THESE Stocks are DYING | Big U-Turn

hey everyone kevin here stocks are all

of a sudden starting to sell off a

little bit midday now oftentimes we do

get a midday sell-off so it would not be

a surprise to rebound from some of the

madness that we're experiencing right

now but why is it that all of a sudden

we're seeing a little bit of a drawdown

on the s p but also multiple other

stocks specifically software stocks

getting hit particularly the hardest

hardware stocks are the ones that are

really doing well especially those with

margin but look at some of these folks

software software software software

software software everything here's

software look at this toast cloudflare

monday.com fastly all these guys down

ten to eight percent twilio uh you know

you've got some in here uh like newegg

or dutch bros or moderna selling off for

their own particular reasons but

software

snowflake getting hit here unity getting

hit zoom getting hit bill.com getting

hit lemonade getting hit roblox getting

hit draftkings getting hit smile direct

club getting hit c3ai getting hit i mean

these are all those are just the five

percenters trade desk under a hundred

robin hoods getting wrecked on mostly on

their lockups but that's a topic for a

different video holy smokes why all of a

sudden are we seeing this massive

software compression and why

are hardware stocks doing better and why

all of a sudden is the market u-turning

intraday like this well part of the

reason the market is u-turning is

because of the following it has to do

once again with our good friends over

in congress

if you have not yet watched my warning

for december of 2021 video that is going

to be relevant all month i highly

encourage you to watch it but one of the

warnings was that congress has just

until december 10th to actually get

their job done

pass the buildback better plan in some

shape or form pass a budget and extend

the debt limit well now

democrats and republicans because they

realize this is unlikely to get all that

done in the next 10 days democrats and

republicans are like well

maybe we could just kick the can down

the road to january and we'll deal with

the budget in january we'll just we'll

just kick the can down the road again do

another stop gap measure because we

don't know how to get work done around

here

great fine

but now we don't have an agreement on

that

it is now appearing increasingly likely

as reported by bloomberg that congress

will not get a stop gap measure

agreed upon

certainly not by the end of this week

that's that's not looking expected at

all but by december 10th which is the

deadline which means we could literally

be increasing the odds of running into a

government shutdown again debt ceiling

crisis

increases the pain

around uncertainty in the markets here

and on top of that you just had jerome

powell and janet yellen testifying

before the

house financial services committee

discussing the impact of inflation about

how inflation is lasting longer and is a

lot larger than expected

now one of the things jerome powell says

about this and it's worth noting jerome

powell mentions hey look this is because

of the massive supply chain constraints

that we have not because we printed too

much money

he argues that a lot that look he says

old school thinking is that when you

print money you expand the monetary the

money supply the supply of money and

then you have inflation jerome powell

says hey that used to be true but that's

somewhat old-school thinking because

that changed about 40 years ago he says

that about 40 years ago we started

seeing a transition to where all of a

sudden what matters much more is

actually supply and de demand and the

dynamics of supply and demand

and as part of that has to do with the

velocity of money but part of it just

has to do with the way the economy

actually functions and that's why we've

seen consistent deflationary trends for

about the last 40 years since coming out

of the 70s and after paul volcker went

ape on inflation

now you do also worth noting have the

ecb kind of responding in a similar way

the european central bank says look it

would be wrong to tighten right now

because if we tighten right now the

price pressures that we have right now

are probably likely to fade by the time

our efforts to tighten now actually take

effect that's because there's usually

about an 18-month delay in how long it

actually takes to to see monetary policy

take effect so if you start tightening

now that tightening really hits the

market in about 18 months but if by then

all of a sudden the supply chain

constraints go away inflation pressures

go away and now you're tightening in a

market that's growing slower and prices

aren't going up now you could actually

push yourself into deflation which is

deemed to be even worse now in fairness

though germany just hit the highest

level of inflation that they've had

since

1992 that's when i was born belgium 5.6

inflation germany 6 inflation

same in spain high levels of inflation a

lot of it having to do with energy

prices going up surprisingly rent's not

going up that much only about 1.4

percent but uh goods up 5.2 services

only about 2.8 in germany uh just some

notes about how kind of some things are

acting across the world obviously turkey

over 20 inflation brazil over 10

inflation so we we are in a global

inflationary crisis right now and jerome

powell is reacting a little bit more

hawkishly than uh anybody has really

expected we all of a sudden saw jerome

powell go from dove to hawk like

overnight and it's freaking out markets

a little bit look at what's doing well

today folks it's crazy but it's also

somewhat expected companies with margins

ford uh hp

mattel

weber companies hardware companies right

hardware product companies apple lucid

lowe's western digital seagate not a lot

of the software companies are really

kicking butt right here the fact that

google's up is actually a surprise

you know some of the auto is doing well

today but it's for some reason we've got

this weird uh sort of divergence between

the software companies like cyber

security or artificial intelligence and

hardware i don't know why this

divergence exists right now but it does

it's pretty bad and it's getting worse

right now it's not getting better so

it's definitely something to keep an eye

on and this is something that we've been

talking about for a couple weeks on this

channel in fact if you're not super

familiar with it you got to ask yourself

why you're not part of the stocks and

psychology of money group yet where we

talk daily about what the heck is going

on in the market you can ask questions

one of the things and check out that

cyber monday coupon code that ends

friday it's cyber monday week but anyway

one of the things that bloomberg told us

a week and a half ago was that if we

continue to see uh inflationary

pressures and we see rates go up over

the next few months to a half year

then we're likely to see valuation

multiples for software companies come

down and that could lead to valuation

compression of over 20 for software

companies this is one of the reasons

we're seeing a lot of pain in the

software companies right now so it's

worth noting that in addition to the

disaster that is congress

and the fact that when you see well wait

a minute kevin why why then is hardware

going up well ism manufacturing lead

times are showing that we might be

actually kind of at a peak of peak pain

when it comes to supply chain shortages

we've already passed peak pricing for

containers we're now passing peak lead

times for hardware so it's kind of no

surprise that the hardware companies are

doing better right now whereas the

software companies that were previously

a little bit more of the sort of safety

getaway during the supply chain crisis

are seeing a rotation out of those

and into the hardware companies my

expectation combined with the fact that

we've got a lot of uncertainty with

congress

leading to this kind of rotation in

addition to of course end of the year

profit taking or loss taking so these

are some things that we're seeing right

now worth watching this in the market

we'll see how this develops make sure to

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