If you want to know when a downturn is coming, don’t check the Fed’s spreadsheets—ask the trucker sitting at a rest stop with an empty trailer. Right now, everyday business owners already know: orders are slowing, inventories are piling up, and credit lines are being maxed out before the banks change the rules.
Wall Street is still selling the “soft landing” dream, but the bond market is screaming something very different. The last time we saw warning signs this sharp was 2007, right before the crash. And just like then, the Fed is the last to figure it out. Rates keep climbing, not because things are strong, but because businesses are pulling down cash before the storm hits.
The pivot everyone’s waiting for will come, but not for the reasons the headlines suggest. The Fed won’t cut rates because they engineered a perfect landing—it’ll be because they screwed up again, just like 2018 and 2020, tightening until something breaks. Markets don’t get rescued when they trend lower; they only get rescued when panic hits and trading floors look like fire drills.
Meanwhile, the jobs picture is a mirage. Yes, the official unemployment rate is still at 3.5%, but tech giants have already laid off tens of thousands, and more pink slips are coming. Layoffs lag the cycle, and they’re only just beginning to show up. Real wages are falling too—paychecks may be up 5%, but with inflation at 6–7%, people are losing ground. Add in millions missing from the workforce, and the true unemployment picture looks a lot closer to depression levels than “Goldilocks.”
So here’s the reality: the stock market is whistling past the graveyard, the bond market is ringing alarm bells, and the Fed is fumbling with the wrong map. This isn’t a “soft landing.” It’s a crash landing in slow motion—felt first in empty shipping containers, shrinking paychecks, and pink slips taped to office doors. By the time the Fed wakes up, Main Street will already be living in the recession they refused to see.
Main Thesis and Deeper Dive
- A recession is imminent and possibly worse than expected.
- The bond market is flashing red, while the stock market remains overly optimistic.
- The Federal Reserve is tightening too far, too late, and will likely pivot (cut rates) only when markets become disorderly, not simply because they’re falling.
Key Points
- Indicators of Recession
- Yield curve inversion is the strongest signal—last seen in 2007 before the 2008 crash.
- Businesspeople (trucking, retail, small firms) see the slowdown first, while the Fed reacts last.
- As businesses sense downturn, they draw on credit lines, pushing rates up before the recession hits.
- Interest Rates
- Interest rates peak after recession begins, making them a lagging indicator.
- Fed often overtightens, then realizes too late and reverses (as in 2018).
- Stock vs. Bond Market
- Stocks: “Goldilocks/soft landing” optimism.
- Bonds: Expect a serious downturn—Fed can’t fix it in time.
- Fed Behavior
- The Fed doesn’t care about gradual declines in stocks but steps in if markets become disorderly (e.g., March 2020, Fall 2008).
- Likely pivot in late summer (July–August 2025), but not because of success—because of failure.
- Unemployment & Layoffs
- Large layoffs already underway (Google, Amazon, Facebook, etc.).
- Official unemployment still ~3.5%, lowest since 1960s, but that’s a lagging indicator.
- Expect unemployment to rise sharply by spring.
- Phillips Curve & Wages
- Fed still relies on Phillips Curve (inverse relationship between inflation and unemployment), which the speaker calls “junk science.”
- Nominal wages up ~5%, but real wages negative due to higher inflation (6–7%).
- Fed wants wages even lower to fight inflation, worsening real incomes.
- Labor Force Participation
- Current participation ~61%, down from 70% in 2000.
- 8–10 million working-age people missing from workforce.
- If counted, true unemployment would be closer to 9% (depression-level).
MAIN POINTS – AGAIN!
- The U.S. is likely already in recession, with layoffs rising and credit stress mounting.
- The Fed has overtightened and will only pivot when disorder strikes, not to engineer a soft landing.
- Real wages are falling, unemployment is understated, and labor force participation is structurally weak—making the recession deeper than official numbers suggest.
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