Well, we gotta address the Bears again out of respect for the Bears. Yes, we have to respect the Bears Uh, we've got to address how the Bears could be right and where the Bears could be right. except in this video Beyond Just talking about their ideas I'm going to go through specifically some stocks that I'm bearish on and why in some sector, a specific sector that I'm bullish on and why and why that sector I think is actually still oversold to a good degree. So first we've We've touched on this piece before, but we touched on the first half.

This is the second half and it's really a Mike Wilson Morgan Stanley piece where we talk about the risk of a credit crunch materially expanding. It is, uh, looks like I've got a little bit. uh, there we go. Okay, sorry, looked like there was a little bit of an oopsy-doopsy there for a moment.

So anyway, when it comes to a credit crunch, what do we have to pay attention to? Well, all of the things on this list actually see a lot of us think oh, it's it's just going to be more mortgages that maybe have a tighter lending standard or maybe car loans will be a little harder to get, but this is actually important when we look at Banks Look at all of the different types of lending that you can get and in a credit crunch environment, all of these get restricted. I'll actually start from the bottom up blocks. Do you know what a block is? Well, if you don't you should. It is a business line of credit.

It is probably one of the most important forms of credit. Remember all this. this kind of stuff. If you've never heard about it before, these are just examples little tidbits of all the stuff that we cover in: The Amazing Programs on Building Your Wealth Link down below, including The Elite Hustlers Course for entrepreneurs starting a side hustle uh, Llc's Insurance Liability, Stocks and Psychology Money Real Estate How to actually go from zero to millionaire? It's not that hard in real estate.

it's actually pretty easy. Just follow the steps in the zero to millionaire course. Anyway, link down below. We've got a coupon code expiring at the end of the day tomorrow, But with that aside, blocks or business lines of credit, they're very important.

They're very important because contractors or or even manufacturers, They use lines of credit to buy inventory. While they use the line of credit, they can manufacture their product or complete a job for their customer. and then after that, what can they then do, Then they can build their customer pay off their line of credit after paying all their bills. It's very typical to use a business line of credit to do that by potentially crimping lending standards and crimping business lines of credit, especially from smaller.

Banks You could really be crimping the economy substantially more than anybody is projecting right now. And I Have to give a credit to the Uh The Bears for this. The Bears are right to say that all of these different types of loans don't need to see a lot of tightening to really crimp the economy. I Just showed you one of them.

Business Lines of Credit Business Lines of credit. Getting a 50 haircut could could shut businesses down. You could see Mass bankruptcies. Now there's no guarantee that these things are going to happen, but let's just say I moved some money from some of my credit lines yesterday to basically have that money drawn down and I'm just leaving it in cash to give me more flexibility in the event that Banks start crimping down on credit lines.

The same goes for now. These can often be deemed more discretionary, but boat loans and plane loans. These These are massive segments of the economy that uh, of more of the wealth economy, but they lead to a lot of additional spending. The maintenance, the piloting, the captaining, the fuel, the the the warranties, The amount of money the amount of GDP that's created when somebody buys a plane or boat is insane.

Uh, just because there's there's so many ancillary costs to the actually the individual product. Somewhat different than a mortgage loan. People might move in and do get some new appliances or whatever, but they're not bleeding money like they are with a boat or a plane. Usually mortgage loans getting tightened.

Uh, Personal lines of credit or personal loans? Home Equity lines of credit Rental Property Lines of credit. These already basically went away in the pandemic. Margin: Of course. margin lines get credit uh or or get squeezed.

Car loans. Credit loans? those are more basic I Mean you all can imagine that? That's that's a little bit more basic. So Morgan Stanley talks a lot about this credit crunch being evidenced by this steepening of the yield curve. This 60 basis point steepening in the yield curve, which we've only actually seen a few times before in history.

And what they say here is they give us this beautiful chart and they say look, growth risks become increasingly apparent when the yield curve re-stepens from a trough. Much like now. look at the last times we've had a re-steepening of the yield curve, let's go back to 1979. Ah, recession.

Right after that bummer. let's go to the early 80s. Oh recession. right after that bummer, let's go to 87.

Oh, recession. right after that recession being the big red bars. What a bummer. Uh, now look at the where.

we actually had some some soft Landings I'll show in just a moment as well. But here you go.com Bubble: Here you go. 0607 Here you go 2019 although that walked into the pandemic. so I'm going to put an x on that one because I think that was really convenient.

That could have been a soft Landing And and not a recession had it not been for the pandemic. But let's actually, uh, take uh, purple. let's take the purple line uh, color here and let's show steepenings on soft Landings Look at that, the famous mid 90s soft Landing Look at that. the re-steepening over here twice in the mid 80s without a recession.

Look at this, the famous 2013 wreath steepening. So you can have race deepenings and no recession. It has happened, so it's kind of tough to say uh, like Darren makes a fair comment Darren writes here, but this time is different LOL he's making the reference to hey, like all these greens are clearly telling us that when we receive in here, we're going to have a deep recession, right? But it's not that easy to say this time is different because which time is different the time we had the soft Landings these three moments of re-steeping over here, or the time we had recessions these five times I Don't know. So I I think that re-steepening is a little bit of a mixed tell I Think the bear argument is much more reasonable in a credit crunch.

That is the lower availability of credit via the sources that I talked about and then also the potential for a lower velocity of money leading to lower spending. And I'll show you where I think that lower spending will be with some specific stocks. So anyway, uh, they talk about the velocity of money and banking potentially falling sharply and likely offsetting any kind of QE money printing or increasing in the money supply. So even though we're seeing that QE up and Bitcoin sort of cheering that idea if the velocity of money goes down, maybe you actually won't see the benefits of that as directly.

So instead, what do we want to pay attention to? Well, maybe we pay attention to uh, earnings and the fact that even though earnings uh, have uh have have come down, they according to Morgan Stanley have remained sticky and in some cases have actually risen here recently. Uh. and so then they also discuss how the earnings risk premium is way too low. In other words, why would you put your money into stocks right now when you could make so much money risk-free via treasuries? the spread is too low.

Now to counter this, one of the reasons the spread is so low is because nobody expects those treasury yields to remain as high as long and the opportunity cost in stocks is actually widening That if treasury yields plummet and the stock market you know goes up 50 percent, Well, Fantastic! Now we can explain why the earnings risk premium is so low. So this is where I want to talk about some specific stocks. and the first sector that I like paying attention to uh is uh, here's a Seeking Alpha piece you could actually sign up for Seeking Alpha by going to Backcam.com Seeking Alpha I Actually I like them sometimes there's good perspective, you just have to understand who's writing it because sometimes you get biased authors over here. But they do have some some really good perspective.

So the first sector, because I want to go through the S P 500 over here, we're going to go through the S P 500 and I'll explain some of my thoughts on some of these different stocks. But when it comes to actual chip expectations, they make this this cautionary note here to say that you should temper your expectations for chips and I agree. I Don't think we want to assume that chips are going to explode now Nvidia stock has exploded and so have some other stocks even like Taiwan semiconductors from their lows. but that's in part due to really high, highly negative expectations that we had for the PC market dropping over 30 in sales.

But they make this argument here that you have mixed conditions in the near term for Uh for chips. They think that data center orders appear to have weakened further in the past few weeks, whereas PCS TVs and smartphones have potentially hit a bottom. Now this is actually reiterated by Amazon potentially indicating slower Revenue in their data center space, which when we went through the Amazon earnings report in our course member live stream, let me see if I have it handy here. We saw exactly that kind of softening.

I'm not sure. Oh yeah, here it is. Look at that. So this is the kind of stuff we generally do in our course member livestream.

We could We pick a company, We do some fundamental analysis. We try to pick up on trends. For example, we recently went through the Honest Company and how horribly honest that uh, earnings call and the actual earnings report was. You could see the full Archive of course member live streams in the fundamental analysis we do in the courses.

remember, you get lifetime access. You'd buy one of any of the courses, You get lifetime access to all of them. Uh, well, to the live streams. Uh, but anyway, with the exception of the Elite Hustlers that has its own separate live stream.

but um, that's a Saturday Sunday live stream. But what we wrote here is that AWS growth has slowed to under 20 percent growth whereas it used to be closer to 30 40 percent growth. And on top of that, they're seeing margin compression in the AWS space, which is starting to indicate a lack of pricing power. It's one of the reasons I personally have stayed away from Amazon because I I Don't think they certainly don't have pricing power on merchandise I Think they lose hand money, hand over fist on merchandise I Don't want to be exposed to the creative sector of Amazon which would be the um, you know the TV segment I think that's a money loser the Production Studio.

So I think the Production Studio is a money loser I think the merchandise is a money loser and the only section that prints money is the server section. and I'm seeing margin compression in lower sales. So for me I'm just not excited about Amazon uh and that's my reason why Now don't get me wrong, I think it's a fantastic company I Love Amazon as a consumer, but do I want to invest in them? No. Uh, but anyway, let's go back to this: Morgan Stanley uh piece here.

Uh oh. actually we gotta finish the chips piece. So what else did the chips piece say here? So uh, chips piece. They actually raised their price Target on Intel which I think is very interesting because I actually think Intel could be one of the very few actual value plays out there right now.

Uh now. anytime you say value, you have to ask yourself, are you looking at a value trap So that's a risk But I actually think Intel is taking a very smart approach by manufacturing for both the risk architecture uh arm, uh, risk arm, right? uh and uh, the X86 architecture which is there or their proprietary version. uh in English I think they're taking a very smart approach manufacturing chips for everyone in the industry and not being so heavily reliant on just their own proprietary chips like you know. Intel Pentium Inside, who remembers those days where you get all the Tv ads? I I can't do the sound.

but anyway I remember Intel Pentium inside and then it went to Intel Centrino for the for laptops. but then again, I'm also the like I'm of the generator this makes me sound so old I'm also of the Gen where And then we got to talk about the S P 500 here. But quick tangent story: I'm of the generation where I played I played so much freaking RuneScape uh that uh when I played so much RuneScape I Remember Well first of all, I remember being mind blown that I could actually play a video game with my friends online. that was like sixth grade.

like how is this possible we used to have the LAN party uh but then I also remember uh, thinking wait, maybe this means one day I could actually take a laptop because yes, laptops existed. But maybe one day I could take a laptop to dinner. That's that was my thinking when I was a child I was at a pizza shop with my dad Anthony so we're at Antonio's and I'm like Dad maybe one day in the future I could sit here with a laptop and play RuneScape while I'm sitting here. it was just like.

It's so weird thinking back to that because that's that's a long ass time ago now. Uh, that's like 17 18 years ago and and I'm just thinking to myself like man, that's it's so weird how far it's coming. It's gonna be so weird thinking about how like what my kids memories are now going forward another 20 years. Uh, but anyway, let's get to these S P companies.

So I think that's really cool. Was there anything else in this one here? Early signs of recovery in: PC Great the graphics chip maker Uh Nvidia strong buy rating on Nvidia because of AI Technologies I have a big position in Nvidia too. Um, I Actually agree there. There's a potential that Nvidia is a little bubbly right now.

kind of like Metaverse made certain companies bubbly like Metaverse propped up Matterport to extreme levels. Uh, there's a risk that some of that's happening a little bit at Nvidia as well. but these are what: I what? I Think about the S P 500 companies and uh, this is where I actually think Morgan Stanley and the Morgan Stanley bears are right to say that there could be an earnings recession for S P 500 companies specifically the pink ones because there are so many pink ones here. so I highlighted green ones as what I think are companies that have big PP So so I think Apple has pricing power I think Nvidia has pricing power I think Tesla has pricing power I do not think Google has as much pricing power uh, oops, uh and I Also don't believe that Microsoft has as much pricing power.

So I think these guys don't have as much pricing power. as Apple and Video or Tesla that's just my take and then companies that I almost think certainly do not have pricing power or Meta I Hate to say it, it's just it's just what I think that doesn't mean it wasn't a good buy when it was super cheap at 80 bucks. That's fine. I Personally, just think they burn way too much of their free cash flow uh, and their profits on the Metaverse, which I'm actually not the biggest believer in.

So short-term trade fantastic on Meta? uh, long term, not for me. uh J and J any kind of Staples I I disagree with Staples and Financials although I am tempted by the idea that there could be a swing trade on a company like JP Morgan when the banking crisis is over. uh Morgan Stanley has a belief that right now they're overweight health care which I know nothing about. so I'm going to stay out of commentary on Healthcare uh I I think I know I don't know anything here Staples I disagree with I think you're you're negative on Staples I Think you're negative on utilities and energy and materials because they've been blown up as recessionary defenses.

Certainly negative on real estate. Maybe there's a trade on financials, but I don't like holding those into a recession. and I actually think you're more likely to to have good upside hashtag not guaranteed in specifically the Pp versions of discretionary Tech and calm Services However, not the non-pp ones, the non-pp ones I Want to stay away from the non-pricing power ones and I have an example of some of those Nike being one of them uh, Nike and the clothing ones. I Really Think when as we go through this next six month period JP Morgan thinks that by Q3 the lower income individuals, the lower income set of people will have run out of excess savings and that's going to hit your Lulus your Nikes your Under Armor basically your discretionaries.

It'll probably also hit your lower income homeowners and especially as the real estate market slows down which would be a hit to Home Depot Financials I Stay away from Visa Visa Mastercard JPMorgan I Stay away from them again I Do think there's a potential play in at JPM If I was going to pick one of the card companies, it would probably be Amex because they appeal more towards the uh, the wealthier cohort. I Think the Staples were your run to in the recessionary fear environment. So your Pepsi Cokes I think and like the McDonald's ridiculous in my opinion. I'll give you an example of why why McDonald's let me pull my last McDonald's look over here MCD McDonald's McDonald's McDonald's so do I have it handy? Maybe I don't have it handy.

But anyway, we went through McDonald's uh, the McDonald's earnings call uh, just a few weeks ago. uh the McDonald's um uh. revenue reports and uh, what you're finding is that Bottom line: the wage increases that they've been forced to take are really starting to impact their margins substantially at the same time as consumers are bait. Like the the average value of a meal purchased as McDonald's is going down.

So you're seeing Revenue pressure, negative revenues year over year Revenue pressure and higher cost pressures. To me, it's the opposite of of pricing power. so it's just the you know. My thesis, uh, could be wrong, but my thesis so uh, continuing on here I I will say I have a potential attraction to uh SAS companies with high cash flow Salesforce Bill.com Otherwise, I think there's a potential there.

However, I'm worried that those are the first ones that in the short term institutions are dumping going into a recession, especially as we have a lower, lower new employee base at companies and potentially more cost cutting at companies. So I'm a little bit torn out of Salesforce and Adobe I have exposure to Adobe But it's low, so we'll pay attention to this. AMD is another good one. I Guess that should in theory be green.

Uh, Raytheon Look the the defense companies. They're so backlogged. Certainly, You could argue they have pricing power, but you're not in a position where they can do much about it. They can't expand manufacturing capacity fast enough.

Aerospace is another space that has substantial pricing power unlike Lowe's for example which I Don't think going into a recessionary environment you have a lot of it all. Uh and uh, Broadcom's exposure to memory and Qualcomm's exposure to 5G makes me a little less excited about them from a chip. POV So those are some of my Theses on on individual. Holdings Now regarding the Bear thesis: Yes, Morgan Stanley has points about this earnings recession.

They're not wrong. Uh, bottom line is that we think this is exactly how a bear Market plays out an unforeseen Catalyst that is obvious in hindsight, forcing Market participants to acknowledge what has been right in front of them this entire time. In this case, it's the fact that earnings growth expectations are too high given the headwinds companies are facing now. In Fairness.

This is this is interesting too. Uh, somebody writes McDonald's has raised menu prices extremely. Food still sucks yeah, but look at margins. uh.

McDonald's did introduce the Chicken Big Mac though did they really well they got? is it? Fried Chicken though when they got rid of uh their actual grilled chicken products I got very upset at McDonald's because then I had nothing left to eat over there I don't want the fried fish although the filetto fish is is pretty good. Uh, back when I used to go to debate Camp there was a guy who would always order phileo fish and his name was Mitch so everybody always called him filetto Mish filet Mitch or something like that. Yeah, I Don't know why I'm talking about that. Let me maybe because I'm trying to pull up the I Want to see the margins? Uh, let me see here if I can grab their last report.

So where are we here on McDonald's So on McDonald's uh, consolidated revenues were flat. We have Consolidated revenues decreased one percent for the fourth quarter. For the full year, we were flat, so we were negative for the fourth quarter. here.

Here you go: taking a quick glance at this. so your negative in revenues for uh, it thanks to a currency adjustments as well, negative in revenues for the quarter flat for the year. Uh, and then we are at. Let's see here: I Want to see margins if we can? Let's see this is the last quarter here.

So if we look at margins, take a quick look here. Operating income: Remember the McDonald's makes most of their money from franchising and you can see that here. That's what's so beautiful about. Uh, this is for the quarter ended in Q4.

Their margins are so high on franchising. If you want to make money in restaurants franchise, look at Red Robin or cheesecake. They lose money hand over fist on actually operating a restaurant. Uh, and and McDonald's has pretty low margins as well.

When you look at the actual company owned stores, the margins are are okay, but they're nowhere near what their margins are for franchising. franchising. is where they make the money off the brand value basically. So that's something to pay attention to.

If You're looking at these companies. They were still able to grow EPS though year over year 16, which is fantastic. But you do have that, uh, sales by company quarter or year over year. Comparing the last quarter down 13, other revenues down seven percent.

They did make a little bit more money raising prices on their franchises. Uh, but uh, you know, even though they're raising prices, they're seeing those revenues come down. and I think that's a sign that people are a little resilient to their um, uh, to these price hikes and uh, let's see what margins are actually doing. They have a calculator handy here.

Let's look at margins if we just do a quick look here. Usually we do this kind of stuff in our course member lives. Uh, we're looking at uh, 15.2 percent on company margins versus uh oh yeah yeah. look at that margin compression: 17.2 percent.

So in other words, you were at 15.2 right here versus 17.2 in 2021.. What I did is I divided their expenses right here by their revenues. To get a margin number, you have to subtract by a hundred. Then you get the margin number.

here. their margin was 17.2 percent that fell 200 basis points. So you're seeing negative sales margin compression. I Think that Trend continues at the same time as year over year the stock is actually held up.

uh and and I've been saying probably for about a month now I think this thing is is gonna walk into uh, some pain. it's been flat the last month, but the fact that it's done so well since uh, January of 2022. If I go to just the week chart, you can see it very easily. Here this is the week chart for McDonald's You can see it's actually held up pretty dang nicely.

Oh I I Wouldn't be surprised if it comes down to revisit the 200-day moving average and that ends up being what you kind of see in an earnings recession. So I think this: uh, this segment here is really a tool for you to see. Hey, look, if you're looking for a potential earnings recession, the place to probably look is in companies that have done very well as Staples and flight to safety style stocks over the last year. and I think that's where Morgan's we could both be right.

Like more, can you believe I'm about to say this: Mike Wilson the big Perma bear and Morgan Stanley and I could both be right. That is pricing. Power stocks do well through a shallow recession or no recession. However, the S P 500 performs poorly as Staples and and the companies I showed mostly that lack pricing power end up underperforming as their earnings estimates are too high.

Now he does say mega cap will not be immune to these growth concerns and I agree for Facebook Microsoft and Google but not for mine has nothing to do with my bias at all. Anyway, obviously I'm placing my BET Now One thing that I agree with him on clearly is being careful of small caps. Small caps have a lot of debt and very thin profit margins I Completely agree with him on that. and that is why almost every small cap that I've been analyzing with course members has not been very attractive.

So be careful, stay safe out there. I Love you all, thank you for being here! Thanks for being subscribers! Get life insurance in as little as five minutes. Go To Metcaven.com Life Seriously Literally go to my Camera.com life on your phone and you can Apple or Android pay for it and then you can tell your family mom, dad I got life insurance like oh how long that take five minutes Then give them your referral link Yes, paid Partnerships uh Weeble 12 free stocks with Weeble and then of course coupon code expiring tomorrow for those programs on building your wealth. So there you have all the perspective.

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