the truth about the market disaster.

hey everyone meet Kevin here we've got

to talk about my expectations for the

stock market going forward because we

just hit I can't believe I'm going to

say this phrase a 52-week high how

remarkable is that the NASDAQ 100

Technologies I prefer ticker qqqm to

measure it just hit a 52 week high

that's absolutely remarkable given that

it feels like we're still supposed to be

in sort of a recessionary time and

you've got fears about Russia Ukraine

even though they just extended a grain

deal you've got fears of the debt

ceiling even though we keep hearing

they're not going to default it's not

over yet we keep having talk about well

all this there's got to be all this new

inflation while at the same time

corporations are missing earnings

just unfortunately almost seems like for

the Bears the stock market recession may

already be behind us which is quite odd

because a lot of people generally say oh

it's when the FED pivots that's when we

have the the second true collapse of the

stock market and we hit new lows but I

think for a moment it makes sense to

just zoom out and just ignore all the

short-term data and noise the corporate

earnings the short-term inflation

expectations of consumers which are so

shaped by the media The Five-Year Bond

markets expectations of inflation which

are at a one year low uh the Federal

Reserve the debt ceiling just put a sign

all of the noise for a second and let's

try to together logic out why would we

be at a 52-week high on the NASDAQ up

1.3 percent today at the time of this

recording why does it make logical sense

at all let's just start there and try to

analyze that and then move on from there

before we do I you have to quickly

remind you thank you for being here if

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that like button but uh I I am

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just mostly because as much as I I like

the idea of fewer videos that we spend

more time editing I get this like weird

fulfillment of waking up early and just

sharing my thoughts in the morning uh

and uh that that is is like missing so

anyway let's get into this okay this

this is the chart now I actually have

the fibonaccis drawn here on qqm or QQQ

rather than qqqm keep in mind that m is

the cheaper version of this it's exactly

the same thing by the same company m is

if you are going to invest in this ETF

this index ETF get qqqm instead of QQQ

you'll see the same thing just a lower

fee so what do we have here well this is

uh basically a Fibonacci retracement

drawn over the top of the market back in

November of 2021 all the way down to the

bottom of the market in October and then

you can see we've kind of started

creating if you could imagine that maybe

in 10 years this is the start of a

volatile Nike Swoosh right this is the

thesis that I've had that we're going to

have this sort of Rapid one year down

and then it might take a few years and

we'll have this extended longer

prolonged bull market hopefully knock on

wood that's been my thesis right and if

you look out if you zoom out sort of

onto the weekly chart you could see the

beginning of that right picture that

there's your down and then picture

extending this for five years out right

and obviously I don't know if that's

going to be the case you'd want to be in

rather than out we don't know that

that's going to be the case

but when we look at this now we have to

try to go back to October and think what

was going on in the summer of last year

and September and October what was going

on what was going on was we just had the

double dip of inflation news in other

words we thought maybe inflation would

have been over

in March we got some bad reports and we

got a soft report and so the market

rallied on that soft report but as soon

as there were signs that uh oh we were

actually about to get more bad reports

we plummeted and we had the same thing

happen a few times it's been a very

volatile way down on inflation reports

if you go back and look at the actual

granular data you'll see it but you'll

also have to align that in September we

got the Jackson Hole meeting where where

Jerome Powell essentially told us look

we are going to have to go a lot higher

and it was really at that moment that

markets internalized this fear of oh my

gosh we could truly be facing a Paul

volcker moment

and that led to the tax loss harvesting

leading into the end of the year because

people thought boy let's get some more

clarity going into the beginning of 2023

if we get Paul volckert which is a

reference to 1981 1982 the second double

dip recession after the 79-80 recession

where essentially interest rates were

jacked up from eight percent to like 19

more than a double a two and a half X

just to control inflation expectations

that fear started getting priced into

our market and in my opinion that is

exactly why we hit a bottom a true fear

think about that for a moment why were

we so low a true fear that a Paul

volcker was coming that we were going to

get rug pulled and we were going to hell

of a depression in other words if you go

back to October what did we have in

front of us in October we had oh my God

inflation's not going down we're going

to get Paul volckert we are going to

have a really nasty recession

Jerome Powell basically says we're

screwed those were the fears that we had

back then you know add on top of that

Commodities inflation oil prices were

still very high uh China's reopening was

going to create an inflationary boom all

this nonsense was ahead of us okay well

where do we stand today

do we think we're going to get Paul

volckerd well no because inflation is

falling substantially in fact leading

indicators at companies and earnings

calls and that indicate that inflation

is falling now the debate has gone from

oh my gosh inflation is out of control

and we're going to get Paul volckerd to

the bear argument which is

well it's not two percent yet and and

it's gonna take a lot longer to get to

two percent

so therefore it's bad

fine that may be true in fact if there's

one lesson that I've learned over this

cycle it's patience it's you know things

don't go as quick as you think

now

patience aside

consider the difference of those

arguments the argument in October was we

have zero hope prices are still rising

at substantial rates companies are still

talking about rates going up commodities

prices are high energy prices are high

uh you know that was right around the

time of the nordstream pipeline oh my

gosh is is you know uh uh the

geopolitical situation going to go

nuclear right I mean how many how many

video titles did we see about nuclear

warfare

so anyway that was your October era

today it's like wow it's just not

following as fast as we'd like that's

okay though in a weird way the Federal

Reserve and this is an important

principle to remember can undertake a

principle known as opportunistic

disinflation they can do so as long as

two conditions are met

so this is a lot of words I'm gonna try

to simplify this

there are two conditions that the FED

can that needs in order to undertake

opportunistic disinflation let me first

explain opportunity to stick

disinflation opportunistic disinflation

is a fancy way of saying inflation is

still higher than where we want it

but we don't have a rush to get it down

so let's just patiently wait for it to

get down

this has historical context in 1982

interest rates were two and a half X

inflation quickly fell to around eight

to nine percent and the Federal Reserve

said well we eventually want to get to

maybe two two and a half percent how

long are we going to take to get to two

and a half percent yes

in other words they had no idea they're

just like well as long as inflation

expectations are going down

and those expectations are stable we can

be patient

guess how patient they were

they waited 20 years to get inflation to

two percent 20 years to get inflation to

two percent they basically just used

every next Market cycle to to ratchet

inflation down it was perfect

I mean I shouldn't say it was perfect

nothing's ever perfect but the point is

as long as your inflation expectations

are anchored the FED can undergo what's

known as opportunistic disinflation so

okay well that's also one of the

conditions is of the two conditions uh

inflation expectations remaining

anchored there are some worries that

consumer expectations of inflation are

de-anchoring because of the University

of Michigan consumer sentiment surveys

however there's an asterisk on that

because consumer inflation expectations

are really shaped by what news headlines

are and news headlines are blatantly

lying to us saying that companies raise

prices nine percent in the first quarter

when we know they raise prices nine

percent the first half of last year

which then when you look at a

year-over-year comparison you're like no

the company's raised night versus nine

percent year over year very different

just ignore that for a moment the point

is I think you could put on the tinfoil

hat with me I'll join you on this and

say the news media makes more money if

they have more fearful headlines and

articles

we all know this

nobody can dispute that and as a result

the news media would love for you to

believe that inflation is still a

massive problem it's not

but is it at two percent yet no no no

it's not but again we're doing

opportunistic disinflation here right

okay so condition number one is of

opportunistic disinflation is anchored

inflation expectations which we have one

year low of the uh five year Break Even

inflation rate easy charges Google that

St Louis fed five year Break Even boom

look at the chart okay pay attention to

it if that disanchers we got a problem

then you have uh this idea of uh the FED

having a meaningfully restrictive

position policy position uh drum Powell

believes that is having a real rate at

two percent and you calculate that don't

worry if you're I lose you here on this

okay I'll just give you the bottom line

you can calculate what the real rate is

by taking your outlook of inflation

expectations and subtracting that from

the Fed rate If the Fed rate is five

percent and one or three year inflation

expectations are three percent then the

real yield is the difference two percent

as long as we're two percent we're good

so what happens if inflation

expectations fall to two percent for the

next year out well great now we can

bring the interest rate down two percent

now what if the FED says well we

actually don't need a real rate of two

percent we actually only need a real

rate of one percent well now you're at

three percent fed funds rate

so there are plenty of ways to loosen

this and I'm not trying to be permeable

here I'm just trying to say this is what

the FED is probably looking at well as

long as expectations are broadly in line

there's no rush to get this down in fact

people are like what do you mean Kevin

they got to get down man they gotta get

it down before they cut no they don't

they do not need to get inflation down

they just need to have inflation

expectations anchored and the uh the the

path of decline they don't need to get

inflation down by a certain point in

fact

take their own words for it let's just

skip to that take their own words for it

look at their last summary of economic

projections how long does it take to

actually get inflation close to two

percent end of 2025.

that's them not me they're basically

saying look we know this is going to

take a while it's probably going to be

two years before we get inflation down

and people are like

you mean they don't have to get

inflation down to two percent sooner or

before they cut no they don't

and so now when we look at this this

chart of what I call the Nike Swoosh it

makes sense in fact about a year ago at

this time I said I believe this Market

is going to pre-price in the feds rate

Cuts well before they come because we

know the problem of this Market is not

the actual economy it's inflation now of

course we're starting to see faltering

in the economy right uh credit whether

it's credit tightening or certain

segments of the auto market or the

Freight Market is in a straight

recession right there are definitely

problems within the market

but broadly the economy is doing

phenomenally well on a broad average

again that's not to say things aren't

trending towards softening but we look

at s p earnings they're above 2019

levels if you look at s p margins

they've just declined to

2019 levels this is like a normalization

that we're going through right now can

it get worse if the FED goes too far

absolutely don't get me wrong if you're

a bear and you're like Kevin man you're

full of it you're biased

there were absolutely still reasons to

be bearish

if inflation unanchors via the Market's

expectations of inflation and this these

next inflation reports don't show us a

continued at least slow downtrend

we're gonna have problems the Market's

going to have to price in higher for

even longer and we're gonna have to push

back those rate cut expectations right

now we're looking at a 36 chance of a 25

basis point hike next uh cycle here June

14th and a

UH 60 chance well a little bit more like

64 chance of of a pause that has

actually compressed we used to be at 80

chance of pause but at the same time as

that is compressed that is the odds of a

pause have actually gone down the stock

market has actually gone up

in my opinion that is solely because

this these two lower bounds of the

Fibonacci retracement here the two lower

channels

our fear they are fear that we are

blatantly screwed worse than we were in

the 1980s

now does that justify us getting to new

all-time highs probably not right then

we really have to be on a path to uh to

two percent inflation

then we can absolutely but again I

really believe in this Nike Swoosh

recovery and I believe that the

companies with the most pricing power

are your uh Nvidia AMD Intel to some

extent though it's the redheaded

stepchild uh you've got

um you know Tesla uh end phase is

probably at its bottom right now and I

think after AMD Nvidia and these

companies level out which are big

positions of mine or I have personal

exposure to them uh then after they

level out I think that you're kind of

like gonna pull up like a rubber band

The the Left Behind uh chip and

Innovative stocks and those will be like

the end phase and the Teslas

uh I really don't think companies like

Walmart I mean okay this morning in the

course member live stream I had a hernia

over Walmart I I kid you not okay let me

just give you a quick little example

over why I was pissed at Walmart Okay

Walmart is a company that is trading at

a 24.6 p e ratio with three percent

Revenue growth

three percent Revenue growth

and nearly a 25 p e ratio forward that's

dumb on top of that earnings per share

are expected to grow nine percent that

puts them at an almost three peg okay

they bring 1.1 to their bottom line

Costco brings 2.6 to the bottom line of

everything they sell

Walmart barely makes money their

valuation is stupid

and then what's Walmart doing they're

paying dividends and issuing BuyBacks

like total morons

of their short-term liabilities and

bills that they have to pay they only

have 11.2 percent in cash available five

times as bad as Costco Costco has nearly

five times as much cash available for

their short-term liabilities as Walmart

does

when you look at their long-term debt

combined you combine their long-term and

short-term debts divided by the cash

they have Walmart has 13.7 times as much

cash as debt or uh sorry 13.7 times as

much debt as cash it's stupid

Walmart has about 2.7 times as much debt

as cash oh sorry Costco I keep screwing

these things up Costco is the better one

Costco is 2.7 times as much uh debt as

cash compared to like the 13x at Walmart

but Walmart's doing well

because people are still convinced

somehow confusingly convinced that the

best place to be going into a recession

is defensive stocks oh well people still

gotta buy toothpaste so I'll buy staples

like Walmart are you kidding me

at a 24 p e ratio with earnings growth

like Revenue growth three percent in

earnings growth at eight to nine percent

this PEG ratio

and phases half the valuation Tesla is

like 60 of valuation like 60 less of a

valuation than Walmart what do you think

is gonna be worth more in five years

don't worry I already did the math our

projection for end phase in five years

is around a two and a half X from here

Walmart our projection for five years

out four or five years out 28 up from

here

what do you want two and a half X or 28

One's Gonna have more volatility than

the other because Walmart thinks it's a

great idea when you have that much debt

and you're paying 500 million dollars in

interest in a quarter they think it's a

great idea to pay dividends and do stock

BuyBacks whatever that's just my

personal opinion right

whatever

those are the things we cover in our

course member live streams by the way

things like that along with real estate

analysis but so what's the bottom line

here well I ask the people I truly ask

the Bears

and it's okay to be bearish I get it you

know I was a bear at one point January

2022. I didn't make I didn't make every

move perfectly Nobody's Perfect it's

okay it's okay to make mistakes

but the point is

I ask the Bears what does it take to get

back to this level

and they just say oh well just wait it's

coming there's gonna be another drop and

it's gonna be even worse than this

because you know we're gonna go into the

real earnings recession or whatever

and then we look and it's like earnings

have normalized and margins have

normalized to 2019 it's like okay so

it's gonna get even worse okay mate

maybe for the Staples

you know you look at chips their

earnings recession is over

you know they had their 30 decline

so now you look and you say okay well

what is it going to take to get back

there oh well a double dip of inflation

okay well where is it

we're slowly trending down on inflation

oh yeah but that's not fast enough

really

by what account does the FED say we need

to get inflation down to two percent now

they haven't even pulled the Fate hat

out of the bag yet when they pull a fate

hat out of the bag we go Moon

because then it's going to remind the

whole world that the FED isn't trying to

get to two percent at a moment they're

trying to get to an average of two

percent over time flexible average

inflation targeting look it up if you

haven't heard about it yet

but beyond that their own projection is

we're going to wait until 2025. so look

this is my perspective uh I do think we

might be a little overextended here in

the short term before the next inflation

report we'll probably have some red days

before that so like short term not

doesn't matter long term the Nike Swoosh

is here I strongly believe in it thank

you so much for watching this video I

really appreciate you hopefully we'll

see you in the next video and uh you

know once in a while have some coffee

out of a princess cup see in the next

one now I want you to know this when it

comes to AI

time is what's going to make you money

and if you can prove that value to an

employer you'll always be able to be

employed so this is another way of

making sure that you don't get replaced

foreign