Well, if it isn't obvious by now, I think at this point it's pretty dang clear the Federal Reserve is going to do us in for a world of pain. and the best we could hope for is they start listening to some of the reports they're releasing like the Dallas Fed report that we're going to look at in this video or potentially start looking at things in the Bond market that suggest oh boy, things are getting quite dirty. Just consider for example, the following: the 10-year three-month a Treasury Curve yield spread. This has regularly been the most reliable indicator for stock performance and the economy going forward.

This inverted pretty dramatically in the fourth quarter of 2022. We're expecting that it could remain inverted for up to two years, but unfortunately the actual inversion isn't the bad part. It's usually the subsequent steepening of the inverted yield curve. That's the most painful.

Consider the following: if we go ahead and plot this green arrow here, we can see that the low points of the 10 year yield curve actually sat around the end of 2006 and the beginning of 2007 and I hate to say it, but the last thing I really want to think is that today we sit somewhere around the end of 2006. I'd much prefer the here that we're sitting at the end of 2008, but as you can see at the end of 2008, the yield curve had already substantially re-steepened. Now you could see something similar over here when you look at the beginning of 2021, which is right behind me. There we go.

Let's hide this a little bit if you look at the beginning of 2001, not 21 beginning of 2001. Over here you can see the yield curve was also at a relatively low level. The stock market did not not actually bottom unfortunately though until about here, which was March of 2003, which is quite disappointing because it meant that you had to wait from here to here to actually see the bottom of the stock market. much like you had to wait from here around the end of 2006 to around February of 2009 to see a bottom in the stock market.

And hate to say it. but come over here to the pandemic. One of the only reasons we saw this very quick re-steepening here and a recession that wasn't actually that painful was because of the vast amount of money printing that we did to bail basically everything out. So what's happening now? Well, it seems like maybe we have hit a bottom on the yield curve inversion and we're starting to re-steep him.

But unfortunately again, that re-steepening can be very painful. This is why I Highly implore you to be out of margin debt and prepared to buckle up for the ride. See Usually the yield curve inverts about 340 days before an official recession is declared. That has been true with only two false positives going all the way back to 1962 and and has caused an average downturn of 8.3 percent in the S P 500.

Now we sit about twice as deep as that right now. But let's just say, even though we're starting to get some dirty indicators for how much the FED is actually starting to hurt the economy in terms of the stock market, things don't look that peachy. In fact, if we go to the next preferred measure from the Federal Reserve on what kind of impact they're having on markets, the Federal Reserve is probably not going to be happy to see that the five-year break-even rate is once again trending up. Just two weeks ago, we were actually trending down and there was some hope that if we continue to Trend down, the Federal Reserve might be able to relax in their push or fight against inflation.

Unfortunately, there's more bad news: that chart is moving up. So in other words, you've got the Steep part of the yield curve inversion ahead of us. not behind us. That's bad.

Uh, you've got a lot of Hope going into 2023. That 2023 is going to be different, but we aren't actually seeing break evens fall the way they really should. Now one Saving Grace here is that if we kind of just draw a trend, we can clearly see that the trend of the break-even rate is down, which is great and I believe as long as we maintain this trend, potentially we could see the Federal Reserve relax as they realize oh crap, the steepening of the yield curve is starting to become really painful. Remember after all, when we peaked around these levels, where I'm about to draw this green line here when we peaked around 2.2 in inflation break evens back in 2018, interest rates were 2 and a half percent.

Now we sit at four and a quarter on the way to five and a quarter percent. So again, more pain ahead of us. Not behind us, but what else is going on? Well, we got two other big things going on. We've got the Dallas Fed report that just came out and we've got the housing market and what's going on with bonds those being associated together.

So let's go ahead and take a look at the Dallas Fed report because let's just say some of the comments are really scary and they're kind of a disaster. so let's talk about those and how those can impact the market. Do remind you though that today is December 27th, That is the release of the FED day, but it is also the expiration of the holidays Coupon code: Link down below. Remember you can get lifetime access on any of the programs on building your long-term wealth through real estate investing.

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So Texas Manufacturing Outlook Survey So the actual manufacturing report was quite interesting because we noticed that in the Texas manufacturing report, we see a little bit of an uptick in output growth, which suggests maybe improving Supply chains, especially since new orders are actually showing negative reports now for the seven month in a row suggesting a continued decrease in demand. So you're seeing output up potentially a supply chains improved, but again, demand moving down and perceptions of what's happening in the business conditions in the economy continue to worsen in. December with Company Outlook posting their 10th straight negative reading. However, despite this negative outlook, what do we have here? 24 percent of firms noting net hiring while only 10 percent are actually laying off individuals.

Now, we don't necessarily need layoffs to see where wages stabilize. We just need to see wages stabilize. Fortunately, that we have a little bit of a good news here in that prices and wage indices saw little movement in the aggregate when they averaged everything together. Little movement and prices and wages, which is good.

It suggests that Supply chains are loosening and that prices are stable in the face of weaker demand than expected. but some of these comments are a little bit nerve-wracking that the Federal Reserve may have gone too far. Consider the following: Business has picked up from a lull in October November says the food manufacturing business. However, they see a lot of illiquid customers.

that is businesses and wholesaling companies that don't actually have a lot of cash. and they have a slam for Biden over here as well, Coupling this illiquidity with the Biden political mentality of things which is unhealthy for businesses. I Think this is very interesting in a Federal Reserve Report a slam on the Biden him in in a Fed report now In Fairness, it is from Texas but still pretty shocking to see a slam on the Biden Administration in a Fed report. But these are the summary of comments from some of their manufacturers.

not the FED right? Seeing a significant downturn and a recession now being planned for in the paper manufacturing industry, so think office education, newspaper towels, right? Potentially things that could be cut in a recessionary environment. That's it. We're going all digital, whatever to try to minimize spend, so it doesn't surprise me to see maybe larger pain here in paper manufacturing. Estimated activity is really down from previous months when it comes to printing.

When it comes to Mineral Product manufacturing, home construction goes down as interest rates go up and they expect that for the next six months home construction will continue to Trend down. Metal fabricating demand decreasing. Oil companies are spending a little bit more, but that makes sense because oil prices are going up and they see a lull in year-end business activity with really no color into what to expect for next year, no doubt. Or they say, never doubt the Federal Reserve's ability to crush the economy when they intervene to stop inflation.

Scary. Take a look at this. A Miscellaneous Manufacturing does indicate there is still significant price pressure from wage growth and a desire to maybe Outsource to without or to outside the United States. But when you look at everything in aggregate, it does seem like wages are holding firm, which is good.

Not an overall red flag here, but it does show you that look at this: Transportation Equipment manufacturing. There is nothing positive in the economic data. The FED should pause to let prior rate increases filter through the economy to avoid overdoing it. and Contracting And here we see a small decrease in new orders, but again, wages and other costs continuing to increase.

investing more in automation to increase the Reliance on labor Yeah, think about McDonald's just came out with a completely automated McDonald's quite remarkable, but it shows you through this Dallas Fed report that look, demand is weakening come companies are preparing for a recession. And in aggregate, we're not actually seeing pricing pressures on the wage front. So it makes you wonder what reports does the Federal Reserve looking at Because when we saw the Philly Fed release their labor report, they clearly saw the FED is over counting jobs by in excess of a million jobs in just the second quarter. Which means they're over counting for the third and fourth quarter as well.

But we won't see those numbers for another three or six months. Which is crazy because at some point the FED has to wake up to realize they're causing a world of pain. I Mean just consider housing from an existing home. Sales are now down 10 months in a row, down 35.4 percent in just the last 12 months.

homebuilders sentiment is down 12 months in a row, and home construction costs are up 30 percent. It's a huge squeeze on home builders. On top of that, permits for single-family homes are down nine months in a row, and we now have more data that in the last month. What did we see? The fourth consecutive monthly decline in the K-shiller 20 City index of home prices with a fall of one half a percent in just a month, over a month reading ending in October Now I know we're in December Now a lot of that data can lag and we know that rates were high in October sitting around 7.08 and they've come down recently in November and the beginning of December we actually saw interest rates meaningfully rotate down.

but I hate to say it. We have some bad news here as well. see interest rates for Real Estate regularly follow the 10-year treasure yield and I hate to say it. while it had fallen nicely to about 3.5 at the beginning of December, the 10-year treasure yield is starting to Peak again now on recessionary concerns that uh oh, we might actually be going into a recession.

Now what's interesting here is I believe and it's going to take a while for this to plan a pan out. So I just want to be very clear about that. Don't expect this to pan out tomorrow. It's going to take a while I Believe that we are likely to see stocks start bringing us out of a recession potentially before we actually enter an officially declared recession.

So if let's say we're in a recession in Q1 2023, we might not officially hear about that until Q4 2023. But in Q1 2023, we could actually be in a recession. Stocks could start pulling us out of that recession. But because we're in a recession, we see 10-year treasure yields stay high or continue to rise, which continues to Pro put substantial pressure on the real estate market, which means we could end up being in a situation where the stock market actually rallies towards the second half of next year, where the real estate market actually hits bottoms around those periods of time which is exactly where we plan to raise money heavily for our real estate startup House Hack Make Sure to learn more about that by going to Houssac.com You can go to Househack.com to read the solicitation there and remember, use that coupon code link down below for the programs in building your wealth and that jet day to shadow Kevin as we go hunt for Real Estate Thanks so much and we'll see in the next one.

Goodbye and good luck.