E74: Market update, inverted yield curve, immigration, new SPAC rules, $FB smears TikTok and more

During the Q1 2022 earnings season (reports released in April–May 2022), public companies will bifurcate: a minority that clearly demonstrate control and strength in their business and forward plans will see their stock prices rewarded, while companies showing indecision or using macro conditions to mask structurally weak businesses will see their stocks hit very hard; Q1 2022 will be the main quarter when this reset occurs and conditions will not be easier for weak companies in subsequent quarters of 2022.

“So what are we doing right now? I think we are going to see this diversion of companies. And we're about to go through earnings season. Right. We're at the end of Q1. And I think what's going to happen is really interesting. You're going to have a handful of companies who have a great handle on their business who actually project strength...Those companies will get rewarded. And then anybody else who has a whiff of indecision or whose structural business is flawed...We'll get completely whacked...and just get all the bad news out now, because this is the quarter. It doesn't get any better from here.” View on YouTube

The U.S. economy is unlikely to experience two consecutive quarters of negative real GDP growth (i.e., an official recession) in the near term following this April 1, 2022 discussion (through at least early 2023).

“So these happen every ten years or so. Uh, so if we do have a recession and it it seems implausible to me that we would have negative growth for two quarters, so.” View on YouTube

The U.S. economy will enter a significant slowdown, with a high probability of falling into a recession or near‑recession conditions, within the next 12–24 months from April 2022 (i.e., by April 2024).

“We're definitely going into a slowdown. And whether it becomes a recession to be determined, I think there's a very good chance...So these are all negative indicators. And I think we're either going to have a recession or something very close to it.” View on YouTube

Within the next few years after April 2022, the U.S. economy is at material risk of entering a 1970s-style stagflation regime characterized by persistently elevated inflation alongside a slowing or stagnant economy, due to limited remaining monetary and fiscal policy tools.

“So there's nothing left to really spend. You can't really drop interest rates much more. And if you do you'll get much worse inflation. So it seems to me that we don't have a lot of tools here. And we could end up with something like a 1970s style stagflation, where we continue to see inflation with the slowing economy.” View on YouTube

Over the coming years after April 2022, the U.S. will not enact major pro‑immigration domestic policies at the scale needed to offset low birth rates and workforce shrinkage; immigration policy will remain more restrictive than required to stabilize population and labor-force growth.

“So immigration is really the only solution, and we don't really have the sponsorship to do that at a domestic policy level.” View on YouTube

Given the then-current yield curve inversion as of late March 2022, there is a very high likelihood that the U.S. will experience a recession within two years, i.e., by March 2024, and a better than two‑thirds likelihood within one year, by March 2023.

“Historically, it's meant when the yield curve inverts, there's been a better than two thirds chance of a recession at some point in the next year. And greater than 98% chance of recession at some point in the next two years. So it looks to me.” View on YouTube

In the second half of 2022, leading into the November 2022 U.S. midterm elections, the U.S. economy will be in a slowdown with relatively high interest rates and elevated consumer prices, creating a very unfavorable economic backdrop for the incumbent Democratic Party.

“we're going to be going into the back half of the year in a midterm election where the economy is slowing, interest rates are high, prices are high. This is a horrible setup for the.” View on YouTube

In the November 2022 U.S. midterm elections, the Democratic Party will suffer large losses (a "shellacking"), with Republicans achieving a significant wave election at the congressional level.

“That is who's driving the agenda in the Democratic Party today. That is why the Democrats are going to get shellacked in November.” View on YouTube

If current trends in births, deaths, and net migration continue, Los Angeles County will reach approximately zero net births (births plus immigration minus deaths) before the year 2100.

“There is a stat in this article as an example, in the county of Los Angeles, um, we are now in the last 20 years, we've seen a 50% reduction in the birth rate in LA from 150,000 births a year to about 100. And if you forecast that forward, you know, before the turn of the century, the county of Los Angeles will have zero net births. If you run, if you run, if you run the. That's insane.” View on YouTube

The SPAC market, which had around 600 active SPACs in early 2022, will consolidate over time so that only roughly 6–7 major sponsors/banks handle the vast majority of SPAC IPO and de‑SPAC business, similar to how traditional IPOs are dominated by a small number of large banks.

“It's going to consolidate to the ten of us that know what we're doing... Similarly SPACs will consolidate around 6 or 7 players. And you know, we'll do most of the business.” View on YouTube

If the SEC implements broad Scope 1/2/3 climate disclosure requirements for public companies, it will lead to frequent material‑omission lawsuits (e.g., over alleged non‑disclosure of supply‑chain emissions), generating tens of millions of dollars in legal and expert‑witness spending per major case and primarily benefiting lawyers and consultants rather than producing clear benefits for ordinary investors.

“Let's say Apple doesn't disclose what's actually happening in their factories. Somebody can now sue them because they will say that's a material disclosure that you didn't disclose... there will be tens and tens of millions of dollars spent on that litigation... So who really wins? Consultants win, trial, experts win, the lawyers.” View on YouTube

Implementation of detailed Scope 1/2/3 emissions reporting and related ESG disclosure rules will primarily create a large consulting and auditing industry producing low‑quality carbon reports, and will trigger repeated waves of materiality‑based lawsuits, rather than materially reducing corporate carbon emissions.

“I just think that there is no credible way to execute on David. What you're saying you want. All it's going to do is going to create a bunch of money that flows to consultants that create BS, nonsensical reports... the downstream implication of that will be lawsuit upon lawsuit that gets adjudicated by the courts on this concept of materiality.” View on YouTube

Over the years following adoption of broad climate‑disclosure rules, the main outcome will be the growth of a "shadow industry" of carbon‑measurement and ESG consulting firms and extended legal debates over materiality, not a significant, regulation‑driven reduction in corporate carbon emissions.

“Instead of actually causing more conformity and have people emitting less carbon. It'll create a shadow industry of measurement and consulting around this industry, while people debate materiality when they get caught.” View on YouTube

Due to war‑related export disruptions from Russia/Ukraine, reduced planting (including up to an ~80% decline in planted acres in Ukraine), and very high fertilizer costs making planting uneconomic in many regions, global food production will decline over the following year (through roughly spring 2023), resulting in famine conditions in parts of the world, with Africa being at especially high near‑term risk.

“That means there's going to be less production over the next year. That means famine hits us in a year. Um, that's a big problem.” View on YouTube

The eventual political settlement of the Russia‑Ukraine war will include some form of de facto or de jure independence (or separation from Kyiv’s control) for the disputed Donetsk and Luhansk territories in the Donbas region, rather than their full reintegration under Ukraine’s central government.

“I think it's going to result in some form of independence for these disputed territories of Donetsk and Luhansk. Right? I mean, and but the reality is the United States of America doesn't have a vital interest.” View on YouTube

The economic fallout from the Russia‑Ukraine war and associated policy responses (e.g., sanctions, energy and commodity shocks) will contribute to the U.S. economy entering a recession, and that recession will negatively affect voter sentiment toward the Biden administration in subsequent elections.

“This is going to hurt us. I mean, look, this is one of those things that the administration thinks doesn't affect them. But you know what? When our economy goes into recession, because this is the straw that breaks the camel's back, voters are going to take it into consideration.” View on YouTube