“Pay no attention to the man behind the curtain.”
The Wizard in the Wizard of Oz
“Cold-hearted orb that rules the night,
Removes the colors from our sight.
Red is grey and yellow white.
But we decide which is right,
And which is an illusion.”
Graeme Edge, Moody Blues
In George Orwell’s classic novel, 1984, he imagined numerous linguistic manipulations. The fictitious government wanted everyone to use Newspeak. As Orwell imagined it, the government imposed a way of speaking in order to control people’s ability to think critically.
In May a Guardian/Harris poll about the economy was released. It found that 56% of Americans think we’re in a recession. I have to stop right there and after I’m done shaking my head, point out that no, we are not in recession. Since 56% of Americans think we are, then the odds are that you, dear reader, think we are in a recession.
There is an organization called the National Bureau of Economic Research (NBER) which officially has the job of dating when recessions start and end. According to NBER, the last recession ended in April 2020 – FOUR YEARS AGO! Sorry, I hate all caps in text. It’s shouting. But I really feel like I need to shout this.
The Guardian/Harris poll further found that 49% of Americans think the S&P500 is down this year. Wow, now we’re really talking about a house of mirrors. As I write this, the S&P500 is at all time record highs. According to Morningstar, the largest independent analyst company in the world, as of June 14th the S&P500 was up more than 14% this year. But half of Americans think it’s down. Here, take a look for yourself. The top one of 4 graphs shows prices. You can see the beginning of 2024 at the far left of the chart below. You can see that is much lower than the last prices on the far right of the chart. Take a look.
The poll also found that 49% of respondents think that unemployment is at a 50 year high. I’m still shaking my head. Unemployment is actually at a 50 year LOW! Really. We are now in the longest period of unemployment below 4% in the last 50 years. And according to recent reports by the Labor Department, for every unemployed person there are 1 ¼ job openings.
In other words, there’s a job available for every person that wants one. Now, maybe they aren’t qualified or don’t want the jobs that are available, but the fact is that the economy is producing more jobs than we have people to fill them.
Sounds like pretty good times, right? And it is. Unemployment at 50 year lows, the economy and the stock market are at record highs. Everyone should be singing Happy Days Are Here Again, right?
And really, in at least one important way, they are. According to a Federal Reserve Household Survey in 2016 70% of survey respondents said they were doing at least OK financially. And in 2023 that figure had moved up slightly to 72%.
So if 72% of people think they are doing at least OK financially, why do 56% of Americans think we’re in a recession? How is that even remotely possible?
Here’s what I think. It’s a guess but please read it because I think you’ll find it squares with your own experience. I think it’s algorithms. Really.
Google, Facebook, Instagram, Amazon, TikTok, YouTube, Netflix. Every one of these companies have huge businesses based on getting companies with something to sell in front of the right people. They can slice and dice market data like never before in history. The whole purpose is to put products in front of you that you have a reasonable likelihood of buying, based on your likes and dislikes. How do they know what you like? They have over 2,000 data points on you. Every time you click on any new story, video, movie, TV series, or better yet, actually buy something online, or research it, that gets recorded by the machines of these huge companies. And then their algorithms feed you what the data says you want to see – the better to market to you.
What this means is that you and I live in our own echo chambers created by big tech. My wife, Joan, clicked on a story about Megan Markle, and for months after that her news feed kept feeding her stories of Megan and her husband, Prince Harry.
When I open Google news I see stories about golf, photography and investments with a sprinkling of stories about my favorite sports teams and maybe every 5th or 10th article about actual important news events. And most of those stories are stories that agree with my particular political outlook.
Joan was recently talking with someone who thought the economy was bad and that Democrats stood for open borders. Most Democrats do not stand for open borders and the economy is pretty strong so she later said to me that he was a typical uninformed voter.
But here’s the thing, we are ALL uniformed voters. Based on what Democrats read, Republicans are all crazy and uniformed. And, based on what Democrats read, they are – because the algorithms are feeding Republicans different stories. We all live in echo chambers and we all think the other side of the political spectrum has lost touch with reality. But, the real truth is that we have all lost touch with reality and it’s not your fault. You’re being kept in the dark and fed BS.
Here's what you can do about it.
- Stop clicking on the same kind of stories – the ones they fed you because it’s what you wanted to hear. This is hard to do. Try asking yourself why you are seeing this story in your feed before you click on it.
- Try searching for primary sources. Want to know how the economy is doing? Read about it on the website of the Federal Reserve – the Atlanta Fed keeps a running estimate of our economic growth called GDP Now. Here’s the link. https://www.atlantafed.org/cqer/research/gdpnow. You can let other people read these things and tell you what you should think about them, or you can make up your own mind. I encourage you to go to the source and make up your own mind.
- Forget politics. Really. A study some years ago looked at communities that were experiencing better than average quality of life and the number one thing they found was that national politics were not important in those places. I have some really good friends who’s politics are the complete opposite of mine. The trick of how we stay friends is that we don’t talk politics. We mostly talk about our common interests.
In today’s world, it takes discipline to live with the algorithms. You have to, at least sometimes, get your head out of the echo chamber.
What’s all this got to do with investing? It’s really important to get yourself out of the echo chamber. Not only does democracy depend on informed citizens, successful investing depends on being informed. The economy is fine. Inflation is slowly declining. Unemployment is low. Make your investments based on that, not based on what the right or left wings want you to believe.
Hal Masover is a Chartered Retirement Planning Counselor and a registered representative. His firm, Investment Insights, is at 508 N 2nd Street, Suite 203, Fairfield, IA 52556. Securities offered through, Cambridge Investment Research, Inc, a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Investment Insights, Inc & Cambridge are not affiliated. Comments and questions can be sent to hal.masover@emailsri.com
These are the opinions of Hal Masover and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. Investing involves risk. Depending on the types of investments, there may be varying degrees of risk. Investors should be prepared to bear loss, including total loss of principal. Past performance is no guarantee of future results.