Sam Ro's Podcast Wisdom: "There's A Risk The Economy Goes Into A Recession" - And Other Key Takeaways

Writing TKer is a process. I first catch up on news and research, and I see what topics are being debated. Then I settle on an angle. Then I draft the newsletter. Then I edit. Then I have an editor take a look. Then I think about the editor's notes. Then I make some tweaks. And then I send out the newsletter to you.

Going on a podcast or YouTube show as a guest is totally different. While the hosts usually flag topics in advance, I often can't predict where the discussions will take us.

That can lead to some unexpected exchanges: about connections between religious traditions and investing advice, how AI is shaking up my job, and even some lessons from a hypothetical ice cream shop.

Below are some points you might find thought-provoking. If you haven't listened to any of these great podcasts before, I encourage you to check them out during the summer lull.

There's a risk the economy goes into a recession 👀

Aside from my expectation that the stock market will be much higher years from now, I don't like to make too many predictions about the markets or economy.

But last Monday, Investopedia's Caleb Silver asked me for a prediction or "hot take’" for the next six months. Here's how I answered:

I’m not gonna say this is a baseline scenario, and I don’t like to commit too much to predictions. But I think that there is very much a real risk that the U.S. economy goes into recession at some point this year. It might already be there. It might happen sometime during the summer. It might happen during the fall. I don’t know if it’s going to be particularly deep. But even with a lot of the economic data still positive, a lot of it has also been cooling. And we were just talking about all the uncertainty out there. I think it’s possible that we hear about the economy going into recession — maybe a short and shallow one. I'll add this sort of curveball to it: I think it's possible that that happens, and I also think that it’s possible that the stock market continues to set new highs. And then we’re gonna have a lot of think pieces at the end of the year talking about why the stock market and the economy are not the same thing.

The once-hot economy has become far less "coiled," and it's reflected by numerous economic metrics that have cooled. Again, I wouldn't say that recession is my base-case scenario. But I definitely think the near-term risk of going into recession is the highest it's been in years.

To be clear, this does not mean I'd dump stocks. It's incredibly difficult to time these trades.

Earlier in our discussion, I told Caleb that I consider myself an optimist in the long term, but a cautious optimist in the short term.

This is because while I'm bullish about being invested in the stock market, I'm well aware that the economy often goes into recession and stocks often go into corrections. This is just part of the deal.

Listen to the whole conversation at Investopedia, Apple Podcasts, or Spotify!

Past events were often worse than we remember 🤔

When we're in the throes of some risk event, it can sometimes feel like things have never been worse.

Maybe we're just misremembering the past.

When I read history or go through old journals, I'm reminded that past events were often, in fact, far worse than I imagined or remembered. And in many cases, they were worse than what we're going through today. (More on this here.)

Someone recently brought up 2010's Deepwater Horizon oil spill. My memory was that it went on for more than a few days — for a couple of weeks, surely.

I was shocked to read that the well was spewing oil into the Gulf of Mexico for three months before it was initially capped. And it took another two months for the well to be declared sealed.

Memory is a weird thing. We have lots of bad memories. For some of us, the further we move past a bad event, the more we forget just how bad it really was.

This might be good for our general mental health.

But the more we forget, the more we risk erroneously concluding that a current risk event is unusually bad. Of course, this same recency bias can apply to positive outcomes as well. Regardless, this misunderstanding could lead to mistakes with our investments if we aren't mindful of it.

This came up in a conversation I had with Barry Ritholtz on Bloomberg's At The Money podcast. Catch it on Bloomberg, Spotify, Apple Podcasts, or YouTube!

AI disruption doesn't spell doom for all of us 🤖

Every couple of days, we hear about another company making layoffs. And in their announcement, management often mentions how artificial intelligence technology is disrupting their business.

Carson Group's Ryan Detrick and Sonu Varghese brought up AI when I joined them on the Facts vs. Feelings podcast. I shared a minor AI-related existential crisis confronting me:

This is a technology that is going to save you a lot of time and a lot of money and a lot of headache. And the quality is improving very, very, very rapidly. Any of us, who have played around with this stuff for the last couple of years, knows that, increasingly, when we do do that fact-checking, it’s airtight. This stuff is getting really, really, really good. And that’s a problem for the people who are providing all of that information! Because they have newsrooms and they have people– I have to pay rent!

Sometimes I use Google to look up topics and maybe even look up some of my past stuff. And instead of getting links to TKer or Yahoo Finance or Business Insider, I’m getting the summary of what Sam Ro said! And how he explained it! And I’m looking at it, and not only is it accurate, it’s written better than how I would have written it!

Many media companies rely heavily on referral traffic from Google searches. That traffic is facing a crisis as readers increasingly read AI summaries instead of clicking into the underlying content.

That said, history is riddled with examples of major technological breakthroughs that disrupted industries but ultimately supported goods and services people continued to value.

The advent of Microsoft Excel eliminated a lot of bookkeeping work, creating an existential crisis for accountants doing it by hand. But Excel also cleared the way for a boom in accounting and financial analysis jobs. Despite the availability of cheap, mass-produced bread, the market for artisanal baked goods has never been bigger. Cars and ride-sharing services are everywhere, and yet demand for bicycles has never been higher.

I think AI is going to take on a lot of tedious, repetitive work. But amid this disruption, I believe there will be continued demand for goods and services that come with a human or analog touch. If anything, awareness of the intangible and undefinable value of such products will rise.

Catch the discussion on CarsonGroup.com, Spotify, Apple Podcasts, or YouTube!

Don't pick winners and losers if you don't have to 🤲

Jared Blikre and Sydnee Fried invited me onto Yahoo Finance's Stocks In Translation podcast for an interesting, wide-ranging discussion.

Before we taped, Jared asked what I'd be doing if I weren't writing about markets as my profession. I hadn't really thought about it before. Maybe it's the recent heat wave, but the first thing that came to mind was running an ice cream shop in a small town.

Jared then asked a most unexpected question:

It is time for our runway showdown featuring two titans of frozen treats. Stage left, gelato glides in on a polished chrome cart. Small batch, slow-churned, and priced for connoisseurs. Think lean inventories, premium margins, and management guarding every basis point of profit. Stage right, we have soft serve. … Light and airy and built for speed. It wins by pumping out cones all day long. A high volume, low margin strategy that keeps cash flowing even in choppy weather. Call it resilience versus throughput. So Sam, when the economic headwinds swirl and valuation stretch, which type struts with the crown?

Maybe it's a question about investing styles. Maybe it's a question about ice cream.

"As someone who preaches the merits of diversification and index fund investing, why do you have to choose one or the other?" I responded. "Why can’t you go with both? If one fails, you still have the other one, and you limit your downside."

There are times when your conviction is high and the move is to go all-in on an investment.

But if you can't risk losing it all and diversification is an option, diversification is often the smarter move.

This is especially the case in the stock market where most stocks underperform and the market's gains are largely driven by a few, hard-to-identify names.

Catch the whole conversation on Yahoo Finance, Apple Podcasts, Spotify, or YouTube!

We value repetition 🔁

I spent many years in the news industry. In this business, there are senior editors who always demand fresh, wholly new stories. They really stress the "new" in "news."

But in investing, history and its lessons often repeat.

In fact, I could make the case that almost all consequential stories about the stock market relate to one of 10 themes.

Accordingly, my writing has a lot of repetition.

This came up in a conversation I had with Joe Fahmy on his podcast, Joe's Happy Hour.

Among other things, we talked about how we were both religion majors in school. The exchange reminded me of a parallel between religion and investing:

We have to repeat to ourselves, "Here’s the data." … Most of the stuff that I publish in the context of market volatility and market routs and sell-offs, always involves stats like we were just talking about. In an average up year, you have these big drawdowns. Or over short periods of time, the odds of a positive return are relatively low relative to when you extend those time horizons. And you just have to keep repeating it.

I think this actually ties back to the whole religion thing too, by they way, and how the most popular book that’s ever been sold is the Bible. I grew up in Louisville, Kentucky, in a religious household. We went to church every Sunday. And anyone who’s affiliated with any religious group knows that once a week, you go somewhere, and someone’s teaching lessons from very old texts. And most of the time, when you listen to that lesson, they are reciting the same scripture, or the same scrolls, or the same verses that you’ve probably heard 50 times. How many times are they going to tell the Noah’s Ark story? Or how many times are they going to tell the story about David versus Goliath? But the story gets told over and over and over and over and over again because people need to hear it. I think it's the same thing with investing and financial markets.

I'm sure many subscribers have noticed that I often repeat the same stats, the same historical parallels, and the same perspectives.

This is not because I'm running out of ideas. It's just often the case that the same lessons and fundamentals apply to new developments in the markets and the economy.

And at least for me, I find it helpful to repeat those lessons. Because for whatever reason, they can be easy to forget when you’re in the throes of some new market rout or some new economic downturn.

Catch my full conversation with Joe on Spotify, Apple Podcasts, or YouTube. Enjoy!

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