Well, there's been a lot of talk about recession and yesterday my team and I had a big discussion putting together as much of the data we could and we had a really crazy thesis that we wanted to run by everyone. Because you know I'm always trying to look ahead at what's going on. I was one of the first YouTubers to actually sell when it was time to sell at the beginning of 2022.. it's one of the first to call for the Nike Swoosh recovery, which knock on wood so far is doing well.

but wait a minute. the yield curve is so inverted. you've got office real estate collapsing. Credit Karma says one in five people aged 59 and older say they didn't have a retirement account and 27 say they have nothing at all set aside for their later years.

You've also seen baby boomers, 17 of them decreasing their contributions to their retirement accounts due to inflation. You've got 41 percent of Jan NZ and 38 of Millennials saying their net worth is zero or negative. Yes, that's literally what's happening to people. you've when you've got four out of ten gen Z your Millennials sitting with a zero or negative net worth.

People are robbing their retirements because of inflation and we believe that a recession is afoot. In other words, recession should be here if it's not here already. except what's actually happening. Well, what's actually happening is things are mostly still booming.

In fact, we were supposed to have a bad earnings season, but according to Bank of America of the 30 S P companies that have already reported during this earnings season, 90 have beat on the bottom line, 73 have beat on sales. and despite the fact that banks are supposedly tightening, it seems like people continue to spend more money on their credit and debit cards. At least when you look at Jpm's earnings, it's exactly what you see: people are spending more on discretionary Goods Despite the fact that we're supposed to be in a recession. and this is something that even Wells Fargo echoed when people are spending more.

This despite the idea of this recession. Now on one hand, we make the argument that okay, well, that'll be a limited candle. In other words, we'll have this candle of excess savings that we saved up. and once we burn through that, then we'll really have this mind-blowing suffering recession.

Maybe not, though. And this was the thesis we talked about yesterday. That is maybe not what if this recession is actually a recession of winners and losers. In other words, on one hand, you have wealthier individuals with exposure to stocks who are able to increase their allocation to some of their favorite stocks during the crisis.

Maybe they were able to increase their exposure to certain businesses or opportunities that they were able to build during the crisis of the last year and a half. Maybe they were able to weed their businesses of talent that didn't end up being productive talent. and they were able to become leaner and actually boost up their margins and become a stronger company. And so therefore, on one hand you have the winners, but then on the other hand, you have the losers which might end up being office commercial real estate, which we think the time bomb of office real estate is going to destroy the entire real estate market.

More on that in a moment, because might not exactly be be what we think. although technically it should be. we'll talk about it. But in addition to Office, you might have people with lower incomes who, yeah, have seen their wages rise.

But in real terms, which means inflation adjusted terms, we've actually seen their incomes go net Negative: So yeah, you might work at Walmart instead of making 14. now make 18. but thanks to inflation, you're actually not any further ahead even though it feels like you're making more money. So the losers could really be those heavily affected by inflation, which are people who spend most of their money on expensive things like, well, I mean expensive Necessities food, gas, and rent.

All three of those absolutely destroying lower income individuals, Whereas on the other hand, businesses are able to refine wealthier individuals are spending through the recession and if the stock market stages of recovery and most of real estate. Dodges The bullet of unoffice disaster. Maybe this is not so much of a broad-based recession, but rather it's a recession for some and a Victory lap for others. Consider the following and this is something we yesterday: We're really thinking hard about and this has to do with real estate because we continue to hear that hey, office real estate is supposed to destroy the entire real estate market.

and that's mostly because we continue to see defaults on office. In fact, just yesterday we had more default announcements. Consider the following: Just yesterday, we ended up seeing a a a a Los Angeles-based Brookfield asset manager default on two more. Uh, well, sorry.

they originally defaulted on two Office Buildings in Los Angeles Then they just defaulted on 12 offices that they hold in Washington DC just defaulted on 161 million dollars of mortgages. just we're gonna stop paying. We'll give the keys back to the bank and a lot of people scratch their heads here and say hi. How is this possible? How are some people losing so much money in real estate? And how is this not going to affect the broader Market In fact, you're even seeing some of it extend over to multi-family Consider this: you've got a Houston apartment owner according to the Wall Street Journal who's now facing foreclosure after losing four complexes with over 3 200 units.

It's the Apple's way. Investment Group That borrowed 230 million dollars that just got hit with a refinance. can't refinance because rates are two to three times as high as they were. And what? Now they're going into foreclosure And so the one the question here is wait a minute.

Isn't this a sign of what's to come if the real estate market collapses, Won't that pull everything else down? Well, let's think about that for a moment. So here's how this usually works. Ordinarily what happens is if you have a certain segment of the real estate market, let's say you have office here and more multi-family will do these separately for a moment. Here and there goes the HDMI connection standby for Kevin to fix the HDMI connection.

Okay, I think I think so. Uh, the let's say you have office and let's say office starts collapsing and office actually does collapse. Let's go with that. Some office valuations are already down as much as 35.

So what happens when office prices go down? Let's go extreme and let's say that prices go down 50 percent. Well, what happens when prices go down is you generally see a cap rate which is basically your yield go up. So when that yield goes up, it should become more attractive compared to other deals. usually because rents don't fall that fast.

So in other words, you're in the situation where okay, prices fell because that office space Maybe was originally less desirable. But once the price Falls to a certain point the yield should go up. and even if rents have to be adjusted a bit, somebody else should be able to come in and buy them. And those people who usually come in to buy that office space tend to be substituting the other real estate they're buying.

Maybe they were originally buying multi-family or retail or industrial and they substitute those purchases for now heavily discounted office space because the yields are higher, right? Well, that's usually what happens, which usually drives the entire real estate market down because you've lost money at office. and then you move money from other segments to office. but that's not actually necessarily what needs to happen. Much like the broader economy you could actually have.

And look at this analogy here. you could actually have the winners, and then you could have the losers. just like you could have those who were highly affected by inflation on one side, and those not affected by inflation on the other side. But wait a minute, how might that work? Well, the way this could actually work in real estate is you could potentially see office space be written down and become a lot less desirable because as those prices go down, maybe those rents are also equally driven down.

Those cap rates don't actually become more desirable. And the best thing to do with a lot of 1960s 50s, 70s Office Buildings that aren't desirable for condo conversions or aren't functional. For new office spaces, those office spaces just go away. They get demolished.

They get deleted. In other words, these become the losers. So people investing over here have invested in the losing side of this recession and this really just disappears, leaving the multi family and the other sectors maybe even single family really unscathed because of the disaster of office. So in other words, you have this: Tale of Two Cities of a recession.

Potentially where on one side you have office as a loser and you have people highly affected by inflation. Unfortunately, the losers in the economy, whereas the winners are people once again with assets that are in time, tend to appreciate in value, people with more cash, businesses that are able to shave off excess workers and refine and increase their margins. And what you end up potentially happening is you end up getting no real recession. In other words, if you get a recession, it's potentially so delayed that it doesn't matter.

Consider this estimates for a recession were originally that we were supposed to go into recession in Q4 or Q3 Q4 of 2022.. those ended up getting pushed back to Q3 to Q4 of 2023.. now the market is saying oh, we might not actually be in a recession until Q1 of 2024.. Well, what happens if the recession? This looming recession? Does it actually hit until Q4 2024? Well, let me ask you, if the recession doesn't technically hit until Q4 of 2024 or high margin business is going to Care are profitable real estate Investments going to care or a higher net worth individuals going to Care unlikely they likely won't care in LA in which in that case means there's a also the potential that you have A Tale of Two Cities in the stock market and the real estate market where potentially on one side.

let's say inflation is back at two percent when this, when this recession hits right? Well, if inflation is back at two percent when this delayed recession hits Federal Reserve Could turn on the money printer to try to help the poorer folks again, right? The FED tries to help basically the losers, but what then happens is when you turn on the money printer, we already know what happens. It's actually not the poor people who win because we know trickle-down economics doesn't work that well. You get maybe a hundred dollars that gets showered down and ninety dollars goes over to the winner side and ten dollars goes over to the losing side. Why? Because again, when you turn the money printers on who wins.

It's people with assets. It's people who have stocks and real estate and businesses. Those are the people who regularly win. So the question that we discussed yesterday was wait a minute.

If this recession continues to get delayed, then what you actually have is the winners continuing to win. In the meantime, as we ramp up for this recession, businesses have the luxury Dare I say of cutting unproductive workers under the guise of a coming recession, Look at: Ernst Young just fired five percent of their staff and they're in consulting. Which makes you wonder, hey, wait a minute. These are a lot of layoffs and Tech is laying off to the tune of hundreds of thousands it seems.

uh, for for the last uh, six to eight months. Yet when we actually look at employment reports, both ADP and the Bureau of Labor Statistics Technically, we're actually gaining jobs on a monthly basis rather than losing jobs. So is it possible then that as the Velocity of Money starts actually and ironically and surprisingly increasing rather than decreasing? Yeah, we might be seeing job loss, but is it possible that we're creating more productivity in this prep for recession so we could Barrel through the recession time? Look at the Velocity of Money right now. if you go to St Louis Fred and you look at the Velocity of Money.

Usually what you would expect in a quantitative tightening cycle is that the velocity of money would be falling. and that's because people are tightening, people have less availability for Lending people are turning inward. they're spending less money. But if you actually look at the Velocity money, what you see happening is the velocity of money has started increasing as of the Fourth quarter.

Which makes you wonder. did the velocity of Money with all this money printing that was done really just fall substantially below this declining Trend to where we could actually see ourselves through a recession as the Velocity of Money picks up again, leading to Greater GDP, especially amongst those winners. Yeah, it's possible. now.

look, the inverted yield curve technically hasn't been wrong in the past. The inverted yield curve says a recession is definitely going to happen, but it doesn't tell us when a recession is going to happen, and it certainly doesn't tell us when the stock market is going to bottom. In fact, if we go into history, the stock market usually bottoms before the end of a recession, and if you have a short recession, you could end up having a stock market bottom quite substantially early. In fact, take a look at this chart here.

This shows that the S P 500 actually bottomed as far as nine months before the bottom of a recession in July to May of 1953 to 1954. And it shows you that yeah, the average might be somewhere around four to five months, but there's no real consistency to say that this couldn't be 18 months or two years, it wouldn't be the average, but there's no consistency to say that it couldn't happen if we've once had the stock market bottom 10 months after a recession ended back in in 01 when we had the early.com recession or uh, or after or way before rather like we had in 53 to 54. So the reality is sure might have a recession, but that does that necessarily mean stocks have to bottom around that time? No, in fact, in many cases, like when you look at a company like Nike we've already seen their earnings recession and this is kind of weird to think about that. The in many cases recession could have already been behind us.

look at Nike For example, Nike's earnings bottomed out with negative year-over-year net earnings for two quarters in a row. Which means they were in an earnings recession last year when we were in the technical recession. remember Q1 and Q2 and we had negative. GDP Maybe the technical recession already happened, or maybe we'll have another minor recession ahead of us.

but I'm convinced that we're living in a tale of two city-style reality. And so regardless of what ends up happening with recession yes or recession, no. I don't personally think that matters much. What I think that really matters is making sure as individuals we can do everything that we can in our power to align with the side that's winning.

And let's be really clear and provide that practical advice. The Practical Advice: Non-personalized advice. Obviously, you know this: I'm a licensed financial advisor I Sell courses on building your wealth I've got uh, you know, affiliate links. You can learn all about those my ETF The courses, everything and meet Kevin.com You know that already.

but this can't be personalized Financial advice because I don't know you. Maybe we could sit down and do an interview one day and then we could do some personalized advice. But the point is, if you want to be a winner in this market, maybe worrying about the recession is actually the wrong strategy. Maybe the strategy needs to be.

What can you do to figure out what the losers are and what the winners are? And the losers are very clear. The losers are office real estate, and unfortunately, if your wages are under about the national average, 33 bucks is the national average, and so I would take it maybe a little bit of a standard deviation further and say somewhere around 25 bucks. If your wages are under 25 bucks, you might have to think to yourself, okay, what can I do to get to a higher level? Maybe the company you're already in has you on a set path where you're going to be making a substantially higher salary in the future, But if you're at a potentially dead end path, maybe the question is, what can you do to become a professional or create or increase rather, your exposure to assets? Remember the three assets that matter here: Bonds, Real estate. Uh, I'll say bonds and stocks.

So bonds and stocks. For most people, that's going to be stocks, real estate and then actually owning businesses. so it will simplify that. Stocks real estate businesses.

Most people, especially when you're younger, under 40 years old, have the capability of generating some kind of professional license. whether that's the CPA A lender, a realtor or whatever has some form of professional designation. substantially increase your income by creating either your own business or working for somebody by making an above average wage which should be above 33 bucks an hour. Then use that to buy stocks and real estate.

And maybe the Nike Swoosh holds. The losers continued to be low earners who have negative real wage growth and office space. And maybe we end up with this Tale of Two Cities of winners and losers style recession. Well yeah, office is going to look like it's in a recession.

Poorer folks are going to be like damn that time sucked and wealthier people or people with the assets, the stocks of businesses and real estate are going to go. Damn that was a and buying opportunity. And what a great opportunity to increase margins at our business by laying off the unproductive Workforce It's the harsh reality. Nothing in this video is designed to be politically correct.

You know. Calling suggesting that people who are more affected by inflation are in the losing Camp is a financial reality. It's certainly not the politically correct thing to say. But when we start considering that maybe we have this two.

City Style Recession Uh oh, maybe it means we've got to realign our expectations for this Mega crash that's supposed to take down the whole world again. Everybody's got fears about everything. Their fears about China invading Taiwan Their fears about dollar the D dollarization Rabobank Just had a massive piece about uh, the brics, currency and the potential D dollarization and this is something that we've been talking about on the channel as well. This this dedolarization uh, under, uh, potentially uh, Joe Biden and potentially some of our weaknesses in the Middle East, Africa and South America leading to other countries wanting to flee the United States.

We've talked about this many times before and the reality is a lot of these fears could end up blowing into real problems, right? It is a problem if the dollar loses its Reserve Status problem of China invades Taiwan but I think a lot of these are much more Edge case scenarios like the chance of us defaulting on our national debt which will probably lead to a substantial decline in the stock market. But we've got to ask ourselves or do we want to be in a situation where we're constantly hedging for this impending recession or all of these potential Edge case scenarios or do we want to do what we know is tried and true, which is exposing ourselves to stocks, businesses, and real estate assets so we could be part of The Winning Side. Now of course, the biggest thing that destroys all of this and ends up destroying both sides. And this is the one red flag to both sides.

There's one thing that can absolutely destroy both the losing side now and The Winning Side. There's one thing that destroys both of these sides. and folks that is resurgent inflation. If for some reason, the velocity of money increase that we're seeing ends up not just offsetting the quantitative tightening that we're seeing, or the tightening blending conditions that we're seeing, or the subprime Autos Market collapsing like we're seeing.

If the velocity and money increase here does more than just offset those things and it actually creates resurgent inflation, then we're screwed. Then the fact is, both sides get hammered. Both sides end up getting Paul Volcker. You get people like a Mr Bullard who end up being right Mr Bullard Actually just provided some commentary.

Let's see what he says: Ballard still sees adequately restrictive policy rate at 5.5 to 5.75 percent with a bias to hold longer until inflation goes away. Not much. Clear progress on inflation means interest rates need to continue to rise. He's referring to core inflation unfortunately, still remaining somewhat sticky.

At 5.6 percent, it's way too high. We need patience to get to two percent and hopefully we can get inflation down. And if we get inflation down, which is my base case that by the end of 2024, we end up getting inflation down, which requires patience. the asset side will prove to be aware.

dinner again, as it historically always has, and the losing side will always always be the side that ends up going bankrupt because of a regime change or people who have low wages. Now, regime change in this case is probably just going to be the changing coveted post covet Dynamic where people don't want to work out of 1960s, 70s, 80s 50s offices anymore and a lot of those buildings are just going to have to get demolished. Which sounds crazy because you might think it'd be realistic to turn them into condos. The reality is, it's not.

So that gives you my opinion on the two-sided recession that we might be facing and how to potentially protect yourself. Obviously, if you want to learn exactly how to go from zero to millionaire in real estate, check out the programs link down below. We've got a course on stocks and psychology money as well the Elite Hustlers group for building your income. Whether you're employed or self-employed starting a business or otherwise, check out those programs linked down below.

But when it comes to recession, really not terribly worried. unless we see the ghost of inflation. Come back. Thank you Foreign.