Hey everyone Me: Kevin Here we've got a talk fact-based update here on what the heck is going on in the market and what you need to be concerned about. Look, let's just be: Crystal Clear Companies are struggling to increase their earnings per share at the same time as Desiring to raise volumes of what they're selling goods and services. The problem is, companies are having a substantial difficulty today passing on cost increases to their customers compared to how easy it used to be. Pepsi For example, just got kicked out of one business owner's store because Pepsi raised prices.

Too many times people are starting to revolt at higher prices and as they should, prices have exploded way too high. Way too fast. And companies realize this. Now from Goods companies to service companies, you want to look at a horrible example at a company that's basically out of money.

Look at: Wayfair They're basically cheering deflation and trying to suggest. We're just passing on the cost savings to our customers. That's why we're cutting prices. It's normal to be.

Super promotional companies are panicking because they can't raise prices anymore as certainly not as high as they used to be able to. And it's not just Wayfair company that's producing Furniture when you're in a very slow real estate. uh Market it's everything from auto companies Auto Zone part suppliers Commodities Look at Lithium prices. it's deflation in Lumber Look at deflation at almost any kind of good or service, the rate of price increases is coming down substantially, even ski tickets.

Yeah, they're still going up somewhere around 7 to 8% which is really annoying because now it cost like $280 for a freaking lift ticket, which is absolutely insane. But the rate of growth is slowing and so I'm not here to say there hasn't been inflation I'm here to say it's all slowing down substantially and when you read company earnings calls, you'll see it. You'll see it so clearly that when you jump over to Ec.com which is the Free Forever Research website where I like to drump drop my research and my opinions and I separate those by check marks and little um, uh Halo emojis here. but I want you to see Paychecks warning Which, as you know, when you pop on over here, you could just click my links and see some of the research that we're looking at.

But look at this: Our small Business Employment Watch continues to show moderation in both job growth and wage inflation, which is indicative of a stable macro environment and and the FED having their desired impact. While we haven't seen any normal signs of a recession though, now this is big. We started to see some softening and seasonal hiring in the Quarter, particularly in our large client segments, including our Human Resources Outsourcing business, many of which typically add seasonal employees at this time of year. Uh-oh warning from Paychecks, but we've talked about this warning before now.

How does this warning relate to data that came out today? And why do we need to be concerned about some of the data that came out today? Well, if you just look at the headline numbers, you'd think the FED still has a long way to go. In fact, you'd probably be in the camp of treasuries going way up. And there are a lot of folks who believe this that treasury yields should go very, very high, potentially higher than 5 6, 7% over the next decade. I Want to be clear my opinion is the opposite will happen that treasury yields and interest rates will actually fall to lower levels than we had before the pandemic.

Now I Want to be clear about my bias before getting into facts. Okay, so let's look at some facts. We know that there are individuals who believe treasuries are going to Skyrocket The reason they believe that is they believe the economy hasn't really been hurt on high interest rates, yet. We've discussed that on Eack as well.

They argue, hey, well, if the economy is doing so well under these high interest rates, maybe we can really sustain higher for longer. That's why when we got a jobs beat this morning where we got a jobs report coming in at 216,000 over 175,000 even though in the last 2 months we took away 71,000 jobs from the numbers we reported, we did have about a 31,000 job beat here. and we had wage gains that are slowing year-over-year but the month-over-month number ticked up at 4% higher than expectations of. 3% This immediately LED Treasury yields to rise and a lot of people to cheer.

Uhoh, this is it. We are going to unpr the March rate cut including myself I Thought with this information, we weren't going to get our March rate cut anymore. Well, that was until we actually got some more realistic data which aligns with what we're seeing in in Uh earnings calls. Now remember when I Talk about more realistic data I Want to be very clear about something when the BLS labor report says there's a problem, it's too late.

Jobs reports are a lagging indicator of problems in the economy. Leading indicators are what companies are actually doing, planning on doing what they're talking about doing. Those are leading indicators What we saw from Paychecks the warning on deflation we're getting from Wayfair The warnings we're getting from. uh, any company you could think of.

whether it's Best Buy it's retail, it's solar. Any company you could think of. The warnings are we are right sizing the business, we are hiring less and we're trying to increase margin because we can't keep raising prices. Those are the warnings we're getting.

And where are some of these finally starting to show up Right here? ISM Services employment missed massively. We got a 43.3 release. Any number under 50 is contraction. We were not only expecting it to be 51, but we were definitely not expecting it to be in contraction.

And this is a this is one of the early indicators because this is a survey that says hey, are yall adding employees Do you have plans to add employees? What are your plans going forward? The Jobs report looks back not only at last month, but it basically reflects hiring decisions that were made when GDP was like 5% in Q3 Right in Q3 You're like, yeah, let's hire some people. Over the next few months, you got to put the job posting out, you allocate the budget, You start hiring people. It takes time to hire people. That's why Jobs data is so lagging and so when we actually look at specifics like whether it's Paychecks, Warning: the Ism Services numbers that we got even numbers that we got earlier this week.

look, yes, we got the Jolts number uh, which was roughly stable. Again, we went to about 1.04 uh or 1.4 in terms of job openings per unemployed person. Look at ISM employment which uh, was not uh, the Uh ISM services employment. This is just it's another survey, right? also in contraction.

Now, that figure did beat expectations a little bit 48.1 but it's in contraction. We were expecting it to be in contraction Services Nobody was expecting that to contract and now we got a big contraction here. So combin what we're seeing with employment in Manufacturing and apparently now in Services in contraction, Paychecks is warning company warnings about right sizing to try to increase margin Because that's probably the only thing that's going to increase. EPS EPS For companies this year.

this year is going to be all about profit. How do you increase earnings per share? It's not going to be Topline it's going to be volume and margin. That's how you're going to make more money. Uh, and so the Fed needs to wake up.

Now we're getting balloons. The FED needs to wake up to these warnings in my opinion as soon as possible because the headline numbers are misleading and if they go negative, it's too late. We're in a recessionary cycle. Look at the rate cut expectations after the Ism numbers: 90.6% chance of five rate cuts by December of 2024 26% chance of seven rate Cuts Little more than a coin toss of six, and now almost a 76% chance of a cut in March Way up from the 58% we saw this morning after some of the data releases.

Now, why did the numbers come in hot? Well, Bloomberg actually thinks warm weather is to blame. Think about the snowfall we've had this year. Very little compared to last year. a lot.

So really interesting to see. Uh, some of the reactions in the market. Very volatile. Okay, stocks way down at first on the headline.

Jobs numbers Way up. Here's what you got to pay attention to going forward. Okay, CPI it's all going to come down to inflation because if we can continue to get weak inflation and I've got the inflation estimates on screen right here. If we can continue to get weak inflation reads: the FED has a license to cut If The Fed has a license to cut.

They are going to suggest that. Well, we're just keeping tightness the same. It's because inflation is going down and then they will cut which they need to do otherwise they will push us into a recession. The Fed was late to deal with the inflation problems.

Yes, I Do think inflation will end up in the long term proving to be transitory. That is the inflation rate. That is not to say that I think high prices are going to to come down. We should not wish for high prices to come down.

It would be very bad people. I I Know that is an unpopular opinion I Know that. Okay I teach all my unpopular opinions in my courses on building rough like the gold course or the real estate zero to millionaire course, stocks and psychology Money course with bellers all those are at Meetkevin.com You know about that I teach things that I think and truly believe in for making real wealth in the long term and so to be very very C Clear Here my opinion is the Fed needs to look past this headline number and as soon as possible needs to start waking up to realizing oh man, our companies are starting to complain that they might have to start laying off even more just to prevent EPS from going negative and then their stocks from really dropping off a cliff. Companies don't want their stocks to fall.

It hurts hiring and it hurts their wealth. Duh. So what do they have to do? They have to beat on EPS How do you do that when you can't raise prices? more volumes? Which actually means lower prices. So you increase volume probably with lower prices deflation And you cut hiring and you cut spending on your Opex right? That's how you do it.

It's a big risk factor. Now, you don't want that deflation to be too extreme, because when you get deflation, you incentivize a cycle of saving versus spending. What does that mean? Big job loss. Deflation has been historically horrible for an economy.

Some people think like, oh, but the Roaring 20s Roaring 20s was a freaking reference to a social Awakening After you know prohibition and uh, uh, then then uh, the social Awakening of women's rights and and uh, you know, freedoms, Libertarian ideals, whatever. Okay, that that's what the Roaring 20s was about. You want to look at the 1920s. You started the decade in a depression.

massive joblessness, and you ended the decade with massive joblessness. You want to know suffering. It's not your stock portfolio going down. it's you losing your job, being unable to get another job, not being able to make the payments on your car and your home having to sell those.

Get rid of those, go into an apartment, and then have your car repossessed. Oh wait, that was my childhood. Yeah, that happened to us. Okay so I know the pain of losing your house, losing your friends, losing your sense of stability, getting your car repossessed, then going to walking to school which I know that doesn't sound like a big deal.

a lot of people walk to school. I'm just saying okay, it's a change fed's got to wake up here. Why not advertise these things that you told us here? I Feel like nobody else knows about this? We'll We'll try a little advertising see how it goes. Congratulations man, you have done so much People love you people look up to you Kevin PA there financial analyst and YouTuber meet Kevin Always great to get your take even though I'm a licensed financial adviser, real estate broker and becoming a stock broker.

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