A Major Shock is about to Hit | -69%

Well, what the houble hockey sticks is

happening in markets today. We just got

ISM reads and S&P manufacturing reads

that give us a little bit of a heads up

of some of the poopy dupies that some

businesses are seeing out there. And

I'll tell you the headlines don't do

justice what is under the cover of

what's going on. But on top of this,

remember this weekend when Kevin was on

a lazy river talking about how we had a

bad news event? Remember tariffs being

declared illegal? Now it's Monday

morning and people are concerned that ah

tariffs are illegal. Then there's a

chance Donald Trump Donny T might have

to print some more bonds to fund the

government because we're going to have

to reimburse all those tariff revenues.

very inefficient should tariffs

ultimately be deemed illegal by the

Supreme Court and refunds be demanded

which is of course leading to

ricocheting effects in markets. We can

see that the 210 spread is at the

highest level of the year. This is not

great. It is a stock style level.

Usually we get these sort of big runups

either leading into or right after a

recessionary environment like what we

had during COVID, like of course what we

had going into 2007, like what we had

going into the dot bubble. These runups

not great. Usually the worst like we

become shockprone over 50. when things

get bad is when it's above one. And

there is enough data coming this week

that this could be the week we end up

shooting above one. And it's one of the

reasons why gold is doing so well. Now,

gold not necessarily right now a

recession indicator, but gold does have

a really interesting history in its

relationship with oil. You can see here

all these red and green arrows, they

really show you there's really no

pattern between the spread between gold

and oil signaling recession. But what it

does do is it tells you that gold or oil

are about to probably make a big move.

Now, how does that work? Basically,

anytime gold gets really, really

stretched relative to oil, you get these

peaks over here or oil goes really low.

Like over here, oil went negative. So

gold looks really expensive relative to

gold. It's just a ratio, right? You

literally just divide the price of gold

today uh by the price of oil, you get

58. It's very simple. So the question

is, what's going to happen right here?

Well, history shows you that this spread

doesn't stay this high for long. It's

going to end up plummeting. Now, why do

some people say that's potentially a

recessionary tell? Well, the reason

people look at this chart is they say

when we get spikes, one of two things

happen. Either the price of gold

plummets or the price of oil skyrockets,

which then narrows the spread. So, like

we had a run up in oil prices over here

after the great recession and we sort of

normalized on the spread between the

two. So, we could have a run up in oil

prices, but that seems pretty unlikely

since right now we're seeing a lot of

excess supplies being built up, not only

in the Middle East, but also more

domestic energy production. This leads

people to say that gold might end up

setting up for a near-term rally. So,

good news in the near term, especially

with this tariff news over the weekend,

people selling bonds, bond yields up,

going into gold as sort of a flight to

safety, but it sets up a potential crash

in gold prices going forward

to normalize this chart again. Now, why

would gold crash? Well, gold tends to

crash when a recession actually

manifests. See, when people are fearful

about a recession or they're fearful

about stagflation, we end up seeing gold

rise. When a recession actually comes,

we know that real recessions bring

deflation and then gold prices collapse.

Look at the history of gold prices. You

usually see gold go up into a recession

and down during and out of a recession.

So really, gold works well as a

recession hedge before the recession.

people start trading out of it and going

into bonds which then pushes yields

lower in that recessionary uh time as

people flee to safety. So an interesting

spread to watch that difference between

sort of what you're seeing in that gold

oil spread and how a lot things are just

setting up for a little bit of a

reckoning point. Now either that's going

to be a soft landing or it's going to be

a pooper dupers. Look at our last soft

landing. Really, the United States's

only soft landing was over here in 1995.

And you could see that 102 yield curve

never made it all the way high like it

did in the early '90s recession or the

80s or the early 2000s or 2007. We

stayed right here where that yellow line

is, which is at 60 basis points. Folks,

look at exactly where we are right now.

63. We're at the same spot. So, we are

at the teetering point of either we go

into recession or we soft land. Now,

that's old news. We know we're at the

teetering point, but what's happening

this week? Jobs data following the ISM

and S&P data that we got this morning.

So, we got to talk about all these. Take

a look at this one. We'll look at this

one first. This is the ISM manufacturing

PMI report. And some of the commentary

in here is wild. Orders across most

product lines have decreased. Tariffs

continue to be unstable. Tariffs

continue to wreck havoc on planning and

scheduling activities. The construction

industry, especially home building, is

still at a lower level. Domestic sales

remain flat. The trucking industry

continues to contract. This current

environment is much worse than the great

recession of 2008 to 2009. There is

absolutely no activity in the

transportation equipment industry. This

is 100%

attributable to current tariff policy

and the uncertainty that has created. We

are in stagflation.

Prices are up due to material tariffs,

but volume is way off. This isn't good.

It's one of the reasons why gold is

moving up as well. It's tagflationary

fears. Very tentative domestic market

with home building and remodeling not

active at all. We've implemented second

price increases with made in America

becoming more difficult due to tariffs

on components. Total price increases so

far this year 24%.

Only to offset tariffs. No influence on

margin. Not trying to make more money.

They're just trying to offset tariffs.

In addition to that, in two rounds of

layoffs,

highkilled roles, highpaying jobs and

highskilled wolves

are being fired. Highpaying and

high-skilled roles like engineers,

marketing people, design firms, finance

or uh design teams, finance teams, IT

teams, and operations are being fired.

The Trump administration wants

manufacturing jobs, but what we're doing

is we're giving up highly skilled and

highly paid jobs in favor of lowerkilled

and lower paid manufacturing jobs.

Obviously, not good for the economy in

the longer term here. With no stability

in trade and economics, capital

expenditures and hiring are frozen. It's

survival out here.

The markets we operate in can be strong

in the short term, but there's an

underlying feeling that has you

questioning how long can this shortterm

boom go on, right? Not great. In

addition to that, look at some of this

information that we're getting over

here. When we scroll down, new orders

expanded in August for the first time in

six consecutive months, which sounds

great. But listen to this. Despite the

move into expansion, for every positive

comment about new orders, there were 2.5

comments expressing concern about

near-term demand. That's not great. In

addition to that, production landed in

contraction for the first time since

May, and layoffs and not filling

positions remain the main headcount

management strategies. For every comment

on hiring, there were four on reducing

headcounts as companies continued to

focus on accelerating staff reductions

due to uncertain near to midterm demand.

So think about this for a moment. You

basically got all of these companies

going, man, like yeah, things are decent

in August. Like things are are like some

new orders reads are up. We got the S&P

manufacturing has a great headline.

surge in production underpins strongest

improvement in manufacturing performance

since May of 2022. But underlying you've

got these comments of hell and more

comments of bad than good, though some

of the good kind of like weighing up

some of the the bad, right? As we just

saw in the ISM. Now, even this report

though, the S&P global manufacturing

report has devils in the details. And

this is what we should pay attention to

because right now you've got the Atlanta

Fed suggesting that GDP is growing at

3.5%.

Which is fantastic and exciting on early

Q3 data. But is it possible that we're

really just coming off a summer high of

inventory building? And what happens

when inventory is fully built and then

we have to sell through that inventory?

Well, we tend to get a deflationary

fall in new orders, which is great

because then you end up getting prices

coming down again. In fact, think about

the potential deflationary forces coming

up. I want you to think about

deflationary forces here for a moment

because it reiterates the direction that

gold not in the near- term. In the near

term, gold's going to go to 4,000, but

if we continue in this deflationary

direction, gold's going to go down.

Think about the nearterm pressures to

the downside for the deflationary

forces. First of all, inventory building

is deflationary because in order to

clear inventory, you reduce prices.

Tariffs becoming illegal, deflationary

will literally go from transitory

inflation on tariffs or from tariffs,

right? uh from tariffs to transitory

deflation as those tariffs go away. And

then obviously recessionary

uh impetus in uh you know in in markets

or in the uh in economy is deflationary,

right? As well as job loss and low job

growth slash low wage pressures with

wages mostly flat

uh are is also deflationary. You know,

it's not like people are making more.

So, there's no question over time rates

are going to plummet under these forces.

The question is just when. Right now,

we're actually in the opposite place

where we're still talking about, oh,

production's good. Yeah, because of

inventory building. Ah, prices are going

up, right? Because of tariffs right now.

But what happens when those tariffs

become illegal? You reverse all of that.

It's kind of a crazy whipsawing we're

seeing right now. But go into this S&P

report for a moment. Look at this. S&P

manufacturing. Okay, take a look at

this.

The headline. If you just listen to CNBC

and you just listen to Rick go

and manufactured May of 22, we are just

absolutely booming. If you just listen

to that garbage on TV, you're going to

totally miss the devils in the details.

So, you scroll into the devil of the

details. And what do we see over here?

I'm going to go to the first devils

which they bury all the way over here.

Take a look at this. Uh look at this. On

the supply side, average lead time has

improved. Fine. Okay. What do we have

here? This purchasing activity rose but

only slightly for a fourth month in a

row. Growth was noticeably slower than

May's record increase. Now, that's

really interesting because the headline

here is surge in production underpins

strongest improvement in manufacturing.

But wait a minute, you're telling me

that purchasing activity only rose

slightly

and marginally and was noticeably slower

than in May. So, how the hell are you

going to have a headline that says we

had a surge in production, the best

since May of 22, the best in 3 years,

when you're telling me new orders only

grows a grew a little bit, and that

we're noticeably slower than in May?

Well, there's a reason for this. When we

go into the actual commentary from the

people who put these reports together,

the answer is right here. The upturn is

in part being fueled by inventory

building with factories reporting a

further jump in warehouse holdings in

August due to concerns over future price

rises and supply constraints.

There you go. So this is an economy that

looks like it's booming right now in the

summer because people are like crap

build up inventory. But wait a minute,

folks. When new orders are not actually

rising, albe anything but slightly and

way slower than they were earlier, and

instead you're talking you're bragging

about the surge of production because of

inventory building, what are you

actually doing? You are setting up

deflation. This is a huge deflationary

impetus that's coming. So again

deflationary number one is inventory

building number two tariffs becoming

illegal number three any kind of

recessionary data is deflationary and

then of course the fact that we don't

have wage pressures certainly doesn't I

mean it's not if wages are flat it's not

necessarily deflationary inflationary it

just suggests that wages aren't going to

be a source of inflation which is the

same thing the Federal Reserve tells us

now the only thing that is really

bullish right now is what we're going to

talking about now. But we know with

certainty

that the prices

>> bullish catalyst

>> of the courses at mekevin.com and the

membership are going to be going up this

Friday. So if you are looking for any

kind of inflationary sources that meet

Kevin membership with a price increase

coming Friday. Remember if you join you

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write off for you. By the way, this

one-time membership you buy and you're

going to get all the new lectures that

are coming out uh by the end of the

month in the property management course,

the do its uh the um uh oh gosh, uh the

trumpics the tax course because we're

breaking down the big beautiful bill,

what to do for taxes before the end of

the year. All this still coming out by

the end of this month, which will be

really exciting. So check that out over

at me.com. Now, with all of that said,

we've got to talk about what are

potentially bullish catalysts on the day

or the week. Well, bullish catalysts for

the week, jobs. Hopefully, hopefully. We

hope that we can confirm a soft landing

because if we can't confirm a soft

landing, then we've got the real pooper

dupers. So, what are we looking for? We

are looking for job openings and labor

turnover data tomorrow morning. That'll

be coming out at 7 a.m. California time.

We're looking for 7.379 million. We are

looking for ADP employment to beat

80,000. 80,000's

okay. Okay, that could be decent enough

to get us back to rally, maybe back to

all-time highs, maybe some enthusiasm in

markets. This morning in the alpha

report, for example, I called the

selloff in the cues when we were down

like 1.8%. I called it overblown and we

had a wonderful boom after the market

opened here. Always after waiting five

minutes first wonderful boom. Remember

to get that alpha report every single

day. But anyway, ADP is expecting 80,000

jobs. If we can confirm a soft landing

or in order to confirm a soft landing to

actually be bullish, we really need this

to be over 80, ideally over 100,000. If

we get a 40 or 50,000 read, not great.

I'll tell you the standard deviation in

just a moment so you can sort of set

your odds expectations for those of you

staticians out there. Uh and then of

course on Friday uh which the ADP report

comes out on Thursday so it's one day

delayed uh which we talked about on the

lazy river this weekend by the way. Did

you watch the lazy river video? If you

haven't seen the lazy river video, go

watch the lazy river video. Uh it's

great. It's like the sinking feeling

from the the Trump tariff disaster,

right? Make sure you watch that. I think

it's fantastic.

Uh the uh but the other thing to to

watch is you've got jobs report coming

uh this Friday. Now the jobs report this

Friday we are looking for 75,000 jobs.

So very much in line with ADP. Same

thing here. If we get some kind of 100k

plus fantastic go back to all-time

highs. If we end up getting something

cloud

like 50,000

not going to look very good. Uh so we

are now looking for an average estimate

76,000 standard deviation is 50

uh sorry standard deviation is 20.8

most of the estimates are bell curving

around

55 to 80 that's where I'd say most of

the estimates are and then there are

more estimates to the high side than the

low side. So people are optimistic on

this this payrolls report that's on the

Friday payrolls report. The ADP report

doesn't move the market as much.

Standard deviation on the ADP report is

20 also. So those are the standard

deviations. We got a 92.1% chance of a

cut in September which is also bullish.

Right? So talking bullish catalyst here

>> catalyst. We didn't get Nvidia as

bullish as we wanted, but we do have two

jobs reports this weekend. That's what

everybody's going to be paying attention

to. In addition to Kevin talking about

going to Mario World with the boys. Uh

we had a we had a great weekend over

here going to uh the Nintendo Mario

World. The kids got the little bands so

you can tag and get points. That's

actually why Jack's holding an iPad

here.

Uh, so he could look on the iPad and

look at the little achievements to see

what he's got to get. And they're kind

of whacking this. That's why you might

hear me say here, let's actually turn

the audio on. You'll hear me say you get

a bonus if you hit 200. They have these

all these various different like

challenges. And if you have a an iPad or

something that you could give your kids,

they could look up all the uh

achievements and the goals. Uh, and

that's what we did there.

>> Remember guys, you get a bonus if you

get 200.

So, we're talking about the the

different achievements here, but I mean,

this place is just sick. Mind you, it's

inside of the Universal uh uh or uh

Universal California

Studios over here. Uh and just the fact,

I mean, look at the detail over here,

like this thing, the rock thing coming

down or whatever. This place is so cool.

Uh so, really cool. Obviously, you got

the Harry Potter world over there as

well. So, shout out to this. And this

Toad Stool Cafe was freaking phenomenal.

really really enjoyed this. So great. I

hope you had a great Labor Day weekend

as well. But we went from waterparks to

uh to to uh Universal Nintendo World.

And then uh did also use to film that

right there the Meta Glasses, which I

did break my Meta Glasses this weekend.

Also, then Amazon overnight delivered a

replacement glasses, swapped out the

lenses because I I may have taken uh my

Meta glasses uh into the lazy river at

Kalahari in Texas. Uh and um note to

self, water resistant does not mean

waterproof. Uh yeah, so don't do that. I

did though, by the way, just anytime I

go to a water park or pool with the kids

in the future. I did get a waterproof

case for the phone. Uh I haven't

actually used this yet, so we'll we'll

see how it works. But um uh you know

that that'll probably be the way I end

up filming because I don't want to carry

so much around. Like you can't carry,

you know, GoPros and glasses and phones

and all this stuff. Like you just got to

have so much stuff. But anyway, uh so

yeah, this uh this gives us a little bit

in terms of what's bullish this week.

hopefully jobs expiring coupon code on

Friday. We know that. Get your alpha

report. Especially this week, you're

going to want alpha. Uh then you also

have deflationary forces that are going

to be really great for real estate in

the long term. In the short term, expect

rate sensitive stocks to get whacked

here. Like uh I'll give an example here.

I don't know. Yeah, look, Rocket

Mortgage today is down 3%. Well, duh.

Look at the bond yields. the 10 years

skyrocket. It's up five, six basis

points today. That's not great for your

30-year mortgage. It actually puts more

pressure on real estate in the near

term. So, you kind of have to think

about it like like almost like a

pressure vat. You know, you're putting

more pressure into this economy and

eventually it just blows. That's why we

start talking about the 210 yield curve.

Once that breaks over a hundred, that's

a sign the valve is opening up and like

the pressure is going poopy dupus and

that's not good.

Uh because it it it doesn't give us a

soft landing. It probably leads to an

unfortunate employment, you know,

recession that that takes decades to get

out of which will be terrible. But real

estate will do really well during that

time. Not because people will be

unemployed, but because rates will come

down and basically the people with

money, the people with the gold will

make more gold, so to speak. Uh so those

rate sensitives could be a little bit of

a buying opportunity here in the near

term as we, you know, lead into uh

deflationary forces coming. They're not

here yet. Gold could probably run to

4,000 before it collapses down. That's

my take. My take is gold goes to 4,000

uh and then we have some kind of blow

off the you know top of this sort of

pressure vat and gold comes right back

down because I don't think that oil

prices are going to be up here because

remember this is more of a price

direction indicator. I wrote this red

text right here. Either oil goes up or

gold goes down. I don't believe that oil

is going to skyrocket here anytime soon

especially if you go into a recessionary

environment. History tells you that

you're not going to see oil skyrocket

because demand will go down and in a

recession, gold ironically goes down.

It's really only good leading into a

recession. It's crazy. If you study the

chart, you'll see it. But, uh, some some

wild information here. As always,

remember, use coupon code

>> and join us in the Meet Kevin alpha

reports every morning. Keep in mind, you

pay once, you get access forever. So, do

check that out.

>> Why not advertise these things that you

told us here? I feel like nobody else

knows about this.

>> We'll we'll try a little advertising and

see how it goes.

>> Congratulations, man. You have done so

much. People love you. People look up to

you.

>> Kevin Praath there, financial analyst

and YouTuber. Meet Kevin. Always great

to get your take.