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Recession Warning?
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Last: 2 days ago by movielover
I know we normally look at GDP data quarterly but I really wish pundits would focus on Q1+Q2 combined this year because of all the quarterly noise Trump's tariffs have caused.
In any case, we seem to be in an AI bubble, similar to the dot-com bubble circa 1999. The AI bubble has caused the stock market to be very narrow and overvalued. On the back of that stock market, the top 10% now command about 50% of all consumption. Meanwhile, housing is weak, the job market is weak, tourism is weak, agriculture has it's struggles, etc. There are lots of economic warning signals out there and we can add this one to the list - but in the meantime, the top 10% are partying like it's 1999.
In any case, we seem to be in an AI bubble, similar to the dot-com bubble circa 1999. The AI bubble has caused the stock market to be very narrow and overvalued. On the back of that stock market, the top 10% now command about 50% of all consumption. Meanwhile, housing is weak, the job market is weak, tourism is weak, agriculture has it's struggles, etc. There are lots of economic warning signals out there and we can add this one to the list - but in the meantime, the top 10% are partying like it's 1999.
From the WSJ article posted above:
The idea that consumption is two-thirds of the economy is one of the great myths in economics. It's based on a faulty reading of national income accounting. Consumer spending represents two-thirds of GDP, but GDP measures only finished or final goods and services. It leaves out the value of the supply chain, which is bigger than GDP itself.
GO shows that consumption is only about one-third of economic activity, not two-thirds. Business spending is almost twice as big and more volatile, and it is a leading indicator. When business puts on the brakes, employment slows, and recession strikes.
Think of GO as the "top line" in national income accounting, and GDP as the "bottom line." GO measures the "make" economy, GDP the "final use" economy. GDP looks strong, but GO is flashing yellow, if not red.
The BEA has promised to highlight and advance this vital statistic, and release it at the same time as GDP data. The sooner the better.
The idea that consumption is two-thirds of the economy is one of the great myths in economics. It's based on a faulty reading of national income accounting. Consumer spending represents two-thirds of GDP, but GDP measures only finished or final goods and services. It leaves out the value of the supply chain, which is bigger than GDP itself.
GO shows that consumption is only about one-third of economic activity, not two-thirds. Business spending is almost twice as big and more volatile, and it is a leading indicator. When business puts on the brakes, employment slows, and recession strikes.
Think of GO as the "top line" in national income accounting, and GDP as the "bottom line." GO measures the "make" economy, GDP the "final use" economy. GDP looks strong, but GO is flashing yellow, if not red.
The BEA has promised to highlight and advance this vital statistic, and release it at the same time as GDP data. The sooner the better.
People might want to check and see how much of our economy is propped up by datacener construction. It's worriesome.
Haloski said:
People might want to check and see how much of our economy is propped up by datacener construction. It's worriesome.
Yes, when Nvidia is investing billions in OpenAI so OpenAI can build datacenters and buy Nividia chips - we have a problem
From Scott Galloway. pic.twitter.com/gPjtVNXonN
— Jared Dillian (@dailydirtnap) September 29, 2025
dajo9 said:
I know we normally look at GDP data quarterly but I really wish pundits would focus on Q1+Q2 combined this year because of all the quarterly noise Trump's tariffs have caused.
In any case, we seem to be in an AI bubble, similar to the dot-com bubble circa 1999. The AI bubble has caused the stock market to be very narrow and overvalued. On the back of that stock market, the top 10% now command about 50% of all consumption. Meanwhile, housing is weak, the job market is weak, tourism is weak, agriculture has it's struggles, etc. There are lots of economic warning signals out there and we can add this one to the list - but in the meantime, the top 10% are partying like it's 1999.
That 50% of consumption is attributed to the top 10% surprised me. I looked up what the household income of the top 10% was and it was also 50% of the total. Doesn'[t that imply a net zero savings rate for the top 10%? That doesn't seem right. Am I missing something?
Increase in value of portfolios and home equity?
Cal88 said:
Increase in value of portfolios and home equity?
That crossed my mind as well. Why put 20% of your income aside when your house and portfolios have increased by a larger amount.
Savings rates are known to go negative during periods of high asset appreciation
Ai hasnt gotten the traction as quickly as its backers suggest. Only 3% of consumers are paying for it according to a study I read.
DiabloWags said:
Ai hasnt gotten the traction as quickly as its backers suggest. Only 3% of consumers are paying for it according to a study I read.
DeepSeek blew up their business model. AI for the general public is a commodity.
There are going to be some specialized verticals, like manufacturing, but there will be no AI monopoly for the general public along the lines of Microsoft, as Altman and co envisioned.
And that's a good thing.
DiabloWags said:
Ai hasnt gotten the traction as quickly as its backers suggest. Only 3% of consumers are paying for it according to a study I read.
AI's biggest market will be war
That, and surveillance (hello Palantir).
Ellison and partners backing JD Vance. That's been a long-term play. I guess the Swamp backing Nikki Haley didn't bear fruit.
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