How Bad the Bears Think the Market Will Crash

this video is going to share a really

good insight into stock picking and

we're going to talk about fundamentals

versus the beam stocks or the momentum

stocks as well as short interest now

we're going to cover two bare pieces uh

who or bears who used to be bears and

we'll see what kind of commentary they

have from Bank of America now there are

two pieces there's one called bye bye

bear and then there's another one that

analyzes uh the potential trajectory of

our Market into recession and three

potential outcomes the first that I'd

like to start with is bye bye bear it's

actually from last week but it's worth

still covering and then the other one is

just from today so the other one is

Super Fresh so we'll get through two of

them one one that's a little bit older

and one that's super Super Fresh so

let's start uh with this one this one

right here is called bye bye bear and

this used to be a very bearish analyst

and they've just had a change in tone

let me go ahead and throw up my little

Banner here for that coupon expiring

tonight there we go okay good so the new

bull market has likes says this analyst

the bear Market is officially over now

remember we had a warning from Cameron

Cruz over at Bloomberg that just because

markets have risen by 20 is not a signal

that technically we are out of the woods

in terms of potential downside going

forward given that during the.com bubble

we have three escapes via a 20 end to

the bear market and we still had

downward pain ahead of us anyway

we don't put a lot of stock pun intended

into arbitrary definitions okay good but

note that after crossing the 20 mark

from the bottom the S P 500 continued to

rise over the next 12 months 92 percent

of the time uh versus 75 overall so just

ignore the 2000s era which would be that

eight percent of the time returning on

average 19 versus 9 on average earlier

dating all the way back to the 1950s so

when you basically extract the.com

bubble coming out of a bear Market with

a 20 rally in the S P 500 is

historically more likely to be good than

bad in fact 92 percent of the time the

market goes up like 19 more thereafter

that's good that's bullish sentiment

positioning fundamentals and supply and

demand support that being under invested

in stocks and cyclicals is a key risk

today wow

Savita was always a big bear and she

flipped she flipped into now saying well

the bigger risk today is being

underexposed to stocks this is what I've

been talking about for like nine months

that people were like Kevin when are you

gonna buy crypto I go the biggest risk

right now is being underexposed to

stocks with real fundamentals here we

are nine months later in a massive rally

later and now the analysts are finally

waking up let's go

uh okay the more likely direction of

surprise is still positive we here

provide our views on the most asked

questions from advisors and clients

quote or question oh sorry my uh my

short shorts pulled the HDMI cable out

of my bed or am I wearing short shorts

maybe I'm naked today anyway what will

it take to get investors bullish again

the official end of the bear Market

might help but the wall of worry could

continue until investors feel pain in

Long bonds or fomo oh that's actually a

really interesting argument this first

one here pain in Long bonds now that I

find interesting

let's see pain in Long bonds when are

you going to feel pain in Long bonds but

for you to feel pain in lung bonds you'd

really have to see yields go up because

that would make your uh your your prices

go down for bonds that you're holding

how else could you feel pain well I

think you could also feel pain in Long

bonds by realizing that maybe your bonds

are stable so let's take a look at this

sure bonds could feel pain like price

could go down as yields go up but we

don't necessarily think that yields are

going to go up what if yields just stay

flat well if yields stay flat then the

value of your bond stays flat and if at

the same time the stock market is going

to do this I think what she's actually

saying is it would be a combination like

your long bonds and your portfolio is

flat and everybody in stocks is running

away that'd be a little bit of a pisser

right but anyway Ai and morbula but a

broader bull case for stocks can be made

we are off zero interest rate policies

and re real yields are positive again

volatility in rates around inflation

have subsided no longer for Creative

inflation I'm Not Afraid anyway

estimates uh estimate dispersion as in

earnings uncertainty has declined and

companies have preserved margins by

cutting costs and focusing on efficiency

even Adobe today revising up their

guidance leading Adobe to actually rally

in the pre-market here as another

software stock set to benefit from

artificial intelligence now very fast

hiking cycle the FED has a Latitude to

ease the equity risk premium could fall

more from here notice she italicized

fall that's because a lot of people are

really frustrated that the equity risk

premium is already relatively low people

like it should be much higher that's

actually an argument that the Bears are

making

show shorts that show the shorts and

I'll sub

you'd have to watch my other my only

fans for that they'd have to pay for

that come pay 4.99 a month and you'll

get that anyway okay which Equity index

equal weighted or cap index okay so

let's get through a little bit more of

this quick reminder because I don't

think I've said it yet and I'm only

going to throw the banners up really

quick uh yes we have a price increase

tonight phase one of the price increases

happens tonight for the build the

courses on building your wealth here are

all of those courses you can just pause

there if you want to see them they're

amazing and we're basically adding a ton

more lectures so we're very excited

about those okay now and the first phase

of expiration is tonight so I'll just

leave it there okay so which Equity

equal weighted or cap weighted index so

anyway the equal weighted S P 500 could

deal double the returns of the S P 500

Index based on various signals this

includes breadth revision value blah

blah blah they're basically saying today

the mega caps like the apple and

Microsoft may have already rallied a lot

and it could be the rest of the S P 500

that rallies more remember like

somewhere around 95 percent of the gains

the S P 500 has shown this year have

been driven by like seven stocks like

you know Tesla and apple and Microsoft

and Google and Facebook anyway if stocks

are viled uh why is the s p trading at

20x forward earnings okay so this is a

dangerous or I don't actually know that

that's forward earnings I think that

might be trailing earnings so the

dangerous thing about using price to

earnings ratios in a recession is that

price to earnings ratios are calculated

by looking at Price oh my gosh imagine

this over earnings well if you look at

the last 12 months what have earnings

done oh my gosh they've been in the

gutter and when the number on the bottom

gets smaller the total number gets

bigger oh look at that it's fifth grade

math yay so all the frankly idiots

looking at trailing 12-month p e ratios

don't understand simple math and that's

okay but when you look at forward

earnings the valuations of a lot of

stocks are actually still very

reasonable at C and phase uh you know

your your ubiquity uh Tesla's starting

to get a little richer again but it

still has likes to go

anyway so we'll see how do I invest in

AI oh yes oh well that would be through

Kevin's AI course on productivity where

it's not about what tool to use but it's

about mastering how to be productive

with AI in your business or as an

employee recent developments in

generative AI Herald a sea change the

obvious beneficiaries are capex takers

the ones I just mentioned uh and then

you have semis and software companies

that can provide AI services but not all

Tech wins many need to spend to remain

competitive the large benefit may be had

by old economy inefficient companies

that can increase their earnings power

more permanently from the unit from the

efficiency and productivity gains that's

an interesting argument that maybe you

know what companies are actually going

to be able to deploy the productive AI

rather than the software that's maybe

providing the AI I'm very bearish AI

software but I think many of you already

know that mostly because we don't know

who the winner is going to be at uh okay

so here's a chart of various different

cycle Market bottoms what will it take

to get investors bullish on stocks we

believe we are back in Bull territory

which might be part of what it takes to

get investors enthusiastic about

equities again this is crazy basically

as of a week ago and in the fund manager

survey we just looked at a few days ago

everyone is still bare like under

allocated to stocks and that is great if

you want long stocks right now if

investors feel pain and bonds via lower

returns or negative opportunity costs

there it is that's what we explained on

the prior page real rates rising from

here they should be inclined to return

to equities right and then they sell

bonds they actually lower the price of

bonds potentially keeping yields higher

crazy why would real rates rise a shift

from that buying to net selling of the

10-year treasuries yep by Foreign buyers

or individual holders yep very very true

as people move from bonds to cash who

actually drive yields higher that could

mean the stock market could go up as

yields go up that sounds crazy does it

uh but anyway it's possible rates mean

revert lower okay well it's just some

random chart here should I index or

invest in actively managed funds we like

both by the choice of index is Paramount

more below we like active investment

amid today signs that this may be the

best time for fundamental stock Pickers

for a host of reasons ooh they're

suggesting they like people who look for

companies with big PP uh you know big

pricing power okay interesting reasons

why resources and eyeballs allocated to

active fundamental investing has shifted

from passive uh or private Equity

arguing for less efficient market that

is basically higher Alpha in other words

in English like

There's an opportunity today to pick

stocks that there hasn't been in the

past okay good

uh then we have let's see here uh mean

reversion evaluations fine 46 of large

cap active funds are ahead here today uh

a five-year High assets under management

and ETFs is now at a critical mass

client data shows that the tide may be

turning for most of this year's

investors have sold ETFs and bought

single stocks finally breath is

indicating a mean reversion for more ETF

buying basically wow interesting okay so

what else here uh this is about index

recap waited okay here if Equity

sentiment is bearish why then is the S P

500 doing well well if Wall Street is

dominated by buyers remember the line I

said

there are no sellers like who's really

selling Tesla the only reason you'd

really sell Tesla right now because I do

think they're stolen legs or if you're

rebalancing a little bit or you have to

like some funds have to rebalance a

little bit because there are various

different compliance rules and laws that

say Hey like if a certain thing has

happened we have to rebalance uh certain

sectors can't be too overweight or

whatever but but beyond that like who's

really betting against in video right

now as an another example what's hard to

bet against it that's why it's only one

percent short but anyway it's people

don't want to sell these things right

now because we don't know but anyway

uh bonds and cash have been favored over

stocks but they're a lack of sellers

because they're a lack of sellers you're

seeing more of these price increases but

how did what happens then when you

actually get real inflows into these now

that'll be quite interesting and that's

roughly what they're they're prepping

for right here can I make money off AI

heck yeah you can uh obviously the

benefit or companies that provide AI

Services we already talked about that so

that's a little redundant so they give a

little bit of uh some projections over

here by 2026. they think the AI total uh

or the AI software Market wow will

represent this item here and then you've

got AI Services as a smaller segment AI

Hardware is a small segment wow they

really see software spend as being the

highest now I agree with that I just

don't know which companies are going to

be the beneficiaries of that uh at this

point it's a little too early to tell

okay so uh so you could see here's a

bear that's flip-flopped but we have

another

piece that we have to talk about let's

look at this one this one just came out

uh today actually and it's called The

Bear of little brain

all right so what is it so scores on the

doors crypto 36 stocks 13 well that's

the s p it must be and that must be BTC

what is it or I don't know yeah these

are year-to-date returns okay fine me

I'm never wrong wife you should explore

that my experience of you is you're

always wrong biggest picture cyclical

breakouts of non-us stocks versus global

fixed income all right let's get to

where they actually get away from their

summary and they get into some actual

talk here

some some English is what we want to see

all right here we go ready for this so

first thing I always like doing is I

like looking at this bold bear indicator

so right now you've moved off of the

extreme bearishness scale but notice

we're actually not at the extreme

bullishness side and this is what I've

been talking about this idea that yeah

it may feel like uh you know the stock

market has been rallying so much but

it's because of a lack of sellers not

because everybody is piling on so I

agree with this chart uh and and you

know if it were different obviously I

would say so you know I I'm not trying

to just use this as a way of reiterating

my opinion but I would agree with where

this is you know I don't think we're

extremely embarrassed right now where

people are dumping the people have

stopped dumping and there's a lack of

dumping there's no dumping happening

anymore that's just any incremental

buying it's leading to prices going up

so what do we have here bears like us

have been wrong in the first half of

2023 because okay so in other words

bears like us have been wrong I love

that line there's it's just music to my

ears but then you have to be careful

because as soon as the bears become

Bulls does that mean it's time for the

Bulls to become bare so no okay anyway

Goldilocks Trump recession neither the

q1 EPS recession or this the first half

uh recession happened actually that

would be the second half recession

nominal GDP remained supercharged by

fiscal stimulus that would be like the

chip sack your inflation causation act

or reduction act depends on what side of

the aisle you are on uh labor market

impervious to monetary policy in the

post-pandemic world so far pretty true

interesting comparison after the uh

Spanish Flu chart eight oh I want to

look at that I want to see a comparison

chart eight here it is Spanish no way

look at that that's so cool

1920s or uh sorry this is not the

Spanish Flu what was the Spanish Flu was

it 1920 yeah whatever the Spanish Flu

yeah yeah it was over here like 1919 or

something like that wasn't it I'm pretty

sure it was but anyway the 20 Spanish

Flu era was also impervious to monetary

policy

oh that's interesting let me see what

what date was this uh yeah 1920s after

the Spanish Flu okay chart eight what

are they showing here because there's a

little bit of a bump here in the U.S

unemployment rate uh uh let's see here

let's do this when was the Spanish Flu

let's find out so we can do it February

1918. okay yeah 19 18 19. okay well

that's what I thought all right well

that's interesting because you did get a

little bit of a bump here in the

unemployment rate I suppose maybe not as

as high as expected okay fascinating

anyway no credit crunch the uh Regional

banking crisis threatened a credit

crunch but was averted thanks to the

feds by the FED pivot facility it's

actually the bank term funding program

but anyway uh no no QT no liquidity

drain quite the opposite we basically

added money to the markets which as

we've seen AI Bull Run unanticipated

event in half in the first half was the

AI run uh which caused basically This

Magnificent incline of uh you know seven

stocks rising and driving up the s p uh

so basically the Bears are like hey we

weren't wrong because of our opinions

were wrong these crazy things just

happened like oh my gosh we didn't go

into a recession and we didn't have an

earnings recession so in other words you

were wrong there was no credit Crunch

and while AI is why we were wrong it's

actually a little bit of a cop-out I

have to say

uh no no this is still bearish right

here we see a Max 100 to 150 Point

upside versus 300 Point downside this is

for the S P 500 between now and labor

day which is in September we are not

convinced we are at the start of a brand

new shiny bull run you know this person

sounds salty we're not convinced we're

at the start of a new shiny bull market

this still feels more like a combination

of 2000 and 2008 a big rally before that

big collapse

but until the FED reintroduces fear via

the terminal rate going to six percent

to crack embedded inflation core CPI

around five percent treasury yields over

four percent uh a signal of financial

conditions tightening and then

unemployment over four percent signaling

a recession we can still end up having

equities elevated maybe this could be

true right I mean if the FED does end up

wanting to go to six percent and real

rates stay high Maybe

but the big thing for me that keeps me

bullish right now is that break even

chart uh now we'll have you know

consumer sentiment data uh that that

will be paying close attention to but so

far expectations for inflation are

staying relatively uh relatively low and

anchored and that's good you see a

breakout of expectations that's your

sell signal

no Landing plays limited trading upside

okay limited trading upsides because the

Magnificent Seven have already run so

much is what they're arguing that's what

they're arguing uh okay cool so a

semiconductor say no Landing but PMI

says otherwise yeah this is another bear

argument people are using the

purchaser's managers index uh isms which

are right here in the negative

contractionary territory while

semiconductors are skyrocketing because

of AI and chips yeah you are seeing some

form of recessionary environment for

manufacturing certainly even Freight uh

and a lot of that makes sense you know a

lot of companies have uh spent a lot of

money on capex and have over allocated

and now there's a limit to how much more

they can spend on capex with the

exception of AI Style capex

what do we have here consumer savings

are only 4.1 percent that's true but if

you actually zoom into this consumer

savings have started rising Rising again

and consumers still have excess savings

so yes well that is bearish it started

actually ironically Rising again which

is remarkable now of course they

wouldn't want to show it Rising again

because it's much you know better for

their argument to to go all the way back

to you know I don't know 100 years ago

that's all right same store sales

suggest weakening yeah I do think that

Staples uh and and uh store-based

consumer discretionaries the targets the

best buys and that may have some pain

coming I actually think internet

discretionary like the etsias is

undervalued right now but we'll see

after July year-over-year comps for

inflation get tougher that's true but

that means we still have one really good

report ahead of us potentially and those

are for year over year numbers not month

after month fed cred credibility on the

ropes again well duh uh that's why I

don't think they're going to start

raising rates again because it affects

their credibility even more Magnificent

Seven bubble Magnificent Seven market

cap as a percentage of the s p this is

basically showing you that uh you know

the biggest stocks in the S P 500 are

the biggest allocation of the S P 500

again at 28.2 percent again compared to

the highs of 28.9 percent in 2021 and

the lows of 20.1 uh in uh in 2022

so outflows from cash in the last eight

weeks money market outflows uh I mean

this doesn't look this here's the four

week moving average you actually still

have in noise oh let's see here money

market flows

positive versus negative yeah okay first

what do we have here first outflow from

cash in eight weeks uh okay okay so what

this is saying is the average flows for

money markets right now are still in

that's the dark blue line that's your

four week moving average people are

still putting money into money markets

anytime this number is up or the bar is

above this line it's an inflow into

money markets it's going into cash but

we have our first outflow in eight weeks

here again and I would be surprised if

that money is these outflows we're

seeing are going into equities

wouldn't shock me at all all right what

else here

some more charts you can kind of pause

on some of these some of these are a

little boring I went through them a

little earlier uh bull bear indicator

all right what do we have here uh hedge

fund positioning neutral

you've got Equity flows very bullish

Equity Market breath bullish

uh blonde flows neutral okay whatever

Bank of America bull bear indicator oh

look at that see even though this guy's

a bear you could see that this is not

we're not sitting at these euphoric

levels of of what you saw at the end of

2021. so this is why I still think this

rally does have legs uh and they just

compare winners and losers over here

that's fine so it's interesting to me

it's sort of a summary of these two

things you have uh two bears you have

one that flip-flopped away from being a

bear and it's like yeah I know this

rally has legs there are just too many

there's too much money on the sidelines

there are too many marginal buyers still

available and you know people are

hoarding too much cash basically that's

one on one hand an issue uh and then so

you have this they are flipping bullish

and then even the bear is kind of like

struggling to find an excuse for why

they were wrong but then rather than

doubling down on talk of the earnings

recession they're like well the

Magnificent Seven are overvalued oh well

that is the market bearish right now no

it's just slightly above bearish but

it's not extremely bullish so it's like

the Bear's own arguments aren't really

feeding into a reason to be even more

bearish here they do give us a warning

that well you're going to have higher

inflation comps after June and you know

maybe that earnings recession will come

but he barely mentions that and suggests

maybe there's a 300 Point downside for

the S P 500 between now and uh Labor day

but what's 300 points you know 300

points out of uh where the s p sits

right now is like maybe a seven percent

downside and uh He suggests maybe

there's a two percent upside so I guess

we'll have to see but uh you know I I

personally think the more bearish people

end up getting on bonds by an

opportunity cost the more people are

going to dump their bonds ironically

keeping yields higher and then when they

keep yields higher they're just going to

drive people into stocks uh because the

value of the bonds will go down and

that's why here let's go higher because

the value of their bonds goes down sure

it's nice to farm that yield but again

if you're farming four or five percent

but then you're seeing you know stocks

do that in a week it's a little bit of a

pisser so anyway that gives us a little

bit of a look into what the Bears are

saying a reminder that we have a price

increase tonight on the courses on

building your wealth and we're releasing

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lectures rather not new courses new

course lectures for the existing courses

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buckle up for that so uh we have to go

to the course member live stream here

I'm just going to look at some comments

here does the fear and greed index

support uh the change in sentiment

um well I I think what happens what you

could see is you could start seeing an

early inflection of a change in

sentiment because what you're doing is

you're moving off of they're super

bearish environment

uh and that's a change that's an

inflection point right so as sentiment

changes from everybody's a super bear to

uh oh okay less people are becoming

Bears or staying bears and more people

are starting to flip flop well that's an

early indicator of you moving away and

seeing a sentiment change it's not

saying that everybody is bullish that's