Navigating Macroeconomic Trends and Investment Strategies

Tom Bodrovics welcomes Edward Dowd, founder of Phinance Technologies, to the show to discuss the unfolding economic landscape and the probable looming recession. Dowd explains that initial recession predictions for late 2023 and early 2024 were incorrect due to an unprecedented economic variable: mass illegal immigration. He estimates that between 20 million people were brought into the U.S. over three-and-a-half years, supported by deficit spending ranging from $500 billion to $2 trillion. This influx of labor and spending temporarily propped up the economy, masking underlying weaknesses, particularly in the housing market. However, with the Trump administration now halting immigration flows and initiating deportations, Dowd expects a significant economic impact. Housing, which constitutes 20% of the consumption economy and 45% of the CPI, is already rolling over, with new home sales plummeting and delinquencies rising. Dowd predicts this will lead to a housing-driven recession, similar to the 2008 crisis but less systemic, barring an oil price shock.

Inflation, which Dowd believes is overstated due to faulty shelter cost metrics, is expected to fall below 2% by year-end. This deflationary trend will likely prompt the Fed to cut rates, but Dowd warns that rate cuts during an economic downturn are bearish for stocks, as seen in 2000 and 2008. He advises investors to focus on U.S. Treasury bonds and gold, which is being re-monetized as a tier-one capital asset. Dowd also highlights the potential for fiscal dominance to worsen, with governments globally struggling under unsustainable debt burdens. He points to Europe and Japan as particularly vulnerable due to demographic declines and debt crises, which could lead to currency collapses or conflicts. In the U.S., he emphasizes the need for fiscal discipline and warns that the current debt trajectory, exacerbated by the Biden administration’s spending, will require painful adjustments. Despite the challenges, Dowd sees opportunities for younger generations should a reset come for the housing markets and for investors during the eventual market correction.

Timestamps:
00:00:00 – Introduction
00:00:36 – Metrics & U.S Outlook
00:05:16 – Real Estate & Oil Crisis
00:08:04 – U.S. Employment Stats
00:11:47 – Fiscal Hangover & DXY
00:14:34 – Fear & Dollar Safety?
00:15:30 – Fiscal Dominance & Fed
00:17:47 – Asset Allocation Changes
00:19:27 – CPI & Fed Reactions
00:25:50 – Powell’s Replacment & Q.E.
00:27:23 – Recession & Risk Assets
00:28:48 – Conflicts, Truth, & Timing
00:32:16 – Gold’s Behavior & Oil
00:34:05 – Trump, Threats, Econ Shocks
00:36:24 – Finding Good Information
00:39:41 – Distractions & Geopolitics
00:40:13 – Euro & Asian Demographics
00:45:12 – Taxes & Gov’t Desperation
00:47:44 – Macro Econ. Alt. Hedge Fund
00:48:48 – Depressions & Commodities
00:50:05 – Wrap Up

Guest Links:
X: https://x.com/DowdEdward
GETTR: @EdwardDowd
LinkedIn: https://www.linkedin.com/in/edward-dowd-87902158/

Edward Dowd is a founding partner with Phinance Technologies. Edward worked on Wall Street the majority of his career most notably at Blackrock as a portfolio manager where he managed a $14 billion Growth equity portfolio for ten years. His book ‘Cause Unknown: The Epidemic of Sudden Death in 2021 & 2022’ propelled him as an alternative voice during the pandemic and the economic implications that continue to plague us today. Their unique alternative macroeconomic analysis of the global debt crisis and what may unfold has given many a deeper understanding of the global nature of our problems today.