We got to cover the bear case because that's what we do here. We cover the bull case. We cover the bear case. I Give you my opinions you're supposed to form your own.

Yes I run an actively managed ETF Yes I'm a licensed financial advisor yes I have a real estate uh, startup and yes I get made fun of for flying around in a private jet. but that's because they don't have a private jet. Now we need to talk about the bear case because that's very important. So what are we getting from the Bears Well, we're getting a few different things.

Number one: Morgan Stanley our favorite bearer of all Mr Mike Wilson What does Mike Wilson have for the bear case today? What's the bear hopium? If you're short selling, what's the cocaine bear that you can sniff on today? Because we just gotta get some more bad news. even though I don't necessarily believe in the bad news. I'm gonna pay attention to it because I always give Credence to people of different perspectives. Let's listen to.

Mike Wilson Although this bear Market has been mostly about inflation and the Fed's reaction to it and higher interest rates, the depth and length of most Bear Markets are determined by the trend in forward earnings. On that score. The next 12 months of earnings per share estimates have started to flatten out, which has provided some investor optimism. Oh, a flattening of forecasts of earnings? That sounds good, right? Uh oh wait no, not so fast during Bear Markets.

next 12 month earnings per Uh per share estimates typically flatten out between quarterly earnings Seasons before resuming their downtrend. Oh well, that sucks if you're a bull and that's great if you're a bear. In fact, take a look at this and I have to give them some credit. This chart? Probably the scariest chart that I've seen in terms of shorter term trading.

And who knows. maybe this year we'll just Echo what we saw last year. But take a look at what we got over here. Pattern of last year suggests March is a high risk month for stocks to Discount the next round of cuts.

Okay, so what does he show us? Well, take a look at this. The blue line here is the S P 500. the yellow line shows you the discounting of the next 12 months of earnings. Now, what I'm going to do is I'm going to take and I'm going to make this a little simpler for us.

Okay, I'm going to take a green highlighter and I'm going to show you where the next 12 month earnings get cut. Okay, ready for that. Here we go. That would be about uh, looks like last year, somewhere around between June and July.

Over here we have somewhere between October and mostly October. Over here you see those earnings getting cut and then you see earnings projections getting cut over here. January and uh. February Okay, so when does the stock market decline in anticipation of the green slopey Dopey going down? When does the stock market start getting sad? Well, the stock market starts getting sad about a month before that.

Look at that stocks discount the earnings season in the last month of the quarter. So you get this massive decline over here in the last month of uh of Q2 2022 massive decline over here in September the last month of Q3 Uh, you get the this massive decline in the last month of the S P 500 of Q4 which is December So it looks like you have about a one month lead. Where what's been happening is earnings forecast? Get cut and stocks Sniff it out about a month earlier and guess what we're in March Uh well, we're about to be in March We're two days away from March Uh, maybe March is actually at high risk of this earnings decline again. Unfortunately, Mike Wilson is making an argument that this time is going to sound just like 2022 is actually a pretty decent bear argument.

I Have to say when Mike Wilson started talking about how the market was basically running out of oxygen and it was kind of like we were climbing. Mount Everest I Had a little bit of this opinion that the Bears were running out of bearish things to say and reasons to complain about the market that they were basically running dry and they had to start coming up with crazy things. You know, this is not that terribly crazy. It's certainly better than we'll look.

A little bit more of what Mike Wilson says, but it's certainly a little bit better than what. Mr Robbo Bank Over here has to say so you've got another mic I Don't know what it is with mics and bears here, but this guy's basically saying hey, um, the bull strategy right now is a Kamikaze strategy Listen To listen to some of the Jade and you got to give him credit I mean he's right about to have this Jade All right, listen to this. In 2021, inflation was not going to happen. then it Rose sharply, but it was called transitory in 2022.

Inflation was not going to soar, nor were rates going to rise than it did and rates roast in 2023. Disinflation and a rates pause was coming and then a rates pivot loomed. Yeah. Then we got hot data in January followed by a really bad Pce numbers and all of a sudden nobody pricing Cuts anymore for 2023.

uh, unfortunately, you have to kind of give him credit for that Jade It's kind of right about that and he's not wrong that you've got people like Larry Summers Now calling for a six percent Fed Funds rate? Really the way to be bullish is to say. Well, the market doesn't so much care about whether it's 5.4 on a Feds fund rate, Fed Funds rate, or six percent the market cares about not getting Paul Volckert, right? That's your bull argument that, no, the disinflation will come. We don't so much have to worry about uh, about any of this. This, whether we're ending at 5.4 or 6, or whatever, we just have to worry about getting Paul Volcker.

But he does end up making the argument here. The idea that the Fed's going to Pivot uh looks like a Kamikaze strategy. That the reality is, we might end up having the price in a six percent Fed Funds rate. Right now we're only sitting at 5.4 price stamp.

You've also got uh, more pain potentially coming from China and Russia You've got to pay attention to the geolip political risks of China arming Russia. All right, like the Bears are trying to grab whatever bearishings they can. Some of the things, though they're not terribly wrong about, like these are definitely bearish arguments that we should pay attention to. Mike Wilson goes on to say hey, look this, this rally that we saw in in January and February is a bull trap and they think the technicals are going to be straight up wrong.

Even though we broke the 200-day moving average, he thinks that is wrong. Take a look at his chart, he gives us a chart here somewhere. Here we go take a look at this first. the DOW Industrials made its high on November 30th but it's very close to taking out the December lows with Friday's close.

and if the economy was about to re-accelerate wouldn't this classic late cycle index be doing better? In other words, if things were going to go better, why is the Dow basically about to take out some of its lows? uh, from from December Also, speculative stocks are starting to underperform again, and he's also right about this. A lot of companies that have reported earnings like SAS companies Airbnb whatever have actually sold off after their earnings because companies or people maybe are taking profits or they're they're hedging. Last week I said Friday was going to be a really good tell after the hot Pce data was the market going to close red or green and that would tell how much fear there actually is for inflation if we close green, nobody really cared about PC Well, we closed pretty dang well. red decently read on Friday And so a suggestion that yeah, Market still is worrying about inflation here.

Uh, and so maybe maybe the warnings that the Kamikaze guy and Mike Wilson are giving are something we want to pay attention to. Now again, they're not necessarily what I believe in while I agree with them. Mike Wilson I Completely agree that valuations on the S P 500 are ridiculous I think it's stupid I'm sorry that probably offends a lot of people, but I think it's stupid to bet on just solely the S P 500. I Understand, it's a diversification tool, but for me, for my personal strategy, this is not for you.

My personal strategy it has. it's way too overweight Staples and sectors that I believe did very well in 22 that won't do well in 2023. But it's not just Mike Wilson and Morgan Stanley or the robot Bank on it's also Barclays Barclays actually gives us some idea of how bad could things get. So they talk about us potentially having to reprice in more hawkish fed path.

The valuations are still high, but look at some of the scenarios they give. here. they talk about in a soft Landing scenario, we have a four and a half percent upside. Okay, that's the upside for the S P 500 where we sit now.

just 4.5 half percent. That's your upside. Four and a half percent. That's it.

Okay, then the bear case. a normal recession negative 18.6 percent. Yikes on the shallow recession negative 6.2 So clearly the Bears are setting up based on their data for much more bearish likelihoods than bullish outlooks. Now I like to be contrarian and when I was super bearish, a lot of people were super bullish.

That's when I sold my stocks in January of 2022. It's also why I sold all my real estate and Q well, almost all my real estate uh, like 85 of my reels hit over 20 million dollars of real estate dumped. uh stuff I own myself, not with Partners or anything. just myself, my wife, uh in in the first quarter of 2022.

now yeah, sure. Did I buy back into some uh what I thought were recession resistant Tech and growth stocks? uh, and pricing power stocks a little too early? absolutely not suggesting I timed it perfectly on both ends. Absolutely not. My point is I like to be contrarian and boy, there's a lot of institutional bearishness right now.

and I really think they're hedging for a Paul Volcker scenario. and even if interest rates go a little bit higher with the Fomc personally, I Don't see myself that terribly bearish. I think we're on the path of massive disinflation, it's just going to be a game of patience. Probably not going to hit as fast as we think, but things are going to be as bad as the Bears are suggesting, suggesting maybe for the S P 500 of Staples but for some of the pricing power stocks that have already had some of their pain in 2022.

Whether those are chips energies uh, you know, automakers, certain automakers obviously like a Tesla and face Nvidia Intel Uh, you know TSM Asml Solar Edge I Don't think so I Don't believe so because I think these are industries that are benefiting from massive stemi checks and from government bailouts. Whether that's the Inflation Reduction Act or the Chips Act, or from the fact that they have low debt unlike a lot of companies that are heavily indebted. In fact, I have a piece here on heavily indebtedness. Uh, that's worth noting.

Here's JP Morgan Talking about pricing Power. You know me? I'm a big fan of Pp, right? Big, big big fan of pricing power. The costs of rates remaining higher for longer are not only demand Destruction for housing, durable goods discretionaries, but also lower margins of roading, pricing, power, and higher interest rate costs. But look at this jump on over to where the most debt seems to be.

It seems to be if we look at the chart on the right side for debt maturity and refinancing risk, that's going to be this column that I'm sort of highlighting. there. On the right side, you're looking at the highest sectors for debt and the companies that I choose have specifically a low low debt. the war sector right Now look at this food and Staples retailing highest levels of debt.

Now you do have technology and Hardware equipment. This is going to be like your your more like your Corsair your Ford your GM very very high levels of debt. Semiconductor is actually not that bad Tesla very very low debt Telecom Media and entertainment low depth the SAS sector not that bad either. Automobiles, components, retailing not that bad Transportation not that bad, but it's really again.

Staples and food and even household and personal products. these are the ones that are heavily heavily and edit so maybe sectors that we got to pay attention to. But anyway, this is the kind of research that I try to do on a daily basis to provide as much insight and perspective onto what's going on in our world. And look, the Bears have an argument, but uh, that doesn't mean you necessarily have to align with them, but it gives you an idea about a bearish sentiment and what's going on with with the Bears uh I Personally think uh, you know as Elijah here in the comments says, bears are a little too heavyweight on the Staples and uh and certainly the broad-based indices although it even seems like they're bearish on the broad based as well.