We were supposed to get a smooth inflation read which we got. Then we were supposed to get a smooth Federal Reserve meeting which we did not get, but then we were supposed to have a Santa Claus rally instead. What happens? The central banks go crazy. Some people are saying maybe maybe it's all by Design and they're coordinating it all to ruin the Santa Claus rally and ruin Christmas to make sure to keep inflation down because we just got yoinked by the Bank of Japan Hey everyone meet Kevin here.

Not only am I going to talk to you about the programs on building your wealth link down below, but we're going to talk about how we just got joint see: the Bank of Japan was expected to do nothing today. They were not expected to raise rates. They weren't expected to touch their yield curve controls. They weren't expected to do anything yet.

What did they decide to do? All of a sudden, they decided to Yeet us and double their yield curve control which officially removes the last major country in the world from a range of negative interest rates. Yeah, you heard that right. negative interest rates. They were negative for a while because of of the uh, the range that they had and and this really now clearly pulls us out of this.

Let me go ahead and show this to you graphically and explain what this means. So this is what yield curve control looks like. Basically, the white line is your 10-year treasury yield in Japan and the barriers the blue or the green are kind of the range that we would expect the 10-year to trade within, and the Bank of Japan basically manipulates it within this range. Here's zero and we were knocking on the door of zero not that long ago in Japan Because Japan has really, since the 90s been struggling with a growth problem.

so they've been hyper stimulating to try to increase growth in Japan. But it was not expected that they would take their yield curve control from a cap of about 0.25 or so 25 basis points and allow that to double to about 50 basis points now. I Wrote some notes here about some implications I Just want you to understand this chart first. Now these will make a little more sense: Higher yields motivate people in Japan to spend less and save more, right? Lower yields motivate people to spend.

This is interesting because Japan has always been trying to motivate since the 90s. People to spend, Spend, Spend spend. So why all of a sudden are they trying to motivate people to spend less? Well, some folks say, and this is the dirty way it all has to do with inflation. Now we'll talk more about that in just a moment.

But let's also consider these other things in order to Institute this yield Curve control. The Bank of Japan is still going to be printing a lot of money to buy bonds, so you still have monetary stimulus, But what they're doing by strengthening yields is they're also attracting people back to Japan They're strengthening the Japanese Yen and what's great about that for them is it weakens the dollar. The Japanese Yen Rose 3.2 percent against the dollar. Today that is a huge move in currencies and really, what they're doing in my opinion is they're fighting the strong dollar that makes the dollar relatively cheaper and it does something known as repatriates Investments back home.

It basically takes Japanese people who you have to know this. Okay, and it's really interesting because when I first started hearing about the story uh it was so weird because I reminded me of when I was in Times Square back in like 2018 or 19 and and I asked people hey, what's the best thing to invest in and I was walking around Times Square with a mic asking people and I asked these people who were from Japan and they said the dollar and I'm like oh okay, it wasn't even a consideration for me at the point. But it is so, uh, obvious that the Japanese culture frequently invests in foreign assets because the yields on their own uh, home-based assets are so low. and so if now, they can earn at least somewhat of a yield of somewhat of a higher yield on their 10-year treasury.

There's an expectation that at least some money is going to repatriate back to Japan. Now All of a sudden, potentially consumers are stronger. because they can. They can buy things based off of a weaker dollar.

Let's go over here to this screen. They could buy things based off a week or dollar, right? It's a strength play for Japan because even though they're kind of in this deflationary environment, maybe they're starting to see their first signs of inflation with projection for maybe as high as Oh My gosh 1.99 inflation this year or next year. So this is really interesting. This shock that nobody was expecting led to some pretty solid Panic You saw U.S Futures.

They've recovered slightly since, but actually they've recovered quite a bit since uh, U.S Futures were down over one percent. You saw yields Skyrocket in the United Kingdom You saw yield Skyrocket in uh, the United States in Germany and yields are actually still kind of holding on to higher levels right now in the United States. And this is actually one of the big broad implications that's coming out of this Japanese rug poll. here is that Holy smokes, we might have just removed the tether of the lowest possible interest rates.

in modern economies, That tether just got cut. And it's kind of a sign that if even Japan is worried about inflation, maybe inflation won't be as transitorious thought in the United States or in the United Kingdom or in Germany or in Europe whatever. So this has some pretty big practical implications. First, it really hurt Japanese equities.

You saw their indices drop somewhere between two to three percent. It did help some of the financials in Tokyo and on the indices there. Obviously, because higher yields is often deemed to be more profit more profitable for banks, we still have yields higher in the United States, which I actually think is potentially somewhat a good thing because if you think about it, higher yields in the United States signal tighter Financial conditions. So if Japan cutting the tether of these sort of low yields is leading to tighter Financial conditions in the United States then maybe that means the FED has to act less aggressively to increase their base rate because Market rates are moving up right.

if 10-year Know this. If the U.S 10-year yield instead of being at three and a half percent, we're at like seven percent. The FED would not have to hike as much because Financial conditions would be pretty dang tight. So this is definitely something that tightens Financial conditions around the entire world.

Some people are kind of referring to it as like a Paul Revere shot heard around the world though. and so it has this: Duality. It has this potential fear that this shot heard around the world is really just a warning sign to everyone. Dude, if Japan thinks the the era of low inflation is over and negative rates are over, don't expect to U-turn back fast.

You better increase your patience and prepare for more pain in the fight against inflation. And so that's a pretty big concern. To the negative side, the shot Heard around the World theory. Now the other theory is that no, this is just a sustainability push.

Maybe this is just necessary to make sure that yields can stay at the levels where they are. And really, we had to increase yields a little bit anyway in Japan because otherwise we were badly lagging and we wouldn't have made it or we wouldn't have been able to control yields here anyway. And then we would have lost credibility. And if you lose credibility as a central bank, then you've got bigger problems.

See, even in the United States we have this belief that the Federal Reserve's credibility really really matters. that when they say oh, don't worry, inflation is transitory, we believe them. But then when we got destroyed by the Federal Reserve because we believe that if inflation was transitory and then it actually wasn't transitory, we lose respect for their credibility and therefore we lose respect in their ability to bring inflation down in the future. This is a really big deal because if that happens in Japan as well and they say Hey, you know we want to keep stimulating the economy, but we want to keep yields within a certain bracket here and we don't want to be too crazy to where we're causing too much inflation.

If people stop believing them and yield curve controls start breaking, then you could have who knows what happens in in Uh in in Japan potentially a depression and that is something that fear people fear as well. See if yield curve controls broke and yields actually Rose to Market rates. Let's say yields in Japan Rose to two or three percent. Potentially that drives people all to start in an extreme way To start.

Uh, saving in Japan Stop spending and what happens? The economy goes into depression. You're right back into the 1990s. So fed and Central Bank credibility is really really important. but this shot heard around the world was a big inflation fear to Global markets.

Uh, so a lot of people see this as having global consequences. Everyone's yields basically shot up because the floor was just removed. We do think that this is potentially The Last Action of the Uh current Central Bank governor in Tokyo who does retire in April We're expecting a a new Uh Fed Bank of Uh or Bank of Japan Governor to be chose was in February there are two choices. There's Mr Boj Uh, this is uh Amania.

definitely screwing that up. But anyway, he was famous for uh an interesting version of a shock and awe campaign. Shock and awe. Usually in the United States is when we think of crazy fast rate increases.

kind of like what we've been dealing with. Well, this was actually the opposite. This was a fight against deflation and shock and awe of massive money Printing and yield curve control. So Mr Boj is one of the choices, and another choice is somebody who actually wound down the Quantitative Easing program in Japan in 2006..

Now, that could be very interesting because even though they led the fight against the banking crisis of the late 90s, this would be a shift away from abnomics. And it could be a reiteration that, hey, it's just time to move away from these really stimulative policies. Keep in mind, the Bank of Japan has been extremely stimulative since the 90s. They've been doing everything possible to print money.

Print Money. Print money. And by printing money constantly, what they're really trying to do is again, keep Japan out of a depression. Now at the same time, the European Central Bank says we're a long way away from achieving our inflationary goals.

China is leaving rates unchanged. Uh, the Bank of New Zealand Uh, Well, actually, in New Zealand, we see, uh, business confidence at record lows. The Royal Bank of Australia is actually considering pausing rate hikes in December and South Korea is another Asian country that we want to pay attention to that could potentially also be signaling a pause. The Bank of Korea actually started hiking before the Federal Reserve and some folks see that a pause at the Bank of Korea has to happen before we get a pause at the Federal Reserve.

So this is interesting because it kind of feels a little bit like a, uh, a real wake-up call to markets that, if potentially Japan is now getting concerned about inflation, everybody ought to get uh, concerned about inflation. And so do keep uh, an eye on some of the market movements today. you could see the NASDAQ is down about one quarter of a percent. We do have uh Tesla looking like it's trending down about eight tenths of a percent.

trade desk up about 1.3 percent likely on the news that Netflix is getting some advertising sign ups on its ad based model uh, and user signups I Believe nine percent of new users. we're now using the ad platform I Personally think it's it's uh, it's a little bit of a speculative uh platform. uh, how advertisements are going to go uh on Netflix and Disney plus but we'll see. uh, but it wouldn't be a surprise to see again.

Potentially, at least initially. a little bit of a risk-based sell down early in the day, and then later in the day we might. uh, who knows, we could see a recovery. You know we do have Jim Cramer Who is calling for a Santa Claus rally though? Some folks say, damn it Jim Now you've really ruined it anyway.

I'll answer a few questions for a few moments here. Keep in mind programs on building your wealth. There's a coupon code a link down below you can take advantage of. there's a program on investing in real estate.

zero to millionaire real estate investing. You'll learn everything that I know about investing in real estate. There's the same kind of strategies that we'll be using for investing in Health Act along with through yourself. Property Management Stocks and Psychology.

Money and lots more. Love this. This is why you need one of his courses. He looks at everything and pulls it all together.

Sherlock Holmes Well, I appreciate that. Dennis that's awesome. Uh, all right. So good morning, good morning, good morning.

Bitcoin Climbing again. That's great. Um, yeah they did. But remember, raising rates does not mean you're not on the path to pausing right now.

This is something you have to remember. Like people I've been saying. look I think massive rate cuts are coming to the Federal Reserve after the 50 basis point hike and potentially after another 25. right? Like people and markets are trying to project forward.

That's that's the most important thing that markets try to do is they try to project forward and understand potentially what's to come. Uh, can you cover the new housing permit data? Sure, why not? Uh, you know. So so Housing Permits and housing? Um, uh. starts.

What's really interesting here is you have to remember that builders that own Lots They got to crank out homes, right? Okay, so what do we have housing? uh, Housing permits Coming in with a survey of 1480k? 1.48 million? Uh. permits Actually coming in at 1.342 That's a miss on building permits? Housing starts actually comes in better than expected. Uh, that makes sense to me. Survey: Negative 1.8 and actual was negative 0.5 and building permits month over month.

The expectation was minus 2.1 percent, but actually came in at minus 11.2 percent. That's a huge Miss That's a Miss by a factor of five and the last month was revised from negative two four to negative three three. Ouch. Okay, so here's just what you have to understand about the housing issue.

Okay So the inverse Santa rally is happening. Yeah, no kidding. Okay, here here's what you have to understand: Building permits are usually one of the first things you see. uh, or sorry, Let me let me rephrase this.

Okay, yeah, no. I think I'm saying this correctly. Building permits are one of the first things you see. They're applications for new developments.

Uh, housing starts or when you actually break ground. So you have to think about it this way: if you buy a piece of land, about six months later, you might actually pull, like apply for a building permit and then maybe two years later you might start building. Okay, so when we see building permits plummet and housing starts go up. What that's telling you is home builders are going.

Oh God Poopy's about to hit the fan. We don't want to apply for more buildings, We want to build the crap we've already committed to. And GTFO because Shi is about to Hit the Fan. okay, that is.

This is actually a really bad number for the real estate market. Uh, some people are going to go. oh look, housing starts are good duh. his home builders want to liquidate uh uh, are you are you anti-bullying James Here looks like he has some beef with Japan potentially about a Fukushima disaster I I don't know I don't know.

Can we still hate for an accident? I mean maybe we can I don't know um uh, have you changed your Market Outlook for 2023? I believe you were bullish going into the year end? Yeah, you know what I've noticed is a lot more patience is is required. Okay, all right, the person who just says housing starts are good. please rewind like a minute and a half. I Just explained why that's bad.

Uh yeah. so I think the most important thing to keep in mind is that this Market requires substantially more patience than I think any of us actually have uh and it's gonna take a lot longer to recover unfortunately I Don't think we're gonna have a Larry Kudlow v-shaped recovery and so I think uh, you know, have at it dollar Cost: average uh if you want but tax loss average average attack tax tax loss Harvest if you want um you know look I'm a financial advisor but I can't give you personalized Financial advice because I I don't know you I don't know your situation right? and uh you know the way I look at it is I think the most important thing is we just have to buckle down for for a long period of basically hell. Now that has pros and cons to it. Uh some of the pros to that are you have more time to to increase your your quantity of share ownership.

The downside is you go through hell for longer and and people make you feel bad for being an investor longer. you know in being an investor goes through Cycles uh it's very crazy. You go through these macro cycles and investors are really hated at some points of the cycle and they're re. everybody wants to be an investor.

At some points of the cycle we're going into one of those Cycles where it's just gonna. It's gonna suck to be an investor and uh, you know the the ones with with uh, you know the ones who generally come out making uh, the largest long-term returns are the ones who are trying to make strategic purchases during periods of high fear. Uh, that's just the way it is. So uh, Florida Builders have sandwich signs.

Uh, sandwich sign holders outside developments of spec homes for about three months now. That was a key thing. I Recall right before the 2008 housing crash. It should.

It should be clear at this point that um, you know housing is heading for a downturn. It's it's absolutely hitting for downturn. There's no question for that, how deep it is. Uh, we shall see.

We shall see anyway. Uh, thoughts on the Dixie you know I've been shorting it I've been shorting it for a while I've been shorting it actually since the summer. I I think uh I think Udn is the play. You could actually get call options on Udn and you get a little bit more of a move.

Uh, some of my calls on Udn are up like 20 30 while everything's down, everything else is down. Uh, you know, like when I when I when I say that everything else is down I mean most other equities are down. But yeah, I mean this is what I've been tracing. this is these are my Fibonaccis on uh, on the this is the dollar short.

You can see the volume on Udn has really popped over here, so I'm actually a fan of that. Uh yeah. don't invest money you need for the next three years. There you go.

Uh, till when? uh TBD Probably some some form of retracement here. We'll we'll see. you know, is that going to be 50? I Don't know, we'll see anyway. folks.

thank you so much for watching. We'll see you in the next one. Good luck out there. Check out the programs on building your wealth.

It's the only sponsor for the channel and uh, that means I have to put my best effort into that content. And boy, we're filming a lot of really great lectures for y'all Uh, over the next couple weekends here Christmas week weekend and such, there's some really cool new lectures coming out and it's all going to be about preparing for 2023, especially buying really good deals in real estate and fundamental analysis for stocks. Thanks so much folks! Bye.