Welcome back! It's February 19th meet Kevin Report number 28 is on the way now. Thanks so much for being here. Whether you're watching on YouTube Facebook Twitch, you're listening to it on a Spotify Apple podcast Google podcast Appreciate you being here a lot to cover today. As usual, we'll talk fed real estate Catalyst Coming up for the week, we've actually got quite a few catalysts coming up uh, this week and we'll want to go into some of the details on those and then of course we'll also touch a little bit on Ukraine and some things that are not so fantastic that were just talked about especially in relation to China's partnership with Uh with Russia.

So we'll talk about all of this: I Want to give you a quick hands up as well, that uh, yesterday, boy it is. uh, uh, I I Rarely have the opportunity to visit family and uh, it's uh, it's nice to uh to be able to fly and make a day trip out to Park City Utah Uh, visit my mom and hopefully uh, we'll be able to do that with other family uh as well. but it's uh, it's pretty nice to be able to go on a day trip to visit family. That way we can keep making videos here, keep working hard in the studio, keep bringing value uh, but still also visit family and of course gotta check in with Realtors as well because boy, the real estate market is going nuts.

Uh, in a bad way. Uh, we'll talk about that a little bit more, but I'll tell you. uh, just as a as a heads up, if you're trying to understand your real estate market, one of the best things you can do is just get in uh and start talking to local Realtors and really, you'll get a pretty clear feel for what's going on very quickly. I Think there's this.

There's this mindset or belief that, uh, you know, we have to get rid of the realtor. Cut out the realtor. you know, cut them out. You don't need them.

They take a commission. Oh no, we'll get our own license Suddenly the worst way to think about real estate. you should be thinking about. uh, the people around you making more money, not less than they, uh, then they're able to, uh, get rewarded for for providing you value.

That's very, very important So, but then again, you know I think in America we have this and I've been talking about this pretty consistently for the last few days. For example, yesterday we had we did our first Elite Hustlers live stream. Uh, so I do two different types of course member live streams. the course member live stream which everyone gets access to.

That's when the market is open right? That's generally Monday through Friday and we talk real estate market stock market. but uh, on Saturdays Now once a week we're doing just a business live stream. It's a smaller group so we've got a lot more time for Q A It's a new live stream and uh, it's uh, it's it's all about uh, increasing money and efficiency in terms of your income whether you're self-employed or or employed. And one of the biggest things that I find is, uh, people regularly come in and it's not their fault.

but come in with this belief of oh well I don't want to work harder because I want to hold back some and get compensated more later you know I don't want to get taken advantage of so to speak and uh, it's it's a very traditional American mindset that uh, you know, oh, you're owed something and that you know, maybe if you get paid more you'll you'll work harder and it's it's such the opposite. Uh, it's really what I try to uninstall from everyone's programming and the courses that I have, but unfortunately that's that's very difficult because that's our society. Our society is is really built around this belief that uh, oh, you don't do anything for free you would, you would never ever dare do something for free. And what I find is The people who are most successful usually recognize that you end up very underpaid first in life and then you end up overpaid.

but you're never appropriately compensated. But as long as you have that mindset of of you know putting one foot in front of the other and providing great value for. whether it's your client or your boss or whatever it may be, you end up uh yeah, you end up getting ahead pretty quickly and and you end up standing out amongst the uh, the the bunch of competitors. Pretty dang fast, so pretty neat.

but uh. anyway, we've got. uh, we've got a lot to touch on. uh I think some of the uh, the big things we want to hit are some unique charts as well as we've got uh, some pretty clever reports out uh from the Fed so we'll look at those in just a moment and uh, and then we'll jump into Catalysts and some of the other topics.

Thank you by the way for being here. If you're in the chat, appreciate you, see you there and uh, all right, well let's get started with uh with these charts on the Federal Reserve how do I feel about Pro a sofa? you know I'll I'll just quickly answer that I get asked all the time and I did a video breaking down sofas fundamentals. Uh, actually I think did I post that I don't know if it was in the course member live stream or it was a separate video. We do so much fundamental analysis in the course member livestream, but one of the uh, like so far, the numbers.

Their last report was phenomenal I was actually just looking at them yesterday. I'm like man, they sold off nicely after their earnings, despite rallying at right after immediately after earnings. they were immediately sold after that. one of the problems I think with exposing yourself to financials is financials are going to do fantastic if if we do end up sticking a soft Landing right? Because now you've been able to expand your loan base without actually incurring the default risk.

Well, that's fantastic. That's like the Goldilocks scenario for financial. Uh, for well, financial institutions. Whether it's Banks or Neo Banks or whatever you want to call them, you know new.

Banks Whatever problem is, if you end up going into a more difficult recession, some of the first places that suffer the the largest defaults tend to be financial institutions. Whether they're Banks new banks, credit unions, lenders like upstart lenders, like a firm and a problem you have. here is, if you go into a tougher recession, you could basically guarantee that financials Get Wrecked However, if you go into a harder recession, you're not necessarily able to guarantee you would think generally yes, but you're not necessarily able to guarantee that companies that are the backbone of future investment are going to get wrecked as badly that would be chips, energy and a specific pricing. Power stocks or or big or or newer stocks still have a lot of growth in them.

Uh so I think there's that sort of Divergence that you risk and I think uh, in a soft Landing scenario. Yeah, so if I could end up being great, but uh, any kind of increased recession risk would likely Drive the stock down and I think that's why it sold off as much as it did uh, after its earnings I thought so so I'm not saying it's a bad stock. uh, but I will say that I it's it's not one that I uh probably wouldn't be investing in in this sort of macro environment that we're in. So maybe I'm just a little scaredy cat about the financials.

Oh, now we got to talk Federal Reserve Because boy, we've got a lot of different reports coming out from the Fed and one from The Economist that's really phenomenal. We'll be going through uh in this video here and we'll also be talking about how you don't want to experience Jomo or fomo Yes, there is now literally a Jomo and we'll break that down all uh in this segment. So first, let's start with a few charts that initially might make us a little nervous, but then we'll balance that off with maybe a little bit of uh Peace of Mind Who knows? we'll see. Let's balance out what's going on the market because there's a lot of noise.

So here's the first chart we've got to pay attention to. I'll actually keep myself removed so that way you can see all of it. This first chart is the five-year Break Even chart. Now we've been studying this all year long, so you should already if you're a regular viewer of the channel.

should already be uh, pretty familiar with this and uh, hopefully familiar with this, you know. nice downtrend that we were having on the five-year break. even. it's not perfect, but we had a pretty decent downtrend here on the five-year Break Even Unfortunately, that has somewhat, uh, gotten destroyed a little bit over the last month and that's because we've gotten data out from January like hot Jobs data Hot PPI Data Hot Uh, CPI data It's A or Trend that we're really paying attention to.

Looks a little bit more sealinged like this, but it's difficult to call it a trend because, well, you know you know you're kind of just re-accelerating on the five-year break-even curve. Now, what is this curve and why is it so important? Well, the five-year Break Even is a quick recap is essentially your bond Market's expectation of inflation, and anytime we get this sort of resurgence in the five years, especially if we start breaking Trends or now, we're making harder to actually create Trends It's a sign. the market is more uncertain about what the future actually holds, and the market is pricing in higher rates of inflation. Usually coinciding with that, you're getting a higher terminal rate from the Federal Reserve.

Now, in the long Grand sort of scheme of this chart over the last year, the chart is straight down, which is phenomenal. It's essentially straight down. However, even that essential straight down chart, the trend line has somewhat broken a little bit. right? You're starting to see maybe that move up and if you were to Trend it like this, yeah, that's not too much of a trend, that's a two-point Trend and maybe you call a third point over here.

Point being, you've got nervousness about a Resurgence of inflation and that Resurgence in concerns over inflation uh suggests we're first of all a lot further away from the 2018 Federal Reserve uh, you know, sort of u-turn at the end of 2018 where the Federal Reserve decided. You know what? We're not going to continue raising rates and all of a sudden, the market had its greatest rally throughout the first six months of 2019 after the pain of the end of 2018. But inflation expectations there were sitting around 1.6 percent. Right now, they're sitting somewhere on 2.5 almost a whole percentage point now away.

we were starting to Trend to Breaking two, but then we shot right back up thanks to the January data, which is not great. Now to offset that, fortunately, Financial conditions have immediately tightened actually quite a bit, which helps the Federal Reserve relax on this idea that they need to be so excessively aggressive. Here is a chart of the financial conditions indexes put together by Goldman Sachs and you can see Financial conditions in the month of February have tightened quite a bit and specifically why they've tightened. Well, it's this Trifecta of pretty rough reports that we've gotten from again, either jobs or CPI or PPI.

On top of this, real rates in the United States compared to the rest of the world are now probably yet some of the highest levels that we've seen over the well. This certainly that we've seen in this tightening cycle, but they're also relative to other countries that are relatively modern economies. Uh, like ours, we're seeing some of the tightest conditions on real rates. Take a look at this particular chart here.

It shows you that real policy rates in major Global economies are positive in the United States and Canada with the United States at real rates at positive 0.95 percent, Canada at point seven percent, and New Zealand Switzerland Norway Australia Japan the United Kingdom, the Eurozone in Aggregate and Sweden still actually negative with real rates. Now, the way they calculate real rates is you're basically taking rates where they are and then subtracting inflation from that annualized inflation generally. So this is where you're getting where real policy rates sit. and the United States is finally in an era of positive, real rates, which that's what you generally want to try to crimp the economy to stick us off.

Landing You have to take the heat out of the economy, and you generally do that once real rates become positive. The Federal Reserve has never paused their hiking cycle until these rates have gone positive. And the good news is they are positive now and in combination. or should I say maybe in conjunction with real rates actually going positive and Jerome Powell suggesting hey, you know, maybe we can just continue to sort of look through the January data.

We've actually seen some pretty substantial surges in particular sectors of the stock market at the beginning of 2023.. you can see consumer discretionary communication Services I.T Tech right? These are some of your biggest gainers that the beginning of 2023, relative to what were the gainers like utilities, energy, and Staples and those becoming losers at the beginning of 2023 despite them having been the gainers in 2022.. Now obviously we know that Breakeven rates are moving up on the five year. That's not great, but at least it's being offset by tighter Financial conditions and real rates.

And really, what it does is it says: look, we just have more work to do That's obvious at this point, but with some of the hot reports that we've gotten, there is this concern that the Federal Reserve is potentially going to come out with some form of 50 BP hike or some kind of rug pull. Basically, and I'd like to point to Mr Barkin from the Federal Reserve who was quoted over here in a Nick T article that circulated pretty much right after Loretta Mester and right after Mr Bullard suggested. Oh, you know we were actually Four 50 basis point hikes Pretty much right after that, Nick T ends up sharing this article of the Wall Street Journal article that he wrote unbarken stance on it. Now, one of the reasons this is so important is because Nick T is generally deemed to be sort of the mouthpiece of the Federal Reserve kind of where.

We don't know this, but we can sort of suspect that Jerome Powell probably text Nick T and says hey, you know what can you massage the messaging like this today. It kind of feeds into the idea that the media is sort of just the mouthpiece of the government anyway. But uh, anyway, so we don't want to go tinfoil at here. So uh.

anyway, let's keep going. So what do we have? uh in this? uh, in this piece over here and fix the star and cable over here. Uh, what we have is basically Barkin suggesting that uh, he's a big fan of continuing with 25 basis point hikes and getting rates above to really that five percent range. We know we unanimously move to about 4.5 But what is interesting that Nikki T shared this piece where a Barkin suggests he likes the 25 basis point path because it gives us the flexibility to respond to the economy.

Basically it lets you just say hey, we'll just keep hiking for longer, but we're not going to go with more aggressive sort of 50 basis point hikes. I Think that's basically priced in I Think we had some fear-mongering of this 50 BP hikes I Personally don't see that happening I Think this Nick T article reconfirms that, especially as potentially a mouthpiece of the Fed and Barkin suggested that regarding the January reports and this is actually really powerful Also, not just reiterating 25 BP hikes, but also because hey, what's the FED saying about these January reports? Well, what's fascinating is this section right here where Mr Barkin said economic figures over the last two weeks have shown surprising resilience and spending and hiring. But and here's the big one: This is a big butt. But he added he wasn't ready to substantially revise his Outlook because the potential for unusual seasonal volatility including a longer holiday spending season in the fourth quarter, warmer weather, and changes in how employers are managing the size of their Workforce Given recent difficulties in hiring now, this is really interesting.

I Mean, think about this for a moment. This winter has been bizarre. We had a colder December but we had a warmer January You almost had as many are saying, a spring like January And what's interesting about that is in the last CPI report. For example, we saw this big boom all of a sudden.

an apparel spending apparel has been one of those good sectors that has been plummeting from an inflation point of view. Why all of a sudden is it up essentially 9.2 percent ish on an annualized basis or sorry I think it was 9.6 because it was 0.8 month over month that annualizes out to 9.6 annualized inflation. That's insane. Why would apparel be moving so hot? Well, some are arguing it's because because since January was hotter, you ended up having people buy potentially spring clothing in January.

Now, what's interesting about buying spring clothing in January You might think, come on, like, who cares like if you buy it in March versus January What's the difference? Well, the difference is the same thing that happens with winter clothing at the end of the Uh winter season is the opposite of what happens with spring clothing in Winter Let me explain that for a moment and I think the easiest way to do that is graphically because I Think that might have sounded a little confusing. but if let's say your winter season, your winter selling season is October to January Your merchandise for the winter season is going to be most expensive in October It's probably going to be most full price in October and it's probably going to be at the lowest cost. Uh, in uh in January February Or it's most discounted. That's because at the beginning of the Season people go by their winter clothes and at the end of the season, they don't really need any more winter clothing.

so the apparel companies discount the winter clothing. But when would spring clothing generally be the most expensive? Well, probably around January Because it's the beginning of the spring era, it's the beginning of the spring shopping era. So there is this potential idea that a warmer January could have actually led to a spike in apparel costs. and that really, maybe what uh, Mr Mark in here was saying is hey, look, this was a weird winter.

It's also a unique era coming off of massive seasonal adjustments. Where not only are we no longer using two years of data because of the pandemic for weightings, we're only using 2021, which is the first time we've only done one year uh, in in recent history, and now we have substantially higher weighting to certain categories, especially like housing which we already know we're running hot in the transitory sort of. Or maybe I shouldn't say the trans story, but the disinflation hasn't actually started occurring in those sectors. So you do have this this potentially bullish look through argument that's happening at the Federal Reserve Now that puts quite a bit of weight on the next CPI reports, right? obviously on March 20th, uh, sorry, on March 22nd, you're going to have the next Federal Open Market Committee meeting, uh, end.

and then you'll have the Jpow press conference. But obviously the next CPI and the next jobs report are probably going to be more critical than what we actually had in January Now that's wild, but because of the seasonal adjustments, you're actually putting more weight on these next reports. The next CPI report, by the way, is March 14th because if we end up seeing something like a spike in January and then a correction sort of back to Trend uh in in February then maybe the Federal Reserve would be inclined to actually look through the hot data of January that we got if we ended up getting two strong reports in a row. Oh, we could end up seeing that March Fomc meeting and the Summary of Economic Projections revised.

Uh, in other words, the terminal Fed funds rate. What if we start seeing something like a 5.75 or even a six handle What If The Fed thinks GDP is going to be higher for longer and therefore they might have to hike more right? These are all things to obviously consider. Now The Economist gives us a little bit of color into how successful the Federal Reserve has been when it comes to Landing a soft Landing. They actually suggest that a soft Landing originally came from this idea of the Apollo 11 mission where the goal was basically to take some heat off the engine so to speak and softly land the Lunar lander without crashing it right.

Unfortunately, in the last time we tried it, well, the last major time we tried to do this in the 70s, Paul Volcker ended up pushing us into as they say here, major and successive recessions as well as the worst joblessness since World War II. And so when we look at hey, are we going to have a soft planning or not, it's somewhat worth looking at. Well, how successful has the FED been and The Economist gives us some insight into that. They say if history is any guide, fears of missing the soft Landing are likely to return.

It's not that soft Landings are impossible. Since the 1970s, Fed policy makers have managed them twice. We had soft Landings in 1984, in 1995. America's stock market began to Rally just as interest rates reached their Peak and investors who bought early were rewarded with sustained multi-year bull markets.

Obviously, if you're heavily invested in stocks right now, you're hoping for a soft Landing Which a soft Landing could be no recession. Or it could be a very, very minor recession without a meaningful increase in unemployment. And that could happen if it's sustained by inflation essentially plummeting unsticky or sticky. Rather, inflation becoming unsticky and going away, and hopefully, hopefully, hopefully, hopefully, you know, a company earnings cycle over the next, uh, year and a half here that doesn't end up substantially below estimates that end up leading to some sort of yeah, you know, earnings per share crash in markets.

But anyway, there have been six other tightening Cycles in the last 50 years, and all of the other six, unfortunately were followed by a recession. And the lesson for the or from The Economist here is that if out of eight times, you were only able to land a soft Landing twice, you have about a 25 chance of sticking a soft Landing Just based on history's guide, that means you have a 75 reason of believing the soft Landing is just a myth that perpetuates a sort of bear Market rally. Now a lot of januaries bear Market Rally was really driven by One retail retail plowing over a billion dollars a day into the stock market in January and number two short covering institutions caught offsides thinking Shorts would continue to protect them in 2023 only to get squeezed The Squeeze has been swoes. Now we'll have to see how markets react to this data or you're going to end up getting a trend.

But what else is the economist tell us Well for soft Landings Js Generally, once the Federal Reserve began to cut rates in soft Landings The bad news ended. Once the FED cut rates and soft Landings bull markets ensued and you had multi-years of positive returns, whereas in hard Landings you actually still had the worst worst Parts Essentially to come weaker employment, weaker housing, weaker earnings per share it at companies now one of the things to consider because it always comes up. even though I've made a plethora of videos about the darn fed Reserve pivot. It's important to remember that when the Federal Reserve ends up pivoting in this cycle, they are doing so because they realize they have achieved.

or at least they believe they have achieved fighting inflation right. This cycle, the FED only pivots when inflation is convincingly falling or gone towards two percent, right? So when you get a Fed pivot in this cycle, you're actually expecting probably the most bullishness for markets. Even though some folks like to point to charts that are very misleading suggesting that oh, If the Fed pivots and reduces rates, the worst is yet to come. That would really imply that the Federal Reserve pivoting on inflation is not why the markets are rotating down.

Markets are generally pretty concerned about the Federal Reserve in its fight against inflation, though we could also see the markets manifest fear thanks to an earnings Crush right? Uh, you know we could end up having a Fed pivot and inflation ends up being gone. but how bad that things get from the Fed's uh, lagging policy rate increases. And that's where the question is: is the stock market pricing in, uh, an EPS crush? or is this stock market more concerned with the odds of inflation staying around sticky and for longer and essentially inviting a new Volcker era? My personal belief, obviously we've said this pretty regularly on the channel, is that we're likely over 2023 to have a lot of noisy data, ups and downs volatility. But I am a big believer in the Nike Swoosh recovery where we've probably, although it's obviously not certain I've uh, have probably recognized some form of bottom behind us.

and this Nike Swoosh recovery, it's probably going to look quite volatile on the up and down, but it really reiterates the idea of essentially by the dip in 2023 which was not the 2022 strategy 2022 strategy where if you really wanted Alpha in 2022 Sure, the shorting was the way to get Alpha in 2022. That's probably a lot more risky in 2023, but we'll see it. The economist takes a little bit of a bearish point of view though, and that's in contrast to my point of view. They suggest that the stock market is really a bad guide for suggesting if you're going to be in a situation where the stock market has been item, then we'll continue to go.

In fact, what's more of a guide in their opinion is the the history of previous Fed tightening cycles and how soft Landings that have occurred were generally preceded by relatively low inflation accompanied by looser Bank lending. While Unfortunately today, we have exactly the opposite. we have high inflation and actually tightening lending standards and the fear is that those are going to lead to job losses and crushes and earnings. Of course, this is where I respond and look at well leading data.

Whether that's in hiring or the supply of labor actually suggests that we shouldn't be seeing a labor induced inflationary regime continuing any more than maybe the first few months of this year as we've talked about many times before on the channel. whether that's the excess Supply we have of drivers for Uber Lyft the excess availability of people in Tech at Starbucks at Chipotle like at Cloudflare's earnings called look at what Procter Gamble and Tyson and Johnson are saying All of them are saying look, there's some Embers of inflation, but we're at a limit in terms of how many, how much more we could really raise in prices. Maybe we're on our last cycle of price increases and that's it. Then then we're then our margin is getting squeezed.

If if costs continue to go up, uh, however, we're starting to see that light at the end of the tunnel, the second half might start looking more disinflationary, or at least you'll see a pause of inflation. So that's that's an idea. You've got insights on both sides saying look, inflation could continue to drive us into an earnings recession, especially if it stays around stickier for longer. But I'm of the mindset that as long as inflation can get conquered, the entire reason we need tighter rates is not structural.

It's solely inflation based, which is the result of us printing as much money as we did during the covet cycle. So we'll see some say Hey You know a recession is exactly what we need. We need a recession, and we need to force a recession so we can actually make sure we get rid of inflation. Maybe it's entirely possible that we have to slightly force a recession, and this is where some folks say, you know what if there is no recession, you could actually end up having a worse outcome.

Here's a piece: Uh, from Stephen Blitz Who suggests that the data we're seeing now is pointing us to a recession? Whether you look at the inversion of yield curves or you look at retail data. Uh, hey, this? Yes. January We had a nice little pop on retail. Could be based on some of the seasonal factors that I've explained earlier, but oh, there goes.

Siri Go away. Siri There we go. Uh, but take a listen to this quote right here. Employment is a lagging indicator until it is coincident with the start of a recession.

Nevertheless, activity is slowing, real policy rates are positive, the curve is inverted, inverted, and still sticking, and we are still sticking with the mid-year recession call as a base case. If there is no recession, outcomes will be worse. suggest Stephen Blitz here and I Think the reason he suggests that is because it'll without an actual slight recession, you keep inflation higher for longer. You don't want inflation higher for longer, you want that inflation going away.

Fortunately, from at least what I'm seeing in company earnings calls and reports is that inflation should be continuing to go away. Especially once we get that housing data showing a decline in owner's equivalent rents and then Services maybe leveling out thanks to finally less wage pressures? Maybe maybe by the end of 2023. We don't end up having sort of a double dip surge of inflation. We can get rid of inflation, we'll see.

Uh, but this idea about uh, about no recession potentially being bad because it keeps inflation ignited is something to consider to where. Maybe that's just what we need as a healthy part of the cycle. You go through a shallow recession and that's what it takes. Uh, this individual suggests that the economy slide towards a contraction is looking normal.

In other words, it's looking like that is exactly the path we're on. Uh, however, by threatening to hike by 50 basis points Financial conditions have become less easy, and ultimately you could end up seeing more pain in the stock market here in the short term, as well as dragging down discretionary income. So in other words, while all of these these indicators that Mr Blitz is looking at such as the inverted yield curve, real positive rates, and the lagging effects of a hiked monetary policy Mr Blitz thinks hey, you don't want to get too hawkish here, because then you could really push us into more pain. So you've got a lot of of these sort of perspectives on where the markets could go.

And it's kind of frustrating because sometimes it feels like they're all pointing in different directions. but I think they're actually not. I actually think they're pretty clear. I Think it's very clear that yes, the economy is trending towards a recession.

yes, the odds of no recession and that Goldilocks sort of soft Landing is only 25. that is, according to the economist as we already reviewed all of that indicating we are trending towards a recession. Yeah, we had retail sales spikes and some data spikes in January, but we think those are mostly seasonal until we get confirmation that they're not, especially a January sort of adjustment cycle. It's too soon to say that oh, that's it.

Here's the second wave of inflation, especially with leading indicators suggesting that from companies hey, it's getting easier to hire, there's more availability of Labor and more availability of Labor Kind of suggests that eventually the unemployment rate will probably rise just like the FED is looking for. That would also suggest trending towards that recession. But all of these down arrows also just inflation goes away, right? you? As long as we're trending towards a recession, we should see inflation go away. And since inflation expectations are anchored, we really hope that we don't end up seeing a second wave of inflation.

And this is where the FED really has to guide us dangerously close to that recessionary line. where yep, maybe we end up having to dip slightly below before we come out. but there's very little at this point at least that suggests. hey, look, we're definitely not trending to a recession I Don't think there's anything that says oh, everything's up.

We're definitely not trending to a recession. Yes, you could point to Temporary retail sales data, but I think that's more of this floating Arrow here where you're still on a trend towards a recession. but yes, you're maybe slightly above that recession Lane I Don't think there's anything glaring that's like we're definitely not going to a recession. Uh, then.

Although that would be the most ironic right if we end up not having a recession because this has been such a predictive procession. Uh, so I don't think you necessarily have data that suggests, okay, definitely no recession. Well, at the same time. I Also, don't think you have data that suggests, oh, we're definitely in Hell over here.

In terms of the data's so terrible, right, consumers still have substantially more savings. uh, and sure, while the excess savings rate has declined and a lot of people are in my opinion, using that as uh, there is a clickbait, uh, it's the excess savings rate you can Google the excess savings rate. but I'll go ahead and pull up the chart for it. and the personal savings rate has fallen substantially even below prior levels of before the pandemic.

You can see that on the chart here. Actually, let me remove myself so you can see that a little bit better. We're at one of the lowest personal savings rates that we've seen. Uh, really? Since about the Uh: the the Uh, a 2005 era where the personal savings rate fell to around levels where it is now.

But look at pre-pandemic you have the personal savings rate substantially higher than where we sit today. and historically the personal savings rate has been a lot higher. So certainly people are not saving like they used to. And if we zoom in to just maybe the last 10 years here, you can see we're certainly at the lowest levels of a personal savings rate and that is starting to slightly take up you saw it slightly take up in December However, it's very, very low.

The way to offset this idea though that this is definitely bad news, that this is definitely this giant arrow to the downside is by remembering and I've mentioned this a few times over the past few days, so forgive me for sounding redundant. I Just think it's so important remembering that the average checking account of somebody who had two and a half thousand dollars to five thousand dollars in the era before the pandemic. So like 2019 now sits at an average of 12.8 thousand dollars of excess savings. That's different from that personal savings rate.

Yeah, the personal savings rate might be low, but if you're sitting at two and a half to four times as many savings, maybe you don't actually need to continue saving that much. And you're still able to spend in markets and in the economy. So point out of all of this this entire segment is yeah, you got to join me on those programs on building your wealth envelope, obviously. But really, the big bottom line out of all of this is what: I try to reconcile all of the noise I'm not seeing things that are so terribly bad that I believe I need to be completely out of the market I did feel that in January of 2022 I Do not feel that here in February of 2023 I Also, don't feel like things are So Glorious in the economy that we're definitely going to avoid a recession that we're definitely going to the moon.

So that to me says I don't want to be all cash and I don't want to be heavily in margin and that's where I think the easiest way to sort of reconcile all of these perspectives is probably and of course you've got to personally come up with your own allocations I can't do it for you, but I probably thinks it may I think it makes sense to be exposed to equities And certainly, you know Bond portfolio. Maybe a 60 40 invested portfolio to the tune of maybe 80, 80, 85 90. Maybe keep that 10 15 around to psychologically help with some of the volatility that we're going to get. but that's been my my thesis for about the last three months and uh, it is.

It's been pretty consistent. Uh, and so uh, hopefully that helps. uh, guide a little bit. Uh, how how all of this noisy data doesn't necessarily all have to point to deep dark recession? or Moon it actually could just point towards.

Okay, yeah, this is the process of a Fed managed disinflation process. Could end up going to crap fed, could end up breaking something. but I would call that a tail event. Let me actually draw that graphically.

So a tail event is really when you look at the bell curve of probability outcomes. so you look at a bell curve. This is not necessarily the best bell curve over here, but you end up with Tails right. So you have a left tail and you have a right tail.

These are sort of your lower probability events outside maybe the five percent uh range. So if you look at you know two standard deviations off of the midpoint, you're probably if I'm drawing a bell curve correctly. Over here, you're probably at over here looking at maybe roughly two and a half percent probability, and over here two and a half percent probability. Maybe it's a little greater, but I think everything everything going to hell, in my opinion is probably over here on that two and a half percent chance and everything just straight going to the Moon without any kind of volatility.

you know. Larry Kudlow V shape recover probably in the order of a two and a half percent chance as well. Uh, whereas I think there's much greater uh of this? Yes, look volatile. Nike Swoosh And that's that's at least where where I'm placing my bets.

uh, could be wrong, but it's where I'm placing my bets. and I always like to say that because you put my money where my mouth is even though I changed my mind a lot. Uh, I do put my money where my mouth is. So hopefully that was insightful on my thoughts on the latest with the bed and also the seasonal reports and insights we get from Nikki t Okie dokie, Now we've got uh, let's do uh.

let's take a look at some uh comments that y'all have and uh, then we've got a bunch of other things to cover as well. So I have a petition to bring my Bloomberg codes. You know they got rid of Bloomberg codes, right? You know? they're now using like an iPhone app and and QR codes and stuff. so I don't really have those anymore, but those would be really cool.

Um, bonds know better and they continue to retrace. Well, that's generally the the idea, right? And really what happens when bonds go up when bond yields go up is hey, because they're actually going down right? Uh, you're You're tightening Financial conditions. And as you tighten Financial conditions, you're actually doing the Fed's job to some degree for it, right? The FED can be more dovish when Financial conditions are tighter, so uh, you know that's that's fantastic now and then. Of course you have this question here: Why is the risk-free rate five percent? It's because your opportunity cost of sitting out the market, it's actually substantially High You know if if we do end up Landing a soft Landing which I think is is probably the base case which could be a shallow recession or or a very close recession.

uh, you, you're probably going to sit out on massive Equity returns or even Bond returns, right? So if you were to invest today and then a year from now, the S P 500 is is up. you know, 15 percent. but you were all in on a five percent risk-free rate. Well, you just missed out on ten percent.

Uh, and so that's uh, you know that's that's pretty important. Oh, that reminds me. we didn't talk about Jomo uh, we're supposed to talk about Jomo So uh, let's touch Jomo really quick because I thought it was very fascinating. Is you have this this idea uh about the joy of potentially missing out and I think this is really like a bear I hate to say it who's lost his mind uh, he literally writes Jomo this is the opposite of fomo fear of missing out.

it's the joy of missing out. and Scott has crazy or has Jomo on the crazy stock market for now while earning five percent on six month t-bills And and basically this reiterates this question that we just got like hey, look the risk-free raid on like, like six monthers or whatever is is basically sitting at close to five percent. Why why would you invest in equities if the average long-term return of equities is you know, seven percent without dividends? Uh, maybe nine? Nine point one percent with dividends reinvested over the last 40 years. Why would you bother investing in equities and you really wouldn't right? You really wouldn't like the spread between the next 12 months, even of earnings per share on the S P 500 and the six month T bills is only 50 basis points, that is a very, very low spread.

It basically says why bother with the risk of the stock market right and U.S Money managers are sitting on the sidelines with six trillion dollars of money ready to invest and that actually uh is leading. A lot of people say hey, they're just going to sit on the sidelines and milk their five percent or whatever but there is a very big counter Trend to that which says well, if we did have a soft Landing you're gonna get caught off sides if you're sitting in your five percent T-bills because you're gonna be that person who's today going I'm making five percent risk free. Meanwhile, the stock market maybe looks back at you in two years and goes two years went by and we, well, you made your five percent per year. We made 15 per year, right? That's possible.

Of course, with that risk comes the chance also that it's actually Equity Bulls who end up sitting off sides and they end up getting screwed with another 20. Downside: Again, nobody really knows but I'm staking my uh my poll so to speak. you know with the Uh with the bulls on this one for for equities. All right now we'll actually get into uh some of the other commentary and comments that you'll have all right invest in a Tesla bot.

LOL uh yeah yeah well. I Do agree with you that things have gotten very expensive I was talking to uh my dad about this quite a bit yesterday about how you know it feels like you're getting ripped off going to like Panera Bread or Panda Express right now because you just get a basic meal of Panda Express and it's like 19 now and it's like what the hell you know what happened I Remember as a child you get pork fry, rye and and you know as your your side and and a couple uh uh you know a couple proteins and and you know you're talking like a seven dollar meal. uh it's it's gotten kind of crazy. so anyway uh, it's pretty wild.

This is why you Diversified it's actually a very good point. It is why you diversify. Uh, that's why I'm a big fan of diversifying into real estate not quite yet, obviously in this macro cycle, but generally in the long term scheme of investing. I'm a big fan of a 50 50 portfolio which is 50 equities and 50 real estate for people who are, uh, still building their wealth and not in the retirement phase of life.

or maybe like, a 60 40 is a little bit more appropriate I Know, financial advisors are big fans of like, no, you want a combo of bonds and stocks I'm a big fan of of stocks and real estate real estate sort of taking the place of bonds for me. Big fan of that. What do you make of the race and change in the terminal rate projections? Yes, Yeah. So we talked about this, uh, quite a bit that the stock market basically, and the bond market have switched from pricing in about 173 basis points of cuts in 2023 to no cuts and 23 and actually moving to a terminal rate of sitting at about 5.32 Right now, it's roughly where the terminal rate is now, uh, relative to the 4-9 that we've seen recently.

And what's really remarkable is while Financial conditions have tightened in response to those expectations, it's been mostly in bonds bond yields have gone up, but the stock market hasn't really given back a lot of the gains that it's had over the last 45 days in in 23 so far. And it's kind of remarkable because you would think that as Financial conditions are tightening, bond yields are going up, you would think that the stock market would give back right? But look here's the NASDAQ since literally the beginning of the year straight up and you've barely given away anything. If anything, you're sitting on the shelf of about 300 on QQQ over here and you've barely given away anything I mean on its high, you had a close of 309. so sure you could say you had a three percent give back.

But I mean that follows going from you know, 262 to 300 which is about a 14 rise uh to to where we are now. So yeah, okay, you've given back a tiny little bit. but but you've mostly stabilized uh, relative to some of the data we got in the tightening of financial conditions you would have expected. Maybe the NASDAQ returning to its 200-day moving average.

Maybe that'll still happen. but uh, but you, the fact that you didn't get that does show the stock market is somewhat believing that. Okay, maybe maybe it is possible the Uh markets are um, seeing the January data as as a you know seasonal abnormality with uh with big old adjustments someone says don't put your eggs in one basket and then somebody else says eggs are a good investment hahaha You know egg prices have fallen so I think they are coming off the top a little bit. Uh so I think we should be okay.

Uh Tesla to start taking over a minor in Mexico This is true. seen a lot about uh this, uh and Tesla's been talking about that quite a bit as well. This idea that they want to take more control of Supply chains which which you you can't blame them for at all, right? It totally makes sense. So I think now, uh, it's it's worth taking just a brief look at what's go.

What's going on with these uh, these fears of uh I hate saying it, but it's it's just. it is something we need to pay attention to. It's really these World War Three fears and so I'd like to just take a brief moment uh to discuss a a two-minute video from uh what our Secretary of State is saying along with some other data points. So let's touch on that.

Can you stand by for like 10 seconds here and we'll get into that. What we need is transition music next time. Sorry. Oh, here goes Alexa man, how I I swear I want to throw that thing against the wall? but I think I actually have some suspense music.

Oh yeah, here we go. Tell me what does something like this sound like? Let's see. Um, would it be this one? That's what we need. transition music? That's the way to do it.

Uh, all right, let's go ahead and hit it and we gotta talk about World War Three and what the Secretary of State just had to say. First, let's set this up for you people. Hear about World War III and they think what's Russia and Ukraine Got to Do with World War III? We gotta look at it this way folks. you've got two massive axes and I hate using that as a reference, but I think it's appropriate.

Consider this. You got Russia on one side. who's now since the Uh Cold War So the first time since the 1970s started loading nuclear missiles, strategic and tactical localized nuclear missiles onto ships for the first time since the 70s. But you have the alliance between not just a Russia and Belarus, but you've also got now the strengthening alliance between Russia and Iran.

Which this is quite problematic because Iran basically supplies weapons to Houthi rebels in Yemen who like to uh, you know, strategically attack a country trees in the region, including the United Arab Emirates. This is not great. You have a lot of regional tension here, and Iran is basically feeding this while at the same time, the United States takes over fishing vessels and sometimes captures thousands of Uh rifles like AK-47s or hundreds of thousands of bullets ammunition 556, you name it, Uh. And and the United States Navy is taking these weapons and bullets.

And usually what the United States does is they take these weapons and they destroy them. But now they're actually thinking about taking these weapons and potentially and this is against the United Nations conventions on this potentially sending them to Ukraine. So in other words, you're literally dare I say stealing might not be the right word, but essentially taking from Iran weapons that are manufactured by Iran and then you're giving them to Ukraine potentially. Now that's pretty wild now.

Remember Iran backs the Houthis who create a lot of problematic issues in the region of the Middle East, but now potentially taking thousands of assault rifles and ammunition, Seizing those and transferring them to Ukraine would be against un the U.N arms embargo. Here's actually a Wall Street Journal article talking about exactly that. It actually says here: the U.S has provided Ukraine with more than 100 million rounds of small arms ammunition as of this week 13 000 grenade launchers, guns and rifles according to the Pentagon and at the rate at which Ukraine is expending ammunition, which is substantially greater than the current rate of production. There are calls on ending the United Nations arms embargo, requiring the U.S and the allies and its allies to destroy, store, or rid seized weapons.

But now you've got the United States seizing weapons from Iran either being transported from Iran to Houthis or directly from Houthis and potentially thinking about sending them to Ukraine. So think about how how you're setting up for this sort of world war where on one side you have Russia with its now loaded up strategic tactical nuclear missiles in combination with Belarus or it was supported by Belarus Which is important because that's where the Minsk 1 and 2 Peace Accords or signed which are essentially torn up now. So again, on one side, you've got Russia Belarus Iran Who, by the way, Iran is now considering building a drone Factory 600 miles east of Moscow so they can make somewhere around 6 000 Kamikaze drones with stronger engines to travel further and faster to dodge Ukrainian anti-suicide drone defenses and you have this combination solidifying again with these factories now being placed potentially within Russia itself. So Iran can profit off the war, but not have the risk of having to transport those weapons from Iran to Russia where they could get captured by the United States and then actually be given to the Uh to Ukraine instead.

Iran's like we'll just build a factory inside Russia so you can move the product directly from within Russia to the front lines. anyway. So on one side you've got Russia Belarus and Iran on the other side, you've got obviously the United States Germany the United Kingdom uh, Spain Portugal Canada France. But listen to this: the United Kingdom is doubling down on their aggressive posture Rishi Uh.

Sunac, who took over from Liz Truss's Uh very brief stint as a prime minister who, uh, didn't Outlast a head of lettuce anyway. Mr Sunak is now urging a double down in supporting Ukraine, but is also pledging that Ukraine should indeed become a member of NATO North Atlanta A Treaty Organization This this would be problematic. In fact, many say it's the entire reason Russia invaded Ukraine in the first place is because NATO keeps expanding uh towards Russia and Russia wants a buffer between itself and NATO Uh, now you've got the United States calling for joint ammo purchases between all of them and then also transferring ammo and weapon Seas from Iran uh to Ukraine. So you've got that one side.

But now listen to this: You potentially have China going from a nuclear or sort of from a from a neutral posture I should say to potentially one that is provoked now by the Chinese weather balloon and potentially now wanting to back Russia with actual Lethal Weapon support for Russia I'm going to play a video here in a moment, but I want you to think about how this is setting up so far again. Russia Belarus Iran China on the other side U.S Germany UK France Canada Spain Portugal It's not looking good then. of course you've got tensions in sort of the middle countries as well, like Turkey and Greece having their own sort of fighting going on. sort of like an off suit offshoot of fighting over here.

And then you've got Taiwan and Japan supporting the United States with South Korea. It's all a mess. but take a listen to this two minute report here and we'll listen to this together. and then I'll add some more commentary.

Here we go. Okay, hold on, be nice. Kevin If you actually would play the audio, you have to turn the audio on for it to work for people. Goodness gracious, you got it.

You gotta unmute it. I Still have it better, but it's not about sorry. Okay, apparently I can't get this going. The pace was brisk as the U.S Secretary of State Anthony Blinken headed off for private talks with his Chinese counterpart Wang Yi The meeting arranged on the sidelines of the Munich security conference.

It was the first top level meeting between the two superpowers since the U.S shot down what it says was a Chinese spy balloon. Keep in mind there has now been talk, uh between the United States and China Which is good because initially China didn't answer a phone call after we shot down their spy balloon. Now there are a lot of murmuring saying obviously China's like dude, it was a weather balloon it blew off course. Obviously the United States is like no, it's a spy blood.

Obviously, the mainstream media is supporting the narrative that it's a spy balloon and I think we widely believe it's his fibulent although we were supposed to shoot it down and then look at the parts and then show the world. look at all this spy technology that Russia was flying above us and so far there's been quiet which is raising the question of okay, well what if it really was just a weather balloon? It's insane because you just almost don't even really know what to believe anymore. But what we do know is things are getting more and more tense, not less tense. Let's keep listening in.

Whoa, Whoa. The incident triggered a major Rift with Mr blinken canceling a planned trip to Beijing Mr secretary, how did the meeting go? The talks lasted just over an hour China sent a surveillance balloon over our territory violating our sovereignty violating international law and I told him quite simply that that was unacceptable and can never happen again. China maintains it was just a civilian balloon that blew off course. Regrettably, All right, we don't have to listen to all this part.

Let's let me just fast forward here to the what: Lincoln says that China is considering providing lethal support to Russia and its aggression against Ukraine and I made clear that that would have serious consequences. That's the most important part, right? there is blinking. Just yesterday in an interview with Meet, the Press said China is considering sending lethal weapons to Russia to support Russia. Now China has been sending uh, supplies and selling supplies to Russia but they've so far been non-lethal and that's because the Chinese government has been trying to, you know, minimize tensions between the United States to minimize additional sanctions.

Of course, this whole weather balloon debacle kind of made those things worse and now it's leading to China. All right, maybe we do want to end up selling lethal weapons to Russia. So what you have is basically a giant sh9t show going on, because again, you have the United States thinking about somehow convincing the United Nations which is supposed to be pretty much everyone in the world with the exception of a very few. but you're supposed to have the United Nations providing sort of neutrality between everyone.

But now the United States is potentially pressuring the United Nations to remove their weapons and arms embargoes, allowing them to take weapons that were basically seized which is just a nice way of saying stolen from Iran and giving them to Ukraine at the same time as you've got what really is setting up to start looking like two major axes: Russia Belarus Iran China U.S Japan South Korea the United Kingdom France Spain Portugal Canada so on, and so forth. Yikes, it's just not good. and I don't think it's a very good idea that people at Rishi Sunac are saying we need to double down on Ukraine becoming a member of NATO even though we know that's what Ukraine wants. That's kind of the whole reason a lot of this started.

obviously a lot more involved, but we already have the idea uh, that that you could see Finland for example, separately get voted into NATO which is also with stone's throw from Russia Remember when? uh, when you had the first uh incursions into Ukraine actually had a lot of Russians flee Russia itself? uh through uh through the trains to Finland is that directly connected? Uh, anyway, this is wild I think it's uh, it's uh, you know, should should. You should be paying a lot of attention to what's going on here and how things are developing because the posturing is getting worse and not better. And I don't just mean verbal posturing either. It was just last week the Financial Times was reporting that Russia is setting up uh a essentially Rose of their Air Force on the border of Ukraine preparing for a larger incursion that would include helicopters and jets, fighter jets and the Financial Times arguing that Russia's uh, Air Force is actually pretty unscathed from this war.

So far, it's just not good, it's just not good. Now a Salam over here says fud fud nothing's gonna happen. You know what's interesting is when people say fud I actually think it's a very uneducated phrase to use fud because it implies that what someone is saying is fake news, right? Fud carries the connotation of fake news because people use it in the same way. Oh, that's just fun.

But fear, uncertainty, and doubt is often based on fact, not fake news. And so when people use the phrase fud I actually think and this isn't to be offensive to this person, but I think it's uh I think it's uneducated to use the word fud so I would stop using the word fud uh I I would say I don't you're welcome to say I don't think it's going to happen just like what Ukrainian said the night before the incursion. you know I had a connection with someone in Ukraine the night before on February 23, 2020 the night before and they said this is just Western hysteria. Nothing's going to happen Russia is not going to invade the very next day The Invasion happens I send off another email I'm like dude, are you okay and they're like yeah, we had to flee to Sicily and I love this person to death like I was super worried I obviously I care about everyone's lives but like this was a a near and dear connection to me.

So I think it's important to remember that using the phrase fud is not a way to Discount reality And the reality is, we have problems that are escalating, not de-escalating All right. Uh, fud you fine, it's a good one. Uh geez, Oh yeah. I mean that's not even this I mean this I mean then of course you got to look at, you know obviously what's going on in Israel as well I mean that's just like that's just the age-old war that keeps going.

uh, which is it's not to say it's it's not terrible, what's happening uh, you know? uh Israel and and Palestine of course you uh I don't want to go down that rabbit hole right now. It's just I don't know. it's all terrible. uh anyway.

all right. so yeah China literally wrote the book on Covert Warfare act like a friend but secretly do everything you can to destroy them. It sounds very um uh, art of the deal trumpian huh? which actually was a good book. but it's funny because every time I mention that I get like 100 comments of people going.

Did you know Trump didn't actually write that book Yeah Well yeah, it was co-authored maybe mostly authored by that other person. Anyway, uh uh, it's leverage. Let's go down the rabbit hole. All right.

Maybe next time we've still got a lot of other stuff to cover. Oh man, oh yeah, yeah. all right. So so that's uh, that's our Ukraine talk talked fed I think we gotta talk Catalyst now because even outside of all this like war and craziness, we have, uh, we have Catalyst which is pretty crazy.

The real fun is the coupon code that is set to expire this Wednesday or coupon codes. We only have flash sales around here. Now we're done with coupon codes on building your wealth. Just flash sales by the way.

Big shout out to uh, the many of you who have been shadowing me over the past few days. it's been pretty phenomenal. Uh, we. We've gotten to see some really cool things and had some really awesome discussions and and hopefully I've been able to motivate you and your businesses.

a lot of entrepreneurs I'm seeing I mean coaches? uh uh, investment advisors? uh real estate professionals? uh some some you know entrepreneurs building uh Tech businesses like coding boot camps? uh somebody who's uh, we're gonna end up sharing some of the stories from some of these folks once we. uh, we edit it together. but uh I want to I want to share some of the shout outs that we have for some of those folks. but just in general, it's really cool meeting y'all in person.

Really really cool. So uh you know I I know we obviously we have like you know our course member live streams and that where we get to connect a little bit more. but I love meeting you all in person. So I really appreciate y'all So yeah John does everything says big shout out to Kevin Oh thank you.

Why do you keep wearing that sweater? You know I wore this sweater today solely for the people who keep asking me why I wear this sweater. It's like it's it's not Christmas put up your sweater and I'm like it's the most. It's like, why why do I wear fake overcoats in the summer? Because it's the ironic and annoying thing to do and I love it because people like lose themselves over things that really don't matter and I think it's I think it's like literally what we should be doing is making fun of ourselves for things that don't matter. Foreign become industrial War You're not wrong about that.

Yeah I Love the sweater. Bullish. Bearish, you know. I think I think Bitcoin will follow the risk cycle uh of a not V-shaped recovery but Nike Swoosh I Personally would rather be in in certain stocks that I think have I have really incredible value right now.

Uh, but that doesn't That doesn't mean that doesn't make me a bearer on on, you know Bitcoin for example, not at all yo. If you want to know my thoughts on 3D printing, it's a fair question. But if you want to know my thoughts on uh 3D printing, you should type into YouTube meet Kevin Nano Dimensions and you'll get my real thoughts on 3D printing. And let's just say they're not bullish.

but you should see why. Uh, you're forecasting Rivien will go to bankruptcy I mean I think they're going to dilute their shareholders to crap to prevent that from happening by. you know, having to basically raise Capital to exceed their market cap. I Think they would be smart to take advantage of any kind of risk on rallies we get and raise capital I Think that would be very smart I think they are likely to do that as well. <