Everyone meet kevin here, all right, two parts to this video. First, what we just heard, which is a game changer for potentially the recession and then, of course, we're going to talk about the recession. Is this time different? After all, we have a 75 chance of a recession by the end of 2023, according to bloomberg economics and a 25 chance of a recession in 2022, though many of us think we might already be in a recession. So, let's get started with part one, which is a little bit of an update to the inventory disaster that we've got going on.

Then, let's talk about the implications, this has for potential recession and then who's going to experience a recession, the worst which countries are going to experience the recession the worst and is this recession going to be different from what we saw in the 70s? Are we going to in the early 80s? Are we going to get paul volcker, let's talk about what that even is and what the odds are of that happening. So first, let's start with the update today, though, which is a disaster and folks we're going to see more of this disaster. Uh style updating over and over again target this morning is down seven percent. Why? Because they released their guidance on may 18 suggesting that their operating profit would be a reduced 5.3 percent.

Just barely three weeks later today, on june 7th, they again cut their forecast. They cut their forecasted operating profit 60 from three 5.3 to two percent and folks. This is not just about today. This is what we're going to see from retailers going forward and it's very, very painful.

They are suffering from not only excess inventory. A massive amount of excess inventory inventory up 61 quarter over quarter, which is absolutely insane. So you know, you've got a massive amount of inventory if, in just three months your inventory went up by 61. Imagine how much it's going to be up by the end of the year.

It's really really incredible. At the same time, you've got foot traffic down 27.8 percent. But what is this signal to you when target three weeks after giving their earnings report and talking to analysts? What does it mean when all of a sudden target says? Oh crap, we got ta release an update to all of our investors, which we don't want to, but that our profits probably going to be down 60 for the second quarter. Well, it means that their price cuts are not working.

I was just in target uh and i'm going to go ahead and show you a picture here. Take a look at this. Here are a couple pictures of from target. This is when i was in target, and i noticed that in the apparel area, not only were they putting up temporary apparel carts, but they had these 30 off banners on literally everything there.

But what was also weird is, it seems like at the same time as they are overwhelmed with inventory in one area they're totally under stocked with inventory in other areas, and it made me realize that not only do they have an inventory problem, but they have a Massive employee problem, which is exacerbated by things like this, take a look at this right here. Here's just a video of one of the delivery trailers posted on reddit and essentially what they're demonstrating here is the disaster of the problem that they have with inventory. Not only do they have overstocked inventory in certain areas, but they're understocked in other areas, because they don't have the employees to go through it all. Let's go ahead and get rid of these pictures and go back to talking about what these problems are here.

So the problem with this is companies are telling us one thing in their earnings. Oh we've got a strategy and the strategy is we're just going to cut prices and we're going to be strategic about it, but the reality is. Deflation is probably coming that companies aren't actually going to be able to be competitive because, quite frankly, if target was either lying to us. Well, i mean there are two answers here: either target was lying to us when they had their earnings call and they realized that what they were doing wasn't working and they lied through their teeth in their earnings, call suggesting that their strategies were going to work or They believed those strategies were going to work, and now they realize oh crap.

We are facing the wrath of a kathy woody in deflation and our competitiveness is about to go to crap we're going to have to massively offload inventory, and not only are we going to have to offload inventory, but we can't even stand to hold this extra inventory Because it's creating a disaster in our back rooms and see there are three reasons: excess inventory is the last thing that you want. When you have too much inventory, you end up damaging the inventory. Stuff falls off the shelves which, if you scroll through targets reddit, you will literally see boxes and boxes of excess inventory, falling off of shelves. Now that stuff gets damaged or it gets stolen or it gets damaged and then stolen or the damage, stuff stays and the non-damaged stuff gets stolen, and then, of course, inventory also goes out of style.

After a time whether it's apparel or tvs become dated when they don't sell, so you can't just pretend that well, we want higher inventory because we want to get away from just in time inventory and we want to have a little bit of a backlog. So we don't miss out on sales, and that is actually where one of my biggest concerns come from comes from is that companies are telling us? Oh yeah, yeah. We have a bump in inventory, but that's just because we want to make sure we have it for our customers, uh, oops or yeah. You want a little bit excess to make sure you have it for your customers, but now you have so much that you are so far away from just-in-time inventory.

You have no choice but to plummet prices. This is likely going to have an impact on inflation, and that brings us to part two of the video we're going to talk about. Is this time different for the potential recession that we are going to see and where are we in terms of inflation before we hit on that? We've got to introduce our sponsor today, ftx make sure to head on over to metkevin.com ftx, where you can get up to eight percent on your crypto and your fiat. You can get the integrated trading view, features built right into the ftx platform.

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But what i'm going to do is i'm going to pull up a chart right here of some items that have already peaked. Take a look at this on the left. We've got the drum contract price and this has to do with semiconductors and you can see we're down 14. This has to do with pricing for things like laptops, leds, dishwashers, that's the left chart you can see.

We've already peaked on that level of inflation in the middle chart. Here we can see the shipping indices and the jury shipping indices, which track inflation and shipping down 26. One of the interesting things about shipping indices is shipping. Indices are part of the producer price index, and so first we might see shipping costs go down in the future.

We might see consumer prices go down and you have to couple this with these input costs like the uh. You know input costs for semiconductors or shipping, and these will eventually show up in cpi, but it takes time at the same time, we've also seen a peak in fertilizer down 24. So it's kind of interesting. You know we've kind of peaked down.

We're done with this chart, let's head back on over to some of our other information and that's the reality that inventories are going to drive inflation down, we're starting to see signs of inflation going down, and it's not just inventories. It's also the fact that retail mobility is starting to plummet. Consumer sentiment is at the lowest levels, we've seen since 2008 and listen to some of the foot traffic target. While their inventory is up 61.

Their foot traffic is down 27.8, but it's not just them. We don't just want to poop on them home depot's foot traffic is down 30 year-over-year nordstrom down 18 year-over-year, most retail categories down year-over-year the only one. That's really up dollar stores up 2.7 percent year-over-year as people are focusing on more cheaper alternatives. At the same time, we also have chinese producer price index indices expected to come in substantially lower than the peaks that we had in april, and this is really good because, again, producer price indices, even in china, lead to a reduction of consumer prices in the united States later, but folks, what about the recession? Well, the next recession is expected to be mild.

This is mild for the united states and that's because some argue that well, this time is different. So how is this time different? Because you've got individuals like larry summers, who's? The ex-treasury secretary who's suggesting that, if we adjust for consumer spending patterns, the inflation that we had in the early eighties was about eight percent uh. Well and i'm sorry. The inflation that we had in the early eighties was about nine point, one percent, but right now it's about eight percent, and so, when you compare those, why was it that in the early eighties, we needed twenty percent interest rates to kill 9.1 percent inflation? But now we're supposed to kill eight percent inflation with two and a half percent interest rates that doesn't seem to make sense, and that's where the question of is this time.

Different comes up so the last time that we had this massive style of inflation in the late 70s and early 80s, we had a wage price spiral, and this is an unacceptable element of the economy that can lead to a destruction of a currency. This is where wages are going up so fast that inflation is basically built into wages going up, because what happens is wages go up now people have more money to spend on on stuff which they then buy, but because people have so much more money. The prices of the goods ends up going up because companies have pricing power and because companies have pricing power, their employees. Well, then, goods end up getting more expensive and then, when goods get more expensive, their uh their employees demand more money to be able to afford those goods, and so you end up getting this self-fulfilling spiral.

We had that in 1978 to 1979 during the carter administration. Today we don't number two: inflation expectations are substantially lower than they were in the late 70s early 80s inflation expectations are anchored unlike in the past. Today we expect that inflation will eventually be transitory. This is reflected in consumer expectations for inflation, but it's also priced into the bond market.

The bond market via five-year break-evens tell us that inflation expectations are falling they're down about 20 percent from their peak in february and march when putin invaded ukraine. Now what else? Well, number: three: we've got consumers and companies propped up with cash which reduces the potential depth of a recession all, but, of course, the lower 20 have more cash than they did in 2019.. You've got a housing market, that's likely to slow down potentially in the neighborhood of 10 to 15, maybe even 20. But it's not a banking risk like we saw in 2008 and it's worth noting that inflation in the early 80s was above six percent for six and a half years, so you had substantially longer term inflation right now, inflation's only been high for about one year now.

It's still bad, but it's a huge difference now that does mean, though, that the recession that we face, whether we face one or not, will be quite different from what we saw in the late 70s and early 80s. In fact, in this case, we expect the united states to feel a minor recession, but unfortunately the international community to experience a substantial recession. That's because real household incomes across especially impoverished nations are collapsing. You have massive fuel and food costs for especially impoverished countries.

We might even see famine in parts of africa or the middle east, including egypt, who relies heavily on wheat from russia and ukraine. On top of that, the stronger the united states economy is during a recession, the stronger the dollar gets, which tends to kill emerging market bond values which is really bad for their ability to finance their own expenditures. The imf, the international monetary fund, sees that 60 percent of poor countries are suffering from debt distress or at high risk of suffering from debt distress. This means we could end up seeing emerging markets, stock markets sell off quite badly and when emerging markets sell off quite badly, the united states stock market can also tend to sell off, because you have lower opportunities that it's cheaper opportunities elsewhere.

So people sell in the united states to go by elsewhere. Now the recession according to the economist, is likely to end by 2024, or at least by the end of 2024, which will actually be quite interesting because it could set the united states up for one heck of a political fight with the federal reserve. That is republicans. Will be less likely to help joe biden and the federal reserve might be interested in trying to pick a political side or might be might not necessarily be interested in.

It might be compelled to pick a political side which could end up with us having a different presidency and another one-term president. In fact, in three out of the last four recessions that we had, they coincided with elections and in every single election that coincided with a recession. The party that controlled the white house ended up losing so keep this in mind, while the american recession might be coming, especially as we see this sort of decline in spending and the lack of pricing power that companies have and that recession might be here, whether it's In 2022 or 2023, the american recession is expected to be mild. However, globally it's expected to be devastating and, unfortunately, both of those scenarios could lead our stock market even lower.

But folks, if you want more insights from me, and you want private live streams with me, check out the programs on building your wealth and your long-term wealth linked down below, especially via real estate, investing and, of course, my strategies in the stock market. Thanks so much for watching and we'll see in the next one.