The evidence is piling up.
The recession is not on its way. It’s already here.
And there’s evidence that it’s already been with us for at least six months. Maybe more…
But what about that great jobs report we received last week? Let’s just say… it’s not telling the whole truth.
And there are four flashing warning signs that show we are already in a hidden recession.
Today I will walk you through each one and provide you a way to stay safe and profit through these tough times.
Warning Sign #1: The Government Is Trying to “Redefine” a Recession
In July 2022, an interesting event took place.
Multiple publications changed the definition of what it meant to go into a recession.
For decades, the definition of a recession was “two consecutive quarters of falling GDP”, but suddenly that definition no longer applied.
GDP stands for the Gross Domestic Product and is the amount of money spent in America over a certain period. It is also the number the government uses to figure out how big our economy is.
And, oddly enough, a week before the release of the latest U.S. GDP figures on July 21, 2022, the White House published a blog that read:
“What is a recession? While some maintain that two consecutive quarters of falling real GDP constitute a recession, that is neither the official definition nor the way economists evaluate the state of the business cycle. Instead, both official determinations of recessions and economists’ assessment of economic activity are based on a holistic look at the data…”
Quite a bit of jargon, to say, “The data you are about to see does not mean we are in a recession because we don’t want you to believe we are in a recession. In fact, we no longer accept the previous definition of a recession, which has been used for decades.”
Wikipedia followed suit, and changed its definition to a something so vague that any evidence of a recession would be hard to prove.
This caused such chaos that Fortune magazine published a piece entitled “The recession debate is so intense that Wikipedia has blocked new users from editing its recession page because people keep changing the definition.”
When someone tries to paint incredibly bad news in a positive light, you should always pay attention. Changing the definition of a recession right as data is coming out to indicate we are in a recession is the same thing.
The July GPD numbers back in 2022 revealed that for the second quarter in a row the U.S. GDP growth was negative. The decades-old definition of a recession.
Maybe it was a coincidence?
Warning Sign #2: Potentially Soaring Job Losses
Now since July 2022, we have had several quarters of positive GDP growth.
But at the beginning of this year, 96% of CEOs believed the economy would drop in 2023. Around 80% of Americans, the Fed’s own experts, and even Warren Buffett agreed. And many experts are predicting a recession will begin in the second half of 2023.
But you might wonder, how can a recession start when we see so many new jobs?
The government says we added 339,000 jobs in May and that we are on track for 3.8 million new jobs this year.
But here’s what you won’t hear on the news about last week’s big jobs report. It’s based on what businesses say.
Another government survey called the Household Survey, measures unemployment.
And it recorded that 440,000 Americans lost their jobs in May.
So, the government says we added 339,000 jobs and the Household Survey says we lost 440,000 jobs.
That’s a big gap!
Looking back in time, we lost about 440,000 jobs every month for a year and a half during the Great Recession.
And if that weren’t concerning enough…
Warning Sign #3: The Worst Productivity Collapse in History
Recently, we’ve seen the worst productivity collapse in U.S. history.
Now, productivity is measured by dividing how much Americans spend – GDP – by how many hours Americans worked.
U.S. productivity has dropped for five straight quarters, with the last report showing -0.8%.
This is the longest slump in productivity since the government started collecting this data in 1948.
There are only two ways to look at this. Either U.S. workers have become some of the least efficient in the world, or our economy is shrinking.
The Wall Street Journal believes it’s more likely that our economy is getting smaller.
So this means that not only is productivity or GDP-to-hours-worked ratio is dropping, so are company profits.
And eventually, falling profits force companies to lay off workers.
Something similar happened in 1973, during a so-called “job-full recession.” High inflation let businesses keep hiring for eight months after the recession began.
But then, job losses shot up, and the stock market plummeted by 54%.
Now, let’s look at a key ‘hidden’ economic fact that suggests we’re already in a recession and have been for six months.
Warning Sign #4: Falling National Income
Aside from GDP, another important number to pay attention to is our Gross Domestic Income, or GDI. GDI keeps track of all the money earned in America.
Because one person’s spending is another person’s income, GDP and GDI usually match up.
But not lately. GDI dropped almost 4% in the fourth quarter of 2022 and just over 2% in the first quarter of 2023.
And the average of both GDP and GDI, which some experts think is the best way to measure economic growth, has been negative for two quarters in a row.
Now as you remember from Warning Sign #1, the definition of a recession for decades has been negative GDP growth for two quarters in a row (roughly 6 months).
This means we are likely already in a recession and have been for at least the last 6 months. And it will probably get worse before it gets better.
That’s because the Federal Reserve isn’t finished increasing interest rates yet.
And as mentioned last week, the U.S. government is about to pull $1.5 trillion out of the economy through reverse money printing.
It might be a hidden recession, but these signs indicate we are in a recession.
And the government might not admit it’s happening until much later… So what should you do in the meantime?
How You Can Make Money from the Hidden Recession
In a hidden recession, a smart and safe way to make money is to buy top-notch stocks that are already priced for recession.
A great one that I have had my eye on is the Pacer US Cash Cows 100 ETF (COWZ). This ETF holds the 100 biggest cash cow companies in America, companies that make lots of free cash. And this cash can be used to pay dividends to investors.
For 2023, analysts are expecting earnings for COWZ to go down by 28%. But even with this drop, it’s only selling for 9.3 times its earnings and 6 times its cash-adjusted earnings.
Most hedge fund deals are selling for twice that price right now to give you an idea of how cheap it is. Even the average deal on the TV show Shark Tank is 7 times cash-adjusted earnings.
So, you can think of COWZ as a great bargain. It’s priced for a bad recession and is like a tightly wound spring ready to shoot up when a far milder recession ends.
And COWZ is not the only bargain deal out there ready to pad your bottom line.
In fact, there is another bargain deal that is so spectacular that Brad Thomas recently published a special presentation on it called “Amazon’s secret royalty program.”
In it, Brad shares how regular Americans are collecting huge payouts from America’s biggest companies (like Amazon)… You don’t want to miss it.
We might be in a recession as a nation but that does not mean your portfolio has to go through a recession too. Click here to watch Brad’s presentation and take advantage of this incredibly opportunity.
Safe Investing,
Adam Galas
Analyst, Intelligent Income Daily