Hey everyone, welcome back to Uh Meet Kevin Report number. Whoa. Whoops! Actually that number is totally wrong. I Gotta fix the number we're on.

We're definitely a lot further along than number 49, so we're gonna go ahead and fix that number. Uh, but welcome back to another meet Kevin report it is April 11th We're going to start with uh CarMax Let's see what went on with Carmax's earnings. Uh, then what we'll do is we'll jump into, uh, some talk on Bitcoin. We've got, uh, consumer talk Market talk a lot of different things to cover today as usual.

Uh, so thank you so much for being back here to another meet. Kevin Report: we are actually on weekend report number 79 so that has been fixed. thank you very much and there we go. Welcome back to 79.

Okay, so first Carmax Carmax I Just reported. Let's see here, let's pull this up here and see exactly what we just had happen over at: Karma X Okay, Perfect. CarMax Just reported CarMax Reported at earnings per share of 44 cents versus the estimate of 20 cents it used A vehicle. sales came in slightly below estimates, so a better bottom line, but a weaker Top Line on used vehicles 4.53 billion dollars of Revenue on used car vehicles versus a 4.8 Expected.

Looks like CarMax spawned about 262 000 vehicles from consumers and dealers in the fourth Quarter. That was down about 22.5 So it looks like either people are selling fewer cars because maybe they're just like in real estate locked into lower rates. or for some reason CarMax is sort of uh, offering a worse deals I would expect that is a combination of both that consumers are more hesitant to sell their car and buy a new one because uh, they would be adjusting to a higher interest rate and CarMax is probably trying to protect their bottom line more and is offering worse deals to people who are interested in actually turning in their vehicle. And then you've got CarMax Affirming that they plan to sell between 2 to 2.4 million vehicles through retail and wholesale channels by the next fiscal year CarMax is planning new store growth in five locations.

Uh, it does actually look like this: Uh, this million vehicle sales is by fiscal year 2026. Uh, right now they are on fiscal 24. gosh, they make this so confusing. Uh, actually I think they're on Q4 2023.

who who comes up with these stupid calendars good? Lord Anyway, uh, looks like they're spending more on cap X than expected. That's actually surprising expected to spend 450 million on Capex versus 380.7 expected. And that's surprising because if we truly are walking into a recessionary environment, generally you see companies pull back on Capital expenditures not actually accelerate them above expectations. Uh, CarMax posts lower fourth quarter Yes, it must be 23 here, lower fourth quarter as inflation weighs on demand and CarMax actually up seven percent in pre-market as that EPS beat seems to be driving uh, the stock movement.

So a little bit of insight into uh CarMax I'd be very curious to see what their average uh sales price per vehicle has been and how that's compared to Prior uh quarters. We'll go through that in the course member live stream and uh, we'll have the earnings call a little bit later as well, which will be neat. So then we have to talk about BTC before we do that. I Do want to look at break evens quickly? Let's get the five-year break even and financial conditions.

So we'll get the Goldman Financial conditions and the five-year Break Even Let's pull these here All right. let's see here these we have five year Break Even Goldman Sachs Financial conditions. Let's see how if how and if those are tightening at all the five-year break even as well for inflation expectations. So we do have Goldman Sachs Financial conditions slightly ticking up Again, they've Fallen substantially after the banking crisis, but a slight minor move back up.

I'll show you both of these in just a moment. Here, we've got the five-year break even, also stable, which is nice to see that it is stable. It it's not falling that would be preferred, but anything is better than a skyrocketing inflation. Break Even Especially going into this inflation report that we have tomorrow tomorrow at 5 30 a.m obviously We'll Be Live covering the uh, the inflation disaster of whatever it may be tomorrow.

Uh, here are the charts for this is your Goldman Sachs Financial conditions index. You can see slight little take up over here, but down from the banking crisis. and then when we look at the five-year Break Even what do we see here? see that stabilization on the right? So that's uh, you know, still still removing this sort of end of February beginning of March Insanity uh of a run that we had here. Not as weak as what we had during the banking crisis, but somewhere in between that so relatively normal here.

nothing too scary there. Okay, now we've got to touch on BTC because it's made some nice movements here and uh, we'll we'll see what kind of uh explanations we might have. Okay, let's see if one boy for Bitcoin there is now a case being made for Banning Bitcoin While at the same time you actually have Bitcoin hitting new record highs. Let's talk about that first because we have not seen over thirty thousand dollars per Bitcoin for over a year and we sat at the 28-2 level for a solid three weeks.

which was actually pretty impressive because it felt like during the banking crisis the safe haven was Bitcoin which is pretty remarkable because as the banking crisis really took hold, we actually went from a low of about 20 000 when the banking crisis started to about that 28 200 level where we sat between about March 17th and about April 9th. It's pretty damn impressive for Bitcoin Now on one hand, there's an argument made that a lot of this is driven by, and after all, we know statistically that over 80 percent of trading volumes for Bitcoin are on Binance. But some folks are making the argument from that Binance is potentially manipulating the Bitcoin Market Conveniently as the occurrences like this happen in the market. Now out, what could potentially have been the Catalyst over the last few days? Well, some people suggest the oil and the dedolarization movements.

So in other words, you have one argument that says look, Bitcoin is rallying because obviously you want to escape the dollar, you want to escape the Federal Reserve You want to escape the Cbdcs, and you want to escape sort of government control and oversight and you want that freedom. That's the one argument, right? That essentially, while we have a banking crisis and the fringes of the banking sector collapse which fringes is a pretty generous word to use given that Credit Suisse was a pretty massive bank and pretty integral to, uh, the Swiss banking system. Uh, But then you, you have these fears that Okay, well, well, if OPEC is still controlling oil and uh, by having a a production kind of of a million barrels a day, they can affect the price of oil so substantially and clearly the reserve currency of the dollar is at risk when that same organization and individual member countries of that organization start considering using or even start using other countries currencies like the Chinese, Yuan or and minby to start transacting in oil. that's creating this sort of dual pressure potentially for Bitcoin.

So you really have three things going for Bitcoin In the banking crisis, you have the d-dollarization thanks to walking away from the Petro dollar. But then you also have this third argument that look, maybe we're looking past the recession. Maybe Bitcoin is the tool that says the recession. If it comes, it's not going to be that bad.

The biggest culprit here is inflation. and we're going to go back to money printing once inflation is gone, and we'll go right back to below one percent interest rates. which is pretty much what the IMF said today. We will be going back to one percent interest rates.

Believe or not. Whatever. Uh, and uh. Potentially Bitcoin is just trying to pre-price in what is to come in the future.

Which makes sense because to some extent, markets that trade freely like to pre-price in what could occur. So that way you're not last to the party so to speak. And that's why. potentially for those three reasons, Bitcoin could be moving up breaking Now that 28 to 2 uh previously resistance level and pretty strong support level, it's been bobbing around above and beyond that level.

Uh, and now we're above 30 000, which potentially sets us up on a course to head back to the next Fibonacci retracement level. which would be thirty five thousand, nine hundred. But at the same time as this is all coming to ahead, now there's talk about potentially Banning BTC now or just Banning Crypto entirely now I Generally don't love talking about this because people usually get mad at me when when we talk about this. but I'd like to see what the argument is that people are making for for Banning Uh, BTC And this is a foreign affairs piece which I generally uh, I generally respect Foreign Affairs But let's let's see what argument they make here.

Uh, It's also worth noting that uh, some folks on these sort of anti-crypto side do make the argument that hey, if Binance controls 80 of a market flows because of people using Binance Uh, is that necessarily a bad thing? It just means they had commission free trading for Bitcoin Maybe that's why they have 80 of the flows because they were smart. Well, according to analysis by Morgan Stanley which a lot of folks in the crypto Community don't believe as far as they can throw them anyway. but Morgan Stanley believes that the biggest Traders during the banking crisis were actually Wales that is likely brokerage accounts, not individual retail Traders So if it was whales driving crypto pricing or Bitcoin pricing, then perhaps there is some convenient manipulation happening, especially since Binance did liquidate Usdc reserves they had in favor of buying. Bitcoin Now that ends up looking like a really good decision because they got a great deal, right and the value of that BTC has gone up.

which is fantastic, But it does make you scratch your head on how much risk is this company taking and that is something that people are very fearful of right now in markets because, well, ultimately, the more risk and exchange takes, the more of this chance you have of creating potentially another FTX which nobody wants to hear about. For example, FTX made headlines yesterday for their nonsensical arguments that they basically would. They had such loose accounting practices that they would sometimes just happen to accidentally just find 50 billion dollars or sorry, 50 million dollars sitting around in an account somewhere and have absolutely no idea what that 50 million dollars was for. That was an example of Binance for or FTX for you.

Now hopefully Binance, as is substantially different, uh, from FTX But we don't know Because we don't have audits, we don't have proof of reserves, our audits anymore, those have been canned, and we do not have uh, any kind of audits that give us insight into how much debt this company actually has. Those are both very important. So what is the potential argument that Foreign Affairs is making? And what is the case for Banning As they say, Crypto? Well, let's jump into exactly that piece. Uh I Do think uh.

I Want to be very clear? Okay, I Want to disclaim this away that even though we're going to look at this piece, it's okay. If you like Bitcoin it's okay to look at what another argument is And they do actually make some interesting arguments. Uh, that, uh that again with the true or not uh, or valid or not or worth considering. So let's take a look at this.

Here is uh, the piece and we're going to go through this together. I Am going to throw up the banner for the coupon codes. Uh, because that coupon code does expire tomorrow for the programs on building your wealth linked down below. So what could the case for Banning Crypto actually be? Well, let's find out.

So they start their article by talking about FTX which isn't that entertaining? Oh, come on there we go. They start their article by talking about FTX But take a look at this. but FTX is unraveling was not an isolated incidence. the incident they say rather, it revealed a fundamental flaw in cryptocurrency.

My goodness, What! What is going on with this computer today? There we go. It revealed a fundamental flaw in cryptocurrency in the cryptocurrency industry. The root of the problem is that cryptocurrency assets can be created at no cost and without limit. And an unlimited supply of assets makes the system more vulnerable to booms and busts now.

I Thought that was a really interesting argument because I'm thinking about it I Think what they're saying and this was sort of. My initial thought when I was hearing this is I think What they're saying is if you have crypto institutions like let's say a binance that says hey, look, we will lend against whatever crypto collateral you have, then you essentially create a fractional Reserve banking system, much like the traditional banking system, right? The difference though, is rather than a country being able to create a currency, anybody in their mom can create their own currency, which if it has some deemed market value, which could be based on a very thin order book and with very horrible fundamentals. If a company starts lending against that, whether it's in the defy space or or the more centralized space like a binance, well then you essentially can create this flywheel of infinite money. And this is how you can actually prop up the boom and bus Cycles substantially more when assets have nothing behind them and no reliable Financial Accounting practices or valuation techniques.

Because you can't value them based on income you can't You can value them based on use, right? And that's generally what people do with Bitcoin or Ethereum is we look at what's what's the value of of the use, the utility, and what's the value of uh of of uh demand compared to supply which is difficult to measure because sure, that takes you right back to well, how much is a Bitcoin being used for transactions but generally you're not using Bitcoin terribly much for transactions I Venture to say that most people are using it for a store of wealth unless of course, you're sending money, uh, overseas and then in which case, you're probably using stable coins anyway. So, but this is very interesting. The root of the problem is that cryptocurrency assets can be created at no cost without limit when assets have nothing behind them and no reliable Financial Accounting Practices or valuation techniques exist to expose fraudulent manipulation of assets. The results is: the result is fraudsters have rushed into cryptocurrency, exploiting the complexity and hype as a way to dupe basically the normies to dupe the people who are completely clueless about how a cryptocurrency can actually be manipulated and this, this is frequently seen uh, obviously in the historical artifacts of what happened with FTX but also uh, when we look at hey, where, why are we no longer even doing proof of reserves Mr binance.

Uh, Mr CZ Oh, not doing proof of reserves anymore because you don't want to. Okay, got it. And uh, you got dumped by the auditing firm because they think the reports aren't being trusted by people anymore as they really shouldn't And then when CZ provides uh, uh, proof of of, uh backing, uh, we tend to get very overlapping wallets which does on one hand make people who are super pro buying and super pro CZ say oh my gosh, he's a God He posts all his transparency. But when you actually go, but when you actually go to the transparency, these wallet chains are like wait a minute.

We're double counting some money and we can't follow through with all of the transactions that are actually occurring because there are things purposely left out. and there's so many wallets that these exchanges have. The as transparent as Crypto is, and as simple as it is to make the argument that old Crypto is transparency or is transparent, it's actually extremely difficult to follow along with most crypto transactions unless you have a complete map of every single wallet uh, that an entity has and it's very difficult. This is why they're actually analytic firms.

uh, designed to try to stitch this all together because it is so complicated it's not. It's almost not meant to be understood by a normal person. It's pretty wild, But anyway, Cryptocurrency concerns. Cryptocurrency already facilitates many different kinds of harms, and this is a pretty like Janet Yellen style argument right here.

Iran and North Korea Use cryptocurrency. Uh, and the anonymous to evade sanctions and launder money. See, this gives you sort of. The other example.

It's like, hey, it's so transparent that criminal entities or estate sponsors of terrorism can use them to basically skirt sanctions. Hey, we need to go buy stuff from Turkey because we can't buy it from Russia anymore. here's Crypto payment. Go turn it into, you know, a stable coin or whatever afterwards if you want.

which they do. In 2022, for example, Payong reported reportedly stole 1.7 billion dollars in cryptocurrency, which it it which it is believed to be using to fund ballistic missiles and nuclear weapon development. So look at that. Here's here's an example: a report by Foreign Affairs suggesting that North Korea stole 1.7 billion dollars in crypto and now they're using it to develop their nuclear weapons program.

It's intense. That's a pretty big allegation. Bitcoin has become the most common form of payment for ransomware attacks, increasingly targeting businesses and public services because it allows the nefarious actors Behind These attacks to receive large amounts of money quickly and anonymously. Cryptocurrencies are also increasingly being used to facilitate drug and human traff trafficking and basically without knowing who's using these wallets.

Uh, the crypto chains are relatively Anonymous if allowed to proceed unchecked. The unrestricted growth of the cryptocurrency industry and its future integration with the traditional Financial system could produce a major crisis. Blockchain-based Finance is complex, automated, and highly interconnected. It offers vast opportunities for creating leverage because there's virtually Unlimited Supply of assets to borrow against.

This is what I talked about earlier with. If you, if anybody in their mom can create a currency and an institution will lend against it, you do create essentially infinite money. These are kind of the kind of fragilities that led to the last financial crisis in 2008. This damaged trust in the traditional Financial system.

Uh, and the cryptocurrency industry wandered into the wreckage, promoting itself as a reliable alternative to bank. So basically, in 2008, when we had infinite money in the traditional system, people stopped trusting the traditional Financial system so much that it essentially created crypto, and now crypto is potentially following in the same footsteps. There's the danger that members of the cryptocurrency communities embittered by their losses may also be funneled into extreme online communities. I Think this is a little bit more of an extreme example here.

Basically, people are gonna turn into a loose canon Maniacs Because they lost money in crypto, industry leaders and lobbyists tend to argue that the primary benefit of crypto is decentralization. Unfortunately, that is unrealistic. The economic incentives of crypto have led to extremely concentrated pools of transaction validators, leaving users develop uh dependent on those small groups of people. I Mean that's true when you look at the controls.

For example of uh, Ethereum, you're looking at Lido being a massive player. uh, in in the space. And now with Ethereum 2.0 We the idea is we have more centralization, but still staking pools. What they really do is centralize control into into a fewer groups.

Now many argue. Well, that's not necessarily a bad thing because people are going to most reliable validators. the ones who have the lowest incentive to actually do something wrong long were nefarious because then they would lose all of the incentives and payments that that pool would otherwise be able to generate and they'd essentially be shooting themselves in the foot. So there's some counter arguments to this: I Think Really, the best argument they make is this infinite money argument I Think that's great.

Otherwise, so far, the arguments here are some of the pretty traditional anti-crypto arguments. Misleading rhetoric about crypto's decentralization is being used to persuade Regulators that software is calling the shots applying their no business entities or humans to regulate. But the reality is that regulation can be applied to many different intermediaries they're basically now they're talking directly to Congress saying look, you know companies like Binance are going to tell you it's all robots and algorithms that are controlling this But the reality is, there are plenty of people behind the curtain. uh, that uh, that that make movement decisions CZ is a perfect example and who knows, they could end up being the the and maybe they will be the Survivor in the cycle.

Uh, you know I I Hope they survive because if they don't survive, it's just going to hurt more of the financial ecosystem. I Personally am just a big fan of not your keys now your crypto. and I Think it. It makes all of this a lot simpler.

Get your money off exchange, right? But if policy makers are reluctant to adopt an outright ban, then the second best alternative is to stringently enforce regulations that are already in place. Banking: Regulators should use existing Prudential rules to keep Banks from being exposed to the risks of crypto. Now I Don't think anybody argues that some regulation would be nice. And Crypto I Mean when you look at Coinbase, they're basically begging for regulation.

They're basically saying, hey, please give us regulation, tell us what the rules are so we can play by them as opposed to the game we have today. which is we're going to try to do our best and then we're just going to keep hitting sued by the SEC and commodities. Future Trading: Commission Because nobody's actually telling us what the rules are and now you're trying to litigate your way to actual Authority which is the inappropriate way to do it. Congress should actually bestow upon you rules to enforce, which then you are dutied or basically, uh, uh, you know, designated to enforce and then those rules could actually be followed or not followed and then duked out in court rather than oh, we don't have any laws.

Let's turn. Let's deputize the SEC and the Commodities Future Trading commission and turn them into cops where they make their own rules and then they find out if those rules are accurate or not in court like it's It's super backwards. Right now. How Crypto is being regulated? Super Super backwards.

Uh, and that's a big problem. and it's not to say there's not also a big problem with potentially some of what's going on at Binance, potentially and potentially this infinite money glitch that you could have with crypto. Uh, I think those are realistic problems, but I do think regulation can help, especially with that infinite money glitch. And then that's exactly why companies like Coinbase vet their coins before they allow them on platform to lend against anyway.

Uh, now to what extent that vetting is, nobody really knows because again, no regulation. Greater concern is the development of an offshore currency industry. See this is the other issue is is when you don't regulate properly here, what you're basically just doing is you're pushing people more out of the United States And so Foreign Affairs makes a very good argument here. At the end, they said the United States should continue to take part in the efforts to limit uh, crypto at a global level level by actually regulating right.

And so maybe maybe it's not so bad if we can actually get some good regulation in that would prevent some of the problems with it. Big fan of that. So I'm not a big fan of banning crypto, but I'm a big fan of actually getting to the point where we have some regulation I Think that would be fantastic. I Also think through a Bitcoin often is is a good leading indicator of potentially what's to come in the stock market, which in the short term I think is actually fantastic that we've just broken through that 28.2 level and I think we're on that path to 35.9 Uh, you know am I Am I knocking on the door of looking at a million dollars for BTC in the future? Who knows.

I mean if BTC runs to 150k over the next one to two years, that could be enough of of sort of starting the flywheel to get people going. Oh my gosh, this is the greatest thing ever. Uh, now will that potentially lead to a 2008 like Foreign Affairs projects? uh, could end up happening? Who knows? Maybe Maybe it won't be this cycle that we get crypto regulation. Maybe maybe it'll be the next boom cycle and then the bus cycle that actually leads to appropriate crypto regulation.

Who knows. But we'll see. Uh, so that gives us a little bit of insight into what's going on with BTC Make sure to check out those programs I'm building your wealth link down below and the expiring coupon code which ends tomorrow. All right.

an extra topic to cover. so that was BTC Now let's go ahead and look at um, what consumers are up to as well as a bear case. Yes, yes, all right. let's start with the bear case one because this is an interesting piece and let me see here.

Mm-hmm Okay, let's get into here. Standby: There we go. All right, this could be interesting. This is a bear argument on how the markets could move lower and wanted to add commentary to this because I always like to look at what is a bears are saying it's a not makes the argument to potentially as if Isabel as a wrong of Isabel isn't right Faiza, that's a new vote Visa All right.

come on. Uh now, how are we gonna do it? Ah yes. All right there we go. All right, that's ready.

All right. Let's not take a listen to the bear case for a lower and potentially plummeting S P 500. let's take a listen in to see what arguments they have and then add some commentary we'll jump on into CNBC that is not CNBC This is CMC right here. Let's listen in to what they got.

Remember we've got that expiring coupon code tomorrow CPI day prices will be going up so get that lifetime access before the end of tomorrow. April 12th Let's listen Jason Trenner another week, another week Chairman and CEO Strategies Jason Trenner There we go. another one. I Still need to to figure out why I Mean you're staying cautious.

you're staying kind of bearish. Yeah, you have watched 4 100 hold I don't know why it's holding on the S p And here's my question to you. What don't we know that that causes you to think that we could have another I don't know What do you think we could do? 10 15 lower or something? Why don't we know everything? Why isn't everything already out on the table? What would be significantly worse than we are what we have I would say let's sort of this way. what we haven't seen yeah, um, right.

uh is a significant weakening in the labor market. and I would say there's there's never been a new cycle that starts when the unemployment rate is three and a half. So so I I would argue almost by the very nature of a business cycle. and I think this is going to be a real business cycle, employment's going to have to.

uh, unemployment is going to have to move higher. The other thing we really haven't seen is, uh, significant or persistent weakness in in earnings. So we had one quarter of down earnings in the fourth quarter. Uh, and it looks like in the first quarter which is going to start in the next week or so, you're going to have an a second down quarter year over year.

And to me, um, that are those are two big things. The other moving part in this? this gets maybe a little too to, uh, maybe two pie in the sky. but um, we have to see what treasury yields look like when the debt ceiling is increased. You know.

part of the reason why I think yields have come down is fairly because the treasury is not issuing treasuries, because you've hit the debt ceiling and you're you're drawing down the general account. And and ironically, I think once you increase the debt ceiling, there is a chance that long-term interest rates rocks. Were you expecting the move from the October lows? no to reach all the way back to 4100? No, you are not. No, absolutely not.

And we, you know we got. we've been. We, as you know, we're like the Tina people. We were bullish for eight years.

We got bearish last year. There there are, but listen, we had perished a year ago. Uh, looked like a great call, but like as this Market does, it could make you look foolish and we looked, you know, felt pretty foolish for a good portion of the first quarter. But I I'm kind of sticking Joe to the kind of the the point now.

I saw your notes. Which is to say that Listen, it's generally speaking if you have a tightening of of Uh Fed policy. if you have a Titan of credit standards, you have lower profits. Those things are generally.

don't know why we don't already see more I don't know why it's holding at 4100, but I mean it's I Mean if the S P is Apple and Microsoft it's 13. Yeah, that's that's one reason they hold. and we've certainly seen that sort of bid to quote unquote Safety and put them in quotes because who knows if they're really safety out of the banking crisis Jason So to the extent that Tech is that Temple for the markets, you know what point do you think You know we need that to crack in order for the S P 500 to crack? Well, I think that's listen, that's where all the weights are and I think that's that's true as far as the indices are concerned. But I would also say for your average investor who probably owns a lot more than just 10 stocks that were up meaningfully in the first quarter, um, their statements that they're getting right now are probably not as reflective as as of good news as let's say the NASDAQ was, or even the S P 500.

So that's another moving part in this. If you're we're talking about the individual investor. Is that, um, the probably the indices belie what they're actually seeing on their statements because I would say that there's a clear slowdown in economic activity and I would say whatever your odds were of a recession before Silicon Valley Bank failed, they have to be higher Now, ours were high before that happened. but I would It seems to be every Bank Country Now is looking at its loan books.

Every Bank in the country is now tightening lending standards and the FED has the FED should keep that in mind. So maybe multiples are too high and earnings are too high. Okay, so you get a double whammy. Word 4 100.

Are you a 3500 guy? or are you a 3200 guy? I'm worth like 3 200 to 3 400. you Are Yeah, if you use that's going to be that would be gut-wrenching yeah. But I mean you know we're over time like a slow steady. just hideous decline for the next year we're I Mean frankly, this is I get a lot of? Keep in mind that's about a 22 Decline And really, this bear is giving us a 22 Decline And you know what his argument has been.

So far, his argument has been that, well, the banking crisis where Fringe Banks collapsed has, uh, increased our review of recession? Okay, uh, but what about uh, earnings? Uh oh well, yeah, you know Facebook has been meta and or Microsoft or just propping up the market. You know that's that's going to end. Earnings are going to come down. Okay, so why oh well, when the treasury Department expands to uh, the debt ceiling, then they're going to issue more treasury bonds that'll lower the price of Treasury bonds and that'll increase yields.

Has he considered the counter argument that perhaps when the debt ceiling crisis is over, people might actually Rush to buy uh bonds at the higher yields that we still have today, because they might be assuming that yields are going to plummet going into the future? Uh, apparently not So so far. I Have to say to argue that the S P 500 has another 2200 percent error 22 drop, but ahead of it. Pretty weak arguments from this individual thus far. Morgan Stanley gives a better argument which is just strictly focused on you know Mike Wilson the Bears over there which is strictly focused on look earnings per share way too high now I Agree with that for many stocks, whether it's uh, your your Consumer Staples uh, some of your defensives, uh, maybe even your military industrial complex ones I Actually think we're going to have growth uh, at any cost very soon because folks are going to see oh, we're trending pretty close to recessionary environment maybe not necessarily in recession, but let's keep going where where the money's been good which is Mega cap Tech and pricing power style stocks.

But anyway, let's listen to the rest of his bear argument here. The questions Now about the No Landing scenario where people say why do we have to land at all and I would say you know no Landing meaning like listen Why Can't This persist, you have you have a shortage of Labor why does there have to be a recession And and the answer I think is if you're going to have a typical business cycle where the FED isn't going to right monkey around with it, um, you're going to have higher inflation and higher long-term interest rates as a result. And that means like the No Landing Center means you land into the side of a mountain or something like I Would much rather have the weakness in the economy in the markets this year before more um accesses get built up because to me, that's it's much more painful that way when when it eventually. Okay, so in other words, the argument being made here that hey, it's actually worse if we end up with not having a Slowdown in the markets as soon as possible I don't know, we'll see, um, not the best argument in my opinion.

I Think he could have done a lot better. What I prefer to look at lately is actually the Atlanta Fed now real GDP Tracker I Think that one's a pretty decent uh and Uh has been pretty functional lately in terms of helping us guide where the market may actually be heading. So let's uh, let's go ahead and pull up the Atlanta now GDP Tracker. That's right here.

and what we could see is that the sort of towards the end of January the Atlantis GDP estimate was sitting just below one percent and that ran over three percent. Uh, right around the time of the banking crisis. But markets Uh apparently sent signals to the Uh Atlanta Fed. the GDP might actually decline closer to two percent by where we stand today April 11th.

So fresh data here. Now what's incredible about the Atlanta uh, real GDP indicator is it's been decently accurate and it shows that the stock market is actually potentially under pricing in how strong the economy is now. Sure, Is the labor market still tight? of course? Uh, are there still potentially some stickinesses in inflation? of course. But with patience, and if the market can't keep chugging along, maybe we're not looking at a negative.

GDP We're not actually knocking in the door of any more recession than we had technically had in 2022. Latest estimate for the real now: GDP measure is 2.2 percent now I Think it's worth looking at what consumers have to say in this, so let's jump on over to a little segment on Z Consumer. Okay, Morgan Stanley Just put together. well.

hold on here. Let me do this. Let's get rid of this. There we go.

Morgan Stanley Just put together a phenomenal piece on the consumer and the consumer is a big piece for what could be happening with our recession. We just listened to a dude on CNBC trying to articulate weekly why he thinks the stock market is going to drop 22 and basically says that in order for us to get through the next cycle that is to get to uh, you know, a bottom and then a recovery. You've got to go through a recession. You've got to have some kind of Crash It gives really weak arguments suggesting that oh well.

treasure yields are going to rise when the debt ceiling gets expanded because the treasury will issue more treasuries, but potentially totally misses counter arguments that, well, if the economy is stronger then consumers are still spending money, then people might want to lock in those higher yields on treasuries and actually end up leading to more binding for treasuries and lower yields. So I wasn't a big fan of this Mr CNBC guy. But what I am a fan of is data. Let's take a look at some of this from Morgan Stanley here on the consumer and remind you that tomorrow is the expiration of the coupon codes linked down below.

So what do we have here? Consumers are more confident in their ability to access credit than their ability to afford it. Over a quarter of consumers are likely to apply for a new credit card over the next six months, which skews much higher amongst the higher income households 40 percent 41 rather of those making a hundred thousand dollars plus plan to apply for a new credit card. We also ask consumers how confident they are that they would be approved for different types of loans if they were to afford these loans. New credit cards? Uh.

and then we get into here. Looking at the net spread between the sort of confident of getting approved versus not confident suggests that consumers are most confident that they would be approved for new credit and are least confident that they would be approved for a new mortgage. So in other words, people really open to the idea of oh, don't worry, we can get higher Consumer Debt but not necessarily asset backed debt because interest rates have gone up so much higher on mortgages and even though credit card rates have gone up, don't worry, we still think we can get access to our dangerous debt. Higher percentage of consumers believe they can't afford a mortgage or a car loan or a personal loan.

All of these Net: 12 percent Net five percent Net four percent. So you're seeing some potential fear that maybe the only type of credit you could get your hands on nowadays is actually credit card And consumer's views on the accessibility and affordability of credit varies heavily by income level. Higher income consumers, like those making more than a hundred thousand dollars, are confident they would be approved for any type of loan and are confident they could afford them, whereas consumers making less than 50 you're not as confident I mean I Feel like that's almost normal. That's not a surprise consumers intend to travel, but are budget conscious.

Consumers continue to report robust intentions to follow through on travel without flights 65 with flights 56 percent internationally 42 all in line with the last two months, so no inflection yet on consumers willingness to travel over the last two months. Six to ten consumers are planning to travel over the next six months up 57 from the same time last year, in line with the 2021. And even with higher intentions to travel, consumers are mindful of their budgets. Okay, not that big of a surprise here.

Household savings reserves are flat. Now this is interesting. This is Morgan Stanley's POV This is different from what Bank of America JP Morgan have suggested. Household savings reserves are in line with the previous wave: 24 of consumers do not have any savings, 34 have three months or less, 28 percent have four to twelve months, and upper income households uh, have around uh 4.8 Well, hold on.

Let's see here. Uh, let's see 28 have 4 to 12 months, 14 have more than a year. This yields to an average reserve of 4.8 months skewing higher amongst higher income households. Obviously, majority of consumer surveyed say they're likely to cut back on spending over the next six months because of inflation and plan savings and credit cards to fund their spending now.

I Have a question here: I Do wonder if people applying for new credit cards at higher income levels aren't necessarily applying for new credit cards because they need the debt? But maybe they're applying for new credit cards because they want the new rewards points or whatever they're getting with a new credit card? Low-income consumers are generally more worried about the ability to pay rent and retain paid debts, while upper income consumers over index on concerns about their Investments political environment in the United States and geopolitical concerns. That's interesting. So if you look at this chart here and just break this down, if you look at the lower income segment which is the blue and the green bar, the blue and the green bar is much higher over here. In the coping with inflation segment, blue and green, you've got blue and green over here.

What is that? Political environment? Lower for blue and green Political environment not able to repay or not able to repay debts, rather over here. higher for blue and green. That makes sense, whereas orange that higher income segment really low. Fear about not being able to pay rent, not being able to pay their loans? Uh, potential salary cut? Very little worry among all of that.

Whereas they're more worried about geopolitics potential of losing money in the stock market or the political environment, that's fascinating. It's a good little difference there. and I think it's a reasonable conclusion we can make. Uh, you know, with even without the data savings versus pre-covered we continue to see a substantial share of consumers 40 reporting that they have less savings now than they did before covet among around 30 percent of a similar level of savings of 31 of a higher level.

Okay, well, let's take a look at this. so we have a much lower segment is Uh is over here and the much higher segment is down here. so upper income consumers are more likely to have a higher level level of savings. Well, of course and uh, that would basically be the it's kind of weird that they threw this at the bottom because I'm assuming that people with much higher current savings these would be your your upper class uh individuals here, but they haven't broken those down by color.

Uh, okay. overall 30 percent or 36 percent flat? uh of consumers reported Mr late payments lower 40 percent and mid-income consumers 35 consumers are more likely to have missed payments versus high income consumers just 26 I mean this makes sense. Higher income less likely to miss your payments, less likely to miss a rent payment? That's pretty logical. Consumer spending intentions are reverting to January levels as consumer expending.

Uh, as of consumers expecting to spend more next month and 17 expending? Uh, okay. well this is a little a little bit of a tricky one. Let's let's use the chart instead of their verbiage to look at this. So overall household dollar spending over the next month over uh, among the total, so less versus last month expected to spend more versus the last month this year less is green and about the same as last month, and these look like weekly analyzes here.

So most people seem to be in this about the same spending category. It doesn't seem like there's very terribly much of a difference hearing people wanting to spend less with the exception of what we had over here in mid June it did mid-june to about October seemed like it could have been about the bottom of the stock market, so it makes you wonder if there's an alignment over here expecting to spend more and that eight from this middle group too, expecting to spend more. Uh, actually interesting Trend Up Let's try to just look at a trend line. On this.

Look at this: if I draw a trend line. Oops, If we actually get a trend line here, if we draw a trend line, it's a little bit of a messy trendline. There we go. If I can recorrect that a little bit, there we go.

I'd say that's a that's a decent Trend up on individuals who are willing to, uh to spend more. Uh, but then again, this segment over here, yeah, that seems to be consistent slight decline over here, and those willing to spend less. There is entirely the possibility that this ends up being that kind of, uh, recessionary environment where we just everybody thinks we're going into recession. All the economists think we're going to recession, but people just keep spending through it.

Consumer electronics and computers continue to post lower net, negative, uh, or negative net spending compared to, uh, previous eras. And this is why we've seen a lot of bearishness around Uh Chip stocks. Although they've rebounded quite well during the first three months of the year here, plans to cut back on spending due to inflation, majority of consumers surveyed continue to say they are likely to cut back on spending over the next six months because of inflation. Another 21 say they're not cutting back.

Yeah, All right. what else do we have in this piece? Let's see here: I Think this is the last page right here. Whereas restaurant spending continue to be most at risk of a consumer pullback, that's probably the one place I Don't want to invest right now is uh, is is restaurants. Oh actually I almost never want to invest in restaurants I Feel like the margins are terrible here.

Other discretionary categories such as clothing and Footwear live entertainment and Leisure Travel are also popular areas to cut back, so it makes you wonder the consumer seems to be relatively mixed. I mean yeah, the lower end and we've been thinking this forever I Mean nothing's new here. Lower end consumers are more likely to miss payments or less likely to want to travel and potentially have less savings. But none of that is really new information this is.

This is pretty pretty redundant. So uh, I'm a big fan of uh, sticking here with uh. pricing power I Don't think this pricing power style stocks, especially those that appeal to higher income individuals. Uh, but I don't know that this really changes anything here.

So uh okay, let's get into we are going to do a public opening bell here and then we're going to jump into one more segment and uh I think we will head on over to the course member live stream. So let us get the opening bell ready and we will listen in the um. well in that case he should be happy with Friday's number. uh lowest uh month on month getting wages in a year and I'm slowing I think he won steep I think Master is you know wants us selling apples, she wants to sell it.

Do you know that Master of with master I'm gonna go buy a lot of Atlas sell them right out here. They're gold. Used to trade couples here Macintosh hey I got apples here Portland Red Delicious a subsidiary of Walmart Celebrating Sam's Club's 40th anniversary and they had Clinton officers and that was one of the reasons why Walmart went from 140 to 150. Dave The View Here during that animal scene, it was so positive.

I don't think Sands is good. well you missed the good one. Sam's had good number. All right, there's the opening bell.

vastly green. Uh I think the the most important thing that we want to look at here is let's just talk about tomorrow. So most important now. obviously we've got green going into uh, the market here on the eve of inflation.

We've got Bitcoin over 30 000. in my opinion, the absolute most important thing coming up is the inflation report tomorrow. So let's just talk about my expectations around this inflation report specifically what I'm looking for and I'll put together all of all of sort of the research that we've been doing to to put my thinking hat on and make a prediction here about inflation. So I want to be very crystal clear here: I Think that inflation will end up proving to be longer term transitory.

There's one thing everybody learned around this cycle and it's patience. Everything took a lot longer than people thought. The pets hiking cycle came later than folks thought it took longer than folks thought things started breaking. but quite frankly, the banking crisis things started breaking.

Really, in my opinion, aren't red flag that the FED has over tightened or has created a recessionary environment. I Think that the fringes suffer when there's a tightening cycle. The companies that are zombie companies with poor risk management procedures, The companies that have poor cash flow, The companies with exposure to risky assets like uh Silicon Valley Bank startup sector uh Signature Bank The crypto sector and uh and uh Credit Suisse has been plagued with scandals and poor auditing and risk management procedures for decades. All of these companies collapsing really serves as no surprise and in my opinion not a sign of a greater financial crisis, but rather of a normal weeding out cycle that you would get in a crisis that is normal.

Companies that should not exist should die at some point and that is what. Cycles Do The bear markets take out the bad, the junk and it's like a hurricane that comes through and weeds all the trees. You know, after a hurricane. every looks super clean around with the exception of all the debris on the floor.

But you look around, it's like wow Everything Feels like it's just got a big bath. Everything just got blown around I grew up in South Florida so it's relatable to me. But anyway, point being this, this recessionary environment could very much be like a an economic hurricane where just the week got cleared out and the excess labor got cleared out and they were encouraged to go be productive somewhere else. and we could end up coming out of this recessionary style environment with a substantially larger or or more productive economy with higher GDP growth which lowers the burden of our national debt anyway, and we could come out of this much more productive than when we went into this.

In other words, all of this insane expansion of the money supply from the stimulus era could actually end up helping create this bubble environment where everybody got showered with money to go innovate and build and build and build. Then you run through and you basically destroy everything that couldn't figure out how to make it with unlimited amounts of money. So try making it with restricted money and now hopefully going forward, you have the most efficient businesses left over that got stimulated massively and are still getting stimulated. whether it's chips, artificial intelligence, electric vehicles, energy, you name it.

So regarding CPI tomorrow and these by the way, all my favorite pricing Power stocks. My favorite stocks. you can see them. my actively managed ETF The courses on building your wealth everything.

Just go to meet Kevin.com We've got a coupon code expiring tomorrow. the price will be going up after April 12th. So CPI per Bloomberg we know is expected to come in at 0.2 percent. Uh, on the month over month level and the year over level.

Uh, year over year level is expected to come in at 5.1 percent. which is fantastic. Uh, these are these are big moves to the downside from six percent to 5.1 percent. Uh, from the prior read, year over year.

that's great. We don't get as much of a movement in core or when we exclude food and energy. so a lot of this being driven by a fall in food and energy prices. But if we look at the non-core what we're really looking for is just starting signs of disinflation in Services That's exactly what Jerome Powell told us to pay attention to.

He said listen, Goods deflation is here that needs to hold so we need to keep seeing weakness in used autos. new Autos durables, any kind of goods outside of foods and energy. Let's continue to see weakening there. Then at some point we're going to get the rollover of housing data.

That is, we will start getting weaker housing data for rents and that will help lower owners equivalent rents. That's part two, but part three That has doesn't have the forecast yet that isn't expected just yet to rule over like housing. Or Goods Part three is that core Services disinflation, Your attorneys, your financial advisors, your haircut, your medical supply, uh, or your medical services. Rather, all of these sectors are where we're looking for weakness and Drum Panel expects to see the process of, in his words, disinflation to begin there Soon, My hope is we start seeing the beginning of disinflation there now.

I Do do I think that inflation is going to just remarkably plummet and come in substantially low and it'll all be over tomorrow. In other words, all the inflation will be gone tomorrow and the FED can finally start cutting interest rates more much like the bond market anticipates. No. I Do think much like we saw last year, that the bond market is a little bit ambitious in their Fed rate cut cycle.

Remember last year what happened? We were expecting at the end of last year that the Federal Reserve was going to cut, uh, somewhere between a 1.5 to 2 percentage points by the end of 2023.. those expectations vanished very quickly. The reason those expectations vanished work very quickly is because we had hot January numbers and all of a sudden we went from pricing and rate cuts to pricing in no rate cuts. But what interestingly happened is the stock market actually rallied substantially in the first three months of the year.

So is it possible that that same thing could happen again? My thesis is yes, we could start C disinflation. On the services side, we're clearly on the path towards disinflation. However, we're not in as bad of a recessionary environment thanks to the banking crisis as people expect. As a result, what happens: we have to start pricing in higher interest rates for longer, but the last time we did that between December and about February stocks actually rallied.

Now it's possible that they rallied because of tax loss harvesting and rebuying Uh in January. But take a look at this particular chart. This shows us the current implied overnight rates of Uh and rate cuts, and what we're seeing is this plummeting. In other words, we'll get to a terminal of about 5.25 with about a 65 percent chance by June 14th and then we'll expect to see this plummeting in rates uh, where we could potentially be cutting rates as much as 2.75 percent as soon as Uh January 2024 and the December cycle in Uh or December meeting in 2023..

that's entirely possible. but I Think personally, it's unlikely we're going to see cuts that dramatic unless of course, the economy is absolutely going into a recession. Based on the Atlanta GDP now forecast GDP today could still be around 2.1 percent, and if that holds even above a half a percent through this summer this scary Q2 Q3 era that people are really worried about, then it's entirely possible that we could see inflation continue to Trend down while stocks continue to Trend up and we probably stay in higher for longer. Now that is what many people call a Goldilocks scenario.

and I think they use that because they're trying to say it's unrealistic. It's not going to happen. it's very unlikely. But let's think about this graphically for a moment.

how this could look and it will also combine real estate. So let's look at this graphically for a moment. So what do we have? We're over here in Uh December of 2022 and we think that rates are going to be lower. so we price in lower rates, right? What happens come about January and February Well, we start pricing in higher rates.

Then we get the banking crisis. and what do we get with the banking crisis over in March Well, we start pricing in lower rates. Uh, for that December era of Uh 2023. So let's go ahead and write December over here.

March The banking crisis happens. so we get higher for longer up here. This will be our rates for Green here. and now we're pricing in lower again, right? This is going to be what is being priced in rates.

Or let's write in uh, we'll say rates uh now for 4 11. But let's do a rates likely trajectory and this is going to be sort of more of what I believe in terms of the trajectory. So we'll go ahead and follow the light green over. here.

we'll We'll get our our five and a quarter, but we potentially stay there at a pause for longer. This is that higher for longer argument, right? And the reason I Think this that maybe we don't actually end up getting any kind of cut until let's say September And we sit at this pause level for longer is because we know the Federal Reserve does not want to make the same mistake that they made in none other than the 1970s. In the 1970s, the FED took this approach of start, stop start, stop with rates and that ended up being a big mistake because it broke inflation expectations because inflation expectations have been so incredibly anchored over this entire cycle. I Personally think it's highly likely that we're going to have a pause for much longer than markets are anticipating.

Uh, now what does that mean? Potentially for the stock market? Well, I think a pause for longer is actually a good thing. You still get your sort of the FED suggesting, hey, we're conquering inflation, We're going to pause so you get the benefit. What does this do? It creates the we'll put benefits It creates the benefit of We didn't break everything. Uh, so didn't over tighten, right? Benefits of pause for longer? That's what I'm calling it, the benefits of a pause for longer.

We didn't break everything we didn't over tighten, which Jay pal says, hey, there's no evidence that we've over tightened which I would argue differently that there are some evidences that we've over tightened. But anyway, Benefits of Pause for Longer. We didn't break everything. Uh, we don't repeat the mistakes of the 70s that created hyperinflation, but in addition to that benefit, we can support a Nike Swoosh stock Market.

Now Why is that? Well, first of all, it is what has been happening as interest rates were actually projected to go up. What happened? Well, the stock market actually also went up, and even though we've been somewhat volatile over here, we've been somewhat stable. Uh, and so the Nike Swoosh thesis. If we kind of, uh, draw the Nike Swoosh as sort of a big down and then a big Trend Channel up with a lot of volatility in it, we could see our Nike Swoosh this Nike Swoosh expecting to take potentially 10 years as we start our next Bull Run Now, what does that potentially mean for real estate? Well, real estate is probably the biggest outlier right now.

We really don't know. Uh, and that's because even though treasury yields have come down, spreads on mortgages have gone up, so mortgages are still pretty expensive. And right now, because there's such a lack of inventory, you're actually seeing prices in many markets start Rising uh, year over year again. and they're escaping that potential year-over-year negativity that we would have expected for next month May had prices even just state level.

we're actually starting to see those move up. You know that could uh turn upside down? In other words, real estate could get hit substantially harder in the event inventory skyrockets as Uh reads start liquidating or professional institutional investors start liquidating. I Think it's unlikely that any kind of liquidations are going to come from regular households via short sales or foreclosures or whatever. So instead I think it's likely that the stock market continues its sort of Nike Swoosh on Trend up.

We have this higher for longer regime in the stock market, right? and this is Kevin's Crystal Ball But I do think that this this takes a lot longer to rotate down. I Think the FED is going to be okay with slightly higher inflation for longer, slightly higher inflation for longer via no wage price spiral that we we already know the conditions of that are not present. We know that very clearly looking at almost any earnings call from the last three to six months of companies who who employ uh or higher labor uh, but also the principle of flexible average inflation targeting, which would suggest that the FED is okay with higher inflation rate for longer because as long as it averages two percent over the long term, they're okay with that. and they can take opportunistic inflation to get there rather than Breaking markets.

So what you have here is this combination of I think the Bond Market is a little enthusiastic assuming that we're going into this deep dark recession. I I think that upper end consumers still have plenty of money to spend and probably will for another year. Uh, but by that time we should be convinced that inflation is actually lower, which might loosen banking standards again as uh as rates slowly start coming down. So I think the the loosening of banking standards comes when inflation is convincingly down right? And then that's actually where we cut when the FED cuts.

It's a huge indicator this cycle that they've won on inflation. The FED winning on inflation is everything here. Folks, this is not the FED cutting because they care about recession or not, they will gladly Force us into a recession if they need to. What the FED cares about is concrete inflation and that's I think why We end up with a pause for a lot longer before we start getting Cuts I Think the Bond Market is being a little excited, anticipating as many Cuts Now what I Do think if I were to draw in real estate here, this is going to be a little bit trickier.

but but let's try to make a projection here with real estate. So I think that real estate prices uh, State stayed higher for longer. I think we had our adjustment down. In real estate, you know about 10 20 in some areas.

You're starting to see this right now where you're trending up in: Florida for example, you're actually positive, so you're starting to see a trend up. The only way you could really push that down is if you get substantial inventory increases, which so far we're not seeing, but people right now seem to be comfortable with these higher rates and it's leading to more of a soft, appreciating market. Now if we, then, as interest rates potentially start coming down, the traditional argument is that okay, well, rates are starting to come down as the FED cuts. The traditional argument is oh great.

Well, that means raise prices are going to go up again, right? Not necessarily what is actually entirely possible with real estate is that as rates come down, more people decide to sell. uh, people who've been locked in and they didn't want to take a high seven percent loan or whatever. and you actually keep this pressure down on real estate whereas you're increasing inventory. and as rates are coming down, you're actually just staying stable.

And I actually think this is going to create a wonderful window of opportunity to buy. I Don't think you necessarily have to try to time here, or if we end up getting any kind of like little bit of a dip again over here. I Don't think you have to be perfect on that. I Think as an investor, you want to look at thi