So now i want to talk a little bit about predicting a recession and some of the things that started declining as early indicators that we were in recession in prior crises. And it's really interesting because there's a conclusion out of that that uh well you'll learn something from because you might not be expecting it. But almost every single one of the prior crashes had different leading indicators and - and that's quite wild - take a look at this. So we jump in over here covered recession.

Obviously, during the covid recession, we've got uh, you know things like recreation services fall right away at the beginning, right we get food prices and accommodations like these are things. These are retail categories that saw the largest hits right totally expected and they even include hospitals, because all those elective surgeries got canned right and those are the money makers, the housing bubble. N07. What were some of the early signs that people were cutting back? Listen to this non-electric cookware tableware furniture dishes and flatware.

Now this is actually one of the reasons why i've frequently said the last place. I want to be if we're going to have uh a a sort of uh slowdown in uh. In you know, retail is probably in stuff, like home improvement stores, lower end of the retail like under armour, which we're going to talk about, but home improvement stores, furniture stores, things related to housing. If you're going to see housing slow down, you're going to see things related to housing, potentially slow down, in addition to potentially lower end consumer goods which we'll talk about those tech bubble, look what went down uh during the tech bubble, luggage and moving in storage services.

Like wait, a minute like that has very little to do with the other things: cable and satellite tv. We got cut uh the shorter recession in the 90s uh traveling window coverings, tv, child care and vehicle maintenance, the volca recession, the second volcker recession. They call it calculators and typewriters schools, outdoor equipment and there's furniture again uh, okay, interesting because the real estate market didn't really have a big crash. Then the first volca recession was also very different.

A year before that uh light trucks, games, toys and hobbies sports and wreck vehicles, the vietnam war recession at 69 shoes bakery products drinks like these. These were things that saw recessionary hits in 73 when we had those oil price, shocks, wreck vehicles, boats, planes, processed fruits, vets, vegetables, sports wreck, vehicles, again uh, and so what's really fascinating about this particular chart. Here is what conclusion: does it tell us about? Predicting a recession. Well tells us almost nothing, in other words like there is a zero consistency between spending uh, you know between which category gets hit first, when it comes to spending going down in a recession.

Now, in surveys, we could try to get like an updated impression of this, like here which of the following. If any, will you consider or would you consider doing if high prices persist right, in other words like potentially, if we're heading into a recession or if we want to start cutting back on something? What do we cut back on first well, 52 percent of people say dining out then cut back on driving 42. It kind of implies a lot of discretionary driving, which you would expect people to cut back on driving when gas prices go up, canceling a trip or vacation 40 canceling a monthly subscription. How interesting 36, which kind of makes me think of like netflix? Oh disney, plus, you know some of the other subscription services.

Certainly netflix has just been a disaster uh a huge miss. Remember. They were expecting to grow accounts by two and a half million. They ended up having a 500 000 account loss, uh, that's even with 700 000 losses.

You know that doesn't include 700 000 losses from russia, but still like. Even if you add russia back in it was still a horrible report. They only added 200k accounts. In that case, right so not a surprise, but look at what doesn't really get cut over here, borrowing or like what doesn't occur as much right borrowing, money or taking on credit card debt to cover expenses like that doesn't necessarily get cut.

People. Don't necessarily do that. Less uh or, let's see, delay buying a home twenty percent delay buying these these kind of more at the end of the survey, not so impressive, as the things that we've got over here, which is cutting back on dining out driving vacations and monthly subscriptions. Those are the big things that people say: they'll do now in a potential recession, but the the the problem that we have right now, hey shout out to ftx.

Take a look at this. I love this about ftx that we could use the trading view technical analysis, software built right into fdx. We could trade our crypto right here, but look at this wedge that we're creating on the day chart for btc. This to me is showing real resistance to bring btc lower and, if anything, we're seeing higher lows.

I love this. I'm spotting this with the ftx app which remember if you want to sign up for ftx, which i highly encourage. You do go to the link in the description down below download the app use code, meet kev and you will save and get free crypto on any transaction over ten dollars. Just make sure you put in that code meetcav when you check out it's linked down below in the description, you can also go to metkevin.com ftx download the app use that code meet kev, but folks look at this.

This is a consolidation pattern and i'm hoping we get a nice breakout to the upside, especially since, when we're looking at that bottom trend line, we've got a solid four bounces now on lows, and today, right here may 6th is one of them. Let's see where we go from here, a lot of macro fears, but hopefully we're destined for that upside and hopefully you're trading it on ftx linked below is travel, is booming. We're expecting bank balances to be higher this year we were originally last year. Thinking that oh at 2022 bank balances will be lower, but no the banks are telling us bank balances are growing, travel spending is growing, the airlines are projecting more travel, not less and they're.

Seeing that trend throughout april and the beginning of may here, so it's kind of wild part of that has to do with what we talked about earlier. The fact that right now, u.s households have net worths capable of supporting 140 percent more consumption than before the pandemic. In 2019 - and this is even with higher oil prices like higher oil prices, are expected to maybe reduce consumption by about one percent in the coming quarters, that's not that big of a deal that's like taking your gdp from maybe uh. You know three percent to two point: three percent, because spending is about you know: seventy percent.

You know the consumer's about seventy percent of the eco, so uh wow like uh, okay. So so then, what do we? What do we look for in terms of recessionary signals? Well, certainly, we want to look for signs that consumers are spending less somewhere. We got some of those signs yesterday, but we get really mixed signs. For example, draftkings reported this morning they reported a beat and they raised their forecast, but one of the big things that was said was the ceo says: we're not actually seeing an impact from inflationary pressures on customer demand you're getting that in a lot of companies.

A lot of companies are telling us we're not seeing the impact of inflation on people's capacity or willingness to spend money. In fact, if there's anything that you're seeing it's, that people are spending more money, not less now, this does stand in contrast to what happened with under armour this morning, and this is something i've talked about before early this year i mentioned, and it's worth actually kind Of drawing this out just to see it a little bit better but uh take a look here. If we draw this, in my opinion, one of the first places like let's say you have on the y-axis here - incomes and you do 50k of income 100k and, let's say 250k plus right, so basically like lower income or or super low income to to higher incomes And sort of that, like one percent level, right uh, everyone in these categories is, is okay buying stuff, like you know, under armor nike uh, whatever. Maybe your lulu stuff right, like everybody, buys in these categories, but probably only in like the 100 to 250k category.

Are you actually getting stuff like teslas and the apple products? Although apple products might extend a little lower to like that 75k region, right and in my opinion, the the first place to kind of get hit, and we want to watch for that is over here in like those under armour nike lululemons, but also things like etsy Or uh you know wayfair the sort of discount furniture like restoration hardware - i don't know a lot of people, and this is just anecdotal, but whatever i'll just put restoration h there we go uh. I don't know a lot of people who make less money who actually go shop at restoration hardware right, so you've got these sort of premium brands that are probably going to be more insulated from a recession. But what you want to look at is who's the recession. Going to hit the most well, it's probably going to be people making less than a hundred thousand dollars.

For a few reasons, one food prices are higher, rents are higher and energy prices are higher and those three things make up large percentages of lower income individuals, spending power, for example, uh people who make twenty five thousand dollars a year, spend roughly fifty percent of their Income just on housing, that's crazy and then they're likely spending 35 percent of the rest of their money on food. So like housing and food makes up, you know somewhere around 85 percent of their spending. Whereas if you go to you know the two, the top one percent or even honestly, people just making over two hundred thousand dollars, which which could be like top ten or top five percent uh, you know, households making. You know an individual 200k household, maybe 300k, somewhere around there, uh you're, certainly in the top 20, but more likely on top 10 percent.

You know these individuals are spending, maybe one or two percent of their incomes on food and maybe they're spending uh. You know somewhere around 25 on housing, so combined they're spending 35 versus like 85 percent of the poorer demos right, and so the spending power of the poorer demos is probably going to get absolutely destroyed in this kind of recession. And this is why, when i say you know when this is all about predicting a recession, where do we want to look well, we want to look at not necessarily the the upper tier which is really you know continuing to spend money. Remember, visa's earnings call.

What did visa tell us visa told us the higher end customer is selling or is spending more money. The premium customers, the luxury people they're spending more money. Well, probably because they're the ones who got the bulk of the wealth effects from the pandemic remember in aggregate we say that household net worths can support 140 percent more consumption than they could three years ago yeah, but that's probably mostly the wealthier folks. You know the people making under 75k maybe haven't been able to participate in the wealth effects because they're not in the stock market they're not in real estate, whatever right, they're, not part of the stocks and psychology of money course they're, not part of the real estate.

Investing course where you learn all of the tricks for actually getting good deals in real estate and construction and property management and knowing how to time the real estate market, whatever right, link down below by the way coupon code expiring in 10 days, but but anyway. So what did we learn so far? Well, this morning we learned a few important things. We learned that under armour is uh starting to show is actually well first of all they missed. They are also forecasting three percent uh lower rev than was expected in part due to cancelled orders.

Now we don't really have clarity on these canceled orders, yet we're wondering if we'll get it. You know once once their earnings transcripts are up uh in terms of their earnings call transcripts, but in their press release they blamed cancelled orders on supply, chain issues and and other things, but a substantial increase in cancelled orders, while it could have something to do with Supply chain issues: you do wonder if it's starting to show signs of cracking in the lower demographics willingness to spend. So maybe you get less spending along with. Ah i've waited too long for this anyway, i'm just gon na cancel, so i have money to go.

Buy you know food or gas right fill up. My tank remember what we heard that hershey's told us. Hershey's told us that people are going to gas stations on average twice as much as usual and that's increasing sales for candy bars at convenience stores, because what people are doing is they're not going to gas stations twice as often because they're using twice as much gas. It's they're going the gas stations more often because they're literally going and filling up their tank half because it's just too expensive to pay for all in once to completely fill up their car.

So now, they're going to gas stations twice as much increasing convenience store sales, because there's so much pressure on lower demos and lower incomes. Look at what happened with the etsy and wayfair earnings, complete disasters, those earnings calls which we did a 20-minute deep dive. It's all on the main channel you can see it did a 20-minute, deep dive on this complete disaster. Bad earnings calls bad forecasts and really they were showing us signs that the consumer and the lower end is cracking, and this is kind of what you would expect going into this type of inflationary recession, where you don't necessarily have the household net worth to support spending.

Uh and again, that's usually in that lower tier of income, so we're we're kind of seeing those things where we're every recession is different. The the signs are here that we are going to have a lower income induced recession, and so you really want to pay attention to those sorts of companies where i do think it's probably a bad idea to look at the earnings for companies like tesla and apple To suggest, oh, are we going into a recession or not? I think it's a much better idea to look at the earnings again for companies like under armour etsy wayfair and all three of those that not good, etsy and wayfair the worse suggesting they don't even have pricing power anymore, because people just aren't shopping as much anymore. That's a problem again for that lower demo. If you're looking at reports like restoration, hardware, tesla apple again and you're like oh, no everything's, fine well, keep in mind who is it fine for right or for whom? Is it fine? Well, the wealthier people? So, if you're looking for signs of a recession and signs of where you're likely to see the greatest weakness in stocks, consider this it's one of the reasons i've increased my allocation substantially to tesla i own, so many more shares of tesla than i ever have before, And i'm doing so because i believe they're more likely to be resilient through what could be a recession for all of 2022 or could be a recession for, for you know, part one in early 2022, maybe the second part in late 2022 and then early 2023.

You know like a q4 q1 kind of thing. Who knows nobody knows, but i expect that you know these. The the companies that cater to lower income individuals are going to get whacked the most. It's just my thesis.

Let me know what you think in the comments down below.