going short Tesla stock.

hey everyone me Kevin here today I'm

going short Tesla I really hate to say

that and it breaks my heart I also feel

stabbed in the back because that might

be what you're feeling you might feel

like wait Kevin how could you do that

you love Tesla and that's true I do you

know

that but I feel stabbed in the

back and a lot of it doesn't even have

to do with Tesla has to do with what I

think the Federal Reserve is about to do

to

us I don't think people are paying

attention to it in this video I'm going

to explain it's not good so hear me out

while I know you might think oh this is

short-term minded short-term trade

you're right it

is it is a short-term trade you're right

I love Tesla I love Optimus and the

hopium of the long long term but the

short term well let's just put it this

way hear this out first of all we need

to look at inflation we all know this

there's something known as the

CPI U and then the core CPI U this gives

you a slightly different non seasonally

adjusted look at consumer prices and one

of the things that's really fascinating

about this particular chart here is look

at the rate of decline from July of last

or July of 2022 we basically saw CPI

come straight down which is fantastic

that's great inflation was proving to be

transitory the blip was here and it

would go away however progress on the

decline of CPI has faltered it's

substantially slowed it's one of the

reasons drum recently has stopped

referring to the three and six-month

Trends because he's worried that the

12month Trends on inflation are

stagnating and he's not wrong now this

is not the core CPI measure the core CPI

measure gives us a little bit of a

different look it suggests that

inflation is substantially coming down

but that that rate of decline has really

slowed somewhat similarly if you don't

look closely at this it looks like hey

but it's declining we're good

right not so fast let's do some very

very simple math look at the decline

between September 20th so that would be

right around uh September 22 that is so

September 2022 right around here this

peak right here September 22 to

September of

2023 you went from a number of

6.64 down to a number right here a 4.1

that's roughly a

2.5% decline that's as we sort of lap

the year-over-year high fing figures

okay that works out to a decline of 21

basis points per month well the decline

from September 2023 to February

2024 which is a 6month period right

September October November December

January February I know I had to count

like six months yeah 6 months okay we

have only seen inflation decline

approximately half of a percent and I'm

being generous it's really more like 44

basis points or so so that's that's

generous uh 44 48 right around there so

call it half okay we're going to round

in favor of more of a decline well half

a percent decline divided by six is only

a six basis point decline per month in

other words from here to here we were

declining at a rate of 21 basis points

per month boom boom boom boom boom now

we're in we're seeing inflation go down

at onethird the rate so in other words

inflation is going down way way slower

and then of course we ask ourselves wait

a minute Kevin how could this be because

every earnings call that we look at we

see inflation plummeting I talk about it

all the freaking time inflation

plummeting plummeting but all the

earnings calls but then I found the

error in my ways think about it we look

at earnings for companies like cocacola

Nike Lululemon Apple Tesla all the fun

things in our life the things that we

touch and feel around us but what do we

not look at earnings calls for

frequently and maybe we should be well

things that relate to structural

deflation versus the cyclicals now

that's a complicated word but think of

this cyclical is just stuff that goes up

and down with the market cycle right so

us spending on consumer

discretionarily get into a tightening

cycle those tend to see more deflation

and those have seen a lot of deflation

there is no doubting that there has been

a lot of deflation in those areas in

fact here's a chart that shows you

cyclical deflation uh essentially or I

should say inflation it's technically

still inflation but it's over here at

like 4% see that white line how the

cyclical inflation has

plummeted but what about structural

inflation which are going to be the

non-fund things that we don't really

look at earnings calls that much for

like insurance companies for health

insurance medical care services Hospital

earnings reports or rent lockin effects

those are structural and unfortunately

structural cpis fall has stalled and

that's a problem and so in just one week

we get the Federal Reserve who is going

to provide us a new summary of economic

projections and in this summary of

economic projections they're going to

have to decide hey do we have an

unemployment situation that calls for

rate cuts no do we have a situation

where Financial conditions have gotten

so tight that we need to imply loosening

for this fed meeting I don't know let's

go look at Goldman Sachs uh the Goldman

Sachs Financial conditions index let's

pop on over here there it is Goldman

Sachs Financial conditions index what do

we see oh Financial conditions are as

low as they were in 2015

2015 and 14 I mean for a brief moment

over there at the end of 2018 Financial

conditions are looser today than what

they were at the end of

2018 and and of course going back to

20145 is more relevant so why is the Fed

going to come loosen Financial

conditions next week well certainly not

to help unemployment labor market is is

still pretty dang tight in fact this

morning we were looking at Goldman Sachs

and TS Lombard analysis on the labor

market and what do we find the

suggestion that the labor market might

seem like it's loosening but TS Lombard

says no it's not the only reason we're

seeing the households report go negative

is potentially because you're seeing

self-employed people get jobs because

the jobs Market is so good and small

business World ain't which sucks so in

other words it it's again those medium

and large businesses that are collecting

all the employees they can because

business is actually good for them but

most self-employed people are like I

don't know the Market's kind of sucking

or most people having to go buy

groceries or normal things in their life

are like I don't know man this this

economy kind of

sucks it's the big boys making all the

money off all their 5% interest rate

yields on cash they're making all the

money that AI

plays so what do you have well you don't

have a situation where you exigent

exigent need to cut rates for

unemployment you certainly don't need to

imply doish to loosen Financial

conditions because really if you loosen

Financial conditions anymore oops wrong

chart if you Lo loosen Financial

conditions any more than this you're

probably just going to reiterate that

stagnating of structural inflation

that's High I mean I'll give you an

example structural inflation just so you

can kind of try to internalize this a

little more because it is a little

tricky when Market rents go up what do

you think your landlord does to your

rent they jack up your rent right that's

why they're movements for rent control

to stop rents from going up when Market

rents go up well technically the free

market when rents go up your rent should

go up technically not saying we like it

when rent goes up but that's technically

what should happen Okay so what happens

when Market rents

decline well in order for you to capture

that rent decline you have two choices

your landlord can reduce your rent good

luck with that or you can move but the

reality is only about 3% of households

move every every single

year so most people are going to get

stuck with structurally higher rent than

what Market rents actually are your rent

will be here Market rents will be here

and then you'll be like landlord I'm

going to move and the landlord's going

to be like go for it and then you're

going to go is it really worth it I'll

just pay the rent and stay because

nobody wants to move that is a form of

keeping structural inflation higher so

everybody bags on the owner's equivalent

rents you know and the way CPI measures

rents but I think it was Morgan Stanley

that got me thinking about this over the

last few weeks I'm like wait a minute

rent realization at lower levels usually

some landlords will lower rent the good

ones uh but rent realization usually

only occurs when people move that's hard

if anything if people are going to move

it might be a good time for those

Furniture stocks look at what William

Sonoma did to Restoration Hardware and

warfare today those suckers are sitting

at like 1.2 pegs with like 40% growth

rates projected

those are sexy right now low valuations

because people are thinking oh nobody's

moving because rates are so

high so you know have those bottomed out

who

knows but the point is the Federal

Reserve is not looking at necessary

loosening in fact the Federal Reserve

has bluntly told us they are more

interested in looking at quantitative

tightening that is softening their

tightening which is another way of

easing then potentially reducing rates

too significantly bosk went as far as

saying maybe we'll cut rates once in the

third quarter and then not again because

see rates are this lever that let you

protect an economy that goes into a

recession but if there's no recession

why cut rates in fact there's an

argument to be made that the FED doesn't

even have to cut rates at all this year

in fact if you look at another source

from the Atlanta fed which I hate to say

it but the St Louis Fred the St Louis

Federal Reserve retweeted this Atlanta

fed chart talking about sticky inflation

this was not good so here's a sticky

inflation chart and if I go over here

and I remove the uh non-sticky so let's

go ahead and reset this chart there we

go you can see sticky inflation is

sitting over here at 4.4 4.9 4.8% it's

been stuck there for a while the rate of

decline has slow just like we saw in CPI

CPI core and it's twice what it used to

be for the sticky categories insurances

rents right the things that are slower

to fall the structural things yes

eventually they'll fall great fantastic

maybe eventually something will break

but doesn't seem like that's near and

when it is you could always move back

into interest rate sensitive stocks

right the bigger problem that you really

want to focus on right now in my opinion

is this this uh let me uh let me do this

there we go okay the bigger thing that

you want to focus on is this chart this

chart right here is the December summary

of economic projections December good

old December you know what December says

December says oh yeah yeah rate Cuts

yeah rate Cuts can happen in fact in

this December summary of economic

projections the Federal Reserve

projected that by the end of

2024 we would have rates at

4.6% and at the end of next year 3.6

then 2.9 in 2026 then 2.5 in the long

term now there are a few things that

make me very nervous about this this is

a signaling tool the Federal Reserve

does not need to Signal something that

is actually going to happen they use it

as a messaging tool they could totally

signal right hikes in theory and then if

poop hits the fan turn around and cut

they could always do that so this is

manipulation now I've gotten a little

pissed about the Federal Reserve because

I feel like I got lied to now I'm not

blaming the fed I'm not going to be one

of those folks that are going to be like

you know what I made a mistake I lost

money in Tesla over the last year

because the FED lied to me no I made a

choice I have to bear the

responsibilities of that Choice that's

me I'm a big boy I take responsibility

it was my fault but something that has

contributed to my realization that

shisa the FED is

foolish is that in 2019 they passed a

4-year monetary framework called

flexible average inflation targeting

nicknamed fate I should have known it

was from when I heard that the

nickname was fate because it's too good

to be

true or maybe I I don't even whatever

well jpow rolled on that last week in

Congress suggesting yeah we only did

that to try to increase inflation

expectations because we were running

below Target now we're running above

Target so we don't really need flexible

average inflation targeting anymore oh

fantastic thanks JP that's because back

then we were sitting at 1.7 1.8 on the

5year break even inflation rate now

we're sitting at 2.42 we got to bring

that sucker down cuz we're anchoring too

high so the FED needs to hawk more how

do you think they're going to Hawk folks

I'll tell you exactly how they're going

to Hawk they're going to use this

messaging tool and they have two of

these tools coming up okay look they get

to Hawk in March then they're going to

pause in May so that you hawk right here

see what happens and then wait and see

then pause and then what happens June

comes around you get another Hawk

opportunity why because this is an SCP

meeting and this is an SCP meeting this

is not an SCP meeting and then that

would make sense if we have a rate cut

maybe you cut in July you've got four

meetings uh you know than than to cut

rates if you really wanted to but I

don't think this March summary of

economic projections is going to be

beautiful why well because the first

thing that they're going to have to do

is they're probably going to have to

raise their core PC targets based on

movements and like the stickiness that

we've seen that's not great but in

addition to that see this fed funds rate

over here at the bottom that is what I'm

going to pay attention to as subject to

the most amount of change that makes me

nervous why does it make me nervous well

because the FED is very simply going to

look at this chart right here this is

the Nick T shared on ec.com six and

three month charts Rising again for pce

core consumer price index oh this is

actually CPI Nick T tweets both of these

charts PC and CPI versions but anyway we

see that Resurgence in the 3 and six

it'll move the 12 and that in my opinion

will necessitate Drome Powell and the

board coming in here and Hawking this

number I'm going to give you my

projections that number is not going to

be 4.6 it's certainly not going to go

down there's no way it goes down there's

no way they price in more Cuts in my

opinion I could be wrong I'm just a

human I make mistakes too but I I just

want to be honest with my audience and

and and everybody that that you know

follows me you don't have to listen to

me you know I'm not your personal

financial adviser you know that I just

try to share my perspective with you I

think I'm really good at real estate uh

I think I'm good at identifying

potential issues how to trade around

them that's a lot harder and ultimately

how to trade around them I think is up

to everybody else but I mean remember

back in January of 2022 everybody

thought I was crazy for selling and that

was the right move again I didn't trade

around it perfectly but it was the right

move I was saying hey I think you should

go to cash because what'll happen is as

everything gets cheaper your cash will

actually gain value and everybody's like

that's stupid why would you want to go

to cash in inflation environment I'm

like because your cash will be more

valuable because everything else is

going down in value right asset prices

it depends what you're buying if you're

buying groceries cash was trash if

you're buying stocks cash was gold so it

it's all relative but anyway uh Federal

Reserve rate I think this is going up I

think we're going to go from 46 to 48

maybe honestly even 0 but I'm just going

to be generous here I think they give us

a slight bump here you go 48 that

basically takes us from three Cuts is

going to become two cuts and that's

going to be a maybe they might even in

may drop that to one cut depending on

how the economy work uh you know

functions right uh so we can even look

at another one just to kind of see how

things are going right now go to the U

Atlanta fed real GDP now uh GDP now is

sitting at 22% so we're definitely above

Trend and if we look at uh this is the

current projection right here next

projection comes out tomorrow but we're

up here at 2 and a half% still above the

Blue Chip consensus anyway okay so now

we're going to jump in right here and

it's not just this year that matters

folks what else is it well I think next

year that 36 they're going to have a

four handled on this possibly honestly a

41 that means we're going to have high

rates above 4% for the next

18

months and that's just this projection

it could get even worse this right here

this 29 handle that's probably going to

be like a 35 I I I don't and mostly

because I think they're going to come up

here and this change in GDP they're

going to kill this 14 they're gonna make

this like probably 1.9 honestly is

probably what they'll go with and I

wouldn't be surprised if they add four

to five basis points on all of these as

well and you're something like this so

hotter economy for longer again a

recession can destroy all of this but

you protect from the scenario of a

recession by having more latitude to cut

rates one of the problems with being at

the the um effective lower bound they

call the elb is you can't cut rates

anymore you have to go to negative rates

and that's a problem being at 5% is like

glorious it's a ballast it's a tool to

protect the Federal Reserve if things

actually break but things actually are

not breaking right now now I know people

like but cin consumer debts are so high

come on man come on like are like you

have to look at these charts you can't

keep lying to yourself look at this

household Debt Service payments as a

percentage of personal disposable income

bro we're lower than where we were the

entire decade before the pandemic we're

nowhere near the level of debt that we

used to be at in terms

of uh like a relativity to income right

same I mean I know the government uh

debt has exploded but same thing I mean

just type it in yourself you can look it

up too uh government uh interest

payments percent of GDP it's skyrocketed

don't get me wrong interest as a

percentage of GDP it's skyrocketed it's

high but again it's still lower than

where we were in the 90s now it's not

sustainable forever don't get me wrong

but in the '90s we had a soft Landing

over here you know what I mean so so

like this still got quite a lot of

latitude to go you know it took it from

here to here it took two years to get

this extra percent so the rollover is

slow and you could always refinance so

to speak in the future by issuing new

debt when rates are lower uh government

spending is a disaster this video isn't

about government spending I think the

government is mostly

ineffective but the point of this is

just more practical for for personal

allocations like this is I think what we

got coming in a week from today this is

a problem so I think when we look at the

dot plots uh we're going to get

basically a ruggan like you're going to

take all of this if this is the trend

right if that's the trend of the hot dog

so to speak I think the hot dog

goes like right

here maybe not necessarily so high but

but it it it the whole thing certainly

moves up something like this to where

you're probably something more like

there you go something like that kind of

hot dog there you go so the whole hot

dog moves up of dots mostly because so

far the economy has not given a hoot

about interest rates one of the

contributing factors to this by the way

was inflation yesterday we had inflation

report that was hot yesterday and guess

what happened stock market didn't care

tech stocks rallied specifically chip

stocks why because they're like immune

to interest rates the higher interest

rates go they're the opposite of

interest rate sensitive they're like

interest rate sensitive to the positive

side the higher rates go the more money

they make on their cash the more they

get to spend Apple Microsoft

Google these are all cash hoarders

Nvidia uh and they just make more money

like the rich just get richer the longer

rates stay higher everybody else gets

screwed Dollar General the dollar store

gets screwed people buying groceries get

screwed renters get screwed people who

want to buy a home get screwed people

who want to buy a new car get

screwed it's not good notice so far I

haven't talked really at

all about Tesla because this this

doesn't have to do with my long-term

thesis for Tesla longterm I think

Tesla's a great company I think they're

doing a great thing for the world I

think EES are here to stay for the long

term I know I know a lot of people

disagree with me on that but I think

they're here to stay but what you have

in the near term is the political weight

of Elon Musk going from basically CEO at

Tesla to CEO of Twitter to now CEO of

border patrol so you have the political

weight of that uh you have a real

Twitter financing risk X financing risk

people don't realize this

but you could look this up here we'll

just type into Google so you could see

it for yourself okay people don't

realize this yet if you don't realize

this yet it's it's okay but I want you

to see it Elon Musk

negotiating thatx Twitter acquisition

Morgan Stanley she's within like the

last week or two uh let's see here uh

Banks stuck with X debt held refinancing

talks with Elon on 122.5 billion of debt

March 4th Morgan Stanley was counting on

150 million in Twitter deal fees I don't

really know what what the scoop is on

this uh but uh estimated fees could

reach $150 million or more blah blah

blah instead the deal has turned into

something of a dud for the bank they

loaned the $ 122.5 billion blah blah

blah this is all behind a pay wall I

don't really care but but the point here

is that if Elon has to pick up more

liquidity where's he going to pick it up

from

Tesla so you have a liquidity risk and

then you also have the stock C plan risk

like what's the board going to do Robin

on the board just sold like $16 million

of Tesla shares then you have the risk

of lower margin

uh and a lot of people like even the

fed's beige book they're like oh we're

not really seeing an impact from the

disruption in the Red Sea well guess who

does get impacted by the Red Sea like

literally everything has just been

designed to take Tesla and re it Tesla

gets affected by the Red Sea because

their shipments from China have to go

and and uh the South China Sea have to

go through the Red Sea to get up to the

German gigafactory well now they got to

go all the way around it takes 30%

longer double the cost for free great on

top of that you're getting more

incentives more incentives on America 5k

supercharging Miles uh cybertruck

shareholder incentives that's not a gift

that's to try to finally motivate some

more people to spend 100 Grand on a

truck you know is going to be worth like

70 or 60 a year from

now and so now this doesn't even have to

do with the Wells Fargo uh you know

downgrade who cares all the analysts

they just downgrade whichever way the

stock is going so I don't really care

about that but there is a real risk of

Wall Street still has not updated still

today has not updated the consensus

estimate because it takes long for these

analysts all to come in with a new

update they still haven't updated uh EPS

projections you're still sitting at $3

okay well that's based on 490,000

deliveries in q1 Troy test like thinks

we're going to come in like 410,000 if

we come in at 420 we're still negative

year-over-year what if we're negative

next year as well well I don't know it's

all speculation but the whole point is

that between now and the end of next

year the Tailwind of rates coming down

probably isn't going to happen as

quickly as we thought and it's entirely

possible that maybe maybe all of a

sudden rates come down quicker than we

thought and you know what then I'll be

right back to buying and if I have to

buy at $200 because you know you sold

some in the 170s or what oh well so be

it it it is worth not getting screwed

with this sucker going down I hate to

say it but we are we are right now under

the 175 is 176 FIB you know where the

next stop is on this sucker right it's

not good you could pray you can pray

that the next stop is over here at like

the 148 but that's a that's not the best

trend line okay I got like three or four

points of data over here and they're not

even that clean so that's a weak trend

line you know what is a strong support

101 you how many margin calls are going

to happen between now and

then I think the Fed B like basically

think of Tesla as like this dirty uh

coffee stained napkin okay like it has a

lot of potential I could unfold it I

could go oh I could do a lot of things

with this I could make a paper mâché you

know I could do a little robot or

batteries or maybe a semi TR or whatever

but what are we going to do in the

meantime with this well we're going to

go in over here and go Red Sea oh

interest rates uh oh nm3 and solar oh uh

what you know what else Elon politics oh

Twitter financing oh uh the you know

lawsuits around the comp plan oh board

selling oh no guidance oh okay what

about margin oh okay look fsd2 by the

way I got the latest updates better

finally finally like I think of it as

net better but are people going to pay

12K for it no so what else are we

getting discounts more discounts more

discounts the cybertruck list like

everybody I talked to who's ordered a

cyber truck early on they've already

gotten their invite and they're like

yeah I'm going to pass for now so you

you end up having this like hopium thing

but it really just looks like uh

and again you know I'm not trying to be

emotional here I'm just saying I think

it's unfortunate the situation Tesla is

in and uh I don't think all of the bad

is priced in yet so unfortunately I

think it's going to get a lot worse

before it gets better so that's just my

thesis and a lot of it again is driven

by the fed the fed the fed the Fed so

I'm not looking forward to a week from

today and you know what if I'm wrong no

problem but being wrong and the stock

going up fantastic good other people H

great being wrong and stock going down

that could hurt a lot of people more

there are a lot of people who rely on

their their Tesla Investments for their

businesses for their household finances

whatever you shouldn't and you

definitely shouldn't I'm not saying you

should I'm just saying there are a lot

of people who are there are also a lot

of people on margin on this sucker so

breaking this 176 level

today