October 10, 2019

Headed South

The other day I was sitting in a new restaurant in town, eating some chicken wings in the bar, killing time before my radio show.

In walks pretty much the whole Chamber of Commerce. They had some social event or something.

I have a theory about signaling—basically, through our clothes, accessories, and our behavior, we signal how much money we have to other people.

Of course, signaling means different things in different places. In New York, a Hickey Freeman suit and a Ferragamo tie means you are a rich Wall Street guy. In hashtag The South, if you are wearing a blue blazer with gold buttons, a white shirt, and khakis, you allegedly have money.

One of the reasons I will always have a soft spot in my heart for San Francisco, no matter how much poo there is on the sidewalk, is because there is no signaling. The guy in a plaid shirt and jeans that went zooming by you on a skateboard might be employee #32 at Facebook and have a phone number in his bank account. You just don’t know.

I’ve never been one for signaling. In my time on Wall Street, I was famous for wearing terrible suits. These days, I go for ripped jeans, a John Varvatos t-shirt, jewelry, and a few tattoos. That was what I was wearing when the whole Chamber of Commerce showed up, and gave me side-eye like I was the janitor.

Guys...

Lehman Brothers had an employee who was doing proprietary trading in Miami. Towards the end, he was making about $80 million—a year—for himself. He was pretty unassuming and never told anyone else in the building who he was. The other people on the floor thought he was an IT guy and would ask him to fix their computers (which he did).

Classic.

I have reached the point in my life where I really just do not care what people think of me. Which is pretty much the definition of freedom.

Moral of the story: you shouldn’t make assumptions about people. Not everyone observes traditional class markers. And they vary from place to place.

Anyway, there are more important things to talk about today.

Hashtag Going South

Speaking of The South, the economy is going south. We’ve had a bunch of bad economic data in quick succession. If you don’t agree by now that the economy is slowing, you might be called a denier.

Yes, unemployment went down to 3.5%, but that is the lagging-est of lagging indicators.

Good thing there is a trade for when the economy slows down. Bonds! Okay, okay, we have talked enough about bonds. And besides, if your sole reason to buy bonds is because the economy is going to slow down, you should step into your time machine and do it nine months ago, when tens were above 3%, and Powell said we were “nowhere near neutral.” That was the time to do it—when the trade made the least amount of sense.

(Disclaimer: of course, there are many more reasons to own bonds than the economy slowing down.)

If the economy is truly slowing—and I think it is—we should get into the political implications. If GDP growth goes negative or unemployment shoots up, Trump is going to be wearing it, and the Democrats are going to have a strong edge going into the election.

In my various newsletters, we have been hard at work coming up with hedging strategies in the event that a Democrat—particularly a far-left Democrat—takes possession of the Oval Office.

I started talking about this a few months ago, and the conversation has picked up steam, and it would be accurate to say that many people on Wall Street are freaking out.

I’m not going to offer a prediction as to what will happen in 2020. Consensus seems to be Elizabeth Warren at the moment. Mayor Pete will make a run for the roses, I assure you of that.

Hillary!

All I can say is, absolutely anything is possible. And I will give you my usual shtick about how people are carrying too much equity risk. A possible recession and an election, and people have 80/20 portfolios going into this. Uh-oh.

If the last two weeks have made you the least bit nervous, then your asset allocation is all wrong. This isn’t supposed to be stressful. If your portfolio is stressing you out, then change it.

And do some stress-testing—if your portfolio will stress you out with stocks down 30%, then change it.

Meanwhile, energy high-yield is getting crushed again, which was a pretty good canary in 2015.

The Jared Dillian Show

I have a radio show. You should really listen in.

Not kidding! It’s currently on from 6-8pm EST on WCGO 1590 in Chicago. Just one station for now, but adding more soon.

You can listen live at jareddillianmoney.com. Or you can listen to the podcasts after the fact, although they are short segments, not the entire thing.

The focus of the show is personal finance and the basics of investing. For example, I spent about a half hour the other night talking about the economics of taking your shirts to the drycleaner, instead of ironing them yourselves.

I’ve talked a lot about relationships and money, like: should you ask your boyfriend/girlfriend their credit score? Should you keep your money separate in a relationship? I’ve talked about student loans, 529s, 401ks, IRAs, and every retirement strategy in the book.

I cover it all.

And I encourage you to call in with your questions.

Go to jareddillianmoney.com and listen live! Get a feel for what I’m talking about, and chime in. Or, just call in with any question at any time (well, any time between 6-8pm EST). Try to stump me—I’ve only been stumped once in 3 months, and it was a question about how to obtain stock certificates.

The cool thing about personal finance is that it is endlessly complex, and nobody is sophisticated enough to run a linear optimization. So people need help.

The show is also lots of fun. I was rapping Public Enemy’s Fight The Power the other night, though I’m not sure anyone got it.

It would be great to talk to you in person. Just call 844-305-7800. Talk to you soon!

Jared Dillian

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