Before we talk retail capitulation and themes, we have added some availability for February and March where you can Shadow me for an inexpensive price Linked down below: you'll come on my private jet, we'll fly to real estate markets, and we'll explore real estate together in a semi-private-ish environment where we'll be with my team and a videographer and our pilots, and we'll get to go cruise around and check out real estate and hang out together. Maybe grab dinner or some drinks or whatever on the way back. It'll be really fun, so check that out linked down below new availability added for February and March Oh man, we gotta talk about retail capitulation because boy oh boy. if you want to make yourself feel bad every single day and feel like you're a complete idiot, all you need to go is long the stock market and buy the dip walking into a recession Because after all, nothing tells you that's a good idea.

In fact, Bloomberg has an index of 15 stock market health indicators. They kind of call it a checklist. They look at things like EPS growth, earnings breadth, margin, forecast, manufacturing signs Ed They basically say quote. Everything is as bad as it gets.

There are no green shoots. Yeah, it's tough, especially since we just got manufacturing and service data. and oh boy, it's quite recessionary. Consider this: durable.

Orders down 2.1 percent. You've got Factory orders expected to come down one percent, coming down 1.8 percent. You've got ISM Services numbers, which we actually do want to see that number come down to prevent Services inflation, right? We're expecting a read of 55 on the survey anytime you get these surveys. Fifth, any, a number over 50 is growing on average, a number under 50 is shrinking in recessionary.

On average, we're expecting 55. Last month, we had 56.5 What did we get? 49.6 Just minutes ago, here comes the recession. Hopefully a Fed U-turn comes before that because if you're buying and huddling, you can't wait. But we need to talk about retail capitulation because, well, retail purchases are starting to I Hate to say it slow down.

Take a look at this right here. These are the average net daily inflows for retail purchases lined up with the S P 500. The blue line here is the S P 500. And for all those of you who are expert a technical anal analysts, let me show you my beautiful technical analysis.

Boom. That's basically all you need to know about the stock market right now. Uh, okay. now the purple line represents average inflows into the stock market.

All you need to know about the purple line is, well, we go back to that technical analysis experience. Oh good lord. It's also straight down and this is a sign that retail is running out of money. Now there is some hope, because hey, you know what? if you want more hopium, just hit the Subscribe button I'll keep bringing it to you with a smile even though I'm melting inside.

Over here is a chart of the seasonality of retail flows into U.S Equities. And what this chart shows you is that at the end of the year October November December You tend to see an increasing outflow from retail investors, so the average monthly net outflows are negative. Uh, when you're looking at the end of the year, However, when you flip that to the beginning of the year, you tend to actually see average inflows, especially in January and February. Now that would be nice, but it potentially is just hope that retail will turn around and start buying again.

Who knows, Because right now what we do know is that retail inflows are starting to show signs of I. Call it, uh, soft capitulation. Soft capitulation is when sentiment is really low and you're seeing inflows slow down. Inflows on the daily right now are 20 percent lower than what they were in 2022 and we might not actually see those inflows in January like we usually do on average because sentiment is really terrible Right now, here is a chart of sentiment.

The green line shows you the TD Ameritrade sentiment average retail investor sentiment Trends And what you can see here is that sentiment hit a really gnarly low over here on the covet pandemic and hit an awesome High over here in 2021, peeking out somewhere around November of 2021 which is also roughly around where markets uh, peaked out. Now, if you look at where sentiment is now and you align that with previous lows, we just broke the December of 2018 sentiment low and we are trending dangerously close to the sentiment low that was experienced during the Covet Pandemic. So things are feeling pretty bad for retail out there now. Retail still, though, is not an average net seller.

There's still an average net buyer. However, those average net buys, which is any number above zero on this chart, is starting to Trend down. For most stocks, the purple line over here represents sort of the retail Tech basket. So this is retail Tech Think Facebook Apple right? Amazon You can see these purchases are declining if you uh, take out Tech or sorry you take out retail and you only look at Tech buying.

you can also see that Redline is declining. So basically purple tells you retail buying in Tech and then red shows you Tech buying without retail. As you can see, retail tends to buy more than the overall Market But when you take out retail, you can see that pretty much everybody is just selling off Tech That's not a surprise. however, inflows by retail into Tesla the green line are actually still trending up.

now. What's crazy about that is, even though the inflows into Tesla are trending up compared to the other stocks, seeing downtrends, the amount of money that people are throwing into Tesla is starting to hit an inflection point. And it's not good. These are just retail purchases of Tesla The purple line shows you all of the retail purchases and you can see as Tesla stock has been plummeting I'll hide myself here as Tesla stock has been plummeting.

Retail purchases have been skyrocketing. however, at the beginning of the year, so far, we have had the lowest inflows into Tesla here of just 38 million dollars. Put this into perspective next to Elon Musk's sales. Okay, you ready for this? This is going to be a little nutso.

So Elon Sold. Let's just keep math. Simply or simple: about 20 billion dollars of Tesla stock. If retail only bought 38 million dollars a day on the net, this is not trading volume.

This is huddle volume, right? If retail only hoddled a net 38 million dollars per day, it would take retail buying 529 days just to offset Elon Musk's sales Elon sold more on net in 2022 than all of retail combined bought on net. So basically, if you're an individual investor and you bought any Tesla stock in 2022, you bought Twitter for Elon Musk Simple. So this seems pretty painful, but let's go ahead and look at a summary of Where Retail is investing and then we'll go ahead and jump on and look at some themes that are going on. So on the five day average, you do still have large inflows into Tesla as the number one inflow stock followed by Apple.

So we've got Tesla and Apple. Personally, these are two great companies in my opinion, with substantial pricing power even in a deflationary environment or disinflationary environment. I Think soon to be deflationary I Think these companies are companies that can maintain substantial margins personally, including a company like Nvidia I actually have less faith for a company like Netflix Amazon and Facebook those are companies I personally have less faith for and I have more faith into Walt Disney though, rather than betting on walls, uh, Walt Disney's bet into advertising I'm gonna make a little bit more of a bet into Trade Desk, so let's take a look at some more flows here. Okay, yeah, so these are these are the order of flows here.

You actually have retail buying Southwest as well. That's pretty incredible. Southwest Boeing Neo over here. Taiwan Semiconductor surprisingly low on this list.

Lucid over here as well. So this is, uh, your average retail net purchases on a five-day moving average. And when we zoom out a little bit and look at some themes released by Vanda track. Here are some of the themes that we're seeing: Financial Conditions to tighten in a stagflationary environment.

That means stocks down. Bond yields up now. I Will say we have seen a fall in the expectations for the terminal rate for the Federal Reserve trending towards five percent today, which is a loosening of financial conditions. but I'll tell you.

Oh wait, no, there we go. Finally, Bond yields plummeting. Uh, that's actually a loosening of financial conditions. This morning we saw Bond yields bear barely move.

But now the 10-year treasury down 10 basis points on that weaker wage gains for average hourly earnings. That's a that's a big shift there. Another theme to look at is a lot of: Wall Street right now is not making bets on a Goldilock recovery. That's when inflation plummets and earnings stay up.

That would be your Goldilock recovery. Goldilocks The global recession is on its way, but Havens are still under owned. Might be like your gold 60 40 positioning hovering around cycle lows being short Global equities seems to be sort of the theme right now. underweight US versus the rest of the world China as an Emerging Market actually doing decently right now with some stock performance uh, coming off of lows avoiding U.S Tech: Pretty big theme right now, although many look at that and say hey, if everybody else wants to avoid U.S Tech: I'll buy That's personally what I think I I mean I'm personally a big fan of find an actively managed ETF one that focuses on companies in my opinion, with high free cash flow.

Uh, High Purchase or pricing Power defined really by net margins, not necessarily nominal prices. Those will always change. You want to pay attention to margins and investing companies that are making money right. And when you do that, in my opinion, in this sort of environment, you're really buying a lot of quantity of something that in the future could have substantial capital gains when these things actually rally and sentiment changes that could leave you with a lot of exposure to large capital gains which you don't really want to pay taxes on.

And one of the ways you can avoid paying taxes on large capital gains is by investing in an actively managed ETF The beautiful thing about investing in an actively managed ETF is an actively managed ETF can rebalance and potentially pass along no tax consequences to you because they can exchange stocks without having taxable consequences. That's crazy. It's kind of like if if Tesla stock quadrupled, you could actually lower your allocation to that rebalance without tax implications by having an actively an active ETF manager do that for you. So something to consider.

So uh, then we've got some other notes here like fading us uh, dollar strength I'm a big fan of that I I've been short the dollar since about June I've taken some profits on that and I've reduced a lot of my dollar short positions as I've gone uh, more heavily into buying the dip on, uh, on on other, um, longer term trades and uh, Investments And here's some other themes that you can pause and read about as well. like uh, underweight, risky G10 currencies like the Australian dollar and the New Zealand dollar. Interesting. So there you have some thoughts on retail themes: trades Capitulation according to Vanda Track: No actual capitulation yet.

but boy, people are running out of money And it's no surprise because retail keeps dumping money into Tesla and Tesla keeps saying Fu Well, at least the stock does you know I think uh, the company versus stock performance is something to be debated. Uh, but hey, you know what If you only wanted to lose one percent of your money, you could have just invested in Dave and Buster's stock for the last year? You'd only be down one percent. How remarkable is that? I Don't know if that makes you feel better or worse. but anyway, thank you so much for watching subscribe and share the video if you found it helpful and we'll see in the next one.

Cheers!.