The ONLY Thing PREVENTING the Recession is FAILING | Warning

now we got to talk about the disaster

that could actually be facing us and

yeah it is the recession because we've

regularly been talking about excess

savings and how excess savings or

potentially the white knight in the no

Landing fairy tale oh crap yeah that's

exactly what uh analysts are now

suggesting that this idea that we can

keep flying uh in the economy without

having to land either via a soft Landing

or a hard Landing recession suggests

that everybody's just going to keep

spending through this recession and as

long as inflation Trends down we're

Gucci everything will be just fine after

all Bank of America has widely told us

that hey look people who used to have

2500 to 5 000 in their bank accounts now

hold somewhere around 12 800 in their

bank accounts and that has only been

drawn down by about 4.4 over the last

year that really suggests that hey if

people have a lot of excess money maybe

they could keep spending keep Doling it

out and actually lead to a GDP increase

now that's very interesting because the

GDP increase would obviously mean no

recession no recession and continued

spending might mean that Consumer

Staples which I personally think are

going to get reamed in a recession

particularly companies like Procter

Gamble Johnson and Johnson any kind of

restaurant uh Target Walmart Costco you

name it I personally think they're all

going to get reamed under substantially

higher costs they're all scrambling to

find more productivity or ways to be

productive even Tyson Foods is freaking

out like we got enough employees now we

got to figure out how to be more

efficient because we're not hiring

anymore because we got enough employees

okay the excess savings though

is potentially dwindling away but at

what level and that's what we want to

pay attention to because the only thing

that in my opinion could potentially

save the Staples and restaurants or the

companies that I just mentioned or xsa

but unfortunately Jamie dimon the CEO of

JPMorgan Chase does not see inflation

coming down fast enough certainly not by

the fourth a quarter in fact He suggests

that the Federal Reserve could end up

being substantially more patient rather

than necessarily continue to hike but

just remain at a high level for

substantially longer than the market is

anticipating Now by some accounts it's

entirely possible that the Federal

Reserve needs to hike rates up to five

and a half to six percent hike rates up

to five and a half to six percent before

they're done but they could actually

potentially remain at those high levels

for so long that once access savings are

depleted and they have less liquidity or

less access to credit we can actually

end up seeing the real pain from this

recession now Bloomberg economics

believes that households today have at

best 12 months of excess savings Runway

at worst case scenario six months left

that puts the recession in alignment

with when excess savings run out of

between September of 2023 and March of

2024 Bloomberg economics suggests that

excess savings are somewhere potentially

as high as 1.7 trillion dollars however

that 1.7 trillion dollars may not

account for Capital losses that people

have incurred due to Investments they've

made over the last couple years losing

value when you consider that excess

savings might only be 1.4 trillion

dollars and the uh the the Bloomberg

staff actually believes that a lot of

that 1.4 trillion dollars might end up

being really illiquid so Bloomberg

suggests what if only or what if the

excess savings we have are actually way

smaller than the reality or than what we

actually currently think there are in

other words what if we run out of this

excess savings way sooner than we think

remember right now we know that the X

excess savings or just the savings rate

in America has fallen to ridiculously

low levels right you could just Google

that St Louis a Fred and type in savings

rate and you'll see that the savings

rate has fallen to very low levels this

is a very common argument of the Bears

the bars pull up the savings rate and

what they like to suggest is well look

the savings rate is plummeted therefore

we're going into our session and if we

just zoom into about the last 10 years

yes the savings rate used to sit around

seven percent it exploded during the

government's stimulus payment era that

makes a lot of sense but we've actually

seen that savings rate plummet to levels

as low as somewhere around three percent

and potentially now sitting around four

and a half percent which is well below

that trend of average of about 6.9

percent before the pandemic so we have a

below Trend savings rate that's what the

Bears say this is bad this is a red flag

the Bulls counter that and say but we

have so much excess savings well

Bloomberg is now countering the Bulls

argument and saying maybe we have excess

savings but what if a lot of that is a

liquid let's try to look at some real

estimates that Bloomberg suggests

Bloomberg thinks the people with the

lowest sixty percent of incomes have

just 566 billion dollars in excess

savings that works out which sounds like

a lot but when you consider sixty

percent of the population divide that

out that works out to only one to three

months of excess savings that means as

soon as this next quarter that is the

next three months March April May which

is not really a calendar quarter but

it's just a quarter right over the next

quarter we could potentially see Staples

start getting whacked because the poor

people that is the lower 60 percent of

individuals that is the poor 60 I know

that might sound offensive but it is

statistically what it is I'm just gonna

stick with the statistics here okay

lower 60 percent

might have to start cutting back

substantially within the next one to

three months that is a big red flag if

you are exposed in my opinion to any

kind of stocks that are exposed to lower

income spending let me tell you the

opposite who is not exposed generally to

that lower sixty percent Tesla apple and

phase semiconductors solar Edge see what

I'm doing the people who spend money on

more expensive devices more expensive

cars more expensive home owner

Investments like energy more expensive

chipsets which companies Buy in servers

buy those in my opinion are going to be

companies are going to be insulated from

this lack of spending that makes sense

that doesn't necessarily mean that's

exactly what's going to happen but it's

one of the reasons I have a strategy

called focusing on investing in High

free cash flowing pricing power stocks I

believe companies that are selling stuff

to people with more money have pricing

power even during a recession I believe

those companies are recession resilient

now that doesn't mean they're perfect in

a recession they can still draw down and

be very very volatile but I think coming

out of the recession and even going

through the recession they will fare

much better than other stocks that's

just my belief that's my investing

thesis who knows but Bloomberg Economist

is now calling for or Bloomberg

economics I should say is now calling

for a recession in the second half

assuming savings run out in the next

three months for that lower 60 however

if the savings last longer they believe

the recession could begin at the

beginning of 2024 so it really sort of

aligns with that estimate that probably

between September and March is where

we're looking at it now Bloomberg

economics

suggests that uh there are two different

estimates if we have around 770 billion

dollars of excess savings per person not

just the lower 60 but for everyone we're

sitting at around five thousand nine

hundred dollars of savings per household

if we have 1.7 trillion the higher

estimate we have around 13 000 of excess

savings per household but again we have

to potentially adjust that for how much

of those savings are illiquid or how

much of those have suffered from Capital

losses because they've invested money

and lost money and what happens when

household savings and household wealth

starts declining and then all of a

sudden the wealth effect kicks in where

because home values are going down

people start spending less money on

residential improvements

which also could affect energy stocks or

battery related stocks right and what do

you end up having you end up having a

recession now the good news is you have

a lot of companies like yesterday we

were looking at a geothermal company uh

fantastic geothermal company evaluation

well I'll save the valuation for the

course member livestream but we went

through a geothermal company it's

probably it's the largest uh one of the

largest in in the world uh and uh and we

talked a lot about sort of its balance

sheet and its revenues and its cash

flows and its valuations uh and really

the future for the company uh but anyway

uh that company was specifically talking

about how battery costs seem to be

declining because of less EV spending in

China

kind of interesting also a red flag yes

for Tesla but also specifically for byd

which is generally appealing to a lower

income audience right anyway

Bloomberg economics goes on to say that

as wealth increases the savings rate can

tend to be less so they're trying to

counter argue this lower savings rate

they're basically saying look if people

feel richer they don't necessarily have

to save as much money

that they do save money when they get it

from the government but they don't

necessarily have to save as much money

if they have more wealth so it is

possible that we do still have a lot of

excess savings the big question though

now is how much do we have enough excess

savings to get us through the next three

months or enough excess savings to get

us through the next year and when we

align this with inflation obviously if

we only have enough excess savings to

get us through the next six months from

poorer folks well then you're going to

see Consumer Staples get hit first and

hard and that recession comes sooner

if it takes us two years to get through

inflation well then potentially

everything gets whacked the lower income

related stocks and the higher income

stocks if inflation goes away by the

beginning of 2024 and wealthier people

still have excess savings and poorer

people don't then maybe only Staples get

whacked and the more expensive stocks or

more expensive selling stocks the ones

that sell stuff to people with more

money maybe those don't get hit as hard

so you're kind of playing this

teeter-totter game where based on excess

savings we're going to determine how bad

the recession ends up being for how many

different companies now what's also very

interesting and in my opinion very

relatable to what you have here on

YouTube is the following the suggestion

that lowest the lowest income households

have stopped accumulating Financial

assets as early as 2022 and in early

2022 they suggest I should reread that

correctly they stopped lowest income

households have stopped accumulating

Financial assets early in 2022. now

that's actually really interesting

because if you look at Finance in

YouTube

you will see that Finance YouTube

viewership has fallen off of a cliff

across all of Finance it's not just some

individuals it's all the finance is

getting whacked there's a reason for

that it's because lower income

households who were interested in

finance in 2020 and 2021 are no longer

as interested in finance Bloomberg is

reiterating that I'm taking an anecdote

to reiterate that as well that's very

interesting because that's sort of the

cyclical Trend when you get everybody

interested in finance fees are up less

people are interested in finance views

or not personally I almost wonder if it

potentially makes sense to time how you

invest in either stocks or real estate

based on finance viewership on YouTube

if everybody is watching real estate

videos on YouTube maybe everybody's

trying to get ready to buy real estate

if real estate YouTube videos aren't

doing that well maybe less people are

interested in buying real estate because

it's a tougher time and cash is less

readily available it's really

interesting it's something I'm paying

attention to because I think that the

people who watch my content are people

who are probably mostly between the ages

of 25 and 45 and are looking to build

their wealth and build their income

that's obviously why I have courses to

add even more perspective to what I can

provide on YouTube going to the course

member live stream after this video for

example

uh but what's really important is that

when you lose sort of the fringes of the

the other income either younger people

or people potentially with less money

it's a sign that the market is getting

tougher right obviously that aligns with

the market obviously it aligns with what

we're seeing with excess savings if

people don't have money to invest

anymore what's the point of watching

Finance content very interesting now

credit card interest rates are expected

to reset substantially higher uh

throughout the rest of this year as well

which will crimp uh substantially excess

savings as well and Bloomberg basically

says the runway is not long enough for

us to get through without a recession

they're basically calling for a

recession because we do not have enough

excess savings to prevent a recession

there's no way is what Bloomberg expects

and again I've said it many times in

this video which stocks I think will do

the best and worse but let me give you

an example of one that isn't doing so

well right now

Dick's Sporting Goods just posted its

smallest quarterly gross margin since

the first quarter of 2021 heightened or

because of quote heightened promotional

activity during the holiday season to

basically put pressure on margins due to

massive discounting but it's not just

retailers who are massively discounting

it's also manufacturers who are starting

to see it we are seeing the strongest

weakness in two years of growth for

manufacturing right now new ISM data

shows that we are down in manufacturing

1.7 percent from May of 2022 roughly the

peak on a three-month average now that

might not sound like a lot but remember

for you to have growth you need

everything to grow like stuff needs to

go up not down if GDP was negative 1.7

percent it would be terrible that is a

bad GDP decline I mean a soft Landing is

like a negative point two percent GDP

negative point or one point seven

percent would be terrible ISM orders on

a three-month average basis moving

average down 1.7 percent so the

retrenching is starting manufacturing

does only represent 11 of GDP but it's

an early indicator of recession

now people are remodeling less they're

buying less appliances they're buying

Less Furniture they're buying less

carpeting uh all of these items are down

15 in January year over year by the way

previously uh owned home sales are at

levels that we haven't seen since the

crash of 2008 because less people were

moving so less people are investing in

homes people usually buy new things

after they move you get new appliances

after move right machineries down 1.8 uh

steel and iron metals are down 3.8

percent these sort of primary medals the

output of plastics uh and and other sort

of industrial goods are also down in

other words like basically good luck

like recession is coming job gains in

the last three months have hit the

slowest Pace in the last 18 months so

last three months slowest Pace in the

last 18 months we're gonna need luck

essentially to avoid a recession at this

point car production still hasn't

recovered business inventories and Q4 or

higher in November and December than at

any point since 2009 Great Recession

you've got a pile up of inventories

that's also now hitting sub suppliers

think about it if you sell t-shirts like

custom printed T-shirts you're looking

and you're like well we don't need to

buy as many new printing presses because

we don't have as many new orders but now

we also have to buy less ink for our

silk printing or however that's done we

have to buy less cotton or yarn or

stitching or whatever everything gets

hit when the economy slows down

construction demand is expected to fall

11 this year it's it's all a disaster

like when it comes to excess savings and

the disaster uh that is pointing to a

recession you got to be really careful

it is a hard time to invest right now

again there's a reason why I personally

am trying to focus on software related

companies where I think the spending

will continue

ships

Apple Tesla uh some of the energy

companies that are starting to look like

a juicy deal although there's still more

downside ahead especially if real estate

weakens even more and this is where you

really want to pay attention to that

10-year uh yield curve because right now

you're sitting at about 3.96 on the

10-year it's expansive it's going to

hurt real estate absolutely going to her

so anyway this gives you a lot of data a

lot of info hopefully you found this

helpful if you like this my goal is to

stream every day uh basically every

single day no matter where I am I'm

going to Florida later this uh actually

I'm flying to Florida today oh good lord

I gotta be in Puerto Rico tomorrow back

in Florida oh there's a lot to do but

anyway my goal is to still provide the

value every single morning all right

before the Market opens jpow does speak

at 7am this morning so in about 33

minutes hey thanks so much for watching

and subscribing as well as sharing the

videos in case you've enjoyed it make

sure to consider getting more

perspective via the links Down Below in

becoming a millionaire through real

estate investing one of our most popular

courses zero to millionaire real estate

investing that is often bundled with the

stocks and psychology of money group or

the do-it-yourself property management

and Rental Renovations guide after that

you can also check out the elite

Hustlers which has its own special

exclusive live stream for people looking

to make more money as an individual

earner or that is as an entrepreneur or

as an employee and of course a check out

the other programs specifically for

agents or YouTube content creators