Well, you all know that I'm a bull. but I love talking about the bear case because I want to see what evidence the Bears have to actually be those dirty lonely bears that they are just kidding I still love you? No I don't No, we could still have a beard. No, we can't I just changed that. Although I might flip-flop No, maybe I won't Anyway, let's actually talk about this piece out from TS Lombard which just came out on looking for the next weakness.

You know why? is it that it seems the Bears keep having to come out with new excuses for why the Market's going lower than it did in October? It's almost like they're running out of reasons, but you know what? they're still bearish and I'm still gonna cover it because I want to see am I missing something because I'll tell you the day I see something that that scares me uh I I I'll have to weenie baby and sell everything. Just kidding. It usually takes me at least a few weeks before I flip-flop. but anyway, financial sector cracks spread to the economy.

Tightening is likely to be strong, longer, and more unpredictable. The risks we know are less worrying. Uh, now that's interesting because usually these folks are very bearish, right? And I actually wrote that little note over here I'm like that's odd. They're usually very bearish.

Don't worry, they get bearish. So first, regarding the banking risk, their Chief economists at T.S Lombard has a house view, which is that the main takeaway of the banking turmoil is that we're likely to see a credit crunch rather than more bank failures. And while there are other risks out there, the broad conclusion is that a credit crunch will feed through into the weaker real economic performance, which in turn could touch off further Financial disturbances and thereby compound the most likely candidates emanate from China and more broadly commercial real estate. Okay, quick note on China because everybody keeps talking about how China is going to go back and boom yesterday.

Bloomberg did this live a Blog On the Chinese premieres piece, the Chinese Premiere was saying the world is at a Crossroads Now what I thought was really interesting is throughout this piece, the premiere talks about how China is booming and like their recovery is so stable and so much better than the United States is recovery. Well, what do you have over here I Thought this was like the best line ever Lee used hi nuns allegedly Resurgence in tourism in the tourism industry as an example of China's rebounding economy. While I generally agree with Lee says the reporter that things on the ground here in China are good I Can say as someone who's been booking hotel rooms, there are a lot of vacant rooms I Read that and I'm like, of course China is probably blowing smoke. They're probably doing a lot worse than they are actually letting on.

They did the same thing with Covid. why would they do anything different for the recovery? So of course the recovery? is probably not as strong as this. This is why I have such problem trusting China And don't get me wrong, I don't trust our government either. but I trust our government more than I Trust China Uh, I'm not saying something.

Uh, but anyway, going to uh this this uh, TS Lombard bear Piece. So uh, China and Commercial Real Estate the potential targets for real pain. Okay, tightening is likely to be stronger and more unpredictable. Okay, so let's learn a little bit why the hard Landing risks have clearly risen, Why the economy needed something to slow down growth and thus inflation.

but the problem with tightening lending comes from a credit squeeze that is unpredictable. The Fomc The Fad is unsure how much tightening has occurred and notable Hawks like Neil Kashcari are getting understandably worried. The curve is strongly signaling a recession, and after the curve reinverts we tend to Signal a recession has begun and Mark it's therefore are remaining on edge. But what's most important? Well, what's most important has TS Lombard Is this shaken confidence in the economy? Has this banking crisis now affected people's willingness to spend? Recessions can become self-fulfilling they say they say headlines of Doom and Gloom and recession and forecasts can negatively impact the investor, the consumer and corporate Behavior feeding negatively into GDP though the Bears on the floor sorry, the Bulls on the flip side argue that.

Well, maybe we're so prepared for a recession that a recession won't actually happen because we hit the brakes on our spending to allow us to spend less so we don't have as bubbly of a GDP. but we could actually spread out how long we could survive the fight against inflation. say I Think about that graphically for a moment because I think it's interesting to potentially consider. So the Bears say okay, if that's recession.

So let's draw that straight if that's recession right here. In other words, that's the zero line right here. that's recession. Well, the Bulls make the the argument that hey, look, GDP is doing so well.

Oh, recession's coming. Hey, let's moderate our spend and basically have the economy do this this sort of like u-shape right? Well, the Bears say, uh, no, you're gonna have a recession. People are blind to the recession until all of a sudden. they're not like a financial crisis and then maybe you get something like that, right? And this is recessionary.

Whereas this is not, it's an idea. So anyway, as our chief Economist argues, jobs and income expectations have never returned to pre-covered levels, meaning the damage to spending will be larger now. I have a counter to that. But let me make their argument first.

Okay, so here's another TS Lombard piece which actually goes into the details they're talking about here. Basically, what they're saying is consumer confidence and consumer expectations of the economy have never actually gone back to the levels where they were. See here's a sentiment chart and they do have a very interesting chart here. They make the argument that when the FED Cuts rates which is signified by this light blue line here, when the FED Cuts you see sentiment plummet, here's a cut.

Sentiment plummets. Here's a a a plummeted sentiment. Oh look Cut in rates. Here's a cut in rates.

Oh, look, plummet and sentiment. And look at this downtrend on sentiment on the right. Sentiment Never recovered to 2022.. Now I have a couple counter arguments to this.

But let me just first finish their argument. Their argument is because sentiment is lower today. In fact, right now we're sitting at like 2007 levels. Basically, this next recession is going to suck even worse because we're going into it with worse sentiment.

Okay, well now it's important to know the following: I Think that's really important. This is my counter and I'll keep going with their bear piece. Okay, so my counter is the following. It's two-folded Okay, so number one counter and the number two counter.

Okay, I'll do. I'm gonna put my little reminder right there. So number One counter I wrote not necessarily If The Fed is cutting rates because inflation is conquered. Expectations, in my opinion, could ironically rise The reason for that.

And I give an analogy. It's like being on a ship. If you're on a ship that crashes into a, uh, an iceberg, you might be like oh my. God We're cutting rates because we just hit a Iceberg Oh crap, we might die.

But if you were on a ship for a year and at the beginning of the cruise, they're like hey, by the way, we're fighting icebergs and really high inflation and then all of a sudden you see land and you're like oh, the inflation's going away. The signal is oh, it's clearing up. The signal is actually positive. In my opinion, your expectations actually go up, not down.

Because in my opinion, in this rate cutting cycle, when the rate Cuts happen, you're sending a signal that inflation is conquered. I Don't believe the FED will cut rates until inflation is conquered. They will shove our faces into the mud of a recession before they cut rates. Uh, and inflation is still high.

They will not let inflation on anchor. They will keep rates High until inflation is gone. That's why in my opinion, when the FED starts cutting here, it's a signal. It's a bat signal going.

Inflation's over. Yay! That would be great. Very good. It's like seeing land and you have scurvy.

You have scurvy and you're like I need an orange? It's a good thing. It should increase your optimism, not decrease your optimism. The second thing that is a counter to this bear piece is they argue that hey, but sentiment hasn't risen. Who cares? If said of it hasn't risen, you know what's risen.

Cash: The amount of money people have folks. The amount of people, The amount of money people got in their pockets in their bank accounts. They got more money than they did in 2019. People have more money today than they had.

Oh, look at this. There's literally a story on this right now. Raid hikes until inflation is killed, then return to normal. Let's listen to this guy for a second.

No more runs on banks I'll let it take the interest rates to wherever he has to take them to to kill inflation and then we can get back to normal. Yeah dude. I Swear that guy was probably listening to my stream and then he's like let me call in to CNBC really quick and basically just say what Kevin was just saying I Mean obviously everybody subscribes to me. Perfect.

Remind you to get life insurance in as little as five minutes. Link down below to make sure you check out the courses on building your wealth. Link down below. Learn more about my ETF by going over to meet Kevin.com and my courses, my live streams, my real estate startup, all that good stuff.

Um, anyway, where were we before I went down this conceited rabbit hole that everybody obviously listens to meet Kevin hashtag don't sue me bro. Uh, let's go back to being humble. Uh, where is that? Oh I can't find it? Uh, okay, so okay. so TS Lombard makes the argument that the coming recession is going to hit with overall sentiment and job and income expectations below covet levels pre-covered levels, people did not buy into the post covet rebound.

Meaning, other than backing and failing to return to approve whatever. In other words, when the recession hits, the damage to spending maybe a lot more than most of us expect and turn the recession into a deep wood than anticipated. There is still a strong contingent believing no recession at all. But there were a lot of very smart people in 2008 in the spring of OEM who were arguing no recession was underway.

That is true. There were a lot of people in like 2005 six and seven that are like, oh, real estate's just gonna level out, it's not gonna crash, don't worry. Oops. So I don't I don't know I mean I I have my bets placed.

But anyway, uh, so they talk about being short and underweight. Real estate? uh, you know Mr Schiller actually came out with a piece yesterday. He was chilling on uh, on basically how he thinks real estate's going to be much better in a much better position to buy in six months. and I'm like, wow, even a Yale Economist Mr Robert Schiller the founder of the case Chiller Index watches to meet Kevin report because obviously if house hacks buying a Q3 Q4 We gotta reiterate that now it's true.

He actually said that yesterday. It's really interesting I Don't actually think these people watched me Kevin report Uh, maybe they should. but uh, but yeah I think that's very interesting. So okay, so the bear piece is is clearly established here.

that uh, these these expectations could potentially lead to a worse recession. It's an argument personally. I Kind of think the Bears are uh, like grasping EX at straws at this point, you know what? what? What to me signaled that the Bears had kind of lost the plot. Uh, it was when Morgan Stanley uh and Mike Wilson Oh I have it right here.

had this piece. This to me is when I thought the Bears lost the plot. You ready for this? The perfect analogy for where Equity investors find themselves today and quite frankly, where they've been many times over the past decade. more specifically either by choice or out of necessity.

As a stock investors follow prices to dizzying Heights once again is liquidity just like bottled oxygen that that lime into a region and where they know they shouldn't go and cannot live very long. They climb into the pursuit of the ultimate topping out of greed assuming they would be able to descend without catastrophic consequences. But oxygen eventually runs out. For those who ignore the risk because after all, there is a peak 3 000 feet above is known as the start of the death zone at Mount Everest And basically stock investors are being morons who are going into thin air expecting not to survive.

Yeah good one. Morgan Stanley from February 19th can somebody please send Mike Wilson an email and tell him to watch the meet Kevin report and stop being such a bear? We got we. I would love to talk to Mike Wilson about PP together pricing power but anyway, ah, I hope I didn't just get the guy in trouble I I actually I actually like his perspectives I think uh, I think he has, uh, you know we cover him very regularly on here. he gets a lot of coverage uh and and I I Like understanding and viewing his bear point I Actually do agree that the S P 500 is probably going to go down substantially.

Uh, but that's why I'm ignoring the Staples within it. But then again, Morgan Stanley's Mike Wilson's going into the Staples like Walmart I mean yesterday we were tearing apart Walmart and Colgate Palmolive come on. Mike Mike We need to have a beer and we need to talk about this and I haven't had alcohol for like 12 days, so that's saying something. I mean I'm basically sober.

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But also check out the courses on building your wealth. link down below for our private course member live stream the next of which starts soon. Love to see you there! You have my Buy sell alerts as well specifically where we sell Blitz foreign.