Man, what happened today today was going good futures were green putin and the kremlin were optimistic about talks with ukraine leading to green futures. Zelensky's been relaxing his tone about nato and neutrality putin's been relaxing a little bit. Despite this talk about chemical and biological weapons, i don't know if it's clickbait or what it is or if it's just misinformation at this point, i'd take everything with a grain of salt. But what's really frustrating is where the heck are the gains going, because prices are going down again in the stock market and there's actually kind of a limited explanation for why, at least until you dig a little bit deeper and then you go ah okay.

This is what's happening and that's what we're going to talk about in this video is why the heck did today turn so red when we've finally gotten past our cpi print, and we thought oh well, it didn't come in worse than expected. It came in our expectations. Why are things going ugly today or went ugly today? Well, let's talk about it, quick note, though this video is brought to you by ftx, but we'll talk more about them later. You can always check out the link, though, in the meantime, by going to meetkevin.com ftx link down below okay.

So after we heard about this optimism from putin and the kremlin, we did hear ukraine's top diplomats suggest that they actually hadn't seen any progress on talks, and so this immediately led the 10-2 treasury yield to go from a spread of about 27 basis points. This morning. During our course, member market open, live stream down to about 24.7 at the close, the 10-year went from about 2 to about 1.95 note, though, we've swung like crazy, and this is a sign sometimes of a bear market when you get these insane swings this week. Just this week we saw the 10-year go from 1.7 to 2.

It's a huge swing. In addition to that, while we had a little bit of a breather on the five-year break evens, those are the expectations for inflation. This is sort of a chart. We look at for what expectations are well, we had a little bit of a break.

That is an inflection point down on wednesday. As soon as we get our cpi print, and today, it went straight back up to new record highs, we're now at 3.63 percent. On the five-year break, even it's getting pretty bad and the s p 500 just had its worst week since january of 2021.. This follows, though, a really good wednesday, but the week still ended bad anyway sentiment.

This morning may have been one of the contributors, we're starting to see, sentiment fall at a faster pace than expectations, and i find this very interesting that is to which point sentiment fell to because it really strikes home. So sentiment fell from 59. Oh sorry, from an expected 61.7 to 59.7. This is the lowest level since 2001..

Sorry not 2001. 2011.! Now, there's something really important about a 2011 that we got to talk about, because there were some big fears in 2011 about something special that was going to happen in the market and if you had believed in that something special you would have missed out on some Dalai hala's, especially when those dolla hollis, came around real fast towards the second half of 2012, and it's certainly the beginning of 2013.. I'm going to talk about that, but first i want to give a quick shout out to our sponsor and then we'll talk about this. Now can i just say if you are not using ftx to trade, your crypto yet, and you are now using the amazing trading, indicating tools that they have with their integration with tradingview.

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You just push a button and buy it right here so check out. Ftx, a link down below they've got a special sign up bonus for you check it out thanks so much to ftx for sponsoring okay. So what happened in 2011? Well, in 2011, we were about two years out of the great recession about three years after the start of it and sentiment in 2011 was such that everyone in markets - maybe not everyone, but most people in markets, were expecting. That's it.

We are going to have a double dip recession. It is going to be caused by greedy banks who are hoarding foreclosures, who are going to saturate the market with these, if foreclosures leading to a double dip real estate crisis and the worst thing to do would be to buy in 2011 or 12. well, i bought In 2011 and 12, because why? Because i didn't believe there was going to be a double dipper session and there wasn't a double dip recession, but sentiment now is as low as it was in 2011 and 2011 was a phenomenal time to get started in. Not only the stock market or the real estate market, it was a great opportunity, but we have some differences now.

Inflation is obviously substantially higher the real estate market's pretty much at the top. We do wonder how much further it can go and the stock market's really the only thing that's on sale. At the same time as we have war going on in the potential of a fed rug poll, remember in 2011, jerome powell was our friend. Actually john powell.

Wasn't the chair of the federal reserve so, let's just say the federal reserve and ben bernanke and of course, geithner over the treasury secretary. They were all about stimulus. This was actually where we began qe right, quantitative, easing one and two, and eventually it just became qe infinity, quantitative easing, which is bond buying right. So this is a quite an interesting read on sentiment.

This really means that people are starting to panic a little bit and when we go back to 2011, we know that in 2011, people were starting well, not only starting to they already had been for the last couple years of the recession, but people were hoarding cash Because they didn't have a lot of it and when people don't have a lot of cash, they tend to spend less money when people spend less money, what happens to earnings earnings go down, and that is not so good because right now, i believe most analysts are Anticipating that oh yeah people are going to still spend money like there's no tomorrow like they were in january, but i actually think we're going to start seeing that consumer spend come down very, very quickly, we'll see. But what else happened? What other catalysts happened today? That could have potentially pushed our markets down. Well, we know consumer sentiment came in worse than expected. That's not so great! In addition to this, if we dive into the consumer sentiment segment, we saw that the biggest drop in consumer sentiment came from those with incomes over 100 000.

These are your consumers. These are the people buying the crap from the companies whose stock you're buying is the people making more than six figures. Those are the ones who've got the discretionary income to spend and they had a 12.9 percent decline in sentiment. This is one of the largest declines.

We saw, and it is the largest of the income thresholds in terms of sentiment, who saw a sentiment decline. This is not good again. These are the discretionary spenders which has some long range implications for travel and consumer spending and other things, but the ecb also had an interesting meeting yesterday. The interesting meeting or the ecb kind of rug pulled us yesterday, uh, that is, they mentioned that they would not only stop bond buying, which we already knew that at some point they would stop uh bond buying, but even though they described war.

As a quote, watershed moment, which is very similar to jerome powell, saying war, is a game changer. They still decided to go hawkish because they're worried that inflation in europe will be so bad that the last thing they need to do is pump more money into the economy. Previously they were expecting to end their bond buying at the end of this year. The end of 2022.

they've now moved that up between three to six months, they're reducing their stimulus to 40 billion dollars of printing 40 billion euros, i'm sorry of printing in april 30 billion euros of printing in may and 20 billion euros of printing in june. This actually came as a surprise because remember what we said with j-pal j-pal is going to go dovish because of war. We thought the same thing would be true with the ecb that they wouldn't hawkishly, try to like rug, pull us and essentially print less money or stimulate the economy less, but see the european central bank realizes that inflation is going to be worse for them than it Is going to be in america because this war directly affects them and they're, not net exporters of energy like we are so this was another negative hit that came on top of that at expectations. High cpi read so we got a few things here so far.

We got declining sentiment, especially amongst the spenders we got. The european central bank rug pulling us slightly, it's kind of like a little rug, tug, that's what we'll call it hashtag rug tug and we got shortages that are certainly not getting any better. In fact, they're getting worse see, you don't even have to look at rivien stock to know that shortages are bad, although that might be a quick cheat sheet, but you also don't have to look at their delivery forecasts. Although that could be another cheat sheet, you could do some actual research and look at things like semiconductor lag times.

Semiconductor lag times have now increased three days to 26.2 weeks, so you order a semiconductor. It now takes a half a year to get one uh. We actually had an improvement in january. It got worse in february, and it's going to get even worse in march.

Are all the way up to a 35.7 week lag time, getting hit a lot harder as well as power controllers. This is incredible. I mean these are insane lead times and the shortages are getting worse, not better. This is bad because we want to see an inflection point down in inflation.

Not up and more shortages would imply more inflation right well, not so fast, because if we were really expecting this inflation to continue, we would continue to believe that the federal reserve would end up rug, pulling us and by rug pulling us, they will raise rates substantially Higher than expected now we're expecting probably anywhere between 7 to 17 25 basis, point hikes at the federal reserve, in fact we're pricing in a 96.9 chance of a 25 basis. Point hike happening this meeting, that is march 16th, which uh just a side. Little note i think it's worth looking at and then i want to talk about what this supply chain issue actually means for the federal reserve and the big issues that we've got to pay attention to it's worth, noting that i have a preview of what the federal Reserve is likely to say at this next meeting here you go. You said no more inflation, jerome powell, i said no more inflation.

All about that comma placement there! Okay, so jokes aside, the fed is, is in this obviously precarious situation, where inflation is really really high. The supply chains are getting worse, war is going to worsen inflation, we've got those two forms of inflation, the old transitory from supply chains, which is also getting worse and the new transitory based on energy. But the big thing that you want to pay attention to is threefold, and this is really the federal reserve's checklist for rug, pulling us: okay, the anchoring of inflation expectations, wages and, ultimately, when we start getting an inflection point down in some of the actual prices due To potentially demand destruction, and so this could be a little bit of an issue. So let's look at those.

So first of all, uh inflation expectations came out today. Inflation expectations for one year rose. They went from 4.9 to 5.4. That's not good! When inflation expectations go up, federal reserve tends to get more nervous.

However, they don't like to focus on the one year they like to focus on the five-year. These are known as long-term inflation expectations back in the 1970s. The federal reserve screwed this up. They didn't pay attention to long-term consumer inflation expectations and because consumers expected that inflation would be high long term, they ended up spending as if inflation would be high.

Long-Term would not end up coming down and therefore they essentially created self-imposed inflation, and this led to a runaway of inflation. Now it's also worth noting that the 70s are so different from today. Why? Because? Well, the 70s. The inflation we had in the 70s was partially caused by the vietnam war.

It was partially caused by the war on poverty and failed price control policies. It was also caused by leaving the gold standard, as well as an oil shock. Now we do have war and an oil shock, but we have better policies today and we're not leaving the gold standard, because we've already left the gold standard. So while some of this rhymes, not everything rhymes and those five-year inflation expectations, stayed constant today, now that's good at three percent.

Three percent is the level they did not go up. So, even though we do we've got a war now the expectations for five year inflation have not moved. This folks is a first good check mark, so fed reserve rug. Pull cheek cheap first box is actually check for no rug, pull check for no rug, pull number one.

Okay. The second thing that we want to talk about is uh the wage bridle and the potential for a wage trial. We, at least in our last labor report, have not yet seen a consistent sign of a wage price spiral. Now it may be too early to tell so.

This is one where we kind of have to go tbd, so we're going to just kind of leave that box blank. The second box blank too too early to tell so far some folks say some signs of a starting wage price spiral. Employment cost indices are rising, but when we look at those month-over-month employment gains wage gains, they were flat in the last labor report. So if you have flat, that's not necessarily a sign of a wage price spiral.

If anything, that's a sign of a reduction in consumer purchasing power which leads to the third box demand destruction. If the federal reserve sees demand destruction well, what happens? Well, earnings at companies go down stocks likely go down, but on the flip side, what else happens? Inflation likely starts trending down. Why? Because people are spending less money, if you don't have enough supply but then demand plummets, then maybe you do end up having enough supply, not because the supply chains got better, but just because people, ain't spending anymore, look at what china is doing. Look at what the chinese people are doing.

The chinese people are very, very smart. The shrewd people i think they've come to be very prepared, they're saving four times as much money this year than they are last year four times as much. That means, if you are usually saving 200 a month putting into your piggy bank, now they've gone from 200 to 800. That's a lot! That's a big shift and they're also taking out less debt because they're fearful of debt in china right now, and this sort of same mentality could end up shifting to the united states and it's something to be careful of, because if we start getting demand destruction, it's Gon na be bad bad day for stocks and i'll tell you.

This oil is not helping oil at 120 per barrel likely means that inflation is going to hit nine percent oil at 150 per barrel. Likely means that inflation is going to hit 10 and every 20 increase in gas prices robs about 2 billion of consumer spending power. That means paying for electronics, furniture, consumer discretionaries, target etsy shopping amazon, you name it. It potentially also means pain in the advertising space.

If companies decide - let's not advertise, but the jury's still out on that one, because sometimes when spending goes down by consumers, companies actually increase their advertising to try to get basically the consumers who are spending money to target the ones who are spending money and to try To keep sales at least up at their business, so i'm kind of leaning on the side of i think advertising companies will do well, but it does this no good if multiples in the market are compressing anyway, so i wouldn't be surprised to see advertising up and Earnings that a lot of companies actually down would not be surprised at all to see that so, okay, we got a few things here, anchored inflation expectation, so no rug, tug from the fed wage price spiral too early to tell okay, great demand, destruction or potentially inflation. Starting to inflict down too early to tell but we're sitting in a tinderbox, in fact, a lot of things could suddenly go wrong, i kind of like to think of it as you're swimming in not water, but gunpowder and somebody's smoking right next to your pool. Okay, that's kind of the situation. We're in somebody's got to turn that into a meme.

You are swimming through gunpowder and somebody's sitting. Next to you gum, don't worry it's transitory yeah. So what do we do in a market like this? Well, i've regularly been saying this and i just want to reiterate this as well as talk about a couple other things uh, especially chinese stocks - something else that's happening here, but it does make sense for, in my opinion, everybody to have some form of downside protection. I would write on on your computer or your monitor or like put a little post-it note up somewhere, buy downside protection next time the market goes green.

I promise you. The market will have a very sexy green day at some point in the future and when it's green, you're gon na get this feeling of oh, i should buy, buy more stocks because we're going to the moon right. That would actually be a good time for you to potentially sell some calls raise some cash and potentially buy stuff like sqqq or sarc. You know shorts, i personally like shorts, better than puts because the volatility crush is just insane right now now regarding chinese stocks, it's also just worth noting that a lot of institutional investors right now are switching over to the hong kong stocks of the individual stocks that Are trading here the adrs and the american depository receipts? So there's a reason why dd and alibaba and neo and all these stocks are going down.

It's because remember the sec. I did videos on this months, back they're, crank, they're. You know they're tightening the screws on these chinese stocks so uh if they don't comply with audits and regulatory uh demands of the sec they're going to get de-listed here you know: dd just fell a ton because of talk about delays of them actually moving their dd Shares from america to hong kong, at a value of like 8 10 per share, well td's trading for like three dollars a share now here, so i don't even think they necessarily need to do that anymore. They probably won't it's a disaster, but anyway, thank you.

So much for watching this, hopefully you found this helpful go check out ftx! Thank you so much again and uh. If you want to see me every morning in those course, member live streams when the market opens up and talk to me as i come up with uh, what's going on in the day and prep for the day. Well, join those live streams. You get lifetime access thanks, so much link down below and we'll see you next time.

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