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Morgan Stanley warns that in early 2023

earnings will quote collapse bringing

the entire stock market down with them

in this video folks we're gonna talk

about is this Christmas going to bring

us a Santa Claus and is Morgan Stanley

going to be wrong or is it going to

bring us the Grinch after all we just

started with earnings season as we heard

some news from Nike and FedEx

and I think it makes a lot of sense to

take a little bit of a look into what

these tell us so that way we can tell

are we ready for bullish signals or do

we need to be a little bit careful with

how bullish we get hey everyone meet

Kevin here let's take a brief look at

some of the highlights that I found in

the Nike and FedEx earnings calls and

then see what kind of takeaways we can

draw to see is Morgan Stanley correct

because at first glance hmm Nike's

earnings were actually up Revenue wise

17 from a year ago an earnings per share

was up one percent from a year ago now

Nike already had two quarters of

negative EPS that implies they've

already gone through an earnings

recession so is it possible that

earnings recession is actually behind us

and not in front of us in which case

would it mean that things are a lot more

bearish and expectations a lot more

bearish today than they really ought to

be well let's take a look at these

earnings calls and get a little bit of a

feel for what we can glean all right so

first things first we're going to look

at the Nike earnings call and I want to

show you the following I noticed this

here they say that we're concerned about

macro uncertainty and the indicators

we're seeing broadly for the consumer

this is pretty generic I think at this

point everybody would be stupid not to

be concerned about macro uncertainties

over the last 90 days though we've seen

strength

macro conditions though still exist

they're still there for the consumer so

we're being cautious now I find this

quite interesting Nike is telling us

look the consumer is facing the macro

headwinds that we're seeing but they're

still buying our product even in China

people are buying our product now it's

worth noting that in China a lot of

these were before covid restrictions

were lifted so we started seeing sales

rise and look at this in the last week

of November

1500 of their stores were closed that's

roughly five times the number of stores

that were closed on average throughout

the entire quarter and we also saw

traffic impacts as China navigates its

covet policy so this right here is

definitely a reiteration that we are

seeing a an inflationary anchor in China

in December this is kind of what we're

feeling we're we're seeing this with

reports from Tesla from automakers like

Toyota suspended planning to suspend

production for 16 days in Japan that's

like half the month that's crazy right

as Asia demand falls off we saw it with

Bentley we're seeing it now here with

Nike that China is probably going to be

an inflation anchor what does that mean

it'll bring inflation down at least for

December January maybe even into

February as China goes through their new

year and we end up seeing that covid

really potentially weighs down demand

and pricing in China now there's always

the risk that this ends up hurting

Supply chains but we'll talk Supply

chains in a moment so far though what

we're getting here from Nike is that hey

look we're actually doing better than

expected which is somewhat bullish but

we're cautious and personally I think

that cautious optimism is certainly a

lot uh better than the worst case

scenarios that everyone's been painting

that oh great here comes the second 50

decline in the stock market when we go

through the real earnings recession

right now that could still happen we

don't want to get overly bullish here

right but this is kind of interesting

that Nike is actually arguing that

they're still seeing in a promotional

environment a lot of full price

realization now generally that's a sign

of pricing power however I had to put a

little bit of an asterisk on their

pricing power when I found out that

their margin declined by three percent

300 basis point decline in gross margin

is not a sign of pricing power right

even though they could be achieving

higher pricing realization in my at the

same time they're complaining about

higher freight costs right while while

FedEx is basically saying the opposite

uh in my opinion they're lacking as much

pricing power as they think they have

but this is a sign that hey the

consumer's still alive the consumer

could be giving us better earnings than

we actually expect for Q4 but let's not

carry get carried away here into saying

that this is fully bullish EPS going up

one percent year over year for Nike is

not fully bullish but it's also not

fully bearish it's not that oh my gosh

50 downside right and this is why we're

seeing Nike stock rally today these

markets are going huh that's actually

not that bad in fact that's potentially

why markets overall are trying to move

up at the time of this recording the

nasdaq's up about one percent and stocks

are trying to Rally up on this idea that

maybe Q4 won't be as bad as we think it

is well I love hearing this transit

times continue to improve and the flow

of supply is normalizing this is really

good we want to see Supply chains

normalize and I did not see any red

flags from Nike that the kovich

shutdowns in China even though this

could be a demand anchor right

disinflationary I did not see any

complaints that all of a sudden Supply

chains were being affected because of

kovit in China remember Vietnam here it

is look at this Vietnam was shut down

for 15 weeks a year ago that led to a

lot of inflation and supply chain

problems for Nike we're not seeing this

so in my opinion so far this Nike

earnings call whether or not you care

about Nike right is actually more

positive than it is negative for the

market smoothing Supply chains

disinflationary pressures from China no

indications that Coven in China is

actually causing supply chain hardships

it just might be a demand decline which

is actually good right that's what you

that's literally what you want you want

Supply chains to normalize not get worse

uh and get better instead and you want

demand to come down that's like this is

so far perfect like shh this is good

okay this is a good thing I don't want

to get super excited and bullish because

I'll you know I'll start I'll start

yoloing again okay

I'm just kidding okay I I really try not

to uh for example this morning we uh

activated in the stocks and psychology

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close out before the end of the 30 days

but so far knock on wood it's it's doing

really really well and so I'm excited

about that to continue I'm looking at it

right now and I'm like let's go let's

keep that going

Okay so

this is good for Nike now let's talk

about FedEx okay what do we got to know

about facts well FedEx is interesting so

FedEx says the declining demand Trends

we saw at the end of q1 softened further

okay okay I actually like that because a

I will not buy fulfillment companies or

shipping companies I don't think they

have pricing power I'm a big fan of pp

you all know that I want PP everywhere I

want big PP everywhere I go that's all I

want in my life is PP pricing power

that's it that's all I want because if

you have pricing power you're not in an

industry that is in a race to zero

that's what fulfillment is in they're in

a race to zero Target Walmart Amazon

FedEx UPS they're all in a race to

either zero profit or the fastest

possible delivery time frames and and

that's not that's not a pricing power

business but anyway declining demand

Trends we saw at the the end of q1

softened further in the second quarter

and we are moving faster with more

determination to accelerate our cost

actions okay jpow right now this is jpow

right now

yeah okay that's what Jerome Powell

wants to hear he wants to see yes cut

costs good lower demand Trends good

softness now they do say and I think

this is a cop-out at this point okay at

this point I think companies saying this

is a cop-out they're saying oh

challenged by volume softness and high

inflation I think the high inflation is

old school that's in the past because

they even mentioned that they've seen in

in a later part they mentioned they've

seen costs come down like gas prices

come down which have actually reduced

their costs so sometimes I think when

they say high inflation they're kind of

copping out a little bit to try to

soften the blow of like hey look our

demand is suffering but what I want to

glean from FedEx is what's happening

with demand and it's clear lower demand

environment uh lower uh and so therefore

they're spending less at FedEx this is

good this is deflationary right

certainly disinflationary they also

mention the industrial economy is

slowing that's manufacturing that's

components that's business fixed

investment that's massive utility scale

solar panel channels or you know at

companies that like Amazon putting solar

panels across their entire rooms buying

new Machinery right everything is kind

of slow

ing down this is a a good early leading

indicator Europe being hardest hit

that's not a surprise

uh and now another thing that is also

very interesting is they talk about

e-commerce going through a reset here

look at this they don't tell us that

macro is so bad this is another one of

those where it's not like no this

doesn't look like a 50 great reset still

coming ahead of us this actually looks

like some good news some bad news yes

demand is slowing that's going to be bad

for some companies and shipping

companies uh who who are generally

product agnostic right uh but what you

have here is look at this I think the

CEO says I think the macro issue in the

United States is really an e-commerce

reset now that's interesting during the

pandemic e-commerce peaked around 22

percent right now it's around 18 or 19

and it used to be around 16 so it's

higher than where it used to be but it's

definitely fallen so an e-commerce reset

that's really interesting so if you're

thinking about your Investments related

to companies like eBay or Etsy or PayPal

right companies that benefit from this

it looks like we're still trending in

that direction of an e-com reset and so

what do I kind of get from FedEx I kind

of get things aren't really that bad I

mean sure like demand is softening that

sucks for you FedEx but you also

attribute this to not everybody in the

consumer World shutting down you

actually attribute this to an e-commerce

reset like if the entire economy were

about to fall out from under us wouldn't

you think FedEx would be like oh my gosh

broad scale this is terrible that's kind

of what they did last quarter and that

was concerning but what did they revise

that to this quarter no this is more of

a an e-commerce reset this might this

macro issue isn't like everything is

falling out from under us it's just an

e-commerce issue now when we combine

that with Nike both of these companies

are actually not giving us a worst case

scenario Outlook they're kind of like

yeah there are problems but this is not

hell that we're going into and sure

they're not saying hey everything's

going to the Moon which would actually

be bad for inflationary purposes there

are plenty of disinflationary anchors

that we see in these reports but overall

in my opinion both of these reports

combined and you have your own opinion

of course are more bullish than bearish

now I think it's personally too soon to

YOLO in it's too soon to say that's it

we're definitely going to the moon this

is why I prefer finding straddles

whether you're selling or buying

straddles right now because you kind of

get the optionality in both directions

things like down great fine you profit

you know things leg up great fine you

can profit especially if you get a

really good stretch to either side which

is what you're hoping for it straddles

what you don't want is things to be

constant but I think with straddles that

is but I think what these reports give

us is a little bit of a bullish tilt

right if we had to go on a scale of one

to ten one being bearish 10 being

bullish where is this this is probably a

six and a half and I think markets have

been pricing in like a three so this

could be the beginning of a little bit

of a small taste of a Santa Claus rally

dare I say it but I want to be very

careful because the Santa Claus rally is

one that could still get sold off

remember the year isn't over tax loss

harvesting isn't over most retail Buys

in January not in December most retail

sells in December so keep that in mind

be prepared but some really cool

insights that I actually again think

till bullish let me know what you think

in the comments down below thanks for

watching and check out the programs on

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