Hey everyone meet kevin here, so stocks are starting off a little red today and there are quite a few reasons: let's talk about, those have to do with ecb. We'll talk about incomes and demos, we'll also talk about zombie companies, and this is a really big one, because a lot of our favorite names have this issue and they've been issues that i've been talking about regularly, whether it's on this channel or also to course, members Where one of the big things that i worry about, especially in times like this, is stay away from heavily indebted companies, there's a reason why indebted companies can survive when rates are zero percent. But guess what tends to happen when rates actually start moving up and you've got zombie companies still reanimated, so stay tuned. For that we'll talk about that during this video.

But first, let's talk about the ecb euro area era. Well, eur the eurozone just had an inflation report that came in a lot hotter than expected. The survey was for a 7.8 estimate for inflation in may, and we came in with a jump of eight point. One percent, so we missed by about three uh point three percent there, which is not so great uh, even though core was substantially lower that headline inflation is still going to lead to concerns that the ecb might end up going with a hawkish 50 bp hike as Well, this is really similar to the fed, except you have to remember that the eurozone is so much more used to deflation and negative interest rates than the feds.

So if we get some kind of 50 bp hike over at the eurozone be a lot more of a shock to markets than than most are pricing in markets. Right now are pricing in about a 25 basis. Point hike, maybe in july, keep in mind. Ecb still has not raised rates right so to go from zero and the expectation that maybe we'll get 25 in july to all of a sudden, seeing like a 50 because of higher oil prices, you know brent's still sitting at like 120 bucks a barrel.

It's pretty wild. You know that that could actually lead to some global tightening in emerging markets, and i know some folks might think well kevin. I only care about the united states market, but remember if one market, like the eurozone market gets substantially more inexpensive. That is their stocks to get more expensive.

You do end up seeing a demand shift from the united states to a cheaper market, whether that's from the united states to china or the united states to europe, and so then that reduces demand here, which then potentially reduces prices here as well. It's all connected now, of course. Last week, what we saw at the end of last week was potentially what some were calling a little bit of a tactical rebound, and that was basically founded in the idea that okay, well, maybe the fed, has reached its peak tightening and maybe maybe fears of a Recession or overblown because people keep spending money, although the more people keep spending money, the more we kind of get this weird balance where it's like. Okay.

Well, if the fed's tightening but people keep spending money, then maybe the fed needs to tighten even more to actually bring inflation down. But we did see a little bit of the bounce last week, not necessarily sure if it's going to continue. Obviously, a lot of folks are hopeful, but i'll tell you. There is so much fear and uncertainty and doubt out there right now that it's almost it's really hard to call any kind of bottom in this market.

This probably been one of the most difficult markets for really anyone to predict whether they're, institutions or individuals, but let's talk about those zombie companies, so zombie companies. This is an important one. Zombie companies are companies that don't make enough money to literally just cover their interest. Expenses and i hate to give you some of the big names here, but i'm going to do that after i remind you that today's the day that prices are going to be going up on the programs on building your wealth, they're all linked down below keep this One short: you know it you've heard it before, but today's the day, so this is going to be the largest increase, because we got a huge set of new lectures coming out by the middle of next month.

They're already set a lot of them, ready to go more of them being recorded, so super excited for those coming out, especially the wealth path course. Even stocks and psych, you name it so and of course, real estate boy. We've got stuff coming for real estate. It's gon na be fun, but anyway, big names that are zombie companies right now, amc folks, amc, american airlines carnival cruise lines, and these are companies that i've been looking at, but i keep stopping myself from wanting to buy, with the exception of the amc shares that I do already hold because i promised i would hold those shares for a year which we're actually probably at a year right now, but i'm still holding them and what's fascinating is that zombie companies, as i alluded to earlier, are companies that you can really get by And survive with when it's easy to borrow money.

Remember the bond raises these companies regularly did when rates were zero percent and as soon as the you know, potential depressionary fears of the covet pandemic went away. What happened? Well, all these companies were able to borrow and refinance at lower rates. Lower rates carnival was previously borrowing at like 17 percent. They were able to get down to 11 and then you get down to six percent and so on and so forth.

Well, that's all fine and dandy when federal reserve rates are zero percent, but it's a big issue when you need a lifeline now and rates are going up and you're facing rampant inflation in the market. We've already seen a 75 percent decline in bond raises by zombie companies this year and it's a clear sign that, even if they wanted to raise money, it's gotten really hard to raise money. In fact, we've got a chart, i'll pull it up, really quick, and it gives you a little bit of an idea about what's happening in the bond market, especially the junk bond market and you've really seen a u-turn at the beginning of this year. Take a look at this on screen now so now.

This is your adjunct bond pricing here and you're, seeing that junk bond pricing kind of plummet here at the beginning of 2022, and look at the other times on this chart that you've sort of seen this plummet. You had it briefly during the beginning of the taper tantrum over here in 2016, so you tend to see these the pricing for these go down and when pricing goes down, this means yields go up right and yields going up is very, very bad for zombie companies Because zombie companies don't want to have to pay even more interest to try to get financing to stay alive. Remember zombie company still means you're burning, more money in just interest than you're, actually making, which is pretty wild, but take a look at that nice plummet. We've got over here in that junk bond market, which is kind of similar to what we saw over here in the coveted pandemic.

Not quite obviously, still probably have another 50 or so to go. But you see that inflection point beginning, and so, even when we see in private capital markets, it's harder for people to fundraise now it's no surprise that junk bonds, especially from zombie companies, are going to be even harder to get uh. You know money races done in which is really bad because for them at least but some say it's actually really healthy, because what ends up happening well, you'll get a large cleaning that happens essentially a bunch of bankruptcies, so very, very likely that you get a lot Of bankruptcies, if we continue on this high inflationary path, high interest rate path, the zombie companies are going to start turning over and in the last few years, we now have about 20 zombie companies out of the in united states as large as 3 000 companies, so Think about that with 3 000 of the largest companies in the united states, 600 of them are zombie companies. Again companies like american airlines, carnival cruise lines.

Amc. You know a lot of a lot of the names that became sort of meme names have or what i like to call momentum names or at risk. There there's a chopping block there, so you do really want to be careful that, even though we could we could see these like nice, you know 10 movements on on like an amc or big swings on you know. Smaller companies, especially the the reopening trades that became such momentum names, whether it was carnival or the airlines or whatever we've got to be really careful, because when it comes time for them to raise money in this kind of market could be the end of the company's Ability to operate, it's just a warning, so another thing that we've noticed uh - and this is just a little bit more historical and it's just an interesting chart to look at is uh how incomes have changed over the last 50 years for folks.

Take a look at this chart right here, so this is a chart of how incomes have changed again, and you could say over here that incomes for those in the upper echelon, upper income, so probably top 20 top 30 or so actually well uh. 219. 000. This would be more like the top like five percent anyway.

Top five percent folks of income has gone up about 61, so you've seen a 61 increase at the top, whereas at the bottom you've seen about a 45 percent increase in income, so again kind of showing off that sort of difference in how wealthier people are getting Wealthier, you know, there's similar charts on this, obviously for race as well, and one of the big differences continues to be home ownership, home ownership. Being one of the big reasons why you see wealth increase substantially more for whites and asians than blacks and hispanics home ownership. Huge difference remember that the average net worth of a homeowner is somewhere around a hundred seventy hundred eighty thousand dollars, whereas the average net worth of a tenant is somewhere around five to six thousand dollars and if you're, one of those folks who believes oh well, i Can make more money investing my down payment or whatever, then in the stock market than i can in real estate? I think you're sorely mistaken, and you should absolutely check out that zero to millionaire real estate investing program, because there are so many easier, safer ways. In my opinion, to make money getting started in real estate than getting started in stocks, okay, next we have okay.

So we talked about bonds. We talked about this ah options, yeah. We want to talk about options and we talked about the ecb, okay options. So this is interesting too, and it just sort of highlights a little bit of the pessimism that we're seeing in the market right now.

This is our chart of uh call option buying right now and uh. You know you can see over here during our last massive rally over here. We have a massive massive uh call option buying because it was really really easy to make money on calls because you could buy them and just hold them and you'd make money same thing over here i mean look at how much sort of buy and hold call Options, essentially, we had here by continuously buying buying buying, right and uh. Compare any of that to this small level over here of call option buying you're getting, and it makes sense because a lot of these call options, uh, you know are, are just uh.

You know evaporating uh a call options i think, are terrible in this market. I think the only reason you'd want call options is to prevent yourself from going into margin or going into uh. You know essentially um heavy speculative positions. So during the time of this recording we've seen uh the qqq dropped to about one percent spies just down about one percent as well.

Tesla went from positive to slightly negative, and it's probably because we're seeing a little bit of that pricing in of okay. How do we handle the pain that we're seeing of uh the ecb rate hike cycle now like if we, if we've got a clear path of the federal reserve's rate hike cycle? How is it going to work when the ecb potentially becomes more hawkish right and we just continue to experience pain? This is why, even when we get two days of rally, it's really important to remember stay at a margin and stay safe right now. You've got the 10-year back up to 2.85. You've also got oil, and this is a big one.

You've got oil a wti sitting at 119. That's pretty substantial! In addition to that, you've got a brent sitting at 124., it's pretty high and so we're going to see some of those headline. Inflation numbers actually head up rather than down because of these. These levels of of oil and energy now uh.

The good news is, we just got our chicago pmi read for may it looks like we got a read of 60.3, which was much better than the estimate of 55 and that's versus the prior read of 56.4. It's entirely possible that, because of that pmi print, we are getting a little bit of these green candlesticks right here, uh, as that just came out within the last couple minutes here so fascinating, but anyway expect that volatility. I think it's it's very easy to get sort of coaxed into this idea that oh a couple risk on days. We see you know big moves, especially in whether it's amc or a firm or airlines or whatever, and so we see these huge moves where, like a firm, for example, goes from 23 bucks to 30, and it just makes us feel like.

Oh, my gosh, we can't get hurt like pile in be careful. The biggest number one thing that i always recommend is stay at a margin. The reason for that is you don't want to go bankrupt in these kind of times, and this pain can last all freaking year. We are not out of the woods at any point this year, so don't rush too much into these markets anyway.

That gives you an update as to what the heck is going on and check out those programs on building your wealth, linked it down below, because we've got a coupon code expiring today, all right! So let's do, let's see what kind.