Ep. 342 — ITR Economics, ButcherJoseph & NCMM: Reading the Real Data Behind the 2023 Headlines

6 min read

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Episode Summary

You’re staring at two articles side by side. One says the consumer is resilient. The other says nobody can afford anything. Both came out yesterday. You’re sitting with a hiring decision, a capex decision, and a lease renewal that’s due, and the Fed keeps flipping its position every six weeks. I brought three of my favorite voices back for the Q1 update to make sense of the noise. Brian Beaulieu from ITR Economics on the macro picture and what the inverse yield curve is actually telling us. Jeff Buechner from ButcherJoseph on what’s happening in deal structures and valuations now that money costs something again. And Doug Farren from the National Center for the Middle Market with fresh data from a thousand privately held owners. We got into why the Fed’s forecast accuracy runs under 50% while ITR’s runs 94.7%. Why the “+517K jobs” headline was actually a 2M job loss before seasonal adjustment. Why private equity pulled back while strategic buyers kept buying. And why ESOPs just got competitive again on the math. Real numbers, real owners, no headline bait. This is the conversation I wish I’d had in the Milestone 8 — Quarterly Boardroom Rhythm when I was running my old business.

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## Top 10 Takeaways
  1. The Fed’s forecast accuracy runs under 50%. ITR’s runs 94.7%. Pick whose data you’re betting your business on.
  2. An inverse yield curve sustained two months running puts recession probability at 88% by late 2024.
  3. The “+517K jobs” headline was seasonally adjusted noise. The real January number was 2M jobs lost.
  4. Stop reading headlines. They’re written to make you click, not to help you decide.
  5. Real wages are rising, the consumer is healthy, and Main Street is doing better than the financial press will tell you.
  6. US demographics are the bright spot. Every other industrialized economy is going negative on population.
  7. Reshoring is real. 52% of middle market companies brought manufacturing back to the US in the last year.
  8. Private equity pulled back as rates rose, but strategic buyers kept buying because their balance sheets healed.
  9. Earnouts are back. The bid-ask spread between seller hope and buyer reality is being bridged with structure, not price.
  10. ESOPs got competitive again. As private equity prices came down, the tax math on a 30% deferral can win on net proceeds.

Sound Bites

“Stop reading headlines. Cause headlines are there to get you to click or buy something. They are not there to edify.” (@TBD) — Brian Beaulieu

“It pays to be independent and the Fed is not independent.” (@TBD) — Brian Beaulieu

“Money’s no longer free. It was free for a long, long time for all sorts of purposes. And now it actually costs something.” (@TBD) — Jeff Buechner

“Every industrialized nation on this planet is confronted with this negative demographic, except for the United States, because we’ve got these millennials, which essentially sets this country up to be the innovative leader, the economic leader, for the next 50 years or more.” (@TBD) — Brian Beaulieu

“12.2% on average across the middle market. That is continuing to be very strong. This is the third straight survey that we’ve had 12% or higher.” (@TBD) — Doug Farren

About This Episode

This is the quarterly economic and M&A market update, sponsored by ITR Economics. Brian Beaulieu is Principal at ITR Economics, founded in 1948, the oldest privately held continuously operating economic research and consulting firm in the US, with a long-term forecast accuracy rating of 94.7%. Jeff Buechner is a partner at ButcherJoseph, an M&A advisory firm that runs ESOP transactions, debt financings, third-party sales, private equity recapitalizations, and internal buyouts. Doug Farren leads the National Center for the Middle Market, which runs the longest continuously operating survey of mid-sized US companies, now in its 38th wave. Ryan sits across the table from all three in one episode to triangulate macro, deal-level, and middle-market owner data.

Resources Mentioned

  • ITR Economics — Sponsor of this episode. Brian and team’s research, books, and subscription services. — itreconomics.com
  • Make Your Move by Brian and Alan Beaulieu — The Fed track-record research Ryan references.
  • Prosperity in the Age of Decline by Brian and Alan Beaulieu — The long-term demographic and economic outlook book.
  • ButcherJoseph — Jeff’s firm. M&A advisory, ESOPs, recapitalizations. — butcherjoseph.com
  • National Center for the Middle Market (NCMM) — Doug’s organization. Middle Market Indicator survey and data. — middlemarketcenter.org
  • ADP Monthly Jobs Report — Used by NCMM as a proxy for small vs. large business employment.
  • Pepperdine Capital Markets Report — Referenced by Ryan as a comprehensive private capital markets data source.
  • Peter Zeihan — Referenced for demographic and geopolitical analysis on US prospects.
  • Factfulness — Referenced for the long-arc view of human progress.
  • Intentional Growth Bootcamp — May at Rollins College, Orlando. — arkona.io
  • Intentional Growth Academy 2.0 — 71 videos, 9.5 hours, do-it-yourself or coached versions. — arkona.io

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