Hey everyone we kevin here, we've got to talk about capitulation. Some news updates that are going on for today, a friday may 27th. It is the last trading day that we have, where we have a beautiful amazing, expiring, coupon code for all the programs on building your wealth link down below, especially learn how to scoop up cheap deals in real estate, do-it-yourself property management, rental renovations and, of course, the Programs on building your wealth and stocks in the psychology of money, folks link down below email me if you need any kind of special help at kevin meetkevin.com and remember that we've got bundles already listed on the website to make it easy for you. So you don't have to email, if you don't need to all right folks, here's what's going on! First, we got pce pc personal consumption expenditures.

We got a measure here and we have some good news here, but we've got to talk about this potential retail capitulation. Despite the fact that things look a little green right now, are we close to that capitulation, but first pce pce down from its peak of 6.6 in march to 6.3 in april those numbers out today, inflation adjusted spending also rose the most in three months, and this Indicates that, even as we have headline inflation numbers now, finally, hitting that turn, this is not really like a big material turn yet, but we're starting to see a little bit of that peaking right. We were talking about this yesterday. How we're even seeing fertilizer prices come down? Wheat prices come down used.

Carb prices come down. Uh diesel inventories, rising prepping for a potential fall in diesel prices right we're, seeing the recipes for inflation coming down apparel computers, chips, all these things rotating down on month-over-month bases. But what do we have here? Well, spending's still going up, and so this is kind of like a good news, bad news situation, because when you have a spending going up adjusted for inflation, i know if i don't say that i'm going to get a bunch of comments about it. In fairness about that, because people like oh kevin spending, went up yeah because everything inflated okay well adjusted for inflation spending still rose 0.7 between march and april.

That's like an 8.4 spending increase at an annualized rate, while inflation has already been subtracted. Excuse me, and so, when you think of that, it's like oh, my gosh people are actually still spending more they're, just spending in very unique places, and this is making it a lot harder to try to figure out what stocks are the safe stocks. We thought it would be staples like walmart and maybe target to some extent nope. Okay, maybe costco.

I don't know costco is down after earnings only down about one percent, but still it's down like 30 since its peak. So then you of course look at a company like macy's and you're like well. Surely people are going to spend less money at macy's because macy's appeals more to poorer consumers right nope, macy's earnings go to the freaking moon like it's very, very complicated to find out where exactly are people spending money you might think? Well, maybe it's on travel, which is true. Google trends for cruise ships are up.

Airfares are skyrocketing, airlines are cutting the amount of flights that they have they're overbooking, the flights that they do have and gas prices are so high, they're, basically trying to pack as many people in and raise prices as much as possible of the flights that they do Have but this makes actually picking stocks extremely difficult and extremely frustrating in this environment, but the big question here is: how do these pc numbers pce numbers affect the fed put the fed put is where the fed comes in and says: oh, okay, all right! We're going to stop hiking and we kind of support the stock market right. It's kind of like you hit the strike price of like qqq. 280. Oh okay, you know what maybe we're gon na pause in september, and you know that's exactly what the federal reserve did.

That's the style of the fed, put we'll see how resilient it is, though, because that's only you know something that we've heard from some of the fed members. So more importantly, we've got to look at this and go all right great. We got the april numbers now. We need to see a continuation of this trend of inflation going down in may june and july uh, leading into september to actually affirm that the fed won't have to rug pull us, which we right now base case is no fed rug, pull just a slightly hawkish Fed and slightly has been pretty painful, so imagine a real rug pull okay! You will not want to be anywhere near stocks if we get a real rug pull.

So what about spending in general going forward? Well, according to bloomberg intelligence, we expected that, yes, as we already know, discretionary items will see less spending, but overall americans are expected to travel and mass this summer. Giving sort of this counter argument that, even if diesel inventories are increasing and fuel inventories and oil inventories are increasing, it's going to be a while before we actually see oil prices come down because there's still going to be a lot of travel demand. Now there's another note where folks are saying: okay: well, maybe if we start seeing those weekly unemployment numbers go up that maybe the fed will actually start relaxing, but we haven't really seen those weekly unemployment numbers go up. Although - and i talked about this yesterday, how we want to watch those weekly unemployment numbers, i want to add some additional information about those weekly unemployment numbers.

The weekly unemployment numbers are not necessarily the best because in the past, like pre-pandemic about 50 percent of people who lost their jobs were able to get unemployment now we're down to about a third, and the reason for that difference is more. People are now quitting see you can only get unemployment if you've had sufficient work, experience, you're willing to work, and you lost your job through no fault of your own, like in other words, you got laid off or you got furloughed. But if you quit, you don't actually show up in those unemployment numbers so potentially a blurry measure, and i wanted to add that extra detail now is capitulation. Close remember, folks, we've seen capitulation in strategic modelers.

These are macro traders they capitulated in january. I was part of that group now since then. Obviously, i've bought back in, but the next group to capitulate was hedge funds. In february and march mutual funds capitulated.

In april now, everybody's looking at retail, going y'all you all ready, y'all ready to jump out because once y'all jump out now we know the bottom's in this is why retail usually gets screwed, but retail this time is like hell. No, we know stocks in the psychology of money. We know kevin's programs on building your wealth. We're staying in not only are retail investors staying in, but they're buying more than ever.

In fact, investors added 20 billion dollars to stocks in the last week alone. According to bank of america, and guess what the biggest like reason, people had money to inflow into stocks was cash. This is really good. This is what i've been sharing on.

The channel for months is more cash, less margin, more cash, less margin and then use it to get in. I dump my real estate to increase my shareholdings in and i'm still not done, selling in real estate, but to increase my shareholdings in companies that i love now. I think these are really big opportunities. We're gon na look back and look at these prices today and we're gon na go.

Oh my gosh, those were steals. Okay, those are steals. I really really believe that no guarantees, obviously, because you know this - this is just what i believe based on my research and unfortunately, that doesn't mean you're always going to be right, but at the same time as we've seen, these massive cash inflows continue into stocks and Retail, not capitulating retail has lost breadth. This is actually a really important number.

That means maybe retail capitulation, is close, and once we hit that retail capitulation, maybe we'll have officially at the bottom. Let me tell you what i mean about breath, but first i want to thank today's sponsor ftx us ftx is the most complete, crypto and finance app out there. Users can buy and sell crypto and nfts with no fees whatsoever, and they also have exciting upcoming products. Such as stocks in the near future, you've probably heard of ftx through their partnerships with tom brady, steph, curry, coachella or the miami heat stadium, amongst others, or even their founder sam bankman, freed one of the leading entrepreneurs in the space who plans to give away 99 Percent of what he personally makes to charities, i love ftx mostly due to their user experience and they're up to 85 cheaper than competitors, so you get more crypto with each purchase.

In fact, most exchanges charge two to three dollars in minimum fees on every transaction, but with the ftx app you can trade as much as you want all for free. They even offer a crypto friendly debit card, allowing you to spend crypto at millions of merchants worldwide. They also make dollar cost averaging easy with things like recurring, buys and transactions where they can pull money directly from your bank account if you want on a weekly, bi-weekly or monthly basis and invest it for you automatically start trading, crypto and nfts with no fees today By downloading the ftx app with the link down below in the description and use code meet kev to get free crypto on trades over 10 again use the link down below download the app and pop in code meet kev and start trading crypto with no fees today. So what does breadth mean again? Breadth means how many names are being bought versus how many names are being sold.

If 200 names are being sold by retail and 100 are being bought. You have negative breadth in the number of companies being bought versus sold right. That's negative, that's bad! You could do this with evaluations as well, not necessarily valuations, but the total sum of the dollar volume of stocks being bought. If you've got you know, six billion dollars worth of stocks being bought and 12 billion dollars of stocks being sold.

You have negative breadth by the amount of two to one vice versa. You could have positive breath by the amount of two to one and right now we're losing breath we're trending towards that negative, where all of a sudden retails like weakening it's kind of like a sign that, like okay, we're kind of running out of money and like So we're kind of like picking and choosing a little bit more because we're kind of running out of money, okay, uh and so that suggests that retail capitulation could be close, doesn't necessarily mean we're in for another huge downside from here, but it could, and once that Happens, whether it happens or not, if this is the bottom or that capitulation level or is the bottom, the expectation now is that the following sectors will lead the recovery, and these are very important. The expectation is that tech and semiconductors will lead the recovery, not value stocks. The reason for that folks is simple, simple, simple, simple, look at the chart on screen now this chart is the comparison of the msci world index, which is basically your value world index.

All value stocks in the world right here compared to all growth stocks in the world, and when you compare those two and you hide kevin, what do you get? You get a clear indication that over here you have growth stocks, substantially underperforming value stocks, value stocks down about 0.5 or about half of i'm sorry, 5 and growth stocks being down about 25. This folks is creating the belief that, when it comes time for the eventual recovery, which is expected to be close, we don't know that with certainty, but we're expecting that to be close based on the level of capitulation that we've seen across the board so far once That occurs, we think that tech and semis will take off, and it's so hard, though, to pick stocks, you have to be careful, for example, meta just got sued for potentially copying six patents related to haptic technology from immersion. This is in their vr. Headsets.

You've got ford, a lot of people have been going to ford because they got a dividend, but now bloomberg intelligence thinks and that ford is going to cut their dividend by 50 or more. You have that uneven hurt. You look at a company like gap, it's down to 18.6 percent. It's gapping down right, walmart, walmart target terrible, william sonoma, great dollar, store's great! It's it's somewhat tricky! You might look at that and go oh yeah.

I would have perfectly bet that well, but we don't always right uh, and so then it makes one of people think well, okay. Well, what about amd, nvidia, tesla and other tech and growth names that have oversold yeah, potentially not a terrible idea, which then brings up the idea of what about that tesla lawsuit that was just filed in california? Okay? Well, i read the lawsuit. The lawsuit alleges two main complaints number one, that elon musk misled investors by failing to properly file the correct form 13g, which would have disclosed his intent to either acquire the company or properly or well and or properly disclosed. That elon musk became a 5 shareholder on march 14th.

He needed to file that form within 10 days. He didn't. He filed it about 11 days late and according to the wall street journal elon musk potentially saved 156 million dollars by doing this by filing late, because he was able to continue to buy twitter shares without the world knowing or order bucks. Seeing it that's the big one right, that's the sort of the big complaint right there that the sec is already investigating elon musk for there's a good chance.

Elon musk could probably see some penalties for that, but the other one that's in this new lawsuit is that elon musk quote waived his due diligence on twitter and ignored that due diligence was available, which could have let elon musk become aware of the fact that uh Twitter didn't have the user base, it thought it had take a look at this. This is directly from the lawsuit look at that elon. It says here that ilama specifically agreed to waive detailed due diligence as a condition of the merger agreement. Now they don't actually provide evidence to this.

So that's sort of evidence and that sort of allegation is going to be have to fought over in court. But i would like to know where elon musk expressly waived detailed due diligence and that somehow that enables somebody to say, oh well, you got to take as many bots as you get at twitter because we all know. This is all about how many bots twitter has right, but this lawsuit then goes on to claim that elon musk should have known that twitter's user growth was wrong because right before a trial in a massive lawsuit that started in 2014, seven years later right before the Start of the trial where twitter was being sued for misleading investors about their user growth, twitter decides to settle the deal without admitting any kind of guilt or disclosing any of the kind of due diligence that came out of the lawsuit. This then led to 809.5 million dollars of settlement money going to the plaintiffs.

In that case, and so this lawsuit says elon, you should have known because of that 809 million dollar lawsuit that the num that the user growth was flawed over at twitter. And if you look at the actual sec document, which elon musk continues to refer to even twitter themselves, expresses doubt that uh, the five percent number could be accurate. Now this could be cya, but then this it sort of delivers the question or brings up the question of okay. Well, what is fair right, and so what i mean by that is take a look at this here on screen.

This is the section of the new lawsuit which quotes the sec's disclosure from twitter, saying that false or spam accounts represented less than five percent of our monthly daily active users. Now the last line in this is, however, this may not accurately represent the actual number of such accounts and the actual number of false or spam accounts could be higher than we have estimated, and so this lawsuit alleges see, look dude. You waived your due diligence. You had a disclaimer in the sec report, you're trying to screw people by not disclosing things on time and, at the same time, of all of this you're, totally ignoring that 809 million dollar settlement that should have given you enough cause for concern about twitter's user growth.

Okay, that's a pretty you know pretty damning kind of lawsuit, at least when you kind of put it together like that. It doesn't sound too good right. But here are the problems. The 800 number one first problem, 809 million dollar settlement a year ago - maybe would have been enough to prove that twitter's user numbers are false, but to what degree, because it was a settlement, we don't know - was it false by 1, 5 10.

We don't know, and so that begs the question like at what point can you rely on a confidential settlement when you don't actually have the real numbers? In my opinion, you really can't, because you don't actually have the facts. You just know that twitter decided it's not worth going through the trial. Let's just pay 809 mil and get this over with that's what twitter decided. That's all we can really know you could assume that twitter was trying to maybe like hide something they did wrong, but that's not always the case, because, even though you could be completely right, you could still lose in a trial of your peers.

I know that sounds crazy, but when you actually open your eyes up to the legal system, it's not always as perfect as we think it is number two. The sec's disclosure uh well twitter's sec filing that bots may be higher than five percent is a good argument, but then again we have to also evaluate what's reasonable. Okay, so say the bots are seven percent okay. Well, then, your cya line makes sense, but what if the bots are 25 or five times more than you've disclosed? Well, then now we're arguing a level of reasonableness, and i would argue that elon musk has the right to make the claim that nah.

This is substantially different and creates the opportunity for renegotiating under the threat of elon musk canceling right and then, on top of that, when it comes to the timing of elon musk's purchases of twitter shares probably going to have to rely on the sec on this one. Because, in order for you to win a lawsuit on that, you'd have to prove damages. You'd have to prove that you owned twitter shares and sold them during that time frame at a loss when you wouldn't have because of elon shares, or you would have had a bot the twitter shares had to and knowing or like you would have had to say That well had i known that elon bot i would have bought, and then i would have made money, and so my three counter arguments here: one the difficulty of you proving damage uh through elon's, a time frame of filing and number two, the lack of like information That we can actually glean about how wrong that five percent number could be the lack of information and number three. The lack of information we get from the 809 million million dollar settlement to me are all actually reasonable.

Counter claims to this lawsuit here to where i don't think, a jury or a judge can look at that lawsuit and say no elon was definitely wrong. I think elon has a reasonable counterclaim to each of those arguments and to me it doesn't make me very nervous and therefore go tesla anyway. Hopefully, you found this information helpful, make sure to check out the programs for building your wealth link down below folks at coupon code expire. Soon it's the last day of the market together, we've got here so may as well check it out and folks we'll see you soon.

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