boolish

Mike Wilson on a rolling recovery rather

than rolling recessions.

>> CIO and chief US equity. Some of your

the forecast. You're not just like

looking at momentum and stocks maybe

continuing to go up. You're trying to

decide whether there there's a recession

risk. You're trying to decide whether at

this point, Bullard just said it. You

think the recession risk is behind us

and we're reacelerating.

>> Yeah, the economy is reacelerating

already.

>> Yeah. Yeah, I mean I think uh

forecasting stock markets is as hard as

coming up with gigawatts or gigawatts.

Okay, trust me.

>> Well, you're not even doing stock

markets. You're doing the you're doing

the economy and the Fed. They can't do

it.

>> Well, I mean, look, it's difficult,

right? We're trying to live six months

in the future and uh I think the market

does live six months in the future as

we've said many many times. And our

thesis for the last two or three years

has been very consistent. We think we've

been in a rolling recession for 3 years

and we've documented this.

>> This is a very Kathy Woodian argument so

far just basically as sectors going

through a recession. I mean, uh, chip

stocks, for example, end of 2022 were in

a recession essentially. Uh, that's back

when I sent out an alert to course

members and bought a bunch of Nvidia

shares. Uh, and still hold those today.

So, it's it's been a good ride.

>> This in quite, you know, quite a bit of

detail. The last couple of weeks, we've

actually gotten more information around

the uh, job revisions, not just the the

big one that we got the 911,000, but

also the two-month payrolls. We've done

some pretty interesting analysis there

that shows very clearly, very clearly

that the trough of the labor cycle was

in March, April. Okay. Whether you're

looking at job cuts or you're looking at

>> March and April for the trough. Really?

I don't know about that. I don't know

about that at all. I think he might be

wrong about that. Hold on a second.

Let's look at 27 week unemployed, which

is typically a proxy for recession. And

I'm not trying to be a bear here, but

you're telling me that the trough was

March and April for the labor market. Uh

I I mean maybe like high is bad here,

right? But we're way worse today than

where we were then. So that's the 27w

week unemployed number. And then if we

look at St. Fred, we do um BLS jobs

report. Just how many uh you know jobs

did we basically gain in non-farm

payrolls. Let's go look at that. Uh and

we'll go to uh the change of thousands

of people on a monthly basis. So the

trough

this I think I screwed up the chart

here. Hold on one second here. Let's

see. Yeah. No, this data goes all the

way. Remember, you could always change

this to change rather than the

cumulative number. And then we're going

to zoom in over here. There we go. Yeah.

So, he's saying March, April, May over

here. Trough.

I don't I don't know about that. I think

it's more like I I mean, I guess if he's

referring to June being May and May

being April because of when they're

reported, they were talking about the

prior month, but we're basically going

right back into that. So, this is why we

really need a strong September report to

say that we're not trending towards

negative here. I mean, any technical

analysis, you know, fan like we do every

morning in the alpha report, uh, is is

going to tell you, hey, man, the the

trend here at your friend. So, I don't

know, man. The payroll revisions and

that bottomed, okay, with the government

recession in Doge, which is what we were

waiting for. So, that was all of our

thesis for this year. So, we feel pretty

good. We have the right narrative now.

The market, by the way, is our

confirmation. The market figured this

out at the exact same time. So that like

the old adage, you know, trust but

verify. We trust our analysis, but the

market kind of verifies. I

>> was going to ask you if if we went

through a recession, why are we at new

highs? But but you said it it didn't

happen until the recession was already

over.

>> That's right. Well, typically, remember,

Joe, when the the market always bottoms

during a recession, it doesn't bottom

when it's over, when it's obvious to

everybody. Okay. Now the Fed's working

on l

the market bottomed uh at the end of

2002 to the beginning of 2003.

That was kind of when the recession was

at the end of the dotcom bubble. The

market bottomed in February of 2009. Uh

obviously the greatest panic was in

September of 2008 during the Lehman

Brothers collapse. So I don't think the

market bottomed you know essentially for

a while there. Of course, people were

worried about a double dip recession for

years after that. So, that's possible.

Uh, you know, COVID recession's really

hard to compare to. So, I I I don't

actually like I don't know, man. Usually

the market bottoms when the Fed turns

the money printer on. That's when the

market bottoms. Mike Wilson,

>> data like always, by the way, that's not

new either. This is not a unusual

feature. We saw the same thing in '08.

We saw the same thing in 01. Okay? We

documented this. So you but again he's

misleading the dates here in my opinion.

I mean unless in 2002 uh you know at the

end of it or the beginning of 2003 you

thought you were in the depths of a

recession and that's how people felt

maybe because unemployment usually lags

right like unemployment didn't really

peak until 2010. So it could take a

while.

This is very apppropo for how it usually

works. The one thing that's missing this

time that's different than 01 and 08 is

the Fed is actually behind the curve

more than they have been in other cycles

because of that lagging labor data which

we think will catch. Okay. He's actually

now making the argument that's

interesting that I think what he's what

he's about to say is the Fed is behind

the curve. That is usually the Fed cuts

when the market bottoms, but the market

bottomed and now the Fed is cutting

years later because they're behind the

curve in a bullish way, not in a bearish

way. Now, that is an interesting

argument I haven't heard before. that

when labor market data is as crappy as

it is, you've got Mike Wilson going, "Oh

yeah, the Fed is actually behind the

curve because of that lagging data." Not

to save the labor market, but on the

upside, oh, next thing you know, he's

going to start talking about interest

rate hikes. What? Well, this is a

different perspective for sure.

>> Up in probably November when all those

Doge employees who were let go have to

file for unemployment insurance.

>> All right. So, we're going to continue

even though we've already bottomed,

we're going to continue to get some

straggling bad numbers,

>> right? So, and and then that once all

those that bad data goes away, then the

Fed can basically hike again or stay

aggressive. I think that's what he's

implying here. This is this is a novel

uh perspective.

>> Absolutely. That's the way it always

works out.

>> Straggle.

>> Interesting statistic. Okay. Which is

the market, okay, typically bottoms a

year before the unemployment rate peaks.

That's typical. Why should

>> Okay, that I agree with because like I

we said with the 2009 to 2010 analogy

that I agree with but the question is

like our unemployment rate is not on a

trend of peaking. Our unemployment rate

has barely moved. So this is where I I

take issue with this as well if we look

at the unemployment rate over time. So,

I'm like I'm trying to jive with Morgan

Stanley's Mike Wilson here because it

sounds bullish, but look at this. Okay,

in 2000, the unemployment rate uh it

looks like it peaked in June of 2003.

Well, the market bottomed 6 months to a

year before that because you sort of had

a double bottom. So, 6 months to a year

before that kind of had that double

bottom. Okay, so that's correct. I agree

with Mike Wilson here. But look at what

the unemployment rate did. It

skyrocketed from 3.9%

to 6.3%. We were up, what is that? 6.3

was that 2 and a half%. 6.3 minus 2.9

3.4%.

Right. So, you got a 3 and 1/2

percentage point move in the

unemployment rate. He talks about 2009

and 10. Yes, correct. The unemployment

rate uh uh you know kept skyrocketing

and it didn't peak until about a year

after. Yeah, he's right. like October of

2009, beginning of 2010 over here you

peak at 10%. But we went up from 5%. So

you had a move over here of 3.4%, a move

over here of 5%. What have we done right

now on the unemployment rate? At most

we've gone from 3.4 to 4.3. We are up

0.9.

So like I mean if that's the worst it's

going to be, great. That's fantastic.

But I don't know that we've really had

the unemployment cycle flush out yet. It

would be very bullish if what Mike

Wilson is saying is true. But I think

he's so shell shocked that he was a bear

during the most of the Nike swoosh

recovery 2022,

23, early 24. He was a bear during

almost the entire Nike swoosh where

we're like, here's the resident bear

again. Nike swoosh keeps booming. And

and I think now he's afraid to be

considered a bear cuz I I don't know.

>> Should the Fed be cutting now? Then they

should be raising.

>> Well, because there's there other

reasons they're cutting. Okay, first of

all, we do need to cut because the part

of in order to get a full recovery,

right, the rolling recovery now, we need

rates lowered. One of the reasons why

we've had a

>> this is so weird. On one hand, he's

telling us, yeah, the Fed's actually

behind the curve because we're just

going to get some straggling bad data

and then the economy is fine. But then

on the other hand, he's saying the

economy is actually not fine because the

Fed needs to cut more. Bro, what are you

smoking?

>> Tepid, you know, kind of economy in the

private sectors because rates are too

high for most businesses, particularly

small businesses and consumers. So, they

do need to cut rates. The question is,

>> so his nuance is well, the recovery

should be even stronger.

>> All right,

>> how much are they going to cut? And

that's why we haven't seen the full

rotation yet to the early cycle small

cap lowquality parts of the market.

Okay. So, so I believe that that last

week was sort of a sell the news event

because the Fed is sort of dragging its

feet. They cut 25 and the market really

wants or expects or is priced for more

importantly for something more

aggressive. So, we have this window now

for probably the next 6 weeks or so

where we think the market is at risk of

this tension between the Fed being kind

of behind its own curve and the bond

market. And I think the next six weeks

matter because you have a government

shutdown on October 1st, which is almost

always a buy the dip opportunity, but it

coincides this time with September job

numbers which are expected to come in at

42,000 which would be great because it

would be finally like we'd be picking up

and then we could agree with this

rolling recovery argument. We'll pick up

again. That comes out on October 3rd.

ADP employment report uh that comes out

on the 1st and those numbers are

expected to be 50,000 in line with the

54 last month. So those numbers could be

good and could could reiterate this.

Okay, rolling recovery can normalize

rates, but the next 6 weeks could be

really funky heavily in part because if

we get bad numbers and you have a

government shutdown,

the Fed's going to be behind the curve,

not in a bullish manner, but in a

bearish manner.

>> The equity market is really wanting or

needing now a more aggressive Fed path.

But

the background your your whole

overriding theme is that we're early

cycle isn't early.

>> Yeah. Yeah. Yeah. That's what like I

appreciate the CNBC guys confusion like

wait wait wait wait. You're saying we

should cut but then you're saying we're

early cycle. It's just we should have a

stronger early cycle

>> cycle. If you're patient for the next 6

weeks shouldn't you be buying stocks

here then if we're early cycle?

>> I mean are you telling people right now

we're early cycle and it could be the

beginning of a multi-year.

>> Yeah. He's doubling down on that. That's

what he's saying. Oh man. Okay. Stock

prices.

>> Exactly. Our call. We we we said very

clearly that you know uh April was a end

of a bare market. That liberation.

>> Sorry, I got to get my stand goal in.

Health is very important.

>> Week was the final piece of bad news you

typically get at the end of a major bare

market. And by the way, just to be

clear, the average stock was down 35%

between July or April.

He's saying the final bad news is

basically going to be uh the Doge

layoffs that that's going to be the

final set of bad data.

Man, I I hope so because people are just

going to adjust those numbers. I get

asked almost daily almost daily. Not

about the balance sheet, although

>> Kevin is much more interested than most

people by the way in the balance sheet.

I know I get asked almost daily about,

"Oh, but Kevin, the Doge job losses are

going to come in the next reports." Yes,

but people are just going to adjust

those away, right? So, my point is

they're going to look and say, "Okay, if

we had -50,000 Doge numbers show up in

in the reports, they're just going to

add those back in." So, if the report

comes in at zero and it's 50 from Doge,

people are going to add that back in and

go, "Okay, well, absent the Doge, you

know, onetime effect, we actually grew

at 50,000 jobs." So, I I don't know,

man. Let me finish my stand goal

>> in April of 25. That's a proper bare

market. So the new bull market began in

April and now it's evolving and the

stock market ahead of kind of the data

as it typically is. We've seen by the

way it's because small caps and

lowquality early cycle stocks haven't

outperformed. They have gone up in

absolute term significantly.

>> So the market is telling us that that

thesis is correct for now. And the risk

of that is that the Fed stays behind the

curve longer than the market expects and

we have a little digestion here which

could be a meaningful correction in the

next 6 weeks. We'll see how it goes. But

like either way that doesn't change our

thesis that the early cycle re rolling

recovery has begun.

>> I can see going against the consensus.

But

>> on one hand we are potentially going to

have a big correction in the next 6

weeks. He says I get it cuz you've got

this data coming out and stuff. kind of

agree that we're sensitive to something

like, you know, a little oopsy dupy over

the next six weeks anyway because of the

jobs numbers and government shutdown

coinciding. Government shutdown alone, I

think, is the greatest buy the dip

opportunity ever because it's the

biggest fugazi ever. But he's basically

saying, "Oh, Liberation Day, that was

the bottom. Uh that was the recession."

Okay, I mean that's a bullish thing to

say, but dude, a recession is pricing in

massive job loss. That's not what we got

at Liberation Day. Liberation Day was

trying to price in what would happen to

company margins, not layoffs. So, when I

look at the job numbers, uh I I see much

more weakening and much more, you know,

devastating data than I think Mike

Wilson is is giving credit here for. Uh,

and I think that's where the best way,

you know, to throw a banner up here is

not just to say that you could get a 2%

bonus on balance transfers at Weeble,

which is obviously a uh

>> paid promotion,

>> but this that you could get life

insurance in as little as 5 minutes by

going to meet me kevin.com/life. I don't

know. interesting perspective here from

him, but I I'm not convinced that that

he's right because again reconciling

that to the bottom line, he's basically

saying the bottom of the market was

April, it's up from here and even though

we'll have some like uh ups and downs,

uh we are bullish going forward and buy

stocks at these valuations is is his

point of view. Uh and his argument is uh

we're we're just going to have a slow

beginning of a recovery and the Fed

should cut to sustain it more. Uh and

once we get rid of this leftover Doge

data, we're good. Basically, he's saying

the economy is going to magically go

from this massive decline in adding jobs

to a U-turn. So, so this will look like

a giant halfpipe basically and we'll

have that U-shaped recovery in jobs.

Okay, Mike Wilson, I don't know. Let me

know what you think uh in the comments.

It seems a little uh wild uh in in my

opinion. Uh a little wild. Uh but okay,

no problem. No problem.

>> I'm like a monkey song. I'm a believer.

>> Yeah.

>> Like I'm in it. I'm just listening to

>> I don't even know if there's a first out

in the first inning here. I mean, we're

that early.

>> Well, speaking of AI, I'm doing this one

for you,

>> Nvidia.

>> Okay, go for it.

>> Got to look at it today. Pulling back a

little bit, but surging on Monday. The

company's investing a whopping hundred

billion dollars in Open AI to support

new data centers. Open AAI will deploy

enough gigawatts of AI to power 8

million homes.

>> I don't think there's a company in

America who people talk more about than

this company. I I hear it all the time.

I started following it nine years ago

because they were in the gaming and and

Bitcoin mining and look what it's

become. I We know this knows about this.

>> We'll we'll try a little advertising and

see how it goes.

>> Congratulations, man. You have done so

much. People love you. People look up to

you.

>> Kevin Praat there, financial analyst and

YouTuber. Meet Kevin. Always great to

get your take.