Warning: The Coming Economic Stagnation CRASH.

yesterday we discussed that the economy

is facing a stagnation and at the same

time we have already discussed that

China is likely going into a depression

this is leading some of the comments to

rightfully question my belief that our

stock market will face a quote volatile

Nike Swoosh recovery let's break this

down and explain how our investments

could be affected in my opinion based on

the fact that yes we could actually be

facing economic stagnation quick update

I am on well

now I am on autopilot on my way to a

destination I have to go fly somewhere

uh so we're gonna fly and uh so we'll be

on autopilot and we'll do this

discussion okay so let's keep this very

clean yesterday we made it clear that

employment placement firms

or suffering their earnings are going

down less white-collar workers are being

hired we are seeing more labor attrition

which is different from laying off

people but it's basically not hiring

people who have otherwise left and we

are seeing a Slowdown in consumer

staples and consumer discretionaries

across the board so in other words

things people need to buy they're buying

a lot of stuff things people want to buy

they're buying less stuff this is

corroborated at small and medium

businesses and across all income

thresholds this is evidenced by American

Express Capital One Target Home Depot

Etsy the list goes on we know the

stagnation is happening and at the same

time we know China is probably in a

depression after all if we rely on maybe

10 to 15 percent of our GDP

on is basically relying on China then is

is that not a possible way that we could

fall into a recession and the answer is

absolutely 110 yes both of these

remember American consumers make up 72

percent of the economy China contributes

to our economy as well after all if they

buy electrical Machinery which is one of

the big things that they actually import

from us if they buy high-end Machinery

from us Machinery that isn't banned well

that contributes to our domestic product

our gross domestic product what we

produce

both of these things can absolutely

contribute to stagnation which is

basically flat growth or a recession

which could be a shallow recession it

could be a negative point one percent

for two quarters in a row which is

basically roughly what we had in the

beginning of 2022 which leads a lot of

people to say the recession is already

behind us but then the yield curve is

still inverted so everything's a little

contorted

question it people were asking Kevin the

most important thing I care about is not

are we going to go on a recession or not

it's how can you possibly say we're

still going to be in a volatile Nike

Swoosh recovery

I'm going to make that answer

exceptionally clear now

the stock market does not give a flying

hoot what is happening to today

you do

I do as individuals as humans we care

about what is happening today

but the stock market has a bizarre way

of looking ahead 18 months this is why

when in May and towards the middle of

April of 2020

after we got destroyed towards the end

of February in all of March and a little

bit of the beginning of April with covet

lockdowns and shut the economy and Bill

Ackman lock everything down for 30 days

and and we knew we were going to be

dealing with a massive nightmare of the

economy this is why we started seeing

pain immediately but it's also why by

mid-april we realized wait a minute

we're gonna reopen everything's gonna go

back to normal everything's gonna be

glorious and great maybe there won't be

other future waves of covid

and the stock market very quickly

rebounded While most of our country was

still in lockdown and thousands of

people were dying to the first strain of

covid which was substantially more

virulent than it is today in many

regards okay great so we know that works

what else did the stock market do the

stock market started selling off in

December of 2021 but inflation didn't

Peak until seven to eight months later

because the stock market price is in the

pain that is to come for the next 18

months well that pain might already be

priced in all the way into December of

2022 which is why we've started having a

recovery my thesis has been the economy

we'll see inflation Trend down it will

come down in volatile reports it'll lead

to a lot of fear in the economy and

we'll have a lot of ups and downs in the

stock market but we will generally Trend

up as people realize we have a big

opportunity cost in sitting in cash and

in bonds and maybe it's time to be

allocated to stocks again and that's

exactly what we saw in 2023 so we have

to remember number one stock market is

forward-looking number two

when we consider the forward-looking

nature of the stock market the little

nonsense that we hear on the daily basis

like uh this morning we had uh uh I

think it was Bullard or barking one of

them over at the Federal Reserve well

you know if the economy is doing

stronger and inflation Trends up we

might have to raise rates higher

all people hear from that is if the

economy is stronger

we have to raise rates

that's not the what he said

what the FED is saying is if the economy

is stronger and inflation is up we then

may have to raise rates more but we can

have a strong economy with falling

inflation we can recover after what we

saw with Paul volcker in 82 over the

next 20 years with declining inflation

and an overall strong economy with short

periods of pain like in 87 in the SNL

crisis and some of the other issues

towards the late 80s but broadly out of

that 20-year period you had pretty much

17 great years you can have a strong

stock market in the face of pain for the

consumer it's weird now we have to go

into the segments though what do I

personally believe will do the best I

want to be crystal clear about this I do

not think every single stock is going to

do well I I despised the fact that

Macy's did well during the pandemic

because I thought this was a company

trending towards being Sears and going

bankrupt and I still believe that yes

they've got a fantastic real estate

portfolio but what good does that do you

in commercial real estate today so

companies like these consumer goods and

clothing and apparel companies and even

some of the beauty companies that have

done really well they've somewhat blown

my mind okay they've done very well

because I do think a weakening consumer

is going to stagnate to lead to probably

massively negative year-over-year

earnings for these companies Consumer

Staples I think will suffer I've been

saying that since December and some of

these consumer discretionaries that have

really been propped up by covid like the

Macy's or even Beauty to that some

extent

I think had their run

I think now where the money is and what

can actually support the stock market

even in the face of these stocks

declining

is going where the spending is sorry I'm

moving some coffee mugs that's the don't

sue me bro coffee mugs anyway going

where the spending is where is the

spending in the economy today

it's simple the spending hands down

is at the biggest companies in America

Amazon Google

Facebook

a Tesla this kind of spending the

spending that we have to build new chip

factories by TSM by Intel the uh from

via the chips act the spending that

we're getting uh contributing to energy

subsidies whether it is solar production

or encouraging people to buy solar or to

buy batteries or manufacturing of

batteries in America these are things

that can actually keep us out of a

recession so as parts of the economy

suffer Freight and some of the consumer

discretionaries are Staples other

economies can flourish

that's sort of a little bit of a yin and

yang yet you would expect in normal

economy anyway everything goes through

different waves but here's the other

thing that's wild home building is

exploding home building is a large part

of our GDP estimate in America business

fixed investment where I should say let

me rephrase that not business fixed

investment residential fixed investment

is expected to balloon in the first

quarter of 2024 thanks to home builders

realizing oh well okay prices hit their

bottom they're starting to Trend up

again there are very few buyers but

price is starting to Trend up again so

we can still make profit on homes

by building them and then selling them

let's go build

but when we get that kind of investment

we hope that GDP can actually remain

strong for the first half of 2024 and it

does seem unlikely that we're going to

hit a recession towards the end of 2023

so there is a possibility that we will

avoid a recession the inverted yield

curve says we will not avoid a recession

but even if we go into a recession

remember the stock market is looking Way

Beyond the stock market is already

beyond the 2024 election think about

that the stock market is already

starting to price in 2025.

and I think that's what folks have a

hard time comprehending in the stock

market and it's okay because it feels

weird here we are just past the middle

of 2023 there are definitely still

problems in the economy and there's

definitely still recession risk over the

next 18 months and the stock market is

already looking past it

because most

of the market does not believe that we

are going to have a high inflation

problem for long the real debate is

actually okay well our rates just going

to stay higher for longer through 2025

are they ever going to go back to zero

percent

okay

but that doesn't mean you have to go

back to December of 2020 to lows or July

of 2022 lows does that potentially limit

how high the stock market can go

absolutely if we went back to zero

interest rates

the NASDAQ would be 20 to 30 percent

higher just solely based on inflation

than where it was in November of 2021 I

strongly believe that we'd be 20 to 30

percent higher than where we were in

November of 2021 simply inflation

adjusting the stock market if we went

back to zurp

but the market isn't necessarily

pressing in zurping oh I pulled too far

away oh I got it uh I think the market

is probably pricing in a return to

somewhere around two percent two and a

half percent interest rates by uh 2025

middle of 2025 not necessarily back to

zero and if we go back to zero

be even better

so this is why I'm doing my best to

align my portfolio with uh companies

that I believe have Enterprise

uh pricing power and higher end uh

consumer products that people are going

to want to buy

no matter what happens uh in the economy

uh and so that I find is very

interesting so I don't I don't have the

perfect answers to that but I do believe

there's a strong case to be made for the

cloud service providers the Googles the

Amazons the Facebook I've been very

impressed with meta's numbers I I admit

I have never been very excited about

them but I've been pretty impressed with

them and uh as far as uh obviously

Nvidia the chip makers the chip stack uh

very excited about those so I think

that's the balance balance that out with

solar thanks so much I gotta go

appreciate y'all I'm gonna upload this

video now we'll see you soon oh and look

we got

69 for PP on the plane now which finally

matches it finally matches