Welcome back to another meet! Kevin Report today is episode number 15 already. Welcome back! Uh. First, we're going to start by talking about what's going on with the latest on Elon. We'll do a little bit on subject to real estate.

We'll talk about what's going on the market of course, some of the earnings that actually missed this morning as well and what that potentially means for the market. Uh, and we'll see what else we've got in store for you. So let's get started first. Uh, Elon Musk So we've got the Super Bowl coming up.

Uh, and uh, Elon Musk Apparently, uh, according to the Wall Street Journal I was asked the Twitter staff to basically do whatever they can to sell uh advertising for the Super Bowl In the past, the Super Bowl has been a really big weekend that Friday Saturday Sunday uh for the Uh for the advertisers on on Twitter Uh. And so apparently in an email, the company is offering basically 250 000 in free ad space to advertisers that spend at least 250 000 on the platform. So it's sort of like a buy one get one. And it's interesting because obviously we know after Elon took over, there were a lot of brands that were very uncertain about the future of Twitter and there's been a lot of a pullback from advertising on Twitter Because of that.

Some of that might have been because of macros, some of that may have been because of uh, the the uncertainty involved in Uh potentially advertising on Musk's platform that at the time everyone in the mainstream media was suggesting was going to implode. Of course, since then, Elon Musk has laid off uh, somewhere around over 60 percent of the company 2500 approximately individuals left of the company, down from about 7 500. So it's actually closer to 67 percent of people gone over at Twitter. Uh, now.

Uh, Elon has uh, recently apparently sent out an email. This was, according to uh, the Informer. They released a report saying Elon sent an email out kind of giving you a little bit of insight into his business practices, asking all employees to list what they had accomplished in January and what other are additional issues that they're working on trying to solve or recommendations they have for the company going forward. I Think it's kind of interesting.

It's kind of like a so what did you get done in the last month that you were paid? It's kind of an interesting argument. If you're working at Twitter and you're watching this, you probably want to start documenting all the good stuff you're doing. Uh, Anyway, going back to Uh, the Wall Street Journal over here Wall Street Journal Uh is suggesting here that uh, they're ramping up their Super Bowl pitches to advertisers offering a last minute deal on one of the most high profile big game ad packages according to an email viewed by The Wall Street Journal It's also telling advertisers that the number of conversations on the platform about the Super Bowl uh, and uh, the National Football League is up significantly from a year earlier. now.

personally: I always somewhat uh, question when I hear stuff like that because I'm like by what measures but hey, you know what whatever they got to do to encourage people to come back and support Twitter Probably not a bad thing, especially since at one point there were suggestions that up to 70 percent of advertisers had left Twitter and by another measure up to 90 percent of a reduction was noticed in ad traffic or not sure I shouldn't say Ad traffic regular traffic to the advertising domain that Twitter uses implying that potentially 90 fewer ads were actually being signed up for in November and December. Who knows. But uh, Elon Musk has also given us a little bit more insight, which actually comes as kind of supportive, especially to Uh Tesla stock since basically Elon Musk used Tesla stock as his piggy bank to finance the purchase of Twitter. But you do have some good news today.

for Twitter, it's and it's uh or for Tesla and it's actually two-fold it. It's obviously the win by Elon Musk and Tesla and the 420 funding secured lawsuit where now they have removed potentially up to 6 to 12 billion dollars of liability. That would have been a big issue if Elon or Tesla had to contribute to this. Obviously the expectation was that that would have gotten negotiated down, but that overhang is now gone.

But the Twitter overhang of Elon Musk having to sell Tesla shares to be able to support this company he was saying was trending towards bankruptcy may now starting to be getting removed and that's because Elon Musk here says in a reply to the Wall Street Journal Uh, and this is uh, the Wall Street Journal trial Uh, uh, a piece here where the Wall Street Journal tweeted out the win you Love Us replies the last three months were extremely tough as he had to save Twitter from bankruptcy while also fulfilling his essential roles at Tesla and SpaceX. He wouldn't wish that pain on anyone, he says. He goes on to say that Twitter still has challenges, but it's now trending to break. even if we keep at it, public support is much appreciated.

so in other words, not yet saved. Not yet clearly in the black, but things are trending towards a better Direction than they previously were. He further clarified this by saying thank you for supporting Twitter and uh, we've got a response here. Somebody asked, was this worse than 2008 or production? Hell, 2008 was the beginning of the Uh Uh, essentially the launch of manufacturing for Teslas via the Roadster Uh, while at the same time being stuck in the Uh in essentially the recession so funding becomes extremely challenging.

2018 represented the Uh production hell of ramping the model 3, while at the same time Elon Musk was dealing with SEC inquiries over his funding secured. Uh, tweets. so uh, some responses here from Elon giving a little bit more clarity, but so far this sounds very good. And keep in mind Elon Musk did sell about 24 billion dollars of Tesla stock in 2022.

that 24 billion dollars of sales pressure offset? That's sales pressure, right? We already know this. Hopefully this is redundant to you, but for those of you who don't know this I want to reiterate Elon's 24 billion dollars in 2022 sales offset 15 billion dollars of retail hoddle buying. So net retail buying was 15 billion, his sales were 24 billion so no duh. the stock moved into a downtrend uh, which was then easily shortable.

Now, of course some people like, but Kevin the volumes higher. That's not how hodler someone who was a hodler now selling works. Okay, it has nothing to do with the volume. The volume is sort of like the waves at the top of the ocean.

A hodler coming out and selling is like draining the stock from the bottom. It's very different from just day volume, but anyway, a little bit more insight here. Uh, we have uh Twitter talking about potentially charging up to a thousand dollars a month for verification for businesses and this is because now Elon Musk is uh, allowing companies to get a this sort of gold check mark like the Wall Street Journal has right here. This gold check mark is, uh, very different from, uh, sort of the regular blue check mark which you could either buy or you get because you're maybe notable or not.

So uh, it used to be that if yeah, there we go. uh, verified account. this is a legacy verified account. It may or may not be notable is sort of the check mark, the old school check mark.

And of course you can now pay for a check mark which just says you have a check mark if you're you know, a Twitter blue subscriber. But the other thing that's interesting is now, uh, let me see if Martin has it I believe he does. Uh, let's see here. Nope.

can't seem to get him very quickly here. But anyway, basically what they've done on Twitter now is they've allowed companies to create this, uh, orange check mark for businesses and then you could get a sort of a little like tea if you work for Tesla next to it. And so you kind of get double verified so you can get a verification. You can get a business badge as well.

And the neat thing about the business badge is you can click on the business badge and it actually links back to that corporate verify the corporate Twitter page. So it's kind of a way that individuals can now show yes, I do actually work for what company I say I work for. So maybe you can actually get a little bit more transparency rather than just somebody's bio being updated saying that they work for a certain company and the idea there is in part to a provide more transparency which we know Elon's a fan of at least that's what he tells us. but it's also in some regards trying to prevent what people like George Santos are able to pull off where they can blatantly lie through their teeth about their resume like going to a university that they never actually enrolled at or working for Credit Suisse or Citibank which they never actually worked at, yet somehow still get elected to congress.

So to some degree, actually being able to verify that somebody actually works for the business they say they work for, as well as being potentially a verified individual are some of the strategies Twitter is working on to not only provide more transparency, but also increase Revenue A business might have the interest in having this additional verification, maybe because as they're advertising they they want to seem more credible which I would imagine if you spend enough money on. Advertising They probably throw in the orange check marks as well as the individual check marks that you get for people who work uh, at the business, but it's kind of neat. Uh, it's uh, these are these are pretty neat and Innovative things that we we haven't actually seen Twitter change that much until Elon came around and now we have view counts. uh, at least some potential reduction in spam.

although there's still plenty of spam obviously the blue check mark change, the orange check mark change, the employee verification changes. So there are changes happening. A company is somehow operating with 67 percent less staff and so far Twitter hasn't gone down so good job! Elon Mainstream media must be a little upset about that because they were pretty convinced this was going to implode. But anyway, several brands are thinking about returning to the platform.

thanks in part to the Super Bowl and cheaper ad rates as well as the release of a new tool. Look at that. already getting new advertising tools. It's pretty smart release of a new tool that allows advertisers to create a list of up to 1 000 keywords and avoid having their ads appear above or below tweets containing those uh words uh so in.

In other words, you can now create negative keywords, which is something that Google Advertising's platform has let you do for quite a while, but apparently Twitter's has not, so thanks for catching Uh Twitter up! Elon This is good anyway. Beverage Company and a financial services firm interviewed by The Wall Street Journal recently began advertising again. Twitter is also offering a three-day Super Bowl weekend package for 250 000 which apparently is considered a fire sale. Wow, that is very expensive.

Uh, then apparently in January the company offered free ad space on promoted tweet campaigns to get people to come back apparently on Super Bowl weekend which is the uh, it's actually not the Friday Saturday Sunday I said that wrong Super Bowl weekends apparently is actually for advertising purposes deemed to be Saturday Sunday Monday Which makes sense because you're flanking the Super Bowl on the left and right since that's on Sunday. Uh, and so you do sort of the Highlight advertising on Monday and you do the prep advertising on Saturday and then of course big game day advertising on Sunday. But anyway, many advertisers including Pfizer United Airlines General Motors have paused spending on Twitter since Elon Musk took over in October I. Can't help but Wonder like how wonderful it just at least seems that Pfizer stopped advertising and on Twitter and presumably Pfizer still advertises on things like YouTube and other platforms.

And when project Veritas does a video critically uh, or potentially even going as far as exposing Pfizer on certain topics, uh, Pfizer those videos from Project Veritas get removed from places like YouTube but they get to stay on places like Twitter and now Pfizer is not advertising on Twitter This is an interesting link. It's probably causation with a correlation, but but you know, wouldn't surprise me if there's at least some link like that still going on. especially since uh, you know companies, uh, companies are seeing their ad Revenue decline even Google. In fact, if we jump over that, that for a moment, Google's uh, YouTube declined now for two quarters in a row, which is a little bit shocking that uh YouTube ads are declining.

This was the last or the second to last report ending September We saw YouTube was down 1.85 a percent from a year ago and that same thing was seen in the last earnings report from Google which I do not have handy at the moment. but we saw the same kind of decline at Google for Google ads. So it makes you wonder if oh, here we go. if at all Twitter is experiencing any of the same difficulties that uh, that the other advertisers are probably even more so then yeah, you know you're you're seeing some year over year declines.

Look at this: Google ads actually down now 7.8 So you've seen an acceleration from first of all, strong growth to then negative growth and now a lot of negative growth. So things got even worse in the quarter ending. uh in December for uh for advertisers here, kind of a red flag for advertisers by the way. yeah, American Express told us the same thing American Express and their earnings call warned that advertising spending was declining at uh, small businesses.

that what I think is so interesting about you get Uh yeah, here we go. Uh, the commercial services and spending by U.S small and medium-sized Enterprise customers represents the majority of Commercial Services However, that segment was the slowest growing customer segment and small business enterprises have recently started to slow down spending in certain categories like digital advertising and I Find it very interesting that they talk about this sort of recent change of a Slowdown in digital advertising, somewhat implying that that Q4 was really a little bit of a larger headwind for a lot of advertising companies probably. frankly, uh, why you have Elon in November and December essentially complaining hey, you know we are trending towards BK over here. Fortunately, though, it seems like things are getting better.

So uh, over here it says Twitter has been telling some brands that advertisers are returning the platform. For those that pause post acquisition, we have seen 30 plus return. Uh, that's great. Uh, more than 70 of Twitter's top 100 AD Spenders The Four Musk Took Over were apparently not advertising on the platform according to sensor Tower as of January 29th.

So that's still potentially 70 of the big boys not being there comparing to the 90 uh. potential reduction in advertising in the fourth quarter? Uh, at least at one point. Uh, Anyway, they give some examples here of: uh: 30 seconds of add time can cost somewhere around seven million dollars for an actual Super Bowl TV ad and uh are making this comparison to companies using Twitter. But uh, look, the good news is clear that even through the advertising challenges, that the entire advertising space is seeing uh, whether it's a TV or potentially connected TV, We'll see what happens when we get uh, trade desk numbers, uh, advertising challenges at Netflix and low take rates on those ads.

At the same time as all of this sort of pain is happening in the ad space, it actually looks like you've got Elon Musk getting the company to at least Trend towards profitability. probably not yet profitable, but Trend towards profitability. And remember he suggested and some like to try to say that this is his promise, but he says that he does not need to sell any Tesla stock in 2023. now uh, that is what he says.

What he does could be different. My suspicion is if he would have lost the lawsuit, he would have been right back to unfortunately having sold. So fortunately, that lawsuit overhang is gone and he says he might not even have to sell any stock in 2024. Maybe he doesn't have to sell until 2025 though that uh, that is a less of a guarantee as more time goes on.

so we'll see. but paying attention to Twitter as a Tesla investor, it's a surprisingly important Endeavor so something to pay attention to. All right, let's listen into Bloomberg for a moment see what they are talking about. 2023.

In really thinking about what 24 looks like? Yeah, absolutely and and just a little bit more approximate. looking at 2023, we're still looking at a recession happening sometime this year, but a shallow one where essentially the FED is not successful and its mission in bringing inflation down to a two to three percent Target but rate Cuts nonetheless eventually hit later this year or more like the early next year. But once you start seeing the FED cutting rates, let's say early next year when inflation is bottoming not at a two percent or one and a half percent, but a three to three and a half percent you're talking about yields Off to the Races again second half of next year. So we're already looking out towards next year and what? and Beyond This what we're saying is double dip Recession is most likely what we're going to see over the next few years because there's going to have to be serious damage done to the labor market to get inflation down this cycle.

Wow. and I Just don't think that double dip like 8081 Exactly exactly I've never heard that that's the original, the post-crisis conversations on yeah, 10 years ago before we get to the second recession. yeah, you know what it seems like every single time there's a recession people start talking about. Oh, it's gonna be a double dip.

It's gonna be a double dip. It's literally what I got in the industry. Uh, in real estate. in starting in Uh, like the late uh, 09, early 2010 when I started getting in? I'm like, all right.

So what do we got here in terms of real estate? Oh terrible. Market Oh dear worst crash in a very long time. Okay, interesting. and as soon as we started recovering and this, the real estate market bottomed out at 2011.

which is crazy because it started falling in O5 didn't bottom out until 11, which is about six years later. Uh, you had everyone worried about the shadow inventory of homes that Banks were hoarding that they were going to release onto the market and crash the market again. As soon as prices popped up a little bit, it was just a bear Market rally and and the real estate market was going to double dip crash. Let's listen in more for a moment here just to see what this guy's talking about.

and we'll do a little bit more analysis on this double dip talk higher income cohorts: They're dipping into savings at an astounding rate as well. That's probably more sustainable because they've got a huge cushion, but you put it all together. We're seeing shallow recession because eventually the consumer wobbles over. and once the consumer wobbles, then businesses stop hoarding that labor like you saw in 2000 with inventories and then you get that Cascade effect.

But it should be fairly shallow because we do think by the time this happens, we're talking later this year and now the Fed's starting to Pivot towards cuts for 2024.. Well, that's what I was going to say. What's the Fed's response to a shallower session? Is it rate Cuts If inflation hasn't really been killed off I Think they're gonna, they're gonna, you know Heaven Hall on this as long as they possibly can. but eventually they will pivot towards rate Cuts But not this year.

Now that's interesting because the bond market as of Friday morning before the the jobs number was pricing in Cuts as soon as we'll say October or November of this year. so the market this morning is pushing those cuts further out it looks like, but the FED is still going to have to wobble itself towards Cuts or pivot towards cuts at some point next year. I Believe is just a shallow recession and nothing deeper enough to justify credit valuations where they are given the ongoing rally that people have really played into. Yeah, I would say no, both in the investment grade and high yield space.

No I mean we've got IG spreads. Investment grade. corporate spreads somewhere around a 115 to 120. Even in a shallow recession.

Historically, you're talking about 180 to 200. That's a very shallow recession. And by the way, you can make the same extrapolation to the equity markets where you're looking at what how much the earnings contract in a shallow recession? It's you know, 15 percent? 20 percent perhaps? So nothing seems to line up with even with that shallow dip in earnings and and output that we're expecting. So there has to be some risk asset pain.

the Chapman pound volume two tomorrow, Can we finish that? If we've spent anything different from the Fat Chair? No. I Think What he's trying to tell us is we don't know where where we're going to terminate the funds rate. It could be five, five and a quarter, five and a half, but we're confident we're going to hold it there for a while and we don't know what a while is. But but it's probably for the the remainder of this year.

Beyond that, he's data dependent I Hate that phrase. We all hate that phrase Tom loves it. But we we need to see numbers. We need to see the jobs numbers and we need to see how quickly inflation is coming down and all of it comes down to one important data point or concept that you're not hearing people talk a lot about today.

Labor Force Productivity If labor force productivity somehow rises in participation rate, Rises then it's a game changer. I Don't see that happening though. participation did on Friday Is there anything about the data at the moment that makes you think I don't really know what's happening here? I Can't draw conclusions about the post-pandemic realities of this labor market. Well, we that that's a head scratcher and what we can broadly say is it seems that 18 to 25 year olds are still to some extent boycotting this.

Market this labor market. We don't know why they're doing that. We can suspect we can give anecdotal reasons, but someone's going to give you one Right now. We all have, and we can have our cynical reasons why.

But for whatever reason, they are boycotting this market. And when they do join the market, the labor market, they're not putting their best efforts forward. so labor force productivity is negative. One of the great things of Strategus is the inbred optimism of the shop when Jason turn it started.

Don't tell me Jason Trenton it's 100 in cash. What's the equity belief that you shot? No. So we're looking at again, consistent with a shallow recession, a modest earnings contraction, and that means that, say the S. P.

Let's put a ballpark here. Let's do 200 per share for earnings for this year. Yeah, 17 to you know, 17 and a half multiple I could ship. We'll say 3 500 and if the fed you know pauses and pivots sooner than expected, maybe you get back down to 3 600.

but we're still bearish at these levels on equities. We just don't I Just love to hear Bond guys talk Equity I Just enjoyed that I Would love to hear Bond guys talk Equity So let's uh, let's let's consider that for a moment. so the individual is not wrong and that the Bond market is pricing in rate Cuts probably is soon as even September and we're pricing in over one percent of rate Cuts in 2023. now Jerome Powell has been telling us hey, we don't have any plans for cuts in 2023, But let's be clear, in his last Fomc press conference, he was pretty dang blunt, suggesting that look, we're gonna look at the data and if inflation comes in hot, then maybe we have to go higher.

And if inflation comes in lower and he purposely implied this because he didn't want to say the word Cuts then obviously they would cut rates and respond accordingly. Now I Think there's going to obviously be volatility over the next, not only year, but certainly the next weeks and months here as we try to get as much data as we can. I Think this sort of Nike Swoosh that we're going through is going to be pretty spiky up and down, but this idea of double dip recession is really interesting. Really, it's a Michael burry in argument.

It's this idea that hey, you know what? We could end up seeing a soft recession here in 2023, Then all of a sudden the FED Cuts But oh no, those cuts lead inflation to actually pop up again. Now people can't go and rely on their savings because their savings are gone. Now, people can't rely on the ability to go borrow and get another personal loan from Sofi or max out their credit cards because they've already done that. And now, if you get into a situation where inflation starts popping off again while the Fed's cutting, now, the FED has to raise rates again at the same time as people don't actually have a way to spend through the recession anymore.

So now what happens, People stop spending and then that's where employers actually start saying okay, this isn't a hunker down style recession. This is now a real recession where we actually have to make meaningful cuts to our businesses. Now we lay people off which kills spending even more more and you get a deeper, ugly, dark, double recession. It's possible, what the individual is saying and the warning from Michael burry is absolutely possible, especially when you combine with that the U.S China Geopolitical tensions.

The fear that, yes, uh, combat with China could actually be something that occurs in the future. Obviously, we shot down their their darn spy drone oh uh, spy balloon uh over the weekend. but uh, look, it's probably going to be months before we're actually able to conduct sort of a dare you say, an autopsy on this balloon to figure out exactly what kind of Technology they had, what kind of scanners and cameras and what kind of data they actually had and we're collecting, as well as what kind of data not only they were collecting, but were able to beam back to China before. uh, this, uh, this spy balloon was shot down.

presumably all of the data that was, uh, that was on it was able already to be sent back to China. But look, China does this sort of stuff right. Like 15 years ago, they stole designs for our F-35 a fighter Jack that's the Lockheed Martin F-35 Gen 5 plane. I Mean this is this is really important and so what? they end up doing that ended up making a pretty similar plane.

Now most of their jets are still like Gen Ford or even older like the 90s Gen 3 kind of stuff. but I mean they've done this before Chinese Hackers have sold in security clearance files from 22 million Americans in 2025. they've sold in medical files from Anthem they stolen travel records from Marriott The difference with this balloon because they always steal our suffer, try to steal our stuff is it was sort of like theft right in our face. And that's pretty ugly, right? So so there's certainly the geopolitical risk here there.

You've got Ukraine and Russia risks. You've got Iran and Russia risks this idea that now Iran is partnering with Russia to manufacture potentially six thousand Kamikaze drones by building a factory in Russia so that way they can be sent straight from Russia to the front lines. you've got the treasury yields Market That's clearly at least showing some short-term uh, nervousness we've had recently Fallen to a low of about 3.35 on the 10-year Right now, we're sitting over 3.6 again, which just drives the real estate market down further. So you do have a lot of reasons to be nervous BTC back under 23 000 which is sort of like a I always like to consider it.

uh, your your risk gauge and uh, you know we we got rejected at 24 and and now all of a sudden the stock market's a little bit more tentative. On top of that, you've got the earthquakes that are going on in Turkey which aren't necessarily A lagging risk uh, right now to the stock market, but they are. They are something that, uh, guess what? Uh, now Turkey is having to shut down certain uh oil facilities uh, in the Turkish region because of a 7.8 magnitude earthquake that hit, followed by a 7.5 after shot potentially 1300 dead in Syria and Turkey. and now you got oil Futures Rising on on that thought and you're back to almost 81 bucks for Brent Uh, which is probably your biggest inflationary impulse.

So you have a lot a lot of uncertainties. and at the same time as you have a lot of uncertainties, you have mixed data coming in as well, right? The jolts data came in high, which Jerome Powell sort of brushed off. The employment cost index came in at one percent, but still, that's 4.4 annualized for wage gains. that's still too high, right? It's nowhere near two percent.

Uh, Factory orders in Germany coming in stronger than expected retail sales in America coming in weaker than expected all across the world. It's sort of like man got some good. some bad. A lot of companies talking about inflation risks going down, but what do you have? You have companies like Hershey telling you that they still are experiencing uh, inflationary pressures still today and what I thought was the most interesting out of the Hershey earnings call because remember this is what I do I I read earnings calls I Love reading and sharing the information with you because you find nuggets like this uh Hershey says historically after they raise prices, you actually don't end up reducing.

uh, prices. That's just not how market dynamics and the candy Market work. So in other words, once you get the inflation, you're stuck with it. Now the good news is, as long as prices stay stable and they don't actually expect to raise prices which they don't uh, but you can actually bring inflation technically back to zero.

It's just now everything's been reset to a higher level. But still, all of these things create substantial uncertainties. and so yeah, this is where people say look, the first recession needs to be aligned with. If we have, a recession needs to be aligned with, well, inflation going away because if inflation doesn't convincingly go away and the fan has to Hawk through a recession, then that's where the Real Pain could come.

And Asbury and this Bond dude suggest you could end up being in a double dip recession. Now this chart is really fascinating is one to pay attention to. This is the probability that the next recession in the economic cycle has started. We briefly looked at this just the other day, but it's important to look at because it's very, uh, historically accurate.

Doesn't mean it will be going forward. But probably one of the most important indicators of a recession or reliable indicators of a recession actually happening are the inverted yield curves. And this one in particular is the Fed's favorite. It's called the three-month 10-year inversion and so you could see that on the bottom, which is basically this upside down Little Blue Mountain over here.

and basically the depth of this inversion is the deepest that we've seen since the 80s. It's pretty dang deep, and in the 80s we had a pretty darn ugly recession because we ended up having to get Paul Volckert. Now eventually, the depth of the inversion is correlated with the amount that in the future, the Bond market actually expects the Federal Reserve will cut interest rates. So yes, at some point we're going to get massive interest rate cuts.

The question is, just do we end up having a single recession? Do we have no recession? or do we have a double dip recession? Nobody really knows. In fact, according to this chart, the odds that we're in a recession right now are less than two percent. In fact, it's more likely that the recession is still somewhere around six months out according to the inverted yield curve. that would put us into a recession somewhere around August and then we'd be within a sort of one standard deviation range of the recession being somewhere between August and December.

Now, if by that point inflation actually is convincingly low, and how can we get convincingly low inflation, we'll talk about the If well to get convincingly low inflation. You need Goods to continue their Trend down, which they already are. That's good. In addition to Goods continuing their Trend down.

What do you need? You need that household inflation to come through that inflation? Uh, sort of a metric from owner's equivalent rents. Uh, we have got to see that continued weakness of that housing sector, right? But on top of that, we have to see a service. Wage inflation go down. Service.

Wage inflation is going to be like Medical Care Uh, haircuts, accounting services, basic services that that even car insurance that that you spend money on just to sort of live right. And the hope is that by the time we get to the summer or say June or July hopefully before we walk into a recession, these numbers are starting to convincingly disinflate. Disinflate. Just this inflate is different from deflation, right? Deflation is falling prices.

Uh, whereas disinflation is prices that are growing at a slower rate, right? So that's falling versus slower rate of growth. Anyway, as long as we can get this and we can confirm. Okay, we have a slower rate of inflation in wages than the Federal Reserve can actually preemptively try to soften the blow of us walking into recession and maybe we completely avoid a recession entirely. However, if we don't get that service side, deflation or disinflation I should say then yeah, it's entirely possible that we walk into a recession.

Not only do we walk into a recession, but then the FED cuts, but inflation still stays sticky. and then we end up getting the worse. Double Dip Recession on the heels of that thereafter. Now again, unfortunately, it looks like wage inflation is actually stabilizing.

This is important. You look at a company like Starbucks and what are they telling you? Wow. It's a lot easier to hire people. A lot less labor turnover.

What is less labor turnover mean it means less wage inflation? Very, very important. Less wage inflation is exactly what we're looking for here. Now, the fascinating part is that a year ago companies were telling you exactly the opposite. They were telling you well, no, but we are having a hard time keeping our employees and we're having to pay more to get more employees right now.

The only place you're really seeing that now is in certain sectors of the airline industry like Pilots. It's still very difficult to hire Pilots because there's so few of them. You still have a smaller industry now than you did before the pandemic. and that's the problem because you had so many retirements.

Uh, but you are still seeing hope and good news that that wage inflation is going to go down. Same thing Starbucks is saying is what Chipotle is saying and a lot of companies suggesting hey, look, Finally, we're seeing those wage pressures go away. That's great, but right now it's just hope that it continues to move in that direction. Now on some good news.

We had earnings this morning from Tyson Foods Tyson Foods A year ago was bragging about how much their margins were exploding. They're bragging about how big their PP is they're bragging about. Look at my PP look at my pricing power. It's so large it's so huge.

That's what they were bragging about last year. And now what are they bragging about? small PP Basically, which is probably not trying to brag about it. but basically chicken prices were so high it was easy for them to have high margins. But unfortunately, chicken is a commodity.

and when you have a commodity, the price of a commodity generally Trends down over time. especially chicken because you get more producers in and we get more producers and what happens. Oh wow, chicken prices plummet. Now what's happening? Well, the company did grow revenues relative to last year.

They grew less than expected 3 or 13.26 billion versus 13.5 expected above the 12.933 from last year. But their earnings per share missed bigly. They were expecting 1.31 cents of Eps markets were we got 85 cents. And that's because as chicken prices plummeted, the company's costs were still rising and so all of a sudden you're getting squeezed on both sides.

This is an example of where it's easy for every company to have told us they had big PP last year. But the reality now is who is actually able to continue to sell product with decent margins while not actually missing estimates as terribly as Tyson Foods did and destroying the margins? So in other words, where can you remain competitive in a recession while still maintaining profitability? Tyson Food Let little bit of an oopsy-doopsy today with substantially less profitability than expected. And this is totally the opposite of what we saw last year. So this is great.

But but look, you know, we are still waiting for substantially more certainty on what's going to happen. You've got Morgan Stanley's Mike Wilson Going see told you bear Market Rally Everything's going to go down again. Uh, obviously Futures right now are red. just about one half to one-third or two-thirds of a percent depending on which index you've got.

Goldman Sachs saying hey, the January rally is as good as it gets. You've got Dell announcing that they're cutting five percent of jobs citing the lack of PC demand. You've got Deutsche Bank Now looking at strategic job Cuts Uh, you've got uh portfolio managers talking about this regime shift of potentially higher rates staying for longer. We saw this double dip guy.

uh, and the double dip guy. You know on one hand he's kind of like hey, look uh in this I'm giving them Credence here. or you know, credit. Essentially here he's talking about how right now people can kind of spend and through this recession right? they can hold out because they could just take on debt or they have the savings they can spend through.

The downside? uh, well I Hate to say it, but when I looked at the uh earnings call uh for American Express they used the phrase that consumers right now especially American Express users are spending through this recession and that's basically reiterating what this double Dip individual is suggesting that. Hey, look, right now, people aren't actually yet treating this like a recession because they're just taking on more debt or loading up credit cards to spend through it. Sort of like the idea that hey, you know what, we just have to get through the next six months and then we're good. uh and then we'll pay off the debts that we accrue.

That's great and it relies on the hope that this is over. After you know we we can prove disinflation. but if we don't then yeah, double dip becomes possible. so you want to hedge for that possibility and the best way to generally Hedge for that sort of possibility is making sure you're not in exposed substantially to debts that could get margin called short amortization periods and you're not exposed to potential job loss.

Now if we actually look at reports from Goldman Sachs and Morgan Stanley, we can get a little bit of insight into sort of their thoughts. We get first of all insight into the European Central Bank hoping that inflation is mostly now conquered or at least on the path to being conquered. and they're actually starting to taper how much uh, they are basically quantitatively tightening so they're reducing their tightening efforts already. Uh, and they're pointing out to a more balanced inflation Outlook That's great.

Uh, this is sort of the European Outlook from Morgan Stanley but Morgan Stanley and a lot of investment. Banks right now are saying that emerging markets and Europe are actually faring a lot better than the United States that the United States is more at risk of an earnings recession than other countries or Emerging Markets if we look at a piece from Goldman Sachs Over here we talk about uh, the the this idea here. that uh in the quick disinflation right now is what's being priced into markets and that actually creates a risk in itself that now all of a sudden everybody is too optimistic that we are pricing in so much disinflation that if that doesn't happen in the face of mixed data and then we start getting realistic data like maybe potentially uh, you have uh of car prices starting to rise again, uh then then what you end up having is forces that were disinflationary in the last few months starting to become inflationary again. And if it takes longer for the housing market to bring home prices or rents down yikes, then uh, than that quick disinflation of the rate Cuts markets are pricing in is all for nothing.

Now one of the interesting notes here from Goldman Sachs is that hey, look, you know, housing starts uh, coming out uh, over the middle of this year will probably help Drive inventory up substantially as home builders actually try to finally finalize some of their building, they get through the construction backlogs and you can actually see some downward pressure on real estate in the second half of the year. Uh, and yeah, the market is pricing in that sort of disinflation. But be careful because even though we have signs that hey, these numbers should come down if for whatever reason, they don't got a big oopsy-doopsy coming your way, so be careful. Uh, and they suggest here that uh, it's probably going to be until the end of the year according to this particular individual at Goldman Sachs uh, before the FED is actually confident that the inflation fight has been won and so Goldman doesn't actually think you're going to see a 50 basis point rate cut until December even though we've been hearing about Raid Cuts coming as soon as September based on what the Bond Market's expectations are Goldman here suggesting that we'll probably end up sitting around three to three and a half percent as sort of a neutral rate once we get into the cutting cycle.

Uh, be it next year. Uh, we'll see, We'll see, but a lot of uncertainty and is it possible there could be a double dip? Yeah, numbers are still very mixed and so I think it's important to sort of stay the course on. Okay, be conservative, have have long exposure, but don't go YOLO not just yet. Uh, Anyway, this gives us some insight here into some of the madness and uncertainty that we're going to be dealing with.

I think it's actually great? Uh, that, uh, that that we are starting to see more of a balanced labor force for businesses. Even as the unemployment rate is as low as it is, it seems like at least from the front lines companies are suggesting look no real concerns of a wage price spiral which reiterates what Jerome Powell had suggested in his Fomc press conference. So I think there are reasons to be optimistic, but but there are definitely risks and and nervous. uh, dry or nervous catalysts that should make us nervous.

Uh, that we want to pay attention to. Uh, this week we do get some more earnings as well Powell Talks tomorrow Biden's got a state of the Union tomorrow as well. that's Tuesday you've got sentiment data coming out Friday you've got Waller and Hawker talking Friday You've also got earnings from companies like KKR The real estate business BNP BP Nintendo Pepsi Semiconductor Manufacturing, International seam and SoftBank Toyota Uber Disney Tyson we just got talked about Energizer Royal Caribbean Hertz Fiserv CVS Hilton Credit Suisse all coming out this week so we'll get some more data but we know what to look for and uh boy oh boy, there's a lot to look for all right. So what else do we have of four? let's see here.

So this, uh I don't know, double dip. kind of interesting. What else do we have to talk about? Ah yeah, okay, we got a lot to talk about. The um I do want to provide a little bit more color on what's going on with uh, these uh, these Iranian drones that I talked about.

So uh, let's see here. just give a little bit more color on that for for some of you. So it's just worth noting a quick note because I mentioned it here that the Iranian drone Factory is expected to be built in Russia It's a in cooperation between Iran and Russia. They are trying to build drones that are faster and more powerful so they can go a longer range and that's because Ukraine started to get pretty decent and at shooting down these drones, they're pretty loud and noisy when they're on their way.

they're Kamikaze drones. So far Ukraine has apparently shot down about 540 of them and there's talk about maybe Iran providing ballistic missiles to Russia Although so far there's no evidence that this has actually occurred. and again, they haven't actually started development yet on their their Kamikaze drone. Factory But uh, there are talks to start breaking ground on this Factory uh within the next couple months here, so we'll see.

gives us a little bit more of insight into uh, the drama between uh Russia Ukraine and of course, our adversaries. Let's look at a few questions that we have here. So what happened to Bitcoin an hour ago? Massive red than normal? Uh yeah. I mean well, um, you know, pre-market you tend to have pretty low volumes and Bitcoin uh frequently uh is uh is something that's worth noting because it trades 24 7 you get less volume per minute, right? Uh, that makes sense.

but I don't actually see anything pretty dramatic on the minute chart here in Bitcoin I mean you, you tend to in pre-market get uh, a lot of nervousness often? Uh, especially after some of the news that we've gotten this morning and the market was actually more red this morning and it seems like it's slightly started trying to recover. Uh, although we'll see when the Market opens in about an hour. seems like Walmart and Mickey D are hiring Tech and auto firing. What's the data showing are jobs hiring, Meeting the living wage 28 plus an hour meeting the living age? Well, you know Walmart uh just raised their minimum wage to I believe it was 14 an hour from 12.

and that actually brings the average wage for Walmart up to 17 an hour. And so you know you're talking about uh, well probably the the lower of the average wage earners average wage in America is somewhere around 32 an hour. So it seems like a lot of hiring is still going on in that retail Hospitality space which is generally lower lower income. So let's see here: Service text in Auto Industry Now Find it impossible to hire people.

You know. One of the things that I find is that you do have a substantial lack of Education for the trades in America and I think that is quite disgraceful. I Think we need a government that provides more education and more opportunities for Uh for people so that they can actually make money coming out of high school. and now Ron DeSantis is suggesting that uh that that he's going to, uh, do exactly this.

Now this is fascinating to me because it's something that I ran for Governor on on the premise of this and Ron DeSantis is now looking at Uh that requiring Uh not only financial education courses in high school, but also degrees from colleges that focus on quote high-wage jobs, not degrees for a political agenda. Now I'm not trying to turn this education talk into one of politics, but when I ran for Governor California my belief was we should have a a new type of school which I called future Schools which could be sort of a an ancillary part of regular high schools or whatever but basically design to give you a trade education in your Junior and senior year in high school to where when you actually graduate, you can be an auto mechanic. The day you graduate you could be a computer programmer. The day you graduate you could be a bookkeeper.

the day you graduate. In other words, you can actually do skills the day you graduate high school. that was a campaign promise that I made. Obviously I didn't run for cover or I didn't I didn't win the governorship.

I came in second place of the recall candidates which is great at almost a million votes which is awesome and an honor. Thank you to all those of you who voted for me. Um, but look, we've gotta I mean that's that's something that we're going to have to deal with over the next. Generations Is this idea that people have to be able to graduate school and actually be able to do something and provide value to society? Unfortunately, we're in a situation right now where you do not have a an education system that enables people to actually get a job when they graduate high school.

It has almost become difficult for people to graduate high school and get a job at McDonald's because what you learn in high school is so limited. The basic levels of high school are so embarrassing that some people graduate and they can't even read or spell correctly. It's embarrassing. So, our education system in America has has really become a a very disgraceful uh and there's a lot of work to do.

And I think there's a lot of benefit that that could be brought to high schools if there was the proper sort of leadership to drive a change for high schools. I'm a big fan of more education in high schools that's practical rather than uh, than than the the forced education that's designed to get you to go to college, to get you to feed the sort of four-year money-making machine of college. and then really, what you're doing is you're just delaying your entry into the workforce by four years and taking on massive student debt, making it impossible or nearly impossible for you to gain wealth through investing in real estate. Because now you're buried in debt and now you're on the flywheel of not being properly educated and having a lot of debt and not able to build wealth.

It's almost like the whole system is designed to screw you. It's kind of broken, really broken, and and at some point we're gonna have to pay the price for that broken system now. Ron DeSantis is education? uh attack is uh also moving into uh ending uh awoke style programs he says, uh, now I'm just going to report on on what he's saying. There's not much necessary opinion to provide here, but basically he's arguing that it's it's important to end programs that uh, promote diversity, equity, and inclusion based programs basically and woke Islam is his argument.

and I wants to start requiring courses in philosophy and history that shaped Western Civilization Kind of interesting. He also uh wants to Empower universities and schools to be able to fire tenured teachers or professors. Because He believes that'll lead to more Innovation or at least more fear that if you don't actually change with the times you're going to get fired. Uh, this has been an argument that's been made.

It's an age-old argument that you know as soon as teachers become tenure, there's this potential incentive to not try as hard to innovate uh, and and teach well because there's no risk of you getting fired. uh, who knows, uh to be curious to see what some teachers think in the comments below. but I do think a transition to focusing on high-wage jobs something you can completely agree with absolutely can agree with that. Some of the other things are obviously going to be more of political hot potatoes, but then again, DeSantis from Florida the governor of Florida is really expecting to be ramping up uh, this sort of, uh, these sort of discussions as he prepares to potentially launch his candidacy to run against Donald Trump for 2024 uh, the 2024 24 presidential election? So we'll see.

We will see. But I think education will be a big part? Do I actually think we're going to get massive changes? I don't know I hope we do, because I don't think it's fair to our children that uh, we have to deal with the crappiness of the school system that we have uh in Scandinavian countries strong apprenticeships and Technical knowledge is on trades even in Innovative areas. Uh, yeah. Okay, so so you're leaving a comment here basically saying the Scandinavian countries do this.

Yes, even even Germany as well as you've mentioned here with the flag. Uh, exactly. So European countries they do this and I think it's brilliant. You know, college sort of.

The regular four-year degree isn't for everyone and there's no shame in going to a uh, you know, a trade-based school. You can make a lot of money, even as a a plumber, running your own business or an electrician. These are very, very well paid professions, especially since there's so few people who can do the work. Now you can make great money.

uh uh uh. working working the trades. really great money. So uh, my girlfriend is a public school teacher and I went to New York Public Schools Our country has no Financial education in public schools.

Yeah, I mean no kidding. No kidding, there's There's no doubt about that. Financial education is another important thing. They've got to work on.

uh and apparently now Anthony Johnston Here is saying that Canada does not fail students anymore. You Auto graduate every year no matter what I mean that's sad I mean that's exactly why people graduate at high school and they they can't even read a book. Uh, let alone read an instruction manual. I mean the education of our of of of really Western schools is a disgrace and it wouldn't be a surprise that this is actually a place where China could potentially start innovating pretty strongly.

which I wouldn't be surprised if they already are to end up kicking our butt uh by having a more educated Workforce in the future. and uh, look, if we want to fight China they better prepare at all levels and working on our education system and proving that would be a great start. All right, let's listen in over here. What's rocon I Got to say on CNBC What do you believe? It was a escape from a lab or however you want to look at it? I mean what happened during that China's Behavior was not very.

Uh, it could have made things a lot worse for the entire world and the way that covet was spread. I Mean do you worry that that they're looking at offensive uses down the road and contesting something like that? Let's go. It would be naive to underestimate them or to think that they're just have good intentions. Look at what's happening in the Taiwan Strait.

They've crossed the median line there in violation of international law. They've launched missiles over Taiwanese airspace testing missiles, but they've crossed the airspace. So they have taken under the deeping aggressive action and the United States has to be prepared for that. uh with tough uh, action and consequences if they act.

But we also need to engage just like President Reagan engaged with the Soviet Union I Mean we don't want it would be catastrophic though for there to be a war between China and the United States let alone something that escalates into a nuclear conflict. And that's why I Think we have to do what we've always done is Americans Be tough, make it clear that they're going to be consequences, but engage in diplomacy in some ways. What we did with the Soviets in the Cold War right and then in the back of everyone's Minds is Taiwan and what this means in relation to the future plans. and for that, Island as well.

dangerous, uh, dangerous chimes in an uncertain future Congressman? Um, was that in your neck? All right. Hold on a second. Here we got a little bit of uh, breaking news. Let's get to the bottom of what's going on here.

Stand by though. EV Take her go EV And the company canoe. uh just suffered a 28 decline on the stock charts and this is in pre-market Here It looks like the company has registered uh, 20 or 52.5 million shares via a direct offering to institutions to help the company stay afloat. This is 52.5 million, uh, dollars worth of shares actually.

But it's pretty dang close because it is. Yeah, it's 50 million shares at a buck 05 a share. So again, 50 million shares registered a buckle five a share. The stock was trading at 125 as of the closing date on Friday.

It's now, uh, looking like after this, uh, registration? uh, at a discount of about 16. the stock is now trading down about 28 to 30 percent because of the dilution. Uh, that, uh that these additional 50 million shares bring, Uh, but also at the lower valuation is really a sign of stress for the company, right? So this is no surprise. We're seeing a lot of companies suffer massive stress in the auto space right now.

This is probably the absolute worst time that you can have a financial crisis for. Uh, For the EV makers, they go through a lot of expenses to try to ramp their businesses. We know that Rivian loses 271 dollars of gross profit. so in other words, gross loss of 271 for every 100 of Revenue they have.

So in other words, they're massively negative on gross profit. When Tesla was manufacturing the same amount of vehicles about 7, 000 Vehicles Tesla actually had a gross profit not including EV credits of twenty dollars. So in other words, they sell 100 bucks of Revenue Tesla actually made 20 bucks. Rivian makes 100 bucks of Revenue They actually spend 271.

That's gross profit I'm not talking about net. Both of the companies at that stage lost money net. but the point is, the cash burn at a lot of these companies. Whether it's Lucid or Rivian, or Go EV or Just or Canoe are absolutely insane.

This There's a reason why I Made a video about two months ago talking about the coming bankruptcy of Rivien and Lucid and basically I went through their balance sheet and said look, these companies are going to have to raise a crapload of money to stay alive and there's a reason why on this channel without fail and consistently I have been warning that you want to stay away from profitless companies I Understand that when the ocean Rises and the stock market rallies up, all companies are going to do very well and you're going to see big rallies in companies uh, that that are money losing companies like for example, Bill.com and they'll rally. But then what will happen when they actually have to raise money or their earnings come out? They plummet. Bill.com shot up from about 91 bucks to uh to about a hundred and thirty two dollars. I Mean think about that 132 divided by 91.

That's about a 45 share gain. What happened, they reported earnings and then all of a sudden the stock fell 25 to 30 percent, which when you fall by that amount off of a higher number could potentially eradicate that full 45 gain. It's not one to one. Do the math and you'll see what I mean.

But basically the Stock's basically right back to 91.92 dollars. So you got to be very, very careful of money losing companies. Especially companies like Canoe. Look at Canoes.

Revenue Folks look at Canoes revenue on their own income statement for the three months ended 2022 or 2021. Oh wait, it's blank. That's because there is no Revenue They have no Revenue They just have R D expenses and SG A It's basically just a business that's burning money at this point in the three months ended. September 30th they burned 117 million dollars with no Revenue In the nine months ended September 30th they burned 407 million dollars with no Revenue That's on their revenue statement and there is no Revenue So it should literally just be an expense statement.

Usually we call it the income statement, but it should be just the expense statement because there is no income. What do you like? An actual operating cash expenses? You're at 329 million dollars of operating expenses. This is the cash flow statement and purchases of plant property and Equipment of 88 million 88.8 million. And this is in the nine months Ended: September 30th You're burning 420 million dollars in nine months.

Which means you're burning about 50 million dollars a month just to survive. So let's write that down for a moment. Okay, Cash burn at Goev. 50 million dollars per month.

It's a pretty old big cash burn, right? Well, how much cash do they have? Well, that's easy because it's all public. You go over here to the balance sheet. Well, oh dear. 6.8 million dollars in cash? Ooh a restricted cash.

Four million dollars. Ooh that's 10 million dollars of cash. How much inventory do you have? Oh 1.2 million. So like none.

Got some prepaid expenses, but those don't help you. How about liabilities? How much money? And like, how many bills do you have due within the next 12 months? Oh good lord. Accounts payable of 96 million dollars, accrued expenses of 74 million dollars. Oh yikes.

You have about 160 million dollars of debts due. 170 ish. closer to 170 million dollars of debts due within the next 12 months. So you have payments due of 170 million dollars.

Do. within 12 months, you're burning 50 million dollars a month staying alive, and you just at a basically 16 discount row. Or tried to raise 50 million dollars in panic money. This company is going bankrupt.

This is absolutely bad there is. There is no hope here. and so it's no surprise that the stock is down now 32 percent in the pre-market This is a zombie company they have no hope of. Revenue And it's no surprise that the company has plummeted now.

They had a lot of Hope when they were priests back right pre-merger there was a lot of opium for them. A lot of opium. but boy oh boy. 2022 was not a year to bet on on some of these companies.

There's a reason why: I repositioned in January of 2022 and got out of every single money losing company I Do not hold a single share of a money losing company right now at least I don't believe I do I'm pretty sure I don't I'm pretty sure I sold everything I Don't know. Maybe there's like one leftover share somewhere. but the point is, you don't want to be in a money losing company during a recession. And if that's not blatantly obvious.

Uh, and you know why you don't want to hold a money losing company in going into a recession. Hopefully this video makes that more obvious. and so I think there's a really big risk in investing in companies like for example: Roku that loses money hand over fist I Understand, they've gone up a lot recently. Look at this: They traded at a low at the end of the year at 38 bucks.

Now they're trading at 61 bucks. It's insane, right? It's intoxicating because the stock is up 60 percent. That's great. But guess what that does? All it does is prop the stock up so that when they need to raise money to survive, they end up diluting you and you're the bag holder.

That's what you got to be careful of on these suckers, you become the bailout mechanism. You know, protection? That is the point of the stock market. The point of the stock market is to provide liquidity for these companies. And guess what? In this case, the company didn't even do this the share sale on the open market because they probably realized they couldn't get it done on the open market.

They couldn't dump 50 shares on the open market 50 million shares. So inste