We may be heading for recession – and it will be no ordinary recession
Just as the downturn in 2020 was not a typical recession. the next downturn could be very different too, says Merryn Somerset Webb.
Netflix. Are you still watching it? I can’t remember when we last did. We aren’t alone. Netflix has just reported losing customers for the first time in a decade. It is already 200,000 down and reckons it will see another two million customers cancel this quarter.
You might see this more as symptomatic of the cost of living crisis and the many economic miseries ahead than anything else. That’s not entirely unreasonable. In this week' smagazine, we look at the danger to the global economy from Xi Jinping’s inflexible empire; we also look at what you should worry about in France (the election and the insanely high levels of debt); and we list the reasons to be frightened of stagflation.
However, the Netflix disaster might be telling us something else altogether – that if there is recession ahead (a lot of indicators suggest there might be), it might be no ordinary recession. There’s a clue about what might be different in what has happened to shares in Netflix (they fell 27% on the news of the firm’s falling popularity) and what has happened to those in hotel company Marriott (up 25% in the last six months), says Bloomberg.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The extremity of the moves is partly about expectations – Netflix’s share price reflected very optimistic views about its future growth and much of the previous underperformance of shares in Marriott reflected pandemic misery extrapolation. But both these moves reflect the possibility that just as the recession of 2020 was “atypical” (to put it mildly) and so was the recovery into last year, the next downturn might also be very different.
Stepping out again
With what money there is left in their pockets after paying their energy bills, might consumers stop sofa surfing, stop browsing the internet for homewares and ineffective masks and just go out? GDP may fall, but hotel occupancy may just keep rising. And Netflix’s customers? They aren’t so much cutting their overall expenditure or leaving because – as Elon Musk thinks – Netflix is too “woke”. No, they are simply transferring their spending power to the pub.
Think Joe Jackson and his 1980s hit Steppin’ Out:
“We are young but getting old before our time
We’ll leave the TV and the radio behind
Don’t you wonder what we will find
Steppin’ out tonight”.
One thing you will find as you step out will be inflation (which is why you will soon cancel your Netflix subscription if you haven’t already). In an inflationary environment everyone puts their prices up (there is no choice), so your investments also need to take account of this. One way to do so (and possibly to take advantage of the reshoring and supply-chain resilience trends as companies move production away from China at the same time) is to look at real estate investment trusts. For even higher yields (albeit maybe temporary ones) remember the miners. Hold BHP, get the full-year dividend analysts expect and you will find you have made 9%. Finally, don’t forget gold – as we note , it is finally showing its mettle as an all-purpose safe haven.
Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).
After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times
Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast - but still writes for Moneyweek monthly.
Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.
-
Should you sell in May this year?
The market adage looks unlikely to apply in 2024, and global equities are proving resilient
By Max King Published
-
Should you invest in UK equities?
The FTSE 100 hit a record high this week, but UK equities remain unloved and undervalued compared to their global and US peers. Should you snap them up at a discount?
By Katie Williams Published
-
Should your business invest in a VoIP phone service?
Here's what you need to know about VOIP (voice over IP) services before landlines go digital in 2025.
By David Prosser Published
-
The end of China’s boom
Like the US, China too got fat on fake money. Now, China's doom is not far away.
By Bill Bonner Published
-
What is the future of Royal Mail in the UK?
With fewer of us sending letters and parcels, the Royal Mail is finding dealing with the nation’s post is an increasingly unprofitable and costly business.
By Simon Wilson Published
-
What's the secret of Manolo Blahnik's success?
Fashion maestro Manolo Blahnik shows little sign of slowing down at 81, and his company notched up a record financial year in 2022. What is the secret of his success?
By Jane Lewis Published
-
Michelle Mone's "tough year of pain"
Michelle Mone liked to portray herself as a working-class heroine who worked her way to the top through grit and determination. But her pedestal is built on sand.
By Jane Lewis Published
-
Trevor Milton, the Elon Musk wannabe, is jailed for fraud
The former CEO of Nikola, Trevor Milton, has been found guilty of lying about the development of the company's electric trucks.
By Jane Lewis Published
-
Directors should think twice before waiving limited liability
Should small-business directors ever provide a personal guarantee in return for bank finance?
By David Prosser Published
-
Why Russia's economy is doing better than predicted
Sanctions were supposed to strangle Russia’s economy, but it seems to be thriving. What’s going on?
By Simon Wilson Published