Edward Dowd, founder of Phinance Technologies and former Blackrock portfolio manager, dives into the looming recession driven by housing market issues. He highlights mass illegal immigration’s role in temporarily boosting the economy, masking vulnerabilities. Dowd predicts a housing-driven decline, echoing the 2008 crisis, with plummeting home sales and rising delinquencies. He also discusses the misrepresentation of inflation figures, encouraging focus on U.S. Treasury bonds and gold as safe investments during uncertain times.
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insights INSIGHT
Immigration Masked Recession
The unexpected influx of 20 million illegal immigrants temporarily boosted the U.S. economy and masked an impending recession.
This variable caused initial recession predictions for late 2023 and early 2024 to be wrong.
insights INSIGHT
Housing Drives U.S. Recession
Housing is crucial, making up 20% of consumption and 45% of CPI through shelter costs.
The housing market is now rolling over, signaling an impending housing-driven recession similar to 2008 but less systemic.
insights INSIGHT
Oil Shock Risk to Crisis
An oil price shock alongside housing issues could make the recession systemic, as seen in 2008.
The current call avoids systemic crisis mainly because the Fed has more tools and consumer leverage is lower.
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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 - Introduction00:00:36 - Metrics & U.S Outlook00:05:16 - Real Estate & Oil Crisis00:08:04 - U.S. Employment Stats00:11:47 - Fiscal Hangover & DXY00:14:34 - Fear & Dollar Safety?00:15:30 - Fiscal Dominance & Fed00:17:47 - Asset Allocation Changes00:19:27 - CPI & Fed Reactions00:25:50 - Powell's Replacment & Q.E.00:27:23 - Recession & Risk Assets00:28:48 - Conflicts, Truth, & Timing00:32:16 - Gold's Behavior & Oil00:34:05 - Trump, Threats, Econ Shocks00:36:24 - Finding Good Information00:39:41 - Distractions & Geopolitics00:40:13 - Euro & Asian Demographics00:45:12 - Taxes & Gov't Desperation00:47:44 - Macro Econ. Alt. Hedge Fund00:48:48 - Depressions & Commodities00:50:05 - Wrap Up
Guest Links:X: https://x.com/DowdEdwardGETTR: @EdwardDowdLinkedIn: 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.