Man, is it really three days to Christmas Eve That means we have a holidays coupon code linked below for you. Check it out! Morgan Stanley Warns that in early 2023, earnings will quote collapse bringing the entire stock market down with them in this video. Folks, we're gonna talk about: is this Christmas going to bring us a Santa Claus and is Morgan Stanley going to be wrong? or is it going to bring us the Grinch After all, we just started with earnings season as we heard some news from Nike and FedEx and I Think it makes a lot of sense to take a little bit of a look into what these tell us. so that way we can tell are we ready for bullish signals or do we need to be a little bit careful with how bullish we get? Hey, everyone meet Kevin Here let's take a brief look at some of the highlights that I found in the Nike and FedEx earnings calls and then see what kind of takeaways we can draw to see is Morgan Stanley Correct because at first glance, hmm Nike's earnings were actually up Revenue wise 17 from a year ago, an earnings per share was up one percent from a year ago.

Now Nike already had two quarters of negative EPS That implies they've already gone through an earnings recession. So is it possible that earnings recession is actually behind us and not in front of us? In which case, would it mean that things are a lot more bearish and expectations a lot more bearish today than they really ought to be? Well, let's take a look at these earnings calls and get a little bit of a feel for what we can glean. All right. So first things first.

we're going to look at the Nike earnings call and I want to show you the following: I Noticed this here. They say that we're concerned about macro uncertainty and the indicators we're seeing broadly. For the consumer. this is pretty generic.

I Think at this point, everybody would be stupid not to be concerned about macro uncertainties. Over the last 90 days though, we've seen strength. Macro conditions, though still exist. they're still there for the consumer, so we're being cautious now.

I Find this quite interesting. Nike is telling us. Look, the consumer is facing the macro headwinds that we're seeing, but they're still buying our product. Even in China people are buying our product.

Now it's worth noting that in China a lot of these were before Covid restrictions were lifted. So we started seeing sales rise. and look at this. in the last week of November 1500 of their stores were closed.

That's roughly five times the number of stores that were closed on average throughout the entire quarter. and we also saw traffic impacts as China navigates its covet policy. So this right here is definitely a reiteration that we are seeing a an inflationary anchor in China In December this is kind of what we're feeling. we're We're seeing this with reports from Tesla from automakers like Toyota suspended planning to suspend production for 16 days in Japan that's like half the month.

That's crazy, right? as Asia demand falls off. We saw it with Bentley We're seeing it now here with Nike that China is probably going to be an inflation anchor. What does that mean? It'll bring inflation down at least for December January maybe even into February as China goes through their new year and we end up seeing that Covid really potentially weighs down demand and pricing in China. Now, there's always the risk that this ends up hurting Supply chains, but we'll talk Supply chains in a moment.

So far though, what we're getting here from Nike is that hey, look, we're actually doing better than expected, which is somewhat bullish, but we're cautious and personally, I think that cautious optimism is certainly a lot. uh, better than the worst case scenarios that everyone's been painting that. Oh great. Here comes the second 50 decline in the stock market when we go through the real earnings recession right now.

that could still happen. We don't want to get overly bullish here, right? But this is kind of interesting that Nike is actually arguing that they're still seeing in a promotional environment. a lot of full price realization. Now, generally that's a sign of pricing power.

However, I had to put a little bit of an asterisk on their pricing power when I found out that their margin declined by three percent 300 basis point decline in gross margin is not a sign of pricing power, right? even though they could be achieving higher pricing realization in my, at the same time, they're complaining about higher freight costs, right? While while FedEx is basically saying the opposite uh, in my opinion, they're lacking as much pricing power as they think they have, but this is a sign that hey, the consumer's still alive, The consumer could be giving us better earnings than we actually expect for Q4. But let's not carry. get carried away here into saying that this is fully bullish. EPS going up one percent year over year for Nike is not fully bullish.

but it's also not fully bearish. It's not that oh my gosh. 50 downside, right? And this is why we're seeing Nike stock rally today. These markets are going.

huh? That's actually not that bad. In fact, that's potentially why markets overall are trying to move up. At the time of this recording, the Nasdaq's up about one percent and stocks are trying to Rally up on this idea that maybe Q4 won't be as bad as we think it is. Well, I Love hearing this Transit times continue to improve and the flow of supply is normalizing.

This is really good. We want to see Supply chains normalize and I did not see any red flags from Nike that the Kovich shutdowns in. China even though this could be a demand anchor right? disinflationary. I Did not see any complaints that all of a sudden Supply chains were being affected because of Kovit in China Remember Vietnam Here it is.

look at this: Vietnam was shut down for 15 weeks a year ago. That led to a lot of inflation and supply chain problems for Nike We're not seeing this. So in my opinion so far this Nike earnings call, whether or not you care about Nike right is actually more positive than it is negative for the market smoothing. Supply chains disinflationary pressures from China No indications that Coven in China is actually causing supply chain hardships.

It just might be a demand decline which is actually good, right? That's what you? That's literally what you want you want Supply Chains to normalize, not get worse. Uh, and get better instead. and you want demand to come down. That's like this is so far perfect.

Like shh. this is good. Okay, this is a good thing I don't want to get super excited and bullish because I'll you know I'll start I'll start yoloing again. Okay, I'm just kidding.

Okay. I I Really? try not to. Uh, for example, this morning we uh, activated in the Stocks and Psychology of Money Group a really cool volatility play. Now I'm going to give you a little bit Insight here in a volatility play.

Uh, and if you're a course member, you could see exactly the details of that play and a little bit of background in terms of what I'm doing with my finances. In the short-term trade section. I Gave a big paragraph this morning before Market opened and prep. But anyway, a volatility trade is where you look at.

Okay, where's volatility low and when volatility is low, where can you potentially go in for a straddle? Where you go buy a call, and you buy a put. And what you hope is to buy a stock that is at some kind of support level like potentially a bottom, and you straddle it hoping that the stock either plummets or moons off of that bottom that it doesn't trade sideways and you pick one that has really, really, really low historic volatility. So when that happens, volatility booms and the value of your options goes up. So volatility increases the value of options you've bought.

And of course, if you have a straddle, you're playing both sides. you're actually not making a directional play. You're just saying, give me a direction in some direction. And so I made about an 80 000 move into that and it's a it's a short term, like 30-day option play.

Uh, that. that will certainly close out before the end of the 30 days. but so far, knock on wood, it's It's doing really, really well and so I'm excited about that to continue. I'm looking at it right now and I'm like, let's go, let's keep that going Okay So this is good for Nike Now let's talk about FedEx Okay, what do we got to know about facts? Well, FedEx is interesting.

So FedEx says the declining demand Trends we saw at the end of Q1 softened further. Okay, okay I actually like that because a I will not buy fulfillment companies or shipping companies I don't think they have pricing power I'm a big fan of Pp. You all know that I want PP Everywhere I Want big PP Everywhere I Go. That's all I Want in my life is PP Pricing Power.

That's it. That's all I want. Because if you have pricing power, you're not in an industry that is in a race to zero. That's what fulfillment is in.

They're in a race to zero. Target Walmart Amazon FedEx UPS They're all in a race to either zero profit or the fastest possible delivery time frames. And and that's not. That's not a pricing power business.

but anyway, declining demand Trends We saw at the the end of Q1 softened further in the second quarter and we are moving faster with more determination to accelerate our cost actions. Okay, Jpow right now this is Jpow right now. Yeah, okay, that's what Jerome Powell wants to hear. He wants to see yes, cut costs, good, lower demand Trends Good softness.

Now they do say and I think this is a cop-out at this point. Okay, at this point I think companies saying this is a cop-out they're saying oh, challenged by volume, softness, and high inflation I Think the high inflation is old school. that's in the past because they even mentioned that they've seen in. In a later part, they mentioned they've seen costs come down like gas prices come down, which have actually reduced their costs.

So sometimes I think when they say high inflation, they're kind of copping out a little bit to try to soften the blow of like, hey, look, our demand is suffering. But what I want to glean from FedEx is what's happening with demand and it's clear. lower demand environment. uh, lower uh And so therefore they're spending less at FedEx This is good.

This is deflationary, right? Certainly disinflationary. They also mention the industrial economy is slowing. That's manufacturing. That's components, that's business fixed investment, that's massive utility scale solar panel channels.

Or you know, at companies that like Amazon putting solar panels across their entire rooms, buying new Machinery right? Everything is kind of slow ing down. This is a a good early leading indicator Europe being hardest hit. That's not a surprise. Uh.

and now another thing that is also very interesting is they talk about E-commerce going through a reset here. Look at this. They don't tell us that Macro is so bad. This is another one of those where it's not like, no, this doesn't look like a 50 great reset still coming ahead of us.

This actually looks like some good news. Some bad news? Yes, demand is slowing. That's going to be bad for some companies and shipping companies. uh, who who are generally product agnostic, right? Uh, But what you have here is: look at this: I Think the CEO says I Think the macro issue in the United States is really an E-commerce reset.

Now that's interesting. During the pandemic, E-commerce peaked around 22 percent. Right now, it's around 18 or 19. and it used to be around 16, so it's higher than where it used to be.

but it's definitely fallen. So an e-commerce reset. That's really interesting. So if you're thinking about your Investments related to companies like eBay or Etsy or PayPal right, companies that benefit from this, It looks like we're still trending in that direction of an e-com reset.

And so what do I kind of get from FedEx I Kind of get. things aren't really that bad. I Mean sure, like demand is softening. That sucks for you.

FedEx But you also attribute this to not everybody in the consumer World Shutting down. You actually attribute this to an e-commerce reset. Like if the entire economy were about to fall out from under us, wouldn't you think FedEx would be like oh my gosh. Broad scale.

This is terrible. That's kind of what they did last quarter and that was concerning. But what did they revise that to this quarter? No, this is more of a an e-commerce reset. this might.

This macro issue isn't like everything is falling out from under us, it's just an e-commerce issue. Now, when we combine that with Nike, both of these companies are actually not giving us a worst case scenario. Outlook They're kind of like, yeah, there are problems, but this is not hell that we're going into. And sure, they're not saying hey, everything's going to the Moon which would actually be bad for inflationary purposes.

There are plenty of disinflationary anchors that we see in these reports, but overall, in my opinion, both of these reports combined, and you have your own opinion, of course, are more bullish than bearish now. I Think it's personally too soon to YOLO In, it's too soon to say. that's it. We're definitely going to the moon.

This is why I prefer finding straddles whether you're selling or buying straddles right now, because you kind of get the optionality in both directions. Things like down, great fine, you profit. You know things leg up great fine. You can profit, especially if you get a really good stretch to either side, which is what you're hoping for.

It straddles what you don't want is things to be constant. but I think with straddles that is. But I Think what these reports give us is a little bit of a bullish tilt, right? If we had to go on a scale of one to ten, one being bearish, 10 being bullish, Where is this? This is probably a six and a half and I think markets have been pricing in like a three, so this could be the beginning of a little bit of a small taste of a Santa Claus rally. Dare I say it? but I Want to be very careful because the Santa Claus rally is one that could still get sold off.

Remember the year isn't over tax, loss harvesting isn't over most retail Buys in January not in December Most retail sells in December so keep that in mind. Be prepared. but some really cool insights that I Actually again, think till bullish. Let me know what you think in the comments down below.

Thanks for watching and check out the programs on building your wealth. Link down below. The only sponsor for this: Channel and we have a beautiful holidays coupon code for you link below.