Everyone meet kevin here, look, look, somebody is wrong in the market and there are some weird things happening here in the marketplace that show us that there is a very, very big divergence between what the market expects will happen and, in my opinion, there's only one possible Explanation for this, but what i want to do in this video first is give a little bit of an introduction about what we could see happen in the market over the next year in terms of economic growth, then i want to talk about this weird divergence in The market that, in my opinion, is a recipe for really only one thing: let's get right into this right after i mentioned that this program is brought to you by my programs on building your wealth, whether it's investing in real estate stocks, making youtube videos or whatever You want to build your wealth, maybe even you're, just looking for a path to build your wealth, to figure out how you're going to get to that next level of wealth check out the programs on building your wealth link down below, because that's the goal. Building your wealth, all right folks, let's get into this and check out those programs before the end of christmas day, okay, first we got to talk about the paths that we could go on, and then we got to talk about what the market is spelling, because the Market's spelling, something very very strange - so take a look at this, so this here just blank sheet. Okay, we have a few opportunities in terms of directionality here we know that when the pandemic struck, our markets did a lot of this. It was sort of a v-shaped recovery is what we called this right here and then we had kind of this uneven recovery, uh coming back mostly because covert really struck the world at different times and different severities, and we had different waves and surges in different places.

Now it feels like we're, probably all going to get army. However, broader markets have really kind of come to terms with already living with covid. We expect that factories aren't going to shut down as much as they did with the delta surge that we're not going to see as many port closures with omicron, as we saw with the delta certa uh. We're we're essentially much more prepared for another wave of covet that now we've almost started learning to deal with covet now.

This is not a coveted video, but it is worth noting that there are a few things that could happen uh regarding omicron. So let's say right now: we're we're on this sort of slower path of recovery. There are a few directions that we could go with. Omicron one direction would be that omicron's surge is so strong and uh governments restrict travel so much that we do end up getting a contraction again uh before we start kind of getting back on that path of recovery.

It's worth noting that this would be global economic trade here and that we're still a good chunk below, where we kind of should be, and that's because we're kind of working our way back to the growth that we used to be on see right now, where we Sit here is roughly equivalent to where we sat at the end of 2019, which basically means we've had zero economic growth or like well yeah economic grow, essentially since the end of 2019 that we're just now getting par but there's a chance we're going to stall here, Because of omicron again, there's also of course, another scenario that maybe we won't have much of a stall at all and then we'll kind of just continue on this slower recovery, and some folks even indicate that hey, you know what this could be the beginning of the End of the pandemic and that, rather than having a v-shaped recovery down, we might actually accelerate growth and and have a boom time in 2022. 2023. So you have these three paths right now, uh that we could go on, and it's worth noting that at this very moment where here at the end of december, where all you know our indices have been down and there's been a lot of fear, uncertainty and doubts In the market, this, in my opinion, is generally the time that you want to invest, and it's really when people are clueless as to which direction we're going to go like. I don't want to invest when we're here already on the path to the moon.

I really don't want to invest when we're on our on our way up over here. Uh i'd i'd rather invest here. Well, i guess there we go i'd rather invest here, uh when we're just trying to understand okay, what are the potential scenarios? So it's worth noting yeah look, we don't have the answer yet in terms of which direction our economy is going to go, but now is a potential time to build that portfolio and build it back better. Your portfolio uh, because the other buildback better plan ain't happening and, as we mentioned in the live stream this morning, folks, it's worth noting the buildback better plan was a massive set of stimulus, just solely not only we're not even talking like ev credits or energy credits Or whatever, just solely in the form of the child tax credit, the child tax credit would cost somewhere between 14 to 15 billion dollars per month right before unemployment expired at the end of uh or at the beginning of september of 2021.

Here uh say in the summer months we were spending about three to four billion dollars per month on unemployment and unemployment was blamed as a reason for people not working well. Why is labor force, petition participation potentially lower in markets now? Well, how about this massive child tax credit that's been going out to the tune of 14 to 15 billion dollars per month. That's uh broken down to 3 000 per year per child under 18 or 3600 per child under six years old per year. Now this expansion just got killed with uh, with, of course, our uh uh build back, better cancellation or so much, or should i say, the death of the buildback - a better plan thanks to joe manchin, but yeah.

Let's put this aside, so this could be another reason for some of this. This pain and uncertainty right here and this bubble of pain and uncertainty right, but what's more interesting folks, is this this weird other divergence, that's happening in the market right now. The market is anticipating that inflation will be two and a half percent by 2023, not 2022. 2023 and then, of course, on one side, you have kathy wood and on the other side you have michael bury, who probably think that inflation will be substantially higher and kathy thinks we're going to go to deflation.

Okay, got it fine, so the market thinks that inflation is going gon na be about two and a half percent. On average by the end of 2023, the fed thinks it'll be around 2.1 percent to 2.3 by the end of 2023. Fine, the fed's always on the lower side. No problem, that's not a big deal, but this is where things get a little weird, because the inflation rate is expected to be a little bit higher than that two percent long run goal.

We do expect the federal reserve to hike interest rates in 2022. We expect three rate increases and in 2023 we expect two rate increases that would get us to about to 1.6 percent. This makes sense, but wait a minute. The market right now is only anticipating that the fed funds rate, which is the overnight lending rate, will be 1.27 if the market price is in a 1.27, but the actual cost is 1.6.

That means you have a negative overnight real rate. Now don't worry if that doesn't make sense. The point is just to say: the market is wrong somewhere somewhere, the market is wrong. The market is either wrong about how high rates will go.

That is, the market is under pricing that we actually are going to have the growth in inflation and the fed is going to jack rates up to 1.6. So option number one market wrong and rates will be higher. That's option number one or option number two is the market is right and ultimately, inflation. The bond market is right because the overall market is thinking that inflation is going to be two and a half percent.

Inflation will actually be lower, which, if inflation is lower, then rate hikes uh will be lower. But folks, this is the weird thing. If the market's wrong and rates are higher, that makes sense. Fine, the market was wrong rates, end up higher, but wait a minute.

If the bond market was right and inflation is lower and rates go down, then that actually means the broader market is wrong and that inflation estimates right now are too high. Inflation estimates are too high, so this means somebody's got to be really wrong here again. Either the bond market is wrong, and rates are indeed going to be higher they're going to be that 1.6 percent, so either the market's wrong here or the market is wrong about inflation, which would make the bond market right or the bond market is wrong about inflation, Which would make the broader market right about inflation? The point of all this is to say that, right now we are in this bizarro freaking place where the market itself does not agree with itself. That's the big bottom line.

The market does not even agree with itself. On one hand, we think inflation inflation's going to be high. On the other hand, we think rates are going to stay low, it doesn't make sense, it doesn't make sense, and so there's only one possible explanation for this. In my opinion and uh, when i say the phrase, there's only one possible explanation for this - you know that means.

There are other explanations. We just don't see them. So i want to be crystal clear about this. I said this going into december as well, when i made my video on negative catalyst for december, and i started selling stocks and started shorting stocks, especially the things we talked about in the course member live streams, which you should definitely check out those programs, i'm building Your wealth down below they come with those private live streams, lifetime access to the content of the course as well, but folks we could be wrong, but in my opinion, the reason we are seeing the bond market uh price in lower yields is because, for some reason, People are fleeing to safety, and people are parking cash which both fleeing to safety and parking cash imply that people could be buying bonds to a fleet of safety and b park cash.

If people buy bonds, then that drives up the price of bonds, the price of bonds goes up. The yield goes down. This is literally what's happening right now, okay, so that means we have a check mark here and a check mark here. That's exactly what's happening.

So if people are fleeing to safety and parking cash that could potentially also be associated with the stock market going down, which is literally what we have happening because of uncertainties in the marketplace. So maybe the reason we have these weird market distortions isn't particularly because anybody's necessarily wrong in the long term, but that in the short term, the market is doing a lot of cash parking, flattening the yield curve, lowering rates on bonds, lowering future expectations for bond yields. But maybe when we end up rotating back out of bonds, we go back to a normal market, and so what does that look like? Well, we potentially rally in the stock market. All of a sudden.

We see a flight from bonds and we get a bond sell-off. So we get a bond, a sell-off and at the same time as we get a bond sell-off, maybe we get a normalization in in expectations. If we get a normalization and expectations, then we can actually look to the bond market as a predictor again, but maybe right now we can't actually use the bond market as a predictor because we're having so much fear and stocks and so much flight to safety. That really we're just setting up for an eventual rally in stocks, no guarantees, but i would not be surprised if what we're seeing happening right now is a massive hoarding of cash on the sidelines.

People are pulling money out of stocks, parking, money and bonds and on the sidelines, it's creating distortions. In the way, the market is trying to understand the future pricing of events, whether that's inflation or where rates will be for the federal reserve, and once we get out of this fear, uncertainty and doubt mentality, we get back to a more normalized market. Then we can actually maybe start trusting the indicators of the bond market again so right now. I don't think i can really trust the bond market to tell us.

Oh, the yield curve is flattening. We're heading towards recession or oh, the 10 year is going down. Therefore, we're expecting inflation expectations to be lower or oh, the fed funds futures are, you know way lower than what the federal reserve expects. Their rate will be in 2023.

Well, a lot of this could be because of the distortions again of people fleeing to safety, in which case it opens the door to the thought that, well, maybe we should be building our stock portfolio in stocks that have maybe started hitting. Some bottoms, like lemonade, seems to be hitting a bottom. Around 40. docusign seems to be hitting a bottom around 140., so 514, beyond meat, 62 to 65., cloudflare, 129 end phase 180 hood 18, matterport, 21, pton 40 carnival cruise line 1780 firm, 92..

Just some examples, but it does seem like we're hitting some bottoms that are hard for us to break through. If we break through some of those numbers, i just listed all right we're going into the basement. That means uh. That means some of these bottoms were quite wrong, but otherwise this is my understanding of what's happening in the market right now, a lot of cash building up, causing massive distortions in the bond market, causing expectations to be very, very funky and weird.

If we break through these floors, that's not that great, but my fingers are crossed that we don't end up breaking through these floors. My thoughts on the weirdness going on the market here, if you found this helpful check out the programs on building your wealth, consider sharing the video and folks we'll see in the next one thanks so much goodbye.