Foreign Welcome back to another meet! Kevin report My favorite metric as of late is honestly: Bitcoin It sounds crazy, but it really tells me what the day is potentially going to be like and so far it's been pretty right on for the last. Uh gosh, I'd say at least two and a half weeks after the banking crisis I Mean quite frankly, look at the Senti of a Bitcoin This here, of course, is Weeble that platform where you can get 12 free stocks on. Uh, now take a look at this. If you look at the banking crisis, you don't even have to know what date the banking crisis occurred.

You could basically see it. The banking crisis came to a head here and we quickly recovered back to that 28 2 level and we've since been bobbing around like a rubber band on a pole a horizontal Monkey Bar bobbing around this level and we've been stuck here for a good coming on three weeks now. In my opinion, that's actually a fantastic thing for markets because it's suggesting that even through the volatility and the fear and the uncertainty and the doubts that we are facing in markets broadly banking crisis politics China Ukraine we are stable around this particular level in terms of risk on sentiment. Now, don't get me wrong, I Still think that there are.

There's a real argument to be made that a lot of Bitcoin trading is heavily manipulated by the exchanges uh, and and particularly whale wallets typically run by exchanges. But that's not to say that I Don't think there's some validity to this as a risk indicator. So I Enjoy! Uh, it's probably one of the first things I look at uh, then if we look at the S P 500, you can actually see where the relatively similar trading range on the week. here.

For much of the Year, we're kind of stuck mostly in between uh, the uh the first two retracement lines uh, four, uh, the uh well I should say the the if this is your your bottom, you're zero then here's your 23 and then you get into your 30s over here uh We've and actually 50 even over here. we've really been trading around this sort of bottom third over here. same thing with uh, the NASDAQ uh except the NASDAQ just in recent days tried to push through. uh and this is despite the fact that we've had so much turmoil now.

I Think this is actually really incredible because now we're starting to potentially break that that uptrend on the NASDAQ uh and maybe that sets up for a little bit of some selling pressure again. or we just slowly Nike Swoosh In my opinion, uh I the Nike Swoosh is gonna be a long game. people Hear me say it, They think, hey, why did stocks go red today then well remember it's always been argued that it'll be extremely volatile. So I really believe that if we zoom out on more of a weak chart, this is the beginning of your Nike Swoosh And if you look at this from the week chart on the QQQ, you really have to think well, Kevin if that's going to be a Nike swoosh because it looks like a reverse Nike Swoosh Right now, you're really talking about a decade of a Nike Swoosh And yeah, that's actually what I believe I Think this will be a nice slow steady.

uh, a very volatile when we zoom in, but on sort of the weak charts, it'll look like a very slow and steady, long elongated Nike Swoosh Could really take potentially a year, maybe uh, or two years, or three years to get back above some of the heights that we saw at the end of 21. Uh, But but really, setting us up for this style of a recovery, which we've had since, uh, probably somewhere around 2010. This is the sort of slow and steady boom again, uh, not necessarily what we saw after the pandemic. not necessarily at the speed, but what we previously saw.

That's a belief that I have right now. Uh, and uh, yeah, y'all know I changed my mind a lot, but this one's been pretty steady consistently here. Uh, it. I Like using Bitcoin as sort of a little bit of a tell of.

Okay, all right, how how's the day starting out and anytime I see it over 28 too I get a little excited I think the next, uh, the next stop probably from a risk metric is uh, is closer to that 36 range uh and Bitcoin Moves In in funny and and quick and Rapid ways so uh, we'll take a look at uh, how that evolves now I do want to look at the five-year break even and uh Financial conditions as well I try to do that every morning in addition to the research that we do throughout the day uh, or in the morning, the five-year Break Even is a pretty cool tool just to see sort of sentiment of the day of where uh, markets heads are at in terms of inflation. Uh, Yesterday of course we got the jolt status jolt stata in my opinion. softer uh than uh than expected. Some people are saying Oh but you know you know quits weren't that high and and maybe that that is a signal of uh uh of of some strength.

uh, who knows. People can argue some of these both ways, which I think is fascinating. But the five-year break even right now. if I look, get it.

it actually did come down after some of that Jolts data. it did rise after the oil talk, but take a look on screen now and you could take a look at the five year break. Even here, you're going to see The Five-Year break even right now. Relatively stable sitting around that 2-4 level.

And when I say stable I mean relative over the last uh, maybe six or seven months here, Let's see, September is nine. So yeah, six months. So it puts us back about six, six and a half months here, of, uh, of of roughly sitting at average right now. Hold on one sec.

Oh I Hate it when those sneezes come out of nowhere. Okay, so uh, so anyway, sitting here roughly about average there on the five-year break. Even now that's good. That's actually a good thing.

Now, it doesn't predicate rate Cuts Yet, right? In order for us to see rate Cuts, we really need to be about a percentage Point low or maybe 80 basis points lower than where we sit now in order to anticipate cuts from the Federal Reserve. However, this can move very, very quickly. We saw that during the banking crisis. Well, we actually went from Hot January Numbers and Fears of Hot January numbers and uh, and and uh, you know, uh, the beginning of, uh, sort of, uh, too much of a little bit of a risk-on rally there right before the banking crisis.

How quickly the banking crisis killed inflation, expectations, and renewed, uh, stagflationary fears. Uh, and so now we're sort of level again. Uh, without. uh, without some of those, uh, uh, uh, you know, euphoric feelings, uh, and some of those fear feelings.

So sitting again, right there at that six-month average? uh, which is a good thing. So uh, now it's just a matter of okay, well, what's next? What's next for the markets? What's next for spending? What's next? Uh, for inflation? Uh, and uh, that's where I'd like to jump into some of the uh sentiment pieces that we've got. The first one that I'd really like to pay attention to incorporates this earnings call that that I thought was, uh, probably one of the most ridiculous earnings calls I've seen in quite a while. so we'll have to go through that as well as looking at corporate spending and some Hospitality spending.

Then we'll get into a little bit on JPM. We'll talk a little bit about the FED as well. So uh, we'll call that sort of the uh, the market intro. And then let's jump into a consumer spending.

So that's always a big deal, especially since the consumer represents about 75. uh, probably less. Now it used to be about 72 actually, but now it's falling a little bit. probably closer to about 65 percent of the economy.

So uh, we'll start there. and uh, let's talk about consumer spending a little bit. so we know consumers make up over two-thirds of the economy. And one of the things I love paying attention to is what's happening at the edges and the fringes.

What's happening with poor spending and what's happening with richer spending because it gives us an idea of where are people starting to cut back and there are two areas: We're starting to see cutbacks, where ordinarily you don't want to see them to keep a good boom bull market going. And in this case, we're going to look specifically at corporations and richer household spending. So let's jump in with corporations, then richer household spending. And then we're going to talk about a CEO that lashes out about what's going on in the market right now Now this is also related to the spending sectors I'm talking about.

But I haven't seen a CEO in my opinion in an earnings call, a professional earnings call lash out the way this one does. Usually CEOs are really respectful and uh, you know they they don't trash their competitors. uh, all all bets were off this time around. Uh, and uh, you're gonna see a little bit of entertainment in an earnings call, which is usually the opposite of what you would expect to get in an earnings call.

But first, let's understand what Barons thinks is happening in terms of corporate spending. Take a look at this. Here's a piece on Company C A Slowdown ahead and this figure tells the story. So let's take a look at the story that Barons is suggesting.

So first, companies are tapping the brakes on Capital spending as they anticipate cooling demand. It's not great. they are conserving cash as they prepare for a tougher economic environment that might be prudent on their part. And good news for shareholders.

After all, good news for shareholders. When a corporation Cuts back, you temporarily see a boost to operating profits, right? right? But what if they're cutting the potential investments in their business that actually let them continue to seek growth? This is actually a very important thing to consider when you're investing in stocks is: wait a minute. It's fantastic that the company I'm investing in is cutting their SG A expenses they're selling General and administrative expenses. But if they're cutting selling, are we potentially robbing from the future growth of the company to have a higher margin? Now, during potentially a weaker time And often the answer is yes.

Now, in many cases, there are also companies that just take advantage of the layoff cycle of a recessionary environment to get rid of poor performers. This is very normal as well. After all, think about it. companies don't want the reputation of firing poor performers because if people regularly get fired, it makes it harder for a company to promise job security to new employees when they come.

However, if a company can throw up their hands and say whoa, Recession? sorry man, we gotta cut back we gotta. You know we can't even offer the food we used to offer anymore. Sorry, we gotta lay off a bunch of people. Generally not always okay, not always, but often the first people to get laid off for the poor performers that if a company had a firing policy, would probably be fired Anyway, there are a lot of companies where people would actually be really hard workers in and they'd look around and go.

This is so frustrating. There are other people putting in 10 percent the effort I do if they get paid the same amount, but the companies don't have a policy where they can actually fire people. so they wait for a recessionary cycle and then they go through the weeding cycle. So I'm saying everybody who's laid off is affected by that.

Just saying. It's a very common thing that corporations do so in this same weeding cycle. What is Barons telling us? Well, they're actually saying that companies may be cutting back on Capex substantially based on the Sharks Barons is looking at and that could be a red flag for companies that sell heavy equipment or Technologies and systems used in Capex. Now the first thing that I think of when I think of heavy equipment is I think of the Investments that farmers were making during the inflationary cycle uh, after uh, the pandemic during the supply chain crises for shipping, but also for food like Farmers for for uh, even wheat after Russia invaded Ukraine or other food products that exploded after the pandemic such as even chicken and so heavy equipment that goes into farming or in industrial manufacturing or even the processing of meats.

I think a lot of that heavy equipment was purchased and invested in during the pandemic or Commodities Bull Run cycles and that may get rained in now. So I'm looking Caterpillar John Deere as potential red flags here. but I also scratched my head and wonder what about Asml? Are they going to produce less chip manufacturing equipment? Well Barons actually gives us a little bit of insight into this and stay tuned because we still have to talk about that crazy uh earnings call from uh from a corporate CEO And that's a corporate CEO you're all well aware of as well. So analysts expect aggregate Capex for companies on the S P 1500 index to rise about seven percent just over one trillion dollars this year.

according to Citigroup that's down from a 21 increase in 2022. That's about a one-third as much growth, and it really kind of matches inflation. It is expected to rise just two percent in 2024.. Now this I think is interesting.

One of the biggest things that I personally have learned during this cycle is that things take a lot longer than normal to adjust. It takes a lot longer than you'd expect for the market to bottom and for things like inflation to actually go away. That patience is frustrating. But it's also good for planning because if we're at the beginning of 2022 and we're thinking all right, recession's coming within the next six months, but it actually potentially takes two years, it would be good to plan for that.

potential. Heads up Now, weakness is expected in more economically sensitive sectors or those that see sales rise and fall with demand economic demand. The consumer discretionary sector, which includes retail, restaurants, and hotels, is likely to see Capex explain a drop rather by three percent this year. Now that's interesting because retail restaurants, hotels, and the like which would include Airlines would make you wonder.

wait a minute. Is it possible that that booming segment where jobs and wages are growing so strongly in retail restaurants Airlines Hotels hospitality. Is it possible that those companies are going to rain back their expenditures on coffee machines, new stoves? uh, you know, new equipment for their airplanes? Whatever. As they try to maintain profit margins, and as they start seeing competition at the top where they can't raise prices anymore, the answer to this is likely yes.

Consider for example, what darted the company that runs Olive Garden for example, is doing they. They're talking almost solely about efficiency and productivity and doing more with less. Back a year ago, all they were doing was bragging about how they could raise prices. This conversation, a narrative has completely turned on its head.

Now all of a sudden this the companies are realizing they're in a situation where they're looking at the scoreboard and they're going uh oh, lost the lead. That's not good. They don't want to lose a lead. They want to stay ahead.

but they don't have Phoebe anymore. They're not pricing power. So what do they do? They stop investing in their business and new equipment to try to maintain margins to appease their shareholders. Excuse me that is really borrowing from the future and giving to today because if you don't continue to reinvest in your business, your sales will probably suffer in the future.

It's one of the reasons I'm personally bearish on uh, on on retail and hospitality and travel. I Understand, there's a boom in that now, but I'm bearish on it because I don't think it'll last. In fact, before we continue with this Barons piece, I could tell you that there are already red flags that some of these sectors are starting to get hit. Look at this.

here is a piece from Bloomberg Talking about hotel rooms over 500 a night are too much even for Rich Travelers And they talk about here. This may be a reflection of diminishing consumer confidence that inflated prices have not been accompanied by a proportionate increase in service quality. See, this actually directly relates to the Barons piece and the argument that I'm making where companies are starting to cut back to maintain whatever margins they have. They can't raise prices any more than they already have, but then people are going what the hell? I'm paying a premium and you all aren't even keeping up with expenditures and investments into your own business.

The service is actually getting worse in certain cases, despite you paying a premium for certain products. The results come during what should be one of the busiest periods for travel booking. March is when people start finalizing summer plans and early birds get a jump on year-end holiday reservations. Okay, however, some 69 percent of poll participants said their maximum budget per hotel room was 500, while 24 were willing to spend thousand dollars.

Still, five percent set their limit at two thousand and two percent were willing to spend three thousand. Respondents include Traders portfolio managers, senior managers, and Retail investors. Uh, although 500 to 1000 might seem high, the range eliminates the fanciest hotels in major markets. Okay, so they kind of give a little bit of a breakdown here of of this survey and here is where they suggest a difference: I'm always interested in the Delta the difference of what's going on.

The results of the survey suggest that luxury hotels, restaurants and Airlines will face increasingly irritated customers or consumers this summer. I Don't even want to talk about how disgusting uh uh, some hotels have gotten in that it's Kovitz over and they're still saying yep, sorry, no room service You know, covert and I'm like this is yeah, it's crazy anyway. uh. bank failures, fast inflation, elevated mortgage payments, and the softening labor market especially in the high income sector such as Tech could see tourists keep discretionary spending in check.

This is a shift. We wrote a little note here. This is a shift. Uh, from what we heard from American Express where individuals were still spending through the recession that was in the American Express last quarter earnings call and American Express appeals heavily to white collar and and higher income individuals.

So what's important about this? Well, what's important is we're starting to see complaints at the margin at sort of the right side of the right tail maybe the higher income tale where people are starting to go okay, starting to run out of money here. it's starting to have to pull back. In my opinion, that's negative. Not just for the companies that would be investing in Capex like we were talking about the hotels or Airline manufacturers, but it's also a red flag That not only are we going to start seeing some of that softening at the lower consumer end where we're probably going to see most of the softening in most of the hip, but we're starting at the margin to see some hit to that discretionary higher income phase.

Uh, and that's something to pay attention to as well. This is why I Always encourage people. make sure you have some kind of side hustle where you're making additional income. In fact, if you want to make YouTube videos, the easiest way in my opinion to do that is check out Stream Yard.

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For example: I'm still working on editing some of my own banners that we threw into Photoshop but I could throw throw up a bunch of different banners here like here's one: I throw around myself Met Kevin.com free I could throw up the little paid promotion thing if I want I could even throw up a little ticker at the bottom over here. It's a pretty cool platform, so go to Metcaven.com stream and realize you could record your presentations. download them in HD edit them even within the browser. don't even need editing software anymore.

They do it with you. So check out Metcavin.com Stream Yard. It's been a lifesaver for me for the past few years, especially since I'm traveling so much. but going back to this and wanting to get into what this CEO is saying as well I Do think it's worth wrapping up on this piece right here before we transition.

Where there's this mention here in Bloomberg that retail investors see positive Airline share drivers, but institutional and professional investors actually think the airlines are going to get hit pretty hard based based on a lack of potential Capex spending that we're starting to see at some of the airlines going back over here to. Barons Look at this. the reason companies are watching they're big ticket spending is because they're preparing for more muted demand and profits. You know there used to be this story, uh, that, uh uh, that my father-in-law used to tell me he goes Hey Kevin You know there's this, uh, there's uh, this story about uh, this father who ran an antique shop off the highway and uh, and the antique shop was doing very, very well.

It was like 2021, right? The antique shop is killing it. It's got growth, its income is going up, everything's fantastic. It's spending money on Advertising it's growing, it's going great and then the son who's college educated says well, Dad don't you realize we're going into a recession? You should cut back and so the father-in-law says oh no or the father said we're going into a recession. That's that's terrible.

Well, we better cut our spending. Let's let's cut our spending on that billboard that we have at the corner of the freeway that says Exit here to our antique store. Let's let's not spend the thousand bucks a month anymore on that billboard because we need to prepare for the recession and so they canceled the billboard. Sure enough, people don't come to the Antique store anymore because now the billboard is gone and all of a sudden income falls for the store.

The Father's like my gosh, son, You were right, we're going into a recession and the point of the story is to argue that good. Lord You know some of of the recessionary impact of the economy that we're in can very much be self-fulfilling When businesses cut their cap X spending, they can induce their own recession. Now this is exactly why uh and I try to be really neutral here: I'm just going to put my cards on the table and go. The reason I selected the cards that I did is because I think the cards that I chose the stocks that I chose are basically businesses that not only have pricing power, but are going to continue to invest in Capex and growing their businesses during the recession whereas other businesses are cutting.

So I think Consumer Staples restaurant retail Hospitality all of those uh, and even the Industrials like the Johnson and Johnsons the 3ms I think they're all looking at all of them because they're self-induced using basically their own recession whereas I think the companies that are not are first of all, the ones getting the stemi checks, but second of all, the ones that are basically the growth companies of the next decade. the energies, the chips, uh, certain electric vehicle manufacturers, right? those are the ones I think have pricing power because first of all, they're getting massive stimmy checks from uh, the government that really helps you continue to spend. And if you continue to spend, you continue to grow and you don't self-induce your recession. Think about it for a moment if you're that antique store.

Except instead of selling antiques, you sell solar inverters and the government's like, hey, don't cut back on spending. Here's billions of dollars. Here's a fire hose of stemi checks. Please keep investing in your business And spending.

Spending Spending Those businesses can be like all right. like I hate to call it like stupid proof because obviously I can't guarantee it. But I'm just saying if I could shake people and go come on, it's obvious, go where the stimmy chicks are going. Uh, anyway, so let's keep going with this Barons piece here.

Then we got to get to that corporate lash-up The reason companies are watching Big Ticket spending is because they're preparing for you to demand and profits. The Federal Reserve's interest rate hike started last year, but usually reduced demand and inflation with the delay. so companies have only begun responding as they reduce large Investments once they see the beginnings of Destruction to demand and sales. In fact, city data shows that in the past few months banks have tightened their belts on lending as a result of consumer and business credit worsening, which should curb demand now.

I'm actually surprised that we've actually started seeing some tightening on this because the banking crisis according to NatWest and many banks hasn't really started yet. But then again, they're talking about the past few months so it is. It is true that we have seen if if the line is down like if I invert this usually tightening credit standards is an upline, but if you invert it, it just psychologically makes a little bit more sense like less availability of credit. The credit tightening has kind of been doing this anyway.

I Think there's this anticipate a patient that the bank crisis would lead to more of a drop off, but that hasn't happened yet. But yes, overall, larger banks have been uh tightening over the last year. Uh, Okay, so this reinforces stagnating earnings growth concerns. Stagnation is oftentimes what leads the stock market to turn red.

The good news though, is according to Barons the stock market has already reflected much of the economic challenges and the S P 1500, while above its low of the bear Market is still down 14 from late 2021's record high. The other good piece of news for stock investors is that lower Capex means companies have more flexibility as to what they can do with their cash. They can return more cash to shareholders through dividends and BuyBacks this by the way I think is a mistake I Really think it's a mistake for corporations to get more dividends right now? they should be investing more of their businesses. But that's okay I still invest in some businesses that do BuyBacks as well.

look at End Face for example, which amplify shareholder Returns the S P 1500 free cash flow is expected to gain nine percent this year because of reduced Capex. That's fine, but what's that going to do to return to earnings next year? The point is that investors should expect weak demand going forward, but that doesn't mean completely shy away from the stock market. fine. But what do we want to keep in mind going forward? And where's the CEO lash out? Well, the first thing that I would keep in mind is and it alluded to it earlier and I wanted to give you my opinion on I Was initially thinking okay, Caterpillar John Deere But what about Asml? I Think because of the chips Act and the massive amount of factories that are going to be built in the next few years and the fact that there's like a two-year wait to get a lot of this industrial equipment I Think companies like Asml are actually going to be just fine thanks to this this massive inflationary stimulus checks uh, that are coming to not only electric vehicles, solar and such, but Chips specifically.

So now we have to get to. we already covered our sponsor for the segment Metkevan.com stream yard. Please check them out. It really helps out the channel if you go to Metcaven.com streaming or check them out, they're fantastic.

Try them, you get a free trial if you sign up anyway. But we now have to look at this earnings call where I have to say I Feel like this guy is totally depressed I Initially talked about this earnings call in a course member live stream and we only briefly looked at it because we had multiple other analyzes to do. I Really enjoy doing the fundamental analysis with all the course members. Uh, but this one I went into a little bit more detail and I Just want to read you some of the segments here.

I'm going to read you some of the segments here of this business because I want you to see the sentiment change. Remember what happened when we went into this crisis in 2022.? everybody's talking about how they can raise prices and how great everything is right? Well, now what I want you to see is the sentiment of the CEO of none other than Restoration Hardware Yes, Restoration Hardware So Steven Forbes an analyst ask the CEO Can you talk about an inflection point within the business And here is are some of his responses: Sure I Think based on the times we're in and uncertainty we're facing, whether it's the continued rise of interest rates or the next bank or two that get hit, it's hard to be anything but conservative right now. I Think it would be foolish to be not just from the perspective of disappointing investors, but disappointing ourselves and possibly making decisions and investments before we could see around the next corner. You hear this.

Reign In. Don't spend more on Capex Reign In: Get small. Get scared is what he's saying because we haven't seen around the corner yet because instead he talks about it's a very unsettling feeling. It's like the days of Bear Sterns and Lehman Brothers and we're just waiting for the next shoe to drop.

It's very unknown right now, so we believe that there will be an inflection point in the second half. Notice he doesn't say good, We don't know what it is, What will what will the economic environment be in the second half? What would be the condition of the banking industry in the second half. Where will interest rates? What would be what if inflation is persisted? All one has to do is Google the history of the Fed's funds rate and zoom into the 70s and 80s 80s and look how many times the Federal resolve Reserve brought inflation under control? Yes, yes, Mr CEO Let's completely ignore that. In the 70s, we left the Gold Standard and we let inflation expectations on anchor and the FED had a start stop mentality that led to a lack of confidence for the Federal Reserve.

Let's completely ignore those things. and let's just talk about the fear of the 70s and 80s. How basically we have to not spend money anymore because we don't know what's around the corner. This is literally a CEO that wakes up.

it probably loses sleep at night and then wakes up in the morning trembling that this company is going to poopsie doopsy. This is Restoration Hardware by the way, and I mean if you just look at their earnings uh, right here you can see their margins are starting to get hit. Now over here, on the right side, you've got uh, their past margins and their income from operations at 14.5 percent, way down from the over 20 percent we used to. Uh, see, their net income is down about an average of about three percentage points over here compared to the Past reporting quarters.

So you could tell there's probably there's a numbers reason why as well. But let's keep going with what he's saying because he starts getting a little angrier. There's not. There's not Oh my.

God Hello grammar. Uh, there are not many people do you know they should really have a word thereer right? like it should be there Or like that that should be a word or should we pronounced there? There are not many people on the planet see that would be good grammar. The shortening of there are, but that's how it should be written, but that doesn't exist. Instead, people get lazy and then they just say theirs because there's no contraction for there are.

That's kind of weird, isn't it? Uh, anyway. uh, in in this context. Okay, so continuing. uh I Don't know why we go on these grammar tangents.

There's there are not many people on the planet in levels of authority and responsibility that we're old enough to experience those times. And I Think having a conservative you and being prepared having a strong balance sheet and trying to see the whole board and all the moves is basically prudent. Okay, that's fine. So always making the argument that we're so scared at.

Restoration Hardware We are going to basically compare this to the 70s and 80s and and try to buckle up as much as possible, which is not a bad idea. It is not a bad idea to say uh, hey, let's let's pause. uh and let's make sure we can reign in to make sure we're not running away and spending all of our money and not being conservative to where then we have to get emergency that debt right? That would be very bad. I'm sorry if you're sending me promotional emails every day, uh, if not every day, multiple times a day calling them different things.

you want to call your promotion something different. That's interesting. He's starting his little lash out right now. We're not pushing the Panic buttons on promotion I wouldn't call it Panic kind of promotions.

It's really trying to hang on to the illusion of where the business was in the pandemic, right? So in other words, he's starting to elude to how they are different from other businesses. They're saying we're not going to do promotions because we're Restoration Hardware and we're fancy and better than promotions. And then he's starting to compare to other businesses that are sending promotional emails every day, sometimes multiple times a day. You can smell the fear at other companies because they're freaking out and they got to get more sales.

Well take a look at this. I Have never ever seen a CEO pull this one. so listen to this. So and that's even in this environment and the product that's on its way is by far the best work we've done talking up their business.

Okay, great how they're not how they have a value proposition and they don't have to send all these disruptive promotions to people that are below us. Uh, it is. Wait what? And I Think that will be disruptive not only to the high end, it's going to be disruptive to the people that are below us in the market just because we have the scale to buy in stock inventory and many people don't. In other words, you really have a CEO who's literally like we don't spam people with promotions.

We aren't going to be suffer like the people who are below us because we are the high-end Corporation And then listen to this literally goes on to name a company by name and back on them. You ready for this? Here we go: the platforms that are out there today. whether it's a Wayfair or others again I Understand they don't take the position we have on inventory so they can't really Buy in volume because they're the poppers. they're the poor normies.

So continuing with the quote here. so they because they can't buy in volume, They can't drive efficiency. So a lot of people say, well, aren't you worried about platform? So I think platforms ought to be worried about us. You know, like those website platforms, they should be worried about Restoration Hardware There's not a lot.

there's not a platform that made a dollar yet or anything. I mean Wayfair made money during the peak of the pandemic for God's sake? No and look. May Wayfair be able to take their prices and make it I don't know. All I know is we've got a really great model we've got I think the most compelling Vision in the industry.

The guy is literally dumping on Wayfair saying they only made my during the pandemic. and basically Restoration Hardware is so much better because they have scale and and they have a reputation and they have a brand and uh, but at the same time we're worried about the 1970s recession and we're worried that. listen to this. I think it's more uncertain today than 2008 and 2009.

if you didn't have the inflation problem that we had today and you didn't have the political unrest, maybe it would be interesting. but but you do. And so uh, if there isn't a complete crash uh, which a complete crash would look like the 70s or 80s, Uh, which would ultimately mean it would take over a decade to recover from the recession. uh then then maybe we could pray for not a complete crash.

But this is what we want to prepare for. So I Kid you not? Restorations Hardware CEO is losing his sh9t. He is literally losing it. Lashing out at the competition, lashing out at promotional emails, and lashing out that basically we're walking into the 70s and 80s and as a result, they're going to pull back on spending.

That's crazy. So look at this in a typical environment, in a slowing. Market There's usually one thing to hit us at once, but multiple things are hitting us at once. Now look at this.

Listen to this. Yeah. I Think you've got. You've got about a 20 margin floor.

Not in the worst housing market though. Right now, we're in the worst luxury housing market I've ever seen. The one of the worst housing markets anybody has ever seen. I Think in the third quarter luxury housing fourth Quarter luxury.

If you think about where luxury housing has been, it was down 18 of the first quarter, down 28 in the second quarter, down 38 in the third quarter, and now reportedly down 45 percent in the fourth quarter. Which means because you're talking about months, they're kind of going down. It probably means the last month of the fourth quarter was down close to 50 percent. Damn.

then you've got the refinance. Market which nobody's refinancing. so nobody's able to buy new furniture. And that means the Market's really down like 80 or 90 Or 70 or 80 percent.

Oh man, this is by far the most comical, but also kind of scary earnings call I've ever seen. This is the CEO of Restoration Hardware But then, but then listen to this. We're cutting through the noise. That's what we're doing.

We're not panicked, we're not nervous, the biggest biggest joke ever, and that then he even he even goes on to say this, do I wish yelling, we'll just tell everybody we're gonna backstop everybody's savings and dance. In other words, do I wish we could just go back to the stimulus days of course. but I think instead we might be facing more of the 1970s. This is by far.

uh uh, the uh I Don't know whether to be to be scared, uh or or to think the guy has just lost it. but uh, you're definitely seeing a CEO here that's a lot more nervous uh than I I've really seen anywhere. And I have to say, first of all, anybody buying Restoration Hardware stuff in this market probably needs to look at themselves in the mirror and go, why am I not buying stocks right now and instead spending it Like why am I spending money on this expensive furniture Anyway, So first things first, you shouldn't be buying crop at Restoration Hardware in this market. Do the save that for a bull run when you trim some of your highly profitable stocks and then go splurge on stupid furniture in a bear.

Market is now the time to go shopping at Restoration Hardware First of all, my advice: Second of all, I think the CEO is seeing a disproportionate impact because I think people are smart and realize the worst thing to do is spend money like this at Restoration Hardware And so he's seeing the writing on the wall that this company is going poopy doopsies. Uh, and it's probably going to be a while before recovers. Part of me after that fear is is almost tempted to short the stock. Uh now.

In Fairness, The stock has already come down substantially and maybe that's why he's freaking out. Let's go over here to Weeble which is the platform that I like using whether it's for trading or looking at the charts. If you go to Weeble and you look at the pandemic low of 2020, we're at 73 bucks. We're way up from that, right? We're 3x from them.

But look at what, we're down from 744 and we hit a low of what 208 roughly. So we're sitting in the bottom section here of the Fibonacci and frankly, this company might actually break lower. It's had a very rapid decline already. so I don't know how much is left to squeeze out of this lemon in terms of a short, but if you're looking for a CEO that's panicking I'll tell you.

I Don't think there's any company that is more fearful right now than Restoration Hardware And unfortunately, it's kind of a slap in the face to what American Express was bragging about. And maybe it's a leading indicator that American Express is next. Which some businesses, by the way, have you ever heard of this they call American Express American Surprise. Uh yeah.

Anyway, uh so um I think that's when small businesses kind of get frustrated at the fees they get charged. But anyway, so American Express talks about people spending through the recession. Well, if people are using American Express at uh Restoration Hardware then you might have a reason to say maybe American Express might be next. So American Express is Axp stock and you can see they might have a little bit more on the FIB retracements to go down.

So if I adjust the phoebees over here, let's do a quick adjustment. Uh, keep in mind we talk about fundamental analysis. Uh, every single day in the courses on building your wealth link down below. Whether it's for stocks or real estate or entrepreneurship, check those out I think you'll enjoy them.

We even have buy now pay later available, so take a look at this for Russia or for American Express We've definitely come off some of the highs following the banking crisis over here. This is the week chart as well, by the way. So we've been teetering around this 162 level. It is possible in my opinion that American Express could go right back to these about 145 levels, if not even I Actually, don't think we're gonna to test the 129, but 145 would be a reasonable so if I was looking for a short, it'd probably be more likely to hit American Express as opposed to Restoration Hardware if I thought at the margin, we were going to see reduced spending by rich people because really, that's what matters.

It's that discretionary credit card style spend at the margin I think businesses uh or or like chip companies or or otherwise they're still going to spend money on chips. but I don't know if they're using American Express or Restoration Hardware as much anymore. So in my opinion, you're starting to see the cracks, not just on the lower end, but now you're finally starting to see the upper end cracks and I'll tell you I it like look I'm a licensed financial advisor every single day I Try to read earnings calls. this is a personal financial advice but I try to read an earnings call a day and I have never seen a CEO lash out like this I have seen pessimism and on certainty but this wild I have not seen this before.

So anyway, with that said, make sure to check out Metcaven.com Streamview. Make sure you get yourself 12 free Stocks by going to Metcaven.com made promotions, make sure you get yourself life insurance in as little as five minutes by going to Metcaven.com Life and obviously check out the programs on building your wealth where and you can now get in with Buy Net, Pay later and get lifetime access. So if you found this useful, also consider sharing the video. Thanks so much.

All right, let's listen in here: A former Wall Street Journal Alum and I'm also also a former Moscow Times Alumni right? I hold a lot Yeah, but for the grace of God with his family, exactly, you're there In Harm's Way Too the Wall Street journals Twitter account all all about uh Evan and uh yeah, we is there a week before we met with with any lawyers I mean I would uh that that is a brave uh Intrepid um guy that you've got there and you know hope with Putin we don't even know what are they saying Yeah crispy I know that says emotion. We kind of have sort of at this point left it because it's kind of funny. although it's probably more embarrassing than funny. Um, but yes I need to change that.

In fact, just for you I will change it right now. hold on Tom will explain that to you uh John Carson about 12 10 midnight I would say but uh, if I ask her you know, have you made up your mind I'm sure she's gonna say we're waiting for the data and it was uh like Jim Bullard told me on Monday he said we don't have to make a decision until May 3rd. so why would we give it all the data that's still out there? The Insight Mike I've had in this hugely uncertain blur and your great work may I say with the Federal Reserve of Boston of St Louis uh Cardinals game you went to was I actually was watching the Cardinals looking behind a home place, you're the only one that can sit in those seats. and now Cleveland But all right, these guys are being boring.

Okay, all right everybody. Crispy Crispy Poyo is now responsible for me fixing the spelling paid promotion see I already had the graphic ready I just needed to load it in. um I actually I needed to do it anyway. but now we're just gonna blame you for being the Catalyst for it.

It's okay. thank you for that. You're right. I've needed to change that newer people to the channel might not know at that time.

Uh, the goal is to help to help convince you that investing is really good. Maybe I need to play some conversion music I Love this thing so much, but it's kind of stupid. but it's also kind of funny. All right, let's listen to the stage for where we're heading because of tighter lending conditions.

Is that how Fed officials look at it? Are they going to speak to that in not only the meeting, but when you talk to the Lord of Master in just a couple minutes? Yeah, they know that. uh, the data are the reasons. Essentially, they're looking at all kinds of data. There are more timely private sector data sets that they're looking at these days and that the government is using.

They have Incorporated some of those into uh, the Bea and BLS numbers that come out, but uh, they know they they're looking backwards so they have to extrapolate forward. Uh, the big number of the Ism Services uh, core Services X housing Um, that's in the Uh, the conference boards index of lagging indicators. So while that is an important number for them, it is not something that is particularly timing timely. At the moment, we've got to get to the balance of Risk question.

Mike There's been a belief for much of the last year that the risk of doing too little outweighed the risk of doing too much. Given the nature of the shock in the last month, does the risk of doing too much now outweigh the risk of doing too little? well? That's a good question for President Mister that I can put to her I Think that they would have told you uh at the last Fed meeting Jay Paul Would have said that the balance of risks is, uh, very finely balanced. At this point, we don't know, and they don't know whether we're going to see a significant tightening in credit because it had already happened. The last senior loan officer survey out in January showed 43 percent of the banks had tightened their credit standards.

So do they need to go much further? Or was this really all right? This guy's kind of boring. Um, okay. let's go look at the AVP numbers come out I Think they may have, uh I thought they come out at 5 30, but maybe they came out at 5 15. jerks.

Oh mocha. Because man, we got some uh, some uh, talking to do here about those numbers. Holy smokes. Okay, I don't know what to tell you if it's good or bad.

Uh, we'll go through it and we'll look at the details here. Uh, wow that that's a shocker. All right. Uh, stand by for the shocker.

All right here we go. Well, the ADP employment report just came out. It is the precursor of the data that we expect to get on Friday which is the official Bureau of Labor Statistics employment report And wow, this ADP report was a shocker. Now look I Actually really like the ADP report because I think it is much more accurate than the government's version.

I Think the government's version has a lot of manipulation in it, from seasonal adjustments and potentially bureaucratic influences that we don't know all the details to. That's not to say the private report doesn't have any bias either, but I Think it's important to look at both reports and mostly look at what were markets expecting and what did we actually get and then look at the details and the ADP employment change this morning? Well, let's just say it. What's the lead? Yeah, uh. the survey.

X Well let me first tell you the last report. The last report was 2 42 that was revised up a little bit by 19 000 jobs. The reason you do that is you get some more data and you're like okay, let's adjust the prior up a little right. so you get 242.

Adjust it up a little bit to 261 for February February Okay, fine. Well now we got the Shocker The survey here was 210 000 jobs which was already 32 000 jobs under the prior report, but we actually missed that by about 30 percent. We came in at 145. uh, actually that's that's even smaller.

145 was the actual report. Uh, that is a Miss uh yeah. Miss up about 31 a 31 Miss 145 000 Jobs versus 210 000. Now we need to go through the actual report, but that kind of Miss makes me want to put up the sponsor for today's video Met Kevin Com slash life Get life insurance in as little as five minutes.

Or if you like producing videos without having a bunch of fancy recording software and you want to do it all from your browser, go to Metcaven.com stream yard. You can edit together your recordings all together. Uh, you can not only record in HD you could share screens, You could put up banners, you could put up a little scrolling tickers at the bottom. The amount of things you could do with Stream Yard is absolutely phenomenal.

and every single day I'm still learning what to put up and how to do it. It's phenomenal. Like you can even throw up comments, which is kind of cool. So check that out my Kevin.com Okay, let's take a look at this: ADP National Employment Report: Private sector employment increased by a hundred forty five thousand jobs in March and annual pay was up 6.9 percent year over year.

I Want to see how that compares because I'm pretty sure that's down from the over seven percent we've been used to. So let's go right to that because I think that's pretty important. Pay insights Here we go: Okay, yep, 7.2 percent was the jobs gain or wage gain in February that fell to 6.9 Uh, for job stayers. For people who were switching their job, pay growth was 14.2 down from 14.4 So again, no indication of a wage price spiral, but again, still a sign that wages are growing.

Here's the median change and where you're seeing the highest wage gains. This is also not a shocker. 9.6 percent for leisure and Hospitality Services 6.9 for other education 7.2 Business Services 6.4 And these are year-over-year numbers, so those are those are still pretty high, right? Absolutely still too high. But let's go ahead and see if we can compare these to the prior month just so we could get a little bit of a look and see where we're potentially getting some of the softening.

This is. Uh, this is the report that was released Feb one I Need the Uh I Need the early March report? Uh, Okay, we'll get the early March report. Let's actually let's go ahead and look at Fab So here's Feb just to compare. This is was the Feb report which would be the January actually better.

It gives us even more of a comparison window. So look at this: Leisure and Hospitality was 10.1 Now it's 9.6 Okay, that's good. You've got Education 7.2 Same at 7.2 Professional Business Services Six nine. Now at Six Four Good Financial Activities Now Six eight.

Uh, and it was Seven four. Information was Six six. Now it's Six three, and Trade and Utilities was seven five. Now it's seven percent.

So you're definitely seeing that pay growth? uh, slow. It's still high year over year. Uh, and you're seeing the month over month numbers inflecting. Uh, but they don't actually give us the month over the month numbers right? The way you have to kind of think about this is a chart where it's like pay growth went up and then what you're trying to do is you're trying to pull down this moving average and then you're comparing to it year over year, right? And when this starts going down, it takes a year for you To actually kind of start seeing that pull down.

So it's like you're pulling down on a 12-month moving average so you're not expecting to see very, very quick declines. So I think this is good across the board. I Don't think there was any sector here that was positive. The only sector that was flat compared to January was education.

and again, that's year over year on on your moving average that you're trying to Joint down, right? Uh, so so in my opinion, that's actually a good thing. So again, this is the EDP report for March I Want to go through as well the projections for Friday for the Uh employment report that'll be released at 5 30 a.m I'll be traveling uh on Friday So I will be streaming it live. As as usual, we'll be streaming it via Stream Yard. So shout out to Stream Yard I Met Kevin.com But what I really want you to think about is uh, the fact that the Jobs Report is very important because the one thing that reminds us of the 1970s is a wage price spiral as well as unanchored inflation expectations.

I Guess that's two things instead of one thing, but this Jobs report is a consistent in my opinion with the softening economy now. I Want to show you what chat GPT has to say about our Jolt support from yesterday as well. Now that I think is actually really interesting. so prepare for the Jolts report in just a moment and the chat CPT Response to the Jolts report put together not by me, but actually put together by a Goldman Sachs analyst.

You ready for this? All right? So first, let's hit this number right here. So this right here is our change in private employment. Where are we seeing job losses Or we're seeing job losses which we'll do with a pink color here in manufacturing Financial Activities: Professional and Business Services: Where are we seeing the bulk of the gains Leisure and hospitality and you are seeing some Mining and construction Which these are some surprises that we're seeing construction, for example, still booming. That could be because of some of the government stimulus into uh, the Inflation Reduction act or the Jobs Act uh, or the Chips Act rather not the Jobs Act.

Let's see here. we'll get some more details here: I Like looking at this detail here: change in establishment by size. It seems like the large. Wow.

This is actually really surprising. It seems like large establishments aren't actually the ones getting as many jobs. it's actually smaller. The smallest are the ones where the job gains are medium and small.

That's surprising. You're really seeing the the larger medium and the larger have have barely job gains or potentially negative. That is very surprising that the smaller ones are reporting the job gains. And let's look at uh, regionally.

The South is losing the most jobs as well as the West. Wow, that's actually really surprising as well because I thought like Florida was supposed to still be killing it. But South Atlantic East and Central this would be like your your North Carolina's uh West South Central I'm assuming that would be like Oklahoma Texas uh. Anyway, negatives over here.

the Midwest is actually where you're getting the job gains as well as the Northeast. Now this could be your Idaho Ohio uh uh uh. potentially because of jobs data and then you've got the Northeast over here. All right, that's interesting.

Now, what did Chachi PT have to say? Now this was mind-blowing in my opinion. So chat. GPT Basically got fed the Jolts data and take a look at this. This is an analyst report from Goldman Sachs here.

Goldman Sachs was just released this this morning. I fed Chachi PT with a selection of Jolt's data and asked whether the Jolt's data was consistent with the decelerating or accelerating economy. This is what it came up with: Colon: we are on borrowed time. Uh, what? I Don't want to hear that so don't tell us we're on borrowed time.

That's a terrible thing to say. but uh, that's what they said. So let's see why they think, uh, we're on a borrow time Uh, it uh, it's a little scary. So what do we have here? This data is more okay.

They fed it in and it says this data is more consistent with a decelerating economy. A decelerating economy is typically characterized by a Slowdown in growth, and the data provided indicates several signs of such a Slowdown This is Chat Gpt's response, folks. It says a decrease in jail job openings total private job openings decreased 559 000 from January to February suggesting fewer opportunities, fewer opportunities for job Seekers decrease in hires indicating companies might be more cautious about expanding and a decrease in layoffs. Uh, it would be usually a positive sign for the economy, right? However, when combined with the decrease in job openings and hirings, it could suggest that companies are more hesitant to let employees go due to the uncertainty of finding new hires in a potentially slowing economy.

Suggesting uh, oh, Maybe the FED is doing a little bit of too much over tightening. So with that said, make sure you come back to the Friday Jobs Data report. But this ADP report suggests slowing wage inflation. no wage price spiral.

It does suggest that the FED may be over tightening, and we could be surprised to the downside with how quickly jobs growth plummets and how quickly the unemployment rate. Rises Remember what Elizabeth Warren said? The Fed's projecting one percent increase in unemployment. Well, usually after a one percent increase, you end up getting two and that ends up hurting more. Gain the lead.

Yeah, wrong button lost the lead Anyway, Uh, okay, so that ends up having uh, the end to The job segment let's listen into. Loretta Mester Here for a sec. Let's see what she has to say. And uh, let's see.

Actually, if I can do this, let's go. Loretta Master She's on Doomberg right now. Give me one second to get her started. Does it? Let me go back more.

Uh, let me go to here. Oh I Think this is roughly when it started great. It's just out 145 000. I Know there's questions about their methodology or what it means, but what do you take away from it? Well, we have to look at all the data so that's a data point that we're going to look at.

We're going to get the employment report on Friday So there's just a lot of data coming in and we're going to use that to assess not only where the economy has been, but where it's going. Because as you know, it's about where the economy is going. That's really important for our setting monetary policy. Well, that was one of the questions that they were just asking me in the surveillance.

Uh, Studio How do you know what you're looking for when the data are in the rear view mirror? Well, you know the data in the real view is important because it tells you something about where the economy is going so you don't throw that data away. But you also have to do a lot of other kind of reconnaissance. so you know the nice thing about having Federal Reserve banks across the country is that we can talk to contacts in our districts. You know, whether it be labor market contacts or business contacts to really find out what's happening on the ground at the moment.

And that information anecdotal information is very helpful as well. And then we do surveys and other kinds of more timely information. So all of that goes into sort of formulating monetary policy. So I think it's wrong to think like, oh, we're looking only in the rearview mirror at data that's from a month ago or two months ago.

That data is actually helpful for looking at Trends And then we also augment that with other data about what's really happening on the ground on Main Street For businesses that have to cope with this economy, well, what's happening on Main Street Uh, but it's kind of two parts in general. What are you hearing and then what are you hearing from Bankers in your District about? uh, credit quality, right? So credit quality is still fine. Um, Bankers are telling us that that isn't really a problem. It might have ticked up a tad, but it certainly is still low.

Very low by historical standards. so that isn't a focus now. The bankers have, you know, struggled with retaining deposits during the March Um. tensions in the banking industry, but that's has stabilized since then in terms of credit quality.

In terms of credit, Um, standards, you know they had already been tightening credit standards as interest rates went up. So they're continuing to do that. They're continuing to monitor Um, you know their their customers. They're continuing to monitor going forward in terms of making sure that they're well positioned for the economy with higher interest rates.

In terms of the businesses themselves, of course, they are preparing right for I Would say some slowdown in the economy, but a lot of the firms are still telling us that their conditions are still pretty good. They're worried about the economy in general and so they're being a little defensive now. Um, some pullback in some of their Investments spending. But again, it doesn't feel like everyone thinks that we're going to have a deep recession.

It's just they're trying to be more cautious so that they're well prepared for whatever happens in the economy in the future. Well, the recession argument that a lot of people are making sort of depends on the idea that the full weight of all of the cumulative weight of your rate increases hasn't hit the economy yet. Plus, we throw in the banking maybe tightening credit standards a little more. Uh, are you worried about the second half of the year? Well, I Do think that growth this year is going to be well below Trend And you're right.

The banking tension? certainly. typically. hey. I'm Gonna Keep listening.

but I'm gonna keep playing it I I Gotta hit the restroom really quick. but I'm Gonna Keep listening. Uh, how do I hit play play? When you see that it's happening, you do see Banks pull back um, on their credit standards and tightening tight. They're tighten their credit standards.

We don't know right now either the duration of those effects from what happened in March or how strong those effects will be. So we do expect that to happen. But right now we're in that time where we're assessing talking to the bankers, looking at things like the sluice which is the senior loan officer opinion survey to get a really good sense of where Bankers are. As I said, even before the March tensions in the industry banking industry, you know the banks were pulling back and tightening credit standards.

and that's kind of normal. That's the normal flow of monetary policy tightening throughout the economy. That's one of the ways it gets pushed down into the economy. so so that's fine.

That's kind of what we are intending in terms of making sure that we can slow down demand so that we get a better balance w