If you're frustrated because you think all of your hard-earned work is disappearing in the market and there's literally nothing you can do other than feel like I may as well be sitting in cash and sell everything, well, you have no one else to blame but California Governor Gavin Newsom That's because after the craziest money Printing and supply chain dislocations leading to the most inflation in 40 years we had California Governor: Gavin Newsom decide the best thing to do is to send stimulus checks in October to Californians making up to five hundred thousand dollars I Kid you not, these were inflation relief stimulus checks to the middle class of people in California that went out in October And those sales data that led businesses to continue to hire people and think that travel and all things spending were good led to substantial increases in retail sales in October that netted the entire country's retail sales to move up. which led the Federal Reserve to say oh dang it, wages aren't going down as quickly as they should. Let's just continue to Hawk And let's revise up all of our expectations for how long we're going to keep rates up. And even though we've had two inflation reports in a row now suggesting that inflation is finally plummeting, we're gonna keep hiking in my opinion.

Heavily thanks to California's screwball in October, Let me show you the chart. This right here is the chart of California's screwball total credit card spending per household Dark blue line shows an explosion thanks to California in spending, which had been pretty much flat for most of the year with the exception over here in May, The rest of the year has either been negative or flat, but then California thought it would be a good idea to send big Fat stemi checks to people in California making up to 500 000 and lo and behold, oh, spending exploded in California which took the downtrend and encouraged an uptrend. Unfortunately, that came at a terrible time because rather than showing the FED look, everything's collapsing. you can relax.

Not only are we seeing the housing market collapse, but we're starting to see retail sales collapse. We're seeing more layoffs. Rather than reiterate that Trend and let the FED do its thing. What if California do? They just wanted everyone to experience a little bit more pain, but hey, at least Californians got a stimi check.

Because now folks, what do we have for the November report? We have a massive collapse of sales from California and a collapse in sales of all other states combined. This is why we are now seeing profit warnings from sectors that we thought were Untouchable like Delta Airlines and JetBlue providing profit warnings Cloud companies providing profit warnings Netflix Suggesting that their ad supported model for Connected TV which is a partnership they have with Microsoft is off to a slow start as the advertising industry collapses. One of the reasons I've actually purposefully not been investing in Netflix and Disney is because I'm worried about how Connected TV advertising through these companies is going to operate. I Personally prefer Trade Desk, which yes, is still in the advertising space, but also has realistic advertising partners and companies who are already advertising on Connected TV and hopefully still growth ahead of it.

So far, they've been growing, but then again, everything is slowing down and getting weighed down. Just consider the data that was released this morning. The Empire manufacturing report had a surveyed expectation of a negative one. Result: it actually came in at negative 11.2 Some of the worst readings that we've seen since August and August was deemed an anomaly To the downside.

Now, we're very clearly in a manufacturing downtrend. What was more interesting was the collapse in retail sales. We were expecting retail sales month over month to actually come in at negative point two percent, but it came in at negative point Six percent. That is a difference of an annualized 7.2 percent collapse versus an expected 2.4 percent collapse.

Both bad. one way worse. we got the way worse one. if you excluded Auto spending.

we were thinking that retail sales would actually come up 0.2 percent 2.4 percent annualized, but they came down 0.2 percent. As a result, What's happening? Well, the Bond market is screaming at us that a recession is around the corner. The three-month 10-year yield is 77 basis points inverted. One of the strongest signals that a recession is to come soon, within, certainly the next three to nine months.

If we're not already in one. The tent, uh, the two-year 10-year yield curve is screaming a 70.8 basis point inversion, which also reiterates a recession coming in the five-year Break Even which talks, the markets expectations for inflation is at its second lowest point in 2022, and that, folks is. unfortunately the problem. The market is screaming that a recession is coming and that things are getting a lot worse.

In fact, the blue line here represents the Market's expectation of the peak Federal Reserve rate. So it's no surprise that the Market's expectation for the Federal Reserve's interest rates are actually trending substantially to the downside, despite the fact that the Federal Reserve is trending to the upside, and this widening Gap that we're seeing between where the FED wants rates to go and where the market thinks rates will actually go is exactly why you're seeing a bloodbath in the stock market. And at the same time as you're seeing a bloodbath in the stock market, you're actually seeing bond yields come down because people are fleeing from the stock market to the bond market. They figure why bother being in the stock market If I can milk a three and a half to four percent yield in the bond market, let's just buy bonds which drives yields down.

Ironically though, when bond yields go down, you actually loosen Financial conditions and then you tell the FED hey, we gotta keep hiking because Financial conditions are loosening. so let's keep raising that white line which they then reiterates the downtrend for stocks and the downtrend for bond yields. it's not great. On top of that, quantitative, quantitative tightening still has another year at least to go according to JP Morgan The ECB is reiterating 50 basis point hikes to come with inflation expectations way higher or inflation forecasts way higher than the market had been anticipating the Nasdaq's falling under its 50-day moving average put premiums for put contracts So people hedging to the downside are extremely high right now.

and Nomura Securities International believes that money managers are about to be forced to drop potentially as much as 30 billion dollars of stocks and go as much as 83 percent short if the S P 500 closes under 3933 per their model. Now this could be a bunch of fud, but their argument is that there are a ton of Institutions that have a lot of future positions. We're talking tens of billions of dollars and margin calls are around the corner if we keep this downtrend going. Hey, but at least there's some good news.

Disney says Avatar 2 Sales so far exceeded Top Gun Maverick sales which Maverick was a pretty big seller, so maybe that's good news for Disney and maybe that's good news for AMC. But I'll tell you, most of the market right now feels like it is in hell and you can't blame anybody who says they're sitting in cash on the sidelines. See, The only reason that you would want to be exposed to the market right now is the hope that the Federal Reserve will realize they have overdone it. They have crashed the market and crashed retail buyers so heavily.

Of course, all it would take then is somebody like California governor Gavin Newsom again issuing some stimulus checks just to keep the Federal Reserve hiking a little bit longer, because why not screw people even more, you freaking idiot? Anyway, in the meantime, markets if you're bullish or Hopi or holding on to Hopium I should say the only reason you would have that kind of mindset is you believe that at some point here soon the FED is going to realize we're about to hit massive deflation and they need to start cutting much sooner than expected, which could lead to a rally in markets which would be okay as long as inflation comes down. The problem is the amount of patience that we need to see that inflation come down. Unfortunately, might be quite severe. the Federal Reserve might make us wait for at least another three inflation reports.

the release in January February and March before the March 22nd meeting from the Federal Reserve before we actually see any even remote indication that they would consider lowering rates. Because after all, what we got yesterday is we're not even talking about reducing rates in 2023 and that folks sent the market into a tailspin today. So even if you have hopium, you better be ready to buckle up for potentially another three months of hell. And if you're sitting on the sidelines, have a beer and watch the show,.

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