Welcome back to me! Kevin Report number 43 This has got to be the weirdest a market yet I'll tell you. Oil down again one and a quarter percent. But what's so weird is that over the last two days that it's a Friday and today the 10-year treasury has plummeted again. We went as high as 4.08 on Thursday, then on Friday we lost about 11 bips and today we lose another 6.4 I mean look, that's fantastic for potentially, uh, you know, loosening Financial conditions such that maybe the stock market could do well and maybe real estate will recover.

But it's so odd because what pushed the head fake all the way up to 4.09 or 4.08 And all of a sudden that sell off again? who knows. Quite weird. even CNBC doesn't know they're running a headline saying treasury yields fall as investors prepare for key economic data. In other words, they have no freaking idea what's going on and I'll tell you that is pretty weird because Goldman Sachs and their financial conditions index plummeted a little bit over the last.

Uh, well, essentially trading day here went from uh, what run from a number of almost knocking on the door of uh 100 a point, two, three, two seven, back to about 99.96 that that might not sound like a big drop, but it's it's a drop that brings us. It starts killing that major uptrend that we've been seeing. I'll show you really quick just over the last few days here. Standby: I'll show you the chart so you could just see it yourself.

uh uh, it's a little bit of a drop, but it shows you a change in Direction over here, right? So uh, this right here is a February Right here is: March All of a sudden Financial condition softening a little bit. Now obviously it's volatile, but we've been in this trend of straight up and all of a sudden we're getting this drop and really most of this is because of the treasury yields in my opinion. Uh, but it's odd because this is happening at the same time as break evens have reset substantially higher. Break Even Inflation rate Now even there, there's an inflection point, but it's uh, super super minor.

And given the volatility of break evens, this one probably means nothing in terms of an inflection point. But take a look at this chart, this is your five year break even and we regularly talk about this one. But what's remarkable here is you're going back to August In terms of, we haven't seen inflation worries this High since August we exceeded the worries of October. Now, technically, if we exceed the worries of October, we should be trading lower in the market, right? But we're not.

And that's in my opinion because this break even isn't the only thing really driving the market either up or down. I Really think I've mentioned this a few times, but I think this sort of evidence is it. it. To me, the fear is not that inflation sticks around a little bit higher for longer I Think the fear is that we go back to these sort of levels of break evens or even substantially even higher.

And that's where Paul Volcker comes out right? If we get these levels or more, we get Paul Volcker. All this crap over here doesn't matter. this is all just all right. whatever.

Inflation will be sticky for a little bit longer, but I'll tell you the market is pretty volatile. uh, in leading into this data over here, uh, just uh. with with drama we saw last week of yield skyrocketing as much as they did and uh, and financial conditions, tightening and all of a sudden they're you turning. The market doesn't know what the hell it wants to do and that's okay.

I mean quite frankly I think everybody's trying to figure out what's going on in the world. Uh, and uh, that's part of why. uh, there's so much, uh, sort of uncertainty in the market if you will. uh, but that's okay.

Uh, now we'll talk about what. Morgan Stanley and uh, some other of the investment. Banks Think about what's going on. We'll jump into that in a moment.

But I Want to start with what's going on over in Florida Uh, because I think it's a little interesting, especially since we get a little taste of Florida here in California So let's uh, do a little touch on that. uh so uh. but yeah, do pay attention to those rates because the rates and the break-evens I think those are what's uh, driving as a market of Rights an hour? All right. So let's jump into here all right.

So the next president of the United States might come from Florida We've got to talk a little bit about Ron DeSantis But also, there's a bill now apparently in Florida's legislature that might end up Banning bloggers unless they register with the state if they even so much as mentioned politicians or the governor. Now Twitter is generally a terrible place for actually getting a deep information on what's going on. but Mr New Ginger was trending yesterday uh here for his tweet where he wrote. The idea that bloggers criticizing a politician should register with the government is insane.

It is an embarrassment that it is a Republican state legislator legislature in Florida legislator in Florida who introduced the bill to that effect. He should withdraw it immediately. And then of course, there's a lot of lashing out against Newt Gingrich A lot of people saying things like hey, well, you're the reason that the Republican party is like this and you should take responsibility. You're basically embarrassed to yourself.

You get a lot of that sort of drama. So what what I like to do is I like to go right to the source and I think that's often Actually, almost always what's missing from Twitter Uh yeah. so jumping right into the source and then we'll talk about what Mr DeSantis is up to take a look at this. There actually is a bill and it's called the ACT relating to information dissemination and basically it would require bloggers to register with the Office of Legislative Services or the Commission of Ethics requiring bloggers file monthly reports with the appropriate office by a certain date.

Now there's some details here that suggest Basically, if you're a blogger who gets paid, you're required to to a register. So they Define here. What? A blogger is someone who frequently updates, uh, opinion commentary or business content. A blogger means any person who submits a blog post which is published.

Okay, great and it has to be four comp compensation. But this is pretty broad here. compensation includes anything of value provided to the Blogger in exchange for a blog post or series of blog posts. Now that's really interesting because I mean in theory, you could say making a YouTube video is for compensation, right? Because you get ad Revenue You post a an article on the medium, you get ad Revenue Now YouTube didn't go to me or the medium doesn't go to people and say please make an article or a video about DeSantis and then we'll pay you, right? So this is a pretty vaguely written bill because it doesn't clarify that and it could potentially mean anyone.

And obviously technically Florida only has jurisdiction over Florida But they don't say if you don't reside in Florida you're exempt from this now. Obviously, the reach of their power their policing power would not exceed past Florida. But what if What if you make videos about the Santos in California and then you go visit Florida You know, are you now going to get fined because because you're you're somebody who has blogged and not reported potentially in Florida as well. It's sort of interesting, and so it's It's raising a lot of eyebrows about the idea that, hey, like, if compensation is so broad, what you're basically saying is anybody who even talks about State uh, Representatives uh or the governor needs to register with the state of Florida And it's really starting to feel a little sort of anti-free speech-esque Which is really odd because generally it's been the Republican party over the last few years who's been sort of clamoring for for free speech.

Uh, and then, while I don't think anybody really is anti-free speech, the big divisiveness of on one side it's hey, we got to control this and misinformation right? and on the other side, it's no, just let everything free, everything be free, right? That's been a pretty political, uh, and uh, politically divisive talking point. and so the idea that Ron DeSantis government who's potentially going to do whatever he needs to get done over this next year? At least that's what sort of researchers political researchers are saying that Florida's legislature based basically wants to prop up Ron Santos to potentially become Governor because it would be good for all of the people in the legislature. If he becomes president, he might pick from that legislature to to have have sort of a cabinet or build out a cabinet if he were to become Uh president. So it's really interesting that uh, you've got on one hand a lot of this talk about Free Speech But now you're basically censoring free speech by forcing monthly reports on people for any basically reason for posting a Blog simply if you comment on the governor or represented that, that seems a little odd at the same time, you have Rhonda Santis who just visited and this comes after CPAC by the way, which was this weekend where uh Donald Trump won sort of the straw poll.

but but you know that somewhat seemed uh to be a little bit more uh of a Trump-attended event Ron DeSantis wasn't there instead Ronda Santis was actually in California he was actually in my home county here in Simi Valley and I thought that was very interesting. uh Rhonda Sanchez went to the Ronald Reagan Presidential Library sold about 1300 tickets and he talked about this great American Exodus from States governed by leftist politicians and how people are voting with their feet I mean this is old news. We've been using that phrase for, you know, since the Fur Wall for probably for decades, quite frankly, but but really heavily since the pandemic. It's hard to argue though, that you know people are solely voting with their feet because of politics California has gotten really expensive and in part because you know California is really beautiful in terms of like, physically.

Uh, you know people are awesome, the weather's cool, but the politicians are loony. Okay, so we know that well, But the Wall Street Journal for example, alleges yeah, there's probably a good chance people are leaving California the ones who are because of a lack of affordable housing and hybrid work setups that really allow you to go from like a three and two here to like a six bedroom mansion in Texas uh, or even Florida right? So, but anyway, Rhonda Santis at his event and see me? uh, Simi Valley Talked about, of course, having empowered people uh, to make a choice as to whether or not they want to take the vaccine, not enforcing mandates. And this is interesting because early in the pandemic Ron DeSantis was actually a big proponent of getting vaccinated, but now he's sort of trying to back that away by saying hey, but I was super anti-mandate and my schools were open over here, right? And the Washington Post interviewed some attendees at the event who described themselves as trumpers, but they responded and said, you know Ronda Santos seems like Trump but less divisive and potentially with a brain. Now that I thought that maybe that obviously that was potentially, you know they picked that one quote because it's a little extreme.

Uh, but uh. but uh. But this idea that maybe Ron DeSantis would be like the diet version of Donald Trump and maybe a little less divisive is really interesting because you know it does seem like there's a chance you'll have Iran DeSantis V Trump primary and then on the other side you might have. If Biden runs, you'll probably just have Biden.

If Biden doesn't run, you'll probably have like a new sum slash combo up runoff. So so we'll see. Uh, but anyway, what's also very interesting, it kind of goes back to sort of how this is all piecing together is Rhonda Sanchez is trying to create The Narrative of everyone fleeing California which again to some regards is true, but on the other hand, it's really pro-free speech while you see at the same time also this sort of almost anti-free speeches bill in Florida. But it's not just that it's also what's going on with Disney and how Disney is kind of being used as a pawn here for Desantis's efforts.

So here's actually an op-ed piece in the Wall Street Journal by the man himself Ron DeSantis himself and he talks about how on Monday he signed a law ending Disney's self-governing status of over 43 square miles Disney no longer has its own government. and and really, this is starting to make people reiterate the idea that man on one hand Ron DeSantis is all like hey, free speech Free Speech But then why is your legislature putting together something that kind of potentially restricts Free Speech requiring this registration, It's basically burden. Right when you put a burden on speech, you essentially restrict it. It's kind of like, hey, you know what we we want you to put these gloves on while you're writing your paper.

It's just another step. We're not stopping you from writing, but we want you to go through another step. And if the more steps we put on you, then the more inconvenient it is, the less likely you produce content, right? That's usually how it works, So it's not really eliminating the opportunity to speak. but it is restricting that somewhat.

And a lot of this drama we're seeing about Disney is also about Free Speech see Disney and and Rhonda Santos obviously talks about this in here and I'll go a little bit into more depth, But basically he talks about how hey, look, uh, if you go whoa, go broke, go to Florida uh and and Wokeness dies like Florida is the place where Wokeness goes to die is essentially what Ron DeSantis argues and uh, he says it here. we are making Florida the state where the economy flourishes because we we are the state where Woke goes to die And he makes this argument that corporations should not involve themselves in politics and that basically Disney uh ended up uh, you know we're challenging this idea. Uh, that uh, that Florida was going to put up the essentially don't say gay bill now that phrase is not actually in the bill, it's just how everybody knows it. That's the politically popular way of talking about.

It basically says hey, we don't want sexual education for people under a certain age, Children under a certain age like five-year-olds shouldn't be talked to about basically sexual education or gender orientation or gender identity and Disney had long been silent on that. Uh, but uh, generally what you find is silence these days in 2023 is deemed to be sort of permission. Uh, and so this is where Ron DeSantis argues. Look, they took a stand.

They took a stand that was anti-mybill and now we're punishing them for that. Now in my opinion, that's somewhat slamming. Disney Uh, from a free speech point of view, right? Like if corporate patients are allowed to have a voice, which they are allowed to have a voice obviously, then they should be able to speak freely without fear of punishment. The idea that that, then, uh, you know, potentially Rhonda Santa starts restricting rights from Disney I think is somewhat interesting because it basically sends a signal to any business in.

Florida Hey, if you don't align with our policies, we'll find a way to screw you. Now How whether or not you agree with the don't say gay, it does not matter here. Like don't get me wrong, I Got a five and seven year old and they don't need to hear about gender identity or gay or or or anything. They're way too young for that.

Okay, five and seven year old? No? Okay, let's wait until like at least fifth grade police or like middle school or you know. High School Obviously is just fine, but but like young children, No. Uh, so so again, I'm not making a a stand here. that Ron DeSantis in the don't say gay bill is wrong or right, it's not the case at all.

If anything I think it makes a lot of sense, but the idea that DeSantis is sort of building his campaign on to some degree silencing some form of speech in my opinion, sort of runs counter to the Republican ideal of no, no, no, all free speech, right? Because in essence, you're trying to restrict bloggers and in essence, you are trying to restrict businesses from taking a stand. Now of course you might say oh well, Disney has no place to be taking a stand, but wait, isn't that restricting? Free Speech right? So uh, now what? I also think is very interesting is Rhonda Santis goes on to say the following here: Disney's special Arrangement which dates back to 1967, was an indefensible example of corporate welfare. Now this I think is remarkable, indefensible example of corporate welfare. I'll let him keep going and then I'll respond to that.

It provided the company with favorable tax treatment, including the ability to assess its own property valuations and enjoy benefits of regional infrastructure improvements without paying taxes towards the project. it Exempted Disney from Florida's building and Fire Prevention codes. It even allowed Disney to build a nuclear power plant and to use eminent domain to seize property outside the district's boundaries. while the districts are common in Florida Disney's deal was conspicuous and the massive benefits and can confirmed.

Okay, so first of all, it's really worth understanding what happened here. Okay, because this right here makes it sound like the scientist is coming in on a on you know, basically a white horse and saying how dare Disney wield all this power. We will take it back, but you have to remember what Orlando was before 1967. folks, it was nothing.

It was swampland. That's it. In fact, much of Florida still today is swamp and that's not a distant. Florida I spent 16 years growing up in Florida I Love Florida I'll actually be at Florida later this week.

But this idea that oh uh, you know you know we got to take back all that was given to Disney Disney created Orlando Disney built its own fire department, police station. It built its uh, the parks and this idea that Disney used its eminent domain to seize private property. Let's hold on for a moment Disney's eminent domain power actually LED Disney to preserve a lot of the natural forestry that's around Disney Because they wanted that on purpose to make the whole Disney World area feel as sort of natural as possible. Now don't get me wrong, yeah, there are going to be cases where certain land was transformed into potentially a parking lot duh.

but then again, it was all a swamp. But when you go to Disney World or even you fly into Orlando like they're having a lot of trees over here. It's not like Disney leveled everything. Also this idea that Disney uh, you know was allowed to build a nuclear reactor.

That's true because Disney takes a lot of power, but they never ended up building their own nuclear reactor and even if they did, that would be better than what we have today, which is a natural gas power plant instead of a nuclear reactor. Now Florida does have its own nuclear reactors, which is great. But remember what Disney was supposed to be Disney was supposed to be the experimental prototype community of tomorrow that stands for Epcot right? It was supposed to be a futuristic city that would be home to 20 000 residents in an area that they're never there. Never used to be people.

So Disney World needed to move fast. They needed to build roads. Emergency Services Utilities Disney did that. They built the levees, They built the drainage system.

Yes, Did other parts of Florida end up hooking up to those projects and benefit from that economic impact of course. But Rhonda Santis I mean we got to look at the numbers I wrote down some of them over here. Disney is Disney's a huge part of Florida I mean look at Oxford Economy Oxford Economics for I used before the pandemic just because of the some of the 2022 numbers aren't available uh yet. And if you go into 21 in 2020, things are very skewed by the pandemic.

So I just wanted to look at 2019 since we're likely to Trend back to that Trend as most things are in business, but look at 2019. Disney World had a 75.2 billion dollar economic impact on Florida Florida's GDP is just under one trillion dollars. That means Disney World itself sets up about 7.7 percent of Florida's entire GDP 4.5 percent of the people who work in Florida work for Disney World or are somehow employed as a contractor by Disney or work for Disney in some regard. and 5.8 billion dollars of Florida's tax revenue or 15.9 percent comes from Disney World.

So I find it really interesting and and I kind of have a a conclusion to all of this. So so first of all, you have this this: uh uh, you know the speech bill right? restricting a speech in Florida Then you have this sort of Disney removing basically their policing Powers which policing powers include building and safety and infrastructure and everything blah blah blah right? So you have the speech build and you have Disney Uh then you have this idea of uh, Woke goes to Die in Florida So my take on this my take uh is that right now in society we do have a very split United States Right now, on one hand, we have this idea that uh, everything has turned woke. Although the idea of woke has really become extreme, right Woke used to just be awareness, right? It used to be uh, aware. so you were sort of aware.

Maybe of privileges or differences, right? This has now gone to the extreme, right? So there's the extreme version and then there's sort of the the normal version of this. Uh, and then what you have happening in Florida is really you've gone to the anti-uh Woke extreme And so that's really the fight of what I think is the 2024 election and what we're going to see a lot of. You're going to basically have an argument of the extreme versus the extreme Now personally I hate that because I think the vast majority of Americans sort of sit in the middle like yeah, look some things over here make sense. Some things over here make sense that doesn't make sense, that doesn't make sense.

and I personally think that Disney and the speech Bill have really just sort of become pawns to the idea of reiterating this extreme. Uh, because that seems to be what's probably most popular for Republican uh candidates right now. and so I don't actually think anything practically is going to change at Disney. In fact, Disney World Florida has a board that controls the sort of the Reedy Creek district and Rhonda Santis can now sort of put his puppets on that board.

but the reality is Florida probably or or Disney World kind of is already built out what they're going to build out right now. That's not to say that well, they won't want to continue to develop, but like these special powers really mattered when they were going from Swamp to something. Now it doesn't matter so much anymore. So in my opinion, both of these things aren't really going to change anything.

they're just examples of what DeSantis is trying to use to build up his platform to really fight. Donald Trump So I think that's very interesting. Uh, you know somebody here uh Brett says anti-woke equals let me continue being a bigot. No.

I I don't agree with that. You know I I think if if somebody I mean like, maybe we say the uh, anti-extreme would be the more the better way to put that right. like I don't think somebody is a bigot for saying I don't want my five-year-old uh to be taught about gender identity right? I don't think that's uh, being a bigot I think that's you know, trying to be reasonable. But of course we could go down the Spectrum and go well at some point.

Uh, we probably all agree with things. You know, it's it's funny. like I I I'll have I'll have a drink where the people have totally random and totally different political ideologies. you know, extreme uh, people on like the super Super Far Left or the Super Far Right or Super Libertarian or or whatever.

and I'll tell you. we usually, even though people identify as potentially Super One Thing most people are relatively reasonable. It's surprising. I'm not saying everyone don't get me wrong, right? Uh, but uh, it is.

It is really, really interesting. I think that's fascinating. So uh, this election cycle is going to be incredible. Somebody here says Kevin contradicts himself.

He says that this is an example of anti-working extremism in one breath and it says won't really matter in the big picture. How is that? Okay, so what I'm saying is so I'm not contradicting myself. Actually, you're just reiterating what I'm saying. What I'm saying is anti-woke extremism is punishing Disney's free speech and taking away, uh, their policing Powers Really, that's that's the way it's being put up on a pedestal.

Oh, you go woke, you go bro. But the reality is, this probably isn't going to affect Disney at all. In fact, I would not be surprised if Ron DeSantis picked up the phone, talked to Bob Iger who just took over a CEO again said look man, I'm gonna put some puppets in you guys just keep doing you but I'm gonna go I'm gonna go use this as a political tool to show everybody that you don't mess with. Ron DeSantis you know that's what I'm saying.

So uh so maybe there's just a misunderstanding in how I explained that. but uh, you know I I don't think uh I I think it's almost a little bit like a Florida style virtue signaling dare I say right like it's not really going to make a difference to Disney World but it does help a sort of prop up his skin. Now don't get me wrong, I don't dis I Want to be very clear here because sometimes I make these these videos and people think oh so you hate to Santa's no, it's not what I'm saying like personally from what I'm seeing I would probably much prefer a DeSantis over like a Gavin Newsom who gives stimulus checks during an inflationary era and can't save homeless people or contribute to mental health for the life of them and doesn't seem to care about financial education in schools. In fact Rob DeSantis past it was one of the first States and one of the first Governors to pass a bill demand a requiring Financial Fitness basically Financial Education in schools.

That's something that I ran a campaign on for governor in 2020. So completely agree. By the way, I think so I Think it's very, very interesting. Uh, very very interesting and definitely worth talking about.

So those are some of my thoughts. but hey, I'll look for your thoughts in the comments somebody here writes: people are factophobic. Well, that's honestly. I think you you watching videos on Twitter is extremely smart.

Like, like me or hate me you watching videos on uh, if I said Twitter I'm at YouTube you watching videos on YouTube is extremely smart because this is where you can actually have more of a dialogue and get deeper into topics. whereas on Twitter I mean go go back to what we saw with the the Newt Gingrich stuff or whatever. the the stuff is just extreme. Like, absolutely extreme People like the messaging doesn't really tell you anything about what's going on, right? I mean we just made you know a 10-15 minute segment here on Florida politics where Newt makes one comment and people bash them like crazy.

Uh, and nobody actually knows what's going on, right? So I I'm a big fan of that sort of perspective, but uh, you have to sort of seek that out. Otherwise, you kind of stay. Uh, you stay uninformed. Okay, let's uh, take a quick peek at the pre-market here.

and then we got some more things to cover. So yeah, wow, Bond's still sitting at 3.91 It's incredible. Uh, you do have what looks like Futures slightly positive. Uh, barely positive.

Nasdaq's definitely outpacing at about point four percent to the upside. Um, all right, let's see here: Bitcoin Sitting at 22-4 trade desk up about one, two, four in pre-market Tesla's up about 0.51 pre-market here we have, uh, luminar up seven crowdstrike up five. Interesting. Okay, again, no, no huge moves here.

some moves on some cannabis stocks moving down Asml down another 1.75 All right. So next a topic for us to discuss. uh oh, by the way I have to say the uh Chris Rock a special. Pretty funny.

you got to give it to them. we're pretty funny I love his comments on uh, like probably my favorite line, especially since I was just bagging kind of on like Twitter he goes I feel something effective I feel bad for the people who sit around all day long trying to come up with woke tweets every day because they're full of that's what that's a Chris Rock quote there uh so really good. really really good piece I thought that was fascinating it was in Baltimore for that live Netflix special. pretty neat.

Uh okay. so uh, now we've got to talk about the Rally mode. Rally Rally Rally mode I Thought this was very interesting. So let's see here.

Oregon Stanley is a flip-flopping I Would have not expected this and not at all. but Morgan Stanley's Mike Wilson the Mega bear. Okay, remember he is the guy who says stocks are going to hell. the recession's gonna stop Suck.

It's going to be way worse than you expect. And basically anybody who's a bull right now is essentially sucking air on Mount Everest which is so oxygen depleted that clearly you're getting delusional because you're not able to think clearly because obviously the stock market's going down. That's been Mike Wilson's argument and I remember I made a video about that Mount Everest a piece that he put out and I thought it was so ludicrous. I Thought to myself, Holy smokes, now the Bears are getting delusional.

In other words, the Bears are starting to run out of crap to say about this economy because the reality is, the consumers and businesses have a lot more money than anybody previously thought and it's lasting a whole lot longer than anybody ever thought it would. So yes, while things are trending bad, we seem to have more fuel in the gas to keep this plane flying for a lot longer than we thought. a lot more fuel in the gas tank. uh, which would essentially coincide with this idea of, well, maybe the plane doesn't have to land yet.

and maybe we can be patient in getting inflation down before markets actually go into that sort of Mike Wilson recession. But anyway, my opinion aside, Mike Wilson actually just changed his tune a little bit and I'd like to read you a quote. take a listen to this. Equity Markets survived a crucial test of support last week that suggests this Bear Market rally is not ready to end yet.

He specifically pointed out the Spy basically bouncing off of the SMA 200 line, which you could see that specifically here. We've talked about it many a time before, but here's your SMA Uh 200 line. your simple daily moving average and that 200 daily moving average showed you support at about 390. We ended up getting to a low of about 392 before bouncing off and closing at about 401.

Pretty, uh, pretty pretty traumatic. uh, moves we've seen over here. Uh, anyway. I mean boy, that is actually pretty dramatic.

I Mean, if you had a low of 392 and you ended up closing at 401, what is that? Uh, 401 divided by 392. Okay, yeah, it's about a 2.2 percent swing from from previous low to to next state close. That's not even next day high, which was 404. That's more like a three, three and a half percent.

That's remarkable. But anyway, Mike Wilson is now calling this a short-term pivot. He does, however, still reiterate that once the fundamentals deteriorate, then the real pain will come. He says this doesn't change the quote.

Very poor risk reward ratio currently offered by many stocks. given valuations and earnings forecasts that remain way too high. In other words, Mike Wilson is saying. Look, people are just going to run out of money, people are going to have money for for to sustain earnings anymore and then earnings are going to disappoint.

Margins are going to disappoint. and you're going to have a pretty nasty crash and that the real pain is still ahead of us. That's the Mike Wilson point. Now he says the gap between reported earnings and cash flow a cash flow is the widest that it's been in 25 years, driven by excess inventory and capitalized costs that have yet to be reflected in earnings per share.

So in other words, when you spend a bunch of money, but you capitalize it, you basically spread the expenses over time. And so when those spread expenses hit in the future when people finally stop spending as much money, we're going to the hell is basically what Mike Wilson's trying to say. And now he's trying to hedge his argument that everything's going to Hell by basically saying okay, well, fine. maybe maybe the rally will last a little bit longer.

But don't worry, the bear Market's coming I promise And I think that's really interesting because yeah, they've they've been, you know Mike Wilson has been sort of a bear for quite a while now. He was right about, uh, you know, the bearishness that we saw last year. But then again, every bear was right last year. At one point, I spent two months as a pair, I posted pictures of me skiing uh, uh, last January and it was basically just a picture of a bear with skis on a ski lift all alone.

a very sad, lonely bear. Uh, but what I always like to do is I try to look at some of the other information that we're getting from other analysts Specifically, even within Mike within Morgan Stanley I Personally wonder if all these people at Morgan Stanley are in the same office and they've like put Mike Wilson in a corner and then you've got like the level-headed people on the main floor that are kind of like there's Mike again, ah poor Mike like I I don't know I don't know and who knows maybe he'll end up being ripe. But here's yet another piece from Morgan Stanley which is basically the opposite. Uh, and what I thought was interesting about this one.

Yeah, and I I try to read everything right I try to read the bear case and I try to read the bull case and when I hear the Bears arguing that don't worry, the pain will come and you must be on Mount Everest because the oxygen is getting thin it makes me think like dude, you're running out of facts and when you're running out of facts to support the bear case, the bear case is going to go away. Like so far, people and businesses still have lots of money and and I think that's the big thing that everyone is missing is just I want to just grab them by the shoulders. Now on one hand, that could be really bad because we could actually confirm a meaningful re-acceleration of inflation right? If in January if the January numbers, uh, re-accelerate in or continue to prove and re-acceleration here in February With the data we're getting in March, we're screwed. Mark Mike Wilson's gonna be right then.

Okay, and in fact, look, you already know this right? You already know. But coming up, we have a jobs report on the 10th, we got CPI on the 14th, and then we get the FED on the 22nd. You already know this. But something that we haven't talked about before is that you should not pay attention specifically to those reports.

You know what you want to pay attention to. You want to pay attention to the following: The revisions: I Want you to look at the January revisions. When this data comes out, pay attention to the January revisions because here's the best case scenario in my opinion. Best case, Best case: We get the Feb data.

The Feb data comes in slightly soft. Okay, I mean the softer it is obviously the better. but you want the FED data to come in soft. But then you want the Jan data to be revised down because the Jan data was so ridiculous with seasonal adjustments.

I'm really hoping for revision down now. I Just want to be really clear here before: I Keep going through this Morgan Stanley piece. If the data for January gets revised down and you get soft February data I Think we break through the next levels of support on the retracement levels for everything Bitcoin spy Tech Tesla I Don't care what you're investing in AMC Oh, you know it's not my fault if you want to invest in bankrupt code I mean in AMC Uh, you know, like it's all going up. that would be great, so revisions pay attention to those really, really important.

But what's Morgan Stanley saying over here? So Morgan Stanley suggests that hey, in the coming weeks we'll get more data. We know that. but Morgan Stanley believes right now that the FED will only require two more price hikes or or interest rate hikes. Now that's interesting because we've really been talking about this idea of maybe a pause after March until that January data came out.

after that January data came out everybody's like oh crap. Yep, we're going to end up seeing rates go up higher for longer and so now we're pricing in that, uh, that hike in um, in May as well. In fact, if we look at Futures pricing, we're about a 71 chance of getting a 25 BP hike. Oh wow, that's actually bullish.

Uh, in a uh, a 28 chance of a 50 BP hike. Now I think that's ludicrous I think there's almost no chance we get a 50 BP hike unless of course, the data comes in like terribly bad. That would have to be so so bad for jobs and CPI to get a 50. because it would just shoot The fed's credibility and foot for what they have left.

Uh, and then when we look at May we're looking at probably a somewhere between a yeah, it's about a 90 95 chance that we're going to be up at five and a quarter to five and a half. So yeah, it's actually closer to like 97. But anyway, pretty pretty much a foregone conclusion that by May we're gonna be at five and a quarter on the low end and uh, 5.5 on the higher end. That's that's essentially a foregone conclusion, right? Uh, so.

but anyway, what do we have here? So they talk about after these two more Cuts they think the FED will pause. So they're setting this up to say that Okay, June pause and then March of of next year. That's when they actually think you get your first cut and you're going to start seeing 25 BP hikes or Cuts rather. Now this is pretty far out.

So what we've noticed is that everything has taken a lot longer than expected. unfortunately. Uh, and patience is really, really important in this sort of. Market Yeah, but if this ends up playing out uh, the way it's expected here, as long as people continue to have money to spend between now and then, Yeah, it we could be okay.

In in a crazy way, we could be okay To sustain this economy out of recession it would be I'll tell you it like fate loves irony as Elon Musk always says it would be the most ironic thing to see that the most predicted recession and the steepest hiking cycle in in 40 years does not end up turning into a recession. Yeah, I that Jerome Powell will go down as an absolute hero now. I've also been reading some Fed papers and it's important to to remember because some people keep talking to me about like oh, the Fed's definitely going to rug pull us I'm like I don't know man, the FED is pretty acutely aware of, uh of the pain that their activity causes. In fact, let me get to the conclusion on this paper: I Was just reading this this morning here.

look at this. My favorite line was actually right here where they said such policies uh in in other words, if you okay so they talk about keeping rates for too low for too long, blah blah But anyway, if if you create the risks of financial crises, uh, then you want to avoid creating the risks of financial crises because of the social, political and economic costs that come with them I Thought that was fascinating because it really shows sort of the Fed's awareness. This is a Fed paper by the way, it shows the Fed's uh, awareness of of look. you know, if you tighten too hard, people lose their jobs, people go bankrupt.

You ruin businesses that potentially could have otherwise thrived. So you really impact humans. Uh, you. You create misery and depression and increase suicides, right? Like it's terrible to put people through a a nasty recession, right? This is the Fed themselves does not want to have to pull Vulceros because the costs are too high.

It also hurts our standing of the US dollar. And and then of course, it hurts the long-term economic prosperity of America as well. Anywho, continuing on here, Fat has made less progress towards disinflation than previously thought. For any additional insight into the main meeting, we would need to see the evidence that the re-acceleration is real.

This is basically saying: look for us to even remotely think we're going to end up getting uh 50 BP We're going to have to somehow prove that Oh yeah, everything's re-accelerating and even if you look at Costco's earnings, call from the second you're not look, you're obviously seeing that prices have gone up. Uh, but uh, they're not meaningfully continuing. In fact, most companies even Costco aren't talking about more future. uh, you know, hikes for wages instead? what are they talking about? They're talking about autonomy and efficiency.

I'll just read it to you because I'm not gonna I'm not making this up. Look at this notwithstanding, the two to three off-season wage increases we had over the last 15 months, uh, we are our which has impacted some slight D Leverage D Leverage Basically, this gets a little complicated. D leverage means basically their Opex uh and their cost of goods sold went up a little bit higher than the rate that Revenue increased. So notwithstanding this information, given that we've only slightly de-leveraged is actually pretty impressive given that labor is our biggest expense.

So then what do they talk about? They don't talk about more wage increases. Instead, they talk about it's our productivity. We're getting better at productivity. And then over here you have an analyst that's saying.

so if compensation is rising six percent and inflation like nominal prices are going up six percent for goods, but traffic is only up three percent, then that means you should be seeing revenues down three percent, right? He's basically saying six and six with a offset by three shouldn't be a negative three, right? And they're responding well. People are spending more money on more expensive things, so not necessarily uh. In other words, not simply price inflation. It's Mix.

Now, Mix is a really important phrase to remember when you're talking about Finance because it's basically saying people are buying higher margin items at Costco rather than somewhere else. So that's good. That's a benefit to Akarovsko that actually shows some level of pricing power that can increase average selling prices. They're not actually just talking about, uh, increasing prices.

In fact, when they're asked about the elasticity of price, they say, well, we don't really analyze price elasticity. We basically just focus on this. If we lower prices, we do more sales. So I think it's really interesting because if you go through the earnings call and I'm just going to sum it up because it's a little Arcane But if I make it simple, the simplest way to put it is Costco is telling you.

In my opinion, basically the same thing that almost every other company is. They're telling you. look, yeah, we had to raise prices, But you know what we're doing. Now we're focusing on the fact that if we want more Revenue we could lower prices.

If we want more margin, we focus on productivity and automating. That's really what you're seeing at almost every single company that I've been analyzing. I'm trying to find where that automate. Here it is.

Oh, found it. Look at this. Uh, so inflation has gone up. We know that it's gone up in the past.

We know that, and I think the focus. Now this is important. Now, what do they focused on is trying to figure out how to do things more efficiently. One of the things we do religiously every four weeks at the budget meeting is the operators are talking about certain Focus items, whether it's improving overtime hours, in other words, cutting those, or things we've done to automate something, physically improving the flow of goods in the warehouse.

So what is pretty much everyone talking about? Everyone's talking about efficiency automating becoming more productive. That's what everyone's talking about. Nobody's talking about? Hey, we still got a lot more uh, you know, wage inflation to pass on. We still got a lot more price increases ahead of us, and if anything, they're like, yeah, like if you want to increase Revenue We could just cut prices.

In my opinion, that's actually very bullish. and and that's it's. very bullish because it shows. Even though we're going to go through some volatile hell over the next bit here, it's very bullish because the last thing you want is evidence that companies are starting to make you think Paul Volcker is coming, right? This is stuff we look at almost on a daily basis in our course member live streams.

When we do fundamental analysis, we try to understand what kind of pricing power do companies have I encourage you to join those. By the way, any of the programs comes with lifetime access to the course member live streams. But anyway, to me, this is fantastic. Uh, this is very good.

It's also fantastic that uh Goldman Sachs for the first time ever has just turned bullish on Apple saying it has a 32 percent upside from here: 199 dollar price Target They talk about Apples widening and increasing install base, basically leading to this moat of people not leaving Apple Uh and uh, really, the more people the Venus fly trap in the better. That was pretty interesting. So uh, we'll see. we'll see.

Uh, but uh. pretty excited about That uh, you know I know I know some people here, uh say things like Paul Volcker can't save us either I mean what? I always respond to stuff like this is hey, um, what evidence do you have? like where? where? where is the bad because I'm looking for it and people send it to me and then I make a video on it explaining how what they think is bad is actually not that bad. You know that's all that's all like. usually the bear argument is but but the prices are still up like 10 I'm like, yeah, no, that's how inflation Works stuff gets more expensive done.

You know, like uh, it's what's what matters is the stickiness of that right? So um, someone here writes Costco croissants are so good. Wow, yeah, you mean like in those the white clam shells that were the clear clam shells where you kind of get like that giant box right sup investment Joy what's up man vest major I Love this guy. uh I gotta come back to Chillicothe and visit you. Super curious what happens if rates hold? With 32 trillion debt, you can't tax your way out of a one trillion dollar.

Debt Service Yeah, here's here's the and it's It's totally understandable because central banks are losing money like hand over fist right now because the yields they're getting on their Investments are substantially lower than what they're having to pay out in the overnight repo facility. And really, what happens is that's where politicians sort of just basically write a blank check to to print more money and offset those losses. Now that sounds ironic, because it's sort of like, hey, but if you print more money, doesn't that create more inflation? Not necessarily if that money isn't being then circulated through the economy. If it's just going to sort of potentially pay off this deficit that the FED has created.

uh. And and the idea there is, well, well, then, won't people lose trust in the institution of America? Well, yeah, eventually. I Mean, at some point in the long term, every currency generally tends to go to zero because its government loses power hour and Trust But in the near term I Don't think it's likely that that's actually something that's going to, you know, sort of destroy our economy I Think people have, people are so much better off today in in aggregate, not everyone obviously, uh, than they were before the pandemic. that, uh, that that really, uh, once we get back to a normalized economy I Don't think that uh, markets will terribly care about the rejiggering that happens at the FED.

Don't get me wrong, there'll be some fun things that are going on over there. But another thing to keep in mind too, is that not, uh, every set of interest uh or or debt essentially the bond or the the our government has is, uh, attached to the interest rates that are being paid today, right? So you got two institutions, You've got our government and you've got the Fed. The vet is paying money. hand over Fists in the repo facility Like they're losing money, right? The government has a lot of their debt.

Uh, that needs to roll into higher yielding debt. And so it basically means the average interest paid is actually still very low for the for the U.S governor. In fact, if you look at here, we can look this up: St Louis Fred Uh. Debt payments as a percentage of GDP.

It's still lower than where we were in the 90s. Interest as a percentage of GDP. All right. So look at this.

This chart goes all the way back to the 1940s, right? So going back to the 1940s, what do you have over here? You actually have in the 1990s our interest rate or or the interest we were paying as a percentage of GDP was basically around three percent. So in other words, we're paying three percent uh of our GDP towards interest. Right now, we're only paying about 1.86 or roughly half of our GDP and interest. Now that is expected to go up.

But even if it goes back up to the 90s, did we really have an economic Calamity in the 90s? Not really. In fact, many say to 1994 was really aligned with a soft Landing Yeah, you had a technical recession in 91, but it's not one ever ever taught anyone ever talks about because it's really not that big of a deal. So uh I think that's pretty fascinating. Yeah, so we'll see.

we'll see. Uh Okay, good. so that uh, that covers some of what's going on in the market Market Rally mode. Now let's go ahead and jump on into I Want to talk about briefly this um, bouncy paper and uh, and then we'll do a little more q A and then we'll jump into the course member live so this one will go pretty fast.

Let me just make sure I have it ready here. Where is my Fauciology paper? Uh yeah, here it is proximal origin. Okay, yeah. I think this is really interesting.

Ready this should go fast Mr Faucy. Oh boy. He has been the topic of a lot. a lot of political attacks and political support.

On one people say he's just the person who tried to do the best with the information he had available. On the other hand, you have people like Elon Musk saying prosecute fauci he lied to Congress and the truth is probably somewhere in the middle. but today we've got to look at what the heck is this proximal origin paper that we just got some more insight on from Congress Let's talk about that because it's a little eyebrow raising about what maybe goes on behind the scenes at our government and how potentially the media narratives get rigged in favor of whatever the government wants. And I know I know there are 50 of you already punching your fists in the air going.

Come on. Kevin You didn't already know that? Oh no, I did. But anyway, let me give you a quick little background. So first, it's really important to remember what what gain of function is and how that compares to Directed Evolution And I'm going to give very Elementary Example: I'm not a biologist or or whoever would work on this kind of stuff.

I'm just going to do my best for you. Okay, so my understanding is, if you have a virus that can only infect bats, then it has not the function of infecting humans. Now if you genetically engineer it, you take some you know Snippets of DNA and you insert it into that virus and you're like here: protein fold some kind of receptacle or whatever that can now land on a human and make them sick. That would be genetic engineering.

Gain a function style research where basically you have genetically made a virus do something that it could not otherwise do. Okay, that's on one hand, gain a function research. On the other hand, there's this thing called Directed Evolution And and the theory here is that rather than taking DNA and trying to screw with the stuff, you're basically trying to let nature do that on its own. But you're doing that in like a rapid and successive manner to kind of get what you want naturally.

Quote: Unquote. Naturally. So here's an example. Let's say you take a naturally occurring coronavirus that only infects monkeys and not humans and then you infect five monkeys with it.

Now which of the monkeys is the sickest which has the strongest form of the virus? Potentially. Okay, take that monkey and make it infect five more. Repeat this experiment a hundred times now. You're left a hundred times down that row with the sickest compounded with the sickest compound with the sickest compounded with the sickest a hundred times.

As an example Here Now you have something that's probably pretty damn hellish and that potentially could be covet. 19. See, that is an example of how Directed Evolution could give you something that's really, really deadly. Uh, that compared to something that was originally benign.

Now let's now. So now you have a little bit of background on sort of the difference of of when being a function is talked about and directed Evolution has talked about. Now we got to look at what's going on with this March of 2020 paper. And what does it have to do with a paper that just came out three years later in March of 2023.? So this is interesting.

So we know that the FBI the Department of Energy and other departments with virologists I Honestly, I don't know why virologists work at the Department of Energy or the FBI I Still haven't figured that out, but there's a reason you have these departments saying yeah, it's looking. We've got some confidence that uh, Kovid came from a lab, right? The lab League Theory right? Uh, and this is a concern because the Wuhan Institute of Virology, which is known for this type of research this gain of function directed Evolution style research is described as China's first biohazard a level four research facility. And the paper is very important that we're about to look at because it basically poo-poos The idea that covet came from a lab. Now the paper that K that that basically pooped with the idea is this right Here This paper is called the proximal origin of Covet 19..

Now what's really interesting about this paper is that this paper ended up getting cited over 2 300 times in different mainstream media articles and videos. Now that's a really big deal because that basically means the government put together this paper and then the media ran with it. and when the media runs with it, they're basically just perpetuating what this paper says without doing any more digging into it. Right now.

that's really important. And so what does this paper say? Well, specifically, it says the following: It is improbable that Covid-19 emerged through laboratory manipulation of Coronaviruses genetic data irrefutably shows that SARS Covid-19 whatever is not derived from any previously used virus backbone. So they're basically trying to poo poo the idea that this came from a lab that this likely either came from an animal Source or human to human Transmission In in sort of a uh, you know, a natural way, right? this is the natural transmission argument and uh, it even. Ends By reiterating, since we observed all Covid A known Coronavirus features including blah blah blah blah as it relates to coronaviruses in nature, we do not believe in any type of laboratory based scenario.

But wait a minute. Remember what I just described about directed Evolution where you kind of take a natural uh, a covid and then maybe you infect monkeys a hundred different times Well If you remember high school biology, this coronavirus that you directedly evoluted boy I probably butchered that, but whatever is going to have some genetic markers that are similar to the ones from nature. you've just really accelerated that process 100x And that's not natural, right? By taking the constant, constantly taking the sickest monkey, and affecting the next sickest monkey is not natural. Because in nature, it's entirely possible that a stronger form of the virus would just end up dying out in nature naturally because it has some sort of a weakness that wouldn't otherwise be exposed in a laboratory where you could actually preserve a virus that's not supposed to exist anymore.

Okay, so you have this paper that the media runs with from March of 2020 promoting that no, no, no, no lab leak Theory Okay, so we have this, but what did we just get? Well, we just got a report from the Congressional Subcommittee on the origins of the Coronavirus and in their report in their memo released on Friday What did they say? Well, they said the following: they said that Fauci who knew uh, the National Institute of Health had contributed funding to the Wuhan Institute of Virology. This Congressional report or memo says that the evidence available to the select subcommittee suggests that Fauci prompted the researchers to write the proximal origin paper and the goal was disprove the lab leak Theory That's not good. Let me make that really clear what that means. Okay, what that means is uh, our government, our government knew they funded the Wuhan Institute Uh to some extent, right? So to some extent our government knew they funded the Wuhan Institute of virology.

Okay, uh, Fauci, uh, was told this and I believe it was around uh, around Jan 27 2020. I don't know exactly which date in the 20s, but it was somewhere around here so our government knew this. Then they decided in March of 2020, let's circulate a brief that disproves the lab League Theory uh and then therefore the the sort of implied conclusion and I'm saying implied here, right? because we're guessing. But the implied conclusion here is our government would be really embarrassed if they uh, had to take any blame for covet much easier to blame China Kind of interesting, right? So what is what is that? The rest of that Congressional Junk say Well, first of all, they say that evidence available to Congress suggests that fauci prompted this paper to disprove any lab League Theory Now notice it's not Uh research to disprove the lab League Theory It's a paper to disprove the lab League Theory Now it'd be one thing.

if it's like hey, look, go to China and see if we can disprove the labeling Theory and if we can't then we can't right, it's a paper. However, to disprove the lab League Theory Uh and then over here you have. look at this. The goal of the proximal Origin paper was to disprove a lab leak Theory Dr Anderson had objectively weighed all the evidence available to him and uh, scientists must make conclusions available by all evidence.

whatever. Whatever, a lot of scientists quietly and privately apparently on phone calls stated hey, like, what if it's a lab leak Theory But then according to emails, even Dr Anderson stated our main work over the last couple weeks has been focused on trying to disprove any type of lab leak. Theory The email directly contradicts Scripps earlier statement that Dr Anderson objectively weighed all evidence related to covet. Instead, it appears Anderson was given Direction and sought to formulate a paper regardless of the available available evidence that would disprove a lab leak.

this is from Congress So then you get a little bit of talk about how uh, Well, here's some more quotes here: Uh, Dr Farah led the drafting process and made at least one uncredited direct edit to the Proximal origin. Uh, this individual is not credited as having any involvement in proximal origin. However, according to New Evidence, he'd led the drafting process and in fact made several direct edits. apparently right before publication emails reveal that Dr Afara uh was thanked for editing the document.

Thank you for shepherding this paper. Listen to this rumors of Bioweaponeering are now circulating in China Dr Farah responds and says confirming that uh, he will be pressuring Nature which is a publication for for science Uh, and we'll be pressuring Nature to publish this letter I will push Nature in addition to Leading the drafting publication process Dr Farah made at least one direct edit to Proximal Origin on February 17th, the day Proximal Origin was first published publicly. Dr Farah made an edit to the draft. sorry to say micromanage micro edit, but would you be willing to change one sentence? uh and I want to get the rest of that hold on? I Wanna I Wanna get exactly that? So stand by I Want to get what that one sentence is? It'll take me just a second here.

But anyway. uh, what? you're finding this idea of Bioengineering or Bioweaponeering? I should say which is a lot more scary? This idea is really. uh, you know at the time that, uh, that we had this sort of, uh, dare I say uh, uh, a covet hysteria? uh, circulating uh, governments were trying to do everything in their power to limit this idea that oh yeah, governments are are taking tax dollars like our tax money and are throwing it at potentially making bio weapons like that's extremely concerning. Extremely unpopular, right? like I don't I don't think anybody really wants to hear that or think that that's sort of happening.

But then again, we also don't want to stick our heads in the sand and assume that that sort of stuff is not happening because clearly to some level it is. Uh, anyway, so uh, this this full piece from the subcommittee uh is available online. it's been published I don't know why my screenshot cut off there and I hate leaving things on uh, sort of a cut off like that because not that I think it really makes a difference but I'd like to have it because I don't uh, narrow, narrow what the rest of it is and I Want To Know It uh okay, well I don't know that I can get it. Oh wait, no.

I have it right. potentially here. So I got their emails. uh I've got all their emails.

Dang it. No, that's embarrassing. All right. Well darn it.

Kevin this is so annoying you ruined your video I Just want to know what the rest of that says. I'll have to figure it out and I'll I'll get to the bottom of exactly what's what's left in that. But um, let me see if I could just get the title of the report and maybe find it within the next minute. Here Standby one second.

So this is the Select Subcommittee On Coronavirus Pandemic Research. Here we go. Oh, I got it Finally God That took me forever. I'm sorry sometimes that happens.

but if I see something that I want more answers on I go find it micro there. I Got it. No way. Look at this and here it is.

Sorry to micromanage micro edit, but would you be willing to change one sentence from? it is unlikely. Kovid emerged from Uh through laboratory manipulation. Two, it is improbable that Covet emerged from a Lab Look at this. So you have somebody who gets no credits in the writing of proximal origin, yet is making these media directives