Welcome back to another episode of the Meet! Kevin Report today we are on episode number 39. Oh well, that's actually almost 40 days in a row of uh, like 3 A.M or or uh, lately it's been like 2 45 a.m wakeups and and getting ready to to be here and prepped. Uh, so thank you so much for being here. Seriously? Uh, wouldn't obviously uh, be able to do this without you So appreciate you, thank you! Uh I got to make sure I I regularly say that because I don't think I say that enough.

uh and I really mean it I appreciate you even even the haters watch which is which is actually really a compliment because you know some people they just hate my guts. they want to punch me in the face, but they but they still watch uh or listen and and I think that's fantastic. uh I don't want to get punched in the face obviously. but but you know I appreciate it.

it's really cool. so uh, anywho. all right, well a lot to talk about today and as usual, so let's uh, start, uh, hopping right into it. Eli Lilly Yesterday, Uh, cut insulin prices by 70 from the fourth quarter.

This is fantastic for seniors or people who are diabetic. There's now a 35 cap on insulin for Medicare that was imposed through the Inflation Reduction act. However, the price of insulin for most people was up to 275 dollars a vial if you weren't on Medicare which is absolutely insane. It's increased like 1200 percent in the last uh, 20 years.

and now by Eli Lilly cutting the prices to about 25 dollars per vial. Really, what they're trying to do is they're trying to get ahead of the regulation that was coming for that, which would have probably price capped them. Uh, but uh. but but they're really trying to get the entire industry to move towards cheaper insulin pricing which is fantastic.

around uh, 8.4 million of the 37 million individuals in America with a diabetes use insulin. So this is a fantastic uh so good news: Alphabets: Waymo is apparently going through a little bit of reorganizing, reducing head count by eight percent and eliminating some engineering rules. And what was really interesting is I actually saw a Waymo vehicle drive past me in Scottsdale Arizona I put it on my Instagram story which followed me on Instagram If you haven't yet, it's at meet Kevin I'll actually be posting stories again today because should be flying out uh, in in a couple hours here. Uh, but anyway, um I posted on my Instagram story this Waymo car driving by and uh and I'm like oh, Tesla has competition and uh Peter Schiff actually responded with the laughing emoji oh my God that's hilarious.

That's awesome. uh Yesterday by the way, I uh I I posted a video about Rivian and uh, you know it's really funny is I think a lot of people who actually invest in Ruby and don't understand the difference between gross margin and net margin. So let me try to make it a little bit easier for people. right now, Rivian on a gross margin basis spends two hundred thousand dollars per vehicle they produce.

Okay, that means the stuff that they put on the assembly line, people and and raw materials. They spend two hundred thousand dollars to make 82 000 because that's about how much they sell the vehicles for. But then they have like an advertising Department a research and development and then they have administrators and Executives right so on and so forth are in the SG a right that's part of Opex Anyway, if you add that in, Rivian actually spends three hundred thousand dollars per vehicle they produce. That's insane.

It's really insane. So if you want to legally Rob or legally steal from a business or you could even say donate to a charity, buy a Rivian. Because if you buy a Rivian, they're spending 300 Grand to deliver you an 82 000 car. It's kind of wild.

Uh, it's actually pretty dang wild. but it's not as wild as Tesla and so I do think it's worth talking a little bit about what was actually good about Tesla yesterday. Uh, now I know that sounds a little crazy. Wait, you know I was a little I was a little pissed off yesterday.

maybe because I felt like I spent uh, you know I don't know. four hours learning virtually nothing. But there were a couple things and I talked about them yesterday as well. But I wanna I wanna take the the like, relaxed, non-alcohol version of Kevin and just look at the little bit of good that there was and try to look at it with with a second, uh, a sort of less angry mindset.

So let's start with one, uh, a very particular screenshot and that was this one right here. Okay, now what's so remarkable about this screenshot is something that we actually didn't talk about. uh, just yet. really.

I don't think many people have touched on this one yet. Uh, and I don't know I try my best not to pay attention to what other people are talking about. People ask me like, oh, why do you do that I go well. If I listen to what other people are saying, then I then then my perspective may be less unique, right? I might start rhyming with other people and and I don't want that I want people to be able to come to the meet Kevin Channel and be like oh, that is unique I've never heard of that person before.

So something that I thought was very interesting is this is the Snx over here, right? Well look at this folks if Tesla's going to have a global electric vehicle Fleet of 20 million Vehicles Which first of all, it's supposed to be. You know the idea was 20 million vehicles per year in the future, right? Uh, and a global vehicle Fleet of 20 million is very different than a you know, a production of 20 million a year, right? So it's like wait a minute. Elon when you say 20 million vehicles, are you talking about trying to get production to 20 mil a year? The highest amount of production a car producer has ever done was somewhere around 12 to 13 million vehicles. But hey, you know we'll take 20 as a goal because say shoot for the moon.

Even if you miss, you'll still have a pretty big PP But anyway, uh, what do we got here? Either way, you look at this. What I thought was really interesting was the way they divided up the numbers. Look at this. The Snx are listed here as 40 million units and that is about one.

maybe. let's call it eighth or ninth of this vehicle right here. which is the what looks like the Cyber truck plus some form of passenger van. Now that's really interesting that the S and X which are pretty popular cars are expected by Tesla to really only represent about one-ninth of solely uh, the production of the Cyber truck in this passenger or cargo van.

In fact, the Snx are really only expected to represent twice. Uh, the the uh oh oh sorry, this isn't 20 million vehicles per year. this is actually the uh, the semi truck. My bad.

Okay, good. all right. Great global electric vehicle. Fleet That's interesting.

So the Snx actually only represent 20, uh, or about twice as much per Tesla's expectations of the Uh a Tesla semi truck. Now that's quite fascinating. So what? I Really thought in In terms of a takeaway though, here was that: Look at this, the Model 3 and why production? That was a killer of a change here. Look at this Model 3 in wide production.

Actually expected to be less of roughly half of whatever this vehicle is over here. 700 million Vehicles Expected to be made of this smaller looking vehicle obviously. Uh, you know it looks like that vehicle is is smaller than this Model 3 over here under wraps. Uh, we could try to play Pixel Games over here, but I don't think it's going to make much of a difference given that this vehicle's sitting at more of an angle uh, than obviously the Model 3 over here, which you can see, uh, the Model 3 sitting at roughly this sort of angle whereas this vehicle is sitting at a substantially, uh, a longer angle right.

and it seems to be a lot thinner uh, than the model Y? uh, or three over here. But point is, let's try to look at something positive from Tesla right? Uh, and and I think that might be the hint they're trying to give us here. So let's let's think about this. Let's phrase this right for a moment: What is something positive that we could say about the Tesla event yesterday? And it's that as much as we hated the event and the presentation and I was pissed about it I Find it remarkable that they think whatever this future vehicle is could potentially in the future have twice as many vehicles ever produced as the Model 3 and the Model Y.

A 380 million vehicle production of the S and Y combined is roughly half of the 700 million unit production of whatever this vehicle is. We expect this vehicle probably to be essentially the Tesla Model 2. my guess is this would probably be for the Asian markets. Uh, whether that's uh, potentially India China Uh, you know Etc essentially the the Asian markets, possibly even South America As is another possibility where essentially a smaller car is more acceptable.

And keep in mind that in America while we like big cars, there are less Americans than there are obviously people in South America or in Asia I mean substantially less I mean even just China is like three to four times the population we do out here Now, of course, we have much more money per capita than people in India or China Uh, by a factor of of five to ten X but over time that will change. and I Think it's very interesting that the expectation is this model, too could potentially generate a substantially more Vehicles produced than the three or the Y. This was one of the hints that Tesla really gave us. Uh, if we want to put on sort of the bullish hat, the sort of the the buy the dip hat right? Really, what they're suggesting is hey, pay attention that smaller vehicle is going to be a game changer.

Now when we look at what Barclay said as sort of an investor Day preview, they suggested that in the future the model 2 would probably be their lowest margin vehicle at around 21 and that I believe is what we're showing here. but they're showing that. Also, next to look at this 300 million vehicles for this Sprinter and potentially cyber truck over here, right? we expect this to be passenger cargo van and then you've got the Cyber truck here. 300 million Vehicles is essentially suggesting that this van and pickup will call it maybe the the cargo lineup.

Okay, the cargo lineup could be roughly as big as the three in the Y. Now that's fascinating that the cargo lineup alone could be roughly as big as the three and Y That's pretty bullish on these new vehicles over here. Notice, this is not saying Tesla is not coming to us and saying hey, we're going to produce the Tesla Roadster I Mean maybe maybe that's the Roadster but I don't believe I mean the shape looks roughly in line with Roadster right? But I Don't believe Tesla would expect the Roadster to sell 700 million Vehicles Because after all, if the S and X are only selling 40 million Vehicles why would the Roadster sell 700 right? It would. It would be way too expensive.

So really, they're suggesting here. Let's let's just do the math over here. They're suggesting that essentially the current lineup uh would be responsible for about oh, that's hilarious. 420 million vehicles at the current lineup? Okay, so uh, let's uh, let's just write that down over here.

So the current lineup would be responsible for about 420 million. Vehicles The new lineup could be responsible for about 1.1 billion Vehicles So consider that for a moment, 1.1 billion divided by 420.. that means the new vehicle lineup could represent 2.6 x the current vehicle lineup. Now that's actually really interesting.

So this combined over here represents 2.6 x the current Uh lineup. ignoring the semi truck, right? So in other words, Tesla themselves thinks, hey, look, the cars we're making right now are not going to be the most popular Vehicles It's these future Vehicles made on the new generation platforms that are going to be the most popular Vehicles Now What's also interesting is that Elon Musk And that really got me thinking Elon Musk and the Q A suggested hey, we're not going to retool these cars to be manufactured by our Optimus robot or or in the more advanced method of manufacturing. Instead, we're going to have our new gigabyte factories Focus Probably on these new vehicles and the new vehicle platform, we're not going to go back and retool all the old stuff because that would be very expensive to do. and Elon Musk actually rolled his eyes at the idea of the copy and paste model Now I'm the one who's been screaming copy and paste for a year and I'll take egg on the face for for you know, apparently not aligning with with the Elon Vision there fine, like it's okay I I'm totally willing to be wrong because see, in my opinion, when you make, uh, when you make a sort of an argument when you have an opinion, you can identify when that opinion is starting to be wrong, right? And that's actually this look at Elon's face here when he responds to the idea of the copy and paste model.

Okay, so my idea has been hey, look, we've got the S's and X's let's let's Master the Snx production I'm sorry, not the Snx, the three and why let's Master the 3ny production at Giga Berlin and Austin Texas and then copy and paste those factories around the world Tell us about South America Tell us about China and tell us how how we're going to get to substantially more vehicles. but I think Elon has a different vision and that vision is no, no, Each Factory needs to be uh, potentially an order of a magnitude more efficient than the prior. Factory Especially since our new vehicle platform is going to be focused on the new models. Just listen to this seven seconds here.

The the term you use Lars is copy paste. So to get it right from the first time, um, you know the look at Elon's face there. Okay, Elon's face here is uh, rolling his eye at the copy and paste idea and then shaking his head I mean the poor guy's falling asleep because he was probably up at like 2 A.M the night four and then I think he had to go to the I'm not sure if he went to the NASA launch, but hey I admire it I You know I think it's awesome. but anyway, again, look at, look at the copy and paste and then Elon's reaction.

it's it's as clear as day. Obvious, what you need to know about copy base, copy and paste is out the window. We're never saying it again with the exception of it's dead. Okay, watch again.

the the term you use Lars is copy paste. So to get it right from the first time, um Elon not happy with copy and paste and I think Elon's not happy with the copy and paste idea specifically because of this idea of this, this new vehicle platform. and I think that's what they see the future as and that was probably uh, the uh. one of the most exciting sort of actually bits of new information we got here is not only their opinion on which vehicles are going to be most popular, not the three and the Y which I think is very interesting and that they're not actually going to retool the existing lines for the Sx3y, but that the future Uh lines are actually going to be more robotically capable.

Right Right now, they're showing humans working on these individual different pieces and the idea was that hey, we can rather than assembling the car and then disassembling the car and reassembling the car, we could just manufacture the car in the various different pieces. So that way no part of the car is not being worked on while it's being manufactured. Uh, and really, what you're saying is let's have robots perfect each piece of the car and then we'll puzzle it together like Legos It makes sense. It initially was a little boring.

this idea of okay 30 space time efficiency Improvement But really, what they're saying is the Optimus robot is going to be building the most popular vehicles for Tesla and the most popular vehicles for Tesla are yet to come. That's sort of the bullish argument. and if you believe in this idea which it's obvious Tesla is really the master uh, and leader in Innovation when it comes to uh, minimizing cost and maximizing margins, that's redundant, That's the same thing. But anyway, uh, obviously then this becomes a nice little by the dippy doodle opportunity here, right? of course.

look I I am a long-term investor I Think the presentation was an Sh-19 show. Uh uh. But but putting the emotion of yesterday aside this is this is actually very interesting. Uh, especially because this next-gen vehicle is actually really I think where they're thinking uh-uh that's going to be where we make most of our vehicles.

Look at this again. 2.6 times as many vehicles are expected to be produced that don't exist yet relative to what is already available from Tesla. So this is really the big takeaway from the master plan is that look the next vehicles that are actually going to represent 2.6 times the production of the current lineup or which are going to be manufactured in a much more efficient manner potentially 50 as inexpensive via the use of our robots or whatever. This is the master plan and this is the scale that nobody's really talking about yet.

Uh, and so okay. I will give that to Tesla I will give that to Tesla that it was there I think it was a very poorly conveyed and only after sobering up after. Basically, you know, falling asleep on the Tesla presentation does that become more apparent. But I think it's It's worth highlighting that because I do think as a long-term investor, this is.

uh, this is actually phenomenally exciting. Uh, so I'm I'm very, very interested by that. Somebody here writes copy and paste assumes the current process is perfect. We should assume everything we do is wrong and can be improved upon.

Yeah, I I mean I don't I don't want to come across as suggesting that copy and paste didn't mean stop refining, right? Uh, and I understand, then that's sort of like definitionally playing with copy and paste. but I mean obviously if you're going to like, okay, good. We've got a really good model for Giga Austin and Giga Berlin. Let's do it again.

Obviously the idea is let's take everything we learned and if we could do things slightly better. great, but let's just get as many factories up as possible. I Think that was the idea of copy and paste. It's let's ramp as many times as we can, but it actually seems like rather than ramping as many times as we can.

Now the real plan is how are we going to prepare for that next-gen vehicle platform that robots are basically assembling that we actually think is going to produce 2.6 times as many vehicles as the the next uh or as the the current Vehicles So I think that's very interesting. Can we call this the Gen Z vehicle? Uh, what the small one? Are you making fun of Gen Z? Uh uh. Let's see here. let's just see if there are any other coming down.

Okay, all right. uh. I do feel bad for MP materials though. they I think they're down like 11 in pre-market because Tesla Talked about getting rid of rare earth materials now.

I've always been a big fan of staying away from Commodities sorry Steve Steve the course member super into Commodities I'm always a fan of that because if if the Commodities use change then then the company that benefits is the one making the changes they they're really agnostic to ultimately the material they use. You know everybody can make all these Lithium. Investments and if all of a sudden we find a better battery chemistry that doesn't use lithium. all those Lithium Investments go to Poopsie Doopsies and and the company actually the the end manufacturer is the one that ends up winning right? because they may they use a more efficient material maybe one that's a lower cost or whatever.

But anyway, MP material did reply uh on Twitter and I thought it was kind of a nice little slap uh at Tesla for their presentation MP Material rights. Did we miss something? Yawn. It's like straight up Mp materials. Clap back I mean MP Materials stock is is obviously going to be a little sad today.

it's down 10.6 because of this Talk about potentially getting rid of uh, rare earth materials and uh, in in the engines of vehicles. and I I Do think that a lot of Tesla investors were sort of diversifying with MP materials, so that doesn't terribly surprise me. But yeah, sorry. MP Clap back was pretty funny though.

So uh. anyway. yeah. so I think the bottom line of that is look, you know price Target wise this has really change anything for Tesla No, the icing on the cake is still there.

Obviously, we still, you know we went in with with somewhat salty expectations. anyway for investor day just because Tesla's not that great at doing events. This just happened to be a very horrible event I would be very upset. uh if if I actually went out there for the event.

uh because I think it was poorly put together I think they could have really spent more time talking about what I just talked about and painting that Vision But this is what happens when you have Engineers putting on a presentation. You know Apple is a company of Engineers but they take the knowledge of the engineers and then they give real presenters that the tool to properly convey the information. Uh, you know and that's you know when they're just relying on Engineers to do it, you just you're just putting on basically a snooze. Fest I Hate to say it, it's nothing against Engineers I think a lot of Engineers will be like no Kevin you're right.

You know, like I don't know this isn't meant to be offensive, it's just it's still honest. Anyway, all right, uh, let's now talk about something else. How about uh, let's jump on over to uh yeah. We got a little bit to talk about regarding the recession, recession, likelihood and such.

let's jump into with somewhat a former fed Governor says about the likelihood of recession. Stand by. Now let's talk about the likelihood of recession. What just happened in the Eurozone what are other folks as saying and what's going on with five-year break evens? What's the disaster happening today here on March 2nd And what do I think about stocks, bonds, real estate, helocs.

We're going to go through all of that in this video. But first, we're going to jump on over here. We're going to listen to CNBC and this likelihood of recession being extremely high per former Fed Governor Let's listen in. You want to bring in former Fed Governor Frederick Michigan he's now a Columbia University professor and a CNBC contributor and Rick It's really good to see you.

It's been a while since we've gotten the chance to talk to you. You've got a new paper that's out and it basically says that the FED is damned if they raise rates. Damned if they don't. You want to explain that well.

I I Don't know if I put it quite that way. but the bottom line is that, uh, in this paper which we we presented the U.S Monetary Policy Forum that uh. one of the things we did is we looked at the history and then we actually did some economic modeling and the history says you look at 16 uh uh uh uh cases of where central banks actually tightened uh interest rates when in fact they had to get inflation down And this is in many countries, not just the US In every single case, you got a recession. uh, and so uh, you know, maybe this time is different, but uh, that's usually dangerous thinking so just on that basis alone.

Uh, the likelihood of a recession is extremely high. And this is particularly true also from a economic theory. Viewpoint When a central bank Gets behind the curve as the Feds certainly did, they made a made a bunch of mistakes. uh, particularly in 2021, which as you might know, I've been on CNBC uh, since April of 2021 being very critical of the pen on this.

When when you get behind the curb in order to get inflation back under control, you have to raise rates a lot. And in fact, you'll inevitably have a recession. So the the you know this is just life. Uh, the pet is actually doing the right thing.

now. They've actually gotten uh uh uh on board to do what they have to do. they stop being gradual, they stopped being. They were not preempted, they now are.

uh, but the bad news is uh, that, uh, that. uh, you got to get the economy to slow down in order to get inflation down when it's actually, uh, burst up in a way that it has recently. Well, Rick Let me let me just say, there are other people who look at what you're talking about in history where Feds try and raise rates and inevitably we wind up in a recession. They say it's just because some people will say it's because the banks will raise interest rates for too long.

Go too far as some people are arguing our Central Bank is doing right now, they're people calling for a pause saying wait and look around and see the lag effect before you continue to raise rates at additional Paces Um, what do you say back to that I This is super dangerous thinking. So uh, uh. one of the things we look at in the paper is uh, we look at a situation which had a lot of parallels now which was the vocal disinflation. Uh, and many people you know folk is a huge hero.

Uh, many people don't really remember what went on there. The Federal Reserve when in October 79 after Volker became chair, uh, raised interest rates to very high levels. Uh, and Uh 17 actually was pretty high level. Uh, and then a recession started and they backed off.

Uh, the result was that inflation did not come down. Expected inflation did not come down. Uh. and in fact, uh, uh, uh, there was no ability to control inflation.

The FED had lost its credibility and now weakened it. Uh, but to Brokers the credit. He then realized that this was a mistake and then the FED really took out the baseball bat. Collaborate heads.

Big Time raised uh, federal funds rates over 20 percent. uh, And then finally, it took several years of very high interest rates than to get inflation down. So uh, it is super dangerous thinking to think that the FED should pivot. Uh, that.

Uh, when central banks have done that they haven't completed their job, they lose credibility. And particularly important is when you've actually gotten behind the curve, you have to re-establish credibility. and therefore, you have to be tough. Now it's true that you might go too far.

Central Banking by the way, is not an easy business. It's uh, there's a lot of art to it. There is science. Uh, you know, economists have contributed to that science of monetary policy, but a lot is Art And so you never quite get it.

perfect. But on the other hand, uh, thinking that you need to back off because you're too worried about a recession is what produces much worse recessions than otherwise occur. People forget that the recession that occurred after the vocal disinflation was actually the most severe in the post-war period. In fact, the unemployment rate went to above what it did during the global financial crisis.

Uh, so uh, this is really something that you really don't think while inflationists. All right. Yeah, so okay, what did we get out of this? Well, first of all, yes, the likelihood of recession is High I Mean, at this point, it seems like a recession is a foregone conclusion. It'd be really weird if we didn't get a recession because every Hana signal you could look at that's recessionary, suggesting recession.

Hey, maybe we will get a recession. I Personally, don't think it's that big of a deal whether we have a recession or not. I Think what actually matters most is the depth of a recession. But what did he say that we could really take away from here? And how does this sort of echo what we're seeing at the Federal Reserve Well, the biggest concern that Jerome Powell keeps talking about at the FED is this idea that they would potentially cut rates and then have to raise rates again because that could lead to what Jerome Powell calls an unanchoring of inflation expectations and lead to a substantially worse recession.

Because basically, they would have to raise rates a lot higher. That's exactly what this former Fed Governor just mentioned. Uh, and uh, you know it's it's the biggest issue. I Think that we Face going forward is exactly that.

a Breaking of inflation expectations. And unfortunately, even though I I like to be a bullish I Have to say this chart right here is bearish. This right here on screen now is a chart of uh, inflation expectations. It is the five-year inflation uh Expectations chart.

If I go ahead and draw a line over here and uh, we just sort of look at where we are right now all the way back up to 2.7 I Mean, look at this. Inflation expectations went down to under about 2.15 on the five-year Break Even We've just gone straight up uh, since the end of January and into Feb. Here, we are now sitting at the same levels of inflation expectations that we saw in October and as a result, we are seeing the 10-year treasury yield right back over four percent. which is horrible for Real Estate Uh, People thought for a moment that uh, I mean and you can sort of align it with the Uh, the 10-year break or the five-year break.

Even over here, people thought over here in December and January. That's it. Inflation has conquered. Uh, the 10-year treasury yield is plummeting.

We're down to 3.38 Well, now, after some of the hot data that we've gotten in January and some of the stagflationary data that we got yesterday and today, this isn't good. Remember yesterday we got Pmis that suggested manufacturing uh, orders are are cut in a contractionary territory, but all of a sudden The Institute for supply side management suggests prices being paid are in an expansionary territory. In other words, prices are going up again. So now you're really looking at stagflation.

You could look at this morning's report as well. From the Eurozone, The Eurozone this morning reported 8.5 headline inflation that's on a 20 country inflation estimate 8.5 headline. That's down from 8.6 which is great, but sort of a slow decline. Uh, the expectation was 8.2 So you've actually come in higher than expectations.

But the problem was that Core can came in higher Again, Not only did Core come in above expectations, but it actually Rose From the prior report, the prior report was 5.3 percent came up to 5.6 So you actually have a lot of ammunition that you are giving to the Bears right now suggesting this inflation fight is not over. In fact, that's why you have people like this: David Einhorn Guy who's jumping on saying he's negative. The stock market and bullish on bonds milk the yields so to speak. Basically, he was shorting the market all last year and now he's suggesting, hey, you should still be short to Market So how does this play in with with the sort of Nike Swoosh recovery thesis? Well, I think all of it comes down to the dates that you have to write down and the dates are very simple.

It's March 10th, 14th, and 22nd. Those are the dates you want to pay attention to because we're going to get the rigged I mean the jobs report on the 10th, then we're going to get a CPI on the 14th and then we'll get the F Fomc on the 22nd. And so far the leading data suggesting it's probably going to be hotter than expected and that either means inflation is becoming uncontrolled which would be the worst case scenario or inflation is just going to be hotter for longer And so that's where we have to sort of evaluate. Okay, what does that mean from an investor point of view, right? Well, I Think we can write that down as as basically three scenarios.

So if if we have, if we continue to have disinflation, which right now seems to be going away, well, that's obvious, right? That's basically just stocks right up stocks. that's That's very simple. Uh, especially growth stocks. uh, and even profitless companies.

One of the reasons by the way, because Arc Invest absolutely killed it in January Uh, and you know just I don't want to like Blanket statement: Arc Invest and say you know, profitless companies are bad I Think there are some fantastic companies they invest in. there's some companies they invest in I don't want to invest in. This is not not any kind of, but they did very very well in January Because if you can confirm a disinflationary narrative, not only will stocks go up, but you'll definitely see a a spike in Risk especially profit list companies. Now One of the reasons I personally have been: this is a personal financial advice for you, right? But this is just sort of broad.

Uh, Financial uh. commentary. you can even say Financial advice. It's just not personalized, right? Um, you know one of the reasons I've been a big fan of keeping some more cash on the side.

Not not a lot, you know, 10 something like that and uh, only exposing myself to PP You know, pricing power a kind of stocks and stocks with high free cash flow is because of scenario number two. So scenario number one might be the disinflation narrative. Scenario number two is the uh, the sort of, uh, bumpy the bumpy ride scenario, right? Uh, bumpy ride where basically you have inflation that stays higher for longer. So inflation inflation and higher for longer.

but but slowly trending down right. but slowly down trending so the channel is down so to speak. But it's it. It's taking a little longer, right? And then of course you have scenario number three, which is the worst case scenario.

And this is your Paul Volcker scenario where basically the FED has lost control. Uh, loss of control. That's your worst case scenario, obviously, right? I Don't actually believe any of the data we're seeing right now is reminiscent of a loss of control. Even those five-year break evens right.

This is not screaming loss of control. Let me hide myself for a moment. over here in March and April This was the market saying oh my God we're losing control, right? This here was the market saying, holy crap, we're screwed. Okay, so if this is loss of control over here.

Let's let's write that down so it's annotated and it's maybe a little bit more clear. so let's put a little background on this. There we go. Okay, good.

so if this right here is lost loss of control and we'll go ahead and drop that right here, then right here is probably your disinflation, right? This is your scenario number one. This is your scenario number three. Well, what the market is telling you right now is that yes, we are trending towards loss of control. but really, where we're sitting is at the bumpy ride level.

right? Bumpy Ride. Uh, and so that's that's where I would align myself where I am I should. aligning myself right now with the Bumpy Ride thesis. And for me, the Bumpy Ride thesis says okay, inflation is going to be higher for longer.

So how do I invest with inflation that's higher for longer, but trending down? well. nothing's changed. You know people say I'm the biggest flip-flopper ever. And yeah, that's true, but there are also a lot of things I am I'm very consistent on and and for me, even with the data we're getting so far, I still believe in that that sort of Nike uh, a swoosh.

It's just going to be more bumpy, a sort of more turbulent than expected. Uh, and I do believe that means more pain for real estate for longer, so it sort of delays your bottom for Real Estate with the exception of Miami I mean Miami is just absolutely killing it. Uh, and I think that's just sort of because so many people have been moving to Miami But anyway. uh, you know what is obviously the risk.

So what happens now we have to ask ourselves what happens if uh, the 10th 14th are bad, right? So if these two dates are bad, well then what happens is, uh, there will be massive fear. Uh, between the 14th to 22nd, you'll have massive fear between the 14th to the 22nd because we'll be worried about 50 BP from Fed which won't happen. Uh, But but the markets will be very worried about that and will be worried about a verbal spanking, right? That's that's where the worries will really be from. So if we have now, now if we have a really uh, but but okay, let me put this way, a somewhat bad a somewhat hot 10th, uh 14th won't necessarily mean we're in a Uh scenario.

Three Paul Volcker, right? A somewhat hot 10th or 14th just reiterates bumpy ride which to me reiterates pricing power stocks right? If uh, like for me to be really concerned, real concern, like serious concern like oh my. God we need to change strategies potentially or like have a little bit more of a cash allocation or whatever. Like, yes, the sell word, right, Real concern would would be an explosion in, uh, in inflation, right? And and where do you get this? You get this in the uh wage, uh uh uh, sort of wage data on wage growth on the 10th and then you get it in. obviously the CPI report.

Uh, and this would be a breakdown in core. Uh. which is possible that you get that, especially as maybe used car prices pop back up. So uh, really, we're probably if if sort of I drew a spectrum here and uh, in my opinion I put us at you know, zero which is full on disinflation and 100 which is full on Paul Volcker, You're screwed.

Uh, I would probably put us uh, right about here, which is about at the 40 level. so slightly like really heavily in the bumpy Ride Zone but slightly closer to disinflation than closer to Paul Volcker. And that's simply because of leading leading wage data that we're seeing, right? A leading wage data about wages coming down the supply of labor skyrocketing, What earnings calls are saying, what forecasts are saying. And really, as long as we end up with the bumpy ride, scenario, recession or not is not going to be that big of a deal, it's scenario number three.

That's bad because that's going to be basically depressive. Like that, that would be terrible. I Mean, this is really where unemployment skyrockets, right? So scenario number three is depressive. Uh, scenario number one is just basically the moon.

Uh, and then what we are is just probably the very wide middle, which is quite a bumpy ride. And so those are my sort of expectations going forward. Uh, and and some commentator here about these massive fears. I I Really Do not believe? Uh, the FED has has any interest in in going to 50 Beyond Maybe just yapping about, uh, a 50 like, oh yeah, open to it.

You know, whatever they say, crap like that all the time. Uh I Don't expect that because in my opinion, it's too much of a credibility shot in the foot. Uh, suggesting that uh, that? uh, you know they they have once again failed. Uh, so uh.

you know somebody here, right? if we had a very hot inflation report, 50 BP will happen. But in fact, it doesn't matter if they go 25 or 50. all the hikes they have done already are not yet reflected in the economy. Get ready for a clapping yeah? I Mean you're not wrong, right? There is still a lag I Think we would have to have a substantially hot uh, 10th and 14th report For a 50 kind of clapping, Recessions can be natural and needed I Don't mind a recession I Mind the damage being done by pretending we can avoid it forever? Yeah, exactly.

It's kind of like just go through your medicine, take your medicine, and go through it. You know? Let the Staples Get Wrecked and go from there. Uh, let's see here is inflation streiber then? Okay, basically the government's to blame for inflation because they spend too much damn money. and maybe if the government stops spending so much damn money, uh, we'd have less inflation.

Well yeah, that's a really good point because not only uh, is is that true? uh, but you know we're still providing massive stim ejects, right? It's just going to electric vehicle companies and Chip companies now. So uh, Nick T Also just retweeted an article uh, about uh CPI running a little bit higher than Pce, but there's this expectation that maybe those will flip Uh, this year I Don't know how much that really matters, but he basically posted a couple screenshots here. uh oh, look, they talk about the wedge. How cool.

Uh, but anyway, it's really just the difference between CPI and PC And really, the thought is that CPI might fall faster than PC I Don't terribly care. Uh, you know which one's falling faster Whatever the Fed's preferred method obviously is looking at Pce and what they're saying is here: the rate of falling of CPI is faster than PC which is great. You know it sort of reiterates the, uh, disinflationary idea, but uh, let's be real. we're still.

um, we're still dealing with one heck of a bumpy ride. Let's put it this way: I wouldn't want to be on. uh, you know this. This sort of like if this Market were a plane, you wouldn't really want to be on it because you'd be very uncomfortable.

You'd probably get motion sickness and and uh, and want to vomit. Now how does that actually relate to us holding stocks? Well, fortunately, there's no motion sickness there. Maybe where there is some motion sickness is the fact that the new you know. Yesterday we talked about this guy Goolsby who now is the president of the Chicago Federal Reserve Bank Apparently the way he was hired was a company was basically contracted called Diversified Search Group and that Diversified search group was put in basically higher to find a new president for the Chicago fed and the person that was hired was actually the director's husband at the Diversified search group.

So in English a lady worked at a recruitment firm that was hired by the FED to find a new president and she's like, you know it'd be perfect for this job. my husband. kind of interesting. Anyway, that gives you a little bit of uh, maybe some Jade for what's going on with the bed, but you know they are.

They're just human too. They don't really know what the heck's going on that these are things that I'm paying attention to to help me. uh to sort of help guide me. Uh, but again, you know, uh, look, would I be throwing my money into bonds or savings? Probably If if I was wanting to buy a lot of real estate Yes, absolutely I'd probably be all in on on bonds and savings.

I just milked the yield until I was ready to buy real estate. Uh, you know I and I Do think with the skyrocketing of the 10-year treasure yield, they're still paying a substantial amount of pain. Unfortunately, ahead of us, you know you look at the bond yields right now. My goodness, skyrocketed this morning? It's up.

Seven bips. Look at this. You're at four point, almost 07 on the 10-year treasury. I mean you zoom out on this I think we're at the highest level since like October or November now? yeah yeah, look at this.

We briefly went to about 4.2 in October over here. but boy, this right here was where you started getting the the idea that oh, real estate's bottoming and people starting to buy again. Yeah, well, they're about to get spanked. Uh, yikes.

So uh, you know, hey, look if I wanted to buy real estate, I'd be standing by. but I still maintain uh and and we'll see. you know, I might have to change my mind after the 10th to the 14th, but uh, at this moment I still maintain substantially the Nike Swoosh idea. Uh, even though you know markets are again going to respond I Expect quite volatile actually.

Anyway, uh to uh to the next few weeks because there'll be so much essentially fear, uncertainty, and doubt about what's going to come. Uh, which entirely makes sense. Uh, yeah. I I would? um, you know I I guess.

Wait and see. as far as Tesla that darn thing's like down almost eight percent in the pre-market right now. Wouldn't be surprised By the way if that sort of retraces back to about 175. That's probably where you have the best support right now for Tesla is about that 175 level.

You could see that on screen here and that's really just looking at our retracements over here. We got rejected at the 221 Uh, and we generally don't like to float around in the middle, so I wouldn't be surprised to see a nice retracement. We're already going to get a massive red candle stick down to about 187.. What I do think will be very interesting is what kind of by the Dip activity are we going to get from institutions when the market actually opens up? That will be very interesting.

Are we going to get a lot of selling before these reports? Possibly a lot of Institutions have a very hard time justifying buying before inflation or jobs reports come out. So the next few weeks, uh, really, the next two weeks, most importantly, the next 12 days are going to be very, very critical vehicle, so we'll pay a lot of attention to specifically what's going on there. But that's roughly my take right there on uh, on markets and what's going on? Okay, uh oh yeah, this was quite interesting. Okay, so I want to do a just a brief talk on this I Know this is a little bit aside from from the market, but it's worth talking about, So um, stand by.

All right? Uh, hold on, give me one more second here. Let me pull this up: I tweeted so much crap yesterday about Tesla I'm trying to pull up my Twitter feed but it's just gonna be just non-stop crap about Tesla's presentation I'm sorry I really apologize. it's just how I felt it's falling asleep. Um, all right here we go.

Now we get to talk about a tweet that I sent yesterday that I actually did quite a well and the reason I'm talking about it is because I think it's a conversation that really is a society we gotta start having and guess what? I'm gonna take the Reigns along with other people who are also taking their hands and not saying it's just me and make an opinion on this Now as you know, opinions can be wrong, but at least it's good to have an opinion and this is my take. Okay, look at my take. So I tweeted this yesterday. if quote: biological men keep playing in women's sports, then soon there will not be any biological women left in competitive.

Sports Instead, we'll be left with biological Men playing men's sports biological Men playing women's sports and then I wrote so much for gender equality Now unfortunately, this was spawned uh by uh by a few different things. uh over some studies on what's going on, but also some uh, some of the recent uh dare I say uh uh uh You know controversies that are happening here. For example, is a piece where we saw that a girls basketball team withdrew from the state tournament they were involved in to protest to protest against a transgender player who who dominates games. And basically they say here that uh, women's basketball team with withdrew from the Vermont division a four-state tournament in protest to the the fact that a transgender individual was playing a biological male was playing against women and uh, and biological women I Suppose I should say uh and uh and they write here allowing biological males to participate in women's sports.

That's a bad precedent for the future of women's sports in general. And and they write down here that uh, in one game, the individual blocked seven shots. That means seven shots typically closer to the basket, so much more likely to go in. We're blocked by the guy who was taller than every girl on the floor and can jump higher and is likely significantly stronger in what world is this remotely Fair uh They write here and and there are some comments here about how this is why: men's competition records sprinting, jumping weight lifting, dwarf women's uh, there's talk about safety concerns and and studies related to this and I thought it was really interesting because when when I talked about it, uh, I tweeted uh about it and uh and somebody replied and said oh well, you know, uh, transgender individuals have been allowed in the Olympics you know for for since 2004 somebody replied uh a tweet replied me with that and I'm like I don't know about that So what? I did So I did a little bit of digging to see what we've got lot uh and first of all, it's It's worth noting that uh, the percentage of individuals that are identifying as uh LGBT uh in this statistic here, which which would include you know, sort of potentially a boost in the trans population has been going up substantially over the past few years.

Uh, in fact, if you go back to 2014, you you had closer to on average about maybe two or three percent of Americans identifying as LGBT Uh, and in 2022, we're up to about 7.2 percent. So you've had this large increase uh in in identification and and possibly that's because, uh, it's become more acceptable, right? But I Thought this was very interesting. Uh, this history here in 2003? Uh, the International Olympic Committee convened an ad hoc committee to discuss the issue of transgender athletes and what they actually required that to be eligible for participation in female or male competitions. you would actually have to complete the surgery to reassign your gender.

So in other words, not only do you have to go through hormone therapy for two years after you're like basically sexual reassignment, but like you, you have to do something uh, really irreversible here, right? Like this is like you are full committee and as a result, you actually didn't have a transgender person until 2018. Uh, 2008. In the Olympics In the hammer Throw 2012, you had the same person uh, and a biological male who competed in a women's uh hammer throw ended up placing fifth. 2015 Transgender male qualified for uh, a a World championship here.

Uh, and uh. essentially the Uh. They also. what did they say here? They they removed.

Oh yeah, here they they the Olympic Committee specifically asked for the removal of the requirement of the surgeries, right? Because the surgery is sort of, gender reassignment surgery is again, pretty irreversible and pretty pretty big deal here. Uh and uh. It was very interesting that you really only had that discussion start in a agreement being made starting in about 2015.. Uh, And so those who transition from female to male are eligible now to compete in the mail category without the reassignment.

That's essentially what they've now aligned allowed at the Olympics. So in other words, since 2003, yeah, they've allowed trans individuals in the Olympics, but only if you went through the whole surgery to reassign your gender. And it was only in 2015 at the end of 2015 that they allowed females to compete in male Sports without the reassignment like the actual surgery, right? But so far, you still need to have the surgery to actually compete in the Olympics Uh, as as a trans individual. And so this is where a lot of folks are suggesting hey, like it's it's not fair uh that trans individuals are are able to play in women's sports because basically you're potentially going to just kill women's sports and when you look at studies on this uh which, there are plenty you can quick Googles of them will pull them up.

But what you find is that people who go through sort of the hormone replacement uh still have statistically a a a 10 to 20 percent Advantage uh over uh biological women as as a biological male uh for for up to two years of going through sort of testosterone suppressant hormone uh applications and so you really have uh a a competitive Advantage for males for certainly the first two years uh of uh of essentially transitioning becoming trans uh and uh And here it is. It's actually a guardian piece. uh I I'm actually I believe I saved that right here. Let me just show you the stat so you could see it directly because the Guardian did a whole piece on this and uh, and then it gives us the exact sort of stats and numbers on it.

Here it is okay, okay, the Guardian so on screen here. Trans women retain a 12 Edge in test two years after transitioning. Groundbreaking new study on transgender athletes has found trans women between entertaining 12 advantage in running tests even after taking hormones for two years to suppress testosterone. Uh, and and so there This is why the International Olympic Committee Uh suggests that trans individuals may have an unfair competitive Advantage The other thing that is is deemed somewhat unfair by some folks here is this idea that right now, if somebody becomes uh, trans, they have to prove that they have less than 10 nanomoles per liter of testosterone.

However, that's still potentially as much as 10 times as high as the biological females testosterone levels, which range range between 0.12 and 1.79 nanimals per liter. Uh, and so over here you have some more information on the studies. Uh. One thing that was very interesting was that Uh individuals who hadn't started their transition trans women that so men, biological men who became women performed 31 more push-ups and 15 more sit-ups in one minute on average than the biological women and ran about 21 faster and it took a full two years really, uh, for some of some of those advantages to go away.

However, there were still some advantages that remained even after two years now. There are also some studies suggesting that after two years, you start getting more alignment. Uh, but uh, but yeah, I mean this. This is something that I think society's really got to look at and say, you know is: is there potentially an argument to be made that maybe there should just be a different division entirely? Like maybe you have biological men's sports, biological women's sports and then transports right? Is? Is that potentially uh, where the future goes? Because I think we Circle back over here.

when we look at the data, it's very difficult to argue in my opinion that people who are in biological man certainly any time before two years, uh, and even after that, you still have advantages uh, can fairly compete with biological women. So curious to see what uh, what what everybody else thinks about that, but uh, but that's um, you know, just sort of some of my thoughts and and some more detail in terms of why I have those thoughts, You know I'm not here to always say hey, my opinion's right or it's perfect. It's just to say hey, look, I have an opinion. Here's why I have the opinion.

uh, and I'm open to talking about it. but but yeah, this, uh, this is one. uh, that's quite interesting, uh to me. So anywho, all right, let's uh, let's go back to Market talk.

So uh, next thing we've got to talk about is ah yes, oh, that's an interesting one too. All right, let's hit this. Oh boy, there's a lot to talk about. I Gotta start these streams earlier.

That's the that's the real uh issue. Now we got to talk about the car bubble because folks, the car industry is not very happy. The percentage of borrowers who are at least 60 days late on their car payments is arising. Not only is it Rising but those delinquencies are now being associated with questionable tactics by.

Banks Basically loan extensions. This is essentially a bank saying hey, look, even though we're going to use car bubble and people can't afford vehicles uh, really anymore without highly stretching themselves. Hey, as soon as people start missing their payments, let's just make it easier for them by extending how long it'll take them to repay their loan. This is kind of some of the stuff that you heard during the Covet era where essentially hey, look, can't make your payment What If Instead of having a five-year loan, we just say you have a 10-year loan now that'll lower your payment.

It'll give you more time to repay. That doesn't really take away the Financial stress and actually increases the total interest that an individual would end up paying for their car. But it's definitely leading to a lot of raised eyebrows about what could end up being a big disaster. Really for poor individuals and we've said this many a time before, but recessions are usually worse for poorer individuals.

They're the ones who get screwed the most. They're the ones who are least able to overcome job loss, They're the ones who are least able to overcome High payments. I'll give you an example: Bloomberg Put a story together talking about interviewing this individual named: Chris Martin Him and his wife were under water on two cars that they had underwater. means the value is here and how much they owe is here.

Which means their asset is worth less than their liability. Well, apparently they were underwater. Fourteen thousand dollars on two cars, but they needed a new car. So what they did is they traded in both of their two cars for one.

Ford Explorer and now they had a loan of 66 000 on a 49 000. Ford Explorer They're literally upside down. Seventeen thousand dollars. If they get into a car accident with that car, they're screwed.

Especially if the insurance only pays them out a fair market value at the time, which might be even less. they would have to come out of pocket to pay off that loan, potentially by 17 or more thousand dollars. This is why negative equity in cars is really, really dangerous. because you get into an accident and now you don't have a car and you owe twenty thousand dollars to pay off your loan.

Now you're really screwed and you're knocking on the door of bankruptcy, especially since trade-in values are cooling. We have recently had a little bit of a sort of anomaly of data in December and January where used car prices have actually picked up, but overall, we do see a longer term trend of trade-in values cooling, meaning more and more people are upside down. The average new car interest rate right now is 6.9 percent. That's up from 4.3 percent a year ago and now you have two out of 13 people today with car payments of greater than one thousand dollars.

Two out of Thirteen if we get a percentage on that. that means 15 of people have a car payment of over 1 000 dollars. New cars are up 20 since the pandemic, used cars are up 37 since the pandemic. And yeah, at a certain period of time there was.

There's this anomaly where basically you were able to buy a use a new car, drive it for a couple years, and then sell it for more than you paid for it thanks to all the inflation we saw. Uh, but a lot of new car dealers and used car dealers are worried what's going to happen. and what are we starting to see now? 90 month loans? Literally, that's how people are getting qualified instead of having a five-year loan for your car like a 60 month loan. Now we're going to 90 month loans and it makes me wonder what's next.

Are we going to start seeing the 50-year mortgage? But take a look at some of the tweets from Mr Car dealership? God I Enjoy following him on Twitter He's very bearish. He's an individual who runs a used car dealership and he does not like what he's seeing. He says new car prices are a disaster. One in four cars sold in December had an MSR P of over sixty thousand dollars a year ago.

that number was 1 in 13. Now note: Uh I just had a family member who, uh, who actually bought a Toyota RAV4 and they spent 68 000 on a new RAV4 and I'm like, my goodness, you got ripped off because you go over here to Tesla a model Y, you could get a Tesla Model Why folks, for a purchase price of 55 000 minus seven thousand, five hundred dollars because of the tax credit. So that means you could have gotten this for somewhere under fifty thousand dollars. You got ripped off by somewhere around 20 grand for essentially the same size vehicle.

And this is the long range model with 330 miles is plenty more than enough, especially with the Tesla supercharging. Network And then of course you get the autonomy and everything. I Don't understand uh, why you would still buy a legacy vehicle, but you know it's like what Elon Musk said yesterday. Buying a legacy vehicle right now is like buying a flip phone.

Uh, but anyway, so to be clear, uh, over here. this is indirect blending. That's okay. so we've got some indirect lending direct lenders offering, uh, 90 months terms.

Sadly, most people don't realize that these sort of 90 month terms are happening too often. Not only that, but also I think this was in response. Yeah, this was in response to this. Look at this: 1998 Ford F Escort bought for 289 dollars a month for the next seven years.

And here's the photo of it: 1998 Ford Escort Okay, what's remarkable about this is that could have been my childhood car because when I was uh, 8 to 14 my mom drove around an old Ford Escort that was that exact color and uh, you know. So so when I was a kid uh you know and that car was a beat to crap. uh yeah because we got it used and it would like break down and like smoke would come out of it. you know I don't know like the radiator broke down and stuff.

but anyway, that's insane. You're paying almost 300 a month for this. Holy smokes, it's just crazy. Uh and anyway, so going back with some of these others over here.

look at this: a hundred eleven thousand dollars for a Jeep for the Grand Wagoneer This is insane why and it explains why Carvana's net income is this. I mean I Love this post right here. Look at Carvana's uh, net income Negative: Many millions of dollars to now Negative: billions. Uh yeah, that's that's a that's definitely a bubble indicator for you.

Uh Auto New auto loan rates have just hit New records. New cars. You're looking at eight point six percent for a new car loan right now. Used cars according to dealer tracks sitting at 13.65 percent.

However, you're still seeing an increase of used car prices at dealer auctions and so there's the potential for prices to rise for used cars going into the next a couple months here, which might show up in CPI uh in March and April Uh, So that would be sort of our April May releases, which is not great because that means something that was an anchor for inflation is actually, potentially, you know, actually going to prop up inflation. That's that's not great. that's bad. So there are definitely some risks here.

I Would I would absolutely be very cautious of buying a new vehicle going into a recession. I Don't think it's a good idea? You'd have to have a very good business purpose for buying any kind of depreciating asset like a car or a plane or a boat. Uh, definitely. I would probably stay away from boats.

Um, planes are also very expensive in Aerospace right now, but cars are just ridiculous right now as well. There's a GM dealership that was interviewed in Virginia and the the general manager was suggesting that people who come in and buy Volvos often pay cash and they'll be okay. but it's the Kia buyers at the other end of the the showroom who often Finance with us that we're worried about and so really look I Hate to say it, but this is an example Again, where capitalism is not screwing the rich people. it's screwing poor people.

Again, you're paying 300 bucks a month for a 1998 Ford Escort because you have to so you could get around to your job. Poor people are the ones getting screwed here. and so this is one of the reasons. uh, and takeaways as stock investor that one of the things that I'm least interested right now in investing in are basically things that uh, uh, poor people have to buy.

uh and again, it sounds terrible, but that's why I'm staying away from. Staples I Think 2023 is is going to be a poopy, crappy-doopy year for Staples uh McDonald's cheesecake Red Robin Procter Gamble Johnson and Johnson Coca-Cola I don't care at Costco all a Kroger uh, whatever. All of these sort