This video is brought to you by 10ds but more on that in a bit. So about a year ago, the Federal Reserve decided to change its stance on inflation. They went from hey, inflation is nothing to be taken seriously. it's completely transitory all the way to oh my.

God Inflation is Will Smith and Jada Pinkett It should be avoided like the plague. Pretty much absolutely going to war against inflation now. I've made a lot of videos throughout the past year saying that a recession will be a consequence of that policy change and it's been a whole year and the recession is still not here. Look, we had a technical recession I Can say that, but it's not really a recession.

True, we had two negative quarters of GDP which is technically a recession, but not. really. Look at the numbers. Unemployment is a 3.4 percent.

That's a historically low number. It's maximum employment, pretty much consumer spending all-time highs. We've been only going up in consumer spending for the past 18 months, in fact, win out almost 10 higher consumer spending than we were at pre-pandemic levels. so people are spending more unemployed, appointment is in the toilet.

I Mean there is no recession, so was I wrong. Now look in this video. I Always will do the same thing I do in every freaking video which is going to give you the bottom line first because maybe you don't have time to watch the entire analysis. and I respect your time.

So the bottom line is sorry the recession is coming and I will show exactly how fast and how bad it will be. but that will have to wait for the full analysis. Now if you just want the bottom line, here, it is. Now Look, let's talk about what happened in the past year.

Now in the past year, we had the Federal Reserve go and absolutely max out interest rate hikes. They've increased interest rates by four and a half percent in one year. We haven't seen this pace of increase since the Paul Voker days and 80s. That's extremely aggressive and a lot of people expected to see an immediate response in the market because when you hike interest that bad that fast, you expect the market to be on the verge of collapse.

But as I just mentioned, nothing is collapsed. Unemployment is pretty much fine. Consumer spending is pretty much fine. Even the housing market is holding pretty much fine.

We have issues with commercial real estate, but it has to do more with change of patterns and working away from home than anything else. The housing market is fine. We just got the median price this year versus last year down by point six percent. I Mean it's pretty much flat.

So there hasn't been a housing crash. there hasn't been a deployment crash. Consumers are still spending. Everything is Gucci right.

Maybe there isn't a hard Landing Maybe there's a soft Landing Maybe there's a no Landing Well, let me clue you in on the uncomfortable truth here, because none of this is true. So here's a few things most people don't understand about the situation. The first thing you have to understand is, although we did speak about interest rates and the way they've gone up aggressively, well, the FED hasn't really gone. Full Throttle On reducing its balance sheet, we went down from 9 to 8.3 which is a significant drop, but looking at pre-pandemic levels, we were three and a half trillion dollars.

so we're still more than double in the balance sheet and until that drops off, we're going to have a propped up stock market and a propped up economy. I Don't know if the FED actually will do it ever, because at this point they seem comfortable just letting it roll off and that might be the case. But if they ever decide to pull that liver, it's going to be absolutely insane. It's going to be pandemonium.

and about jobs. Look, if you ever run a business, you'll know exactly what I'm talking about. Employing people and firing people isn't a sponge, isn't a button. you just click and you add and reduce.

It takes time. It costs money. It's not a simple process, especially if you had a hard time hiring these people, training these people. Especially if consumer spending is at all-time highs, you're not gonna be laying off people because of a recession that might come in the future.

Okay, so that covers jobs, but what about the housing market? At this point? we should have seen a shift. We should have seen a drop. We should have seen a collapse. Mortgage rates went up to seven percent all the way from three percent just a year ago.

We should have seen prices drop like a stone. Well, not exactly. look. the housing market has its problems.

But the one good thing that happened after 2008 after that crash is about 80 percent of people who do mortgages in the past 15 years are sitting on the fixed rate, so they don't care. and their spending power was not diminished by one cent because they're paying the same rate they've always paid. The other indicator you should be looking at is New Home Sales. Now, in New Home Sales where you have homebuilders versus first-time home buyers, that's where you see the elasticity.

And there you have a good indicator. According to recent data, about 75 percent of home builders are now offering a mortgage buy down. Essentially, 75 of home builders are offering to subsidize the mortgage for new purchases for three, four, or five years, whatever that may be in order to get them to buy. And that means one thing.

the stomach that we're seeing right now in the housing market. Essentially sellers not interested in selling in lower prices. buyers not interested to pay last year's prices eventually will have to crack. And at this point the ones that will crack are the sellers.

Because look at what's going on with new homes that's going to trickle down and sellers will eventually have to crack and this will become a buyer's market. At that point. we will have that slowdown that everybody is expecting the housing market, but it doesn't happen overnight. And let's not forget student debt.

People who used to pay hundreds of dollars every month for student that haven't been paying for a long time. we've been frozen. That few hundred dollars are going back into consumerism back into spending now until some politician is going to touch this hot potato and it's going to make them pay again. This money is going to keep fueling the consumer.

Market It's just the way it is. There's more disposable income. So here's what's going on. Disposable income is going into retail.

Retail is keeping the jobs. People have jobs. They're spending more money. Everything is great.

And while this Fiesta on the surface is going on beneath the surface, much like in HBO's less of us, there's some problems starting to form. There's a lot of monsters. Look, people will still buy homes, but now they will pay seven percent mortgage. people will eventually have to repay student debt.

This isn't going to last forever. This is going to eat away at disposable income and reduce consumer spending Hurt retail eventually leading to job loss. Look at how constrained the system already is. If you look at the car market which doesn't have fixed interest like the real estate market, you're going to see some really scary things.

The average cost of a lease these days for a new car is 700. That's from four hundred dollars just two years ago. There's about 15 percent of leases above a thousand dollars. That's three times higher than just two years ago.

It's not that people are buying luxury cars, it's just cost of goods. and the cost of cars are going up beyond what is sustainable. And when 64 of Americans are living paycheck to paycheck and can't afford a 400 expense out of the blue, those things will eventually start to add up. And unfortunately, that creates a very dangerous situation.

On the one hand, the macro signals are basically sending alarm bells for the FED Unemployment 3.4 percent oh my. God consumer spending all-time high housing flat. So the FED is basically going oh my God We have to push harder. On the other hand, two-thirds of Americans are unable to squeeze in another 500 per month because they're living paycheck to paycheck.

So we have this fed overreaction potentially coming in because of all the hot numbers coming in. And on top of it, we have people who are unable to pay any more because they're already spread thin. Now look at the numbers coming out of inflation, not CPI The other data PPI the producer price index. That thing is the raw materials that tells you in advance what's going to happen with CPI PC Also went up higher than expected and unfortunately that creates a significant risk of a Fed of a reaction pushing the market into recession.

If The Fed decides to push harder on interest rates and push harder on reducing its battle. cheat the housing market, the consumer spending, the student loans, the car market. All of those will push the market down. People will be left without money.

Consumer spending will go down. People will lose their jobs less spending. A vicious cycle leading to a very nasty recession. Unfortunately, this renders the soft Landing or no Landing scenarios impossible.

Look, the FED is looking at this: Micro Data It has to either increase rates at a high rate for a longer time and or decrease its balance sheet even further. And that's going to put a lot of pressure on consumers. They're going to be paying more for housing for cars, for groceries, for student debt, whatever, you name it. less consumer spending, less retail income Less jobs leading to a vicious cycle leading to a recession.

Now, hopefully it's going to be a mild recession, but to say that there's a scenario here of no recession no Landing or soft lending Sorry now. I Do owe everybody a huge apology I Forgot my crystal ball at home today. so I don't know when this is going to happen. That is why it is important for you guys to hedge your position to manage the risk.

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