Wow, this is quite interesting. Not only is the economy starting to look bad which is leading someone Wall Street to suggest could actually be good for stocks, the bank bailout program is starting to see some of its usage inflect up again, and that's leading some folks to be a little bit concerned about what that could mean going forward. On top of that, we just had Nike earnings and the forecast wasn't that great and it comes right after what we talked about this morning looks like it's starting to Bear some fruit. Let me quickly remind you what we talked about this morning.

as usual: I've got a lot of my content available for you on Ec.com but if you want to listen to it or watch me here, you can do that as well. So uh, this morning we talked about this idea that the lower 60% of American incomes are likely going to be most affected by higher credit card debt and therefore higher credit card delinquencies. And so this morning I suggested there was a chance we were going to see more people start having to pull back from discretionary types of purchases that all Americans buy whether you're in the lower or the upper percentiles. In this case, Nike and Costco would be frankly, very perfect candidates to see some form of pullback as consumers get pinched, whereas potentially higher income thresholds those in the upper 40% might be more likely to still go buy solar panel systems or Tesla vehicles or new computers or start a business or whatever, especially as their stocks start.

Rising whereas individuals who don't own stocks might not have that benefit. So that's what we talked about this morning. Well, if we scroll up over here past some of the other news and updates including the Kathy Wood update or the Asml Intel Apple update, we'll find the Nike update. Take a look at this.

While Nike beat by about 21 percent, we did end up getting a gross margin beat as well. We had some weak guidance and it led to some sadness for the stock. A lot of sadness in fact the stock down somewhere around 11% here in the after hours. It fell even more after the company gave guidance which they preserve for their actual earnings call and I wrote down some notes from the specific earnings call so you could see.

Oh, this is where they think things are going here. and like I said, not the best Direction So let's look here. Not only did we miss in China which is expected Nike SE softer Revenue in calendar Q1 Q2 of 20124, they're going to lay off people not just in management, but also different portions of their procurement supply chain. And even though they had one of the strongest Black Friday weeks ever, they see indications of a more cautious consumer around the entire world.

and there retail sales forecast came in short of expectations. with softness starting to show up in digital traffics and higher levels of promotional activity throughout the entire space this morning. and I don't really know why, but I Was tempted to go through the pelaton earnings call and I'll tell you I saw the same thing there. They're like yeah, we're having to promote a little bit more.

Uh, it's not as bad as last year, but we're definitely having to promote very very little. Talk about increasing sales and a lot of talk about promotions not so great. Same thing now happening with Nike and I think this is sort of the canary in the coal mine of what's coming to the bulk of the consumer which is, oh no, the bulk of the consumer might really start raining in. It wasn't just Nike which we got from the reports today.

Talked about this one before remember Ulta yeah and now we got the bank term funding program we got to talk about as a disaster. but remember what we talked about with Ulta With Ulta we realized uhoh, Ulta is starting to have to be more Promotional and they're starting to see an a limit to how much they could raise prices because the consumer's unwilling to pay for it anymore now. Ulta was still able to provide a positive forecast so their stock went up, but in their actual earning call notes, they made it very clear yeah, there's a limit to how much we can raise prices now. I Did read the Micron earnings call this morning and they seemed optimistic about being able to raise prices because cashr companies are continuing to spend on memory or specifically AI related chips.

But that's not true of the typical consumer daily purchase. Goods I Would guess this same thing would be true for not just a Pon or Nike but also think about McDonald's Costco uh, Sam's Club Walmart Target uh, under arour you name it just your ba. Everything that somebody would buy on a daily basis, whether it's uh, Furniture potentially some of the lower hanging fruit over at Apple uh or or whatever. uh and that could actually lead companies to end up advertising more because you don't want to see your unit volumes go down.

So usually what you do is end up advertising more. So you lay off staff where you can you replace them with AI and then you advertise more to try to get your sales volumes up. and then you save the money somewhere else. So in a weird way, you could actually see revenues go down, margins go up, and AD spending go up because you're laying people off.

But the problem is when you see that lay that the laying off start the FED goes oh dear. We might have started a little bit of a Poopsy dupsies problem here, and this is why a lot of folks are flagging the Sam rule. The Sam rule right here is a way of starting to indicate when we might be going into a recession. This looks at the change in monthly unemployment over time and as the number goes positive, we can very quickly and rapidly Skyrocket via the Sam rule which would tell us we are indeed in a recession.

unfortunately tends to lag. So theoretically you could be in a recession now and not know it yet. So definitely some red flags. In addition to that, look at the bank term funding program.

The bank term funding program just released its latest data for the week ending December 20th. The bank term funding program inflected up once again increas. This increases the hopes for that should be rate Cuts I'm going to go ahead and fix that really quick. increases the hopes for rate Cuts not eight Cuts Uh, But anyway.

Uh, this allows. uh. Remember what the bank term funding program does is it basically allows Banks who have bonds to go to the Federal Reserve and say look, our bonds lost a lot of value. But can you just lend us based on what the bonds should be worth 100% of the face value of these bonds and that way we can give our customers the withdrawals they're looking for.

Now there are two potential reasons you could see withdrawals from Banks which if you see withdrawal BS from Banks money moving out of Banks Banks have to come up with that cash somewhere. If they have bonds, they don't want to sell those bonds for a loss. so they go to the Fed and go, hey, can we borrow money so we can give our clients their withdrawal money? So they do that. We just saw this: INF Flct up.

These are usually smaller. Banks Regional Credit Unions Whatever. They don't want to go bankrupt, they're probably not going to go bankrupt. We're probably not going to see a banking crisis number, you know, 2.0 Basically because the FED will just bail them out.

This is a taxpayer backed F. by the way, any losses the FED experiences here taxpayers are on the hook for bailing out. So what is a bailout program? Let's be clear about that. But anyway, the point of this is why would people be taking money out of the banks? Well, probably because they're seeing the stock market go up and they're like, okay, well these yields at the banks aren't going to last.

So let's take our money out of the bank. Now the bank is like ah, crap. we got to fund all these withdrawals and they just throw it in the stock market which is no longer in the bank's hands Or they go buy bonds themselves which is then also no longer in the bank's hand. Another $8 billion came came out of here and let's be clear, that's that's a lot.

and if the trend continues up, this program could potentially double because what I think will happen is bonds will continue to Rally So bond prices go up, yields will continue to go down. That'll just reiterate more people taking their money out of Banks and throwing it into bonds or the stock market because as yields come down, the stock market will also become more attractive and so it's likely we could see some more smaller. Banks Just shut their doors. They might not necessarily go bankrupt because you've got the bailout facility assuming they have acceptable assets to deposit at the FED as soon as they run out of acceptable deposits.

Yes, then they might go bankrupt. literally. That's where the phrase bankrupt comes from. By the way, when the bank runs out of money.

So if you're at smaller Banks, you know, so hopefully you're under that FD limit. Okay, Banking Crisis 2.0 could come around Uh markets now pricing in 155 basis points of cuts. and then of course you have individuals who are suggesting I mean mostly the Kabi letter here on Twitter they or X they are like the classic Perma a bear. Uh, and it's fine.

Like it's great because then I can look and go. What are the Bears up to now and it's like the same exact thing that they've been talking about for a year. They just do over and over and over again. It's like Oh look The Chart overlaid Uh, back to the 1970s is so similar.

That's great. But you know people like to say you should look at history and study history. Well, who says it has to be the 70s because if you go back to the mid1, 1950s or the late 60s uh, you know, after the Korean war after the late 50s, or you look at the mid 90s, you don't actually have that big of a deal like there's There's no problem. you could have a soft Landing But of course the Kobc letter wants to look at the 70s, which led to Paul Vulker without considering the fact that there are substantial opposites from then to now.

So some of the Uh notable ones are we have stable inflation expectations today versus we did not back then. That was obvious. We just left the Gold Standard, so we had just been introduced to Fiat The unemployment rate was also at 8 . 4% That's more than double than what it is now.

Okay, that's very, very very very opposite. Uh, and the FED had very little credibility and I'm saying today's Fed has a lot, but they had even less credibility because they didn't even have a mandate back then. They're kind of just like shooting from the hip. Uh, you know some things that are similar to the 70s.

Supply Disruptions War Ukraine Israel whatever. Uh, but there are a lot of opposites I Think comparing to the 70s is a great way to mislead yourself. Now, of course, could inflation pop back up as the FED Cuts rates? Maybe. But it's not what we saw over the last 40 years.

So you're actually making a bet that is anti-history if you think inflation's just going to resurge up and I Know people that but Kevin 70s inflation went up. Yeah, But again, we just talked about how opposite things are. so you know you would. You would need to have those things flip first to un anchor inflation expectations.

And then you could expect that things might look like the 70s because if you're going to look at history at least the line history correctly, it's kind of like the 1970s or a triangle and you have a a square peg of a market. It's like, okay, well, where does the square peg fit? Oh, mid 90s? Oh okay. early 1950s post Korean War those a line a lot better. Uh, of course they're different shapes a little bit.

The colors are a little different because every cycle is somewhat different, but history Rhymes You just have to then decide okay, what which history do you want to use. If you're a bear, you use the 70s. Otherwise you go look at some other stuff. Well, there actually some more similarities anyway.

Uh, inflation expectations stable on the 5-year break even at 2.19 and I will see you in the Meet Kevin podcast very soon. If you haven't checked it out yet, we have a great discussion on a lot of different things. We do include a little bit of politics a lot of Tesla talk. Usually it's really fun, so join Mikey and I over at the meet Kevin Podcast Make sure to go to Ec.com to get your uh free forever uh news and research I've also added a new feature where you can now link to the individual posts so it kind of pulls you to that individual spot in case you want to link it to share it with somebody.

and I really appreciate you. We'll see you in the next one. goodbye. Do Not advertise these things that you told us here.

I Feel like nobody else knows about this? We'll We'll try a little advertising and see how it goes. Congratulations man, you have done so much. People love you people. look up to you Kevin PA there financial analyst and YouTuber meet Kevin Always great to get your take even though I'm a licensed financial adviser, real estate broker, and becoming a stock broker.

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