Everyone meet kevin here have we hit market bottom. Yet or what should we look look for to determine whether or not a market bottom has happened well folks let take a look at the following and talk about what's going on in this crazy market because we just started off the second half of the year right again folks let's get right into it right after i mentioned that if you want to get a free stock worth all the way up to a thousand dollars make sure to go to met kevincom. Public deposit. Any amount of money and you'll get a free stock worth up to a thousand dollars with.

Public great trading. Platform that does not use payment for order. Flow met kevincom public. Okay folks one of the first things that we really need to hit a bottom is what we call a cathartic flush out and this is really when the volatility index gets to a point of such height or such extreme.

Which in this case is actually represented by a decline over here and that's because of the measure. We used but in other words when these lines here were at lows the volatility index hit substantial extremes and you can see right here in this inverted chart that we really haven't hit extremes yet that we hit extremes over here in the dot com bubble. When we bottomed out at the beginning of 2003 we hit extremes here in 2009. We had extremes during the covet pandemic and really what was incredible is the copper pandemic wasn't that long ago and you might remember that during the coveted pandemic.

We saw price drops in the stock market of the dow. And the s p of three four five percent at the same time. We saw stocks plummeting oh across the board. 15 to 20 percent.

Now in case. You don't remember. The covet pandemic take a look at this screen right. Here.

This is a screen grab look at that amazon down seven percent disney down thirteen percent zillow down. Fifteen percent tesla down thirteen. Percent you the nasdaq in here. Over.

8. Down the dow 93. Down. This folks was march 12.

2020. I have a screen grab recording of this. And it just really reminded me of wow. That's kind of what a cathartic flush out looks like that's what it looks like when all of a sudden the volatility index goes from this insane low where things are relatively benign like they are now and it just feels like we're bleeding out.

And we actually get to a real capitulation point that yet hasn't occurred in this market. Now part of the reason for this is we still have relatively low longer term inflation expectations sure over the next year. Folks have a lot of fear that inflation is going to be quite substantial as they should this is a consumer sentiment expectation here and then of course we've got the five year expectations here we're not really expecting what we saw in the 70s and this chart does such a great job of showing us that difference of expectations because if you look over here look at this this massive slope that we have here this represented. The expectations of individuals for one year ahead and five years ahead back in the 70s when we got paul volcker.

So you could really see that missing anchoring of inflation. Which we have today we have an anchoring of inflation in that look at these long term expectations of the five year they're relatively anchored here along with history sure the one year is higher. But that five that three to five year term out is relatively anchored and we're seeing this not just in consumer expectations for inflation. As well.

We're also seeing the same phenomenon occur in the bond market in fact. If we jump over to right here. You'll see towards at the bottom here look at this recent decline. We've had here this plummeting.

This is a plummeting that has really been unique to the end of june and end of july here in the bond markets. Expectations for inflation. If i go all the way over here. You kind of see this january february ramp up this sort of aligns with the markets just having a horrible time right.

But look at this plummet over here. Where sure we had a commodities boom. We had expectations that inflation was going to go to the moon. But those expectations have really subsided.

So you're kind of in this weird environment. Where it's like okay. So we're not having a cathartic flush out where the vix explodes and inflation expectations run away. And this is really the end of the world.

Because maybe. It's not really the end of the world. But then again it depends whom you ask because if you take a look at this chart you can see this spread between on average or in the median here the middle in the middle inflation expectations are anchored. But if you look at the people who believe that inflation.

The top the 25 percent of people who think inflation will be the highest in the next five to 10 years. That's the 75 percentile item here if you talk to these folks inflation is a runaway problem and we're gonna have a disaster. These are generally your low your really vocal inflation is going to kill us folks. And then you look over here at the bottom 25.

And these are your and this is not bottom 25 of income. It's just of those with the lowest inflation expectations. These folks say no no we actually think inflation is likely to be even less going forward because it's so high now so you look in the middle. Most people nowhere near what we saw in the 70s or in this in this particular chart doesn't even go back to the 70s.

It just goes back to the 90s historically still relatively low. We've got this divergence between the vocal folks. So the inflation is transitory folks and then the peter schiff. We're screwed folks and so to some degree.

It makes sense that we don't have the conditions for like that kind of big pain that we saw in the 2020. Pandemic again at least not in in a very short period of time. It's more like a slow bleed out. But we've got to also be real see this segment right here on the chart this lower area to the right of the chart here.

This is a representation of real two year yields so what's the two year treasury bond yielding minus inflation you get to the real estimate what you can say here is it's still in a miserable position. It's super super low at negative six percent and one of the things to know is throughout this chart over here. The federal reserve has never ever ended a tightening cycle without positive real yields you can see even right here in the middle roughly. Where i am we see this positive.

Which is kind of above where my arms are here positive that's when we last ended. The tightening cycle back in the mid 2000s. Although. I will say we did also end a tightening cycle briefly when we kind of took a pause over here in the 2018 era and again you can see that yields were just barely positive there.

But we don't have that now which actually to many market experts says we're quite far away from a bottom because not only do we need to have this chart be positive. Which means. The fed has to talk these yields up which right now yields aren't going up they're actually going down they're falling today why they're falling because we have recessionary fears and folks say oh. We'll flee to the safety of the bond market and we'll be safe in the bond market.

Well great. The more people flee to the safety of the bond market and more those yields go down the more the fed has to work to tighten so you've actually got a pretty terrible setup of conditions that suggest no the bottoms not even close why well let's write those out first the vix has not had a flush out yet. We really need to see a vix of 40 plus to say okay yeah. This this is capitulation.

This is a bottom. We know that retail hasn't capitulated yet although the amount of money that they're able to contribute to the market is trending down. This makes sense we talk about this regularly with course members about what's the best balance between cash and being invested of course. Everybody has to make their own decision.

But it's a question that we're asking on a daily basis. And if you're not part of the program. Yet check them out link down below we've got a fourth of july week a coupon code fireworks down there we're adding new lectures with our beautiful board here daily now up until friday. So we've got big plans coming for a massive release of lectures check them out again link down below.

So we don't have that flush out yet we've got retail with less money to contribute we do not have we'll say no positive yield on that shorter term. Which is the two year and with people every time you see like the 10 year treasury. Going down. Like it is now anytime that 10 year goes down at somewhere around 281.

Right now as a yield anytime. You see that you should be thinking to yourself crap that's actually bad this should be going up not down because the more it goes up the more financial conditions are tightening the more it goes down the more financial conditions are loosening right a decline in this treasury yield. Represents also a decline generally in mortgage yields. Which makes it more affordable to go speculate on housing again right and so these are conditions.

The fed is going to look at and say well folks we got to talk up the two year. The short end of the curve we get to talk this up which means more pain coming from the fed. We got to talk this up to actually tighten things in the market. We've got to get retail to the point where they're out of money and then we've got to get them to a point of capitulation where that vix flushes above 40 or to create a flush out.

We still haven't seen these conditions. Unfortunately when we map this out it doesn't really matter if our economy is such that potentially it's going to move into a recessionary territory. Many of us think we're already in one uh starting in about february. I realized as well myself like yeah.

No this probably is the beginning of this fashion. The recession doesn't have to be two quarters long either right we could end up having a four to five quarter long recession. And this is what's creating fears of stagflation is that we could potentially be in a recession. Right now.

Which would be represented by q1 and q2 being in a recession. But then at the same time we could see growth come off this crazy sugar high. That we've been on and we could see growth at a negative at companies nike's already got negative growth year over year and you see that two quarters in a row. Now you've got an earnings recession and when you couple an earnings recession with high inflation.

What do you have a stagnating economy. You have stagflation and so it's very likely that we could be facing this stagflationary disaster over the next half of the year here. A lot of folks are convinced that this the second half will find its bottom. I i'm in that camp as well.

But i have to tell you you know i go through my notes and i'm not always right i look back at uh last april and last summer. And i said to myself actually i wrote this down in our course. Member alerts. It was one of the things i remember saying is first.

I mentioned hey i'm going to sell shift technologies because i think if when there are lack of used cars. You can't advertise and bring new customers into a platform. So i've been out of shift since uh somewhere between six dollars and fifty cents and seven dollars because of of just the the macro changes that we've seen in the used car market terrible place to be is a used car manufacturer so at the same time. I was talking about this in our course.

Member notes. One of the things. I mentioned was hey you know if we have a prolonged bear market. There are certain stocks that we want to be out of and uh at that time the odds.

I thought of a prolonged bear market. Within the next year were closer to 20 well unfortunately uh the odds of uh uh well my prolonged bear market. I should say came right we've been in a bear market now for coming up on seven months here. So obviously that can happen at least.

Though you want to have a manuscript for what are you going to do right so for example. You can't hold on to a company like a firm going into a recession. At least until the allowance for losses at a firmer financials maxes out and then that's when you want to hold companies like this. But these are this is why it's so important to write down.

What your expectations are so that way you can see an inflection point in your expectations. And it's okay to to be wrong on a projection. What's most important though is that you notice changes coming in those projections. Uh and unfortunately.

We're just not yet. Seeing an inflection point. Other than some things that suggest hey the market's slowing down take a look at this global semiconductor stocks falling to the lowest level since 2020 relative to the overall market right here so this means you've really squeezed out all of the semiconductor premium in the semiconductor market which is quite phenomenal especially since most folks have looked at semis as as the next innovative play to really be within you can go over here and take a look at commodities and that's this blue section. Right here this lower blue here.

What you can see here is commodities seem like they may be peaked here. Towards the end of may and beginning of june maybe we're getting some relaxation and commodities. Which might take some pressure off of inflation. But how could you take pressure off of inflation.

When you still have an increasing set of of lagging housing inflation coming via owner's equivalent rents and at the same time single stock volatility is still substantially below. What we had during the dot com. Era and then certainly of course even during the recession. Over.

Here. This is single stock volatility here coming in at about 38. And look at this we were almost double that volatility in the dot com. Era and substantially above that both in the covet pandemic and the uh 2008 recession.

So uh does this mean we're at a bottom probably not yet. We've still got a lot of work to do is it possible we could bleed up maybe that'd be nice like it's sort of instead of bleeding out like slowly maybe bounce around the bottom and slowly start trending up again maybe. But again if you look at the conditions of the federal reserve and what they're trying to set they want positive real yields they want a higher 10 year treasury they want tighter financial conditions those are things that actually spell for more pain to come when the federal reserve has its meeting in a couple weeks at least more tough talk and they'll be going in a blackout period before their next meeting. But expect they'll have their meeting.

We'll get some tough talk at the meeting and then after that we'll get even more tough talk because again as we see these bond yields. Come down. The fed's thinking dang market's going the opposite direction again time to talk dirty to the markets. Again.

So write down your expectation. This is sort of my overarching tip to you is write down your expectations. Though uh in my opinion. If i were let's say 50 50 cash right now okay so let's say we're 50 50 cash.

What would i be writing down well if i were looking for a bottom to deploy some of that cash versus uh. You know easing characteristics. What would i be looking for well easing characteristics. Obviously would be cpi coming down unfortunately right now the expectations are this week when we get our next cpi read.

We're going to have the highest cpi ever it's going to come in at a rate of something like an 88. Percent. Which is even higher than we had before it's at least the bloomberg consensus estimate again to get that bottom we need that that vix uh probably to be above 40 again maybe even above 50 in addition to that we need a positive yield on the uh. The two year that's a positive real yield on the two year.

We certainly in order to see some more easing. We need to see commodities continue their trend down. And we probably need to see oil. Sub 75 dollars per barrel.

Though jp morgan. Just released. An estimate that a worst case scenario could be that come winter season. We could uh we could end up having oil run up to 380 right so a lot of this is hopeful that cpi will actually peak meaningfully that we'll see commodities continue to trend down.

That we'll see oil come down maybe that the war ends in ukraine. Unfortunately. What you have you've got a situation where putin doesn't even seem like he's interested in negotiating. He's going to keep going until he gets what he wants and so far at least in the last few weeks.

It looks like ukraine is quite frankly running out of weapons and running out of money and running out of soldiers. And things are leaning a little bit more in favor of russia right now that's not great again. We've been talking about the conditions for bottom. Which we haven't really seen yet.

So we're in a tough spot to say with certainty that yeah. Now is definitely the time to take all that extra cash and flush in but at least. Now you have some ideas of the things to track to know when to adjust no matter what stock you're in you should always be asking yourself what should i be looking for for a red flag now another thing you might just end up doing with leftover cash is what i've been talking about since january. Which is just wait for a u turn from the federal reserve.

The problem is the following right now we have year end estimates that the federal funds rate will be at three percent by the end of the year. And by early 2023 will rise to about three and a half percent with a u turn of the fed going back from three and a half percent to about three point two five percent sometime in the summer of 2023. The problem with this folks is you've got people like bill ackman. Okay now keep in mind bill ackman.

If for some reason every time it seems like he comes out yapping. It's on a bloody red day. And he's shorting that day now. I can't guarantee that it just happens to be something that bill ackman.

Likes doing maybe he calls it hedging. But he likes to get out of the money puts essentially not necessarily could be using other derivatives. But something to this fact to where if he gets a short term spike. He makes some big money.

But anyway he came out this morning. Conveniently and he's like you know the fed's really got to get to four to five percent to kill inflation. And that's going to be better in the long run for everyone. He says well folks if bill ackman is right and the fed even has to get to four percent.

That means the market has to price in another half percent of tightening and delay that u turn. Which the market also would have to price in any time. The market still has to price in bad news and we approach that bad news. You get more pain in the markets right so folks.

I i don't know i i think if you're in this market. I hope you're just dca in and this is another thing that we talk about uh in in our courses. As well is look the market cycles do this and you really have a choice when the market goes down of course you could try to sell here and buy here right. But timing is difficult i mean even if you sell there and you buy a little bit earlier.

You know you buy halfway down or three quarters of the way down the cycle. Even if you do that you still have to offset the fact that sure you may have reduced your cost basis. But now you've got to pay taxes right so there's a lot to consider when you're doing this but for most people it seems like trying to do buying in this this lower section. Here is actually a beautiful opportunity.

Unfortunately a lot of folks who sit on cash that do end up selling no matter where they end up selling uh oftentimes. They end up missing this and then they end up really waiting for confirmation because any kind of bounce. They just end up calling a bear market rally uh that's or a dead cat bounce that that's just gonna end up giving back and going lower. But for me.

It's these highlighted periods right here here this is really where i want to be buying. And it's periods like november. Which is what i was doing as well i like to trim selling you know. 10 to 20 percent of the portfolio and doing a little bit of trimming obviously in hindsight.

It's like should have just sold everything dead right hindsight. But uh. But this generally can be a good strategy in euphoric times. You trim and uh in painful times.

You just slowly add add add not to any kind of breaking point. Where obviously you're going to get margin called or something like that but certainly in a position. Where you're taking this extended period of pain. Which that could be a year right there could be longer it could be two years you know dot com.

Bubble was three years so it could be a while yeah and you're using that as an opportunity anyway. Some more thoughts. I'll give you this because. We just had some click bait over this from.

Bloomberg bloomberg. Was suggesting uh via a headline that tesla is pausing gigafactories that was their headline tesla pausing gigafactories. I'm like oh that's actually one of the worst things that you could say because what we want and it's a catalyst for tesla is we want tesla to produce more gigafactories not less. We want to see them copy and paste.

The model of giga berlin and giga austin taxes all over the world let's get 10. More gigafactories within the next five years and so the this idea that oh no tesla could be pausing factories is actually terrible. And it's one of my conditions for uh massive warning signs for for potentially getting out of a position like tesla is is us not being able to continue to expand the uh. The gigafactory setup of course when you actually read the article.

You see that a lot of it was well really just clickbait. So here you can see the title tesla. Pauses plants and i hear that i'm like what are you talking about tesla paws plants. But then of course all they're really doing here is they're actually upgrading their model y assembly.

Line in shanghai. For the first two weeks of july. Such as one of the lines uh. They're pausing so they'll keep producing the three then they're going to switch.

And they'll pause. The model 3 line for a 20 day stretch starting july 18th and they're going to work to upgrade factory output for both of these vehicles expected to be completed by early august. So you're going to have that mid q3 kind of temporary shutdown. Pain point.

There and then we also expect that berlin will take a two week break starting july 11th uh. You know so to me. That's a completely different story than a catalyst that says. Oh yeah we need to uh dump tesla.

If anything that's like no this is great so what you're telling. Me is uh. You know we're now initiating upgrades to increase production. Uh and we potentially could more than offset.

The the delay uh in in having paused. These lines by producing more vehicles once these lines are upgraded. I actually think that's considered investing it's not really pausing gigafactory expansion plans yeah some of these are temporarily taking a break in some lines for upgrades. But totally normal for me totally frustrating headline there.

But anyway so these are things that i'd be looking for i think it's always important and i would do this right now as i would write down what are my catalysts to say when am i going all in with my cash write these conditions down. So you could actually compare them. And you should do that for every stock and every individual stock that you own as well so that way you know what's like a red line for you what's the worst case scenario for a stock. I mentioned a firm earlier.

A firm a big thing for me was hey. A firm is great in a bull market. You do not want to own a firm in a recession. At least until you get to max allowance for credit losses and quite frankly a max default rate.

Which guess what folks buy now pay later has not been through a recession. Yet it's not necessarily a play i'd want to hold through a recession. But anyway. See what happens thanks so much for watching folks we'll see you next one bye.