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Season 2, Episode 28 — Transcribed: Economic Growth Prospects Are Better Than Advertised

Alex Chausovsky of ITR Economics discusses the metrics pointing to continued recovery from COVID

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Nathaniel E. Baker 0:00
Alex Chausovsky of ITR economics. Thank you so much for joining me Contrarian Investor Podcast. The topic of today is this economic recovery. And the current narrative, I would, if I dare to say that is kind of this point taken hold, is that this recovery is not really on very firm footing, that we’ve seen just recently in September. Now, some hiccups, especially from tech stocks, you hear a lot about how valuations are extremely rich, and potentially even overvalued, even in light of this last correction in the tech sector. And that, you know, again, maybe the US consumer will not return in full force, the jobs, especially an employment picture, is not a very firm footing. So that that I would say, it’s fair to say that that is at least one prevailing view that has taken hold here, as we record this on September 17. But you have your view is, is it goes against that, and you actually have reasons to be a little bit more optimistic about the economic recovery. So tell me about that.

Alex Chausovsky 1:19
Yeah, there’s, there’s a couple of different ways that you can look at this. And and I’m going to try to keep it fairly top level by first of all addressing the very real downside risks that still exist to the economy. We are obviously heading into the flu season, into the colder winter months, we have no way of knowing how the pandemic is going to behave when it combines with the flu season, whether or not we’re going to have a huge upswell in cases and in deaths and hospitalization rates. But basically, what we’re tracking on the COVID side right now is that the data is painting at relatively favorable picture, the case counts are down over the last six weeks, in some cases quite significantly. So if you look at kind of the mid July timeframe, we were averaging about 70,000 cases per day, we’re now averaging somewhere around the 35,000 mark. So it’s still a high number, but not nearly as scary as what was going on in the summer months. If we look at deaths, they have pulled back and again, not anywhere near the original swell that we had during that March, April May timeframe. So that’s encouraging. And really, when it comes to talking about the economic impact of the pandemic, what you have to understand is, it’s not the cases or the deaths, or the hospitalization rates that determine the impact. It’s how we react to those to that information. And what we’re seeing is that it is extremely unlikely at this point that we have the same kind of countrywide or statewide shutdowns that really kind of crippled the economy in the second half of the second quarter of the year. So our premise for the recovery to building momentum from this point on onward is assuming that we do not have the same kind of stay at home orders or sector wide shutdowns that we saw in early 2020. The other component that I think should be mentioned here as a risk factor is the absence of government stimulus, right, we had a large part of the green shoots of recovery, if you will, had to do with the direct payments that individuals they had to do with the additional unemployment benefits, and certainly the PPP program, providing what is essentially a liquidity bridge for both consumers and businesses to get past the chasms of the pandemic. Right. Right now, there is obviously squabbling going on on Capitol Hill, the democrats win support for state of the market.

Nathaniel E. Baker 3:33
Yeah, to put it mildly

Alex Chausovsky 3:34
yeah, to put it mildly. The republican contingent, they want to focus more on business liability protections, they want to get more money to businesses. And so there’s a disagreement in that sense, but there is a bipartisan support that more stimulus is needed. So we are encouraged by that sentiment, we think that there is going to be additional government support for the economy as they try to mitigate some of the worst impact of the pandemic. So having addressed those kind of downside risk factors that could potentially derail the economy, what I can talk to you about are signals that the recovery is going to very likely continue. What we do at ITR economics is we use a system of leading indicators that consistently and accurately predict what’s happening in the economic cycle as far as 12 to 18 months into the future. And the good news there is that our tried and true system of leading indicators right now, the top dozen or so are all consistently pointing to rise, once we get into 2021 business cycle rise, that means recovery off of the low point, and then some growth in the second half of next year. So when you look at the specifics of that the particular strength right now is actually coming from the consumer. And you talked about some of the weakening signs that we’ve seen recently. But the good news that I can share with you is if you look at the aspects of the economy that are heavily reliant on the consumer, that being the housing market, for example, or retail sales, or the shipment of goods all around the country. They’re consistently up not only off of the low points that we saw back in March in April, but they’re actually up year over year. For example, just yesterday, we got the retail sales data at the nationwide level for the month of August. And we now have three consecutive months where there has been not only growth relative to the low point in the cycle earlier this year, but it’s been year over year growth. So June, July, and August are all above their same levels seen in 2019, which is really phenomenal, right? When you think about what typically happens in a recession, you don’t have consumers spending more money than they spent last year, you don’t have consumers with higher disposable personal incomes the way that we’ve seen over the summer months. And so I guess the main argument that I’ll make here is the resiliency of the consumer, coupled with the strength that we’re seeing in the housing market, all pointed to a very favorable economic performance in 2021.

Nathaniel E. Baker 5:58
Okay, all right. So I’m curious now, what are these indicators that you track? How many are that you have talked through all of them? The what are the what are the some of the most you mentioned the consumer? And what are some other ones?

Alex Chausovsky 6:08
Yeah, so there are a plethora of indicators, we track hundreds upon thousands of series, but the ones that I find the most indicative, the ones that have the highest correlation and the longest predictive abilities tend to be focused in the proprietary indicators that we have ITR economics things that we developed ourselves. But if I were to give you some specific examples, things like the purchasing managers index, that’s typically a really good indication of what’s happening about 12 months into the future, basically, people’s opinions about the purchasing decisions they’re going to be making over the next several years, we look at things like utilization rates. So that means that if you look at the current percentage of infrastructure, factory space, and people that we’re using to meet the current levels of demand, if those utilization rates are rising, that means that there’s going to be some impetus down the road for more investment, more purchasing to happen. Exports, the housing market is a great 12 months leading indicator to the overall economic cycle in the United States. We look at trade and all sorts of different matrices. But I would say that those are kind of the some of the favorite ones that we tend to leverage.

Nathaniel E. Baker 7:18
One you didn’t mention was was employment. How does that how does that factor in so much?

Alex Chausovsky 7:23
So it’s very interesting you asked about employment, because that’s actually a lagging indicator, what we do is we look for series that have future predictive ability, but unemployment and employment numbers typically lag that economic cycle, right? Once businesses start to see their revenues fall off a cliff, then you have several months or several quarters later that you have unemployment ranks well. So it typically follows the economic cycle, which is why we’re not really looking at that as a predictive ability. We’re looking at it more as a response than what’s going on in the economy. But I will say that our outlook for employment is certainly one that reflects the challenges that we face, we think that by the second half of next year, for example, we still have an additional three to 5 million people in the unemployment ranks that we did not have back in early 2020. So it’s going to continue to come back, it’ll do so relatively slowly. But I will say that even those figures have been surprisingly positive. Because if you remember, we had an unemployment rate peak somewhere around 15%, earlier this year, and we are now at 8%, essentially, six months later. So that’s a fairly robust rebound that we’ve seen that employment market, not all industries and sectors are behaving the same way, obviously, you know, the retail environment, food service, anything related to Travel and Leisure. They’re lagging behind, because we haven’t gotten back to life as normal yet. But if you look at manufacturing, for example, you know, which accounts for a substantial part of the economy when you look at services, software, and and really the professional environment that’s been extremely resilient in the face of this crisis.

Nathaniel E. Baker 8:58
Mm hmm. Very interesting. Yeah. And certainly, you know, as we know, the US consumer props up the entire globally, most of the global economy. And if US citizens are buying stuff in large numbers and increasing those purchases, it generally bodes well for the global economy. And then if people are buying homes in the US, that’s an even better indicator. So yeah, so those two things in your favorite but for sure, now, there is a another one big thing that we are all looking out for here. And anticipating and obviously it’s in the news every single minute of every single day and I am referring here to the election, of course. Do you have any views on that because there are some things that I hear about how especially if there if there is contested election, If one side or the other or both are somehow create some kind of ruckus with this not accepted or if there is no clear outcome, or if somehow this this thing gets dragged out. And there’s uncertainty and unrest, potentially, that could really kind of screw things up.

Alex Chausovsky 10:19
Yeah, certainly is a major topic of conversation for us with our clients. Right now. I’ll separate my answer in two components here. The first one is to answer your question regarding the the contested election process. What I would say is, if that does happen, and it’s still a very big, if at this point, then I would chalk that up to kind of as a black swan event type of thing, it’s really difficult to predict what the outcome of that will be, we really haven’t had something like that happen, certainly not in recent history. And it’s very tough to try to, you know, forecast what that means from an economic perspective, because you have to layer assumption upon assumption upon assumption, right. And at that point, it’s just a guessing game. But I can tell you that when we look at the impact of elections, in general, what we find is that there’s actually fairly little immediate impact for the economy. What I mean by that is that it’s not about the party that gets elected into power. If you look at, for example, GDP growth a year after each of the presidential election since 1950, it’s essentially the same whether it’s a rep Republican or a Democrat in the White House, roughly 2.8%. So kind of a rounding error, the economy essentially has no preference for one party affiliation or another, what really makes a difference is policy. Right. And you can understand that it takes time to pass significant pieces of policy. And then it takes more time for that policy to kind of unfold and really start to impact the economic cycle. And the 2016 election is actually a perfect example of this. So back on the campaign trail in mid 2016, President Trump had a lot of big ticket items on the agenda, there was healthcare reform, and immigration reform and infrastructure and trade and taxes, right. And it wasn’t until a full two years later, in 2018, that we had the first meaningful piece of policy actually gets signed into law, which was, of course, trade and the tax reform package right. Now, it took another six months from that point for it to actually affect the economic cycle in the United States to the positive right, especially on the taxes side. So what we’re saying is that the outcome of both the economy and likely, you know, in the longer term, the market itself, is going to be unaffected by the immediate implications of the election, it’s likely going to be visible, kind of in the late 2021, maybe into the 22 timeframe. But certainly, we’re not looking to change our forecasts for economic performance for 2021. based on who wins in the in the November presidential election.

Nathaniel E. Baker 12:55
Is that true? Even if Biden wins and the democrats take back the senate? Because if that happens, one would think that, you know, there there is the chances for some kind of, you know, be at higher taxes, more regulation, the types of things that many economists not all, but many, say, are kind of a drag on the economic growth. So would that would that hold true, then even even then,

Alex Chausovsky 13:20
I would say certainly, if we do have that scenario, fold where Biden wins the presidency, and there is a takeover of the senate by the Democrats. And so they have, you know, control over essentially, you know, the decision making branches of government, then the probability of Biden’s tax proposal, for example, going through is going to become much more likely right. But that’s a huge if it again, relies on a lot of assumptions. So at this point, if we are not thinking that that’s a default by any means that that happens. But the interesting thing that I think people tend to misrepresent sometimes, is the relationship between economic performance and tax rates. So for example, if you look back at the tax proposal by President Trump, when we lowered the corporate tax rate significantly, from 35%, down to 21%, right, we didn’t really see a huge additional swell of investment, right? People were paying out more dividends, they gave, you know, they did a lot more stock buybacks, but they didn’t invest in a meaningful way that would drive economic growth. And if I remember correctly, Biden’s current proposal has the corporate tax rate going from 21 to 28%. So not nearly as far back as what we had prior to the Trump reforms. And so I think that, yes, it has the potential to be a little bit of a headwind to the economy, but I really think people overestimate the impact that that has, because businesses are driven by things like capacity planning, if they need that machine, they’re gonna buy it whether or not the taxation of it is going to be 21% or 28%. And I think that when you look at the our expectations for the cycle, which is to say the demand should see a healthy recovery over the next 12 months. 18 months, companies are going to need that capacity to meet that demand. We’re already seeing some segments of the economy run up against those capacity constraints. So I think that changing in the tax environment is not really going to be as significant of an impact from an economic perspective, as many people believe.

Nathaniel E. Baker 15:17
fair points. Okay. All right. Alex Chausovsky, ITR Economics, I want to take a short break, and come back and ask you a number of other things. But let’s first pause here and take a quick break.

Okay, welcome back. I’m here with Alex Chausovsky of ITR. Economics. Alex, this is the segment of the show where our guest tells us a little bit more about themselves, and how they came to their present station in life, if you will. So curious about you know, your background and your education and experience and all of that, you know, not going back too far, you know, grade school and things like that. But, you know, higher education such and obviously experience and how you came to this role at ITR. It would also be interesting if, as a follow up to that, you go into a little bit what what went into developing these models that you guys have?

Alex Chausovsky 16:12
Absolutely. So going back to the beginnings, I was born in Kiev, Ukraine, which was still part of the Soviet Union. And I emigrated to the US when I was 10 years old. Part of that process was we were refugees for about a year and a half. So I spent time living in Austria and in Italy, before the United States, open its doors and welcomes welcomed us in. But I can tell you that as soon as I arrived here, and our first point of demarcation was Dallas, Texas, I fell in love with capitalism, I have to tell you, it’s really a phenomenal thing. I think people really don’t give it credit for how awesome we have it here in the United States that we love to focus on all the problems and all the challenges we face. But you know, the opportunities that are available to people in this country are really remarkable if you’re willing to work hard if you’re willing to do what other people aren’t willing to do and really kind of devote yourself to becoming the best version of yourself. I think that that’s, that’s really phenomenal to me. So I hope that your audience can share their enthusiasm and their appreciation of the kind of opportunities that they themselves have had.

So I mentioned we landed in Dallas, it was obviously a very big acclimation to get used to not only the Texas culture, but also the the heat of the environment. So I spent the first few years attending middle school and in high school. And when it came time for me to go to college, I was accepted to many different Ivy League institutions, including Columbia and, and others, and, but we were very poor. And so even with a 50% scholarship, I simply didn’t have the money to go to those places. And so I chose to go to the University of Texas at Austin, which is a great school, my alma mater, hook em horns, and I got a full ride for the initial period. And my first entry point into the education I was an undeclared med school kind of target. But I quickly realized that that was not the life for me, I wanted a good balance of family stuff. And so I switched to business. And so I got my undergraduate degree in international business from Texas. A couple of years later, I got my MBA from that cheaper yet just as good Texas State University just down the road and in San Marcos, Texas, and, you know, entered the business world doing a lot of different things. I wasn’t really sure what my calling was. So I spent some time my first job out of school was working at Bank of America as a commercial teller and kind of small business focus. I then moved on and spent some times in some time in sales at Dell so is responsible for selling computers and servers and systems to small businesses. I then worked in marketing at a telecommunications company. And after I finished my MBA, I took a job in the market research world. So I worked for a very small privately owned organization that looked at factory automation and the industrial sector in particular, in terms of doing market sizing and, you know, market share analysis and giving people some expectation of what those markets we’re going to be doing. I led a pretty big team. I had people in China in the UK and South America. And eventually I realized that, you know, I really wanted to be a sole contributor rather than a manager that the the bureaucracy of it all kind of, you know, really dissuaded me from growing up that that chain in the company. And so I decided to become what we called a thought leader and my focus area became 3d printing. So I spent a few years really kind of helping companies understand the implications of the technology, and really how it applies as a threat or an opportunity to their business. Can they benefit from it? Is it really harmful to them down the road? And so part of that job was actually traveling all around the world and making presentations at conferences. educating people on what the technology is, what it isn’t, and what its implications are. So about 10 years ago, I first crossed paths with my colleagues here at ITR. economics in the sense that the principal, the the president of the company, was giving a economic presentation at several of the same events where I was speaking about technology and 3d printing. And after one of my presentations, he came up to me and said, You know, we’re really looking to grow the team here, I can teach you about the economics aspect of it, I can’t teach you to be a good presenter. So why don’t you come out to New Hampshire, which is where we’re based, check it out and see if you’re interested. And so long story short, about five years ago, and in 2015, I picked up my wife and kids and we moved from Austin, Texas, to New Hampshire, which is where I chair economics is based now. And I spent the last five years traveling not only in the US, but globally, and working to deliver economic content, but most importantly, specific company forecasts, what we have the ability to do is actually take a company’s revenue stream, and forecast that three years into the future, which I think makes us very unique. So that’s kind of how I got to where I am today. As far as the models I mentioned earlier in the podcast, the the leading indicators we do. So what it takes for us to develop a particular forecast for a good for a business or a vertical market, per se, is a combination of factors. First, we look at the way the data typically behaves. So during a period of decline, for example, how long does that decline last? And how low on the amplitude meaning the rates of change? How far do they drop on during a period of rise? What does that typically look like? And how do we choose various scenarios based on what we think is going on right now compared to what has happened in that company in the future. But really, the crux of what we do is leverage those economic indicators that I mentioned earlier, to predict turns in the business cycle. Because it’s those turns the low points and the high points that we believe coincide with the most important decision making, we think that business decisions are actually very similar to what you would do in the stock market, you’ve got to buy low and sell high, that means that you’ve got to aggressively invest in the future growth of your business at the low point, which as I mentioned earlier, we see coming up in the near term future, you got to position your business to take full advantage of that rising trend, and then recognize when you’re about to top out and then start pulling that belt a little bit, cutting back on spending being a little bit more defensive. And so that’s the notion of how we approach company forecasting is helping people understand and see around the corner of when those turns are going to come and then giving them specific actionable advice of what they should be doing in return in order to reflect those type of market conditions.

Nathaniel E. Baker 22:42
You said some something in the middle there that I want to follow up on, which is the individual companies and their revenue growth three years into the future. Is there anything there that you can tell us that might be of interest to this listenership? Many of you are invested in the stock market?

Alex Chausovsky 23:03
Yes, I think there is something that I really think is important for people to understand, folks like to put a letter shape to the recovery profiles that people talk about v shapes, u shapes, l shapes, right. But I think the real truth here is the way that you look at the data. So for example, our forecasts for the rebound when it comes to the rates of change is more of a V shaped recovery, right. And that makes logical sense, because rates of change are simply a reflection of basic math. So if you have an abysmal second quarter this year, then it’s much more likely they’re going to have a very high positive growth in the second quarter of next year, because you’re comparing it to a much lower base, right. So to have the growth rates bounce back relatively quickly, is not that difficult to do. And we’ve seen that consistently happen over the history of our economy. But the implications to business volumes and the amount of activity is a very different perspective, despite the fact that we do have those rates of change bouncing back relatively quickly. Our main position is that it’s going to take some time, somewhere between two to three years for us to get to pre Black Swan levels of activity, it’s not going to be a very quick rebound. And so when I talk about most of the company projections that we’re issuing, right now, we don’t have a lot of the businesses coming back to the type of level of revenues that they witnessed in late 2019 and early 2020 until 22, or even 23 in some cases. So I think the main message that I would try to convey to your audience is that you need to be, you know, temperate, you need to understand that it’s going to take some time, it’s not going to be getting back to business as usual very quickly. And that is simply a function again of it takes time to dig out of that hole. Under underlying all of that is the huge amount of uncertainty relating to the vaccine, right? I mean, we really can’t get back to any sense of normalcy until Not only is there a vaccine in place, but we actually Have a widely distributed to the population. And there are so many complexities surrounding that, that I don’t even know where to begin talking about it. But it’s everything ranging from the ingredients going into the vaccine. Some of the vaccine candidates are made from the stomach lining of allama. Others of from the bark of a tree that’s harvested in Peru only during the the kind of warm summer months. And it depends on which one gets approved before we can start to think about the implications to mass scale manufacturing of that vaccine. Right. The next layer is how do we get enough doses out to the population given that not all vaccines work the same way, some of their vaccines are going to be a one and done shot, right. Others are two separate injections six months apart? So how do we know which one of those is going to be the one that’s approved and gets kind of disseminated to the population. And the third and final component of this and the one that I think is the most fascinating has to do with our actual willingness to take the vaccine when it becomes available. I saw a recent survey that said something like less than half of all Americans for various reasons. Some of them are obviously in the anti vaccination camp. Others think that we’re sacrificing quality and are rushing through the process. So they don’t feel safe taking a vaccine that was really accelerated the way that we did with this one. And so what we’re saying is, yeah, even if there is a vaccine, and if we’re able to make enough of it, we don’t know how many people are going to take that vaccine. So again, going back to my original point, I would say you’ve got to temper your expectations for getting back to normalcy. If by normal, you mean kind of the levels of general economic activity that we saw in that late 2019, early 2020 timeframe before the Black Swan events took place.

Nathaniel E. Baker 26:44
Interesting. So it’s almost like you’re saying that it’s like a little bit of a checkmark recovery?

Alex Chausovsky 26:50
Yeah, I mean, I think you can certainly do, I think that what we’ve seen is a relatively robust rebound, because Because again, the effect that that close closing down of the economy had in March and April, there’s nothing like that on record, we’ve never seen anything like that happen. So for example, GDP contracted by such a large amount that essentially wiped out five years of growth in one quarter. But what we’ve also seen is a relatively sharp, near term rebound off of that level. But I think as we move into the future, it’s going to be a little bit shallower of a growth rate, it’s not going to be happening at a robust pace now that we have started to open up the economy, it’s going to be more gradual in nature of you. Yeah. Interesting. Um, I wonder if you have any thoughts on, you know, talk about Black Swans, this isn’t a black swan. But this move that, you know, I’m based in New York, and, as I’m sure you’ve heard, you know, that so many

Nathaniel E. Baker 27:46
the idea of commercial real estate, at least in New York, with offices not returning to full capacity of having workers come in. And, and many people viewing that as something that is very much an antiquated model that will never come back at all. And so at that point, you know, many commercial real estate landlords will be on the hook for will have a lot of inventory, they’ll have fewer revenues, they’ll probably have a lot of trouble. And, you know, some of these are big companies. And it’s certainly feasible, but that can have a ripple effect, at least through local economies and big cities in the country. Is that something that you that you’re concerned about at all?

Alex Chausovsky 28:30
Well, certainly watching this very carefully. So there was a couple of points in that question that I wanted to address. First and foremost, I remain of the belief that we are social beings at heart that we are not going to transition to this permanent work from home mantra, we might have a little bit more flexibility, which is what the millennials and Gen Z’s have been asking for quite some time anyway. But people will go back to work, they want to be in the office, they want to be congregating with their peers. There’s no replacing that and we’ve seen that in our own business, we we recognize that despite the fact that we’re highly productive and efficient working from home, we’re essentially kind of firing on seven out of eight cylinders, because there’s a Genesee quad, there’s something missing from not being able to come together to brainstorm the same way that we were doing before. So I will say that, that some of the fears, I think, are a little bit like likely overblown in terms of the the sheer swing to the other side of the spectrum that this is going to cause. However, having said that, I agree with your kind of indication that the non residential construction markets and particular commercial office buildings, that kind of space, but also it extends to medical facilities, and education, construction, those are going to be under fairly significant pressure. We believe that the next two years are down years for that construction segment, right. And with existing buildings, it’s likely going to result in some significant pricing pressures over this timeframe as well before the market can truly recover. But I do You think that recovery does occur because young people do not want to live in the suburbs, where you want to live in the suburbs when you’re in your mid 30s. And you’ve got a young kid and a dog, so you want a yard for them to play. And right, young people want to be mobile, they want to be in the thick of it, they want to be able to move about easily through whether it’s Uber or public transportation system. So I think that further down the road, let’s call it three to five years out, we largely see a recovery in that marketplace. But in the meantime, it’s certainly going to be something that’s going to be quite pressured. And my advice to companies, if they’re renting a building, use this negativity and pessimism to negotiate better lease terms, or even think about when you get to the low point, let’s say 12 to 18 months from now, when there’s been enough of a price pullback, if it makes sense, maybe even consider buying some of that non residential real estate because I think that in time, it does come back. And if you can get a good enough valuation on it, and get it at a discount, then that might not be a bad idea, especially if this is a building that you plan on keeping long term anyway, right? If it’s a like a warehouse or a distribution location, that, you know, you’re just going to be paying rent on this thing for the next 10 or 20 years, well, that might not be a bad idea to invest. We’ve always and for a long time now been very much positive on real estate investment. Overall, we think it should be a part of any managed portfolio structure. And so we think that this presents some really interesting opportunities. But again, it’s all about location, it’s all about making sure you’re paying the right price, and making sure that it’s a sensible investment for you longer term, rather than just hoping to make a quick buck or two, because we’re not exactly clear on how long this trend that I’m describing is going to take the play out.

Nathaniel E. Baker 31:41
Right. Yeah, right. Okay. Last question I have is, we’ve seen here, surprisingly, to many, many companies that have really profited from the not the pandemic itself. But all of the kind of derivative effects. And you can think of a company like zoom. Right? Or even Amazon has says has done great, although not not so much recently, but during during this thing with people ordering stuff from home, ya know, grocers that have gone into digital things have done quite well. Are there as you have looked at forecasts and for for businesses and such, are there any other sectors maybe of the economy, or companies that you think could be in a position to benefit as this drags on?

Alex Chausovsky 32:35
Yeah. So I will say that there are sectors of the economy that are typically counter cyclical, although I would say that right now, that’s not really the case. So the ones that in particular, I’m thinking about are medical and aerospace, they tend to act in a counter cyclical manner to the overall economy. But obviously, what’s going on with leisure travel right now is certainly affecting the, the Boeing’s and airbuses of the world, what we’ve got going on in the healthcare sector, which is people just kind of pushing back elective procedures, and generally speaking, not wanting to go into healthcare facilities, unless they absolutely need to, you know, we’ve seen surprisingly layoffs and and really business closures in the medical sector, which is very, very uncharacteristic. So I think, I think right now, the area where I am encouraged by and I think longer term does present a really interesting opportunity is defense, in particular, because that sector is not only not really driven by the economic cycle in general, it’s driven in large part by budgets and appropriations and things that are kind of set in place, and then don’t change as a result of what’s going on in the economy. But I also think that there’s a very healthy amount of export activity being driven right now, because governments all around the world, as the world moves into this more inward looking nationalistic posture, everyone is starting to realize Americans are pulling back, they’re no longer going to be the police of the world. And we’ve got to start taking care of ourselves a little bit more than we have, in the past when we relied on that American protection. You see this in Asia, you see this in the Middle East? You know, certainly the Europeans are becoming more aware of that. So I think that there are a lot of positive tailwinds for export sales of defense equipment. So you know, I’m not going to give specific company names research, right, you’re going to have an ample selection of businesses to choose from, I would say focus more on export driven businesses rather than those serving the domestic market. Because, as you say, you know, as we get closer to the long term trajectory, and as the government takes on more and more debt as part of the stimulus package, we’re going to be looking for ways to cut back on spending. And so I think it’s that export driven side of the market, that’s going to be the more let’s call it the outperforming segment of within defense. So that would be my recommendations. Take a look at that. And of course, you know, I remain very positive on both tech and the market as a whole One thing that really strikes me when I think about investing is that the stock market is the only vehicle that I know of that has a constant influx of funds going into it no matter what’s going on, right? I mean, every two weeks people get paid. They’re putting money into their 401 K’s. They’re putting money into their IRAs, and that I don’t know of any other investment that has that baked in kind of feeding mechanism that continuously over, obviously, an extended period of time, but it generally pushes the valuations upward in a positive direction, right? We all know that the average growth rate for the s&p has been something like what six to 8%, if you look back far enough into the future, but the reality is, I think when it comes to investing, specifically, my my perspective is, how do you sleep better at night? Right? Do you sleep better at night, knowing that your money is in relatively safe haven investments, things like dividends and value funds? And you’re not going to capture some of that massive upside you might see in stocks, like Tesla, for example, or in Bitcoin, right? But you’re okay, knowing that your money is going to generally grow over time. And it’s going to kind of build that that wealth nest egg for you? Or do you struggle with missing out on those run ups? Right? Do you want to be a little bit more aggressive and therefore are willing to take on that risk. And then that’s how your investment strategy should be kind of built up to position your preference for risk and the FOMO effect, right? You don’t want to be missing out on one way or another. So that would be my my recommendation is, especially for those of you that are investing with a longer term horizon understand, the general trend is one of upside movement, and that should continue no matter what happens, there’s going to be periods of great volatility. I think a lot of times the stock market tends to overreact, especially as you talk about things that are like the the presidential election with with so many people now joining the ranks of investors from their couch, right, and and really driving their investment decisions based on what Jim Cramer’s happens to be saying on that particular talk show.

Nathaniel E. Baker 36:59
Hopefully, not that many, but okay.

Alex Chausovsky 37:01
Well, I think what we’ve seen is with the closure of the sporting events, and gambling and some of that, we’ve seen a lot of that money come into the market. I mean, for sure, you know, so so that’s

Nathaniel E. Baker 37:11
kind of a maybe Davey day trader is a better reference point.

Alex Chausovsky 37:14
Yeah. Davey day trader. There you go. There you go. I like to think of a guy sitting on his couch in his in his, you know, robe and eating popcorn while he’s watching Jim Cramer and pulling the trigger on some stocks. Right. So generally speaking, I’m positive on the market overall, short term, certainly there is some some downside risk because of the uncertainty out there right now. But I think if you align it with what we’re expecting in the macro environment, which as I said, is a continuation of the recovery trend. I think that, you know, over the next couple of years, the market should continue to do well, in my opinion.

Nathaniel E. Baker 37:46
Very good. Alex shinozaki, thank you so much for joining us. Maybe in closing, and I’ll put this in the show notes as well, you can just tell our listeners how they can find a little bit more about you. websites, Twitter accounts, etc.

Alex Chausovsky 38:00
Absolutely, yeah. So the ITR economics website is very logical and straightforward, ITR There, we have lots of different sections on there, you can look to hire us for our forecasting services, we do a lot of presentations, including to the financial and investment community. So if you’d like to get a little bit broader context of what what we do, certainly feel free to contact us through the website. We are on Twitter, and LinkedIn and Facebook. And my personal Twitter account is just @AChausovsky. So my first initial last name, we’re constantly putting out free content for you. So blog posts, opinion pieces, you know, little audio and video files, discussing the latest developments that are going on and giving you our opinion of what what the implications of those developments are. So I certainly invite you to join us and follow us on the social media channels and hopefully get some better insights because what we focus on is cutting through some of that noise that’s out there right now being data driven decision makers and not being driven by emotion and anxiety. And so if you’re looking for that kind of input, certainly please feel free to follow us.

Nathaniel E. Baker 39:04
Yeah, certainly. That’d be a better recourse than going to Jim Cramer or David day trader. But yeah, that’s wonderful.

Alex Chausovsky 39:12
Like all the sound bites that he plays, you know, the noises and

Nathaniel E. Baker 39:15
yeah, I view him as a contrarian, if anything, but yeah. Cool. Awesome. All right. Alex, thank you so much for joining us. Thank you all for listening, and we look forward to speaking to you again next time.