Oh hey, everyone, welcome back to episode number 58 of the Meet Kevin report. Oh, we've got a lot to cover today and we're gonna start with BTC Yesterday we covered Bitcoin We covered Bitcoin right here and we noticed that Bitcoin was wanting and it was just breaking above 282 Yesterday we're sitting right at 28.3 We we didn't close above that level on the Candlestick. We're about to form our new Candlestick in about 30 minutes here. Uh, and it doesn't look like we're gonna be closing above that.

So sitting right there at that resistance level. I Personally think that the next Fomc meeting is going to drive us into one of these directions where maybe if we get a pretty dovish powie a powie wowie. Maybe maybe we could actually pump uh from where we sit now to about 35 if we had a super dubbish Powell Uh, and there was any kind of convincing, uh, convincingness that maybe in inflation was indeed going away. The same could be true potentially for the spy and the same could be true for the QQQ Bullish targets would be uh, 409 for the spy.

and if we jump over to the QQQ we'd probably be looking at I Mean 311 should be easy, but within that 3 11, 312 to 3 30. Rich That's in a bullish scenario. If we get a pretty Hawk Uh, pretty pretty solid Hawk Tomorrow that is, we get a 25 and maybe we get recessionary GDP Outlook and we get a higher terminal rate. Despite the banking crisis, in other words, the FED is unfazed by the banking crisis.

It's entirely possible that, uh, that we fall below uh, the levels we are now and and I think the that's probably a little bit closer to where we're going to lean I Personally wouldn't be shocked. Uh, if the Federal Reserve ends up pulling some kind of Genie out of the bottle like uh, uh, hey, You know what, We solved the banking crisis. The banking crisis is solved. We had our term funding facility and we got to keep fighting inflation.

That wouldn't surprise me. so uh, that is potentially something that uh, that I think is uh is has a real potential of happening. That we did get some good news this morning. uh and uh, that has to do with Canadian uh disinflation.

We'll talk about that along with what Goldman Sachs thinks is going to happen with the Federal Reserve So let's hop into those. So this morning, uh, we got uh, we got Canadian inflation. uh Canadian inflation. Let's see here.

Okay Canadian inflation came in. Can I do this I think I could do that? sorry I switched I switched boards. There we go. This is easier.

Okay, cool. All right. let's let's fix that. Let's now talk about the Federal Reserve inflation.

What's going to happen tomorrow and what Goldman Sachs is projecting. This is a pretty interesting piece we're going to be going through from: Goldman Sachs Uh, but first Canadian inflation. Kind of interesting. Uh, big drop compared to the estimates Uh, Canadian CPI year over year for February came in at 5.2 versus the 5-9 previous and the estimate of 5'4 So a nice softening.

We want to see that in the International Community just like we want to see that at home. Uh, it looks like we had month over month coming at 0.4 versus the 0.5 previous and 0.5 estimate is. now. some are arguing that we're going to be Crossing base effects, which is where we compare to high levels of inflation last year and that's why we could potentially be getting staggered down inflation reads going forward.

But look, I don't care what it is that's pushing inflation down I'd like to see inflation Trend down because it's going to help us convince the Federal Reserve to do what, of course to pause. So let's talk about the Goldman Sachs projection for tomorrow. Uh, this came out uh, yesterday and uh, this is the forecast from Goldman Sachs I Was reading this last night and this is the forecast from Goldman Sachs They are calling for a Federal Reserve pause tomorrow. Tomorrow's also coupon expiration day guaranteed.

best price prices will be going up after that for those great programs on building your wealth. Link down below. so you're in a mill in stocks and psych most popular right now. So what do we got? We expect the FED to pause at its March meeting this week because of stress in the banking system.

Now that's interesting. A lot of folks are saying the stress in the banking system is exactly why the FED would pause and that makes logical sense. however. I Personally, and this is my take: I'm of the mindset that the FED doesn't actually think that rates uh would would really affect solving issues at the banking sector.

In other words, is a pause really going to change Change Anything from the banking sector? Let's put it this way: Remember what affects Banks right now, What affects Banks Well, what affects banks are the value of treasuries. Now yes, the FED action could drive the value of treasuries mortgage-backed Securities Agency secures. Whatever. All of these could be affected by the Fed's decision tomorrow? Yes, but they could probably have a similar effect with their talking.

In other words: I Don't think the base Fomc rate is going to be really necessary for the FED to try to manipulate the banking sector at all. I Think they can do that with their talking, they're yapping, and their projections. So I actually think the FED is going to go for we need to maintain the inflation fight. We do that with rates.

uh, banking. We we solve with the uh, buy the FED pivot facility Oop There We go by the FED pivot facility. that's not actually what it's called, but that's what we nickname it. Buy the FED pivot facility.

That's how they solve Banking And so that's my take as to what they're going to say tomorrow. And really, treasury yields have come down so much that the value of a lot of this agency debt has actually gone up. Because remember when when, uh, um, uh, sorry, Let me rephrase this: When treasury yields full, the value of the bonds goes up. One of the big issues that you've had at the banks is this plummeting in the value of their bond portfolio.

Their held to maturities and they're available for sale. Securities Well, both of them have been plummeting in value and as people take money out of the banks, they have to sell something that's worth less money now. So in other words, Banks Like crap, you know we're losing asset value while being forced to basically liquidate. This sucks, but because the banking crisis started, we've actually seen treasury yields plummet Bond values rise, which actually reduces some of the strain on banks.

So in other words, you could be in a situation where the FED looks and says, look, things are getting better, the banks are of the value of their bonds rally Financial Conditions are still tight, even though bonds rallied and yields fell a little bit. We've got an inflation fight to worry about, and that's the top priority for us because there's nothing worse than losing control of inflation. I Really expect Fed to say that now, of course I Want to go through the Goldman Sachs argument here, but just to finish: I Suppose my own. uh, take a look at this right here.

These are the and it's straight up from Goldman Goldman Sachs Financial Conditions Index: Where are we as of this morning, still stable, stable, and high Much higher than where we were in January And Jerome Powell was satisfied with that bump right there. That's the crazy thing to think about. For a moment When that Hot Jobs report came out in January Jerome Powell was like oh well Financial conditions have already tightened. He basically rolled it off the cuff to say ah, well, Financial Conditions are tight.

we're Gucci That was down here. We're up here so things are actually tighter now. Uh, then over here. this is the five-year Break Even Inflation rate.

This is in my opinion, what right here is going to reiterate the FED going for 25 tomorrow. the five-year break-even rate on inflation ticked up again. Uh, into this morning. Here last night, into this morning, that to me is telling the FED Okay, we got.

we got to stay strong because if we lose control of inflation expectations, then we're really screwed. and uh, we don't like getting screwed. Here's that inversion of the yield curve. This is the 10-2 we're looking at.

Uh, obviously the steepening is usually a sign of something breaking, which is exactly what happened. Uh, but uh, let's uh, let's uh. you know that's my argument, right? But let's let's now that I've poisoned the well. I Suppose let's go into the Goldman argument.

So they say, uh, that the FED should take a pause in the inflation fight. Uh, but that should not be a problem because bringing inflation back to two percent is a medium-term goal says Goldman Sachs So in other words, we have time, which the Fomc expects to solve only gradually over the next two years. I Don't know where they're getting this two-year idea from? Uh, that seems a little wild to me because the Federal Reserve in the past has taken the approach of opportunistic disinflation, which is where they've literally waited 20 years to get down to two percent. But whatever.

the inflation problem actually actually looks less urgent now than last summer again. I Personally disagree with that, because, if uh, the FED loses control of expectations, then we're really screwed. But anyway, and that's because near-term expectations have fallen sharply. That is true.

Long-term expectations for inflation remain anchored true. Moreover, the link between a single 25 BP rate hike and future inflation is very tenuous. That's also true. How much is our 25 BP hike really going to make a difference? But you could say that same thing in both directions, right? You could say, hey, what's the difference between 25 BP as a hike it's not going to hurt anything.

Just like you could say, hey, why another 25 Is it really going to help You could go in both ways with this right now I see your comments here. Somebody says Banks need cuts to survive? Well, not necessarily in fact Banks What they need is the value of their bond portfolios to go up. The value of their bond portfolio is just skyrocketed through the banking crisis. Now you? yes I understand it skyrocketed from a hole, right? It's like it plummeted and then it's up.

It's like that Meme that we see where everything plummets and then it goes up a little and we're like really happy that did happen. Uh, now of course even Elon Musk is chiming in on this, which this is generally a negative indicator in my opinion. for for Tesla when he acts like this, uh, which is okay, it's it's a it's not. This is not to to say that Elon shouldn't I'll I'll take it.

Uh, it's actually just a little bit of a leading indicator. When he starts complaining about rates, it's a sign. Uh, that maybe auto loans are getting a little tougher to manage. But take a look at this.

So uh, this right here is uh, Twitter Uh, Bill Ackman says the Federal Reserve should pause on Wednesday We have had a number of major shocks to the system: Three Bank closures in a week week wiping out equity and bondholders, the demise of Credit Suisse and the zeroing of its Junior bondholders. Notably, bondholders bearing losses is a major problem. Notably, bondholders. Okay, it's a major phenomenon.

fine. whatever. Uh, So then he talks a little bit more here about First Republic and the effect about this meaningful tightening that we've seen is not yet visible. fully visible.

He's basically talking about the lags of rate hikes here now. Bill Ackman is convinced the Federal Reserve studies his tweets so he takes in my opinion. He puts on this sort of like God complex uh and is like in Fed, you must listen to me. We don't yet know where all the losses are.

What if more, there are more failures of other Banks which honestly, there probably will be. There are too many lag effects and yes, inflation is still a problem. But Powell can do that by pausing and making it very clear that this is a temporary pause. No, no, it's not gonna happen.

It's absolutely not going to happen. And I'll tell you my opinion as to why and I'll take the L I I'll die on the hill. If I'm wrong, it's fine. But I'm gonna make the argument here.

Okay, anyway. Elon replies to this and says no, we don't need to pause. We need to drop the rate by 50. BP on Wednesday it's not going to happen either and I'll explain why.

So uh, here's the thing. the Federal Reserve for the last year has said: we need to prevent the mistakes of the 1970s because in the 1970s under Arthur Burns we had a start stop mentality at the Federal Reserve which was this idea that uh okay, things are getting better. Let's pause. Okay, uh uh oh oh oh oh, Inflation's coming back.

Okay, let's hike again. Oh oh okay okay, it's calming down again. Okay, let's pause that created Paul Volcker. That is literally what Jerome Powell wants to prevent the even though people say drum Powell wants to be a Paul Volcker and that he's a wannabe Paul Volcker.

I Actually don't think he wants to be a Paul Volcker because here's the thing. let's put the bias hat on for a moment. if you're Jerome Powell what do you want I will make it Crystal Clear What you want if you're drone power inflation to go to two percent with as little job loss and damage to the economy as possible and ideally no recession. Simple right? He doesn't need to pull Vulceros if inflation goes away because Paul Volcker is the equivalent of pain and Jerome Powell himself said we don't want to cause unnecessary human pain even though in the past he said we could always over tighten because then we can always basically turn the money printer on.

Again, he's balanced that argument now with the idea that he wants to limit human pain. Now are the Burns In the 70s took this start stop approach and since then the Federal Reserve has made it very clear that was stupid now. In Fairness. They didn't know because they didn't have another situation like that to compare back to.

But today we do. And today the Federal Reserve has made it very clear that a start-stop approach is a very bad idea. Uh, because it it potentially unanchors inflation expectations and then you're really screwed. Now you have Bill Ackman, Elon, Musk and Goldman Sachs all calling for either a pause or a cut.

But a start stop is exactly what the Federal Reserve has telegraphed. They will not do. They have telegraphed a start stop approach is not happening as clearly as I have reminded you that there's a coupon code expiring tomorrow that you can get life insurance in as little as five minutes. That's exactly what I use.

Apple pay and Android pay for it linked down below and you can get 12 free stocks with Weeble by going to Metcaven.com free. All of those are linked down below. Like as clearly as I've telegraphed those pitches, the Federal Reserve has said we are not going back to start. Stop It It seems crystal clear.

but but then again, people still have their their hopes again. this is all. I'm saying this what 16 hours before the event? So maybe I'll take the L here and I'll gladly take the L. But I think we're getting 25 and no start stopping I think Jay Powell goes.

Look, you know Financial conditions are good, we'll keep rates up to keep fighting inflation and on top of that the value of of agency Securities That uh Banks hold has just gone up. so that should actually take some stress out of the system along with our buy the FED pivot facility anyway. Goldman Sachs Goes on to say that tighter, tighter lending standards resulting from bank stress will subtract about a quarter to one half percent from GDP growth in 2023, the equivalent of an impact of another 25 to 50 BP of tightening on financial conditions. That's their belief.

I Actually think uh, that that could be a little later, but that's okay. The estimated impact is relatively moderate. in part because lending standards had already tightened sharply in Prior quarters, they're basically throwing cold water on the idea that why do we need another 25 BP Okay, however, the risks are tilted toward a larger effect and the uncertainty will likely linger for a while. Yes, uncertainty will likely linger for a while.

This is true. Let me just be clear, if if we get a pause tomorrow I Personally think we're going to the moon in the stonk market. Uh, like I I've said it before. I'll say it again.

I Think QQQ could potentially run uh up to 330 I Think you could get uh, the Spy easily run up past 410. uh and I think BTC could honestly start knocking on the door of 32k again. uh, potentially even higher. Um, would not surprise me at all if we get a pause tomorrow.

I Really don't think the Market's actually expecting to pause. But anyway, we have left our Fed forecast unchanged Beyond March and continue to expect. See, this is stupid man. this is no three additional 25 BP hikes in May June and July which would raise the future Peak to 5.25 to 5.

like markets aren't even projecting that right now and it's fine. I Mean it's it's Goldman's opinion, but it just seems like a very bizarre argument to pause and then go back to this idea of multiple raid hikes. Um, I I Don't see it. But okay, let's let's see what other arguments they have here.

So expectations for the Fomc meeting have changed abruptly over the last 10 days. We now expect the FED to pause. Uh, banking stress calls for a pause and we discussed it And thinking. or or we discussed our thinking.

uh in our call. Our rationale is simple: it doesn't make sense to tighten monetary policy amidst stress in the banking system that could present substantial downside, risk to the economy. you know? Another thing that people have argued is that the banking crisis was really a a tool to determine. Okay, uh, like we broke things.

how bad is it going to get and the FED could actually potentially guide? Are we going to go for 25 BP or not based on what the Market's reaction is? Well, uh, the Market's reaction is something that we could actually take a look at this morning. uh, which is a benefit that Goldman here doesn't have. Take a look at this. If we hop on over here, look at this first: Republic of 25 in the pre-market twenty six percent.

Now in the pre-market just go to the five minute chart here so you can see First Republic recovering UBS is running up uh, seven percent here and Credit Suisse is sitting at 97 cents. That's almost 15 cents above the buyout price for this. uh for the stock. So uh, that Arbitrage opportunity is continuing here.

But it's showing you that people think there's a chance now that mortgage bonds uh, and treasury bonds have actually increased in value. maybe the pain is slowly over. Now that's not to say there won't be other stresses on the regional banking system, but you just had Janet Yellen yesterday. Talk about how they're finding ways to potentially, uh, relieve the FDIC coverage limits uh, and and increase them to temporarily and potentially guarantee deposits of everyone at small and medium Banks going forward even without Congressional Authority That's something that they're quote studying right now, but based on what the market is doing today, the market seems to think oh, banking crisis.

Yeah, okay, there might still be some strains, but this is not systemic. Anyway, we'll keep going back to this uh Goldman piece here: I I Remember I Like looking at what other people what the opinions of others are Uh, because I do think it's very valuable, uh to to always challenge your own beliefs and opinions. All right. So as a result, uh, additional stress in the banking system is the most immediate concern.

But the lingering concern is that, uh, wealthy individuals and large depositors who are not fully protected might move away from the small. Banks Uh, And this is what we've also talked about with basically this idea that maybe medium and small banks will get their FDIC limits uh, extended. Of course, we've seen some substantially large borrowing. But why do they call for a pause? Well, they actually call for a pause because they argue here that inflation can wait six weeks that the inflation.

Now the inflation problem looks less urgent now than it did last summer because of year ahead expectations. However, you have to remember how the FED looks at this. The FED looks at this and says that's fantastic that expectations are lower a year ahead for inflation. but we actually we actually have to see those come through.

We actually have to see those expectations come to fruition and reality. Otherwise, we could potentially risk those things not actually happening. You know. I Know everybody's talking about this idea of housing disinflation that owners equivalent rents are going to tank, But what if they don't That's a real possibility that what if they don't Well, if they don't then you don't get the disinflation that you're projecting, right? So you actually do have to tighten to the point where you actually start seeing the stuff go through.

Yes, that creates a risk of over tightening. Our best guess is the economy will emerge strong enough that future rate hikes will be appropriate. That is from this banking crisis before the appearance of stress in the banking system. Two Trends in data suggested the risks lay in the hawkish Direction First inflation news had deteriorated a little bit with upward revisions and further problems of the auto sector still have supply chain issues in the auto sector, leading to increasing Uh wholesale prices not necessarily retail prices though.

second strength in hiring real to swell. Uh I mean I I'd like to see their data on strength and hiring I question that a little bit. Real disposable income which is still negative and consumer spending all pointing to some risk of a moderate GDP re-acceleration Maybe we'll see for January but uh, it's an interesting piece from Goldman Sachs It's an interesting argument. There is.

there is a argument an argument to be made about this idea of potentially pausing. Uh I Don't think it's a very strong one. The Fed's path Beyond March The March meeting will depend on the impact of the bank stress on the economy. So this is where they think the FED could basically pause and then just re-tighten again three times.

I Really think that meter is the 70s? too much? and if that were to happen, you Really got to start asking yourself, Is the Fed just making a historically bad mistake? I Think it would be wild and the other thing that this would accomplish a pause over here is the potential fear, right? I Mean, think about this. A Fed pause could easily be seen as what do you know that we don't and it's bad, isn't it? That's that's my thesis I Know that's a little bit jaded to think, but think about it if we get a pause tomorrow. Uh, you know on one hand, it seems like oh, that should be good, right? but then that's also going to get counterbalanced with fear. Sure, maybe we could rally under the idea of a pause, But wait a minute.

What if the fear of a pause actually ends up extending too much Where now all of a sudden people are convinced that the FED sees how bad things really have gotten and it's way worse than we think. It's not just Credit Suisse Uh, and Silicon Valley Bank and some of these crypto related firms like Silvergate or Signature, it's potentially all banks. I Mean think about the banks that have collapsed Credit Suisse has historically had horrible risk management procedures Silicon Valley Bank led to very risky startups who ran out of capital and uh, uh, you know, really, in a recession are the least likely to survive. Uh, then you've got Silvergated Signature who, uh, were basically a crypto on-ramp but because of cryptos fall over the last year, you've had a substantial withdrawal of cash from these Banks Now all of these Banks that have failed so far I have had higher risk profiles than than most other Banks So if the FED pauses after those failures, it's saying oh no, those risk profiles extend to the regular banking system as well.

Uh, that. that's that. Seems like a stretch for for me to see the FED doing that I know a lot of people are calling for it. Uh, and this this idea of a pause tomorrow.

But I mean we should make a bet. Uh, we should. You know what? Let's let's run a poll. Uh, and let's see what you think.

Will the FED pause tomorrow? All right. Paul start your pull. Will the FED pause tomorrow? Yes, pause, no pause. We'll see what you all think.

Yeah. Anyway, all right. Oh yeah. so so my take actually for what is going to be the most bullish for the market tomorrow, Well let me answer that first.

and then I'll talk about this section here from Goldman So what would be the most bullish tomorrow in my opinion, the expiration of the coupon code. but beyond that I would say the most bullish thing would be a 25 BP and then a very dovish SCP and a dovish presser. Uh, and an optimistic view on inflation. That's that's what I think would be very, very good for the stock market tomorrow.

Like if we get this I'm gonna be very happy tomorrow. Uh 25 BP dovish projections on on how bad things are going to get uh uh, for you know, recessionary point of view which will lead to a lower terminal rate and potentially a softer view on inflation that that's a hope we'll see that. In my my opinion, this would be the best case scenario in my opinion. Best case scenario number one: Uh, best case scenario number two.

Okay, best case scenario number two would be uh, pause along with a dovish sep, uh dovish um, let's see uh uh uh presser Presser not not pressure pressure is the press conference uh and then optimistic view on inflation. This has uh has the potential of creating some fear, but if it's matched with dovishness that would be very good then you do have uh. the bearish scenario. a bearish I'll call this the worst case worst case One worst case one would be 25 BP uh hawkish inflation a hawkish sap, higher term uh, lower GDP and uh Hawk pressure hawkish? Press that.

that would be your probably more worst case scenario over here. uh I Suppose you could also suggest there's a worst case scenario where the FED pauses and then it's hawkish. uh I Think that would be unlikely if they're going to Hawk it'll be 25. So I'll I'll say these These are the three scenarios uh I would I'm gonna go ahead and say that you're probably 50 percent.

30 percent? No, no, no no no no, let's go a little lower here. Uh, let's go 20 here and then maybe maybe 30 over here. That's those are Kevin's Theses here. All right.

March Meeting: Whether the Fomc pauses or not this week, it's likely to include some acknowledgment about uncertainty. but no. duh. I Mean this is like saying the sky is blue.

We expect a few changes to the SCP first: GDP growth will likely be revised up to uh, reflect the strength of the first quarter. Uh, uh, maybe maybe okay. but what about the 2024? GDP The second? the 2023 unemployment will probably be revised down. potentially by uh, a 0.5 B percentage points revise down for this year to reflect continued strength.

Okay, potentially. uh, that's going. You know, staying in the three percent range. okay, unemployment path for 24.25 will only come down slightly.

They really think things are good. which I mean that's also somewhat bullish, right? I mean Goldman To some extent here is saying like the economy is doing really well. Like so what? Uh, you know, maybe a quick little pause to get through the banking crisis and we'll take it from there. So these are their expectations so they are picking up.

They're going to increase their a real GDP Outlook compared to the Feds right here. the FED in the Fed's in green right here. And let's see where their differences are. So their differences are higher GDP Lower unemployment and a slightly higher inflation, but not much higher with a slightly higher terminal rate 5.32 Okay, it's an idea.

Uh I I'm really hoping that they lower that terminal rate. That's my thesis. but in the video that I did yesterday where we covered, uh, my sort of thoughts on the SCP I Really think that that term rate will come down? Uh, but maybe not. These were my projections.

Let's see here. my projections were right here. So let's see here this would be: Is this the right? Yeah, this is December and I'm trying to remember what we talked about yesterday: the 425. We're past that.

So Five One, uh uh. I Remember what I said yesterday I said I think I think 2023 is going to go to more like Four Eight. So let me write that down. So 2023 would be more like Four Eight.

It was my take. Goldman thinks they're going to go to about Five Three, so they're gonna pop this up a little bit. That's Goldman's take compared to mine. We'll see, We shall see.

That's a little bit very interesting, but let's go ahead and see now what y'all voted here in the poll? So uh, after all that, um, 22 percent of you voted for pause, 78 of you voted for no Pause by J-pal Doesn't this all seem manufactured trying to Institute a Cbdc? I mean like I Don't know why people are so afraid about this idea of a central bank digital currency DeSantis Was freaking out about that yesterday and he was like if I become you know? Well I mean he didn't say if I become president but we all know what he means. He's basically talking about how he wants to get rid of uh or ban the ability of the government to have a central bank digital currency. I Actually think that's fantastic for blockchain I think it's Central Bank digital currency is is a choice and shows you it gives you a lot of Merit and Credence to to blockchain I Don't know why people are so afraid of uh uh. this this idea of maybe like a Fed coin or something like that.

By the way, check this out. I Got a house hack vest? Yeah yeah, some nice colors over here. Anyway, if the FED pauses, the consequences could be horrific. Um, all right.

so the cure for a full banking system failure is a partial banking system failure. No. I Think that in capitalism, when you go into a recessionary period of time, the riskiest businesses go bankrupt. That's the point.

That's what capitalism is supposed to do with the Cbdc. They can control where you spend your money. When you can spend your money, they can apply negative interest rates and force you to spend your money. Privacy? Gone, you already have very limited privacy.

Uh, with with a lot of uh, cryptocurrency. Once people know what your wallet address is, you actually have even less privacy, right? Uh, and all it takes is the IRS to start mandating that you give them your wallet addresses and there goes all your privacy. So the Privacy takeover can happen regardless, right? Uh, This idea that that they can control your money I mean that's no different from the fact that they can control your money right now at JPMorgan JPMorgan can freeze your bank accounts tomorrow and you have no control of your money. They could close your credit lines.

They can close your credit cards. Uh, you know that like all of these things, the negative interest rates. All of those things can already happen in the central banking system. The idea that somehow Cbdc's are are like so much horribly different than what the banking system can already do with you.

And don't get me wrong, like I think a a decentralized alternative to the banking system has a lot of Merit I'm just saying the idea that that the banks can do all these things to you or ideas that already exist. Uh, so uh, we'll see. Uh I can't close my safe with gold and silver? Yeah, you got me there. That's true.

Unless you put it in a safety deposit box, then they got you. But I know you wouldn't do that. Steve All right, hit the next topic. So next next that was a great piece.

Hello right? Uh, alrighty, let's do a little bit of Tesla talk and then we need to. Oh, and then we got a Morgan Stanley piece as well. Okay, fantastic, all right Tesla My Tesla standby for little bit on Tesla All right, thank you. let's talk a Tesla First of all, I Hate to say it, but when Elon Musk starts complaining about the Federal Reserve on Twitter, let's just say it's always been followed by poor stock performance and what was Elon Musk doing yesterday? He was complaining about the Federal Reserve on Twitter and how they need to lower rates by 50 basis points.

However, as a long-term holder of Tesla, my bias exposed. Perhaps that'll create some more buying opportunities that's also predicated on having more cash to buy with. But anyway, let's talk about what Morgan Stanley in the Wall Street Journal just had to say about Tesla and how that could impact Tesla versus the competition. Here we go: the Wall Street Journal Elon Musk cost cutting targets at Tesla pressure EV Rivals Now I Love hearing that because everybody keeps talking about how fantastic of an idea it is that uh, basically uh, EVS are going to have so much competition and Tesla's going to be screwed because there'll be so much competition.

Part of that is predicated on this this concept that oh well. all the other competitors are going to come out with a cheaper car and then Tesla's going to be screwed. Okay, well let's talk about that because what do we have over here? First of all, uh, the Wall Street Journal dives into this idea that Elon Musk's new efforts of trying to cut costs by potentially 50 for a future release of a Model 2 quote ratchets up the pressure on traditional Automaker says here a managing director of a consulting firm in the Auto industry interviewed by The Wall Street Journal and what's fascinating to me is how this article Dives right into Volkswagen and a UBS analyst where Patrick hubu referred to Tesla's cost cutting plans in asking Volkswagen officials about their EV ID3 and that's because Volkswagen uh just on Tuesday had uh today just had an event where they talked about uh, the the various different uh uh, future plans for Volkswagen and in questioning the individual asks hey, so y'all want to cut prices but the reality is right now your ID3 electric vehicle barely sells above its Breakeven level. How do you actually expect to make money with an even really cheaper priced car? In fact, he says I really struggle to see how Volkswagen is going to have an affordable electric vehicle that's profitable to you in a couple years time.

The response that competition will become tougher so we will try to stay as fixed as possible on the overhead side of cost. I could do that because I was born in Germany Okay, but anyway, uh uh, we even have sailed by Zen referring to their 25 000 Euro vehicle concept car from 2025 or that should be out at 2025.. Now let me just say this: How do you expect to get to scale on a car you haven't actually manufactured yet? If there's one thing we've learned is you start manufacturing a car first and then you get to more scale. What Volkswagen is trying to say is hey, don't worry, we're go in two years the scale of our production will be so amazing for our break.

Even ID3 that will be able to produce a car that's about 40 percent less expensive because we'll finally have figured out how to not operate a money losing business I Don't buy that at all I think that sounds like a horrible idea and I don't think they're going anywhere. but okay, we'll keep going here. So uh, you've got here Airsoft Global which tears apart vehicles to Compare costs between competitors and estimates that Tesla's model Y could have about a three thousand dollar cost advantage to a competitor's comparable offerings not even including batteries. And that's today.

Even if Elon Musk is unsuccessful at reaching a 50 reduction in costs, industry observers say any significant effort towards the goal would be meaningful at basically cementing Tesla's lead above its competitors. Okay, fascinating. The rest of the industry is going to stand up and notice. Now the Uh, the Uh, Wall Street Journal then jumps on over from basically going from this idea of Volkswagen actually thinks they're going to go from near breakevens to profitable on a car that costs 40 percent less money.

Good luck to them. In the meantime, Tesla's uh, already got cost advantages today and on top of that are trending towards even better cost advantages. And so then what do they do They compare to Ford they compare to Ford and they say Mr Farley often cites Tesla at having a more than ten thousand dollar vehicle cost Advantage per car greater than that three thousand dollars. It's getting even worse for the Legacy auto.

Uh. and what I think is great about Mr Farley is I Think he really realizes where the money is to be made and where money is not to be made. And one of the things that I think is incredible is his blatant basically admission of how behind Ford is. Now some of you might remember this from the Q4 earnings call.

I Think it's worth bringing up again because we're about to go into a Morgan Stanley piece. and in the Morgan Stanley piece, we have some potential negative news that we need to cover. Of course, we could always balance out negative news by reminding you about the coupon that expires tomorrow. Prices go up, You get the guaranteed best price, you get lifetime access to those course member live streams uh, and all the new content that gets added.

So, but what do we have here? Uh, Jim Farley makes it very clear that they as well are not profitable on EVS they're not expecting to be profitable on EVS until 2026.. they also realize they have to go through many more Cycles to understand uh, how not to waste an extra mile of cabling on their products when they actually manufacture a car. And while they figure out how to actually get to profitability, they also realize the place to make money isn't actually on the car itself, but on software. You might remember me playing this clip of Jim Farley going.

But our new fully updated electric architecture is basically where we want to focus because we've learned on Pro. What we've learned on Pro is we can make real money on software. He says it kind of a little bit creepily, but the point is, they're dreaming to be Tesla. That's the point is.

the competitors are dreaming to be Tesla And basically the Wall Street Journal is making fun of them here. They're making fun of Volkswagen and they're making fun of Ford by showing they're not even close now. Look, even GM suggests our aim is to have industry leading margins. They don't They don't break out what their margins are because they're probably so miserable.

So for GM and Volkswagen, they're not competitors to Tesla Now there is a risk factor though, and Morgan Stanley believes the risk factor despite having a 220 price Target on Tesla uh and holding an overweight rating for the stock. which means they lack it. Uh, they believe that EV price cuts are not a fad, but instead are a trend. Uh, and they think basically more price cuts are going to come and that investors should anticipate further price Cuts even.

Uh, if basically Tesla isn't the one cutting see they say here. One of the reasons analysts believe prices will continue to drop is competition. If Tesla doesn't cut prices, someone else will, that's Morgan Stanley's take I Actually completely disagree I Completely disagree with this. So why do I disagree? Well, I believe that the entire industry doesn't have any room to cut prices anymore.

Byd takes three percent to net Tesla take 17 percent to net on electric. Well, that's actually the entire business for both of those companies. Then when you look at Ford GM and Volkswagen they're basically all losing money on their EVS How can the rest of the industry cut prices? They can't be a price leader because they have no PP They have no pricing power. They don't control price.

Who controls price? Tesla does. as soon as Tesla cut what happened Neo Byd dealerships. Uh, Volkswagen Ford GM All of them cut prices. They didn't cut prices first because they don't, they can't Tesla did so.

I actually disagree that even if others. uh, even if Tesla doesn't drop prices, others will and then that'll somehow subsequently lead Tesla Cut prices I don't see that. but maybe now in response to commodity Steve My boy Steve over here. Uh, this is the only person that my son knows because he knows that Steve likes gold like Steve from Minecraft Steve says Volkswagen is spending 190 180 to 190 billion on battery plants and securing raw material supply over the next five years.

That's a huge amount of money. What will? Volkswagen is higher energy prices in Germany due to no more natural gas from Russia The raw material price of battery Metals is not going to drop between now and 2026. it will stay roughly flat or increase I think increase. Well, fairness Steve is all in on the comms.

all in on the commodities I'm not I don't think Commodities actually have pricing power but I got this for you Steve I did I I had to do it man. I had to do it I had to do it Morgan Stanley and the Reuters piece here. falling lithium prices have also contributed to price cuts. Spot prices for China's lithium carbonate have fallen sharply to just below 40K a ton.

As the latest data shows, China's battery production is still still significantly exceeds installations. In other words, a glut of battery supplied Uh is sort of building up and that is because to some degree EV demand is slowing. so we are actually seeing some of that slowing start affecting commodity prices. I Personally am of the mindset that Commodities while they might be necessary I think they have hit a sort of a speculative bubble where they have speculatively been ridden up because people believe they're going to be so necessary and I think that is creating a little bit of a bubbling there.

Now, don't get me wrong, commodity prices are still substantially higher than where they have been in the past. But the point of this is not to discredit. Steve even though that would be fun and I'll still have uh beer with Steve I Understand commodity prices are still higher and I respect Steve What's worth noting though is that this is actually a very good thing. Who's it? Who whom is this good for? Whom is this good for? It's actually good for EVS that are still selling which would be like Teslas right as it compared to like Fords where your production line is stuck uh or GM even shut down their production line for a period.

So whom is this good for? Well, it's good for EVS that are still selling so that would be Tesla and Byd. but who else is it good for? Well, it's also good for battery sellers like Generac uh and and face when those battery costs come down right? So uh, that that is, that's you know it's actually a good thing. Uh, so we are prepared for Price Cuts uh to be an established feature though says Morgan Stanley. As Supply demand continues to change, we would prepare for potentially lower margins and that could potentially create more opportunistic entry points for the stock.

huh? Okay, that's where I have to actually somewhat agree with Morgan Stanley. Well, I do not believe that uh uh. you know other EVS are going to drive pricing cuts at Tesla I Do think Morgan Stanley is potentially correct in that? Yeah, maybe maybe uh, lower margins are going to be coming and I think Q1 is probably going to hurt for Tesla And maybe that's why Elon Musk to kind of Go Full Circle is yapping about this idea of a 25 BP cut. The reason for that is I really think that Elon uh well I mean we know this.

We know he has a an early look on this. We know in the last earnings call the expectation set was that margins could go down to 20. but I don't think Wall Street is convinced that we're going to get 20 yet. So I'm a little nervous for that next earnings report.

combining Elon Morgan Stanley and what was said in the last earnings call: I I'm not short-term YOLO Tesla Uh I Do not believe we're going to revisit the lows we've had on Tesla Could we trade sideways and maybe test that that you know around the ones? I Don't know that we're gonna even break 170. If we do, it wouldn't be that great. but 170 175 around there has got some pretty good support I Just don't see us escaping from that until after we get past the the Q1 era. unless of course we had an incredibly bullish fad tomorrow, which which is always a potential.

but uh, but but I remain I remain unconvinced. Bottom line: out of all of this coupon code expires tomorrow. Get life insurance in as little as five minutes, Get 12 free stocks with Weeble Tesla Bottom Line: Short Term Little Bearish Elon uh Margins Short-term bearish especially through this next uh uh uh. quarter report which comes out in April probably around 4 20 actually actually I wonder if it's scheduled? That would be funny.

Let's see here. Tesla Earnings Report Date: Let's see if that oh missed opportunity 419. so that's less than a month away. We've already got Tesla earnings coming up.

So I think you're going to have a fear trade going into Tesla Earnings usually Tesla Stock trends down after earnings. Uh, and after events. Any kind of events tend to push Tesla down lower as well because well, the events are just not as juicy to to the broader Wall Street Market They're juicy to long-term investors. They're fantastic for long termers, but in the short term, events and reports seem to be more negative than positive.

So anyway, uh, 419, mark your calendar for that. uh I Do actually think that event eventually these these falling commodity prices will help. but I don't think they're falling quickly enough to actually get Tesla back to higher margins soon. Remember what they told us in the last earnings call and the last earnings call, they said yeah, probably trending closer to 20 and then it'll take us a few years to get back to 30 margins.

So they did set the expectations. but I Personally think nobody really paid attention to what they said in that earnings call. So I think there's uh, there's going to be a a little oopsie-doopsy there. Um, so we'll see.

But yeah, Elon asking for a 50 BP cut I think is a little bit of a red flag too. so again, short-term bearish, long-term bullish. I Really don't think the competition has pricing power uh or or holds a candle. but I'll I'll use it as a a by the dip op so we shall see.

All right. next up. Well, we're gonna have the opening bell here in a minute. so I rarely do this, but we're actually going to hang out for the Bell together today.

I Started so late and I still have uh, another one or two stories to cover. That's my fault. So that means uh, all us course members are going to be starting at 7am in about 35 minutes. Uh, I don't fly today so we've got lots of extra time, but that doesn't mean everything got shifted back.

That is the first time out of 58 meet Kevin reports that uh, we'll have a public bell ringing together. Let's make sure I can actually get it right. Let me see here if I do uh I suppose I need to figure out because I have this new board now if I press this button uh now I just have to figure out how to get the uh the oh yeah, that's this button is it? Oh I gotta figure I figure that out. Oh okay, hold on a sec I gotta make sure I get the audio going uh -huh Kevin set your audio up the uh I have a brand new switcher board today.

uh and I'm very excited about it but it is very very complicated so I need to uh get to the bottom of it. Oh there we go. This is the first time I've seen this morning the notion that the revenues are getting better A lot of people liked I did all these different cuts because the records don't get any better. You're fine.

This is a piece which is metas AI Investments are making reals and real engagement Revenue drivers so that this is something that Mark Zucker was helping reels is going to really come around spending a lot of time there just to talk about the people are are just using plain old uh Instagram work. So I think the thing that it's as they say it's under appreciated. Call option even faster Revenue No one David No one has investor revenue and crazy right? I mean we there we go Manifesto All right I figured it out I did it Fantastic! Uh you know what's actually interesting is my new board has an eight button soundboard built into it. but I I can't figure out how to get the files on it yet? So yes, I'll have a little eight button soundboard and I hope to be able to play some music for us soon so we can make some funny sounds.

uh but for some reason it doesn't want to load my little USB drive. it seems to be convinced to just give me an empty file list. Oh well, I'll figure it out. So uh, all right.

uh, we got about one minute to go before the Bell let's uh, take a quick little look over here. uh as I figure out my my technical stuff. oh that is nice. All right.

Uh okay, let's see what we got here. So uh okay, QQQ looks like right now we are, uh, we're trending up uh, what are we at? 0.64 So almost, uh, two-thirds of a percent up and face has been rocketing uh, increase my allocation a bit uh to end phase uh, indirectly through my ETF which you could learn more about uh by going to meet Kevin.com But I increase the allocation like three times last week? uh to this one and uh, specific. the largest increase was around like 182. so I felt pretty good about that one.

uh I I Do think the the low is 164 for this. this is the back of the truck so every time it kind of breaks this 200 I I Like it. but anyway, uh we'll see how the Bell is this morning. Let's go listen to Jimbo the revenue both is slowing.

It's slowing big in Amazon Now how about this game itself. They sold straight what they fired X now Amazon had hold on. we're gonna get an opening belt. it's gonna get loud ringing right now.

Pharmaceutical Services Celebrating I I Still think the Bell is so cool it is. It is such a cool tradition. I I love the Bell Uh, maybe because I was actually there and rang the bell. so maybe I'm biased but uh, look at that folks.

we've uh, we used to be pumping at open into uh uh into uh, what's it called uh uh, the Fomc meeting tomorrow. uh, look at that. JPM up three percent. How? How are you supposed to tell Jerome Powell that we have a banking crisis We need to be worried about when JP Morgan's up 2.8 percent when uh, where's uh, you know Credit Suisse is up at 97 cents when UBS is up seven when First Republic is up 30 percent Tesla 3.4 Dave and Buster's up two percent.

back to 36 bucks. Nice! Etsy Slowly trying to come back. Etsy's been getting reamed. Uh, although if we can get him back under 100 I think there'll be some nice opportunities here.

Charles Schwab Now up four percent. Uh. Canadian Solar Open Door. Oh, you got a risk rally today Carnival Dogecoin Harley Sun Power Meta.

These guys are all moving nicely here. Oh well, it'll be really entertaining. There's always one thing you can guarantee and that's Entertainment So uh. all right, let's uh.

let's get to covering our next starry let's see here. How do I do this? Uh oh dear oh, that's inconvenient. Okay, well I'll figure I'll fix that problem later I Love it when they're problems with my new board. All right, All right here we go.

Okay, so the next topic that we've got to cover is let's get into this: Uh Morgan Stanley bear piece and a little bit on chips. Okey-dokey good old Bears Love the Bears Bears are great all right. or Morgan Morgan What have you for us today? There we go. Oh yeah, we'll talk about the S P 500 too.

This will be fun. Okay, and yeah, here we go. All right. Well, we gotta address the Bears again out of respect for the Bears.

Yes, we have to respect the Bears. Uh, we've got to address how the Bears could be right and where the Bears could be right. Except in this video Beyond Just talking about their ideas I'm going to go through specifically some stocks that I'm bearish on and why in some sector, a specific sector that I'm bullish on and why and why that sector I think is actually still oversold to a good degree. So first we've We've touched on this piece before, but we touched on the first half.

This is the second half and it's really a Mike Wilson Morgan Stanley piece Where we talk about the risk of a credit crunch materially expanding. And one of the things that I really want you to think about when it comes to a credit crunch is what's on what's on screen. Uh, oops, there we go. What's on screen right now? So when it comes to a credit crunch, uh, hold on a second.

Here, it is, uh, looks like I've got a little bit There we go. Okay, sorry, looked like there was a little bit of an oopsy-doopsy there for a moment. So anyway, when it comes to a credit crunch, what do we have to pay attention to? Well, all of the things on this list actually see a lot of us think oh, it's it's just going to be mortgages that maybe have a tighter lending standard or maybe car loans will be a little harder to get. but this is actually important when we look at Banks Look at all of the different types of lending that you can get in a credit crunch environment.

All of these get restricted. I'll actually start from the bottom up blocks. Do you know what a block is? Well, if you don't, you should. It is a business line of credit.

It is probably one of the most important forms of credit. Remember all this this kind of stuff. If you've never heard about it before, these are just examples little tidbits of all the stuff that we cover and the amazing programs on building your wealth. Link down below, including the Elite Hustlers Course for entrepreneurs starting a side hustle uh, Llc's Insurance Liability, Stocks and Psychology Money Real Estate How to actually go from zero to millionaire? It's not that hard in real estate.

it's actually pretty easy. Just follow the steps in the zero to millionaire course. Anyway, link down below. We've got a coupon code expiring at the end of the day tomorrow.

But with that aside, blocks or business lines of credit, they're very important. They're very important because contractors or, uh, or even manufacturers. They use lines of credit to buy inventory. While they use the line of credit, they can manufacture their product or complete a job for their customer, and then after that, what can they then do? Then they can bill their customer, pay off their line of credit after paying all their bills.

It's very typical to use a business line of credit to do that by potentially crimping lending standards and crimping business lines of credit. Uh, especially from smaller. Banks You could really be crimping the economy substantially more than anybody is projecting right now. And I have to give a credit to the Uh the Bears for this.

The Bears are right to say that all of these different types of loans don't need to see a lot of tightening to really crimp the economy. I Just showed you one of them. Business Lines of Credit Business Lines of credit. Getting a 50 haircut could could shut businesses down.

You could see Mass bankruptcies. Now there's no guarantee that these things are going to happen, but let's just say I moved some money from some of my credit lines yesterday to to basically have that money drawn down and I'm just leaving it in cash to give me more flexibility in the event that Banks start crimping down on credit lines. The same goes for now. these can often be deemed more discretionary, but boat loans and plane loans.

These These are massive segments of the economy that uh uh, of more of the wealth economy, but they lead to a lot of additional spending. The maintenance, the piloting, the captaining, the fuel, the the, the warranties, the amount of money the amount of GDP that's created when somebody buys a plane or boat is insane. Uh, just because there's there's so many ancillary costs, they actually the individual product somewhat different than a mortgage loan. People might move in and do get some new appliances or whatever, but they're not bleeding money like they are with a boat or a plane.

Usually mortgage loans getting tightened. Uh, Personal lines of credit or personal loans? Home Equity lines of credit, Rental Property lines of credit. These already basically went away in the pandemic. Margin? of course.

Margin lines get credit. uh or or get squeezed. Car loans, Credit loans? those are more basic. I Mean you all can imagine that.

That's that's a little bit more basic. So Morgan Stanley talks a lot about this credit crunch being evidenced by this steepening of the yield curve. This 60 basis point steepening in the yield curve, which we've only actually seen a few times before in history. And what they say here is they give us this beautiful chart and they say look: Growth risks become increasingly apparent when the yield curve re-stepens from a trough.

Much like now. look at the last times we've had a re-steepening of the yield curve. Let's go back to 1979. Ah, recession.

right after that bummer. let's go to the early 80s. Oh recession. Right after that bummer, let's go to 87.

Oh recession. Right after that recession Being the big red bars, What a bummer. Uh, now look at the where we actually had some some soft Landings I'll show in just a moment as well. But here you go.com bubble.

Here you go. 0607 Here you go 2019 Although that walked into the pandemic. so I'm going to put an x on that one because I think that was really convenient. That could have been a soft Landing and and not a recession had it not been for the pandemic.

But let's actually, uh, take uh, purple. let's take the purple line. uh, color here and let's show steepenings on soft Landings Look at that, the famous mid 90s soft Landing Look at that. the re-steepening over here twice in the mid 80s without a recession.

Look at this, the famous 2013 wreath steepening. So you can have race deepenings and no recession. It has happened, so it's kind of tough to say. uh, like Darren makes a fair comment Darren writes here but this time is different LOL he's making the reference to hey, like all these greens are clearly telling us that when we receive in here, we're going to have a deep recession, right? But it's not that easy to say this time is different because which time is different the time we had the soft Landings these three moments of re-steeping over here or the time we had recessions these five times I Don't know.

So I I think that re-steepening is a little bit of a mixed tell I think the bear argument is much more reasonable in a credit crunch. that is the lower availability of credit via the sources that I talked about uh, and then also the potential for a lower velocity of money leading to lower spending. And I'll show you where I think that lower spending will be with some specific stocks. So anyway, uh, they talk about the velocity of money and banking potentially falling sharply and likely offsetting any kind of QE money printing or increasing in the money supply.

So even though we're seeing that QE up and Bitcoin sort of cheering that idea if the velocity of money goes down, maybe you actually won't see the benefits of that as directly. So instead, what do we want to pay attention to? Well, maybe we pay attention to uh, earnings and the fact that even though earnings uh, have uh have have come down, they according to Morgan Stanley have remained sticky and in some cases have actually risen here recently. Uh, and so then they also discuss how the earnings risk premium is way too low. In other words, why would you put your money into stocks right now when you could make so much money risk-free via treasuries? the spread is too low.

Now to counter this, one of the reasons the spread is so low is because nobody expects those treasury yields to remain as high as long and the opportunity cost in stocks is actually widening. That if treasury, let's plummet and the stock market you know goes up 50 percent. Well, fantastic. Now we can explain why the earnings risk premium is so low.

So this is where I want to talk about some specific stocks and the first sector that I like paying attention to uh is Uh, here's a Seeking Alpha piece you could actually sign up for Seeking Alpha by going about Kevin.com Seeking Alpha I actually I like them, sometimes there's good perspective, you just have to understand who's writing it because sometimes you get biased authors over here. but they do have some some really good perspective. So the first sector, because I want to go through the S P 500 over here, we're going to go through the S P 500 and I'll explain some of my thoughts on some of these different stocks. but when it comes to actual chip expectations, they make this this cautionary note here to say that you should temper your expectations for chips and I agree I Don't think we want to assume that chips are going to explode now Nvidia stock has exploded and so have some other stocks even like Taiwan semiconductors from their lows.

but that's in part due to really high, highly negative expectations that we had for the PC market dropping over 30 in sales. But they make this argument here that you have mixed conditions in the near term for uh. for chips, they think that data center orders appear to have weakened further in the past few weeks, whereas PCS TVs and smartphones have potentially hit a bottom. Now this is actually reiterated by Amazon potentially indicating slower Revenue in their data center space which when we went through the Amazon earnings report in our course member live stream, let me see if I have it handy here.

We saw exactly that kind of softening. I'm not sure if oh yeah, here it is. Look at that. So this is the kind of stuff we generally do at our course member livestream.

We could we pick a company we do some fundamental analysis we try to pick up on trends. For example, we recently went through the Honest Company and how horribly honest that uh, earnings call and the actual earnings report was. You could see the full Archive of course member live streams of the fundamental analysis we do in the courses. remember, you get a lifetime access.

You buy one of any of the courses, you get lifetime access to all of them. Uh, well, to the live streams. Uh, but anyway, with the exception the Elite Hustlers that has its own separate live stream. but um, that's a Saturday Sunday live stream.

But what we wrote here is that AWS growth has slowed to under 20 percent growth whereas it used to be closer to 30 40 percent growth. And on top of that, they're seeing margin compression in the AWS space which is starting to indicate a lack of pricing power. It's one of the reasons I Personally have stayed away from Amazon because I I Don't think they certainly don't have pricing power on merchandise I Think they lose money hand over fist on merchandise I Don't want to be exposed to the creative sector of Amazon which would be the um, you know the TV segment I think that's a money looser the Production Studio So I think the Production Studio is a money loser