The Bears are back and we're going to start with a report by who is now known as the Cocaine Bear. We're going to start by looking at a perspective from the Cocaine Bear. We'll talk about what's actually happening in the Bond market. It's a massive red flags that are popping up in the Bond market, but those red flags could potentially turn bullish.

I'll talk about how those red flags could turn bullish. We'll also look at Morgan Stanley's bear case. So if you're looking for fun, this is probably your video. but that fun could actually turn bullish.

and I'm going to show you how it could turn bullish towards the end of the video. So if you want some fear, uncertainty, and doubt and see what the Bears are saying, but you always want to elevate your perspective, let's get started with the Cocaine Bear from Rubberbank. I Get quite a lot of direct and indirect feedback to the global daily. some of it positive, some of it negative.

However, yesterday for the first time, I was told I was on cocaine for arguing that higher rates can in some cases lead to higher inflation. Okay, this is actually a very traditional argument that initially when rates go up, the cost of doing business goes up and therefore you end up actually in the short term increasing inflation when you start increasing interest rates. This is not wrong, and it's not actually the fundamental point of what I want to show here. However, what I want to show is that this individual reports what exactly what I'm seeing in the Bond market as well that Bloomberg or finitive Reuters We are seeing all over the place that Traders and journalists are and analysts are betting that U.S interest rates may go as high as six percent which is the opposite bet that we have been seeing getting made now.

Unfortunately, this is starting to actually materialize in the Fed's Terminal Rate. We have been sitting at a Fed terminal Reign. We've been pretty much range bound I'm looking at the chart right here between October and the end of January so January 31, October 1 and January 31. we have been range bound between 5.13 and 4.9 as a terminal rate of where the Federal Reserve is going to end.

So basically pretend it's been very, very volatile between that on rate projections. Well, since the Jobs report, this terminal rate has actually taken a solid leg up and that's what it looks like now is a solid leg up to currently. the Fed's terminal rate being priced in is actually 5.33 Which is higher than what the Federal Reserve projects of a 5.1 percent terminal rate. Now that's actually interesting because the Federal Reserve use usually likes to massage markets and dialogue before they actually make any kind of rate decisions.

Now, this move up was on Jobs data Jerome Powell's already tried to explain down the Jobs report by suggesting oh, will Financial conditions tightened as soon as the report came out which is not wrong about financial conditions did tighten right afterwards, but it's not stopping people for making bets that rates could go up as high as six percent and some are even going as far as calling for eight percent rates. Now, what's interesting as well is this individual is basically making this argument that we might end up seeing a structural shift in America that ultimately we build more of our things at home. He calls this the Global Neo mercantilism. Basically, hey, you know what, We're going to encourage sending stuff out and selling stuff to other people and we are going to discourage bringing stuff in because we want to create more at home.

It's basically the deglobalization argument. So here you've got one particular bear who says, look, we could face higher uh rates which will actually push inflation higher A combined with deglobalization. Now you're in a situation where you have a recipe for disaster. Rates go going up.

Inflation's still going up, leading more inflation pressures because rates keep going up and what ultimately ends up happening. Well, you end up in a situation of stagflation. This is your classic stagflationary argument, right? Unfortunately, the problem is, you're actually seeing now the market. Try to start pricing in more inflationary concerns and higher rate concerns.

In fact, yesterday's Bond auction was terrible, suggesting that markets expect rates to go higher. When rates go higher, bond yields fall. Or sorry. a bond prices fall.

Bond yields go up right. Rates going up. Prices fall. Now that's interesting because yesterday's auction was so terrible.

Why? Well, because basically people think that why would I pay that price for your auctions I think the price of those bonds is going to go lower. so I'll just wait until it's lower. And sure enough, if you look at the 10-year treasury yield today, what do we see? We see a 3.69 this morning. We're sitting at a 3 7, 7 handle.

We're basically trending back to that four percent level on the 10-year treasury, which is not only bad for the cost of doing business for companies, but it's also bad from the point of view of real estate. And this is why money is pouring into option bets betting on higher rates. This is a very clear and consistent belief across the board. Uh, from a Wall Street right now, and one of the reasons is that CPI forecast for next week is not fantastic.

The fact that that CPI forecast for Valentine's Day is suggesting we might see CPI month over month. data reads coming in at 0.5 percent, which is a six percent annualized rate is leading a lot of people to say holy smokes, when that print comes out, the Market's going to sell off. especially if we beat it and it comes in higher, right? Worse, the number comes in higher. Uh, then then we want to be positioned and hedged.

So what are you starting to see? You're seeing a lot more inflows into hedging? You're seeing a very negative of Outlook in terms of where where the stock market belongs to go or should be going. And even this morning, there was a lot of talk from Wall Street analysts about how the only reason we had a rally in January was a short covering temporarily under multiple expansion which the last thing you want if you're going into a recession is multiple expansion since usually the first thing that collapses in a recession are stock multiples. then earnings fall and stocks fall even more. But if you're getting multiple expansion then you're kind of having this bat that everything's good.

You're betting on sort of the fairy tale that inflation's going to come down. Jobs will stay strong, which means we won't go into a recession. It's A you know, that's obviously the hope, that's the soft Landing bet. but people aren't buying it.

They're not buying it So much so that previously as of just eight days ago, the implied policy rate curve looked like this on screen. Now you will see the implied overnight rate and the number of hikes that you expect to see from the Fed. and what you see is a Peak at 4.9 percent with cuts starting in July And then you have this bar that goes really low on the right because those are the number of uh Cuts basically cumulatively Incorporated and you're looking at over 1.5 percent in cuts by January That's pretty consistent with the belief that we have over 1.7 percent in Cuts priced in by the end of the year. That chart has completely changed in the last eight days.

since the Jobs report. The chart does not look anything like what you just saw or heard about. depending on if you're listening to this on Apple or Google podcasts or Spotify. This particular chart right here shows you what things look like as of last night.

you can see: Zero Cumulative Cuts Priced in and this is why we've had a few red days over the last few days here. What do we have? Zero Cuts Priced in that's not great. What do we have over here? January 31st No Cuts Priced in and look at that Peak that peak in July actually potentially suggesting a 25 basis point hike in June and July that Peak now sitting around that 5.3 level. Uh oh.

so what does this mean? Again, more bearish bets being made on the CPI report coming out now. I Mentioned to you that there could be a reason that this would end up going bullish, right? Yes, and stand by for that. We're going to talk about that. But first, we gotta talk about what Morgan Stanley says and particularly I Want to look at what Mr Wilson says now Mr Wilson is your big bad bear? He's not the cocaine bear, He's just another bear.

He is a pretty big bear And this individual says that look, while it may take longer for the market to price in materially are below consensus view on earnings and the Fed's restrictive policy. We reiterate that this new bull market is nonsense and that is essentially the market is going to go down a lot more. This individual suggests that forward earnings expectations are way higher than they should be. We're finally getting negative revisions and ultimately MO multiple expansion is not why we should be rallying right now.

Now it's worth noting and I wrote this on the side here that sixty percent of S P companies that reported through January 27th beat and 69 Uh beat on on EPS Uh at 69 60 beat on Revenue 69 beat on EPS I Gotta fix my little note there on the side. But anyway, uh, He suggests that hey, look based on their research, forward EPS Growth is now negative for just the fifth time since 2000 and history therefore shows that price downside is in front of us, not behind us and he creates this chart over here which shows you, uh, that we've had negative forward EPS in 2001 and sure enough, prices via the S P 500 fell Afterwards you had a negative hit in 2008. lower stock prices. Afterwards you add a negative hit in two thousand and 15.

now this one I'm going to call a little bit of a false flag. This is interesting because yes, even though there was some temporary turmoil in the stock market, that turmoil was really nominal. You're talking about maybe three, two to three months of a little bit of pain. But that negative signal right here was a bad time to sell because the market is up way substantially from that, so that was a bad signal.

That's where his chart and graph falls apart. obviously negative forward EPS in the coveted pandemic and then now. But if you take out, let's do this for a moment. Let's try to dismantle this if we take out Covid if we take out now because now has not happened yet and if in 2015 we're like, well, this is bull crap.

Let's take that out because nothing happened in 2015. Like you would have been better not to have sold then right, that would that would you would have missed out a lot. So if you take out what hasn't happened yet, covid and 2015, his chart doesn't look that impressive anymore. Now you're only suggesting that hey, well, stuff was still worse in the pan or in in the.com bubble.

Sure, But our stock market today has fallen three times as fast as the.com bubble. And if you look at the structural problems of 2008, you kind of Wonder like are we really going to face a 2008 or if inflation goes away, Could we potentially avoid that, right? So you know? Obviously the Bears have their arguments and the Bulls have their arguments and that's fine. EPS Surprise He says uh on in terms of growth even though it's positive, it's the lowest that we have seen since the Great Financial crisis. Uh, and he does actually suggest night.

This is not actually what I'm seeing a lot of, but but you are seeing a a more long exposure here in January than you have seen since September. Now this is true though, because you and based on surveys, you have a lot of Institutions suggesting they want more exposure to like Tech and growth for example in January than they did in September But it's still lower than what we've seen throughout 2021. And he kind of cuts this chart off in September of 2021 because quite frankly, in my opinion, the chart would be a lot higher to the left of that than to the right of this. But but whatever.

So he's obviously he's trying to make his case over here. He also then talks about while some of the upside surprise can be attributed to okay, this I think is the Jobs report Yes, this is the Jobs Report Friday's blowout Jobs report. While some of the upside surprise can be attributed to seasonal and longer term adjustments to the data, it's hard to argue the labor data is not strong, which means there's really no reason for Equity investors to get excited about cuts and rates now. In Fairness: The market has already removed rate cut pricing over the last few days.

So like if you think the Market's still excited about Cuts in 2023, Wrong, it's already been removed. which on one hand and this is kind of leading to where my conclusion goes. But but by conclusion, don't worry, it says some more to it. Uh, it's actually kind of bullish in some degree.

because like if the Market's already removed price cuts from 2023 and how much has the S P Fallen like nominally I mean let's look for a moment, let's go to the Spy and let's go to the day chart on the spy and what do we have on the day chart of the spine I Mean look at that. There's like no downside movement over here. So we ran to 418 for a moment at Peak Within the day we didn't even close at that. we closed at 4 15.

right now we're at 405. Okay, well, 405 divided by 415. What are we down? two and a half percent? Or well, big whoop, Who cares, right? If if a two and a half percent downside on the S P 500 is all it took to price in No. Cuts in 2023.

it doesn't sound too bearish to Me Maybe We're all okay with higher rates for longer, you know? Uh, but anyway, this individual makes the the very strong claim or in their opinion that hey, look no rate Cuts 23 . we all got more pain coming that is their argument, right? And if you combine that with the cocaine bear, you have a story that's kind of like yes, this isn't good right now. What you also have is this potential that yeah, rates could stay higher longer. In fact Ken Rogroth, who is a Harvard Professor suggests that look generally as populations grow and economies mature and democracy is mature generally, looking back over the past 700 years.

Generally, over the history of financial markets, we tend to see a downward Trend in the natural rate of interest. However, in that 700 year span, we actually go through substantial periods as long as 15 years where you have deviations from Trent 15-year deviations from Trend or a long time And basically Ken is making the argument. Professor Ken is making the argument that hey, keep in mind it is possible for rates to stay a lot higher for a lot longer than anybody expects we could be at a higher rate regime for five years. Potentially changes everything.

We don't necessarily have to go back to zero in 2024.. So interesting argument. And there's also of course the potential that, well, there are really three outcomes and any of these is possible at this point. Look, sure, we can have orderly disinflation and basically inflation goes down towards two percent.

You don't cause substantial damage to jobs and growth and things are better. or you have sticky inflation. Inflation Falls to like three or four percent, but then you get stuck. Then you kind of hope that the Federal Reserve pulls up Fate out of the bag which they've been kind of refusing to mention because I think it's a tool on their tool belt that they're not telling the mainstream media in the world about.

but I've been yelling about for the past six months like it's gonna come. They're gonna pull that Genie out of the bottle or you can have you a u-shape of inflation where basically these higher yields do exactly what the cocaine bear says and you end up seeing a second wave of inflation, right? Higher rates. with higher inflation? it's all possible. It's all very bearish now personally.

I think this bearish positioning that we're seeing getting priced into the market right now that actually is barely moving the indices. as I mentioned the S P 500 not that far down, down two and a half percent simply by removing raid Cuts in 2023. That's a nominal move to the downside for what seems to be a lot of bearish positioning and this is just my opinion. but I think there's a chance we have a lot of bearishness today and Monday going into the CPI print and if we get a a good CPI print, you could end up seeing another rally to the upside.

now another another large leg to the upside. I Don't even think that a big Miss on CPI would bring us back to a new low like October or below I Don't think most individual investors or institutional investors actually think we're going to break a new low I Do think it makes sense to bet uh or Hedge for the potential another leg down. but you do have people like Mike Wilson who are like, oh no no, no, the real big leg down is still coming. Look at my charts, which obviously I've dismantled one of the charts one of his primary charts, but hey, you know what that doesn't mean I'm going to be right I Just want to share the perspective again.

Write these numbers down: CPI month over month projection: 0.5 That's way higher than the negative point one that we had last month. That's a problem. That's headline inflation went up up right. Headline inflation that's led by energy.

It's really led by energy. But you also have Core. Oh, they just revised Core. Oh, that's fantastic.

Uh, they. uh, the survey for core is now 0.3 That is in line with the 0.3 Previously, that is a revision down from yesterday which actually suggested Core would be 0.4 on a month over month basis. CPI Headline 6.2 estimate and CPI core estimate of 5.4 Interesting, we will see. Obviously we'll see, but uh anyway.

uh, let's uh I want to see what some of y'all are saying here are: Cuts Not A Bad Thing Usually the economy crashes after the FED pivots God Damn it. Anybody who watches my videos is like oh no, here we go again. dude. Foodle funnel Man you might be new around here I appreciate you being a member, but I think I have made like 17 videos talking about how the FED pivot and the market crashing after the FED pivot is straight I'm gonna just simplify it like my I mean and you can just type this into YouTube and get my details on it.

But literally yesterday morning I talked about it the day before in the morning I talked about it and you could just type into YouTube meet Kevin Fed Pivot and you'll see me dismantle it. But let me just try to sum it up in in 30 seconds. Yeah, people are Charlie's like foodle has to be trolling. Maybe maybe I'm getting trolled here.

but but let me just try to sum it up in like 15 seconds. Okay, the FED will only pivot down in this recession. When inflation is convincingly falling, Inflation is the only reason we are going into a recession. If The Fed pivots.

It means inflation is getting conquered. Which means the problems are going away. Which means we go up, not down and and watch my other videos for for why the FED pivot is just nonsense. oh God Lord Hey Kevin How can I send you a gift 9452 Telephone Road Ventura California 93004 Oh yeah, yeah, Fed made it clear that they needed to tackle inflation.

otherwise people will lose face faith. I'll I'd say higher for longer exactly but the higher for longer argument actually reiterates why when the FED actually does pivot, it's actually a good thing, right? Also, tell us where you got that jacket. This jacket was a gift from my father. It is a Robert Graham jacket you know Robert Graham usually puts like a a number on each of them of of how like all of the products he makes are numbered and uh yeah it's a really cool jacket.

but but they they have like uh uh how many they've made or whatever I don't I don't know I mean this is probably this is one of my favorites because it makes it look like you're wearing a double jacket. but it's it's click bait. It's the best. uh nobody knows clickbait better than I do foreign anyway.

uh what are we gonna title this video something about, uh, prepare for the market crash I don't know I actually I think this stuff is a really good video I mean I I think the content's really good. uh but uh, some people just read the titles and and they don't actually watch the video and and for those people, sucks for you.