Hey everyone kevin here in this video you're, going to take away two things and number one you're going to find out how much research suggests the market could continue to fall and the second thing is you're going to take away exactly what the federal reserve is going To be looking at in their meeting that starts today and ends tomorrow and culminates with the federal reserve telling us exactly what they're going to do at 11 a.m. Pacific time tomorrow, so stay tuned i'll be live streaming, that it's gon na be huge tomorrow for the markets. Okay, uh, the very first thing, though, before we get into this, is i just have to say two things one. This video is brought to you by titan link down below, but also andre andre.

How could you do this to me andres one of my buddies, one of the homies and a lot of you on the channel know that i put together. I put this together. I thought about it, i edited it, i put it all together and i did it for free. I put together a video on the titanic right.

You remember how the titanic is kind of like the analogy of the market or the allegory of the market, that video got like 300 000 views, but i got nothing for it and that's: okay, that's okay! I i made the video expecting not to get anything from it, because it's copyright claimed it's ineligible right, but my boy, andre, come on dog. Come on made a video got over 200 000 views talking about what happens next in the super bubble and uses my entire titanic clip, without even as much of a hey good video clip kevin. Now i still like you andrea, come on man come on man. That is not cool, that's all i got to say.

I didn't even make a whole video using the titanic clip. Maybe i should have dang it. Ah, all right, let's talk about the fat, it's more important. We got ta talk about the fed, all right, uh.

First, i said: you'd get two things out of this video number one: how much pain? Let's talk about that and then the fed okay uh. So, according to research, when the nasdaq drops more than four percent in a day, which only has happened in dot-com bubble and during the great recession uh and then reverses to a positive that sort of big drawdown and quick reversal happens in bear markets. It's very very bad, i mean it doesn't necessarily mean it will always happen in bear markets, but it's a it's kind of a bad signal for markets right and i made a short on this. You probably saw it yesterday - maybe you didn't but anyway, that is a statistic that came out uh yesterday and the research that went along with this was really interesting.

When i dove deep into it. The research suggests that when we see the nasdaq 100 go minus four percent to positive in one day, the median nasdaq return over the next month - or i should say how much is the nasdaq worth one month later, the nasdaq tends to be worth 5.5 percent less One month later, that's the median term, so that would be february 24th. The market might be worth about 5.5 percent, less the three-month median. So a longer-term mindset right longer term.

I mean look years, i'm bullish on this market short term, i'm quite bearish anyway. I think. That's obvious by now, but anyway, three month decline. The median expectation is a 7.9 percent decline after this sort of correction and reversal it's kind of bearish.

Now i want to be very, very crystal clear because there's a lot of misinformation uh, i uh. I'm only point. Six percent short in the market lucid and rk. That's it uh point: six percent: it's a hundred twenty thousand dollars, my portfolio um, nine percent, long it's about 1.8 mil and the rest is cash.

That's it! Okay! So you know. Sometimes people are like uh kevin's just 100 shorts. This is not true uh, but i do send every single stock purchase and sale that i make in the stocks and psychology of money group link down below okay. Now we got to talk about the federal reserve, because this is a big deal so to understand the federal reserve.

We've got to do two things. One we've got to look at the data that we've recently gotten and then we have to compare that to what the federal reserve said in december, because what we're looking for is if the federal reserve was disappointed in december, then maybe they've, gotten happier and they're going To be dovish tomorrow, they're going to u-turn and then the markets will be all rosy again right. Maybe maybe i hope so because i want the pain to end i want to buy back in once i have the catalyst that says the pain is going to be over and we go to the moon. That's what i would love.

That's what i want, because i want to make money uh and since i'm mostly cash and not long short, i don't benefit from the market going down. Okay, so here's the latest information that we know and then we're going to talk about the fed. So the latest thing that we know is that banks expect slowing customer deposits for 2022.. All of the banks basically said this and their earnings calls.

I read the earnings calls. They also recognize that the savings rate has fallen, which, which is not good, because that lowers the amount of cash people have available uh. We had a survey and when i say survey, it's more like a study from the federal reserve. This matters, the new york fed uh, came out and said: look people are spending more money on essentials and less money on non-essentials and plan to spend less money on non-essentials.

That's not good. That's slowing consumer growth right the netflix massive forecast reduction is probably going to be considered a covert related drawdown. So i'm not going to focus so much on netflix. But in my opinion, the real issue is actually in earnings that we got today and it's it's a really big issue.

Listen to this general electric is quote grappling with worsening supply chain pressures and the effects of the omicron variant, leading the stock to fall. Six to seven percent in trading today, they're dealing with supply chain issues across all businesses and issues that are becoming quote persistent, that's a bad word, persistent supply chain issues which is similar to persistent inflation right and they can't get orders out of the door due to Component shortages and many other issues, yet at the same time margins are expanding, so the being the company's making more profit. So it's not like the company's suffering or somehow unable to hire folks if folks were available to be hired, but uh they're having so many supply chain issues that are getting worse because of omicron now this is gon na be a big deal. When we talk about what the fed has to deal with in just a moment, but first i have to send you to a message from our sponsor titan, which i'm really excited about.

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The titan team can manage it for you, you'll even see exactly how your many money is managed through their video audio and written updates through their proprietary mobile app right now, if you use a my url titan dot com, slash kevin you'll get your first three months Of investment management totally for free zero fees and you can now join the smarter way to invest with titan and all it takes, is clicking that link down below or going to titan.com kevin and a hundred dollars, and you can get started. Remember, that's titan.com kevin for zero fees. Now, let's talk about 3m, so 3m says they are so confused with what's happening with omicron and supply chain issues that they are actually delaying providing any forecasts until february wild. In addition to that raytheon, all three of these companies reported today, so this is fresh information i reported this morning.

Raytheon, guided lower into 2022 does not believe that inflation pressures will ease until quote late 2022 and took a 150 million expense, in quote unexpected. Inflation related cost increases, labor, uh shortages are also hitting supply chains, they say, and the supply issues will end up hurting deliveries for their company. However, demand is not slowing, even despite omicron at raytheon, so that's actually kind of like a worst case scenario where it's like demand is still strong from the fed's point of view. Right demand is still strong, but they're having these labor and supply chain, issues that are making things worse, not great, uh, okay, all right, so these are from three companies that reported today, all three of them in the industrial space, which is where manufacturing is very, very Important this is different from like a snowflake reporting, they're selling software or ibm who's.

Now saying they're, you know 70 software, whatever the ibm earnings were, were like a nothing burger. They were so confusing with their guidance and i'm not the only one who's confused. Even the analysts were like this is weird y'all, weird anyway. Okay now, let's understand the federal reserve, because this is a big deal here, so the federal reserve uh in the last notes from their last meeting, said that rates are their top priority as a policy tool.

Jerome himself said that federal reserve policy action with rates can act quicker to slow the market, and we know that if we take like, if we reduce the balance sheet, there's so much money left in the system, especially if you look at the reverse repo market. Basically, there's so much cash available. It doesn't really matter if they take some of the cash or they start vacuuming up cash from the markets. We're not going to feel that effect until, like later in 2023, the more immediate thing that's going to slow this market down a little bit which is kind of what the fed believes we need is rate hikes.

But that's also what the stock market is afraid of is rate hikes, so jerome powell says rates are a top priority and that we are better positioned for policy normalization than we have been in the past, so in other words, rates are our top priority and we're More prepared now than ever to hike rates. Now they don't actually expect to complete their taper until mid-march. They said this in december, so it would be a rug pull from the fed if they ended their taper or sort of their their bond buying program if they ended that they completed their taper early in january. That would be a surprise.

That would mean the taper ended two months earlier than expected. That would be a rug pull. I would expect markets to freak out tomorrow. However, the market might be going as extreme as thinking that the fed's going to raise rates tomorrow, which i really don't think is going to happen.

The fed has said they will not raise rates until they finish the taper, so the expectation is they're just going to say tomorrow, hey look we're going to complete the taper by march, then we're going to raise rates which kind of means they're kicking the can down. The road and all those fears are getting kicked down the road a little bit, which is not great. Okay, then, the federal reserve said that one of their big goals - and this is very important - one of their big goals - is to limit yield curve flattening by potentially running off the balance sheet versus just using rates. So i looked at what the yield curve is doing and what it has been doing since their december policy meeting and since their december policy meeting the yield curve has actually not flattened any further.

So the yield curve fault like flattening has stabilized so understand this. For a moment, if the fed is worried about this line over here going down - and maybe they won't raise rates, if this line goes down too fast, then it would be a problem if this line were going down fast. It might actually be good news because the fed might say, oh, that line's going down too fast, that's a problem, let's not hike rates, but it's not going down and if the fed is saying they want to limit yield curve. Flattening - and might you know not be so aggressive on rates if the yield curve keeps slumbering, then the reverse would be true that if the yield curve stays stable, they could actually be set up to raise rates.

So, look at the nastiness that we're setting up for here we're setting up for a big nothing burger tomorrow, kicking the can down the road to march where in march we hike rates and the fed says see, yield curve, stable time to hike hike hike. Maybe we even need to hike a little bit more than we previously expected that fear is going to eat away at this market. It's going to be a slow bleed. Now the federal reserve is also calling for modestly lower growth over time, but as they start, raising the federal funds rates but they're.

Okay with that so they're, okay, with slowing the economy to raise rates - and the way i look at this is - is by looking at their dual mandate: maximum employment and stable prices. Well, they're failing at stable prices right, so their success is like failure. Failure. Inflation is a failure, whereas on jobs, they've succeeded substantially well, so what they need to do is they need to fight inflation, so they need to bring up their efforts against inflation.

Now, when they bring up their efforts against inflation, they might actually bring down how crazy this job market is, and businesses desires, to keep hiring hiring, hiring and paying more more more for people, because there's so there's so many job openings, but not enough people to actually Take the jobs right now that it doesn't really matter you get so much meat on the bone, so to speak on the job side that, even if we fight inflation we can. We can cool down the amount of hiring a little bit and not really affect the economy. So the fed has this really big buffer right here, whereas they're failing on the inflation side. So, in other words, when people say oh, no, no fed's not going to want to crash the economy because that's going to hurt jobs, we have so much meat on the bone in terms of the job market.

That is there's so many job openings. We could literally have 50 less job openings and still have a tight labor market like the markets. People would still be able to get a job and still have wage increases, like that's, not a problem right now, so the biggest problem is inflation and so wait a minute. If you start putting these things together, their priority is interest rates.

As long as the yield curve is stable, raise rates, we can raise rates without devastating jobs. We don't mind if we have slower growth. We also don't mind if valuations in the stock market come down, because we believe that high valuations lead to excessive risk, taking excessive debt taking excessive speculation and that actually creates more of a risk to the financial system. So when you start putting this puzzle piece together here, you're like oh, my gosh, the fed is gon na.

In my opinion, and - and i imagine that you would might think the same way - there's no way the fed's, not gon na - want to raise rates aggressively again. Raising rates is substantiated by the yield curve, not falling more, not flattening more uh. The the inflation problems we're having the persistent problems we're having with the supply chain issues. If we take some demand away, we could finally give supply chains a little bit of time to grow right or to like breathe a little bit doesn't matter if valuations come down, because that actually helps the fed's mission doesn't matter if jobs, job openings constrict a little Bit because we've got more than we need, so all of a sudden when you put all this together, it's like they're, going to hike rates a lot, and this is going to be a painful year.

At the same time, business mortgage card and auto loan defaults are at record lows, there's more upside risk that inflation is going to continue running and put all together. I think what's crystal clear about what's going to happen here as a bottom line, is the federal reserve is going to finish their taper, probably by march, if they finish the taper early, the market's going to tank? If they they come out tomorrow and say, hey we decided to finish the taper early. We got big problems in the market. That's going to be a big issue to all the people who think the federal reserve is going to bail out the stock market tomorrow, because the nasdaq and the s p farted 8 to 12 percent dream on.

I i like really dream on. I i hope, i'm wrong because again i want to be in a bull market. I want to throw all my money back in and i want to ride the rocket ship. Okay, but i i think it's it's totally wrong, because if you go back to those minute meetings, uh minute meeting notes from uh from december, you could see where their their head is.

They are worried. Let's draw a little summary box here: okay, they're worried about supply chain constraints, causing inflation they're worried about broadening inflation. What did the imf say today? Inflation is broadening they're worried about consumers spending more on essentials. We just got that report yesterday from the fed from the ny fed right literally, the fed is reporting that, on top of that, they don't care.

If prices come down in the stock market, it's a good thing. Next, they don't mind uh. If, if uh jolts or slash job, openings, we'll say job openings decline, because we have plenty because we have plenty, we won't hurt the job market uh and, and then, as long as as long as the yield curve does not flatten more rates are the preference. I don't understand how much more clear the fed could be like if i were like jay, pal and and people are like.

Oh jay, pal you're, gon na bail us out tomorrow, right i'd, be like. Have you literally not paid attention to anything? I've been saying we are desperately concerned with supply chain constraints being persistent and causing more inflation and broadening inflation, which we got from the imf today and we're hearing from earnings reports. Today i mean like the latest information is that things are getting worse, not better and they're, probably going to be bad through the end of 2022.. Consumers are spending more on essentials, which means more inflation, right, energy costs, food so on and so forth.

We don't really care if valuations go down, because that reduces risk in the market. We don't mind if job openings decline, because we have plenty of job openings and as long as the yield curve does not flatten more rates, are the preference literally one two three four five. Six, all six of these reasons. Right here say: fed hike rates, hike rates, hike rates, height rates and six times over right.

That is going to set us up in addition to that price decline. Information that i mentioned earlier for probably either a slow bleed market over the next three to six months or a lot of volatility. So don't be surprised to see your portfolio swinging crazy ways now. Bottom line, i don't recommend you just pay and excel, don't panic excel.

I did not pan excel. I'm making a very strategic bet on jerome powell, but don't look. I study drone powell, i believe more than anybody in the world. Okay, maybe there's some economists who study them with me, but i feel i believe i mean this.

Guy comes up in my dreams: uh and my nightmares. Okay in both uh he's like the most recurring character of of my dreams. It's crazy and i missed uh and it's really really annoying but anyway, uh. Look.

The bottom line is i'm bearish in the short term bullish in the long term for most passive investors, you're better off just buying the dip and dollar cost averaging for active investors who want to make a bet, hey here's something to consider. But what you should also consider is using that coupon code link down below before my birthday before that expires and, of course, checking out titan via the link down below thanks. So much bye.