenon of RMDs from the baby boomers has also just begun.

Age 73: must begin to take RMDs from IRAs.

Human nature: most folks who have sizeable IRAs and understand investing will try to wait as long as they can to start taking their RMDs each year. So, now, we're coming to the end of the year, and the holidays are coming. RMDs for 2023 start to hit their stride now.

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Housing

Baby boomers: big families. Common for folks like me to have four, five, or six siblings. But, Gens X, Y, and Z will have youngsters with zero or one sibling and that's it. 

Much less money being spent on housing (high interest rates, also, of course, but less money on housing translates into more money in non-housing retail sector.

Link here. 

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Transportation

Due to high cost of automobiles, shortage of vehicles, etc., folks spending a lot less on autos. That leaves a lot more money for non-auto retail sales.

Excluding autos, sales were up 0.6%, also well ahead of the forecast for just 0.2%. The so-called control group, which strips out items such as auto dealers, gas stations, office supply stores, mobile homes and tobacco stores and is used for the department’s GDP calculation, rose 0.6% as well.

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Disposable Income

In the US, averages $50,000 per capita. Previously reported. Link provided by a reader, thank you.

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Bottom Line

From the linked CNBC article:

 “The U.S. consumer cannot stop spending,” said David Russell, global head of market strategy at TradeStation.

“All three retail sales reports for Q3 were above estimates, which puts us on track for a strong GDP number later this month. It also gives the Fed zero reason to loosen policy, which keeps the 10-year Treasury yield pushing toward 5%.”

Sales gains were broad-based on the month, with the biggest increase coming at miscellaneous store retailers, which saw an increase of 3%.

Online sales rose 1.1% while motor vehicle parts and dealers saw a 1% increase and food services and drinking places grew by 0.9%, good for a yearly increase of 9.2%, which led all categories.

There were only a few categories that showed a decline; electronics and appliances stores as well as clothing retailers both saw decreases of 0.8% on the month.

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GDPNow

Link here.

Estimates for 3Q23 coming in at 5.4%.