Wall Street loves to obsess about the dilemma Goldilocks faces in the fairy tale: what it the economy is too hot? what if it’s too cold? But they’re forgetting that the characters who made the porridge in the first place are the bears who prefer the extreme scenarios to the circumstances that normally nourish investors.

We saw this today. While it’s usually seen as a good thing when people are employed, news that U.S. employers hired enough people to push the unemployment rate down was initially viewed as too hot for comfort.

After all, rising salaries are a major engine of inflation. Persistent inflation will keep the Fed in an aggressive posture as long as it lasts. And people who feel confident that they won’t be laid off any time soon can negotiate higher compensation from current employers or find a better deal elsewhere.

That’s what we really mean when we say the economy is “too hot.” Wall Street is so terrified of the Fed that any hint of that heat gets interpreted as a sell signal. Too much heat, in other words, sets the table for the bears and beckons them to eat.

But then the mood changed. It is practically impossible for an economy running this hot to tilt immediately into recession, which is also a scenario that terrifies Wall Street.

Nobody who lived through the last major recession of 2008 wants to do it again. Those who only remember it in rumors and hearsay have no direct experience of what it really means.

Either way, a slowing economy means it’s harder for everyone to make money. Investors don’t enjoy that. And so when concrete signs of that kind of slowdown emerge, the bears get a meal they like.

These are different bear arguments. No economy can be both hot and cold at the same time. A cold economy rarely generates inflation. But the bears are closely related. They live in the same house, if you like.

The problem with inflation is that it motivates the Fed to raise interest rates to a level that kills inflation while theoretically pushing the economy toward the recession cliff. It’s a circular narrative that makes a lot of assumptions along the way.

As you’ve probably noticed, what Wall Street really fears about the heat is the prospect that it will trigger a cascade of events that leaves us all in the deep freeze. Recession is the real enemy.

That makes sense. Again, when it’s too cold in the economy, it’s hard to make money. You can’t really get a satisfying meal when the porridge is frozen solid.

And inflation in itself is not actually a threat. We know this because after the CPI spiked to 4.1% in early 2021 . . . the highest level since 2008 . . . stocks kept rallying for another 8 months. Heat can be harnessed. If you’re positioned right, you can make money.

In the final analysis, the cold porridge is the biggest threat at the table. We’d rather have a vibrant economy where more people are still finding jobs, even if it means accepting the notion that prices are going to keep climbing.

As long as there’s heat out there, we have the chance of making enough to maintain our purchasing power or even get ahead of inflation. In a full-fledged recession, the best that most people hope for is survival until conditions improve.

In a recession, you’re hoping for some heat. Today’s recovery shows that in the final analysis, Wall Street would really rather have it too hot than too cold. The longer we avoid the winter, the more time our money has to keep moving in our favor.

Think back to Goldilocks. Yes, some porridge can be too hot to handle. Inflationary environments can be miserable.

But unless the bowl is kept in the oven, it’s going to cool off over time. Money in motion will eventually slow down. And when the Fed is interested, it’s like every rate hike drops an ice cube into the bowl.

Sooner or later, that porridge will be cool enough to swallow. That’s really what “just right” means in the grand scheme of things.

Remember, inflation normally runs about 3% a year. The long stretch from 2008 to 2021 was an aberration brought about by the wreckage of the 2008 crash, which practically wrecked the job market permanently.

In exchange for that 3% inflation, we generally expect the economy to grow a little faster. The long 2008-21 lull in inflation coincided with a significant stretch of subdued GDP expansion that never got above 2.95% a year.

The economy was too damaged to get any hotter, even in what was effectively a zero-rate environment similar to the Fed’s COVID stimulus campaign. The Fed couldn’t raise rates in that period but they couldn’t lower them either.

There was nobody to turn up the heat.That’s the real “not too hot, not too cold” scenario. It wasn’t bad for investors, but it wasn’t realistic or sustainable either.

I don’t want to go back to that lukewarm world. Serve my porridge a little on the hot side. Once it’s out of the kitchen, it’s hard to heat it up. It will cool off on its own.

Find the hot spots. Avoid the chill. Only bears can survive that weather and only the worst of the bears craves that meal.