Critical Shift | The Stock Market Great Reset.

oh boy you just can't make this stuff up

oh one of my favorite sources to go to

to find bears well there are actually

two of them one is T.S Lombard and the

second is the greed and fear index and

both of them have pieces out that just

made me laugh and I'm really not trying

to rub salt in the wound but I'm

actually legitimately starting to get

concerned that being a bull is about to

get very crowded because I'm concerned

that the Bears are all going to flip

over and then we're going to have a

bubble market and then I'm gonna have to

become a bear again in flip-flop this is

crazy but listen to this I I literally

had to write what the f on this document

what the f I kid you not T.S Lombard a

great resource for looking at the Bears

lately has just said the following to

manage the near-term risk of a melt up

we add to equities and go neutral

you should be laughing your butt off

right now the Bears at TS Lombard

literally just said

well even though we're Bears because

we're missing out so much we are going

to add to our stock positioning because

the Market's going to melt up if we

don't well the Market's gonna melt up if

all the Bears flip-flop over because

they realize they've been wrong but oh

my gosh I this is remarkable especially

when you combine this with what we

talked about in the Bank of America fund

survey the other day uh in fact towards

the end of this video I'll include what

we talked about at the B of A fund

survey positioning is so low in equities

right now that of course the Bears have

to flip but let's take a look more at

this let's give the article some respect

here Beyond well what I just did anyway

equities continue to price in a soft

Landing scenario which in our view is

still elusive the US recession remains a

consensusive consensus view right so

because a recession is so for sure going

to happen and the fed's going to commit

another policy mistake of course the

best thing to do right now is to add to

equities because while prices are going

up I mean it it's just becoming an eye

roller but let's look a little bit more

into their detail so here are their

rationales so first they say the

recession is in the cards because of the

late impacts of tighter monetary policy

we've heard that argument a million

times before inflation has started to

surprise to the downside oh darn it that

doesn't feed into the bear narrative it

actually encourages uh assets like

stocks to go up spells especially wages

being subdued meaning no wage prices and

guess what oh yeah risk assets tend to

perform well during disinflationary

periods and darn it there might even be

some short squeezes so you know what

we're just going to have to increase our

Equity allocation

okay that defies logic if that's really

what you believe but okay continuing on

but we do think a recession is going to

happen because of oh no the inverted

yield curve oh no and the refilling of

the TGA which we already know the

refilling of the TGA liquidity pain is a

total myth it's just coming straight out

of the reverse repo facility basically

people like oh no there's a lack of

money at the treasury and then people

who are actually looking at the data are

like dude there's over two trillion

dollars sloshing around in the reverse

repo facility the FED could go like this

and lower reverse repo rates if they

needed to and that liquidity would be

totally in Balance again but guess what

they don't even need to because there is

no liquidity crisis ah it's pretty it's

just ridiculous anyway if the US does

indeed go to a recession it's difficult

to imagine the rest of the world not

catching the proverbial cold so here

they're basically saying if the United

States sneezes everybody else catches a

cold and it's a way to say like this is

why we're still bearish on stocks

because you have to be bearish because

if the U.S goes into recession

everything's gonna get sucked into this

void of Hell uh and so then they argue

but uh you know if we do get a recession

the FED will probably cut rates

aggressively but of course because we're

Bears that's going to be negative at

first before it's positive rate Cuts

would not be a good thing uh at least

initially that because you know stocks

are going to sell off during the

re-stepening of the inversion of the

yield curve right just like stocks sold

off in March during the banking crisis

and the yield curve inverted 50 basis

points in a matter of two days oh wait

stocks were flat and then skyrocketed

thereafter that's right they didn't

actually go down okay anyway the problem

with this logic is that when a recession

starts it's difficult to know for sure

when it'll end so maybe you know even

though some people think they can just

look through a mild recession things

might end up really really bad because

it's uncertain to know when the

recession is going to end

the Bears are now resorting to okay okay

all right maybe maybe stocks won't go

down in an initial part of the recession

and in fact maybe things won't actually

be that bad because after all Germany's

in recession and their stock market's at

an all-time high New Zealand just

entered into a technical recession and

their stock market's barely down you

know like a few percentage points so

maybe maybe going into recession isn't

the bad part maybe it's the fact that

once we go into a recession we don't

know when it'll end and yeah that'll be

the bad part but in the meantime we're

still going to buy stocks this is like

this is an embarrassing piece this is an

embarrassment to the Bears I'll get to

another piece in just a moment I want to

talk about their downside risks here and

then I want to so there are two more

pages three more pages here and then

we're going to jump over to the greed

and fear in uh paper which is actually a

pretty good paper but uh we'll go

through what they're saying they're also

bears but anyway uh so what do you say

here oh yeah don't position yourself for

defensive stocks which would be like

your health care and utility stocks

because oh the recession might not come

soon enough for the defensives to play

out oh that's probably bad for Staples

as well and missing the late stages of

an equity rally can lead to massive lost

returns of in the S P 500 13 to 9 oh so

that's why you guys are increasing

stocks purely because or your stock

allocation purely because of

fomo darn uh also you have s p physician

positioning right now uh that is the

shortest since a 2007 and institutional

investors are pretty mispositioned so

really what you have is you have a lot

of shorts and a lot of misposition funds

that are literally punching the air

right now going this can't be this was

supposed to be a hellish market and it's

all going good in fact when I launched

my ETF people were leaving me comments

going you're an idiot 2023 is going to

be the worst year in a century and I'm

like

bring it on it's been like straight up

from there whatever man so individual

investors have turned bullish albeit

somewhat slightly over here

institutional investors the ones with

the big dollars are missing out and so

now TS Lombard says well mind the short

squeeze because the short squeeze is

going to cause more fomo and blah blah

blah okay let's go jump on over to TS

Lombard oh uh sorry this is TS Lombard

we're gonna go to Greed and fear but

quickly they say uh they're the building

out of a bubble is starting this is like

the classic uh bear argument when the

bearer is wrong for too long they just

start punching the air again screaming

well well fine maybe I was wrong but no

it's a bubble and so the ingredients are

a good fundamental story a compelling

narrative to justify future growth and

liquidity or leverage to take on

speculative wrist risk-taking they

suggest that AI seems to be the place

for that to some extent I think that's

going to actually be true I think that

there will be a bubble in uh in software

AI I don't know that we are yet at

liquidity or leverage because I don't

think individual or institutional uh

investment liquidity is that great right

now for equities so I I'm not convinced

that we have all three pieces yet but I

do think eventually there'll be a

software bubble uh so what do we have

here here's the greed and fear uh

document

there is no doubt that the pain trade is

getting more painful for those Equity

investors still defensively positioned

as confidence grows that AI provides the

next productivity enhancing narrative in

other words it sucks to be a bear right

now especially since AI conveniently

happens to also be disinflationary

greed and fear has to emit again

remember they're Bears okay they've been

Bears greed and fear has to admit again

that this is indeed a powerful narrative

which the cautiously inclined need to

treat with respect in other words all

the Bears need to respect the rally

because it might actually have legs

especially the pick and shovel themes

like chips or designers for chips like

Nvidia and Chip manufacturers huh we've

been saying that for about nine months

but okay all right what else do they

have to say uh okay to talk a little bit

about Microsoft and Apple here okay here

we go now the core issue in the coming

months is which part of the fed's Dual

mandate the FED will prioritize will

they prioritize inflation or employment

in other words if employment starts

unemployment starts Rising will they

blink and cut rates and they believe the

chances that they're going to favor

preventing unemployment and they'll

become more patient with inflation in

fact some will make the argument which

is likely a good argument some will make

the argument that right now the FED is

being so aggressive on inflation because

they have the Liberty to be because we

don't really see the massive job losses

yet yes there have been job losses but

they have not been to the level of

massive yet or really Rising

unemployment above four percent

uh then we've got a bank deposits

starting to rise again so the banking

crisis somewhat coming to an end uh on

page 14 they talk about Chinese

consumers being risk adverse and this

Chinese slowdown yes we already know

that uh and then of course they talk a

little bit about this Shadow banking

crisis about how half of uh the world's

Financial assets are controlled by

non-bank Financial uh systems really at

this point what you're saying is uh the

Bears for greed and fear at least it's

kind of embarrassing but honestly I'll

highlight it here for you this means

that if there is a real problem lurking

the world is likely to find out about it

after the event and not before and

that's actually how they end their bear

piece so think about that for a moment

the Bears are literally on one hand you

have TS Lombard that's like

we're such Bears we're gonna buy stocks

and then you have greed the greed and

fear index uh those folks who are real

big bears going yeah this rally has legs

but but um

did you know half the world's Financial

assets were controlled by non-banks

doesn't that sound like a Black Swan to

you

and then they slam the door shut and

it's like dude that's not a valid

conclusion

anyway I want to play a little bit from

the Bank of America fund manager survey

so let's jump into that but I'll tell

you this is just getting hilarious

now we've got to cover what fund

managers are allocating to and Bank of

America just released the fund manager

survey for this month and they give us

some pretty good Insight in terms of at

least where registered investment

advisors are allocating their clients

capital and what I like to do is I like

to be the contrarian I like to look at

this and go okay where are things

crowded so I know not to go there and so

let's go through some of the individual

sections that I've highlighted the first

and this is not a surprise we started

making fun of this probably around two

months ago we started arguing just wait

you're going to start seeing the

recession calls for Q3 get delayed to Q4

and then q1 and literally look at the

fund manager survey here start a

recession punted into Q3 q1 2024. it

looks like you have most people

targeting at least from the fund manager

survey about 33-ish percent of folks

looking at a recession in Q4 and then

about 25 percent in 2024 with 14 percent

of fund managers seeing no recession in

the next 12 months now note here you do

have this optimism that seems to be

slightly balanced between hard and soft

Landing when you look at the June and

may survey as far as uh aware the the

bias is though it's definitely towards a

soft Landing uh the the hard Landing

narrative only resonates with about 26

27 percent of fund managers and uh but

but most people are expecting a soft

Landing which means not a stronger

economy that's important to consider

because if everybody's thinking of oh

everything's gonna be stronger

everything's gonna be better you know

that that becomes wildly bullish So Soft

Landing shouldn't be considered uh

Stronger it should just be considered

not recession but slower right so any

kind of revisions to the upside where

you actually do in end up having a

stronger economy would not yet be priced

in at least according to fund manager

allocations

this is where you have that Chinese

optimism flipping back to pessimism this

is something we talked about actually

over here specifically I called the

Chinese reopening click bait and the

reason I called the Chinese reopening

clickbait is because first of all nobody

knows clickbait better than I do and so

when I saw it when I saw the setup for

this Chinese stuff I'm like oh yeah

that's clickbait there's no way there's

no way with the lack of savings that the

Chinese have relative to Americans

coming out of the lockdowns there's no

way you're going to get this this insane

boom in China and that that'll end up

driving inflation like people expected

now what you have now is basically

optimism shifting to pessimism but on

top of that yesterday you had an

announcement of some rate cuts from the

Bank of China and so what did you the

People's Bank in China so what you ended

up seeing is you actually saw oil move

up about three percent just on the day

yesterday because China is now resorting

to stimulus to try to basically help the

Chinese get it up and the pricing Powers

just not not happening right now you're

also seeing some of that more luxury

spend that luxury discretionary spent

start showing cracks and and China can

be one of the reasons for that

uh here's another one uh this was just

15 expect stronger economic growth I

find that quite interesting this right

here is remarkable because you you and

and Steve here asks you don't think the

government is going to stimulate in

China no no they will the government

will stimulate but remember that Chinese

stimulus is different from American

stimulus Chinese stimulus is usually

infrastructure spent or corporate

stimulus it is rarely consumer stimulus

and that is a very different slower

moving animal when you when you

stimulate uh businesses and

infrastructure compared to the consumer

which is a very quick and very spendy

animal

anyway looking over here just 15

expecting stronger economic growth

that's a really low number again that in

my opinion means markets still today

even after the stock market rally are

actually not pricing in the potential

for a stronger uh uh growth set which is

remarkable

um no PayPal's not pricing in 6pe

um yeah I mean if you go forward very

very far maybe but uh for the end of

this year PayPal's pricing in just as a

tangent somewhere around uh a 12 to 13 p

e ratio which puts you at about a peg of

one but again if if the growth of PayPal

evaporates from 10 to 12 down to five

percent uh then then you're actually

starting to look you know then you may

as well buy Tesla at a two Peg uh or a

2.4 Peg

so keep that in mind when you're doing

your growth valuations something

obviously we regularly talk about of

course in the programs on building your

wealth which is the perfect time for me

to remind you about these four phases of

price increases we have coming this is

going to be a reward to all the existing

uh course members as we've got large

sets of new lectures coming out for

stocks and psych we're adding AI real

estate zero to millionaire adding Ai and

then more AI lectures in the making more

money in the productivity course but

we're going to have four phases of price

increases the first price increase will

occur on June 16th so check that out and

linked it down below if you want to lock

in the best pricing okay back to the

fund manager surveys and this lack of

really pricing in a strong economy is

shocking to me you have negative a net

negative 62 expectation for a stronger

economy being priced in that's a sign of

really

if we get growth this year and next year

people are vastly mispositioned uh still

today this is a this is a survey that

just came out and despite this stock

market rallying you still have a

mispositioning

only two percent of investors actually

expect higher inflation the inflation's

basically over but the question then is

okay well how long is it going to take

to get inflation debt that's the real

question now

uh so you've got this idea of the FED

flip flop here uh how many people

actually think the FED is done only

about 32 percent of fund managers

actually think the FED is done that's a

flip from what we saw in May but as of

June most people think the FED is

actually going to hike again uh in the

future so we'll find that interesting

uh fed First Fed rate cut expectations

most rate cut expectations are sitting

in q1 2024 so no more rate cut

expectations set for 2023 here or here

you can see those are relatively low

although there's still that chance for

the end of the year

okay continuing here we have investors

wanting companies to increase Capital

expenditures at the highest level since

September of 2022 actually not too

terribly long ago but uh you're you're

still seeing more of this likely because

of artificial intelligence a desire uh

fund managers to see companies invest uh

in their companies rather than just save

money and increase cash although

improving their balance sheet still very

very important which is the blue line

here

cash level you could see cash levels

slowing a bit we're still above the

longer term average of where cash levels

sit the longer term average is the lower

red line and where we sit right now is

the upper red line so right here in

between if I shade this in this shows

you your excess cash position compared

to history according to fund manager

allocations so a little bit higher on

cash allocation than expected

these are month over month changes in

investor positioning you could see

Investments alternative Investments

actually seeing a little bit of a rise

uh this could be like your gold for

example

uh and real estate whereas a lower on

cash for allocations

jumping in over here investors on a

bonds uh less interesting over here in

fact I'm just going to move forward over

here because we have a different segment

that talks about bonds so uh this chart

fascinating compared to the last ones I

just skipped here this chart fascinating

this shows you investor fund manager

allocation to technology stocks versus

energy stocks and what you can see is

Technology stock allocation hit a peak

in April of 2020 during coveted lockdown

period and September of 2015

but if you draw a longer term average of

where technology allocation has been

between 2010 and 2020 ignoring the

2000s.com bubble disaster and the Great

Recession you can actually see we're

allocated somewhat on the low side

relative to where we have been in the

last decade

and frankly I would make the argument

that inflation or or rather technology

allocations today are much more

important that's what I wrote here in

the red much more important today than

where they were uh in the last decade so

I think this low allocation to Tech is a

mistake I started highly allocating to

Tech uh really in this November area

over here I even created a fund uh about

November 30th that was highly allocated

to chips and Technology at the time

everybody made fun of me for it but you

know I guess that's the way it works so

anyway unfortunately this one bothered

me they indicate that even though

allocations to equity are low and growth

expectations are low the most crowded

trade right now as of June 2023 is being

long technology so I thought okay does

it make sense to allocate a little bit

more again to the US dollar and while I

consider that I realized you have a

large opportunity cost of allocating to

the dollar or treasuries given the

potential rise in in equities so that is

a risk

now this was about the opposite that I

thought uh so it actually still is so

this right here shows you the worries

that fund managers have for the market

and what you actually see is fund

managers

are most worried with about a 35 percent

worry level of high inflation keeping

central banks hawkish

followed by a Global Credit Crunch at

about 22 percent geopolitics worsening

at about 16 some sort of Black Swan at

12 13 and AI being a bubble at just nine

percent

I was actually slightly the opposite of

this now that's crazy to think

oops I knocked over one of my lights uh

anyway

so I was the opposite of this the reason

I was the opposite of this is because I

do not I'm not terribly worried about

this I think that this is Click bait so

I'm going to break this down here and

this is what I think is incredible

because you you kind of want to see

where you're different

so I found this to be in my opinion

clickbait I also think this is clickbait

which is the credit crunch so in other

words this higher for longer nonsense

and and the continued hiking I think

these two are clickbait

I'm kind of neutral on Ukraine and

Russia and the impacts on the market as

well as this uh systemic event I'm

actually more concerned about an AI

bubble

and the reason I'm more concerned about

an AI bubble is I think that people are

really misallocating to Software

I think that a lot of fund managers

don't know anything about artificial

intelligence and don't realize uh to

some extent and it depends on the type

of application to some extent how easy

open Ai and some of these language

models have made it to create an AI

startup or AI software

in an example I'd like to give you is

Snowflake and this hasn't played out yet

but consider this c3ai has all has been

running on this idea that it's

Enterprise Ai and oh you know they have

emote in Enterprise Ai and nobody's

better than c3i at Enterprise AI so what

does snowflake do yesterday they come

out and announce Enterprise Ai and it

made me think wow you know that here's

the direct risk and now a direct

competitor to companies like potentially

a palantir or a a snowflake when you

have or sorry not snowflake to announce

it was Salesforce here's a direct

competitor to Snowflake and palantir and

c3ai Salesforce just boom now we have

Enterprise AI and the reason I say that

is these companies have so many massive

teams dedicated to creating the software

Suites that people are going to spend

money on that software competition for

Enterprise AI is about to explode and

it's actually going to give the

government substantially more uh choices

in determining what's best for them

that's a competitor to Gotham uh for a

palantir and it's also going to create

competition for Foundry over at palantir

which is their commercial Enterprise

segment and my point of this is I think

fund managers are over allocating to

software when it's really unclear who's

going to win from the software AI LED

Revolution

and I'm not going to make bets on

software I've actually been reducing my

exposure to software because I think

it's too bubbly and frothy I would

rather allocate more to chips and Chip

manufacturing than software I could end

up being wrong about that

but I don't think I will be because I

don't think any of us know who is going

to profit the most from Ai and remind

remind yourselves of that I'm not saying

who's going to have the most customers

or who has the best software we're going

to say who's going to profit the most

from the software that's a very

different question and that is a

question that I remain unconvinced on

because the barriers to entry are like

nearly zero and it depends what you're

doing with AI right

that's where the barriers because if you

have to train a model and your IP is the

way you've trained a model then that's

unique but if your IP is well we'll make

a software suite for you so you could

use chat GPT you have zero mode and

quite frankly you deserve virtually no

profit

so it depends what the offering is I

suppose

okay speaking of offering have I shown

you the price increase schedule how

we're raising prices for in four phases

for the courses on building your wealth

people ask me Kevin why are you raising

prices you're contributing to inflation

first of all I'm not because I'm not in

this inflation report

uh otherwise I suppose I would be but

second of all uh we keep adding more

value so if you adjust for the value

we're adding the courses are actually

deflating even though the nominal prices

are going up the value you're getting is

going up uh it is so much more that uh

that your nominal payment to set it's

actually less or the real payment there

you go that's that's the way to put it

the real payment is actually less so

risk barometer you could see some more

risk appetite coming in for fund

managers look at this folks look at that

rotation away from Staples and cash we

saw this coming a mile away finally

you're seeing that walk away from

Staples over here finally look at these

fears now if there's one chart that made

me very very excited it was this look at

it over history fears plummeting in the

fund manager survey like if you go to

the bottom of this look at some of these

fears EU sovereign debt funding crisis

the collapse of the EU Chinese hard

Landing geopolitical crises U.S Festival

Cliff this is all back to 2013 2011 2012

EU is going to fall apart the oh no the

FED in 2018 the trade war covid and if

you actually look at where we sit on the

fear level right now if I take a big

highlighter and draw it through the the

sort of fear level we we probably sit

right about here which is a little bit

on the lower side of fear for high

inflation and a credit crunch or a

systemic credit risk or whatever or

hawkish central banks we're actually not

that fearful right now but not only are

we not that fearful with fund managers

right now look at these asset

allocations here these show you now this

is a little complicated to read and I

got to be quick because we got PPI

coming out so you're ready for this

let's summarizes quickly see the Blue

Line the blue line or stocks going up

see the light blue section right here

those are allocations fund manager

allocations to equities are 32 percent

underweight that means there's still a

ton of money sitting on the sidelines to

go into stocks which is insane in fact

these fund managers are still overweight

bonds see that little blue the little

blue lines over here there's still

overweight bonds and they're still

overweight cash a lot this is insane how

much fund managers are still underweight

equities even though they've gone

bullish long tech they're still way

underweight equities which is

mind-blowing to me you're underweight

real estate and equities well we got to

talk real estate as well as some real

estate opportunities uh and then Global

uh Global Tech Global that's different

because you get the Emerging Markets

built in there still low but a little

bit more allocation to Global Tech

compared to just American Tech so bottom

line when you look at this fund manager

survey what do you get while the fund

manager survey is screaming at you that

finally fund managers are realizing you

have to go long U.S tech but they're

still way underweight U.S tech there's

still a lot of money sitting not just on

the sidelines for cash but in bonds and

I think as we start seeing real estate

liquidations from institutions which

we're starting to see you'll see more

money flow into equities and that's all

very supportive to equities even though

things feel somewhat bubbly right now

there's actually a lot of Tailwind still

behind us which is insane