Should you be preparing for a 20 market crash and correction coming by the end of March That's what we're going to talk about in this video. in addition to our Bears manipulating data to make things actually worse than they appear that and more in this report. Let's get started. Let's mark your calendars for January 30th and the expiration of that coupon code.

It's the last expiration so you'll lock in the best price ever, at least for the next three months, guaranteed. We've had quite a few negative pieces of information come out about the market. A lot of banks suggesting there's reason not to buy the rally to not get caught in this idea that, oh, that's it. A peak uh Peak Pain is now behind us and we can move forward in this stock market rally.

Probably one of the biggest individuals screaming this is Mike Wilson from Morgan Stanley We're going to take a look at some of his notes, but it's not not just him. there are a lot of companies screaming don't buy the rally and I'd like to pay a little bit of attention to exactly what it is they're saying and observe what the market is doing in response to bad news. I Think one of the easiest ways to look at what the market is doing in response to bad news is to look at how companies are performing following their earnings reports. So we just had Logitech report earnings and a logitech's earnings weren't that great.

Logitech announces uh, the third quarter 2023 results. They did so uh, last night Switzerland January 24th and they indicated that sales were down 22 in US Dollars and they blame the macro economic environment on this. They say that gaming sales were down 16 in US Dollars keyboard sales down 22 percent, pointing devices down 14 percent, event video collab sales down 17, and a reflection that consumer purchasing was concentrated in promotional weeks throughout the quarter. Now, we just heard the Verizon CEO say that people were kind of buying or spending money in in lumpy periods that people were still buying, but they're doing so in sort of lumps.

That's roughly what Logitech is telling us. And it's also what Macy said that a bulk of the spending was happening during promotional periods of time, and that can actually be a sign of some stress from the consumer that consumers are waiting until the last absolute minute or last possible minute to depart with their cash. Maybe because cash is becoming a little bit harder to come by because either they've been laid off, their hours are getting cut, we are seeing hours drop for hours, worked on labor surveys, which which is taking some pressure off of wages, and we're also obviously seeing the savings right plummet. But not only that, the amount of savings that individuals have in America is now lower than where we were before the pandemic.

so you're seeing that draw down, as well as an increase in deficit spending, taking on debt to spend money to support a lifestyle or to support spending. Now what I thought was remarkable was most of the damage for Logitech stock was actually on January 12th. When they pre-guided that some of this pain was to come, the stock fell from about 68 to about 56. However, after the actual earnings came out, the stock barely moved.

and if we look back to December or we look back to some of the lows of last year, even with some of these terrible Q4 earnings, you're not seeing companies fall back to levels that that we had seen at the end of last year, suggesting that some of the pain that we're looking at in the stock market may already be priced in or potentially more pain than was necessary was priced him way back at the end of last year. Now you again do have a lot of investment analysts saying be careful. The leading data is overwhelmingly negative, and this is where you have folks like Morgan Stanley's Mike Wilson suggesting that the stock market still has a large correction ahead of it. potentially as high as a 20 correction coming more.

Uh, Morgan Stanley's Mike Wilson suggests that the S P with a Ford 17.5 times price to earnings multiple is too optimistic that the S P is basically pricing in a less hawkish fed. it's pricing in a Goldilocks scenario and it's not really pricing in an earnings Miss. In fact, they suggest that 70 of exposure for U.S companies is to America Which means even as the dollar weakens, providing some relief for companies with International exposure, most of the S P 500. Well, 70 percent of its earnings come from the United States where the United States is actually the one potentially lagging more than the rest of the world.

This is actually kind of crazy. in fact: I Joked about this last year: I Go! Wouldn't it be crazy because everybody's calling for a recession in Europe and everybody thinks we're going to get through without a recession in the United States. Wouldn't it be crazy if it's the U.S that goes through a recession and not Europe And in a weird way, that's kind of how things are looking right now. It's almost as if the United States is destined for a recession, whereas now you've got Germany and France saying hey, growth's going to be low Germany just came out with a 0.2 percent estimate.

But we think we're going to skate past without a recession, especially as their winter wasn't as hard as expected. and in part, this is leading the emerging markets and International Community to see their stocks rally above and beyond that of the United States. Consider that Europe is up about 12 since October lows, whereas the United States is only up about 4.85 percent since October. In fact, if you look at the Msci World Index and subtract out the United States, the rest of the world is up 19 to our about five percent.

So the rest of the world is actually substantially more optimistic than the United States right now, which is basically the opposite of what everyone was expecting last year that this was an international problem. the United States would be able to weather this this sort of inflationary pain more. Maybe we printed too much money and that actually isn't actually going to be true. But anyway.

Uh, Mike Wilson here suggests that the hard data and Survey data all points to a recession and earnings per share declines. They think that the big pain is actually going to occur in Q1, So this is a big warning from Mike Wilson and those are over at Morgan Stanley suggesting that we have to be careful that the full reopening in China will not be enough to help the United States. They say that the S P 500 only has about four percent of its shares exposed to the United Uh, or exposed to China so the Chinese reopening shouldn't actually show up in earnings really at all is what they're suggesting. Now this is where I think it's very fascinating.

Something that you can do is you can go look at your own stocks. Let's say, for example, you're really interested in pricing power stocks. You could look at your individual stocks and say oh wow, look Nvidia 25 exposure to China That alone is already five times more than the United States average exposure to China in the S P 500. AMD is about 25 exposure to China Taiwan Massive Taiwan Semiconductors massive International exposure Uh, you've got a Tesla 45 International exposure Apple substantially large International exposure I could show you how to calculate that as well.

It's pretty simple, but usually what I like to do is I like to just go investor relations. throw that into Google type in something like investor relations and then the company you're looking for and then when that investor relations page pops up, grab the last quarterly or an annual report, and generally pretty soon after the revenue section on the income statement, you actually see a geographic breakdown, which is useful Obviously, for understanding what's your exposure to. Emerging Markets You'd be surprised, but a lot of U.S companies actually give you a lot of international exposure. The S P 500 in aggregate doesn't though, And this is where a lot of folks say the biggest recession might be coming to larger indices and not individual stocks.

This is where we're also seeing a lot of data pointing to retail buying, actively managed ETFs or individual stocks more than they're buying. uh, index-based ETFs at this point. Fascinating argument. Let's keep looking here at Mike Wilson though Mike Wilson here suggests that in January of 2001, forward earnings per share, we're down four and a half percent from the peak.

And he actually says that remember that in January of 2001, we were about a year eight months into the.com bubble. He actually thinks we're in the same place today as we were in January of 2001. And keep in mind the stock market didn't actually bottom out until about the end of 2002 early 2003, where we kind of flat now. In Fairness.

And this is something that Mike Wilson does not mention. Today's stock market plummet has occurred about three times as fast as the drawdown that we had in 2000 uh, to 2003, suggesting that maybe today we would actually recover three times as fast. Who knows. But he makes some other comparisons such as where Pmis are and where the unemployment rate is Basically saying the recession has not been priced in yet, and what ended up happening between January of 2001 and March of 2001 was a 20 drawdown through the end of March and a shallow labor cycle thereafter, and monetary policy at the time was not accommodative enough to compensate for those deteriorating fundamentals.

And he ends up saying that look, five percent rates today by the FED is going to be very hawkish in the face of bad news. Mike Wilson goes on pretty heavily here to show all of the bad news and all of the fear, uncertainty, and doubt you could potentially put together in a report. to reiterate why the Stock Market rally now is ridiculous Now, Stock Market seems to disagree, because obviously we've had a pretty strong move over just the last couple weeks. But then again, the stock market has a very short-term mindset.

whereas data obviously, it tends to represent longer periods of time. Although sometimes by the time we actually get the data and the data shows that maybe we're in a recessionary environment, sometimes it actually argues that it could be. Or we could actually argue that it could be the best potential time to actually buy, even if there's more pain ahead. Look for example here: CEO Confidence about the economy bottomed out.

Over here, it's a little large. Uh, let's do that. a little smaller. There we go.

CEO Confidence about the Economy bottomed out at about 2009, which is roughly where the the stock market bottomed out. Now, it did bottom out in about 2001, which is not yet where the stock market bottom. And look at where we sit right now. Pretty painfully low.

If you look at small businesses, what percentage of small businesses think it's a good time to expand? Pretty dang low levels right now. Kind of like what we saw in the Covid recession. And if you compare that to 2009, you didn't really get the bottom of small business expansionary thought until about 2009.. Again, that was actually buy time.

So in a weird way, some of Mike Wilson's charts here. even though he's trying to be bearish about the market, in my opinion, you're kind of signaling a screaming. But don't get me wrong, but I am that kind of crazy person and I realize that I feel like you have to kind of be crazy to to do what I do and to want to work as much as I do I don't encourage it for anyone but what I actually believe and I wholeheartedly believe this. but I believe that a recession is one of the best times to expand.

It's one of the reasons I've added another course. Remember we've got a coupon code expiring on January 30th for that. It's one of the reasons I bought a plane to expand my startup and I personally bought that plane. Zero dollars have been charged to my uh to my company, uh, my real estate startup for that because I'm basically what I'm doing is I'm making this life YOLO Thinking this is the time to build, This is the time to launch an ETF This is the time to launch a startup.

This is the time to launch everything that I can expand my businesses because nobody else thinks it's time to do so I Love that Personally, I think the worst time to do it is here, right? So anyway, uh, that's just my thesis obviously. Then you have ISM Pmis Manufacturing surveys obviously plummeting drops in ISM below 50 sending recessionary signals I'm I mean there are no shortages of charts pointing down suggesting yes Mike Wilson you are correct. Things look painful. Inventories are rising Supply chains are loosening.

However, one of the big differences that Mike Wilson forgets is that these charts actually provide a counter narrative to his fud see a lot of investors today, especially people like Michael Burry. Argue that wait a minute folks. we gotta take a seat back here because wait a minute. What if the FED ends up cutting rates because we're in a recession and then we end up getting a second wave of inflation? Well, in my opinion and it's an argument that I've made before.

we have a scrunchie of pent up capable. Uh, Supply right now, rather than being a stretched thin rubber band, we're a little scrunchy of a rubber band right now where manufacturing can easily expand and be a normal rubber band from where we are now. In other words, companies have a lot of excess Supply capabilities on the sidelines and his own charts argue what I am saying Supply chains have loosened. Yeah, no kidding.

Supply chains are at some of the loosest levels that we have seen since the 2009 recession or the.com Bubble. That actually in my opinion, counters his own arguments so that things are bad Because in my opinion, the biggest fear that we have now is that inflation pops back up. This suggests no, and so does inventories. Or so do inventories.

Rising Because as inventories rise, you get pricing pressures. To the downside, which is a deflationary force. A disinflationary force. So I hate to say it.

but Mike Wilson has a 41 page basically fud piece on on the market and these are his positions: He's underweight Tech underweight discretionaries. he's still old school January 2022 long Health Care long Staples and long utilities look I Hate to say it, but that was the Tactical trade of 2022. the the best thing you could have done in 2022 would have been to move to cash or go Staples that was the Tactical trade and the opposite of that tactical trade was uh, well well I should say to reiterate that tactical trade. but just the other side of that tactical trade was getting out of discretionary and getting out of tech.

Well, if inflation goes away and one of the only reasons we're actually seeing such a terrible uh a bear Market is because the FED is inducing a recession to Stamp Out inflation and if the inflationary concerns actually go away and prove that they're gone, then maybe things actually aren't that bad. But bears are really good at only giving you bad information. Now don't get me wrong, there are also Bulls who only give you good information and I'm probably a little bit biased to the bull side. I Do try my best to provide balanced information, but I Have to say I'm a little bit concerned that we're getting into an environment where there are actually a lot of analysts who are trying to manipulate data.

To the downside to paint a more bearish picture than is really happening now I Actually respect this individual on Twitter but I have a lot of questions for him and I hope that he could provide a little bit more answers into what he provided. There's this guy named macro Elf who's basically been a bear since about February of 2022. uh, I followed him a lot when I originally became very bearish in January of 2022 and sold my stocks because I'm like oh, look, here's another bear, You know, because I felt kind of lonely. Anyway, he posted something the other day called the Credit Impulse Chart.

Now to briefly understand credit Impulse and this is really important because there's there's a real big concern to this. To understand credit Impulse, you have to know that credit impulse is just a fancy way. CI is saying hey, how much debt are people taking out So how much debt and we'll go ahead and call this new debt. How much new debt are people taking out as a ratio of GDP So in other words, you're measuring a change, right? If this number goes massively negative, it just means people are taking out less debt as a percentage of GDP And that could actually be a red flag for the future of earnings for companies, which actually reiterates what Mike Wilson says at Morgan Stanley that hey, look if Morgan Stanley and Mike Wilson are huge Perma Bears right now and they're like hell's about to come ahead of us.

And then all of a sudden the macro elf post this for credit impulse. the Blue Line representing G5 Credit Impulse G5 being like us China right? Uh, the big five economies of the world? Well, this is massively concerning because it shows credit impulse going from positive, say about three and a half percent to about negative two and a half percent. This is a massive drawdown in credit impulse and this looks very very concerning. And so what? My team and I actually did.

And and again I Want to be very, very clear here. we could be wrong, but we have suspicions about this chart. What we did is first thing we said, let's try to replicate the data. Let's see where they're getting their data from And so the first thing we did is we looked at the United States Credit Impulse charts and we do not see that drop.

This chart goes all the way back to 2000. his chart went to about 2014 and yes, we do see some decline, but it's nowhere near what we saw in the pandemic and when we jump over here, we actually see that his pandemic, uh, a credit impulse drop is like right there and we're like, why is there so much Distortion in his chart showing such a massive decline in credit impulse, implying basically the world is about to end. Why is there such a difference between his chart and the U.S credit impulse, and then we're like, okay, well, maybe China's credit impulse as part of the G5 is really bad And we're like, well, here's China Going back to 2004 for the Credit Impulse chart. And yeah, it goes up and down, but it's nowhere near as low as what we've seen in the past.

So how all of a sudden are we getting this massive chart to the downside in Credit Impulse from a Bear And this is where we thought to ourselves, we have to figure out how he built this data And again, we could be wrong about how we built this data. But we have a theory. Even though it's not perfect, we have a theory about how a Bear is showing that everything's about to go to hell in the market, and we're a little bit concerned about the theory. Take a look at this.

This is his tweet. The Tweet here from Macroth suggests that his Global impulse tracker tracks the real pace of economic money Creation in inflation-adjusted terms. Now this right here is a really critical phrase. He says inflation adjusted terms.

So what we did is we thought, okay, what if he's taking this ratio right here and he's subtracting nominal inflation from it. Which means if credit impulse is like negative point two five percent And throughout the last 20 years, inflation has been say two percent, then everywhere credit impulses negative 2.5 percent, it would be negative 2.25 Right And Then you would just see fluctuations. Like from negative 2.25 to negative 2.75 to maybe positive Uh, or to negative 1.75 Right, you would see minor fluctuations. But what would you do if you subtracted inflation today from this? Well, you'd go a credit impulse of basically negative 0.25 minus inflation.

of say seven percent, you'd be a negative Seven points. Uh, Two, Five percent. In other words, if you just subtracted inflation from his credit impulse chart, you would basically get credit impulse That looks like that because inflation is so historically high today. So that was our Theory.

We're like, is he subtracting inflation from a ratio which you should not do you. You should not take inflation off of a ratio. If you want to inflation adjust this. you inflation adjusts the new debt and the GDP.

But you do not inflation adjust a ratio. Inflation adjustments are made to pricing power, not to ratios. Okay, so we went with that anyway though. and we rebuilt his chart.

Uh, going all the way back to the 80s. I Believe that's the chart I have here. Let me double check. Uh, okay, we went back to 2000 because the G5 for China didn't pull back to the 80s.

Uh, but we do have other charts going back to the 80s as well and I'll talk about those. So we rebuilt the Credit Impulse chart and uh, the gray line that you're about to see is the rebuilt Credit Impulse chart. over the last 22 years if you simply subtract inflation from what credit impulse is doing, so I want you to pay attention to the Gray Line And our chart's not as pretty as the macro guys. But look at this chart that we've rebuilt, you could see on the right side The Gray Line plummets because you're pulling inflation off of it.

more so than the plummet you saw during the pandemic. More so than the plummet you saw in the recession. And when we rebuilt this, going back to the 80s, we also saw a massive drop in the 80s because because you're pulling off inflation off of a ratio which I don't think you should do so. Now we again, we don't know if this individual who's providing this data is doing so.

Uh, you know, to purposefully mislead people. That's not what we're suggesting. We're just saying we can't rebuild this Credit Impulse plummet the way he has it His only goes back to 2013. It ignores the recession, it ignores the inflationary time of the 80s, And we think the way they're achieving this chart is by somehow making some kind of crazy inflation adjustment on the right side of the chart, which we think is totally misleading and inappropriate.

Again, maybe maybe we have rebuilt the charts inappropriately, but we cannot recreate that kind of bearish chart because seriously, when we first saw it, we're like, this is terrible. That's horrible. So that's why we wanted to rebuild the data. Because we're like.

that is really a bad leading indicator for Market But we can't rebuild the data. We're not getting the same bearish result. And so we think what's happening is the data is whether intentionally or not being manipulated to paint a more bearish picture of the economy than should actually be painted. Now moving on to some other reports.

Don't get me wrong, there are a lot of bad indicators which: I Talked about how Morgan Stanley is bearish I Talked about how the uh, the macro elf guy is is providing very bearish information. We looked at Logitech earnings to just see how bearish things are. Right now, things are bad. There's also Barclays warning that hey, hey, we got to be careful.

we're getting a little bit too Goldilocks over here. I'll show it to you. Look, this is, uh, this is, uh, the temporary Goldilocks I Believe that's the headline of this. a temporary Goldilocks a global macro thought piece And they're basically saying Europe and China are doing better than expected.

better than the United States U.S Data flow has worsened. Retail sales are falling sharply in November December Housing starts an industrial production point to a further slowdown. So don't get me wrong, data is looking bad. The question now is just how bad is it and how much has been priced in.

That's the question right now. Barclays Interesting note: Actually thinks that the X date or one will run out of money for the debt ceiling is actually closer to August Uh, we uh. Barclays Also says we think markets will only react a few weeks before the debt ceiling debate. Uh, the soft Landing narrative is likely to carry on for a few weeks, but bad data could actually drive the market lower.

This is very similar to what Morgan Stanley is saying. So don't get me wrong, I'm probably outnumbered in how many bears there are right now. There are a lot of bearish folks. Here's another one: BNP What do they say they say? Fundamentally, we do not not believe the current Goldilocks flow of information is stable equilibrium.

If U.S Data proves more resilient and the labor market remains tight, then inflation will not fall and will remain near the Fed's target without the policy. Uh, well, without policy being kept restricted for longer, something has to give. So they're basically making this argument. Look, the economy.

Yeah, right now we're getting some data. That's like bad saying inflation's going to come down. but if the labor market remains tight, maybe inflation doesn't go down. The thing is, nobody really knows what's going to happen.

But I am starting to see a trend where some people who have kind of adopted the bearish mindset are doubling down on being Perma bears. That is even news that's coming out that's good is starting being interpreted as bad because that's their position and a lot of people have a really hard time flipping their position. It's really hard to say oh, things are changing. That's very, very difficult.

and for some reason in society we seem to be attracted to people who have the same position all the time. You know, like never use debt. There's not a single circumstance you could use debt or like never buy a single family home. It's stupid, right? Like it's very hard for people to make the argument that wait a minute, there could be exceptions to those rules, right? It's very hard to say Oh, maybe things actually aren't as bearish as they seem, because after all, and this is sort of just just my my thesis on this.

My thought is that yes, we have bad data, and yes, the data is pointing to a substantial slowdown in inflation, but we have to make sure that data continues to come in. Otherwise, the FED has to stay strong and tighten through a recession, which truly would be bad. Fortunately, so far, leading indicators are suggesting inflation will continue its plummet. Now we just have to prove that it will continue to plummet to the FED I.

Highly expect that, but that is the weak bull thesis. The bull thesis falls apart as soon as inflation shoots back up. We could, though, and this is something that I think a lot of bears are not considering the FED does not have to destroy the labor market. Think about that for a moment.

This is something that a lot of bears are not considering. Right now, the FED does not have to kill the labor market. The FED thinks that the unemployment rate is going to rise to four and a half percent. That's what they believe from where we sit.

Now, at about 3.5 percent, they think the unemployment rate is going to get to four and a half percent in order for them or have to get to that level in order for them to get inflation down. But let me make an extreme example here. Just to show you how this doesn't have to be true, let's go extreme. Let's say, starting next month, inflation comes in negative.

Okay, and we don't actually think that. But let's just say the month over month data is negative. And you know what? Let's be extreme: The year-over-year data is a negative and let's say for the next three months it's all negative and it continues negative thereafter. In other words, comparing to 2022, everything is less expensive.

Well, at some point, the Federal Reserve will find that this fall in inflation is consistent and persistent enough that they can reduce rates. And if the unemployment rate has gone up to say 3.7 percent and job openings have reduced a little bit, but the unemployment rate hasn't gone up to four and a half percent, the FED does not actually have to continue forcing people to lose their jobs in order to get inflation down. Because remember the Dual Mandate of the Fed, The Dual Mandate of the FED is stable prices and Max employment. Well, if prices are actually unstable to the downside and jobs are going up, then they're failing at both ends of their mandate.

So then they have to cut rates and stabilize the unemployment rate from going up and actually kill this idea and prevent that. This is just an extreme example. To prove that the FED does not have to continue to Hawk until unemployment skyrockets. They just have to honk until inflation is down and stably down.

That's it. And then they can U-turn and remember. The big thing that I think a lot of folks forget is the Fed has an easy out to maintain and restore their credibility. All they have to do is say hey, look, inflation right now is sitting at about three percent.

That's consistent with our two percent average. That's all they have to do through the policy we adopted in 2019 called Fate Flexible Average Inflation Targeting and then guess what game Over all of a sudden, people like damn, they pulled a rabbit out of the hat that we weren't expecting and by I've been screaming about this for quite a while now that they're probably gonna end up pulling out that average argument to stabilize markets and and ultimately fight off the recessionary Dynamics that we're going through. But again, I Want to be very, very clear: My criticisms of some of the Bears are not to say they are wrong. I'm not here to say I could tell you the stock market for sure is not going to fall 20 in March I Just personally think what we're seeing right now is consistent with getting inflation down and things could end up a lot better than has potentially already been priced in.

And I solely believe that because of what in terms of price being priced in I Believe that because what I'm seeing in earnings Taiwan Semiconductors provides bad news. Guess what stocks up like 50 Since that bad news Nvidia provides terrible news on forecasts. Guess what stocks up substantially? Uh, Samsung reports like a 69 drop in Revenue Guess what stocks up substantially La Logitech Similar thing nowhere even close to the bottom we saw last year, suggesting in my opinion, that for earnings coming up especially, you've got like Microsoft and Tesla coming up. Yeah, the numbers are probably going to be bad, but possibly not as bad as expected and that's actually quite bullish.

So pretty remarkable situation going on in markets. That's also pretty remarkable that that coupon code expires in 30 days or sorry in Six Days on the 30th and you get lifetime access to all those programs on building your wealth and the course member live stream that we do after the pre-market live stream. Callum I Don't want to start with that I Want to start with this this from BMP Paraba in the last 24 hours. I'll read the quote out for you and I'll get you a view on it self Landing has been the catchphrase for still young 23, but we think it will go out the window in the same fashion as transitory inflation did in 2022..

that line right there. Do you agree? It's what we just read I Think there are risks to this scenario I Think the dangers in markets we start pricing in I would call it La La Land Which is, we have two risks to worry about. There's the huge Global energy price shock, which so far actually at least in Europe and the US doesn't seem to be playing out quite as aggressively as markets might have thought, say six months ago. But then there's the reaction to that which is tight Financial conditions from central banks.

Remember this energy shock hit tight labor markets and tight product markets coming out of Covid and triggered these second round effects. And so the danger here is that we think all right. I Think we've got enough. honestly of the fun, but uh, like this is basically what we were just reading.

It's maybe they're watching our stream and they're like Kevin's talking about about the bearish reports. Let's put those up as well. Okay, no I'm just patting myself on the back here.