Gotta Give The Bear Report and there are red flags in the Bear Report personally. I Would just want to be up front I Don't think they're as Salient as the Bears are making them out to be. but I Want to tell you what the Bears are saying because you know me. I'm always looking for the Achilles heel and I think every investor and Company owner or startup founder has to look at their Achilles heels because if you're not, you're going to get blindsided.

So it's important that we give some Credence to the Bears. Even if we think they're loony, you gotta respect them and you still have to be willing to go have a beer with the Bears and I'm willing to have a beer with anyone. So let's get started. Nobody knows beer like I do anyway.

So Morgan Stanley says in their opinion, it's good news that earnings estimates are finally moving in the right direction down and are reflecting the story of negative operating leverage and the sign that earnings forecasts are finally turning negative year over year. However, Morgan Stanley and their Bear Report tells us that the bad news is the earnings estimates are well Off the Mark as if our forecasts were to be correct. So Morgan Stanley is making the argument that folks listen to Michael Burry Michael Burry is right. That's what Morgan Stanley is saying.

Morgan Stanley is shouting at you screaming and saying earnings are going to come down and that is going to crush equities. And you should be prepared because the second half of the bear face is the crushing of valuations because earnings are going down. Now be very clear. the first is your multiple trading for 15x 18x, right? You get a multiple compression.

You come down from 25 times earnings. To say, 15 times earnings. That's a big Crush In terms of valuation. In fact, going from 15 to 20 represents basically a 40 decline.

The second half. In other words, the next 50 percent decline is when er, like EPS goes down because then you're multiplying a smaller number by a smaller multiple and boom, you get your second half paying. So why does Morgan Stanley feel this way? Well, let's look at some of the sectors from here. We're going to jump around the report a little bit and get to the best part.

As noted last week: EPS Growth This quarter is negative for the first time since the coveted recession out of Quarter One estimates or uh, out Quarter One estimates. Oh, forward Quarter One estimates are falling at the fastest Pace since 2020 and forward EPS growth is now negative. Confirming the earnings recession has arrived further. The decline in S P 500 margin estimates since the start of the year is the worst since the great Financial crisis and more of a macro cost context.

We also highlight that the cross Asset Strategy Team so basically the people at Morgan Stanley uh, argue that we have just entered the downturn phase, which is supportive of the notion that the macro backdrop is deteriorating. Bottom line: we don't advise waiting for the obvious signal. the Bear Market rally is over. We recommend positioning now in anticipation of the Moment of Truth before it's obvious and too late to move in any real size.

In short, timing is everything okay. This is like the most bearish report I've seen in a while and it like this is pretty bearish. They're basically it'll telling you like shit's about to hit the fan. You better start shorting the market and part of me feels like they're kind of like the frustrated Bears who just haven't figured out their identity yet and they're like damn it, we got caught offside.

so terribly in January the market has to go down more and they throw up charts like the following: See they say the hope for a pet fed pivot is dwindling and fundamentals are deteriorating. They seem to totally ignore that consumers have 12.8 thousand dollars of F excess savings built up compared to the usual two and a half to five thousand dollars. They seem to completely ignore that analysis from Bank of America And basically what they say we got to give Credence to it. Okay, what they say is look, the market rallied for a Fed pivot in June of 2022, then crashed it.

hoped it rallied for a Fed pivot in September and then crashed in like August and September and then crashed. It rallied in December and hope or in November for hopes of a Fed pivot and then basically crashed in December as a people were tax loss harvesting as well. Now what I did is I highlighted green circles showing you kind of the bottoms in those areas that they've highlighted for hopes for a pet fed pivot. you actually noticed at the bottom in December was not as low as the October bottom for the S P 500.

But they're making the argument that we're basically just in another bear Market rally and that it's going to come down because the fundamentals are falling because earnings are weaker than they appear and everything's going to be end up being worse Tech Earnings were weaker than appreciate. Dated this quarter and they show you how negative everything is look. they're not wrong, earnings are going down and if it's just hopes of a Fed pivot that's popping up the market, yeah, we're probably going to leg down again. The only counter that I have to this is the belief that markets were actually selling off for fear of a Paul Volcker experience in a wage price spiral which in my other videos I've already made very clear I Do not think we're running into a wage price spiral, but I will tell you I think that the Bears are getting very frustrated because Mike Wilson who's known as like the most famous bear of Wall Street from Morgan Stanley has to tell us a story to make us feel more bearish.

I'm just going to read you some parts of this while scaling Mount Everest has some highly technical aspects. The most dangerous feature is its sheer size. The peak is three thousand feet above the start of the death zone, the altitude at which oxygen pressure is insufficient to sustain human life for an extended period of time. Many fatalities in the High Altitude mountaineering area or have been caused by the death zone either directly through loss of vital functions or indirectly by wrong decisions made under stress or physical weakening that led to accidents.

This is the perfect analogy for where Equity investors find themselves today, and quite frankly, where they've been many times over the past decades. More specifically, either by choice or out of necessity, investors have followed the stock market to dizzying Heights once again as liquidity AKA oxygen allows them to climb into a region where they know they shouldn't go and can't live very long the climb in pursuit of the ultimate topping out of greed assuming they will be able to descend without catastrophic consequences, but the oxygen eventually runs out and those who ignore the risk get hurt. In this most recent Ascent which we began in October from a much safer place of valuations at forward 15 times earnings and then Equity risk premium of 270 bips was a much more reasonable rise. However, by December the air started getting thin again with multiples of the S P 500 forward sitting at 18 times and risk premium down to 225 bips.

And remember, we lose many climbers climbing in the death zone. So basically while the narratives continue going that the FED is going to pause at some point, we believe we've reached to Heights where people are now so delusional that they're talking about a no Landing scenario. And basically the bottom line is the bear Market rally that began in October from reasonable prices and low expectations has morphed into a speculative frenzy based on the fat pivot that isn't coming. While the economic situation appears to have improved that the margin Lord uh like I hate to say it, but these Bears quite frankly sound desperate like chill the F out like look I get it, you screwed up for January Okay, now don't get me wrong, I Want to be very clear.

Yes, the market can continue to like lower, but I am making the bet that the reason the market has collapsed as fast it is as it did in 2022 is because everybody's like, oh my gosh, we're about to get a wage price spiral and we're about to get Paul Volckerd you know? and and it's gonna suck like nobody likes wants to take you know, take a beating from Paul Volcker. Nobody wants that. Uh and I think that's why the Market's uh sold off as much as they did just because we have a slight break over the 200 a day moving average. I Don't think makes the markets a speculative frenzy or in thin air of the Death Zone look if we were back to like highs I'd be like yeah, this is like nutty and this is stupid but just because we're you know, back to like maybe slightly above the 200-day moving average which has collapsed uh I don't think we're in a speculative frenzy I mean quite frankly, if we go to a Fibonacci retracement and we try to go to a top at about 405 and a bottom on QQQ of 257, we're literally getting rejected in the 30 percent range.

And look at this. Here's here's the Fibonacci curve and you could see us almost perfectly getting rejected by the FIB like we are still in the bottom third of the Fibonacci retracement. So I don't think this is us in the Death Zone look if QQQ was like 373 I'd be like yeah okay maybe he's got a point but I don't know. it feels a little desperate to be this.

this call for like the earnings crash is going to crush you. but don't get me wrong, I mean cognizant that probably the worst place to be right now is in Staples that ran as much as they did last year because Staples I think are going to get hit hardest by by margin compression because they're not going to have the big PP the big pricing power. uh that uh that other companies will uh by the way, uh and that's this pissed people off. so uh, because it pissed people off I'm gonna play it anyway.

uh, people got mad at me for showing the shadow of my my big peepee. So now I'm just gonna play it for you here on video. there's really no sound but there you go. there's the shadow.

sorry if you're listening on uh audio. that's gonna be a little awkward. but anyway, there you go. I I did it I showed it I said I would show it and I did.

All right anyway. so uh so yeah. I I don't know I'm not that bearish I'm really not that bearish.