DSC Weekly 10 January 2023 – Recession Analysis

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Recession Analysis

Editor’s Note: This week’s editorial was written by a guest contributor. If you would like to submit an article or editorial, please contact the editors below.

One question that many are pondering is whether we are entering in a recession, and when it will end. Especially regarding the tech sector. Are there still growing sectors or are all companies in hiring freeze mode? 

I believe the recession started several months ago, despite claims to the contrary. I am sure you can feel it! The stock market, especially the tech sector, has been massively hammered. Of course, after the long exponential growth, a correction was expected, but this more than a correction. Trillions of dollars were created by the government to fight Covid and other issues (student loan forgiveness, war in Ukraine). Artificially producing money without corresponding added value – on top of many people leaving the workforce for good and not being replaced — means that the money loses its value: it is unsustainable and leads to inflation.  

The asset destruction has been quite massive: real estate, stock market, and so on. It seems like there is no safe heaven. I was joking recently with my banker saying that a good investment would be to purchase tons of drinking water. Unlike gold, you need it to survive. Then I mentioned selling one of my homes and being the banker myself, offering a 5% mortgage interest rate to potential buyers when competitors (the banks) offered 7%. In the end, I ended up putting some money on a saving account instead, with the bank offering 5.4%. It took a month to get the transaction settled: the issuer was swamped with applications, as if everyone was rushing to get the great offer in question.  

So yes, there are ways to do relatively well in this economy. Another one is to jump-start a company, ideally self-funded, with sound financial management and real products offering real value. And reap the rewards when the economy starts improving. If you can’t do it, maybe you can invest in such a company. 

On the plus side, gas prices are a lot down now. Companies continue to hire modestly: even Meta contacts me, more so now after the big layoffs, than ever before, about machine learning jobs. And they are not the only ones. Some companies (JP Morgan Chase) capitalized on the big layoffs to hire thousands of engineers. If there was ever a discussion about real versus fake data scientists, these days only the real ones will get a job, more easily than before, while those deemed fake, outnumbering the real ones, will have a hard time landing a job in the field. 

Contact The DSC Team if you are interested in contributing.

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