The Flashing Double-Dip Crash WARNING.

now we gotta bring up the bear case

again you know I don't like the fear

uncertainty and doubt but I pay

attention to it because I need to know

what I could potentially be missing this

is really important and JPM tells us

exactly what the problem is and it's

really interesting take a look at this

JPM and this is a piece out uh from Feb

20th year JPM published this and says

look the equity Market rebound since

October is drawing investors in many who

are convinced last summer that any rally

should be seen as a bear Market rally

are now

nurturing increasing optimism that a

recession can be avoided altogether and

that earnings remain resilient however

while looking forward and we believe

that q1 will stay robust we do not

expect there will be a fundamental

confirmation for the next leg higher and

see the rally fading as we move through

the quarter with quarter one potential

actually marking the stock market high

for the year now that doesn't sound

great right the high for the year you

look at the QQQ fibbies man come on this

being the high lame absolutely lame

right look zoom out for a sec look at

the QQQ we get rejected at 3 11.99 on on

the fibonaccis there we go on screen now

we get it rejected by 311.99 Fallen back

to about the 289 support level and as

that ends up marking a high for a year

well damn that sucks that's gonna set up

for a boring 2023. why does JPMorgan

think that why are they so bearish well

let's see what they say number one yield

curve inverted remember we've never

escaped a recession from this point of

the inversion and they're right now some

people make the counter argument that

the reason the yield curve is so

freaking inverted is because we expect a

rapid massively rapid disinflation and

that's why you're seeing basically

two-year yields on onto your bonds that

are way higher than the 10-year long

term basically the bond Market's telling

you look somehow we expect massive

disinflation these yields aren't going

to last now that would be really weird

because it would be the first time in

history that we have had a yield curve

steepening

and not a recession but just think about

this for a moment okay like logically

for a moment because I I think I think

there's a lot of confusion when we hear

the yield curve I understand it's a very

complicated concept and I'm not

professing to know it perfectly myself

but let me just try to make this very

very simple if the two-year bond yield

is five percent and the 10-year is four

percent then what you're really saying

is hey look in the future I actually

don't expect inflation to be that high

in in you know 10 years down the road

but over the next two years I do expect

it to be very very high and so in other

words that is one way you could

potentially explain away the inverted

yield curve simply from an inflationary

argument that I need more compensation

today than I will in the future that is

the easiest way to explain away the

yield curve however it is not the

traditional way to explain the yield

curve generally a yield curve inversion

occurs because markets are expecting

massive disinflation not because of just

you know like okay The disinflation's

Happening they expect it because of

massive job losses people spending less

money and you actually going into a deep

recession that's usually why you see a

yield curve inversion because the

Market's like uh yeah we think there's

going to be rapid disinflation from the

market crashing not because it's

naturally going away so that that does

make the yield curve a little bit more

like okay like historically it's been

big recession coming could quote unquote

very dangerous words this time be

different

maybe it hasn't been historically but

that is the counter argument to JP

Morgan's warning signal here money

supply moving lower and decelerating

rapidly that's actually a bullish

argument that is a bullish argument that

if money supply is potentially a leading

indicator for massive disinflation then

then great however it leads to the idea

that oh this could actually indicate a

contraction coming right or session

coming I believe you're more likely to

see that earnings recession to Consumer

Staples JP Morgan here arguing basically

across the board but that's again

because they're also looking at the

industry levels uh and the industry

levels represent a lot of consumer

staples banking lending standards are

tightening and half tightening have

tightened they make the argument as

we've heard many times before that oh

usually you know when we see the FED

pivot maybe it's going to be because

they've actually really crushed the

economy so much and that is possible you

know we've talked about that many times

on this channel that in my opinion when

the Federal Reserve pivots it's because

they're so convinced we're not going to

get Paul volckert that'd actually be a

good thing the counter argument is no

the fed's only going to Pivot when they

break something and they're about to

break our economy because they've raised

rates so high at the same time as you

still have quantitative tightening

occurring in the background now some of

the data that they use I think is

unfortunately very misleading I'll show

you what I mean when I say some of the

data is misleading in the charts right

here especially in relation to that

mortgage chart which I'll show you just

a moment but I want you to see some of

these charts so just to really catch you

catch you up really quickly here's a

chart on the 10-2 yield curve inversion

which shows you basically a recession

coming after every single inversion you

see the red circle shows you inversion

blue which I'm going to highlight here

as a green circle shows you recession

coming every single time but don't worry

this time is different that's that's the

bull argument right again for the reason

that I've explained average recession

usually starts 16 months after a reserve

or you know uh 16 months after the

inversion however here they do also

recognize the bull thesis they say here

there's a growing view that the yield

Curve will not work as a recession

signal this time around we have sympathy

with some of this in particularly the

point that the yield curve at present

could be predominantly pricing in a

sharp level of disinflation ahead this

is essentially what we just explained so

they are they see that however they

worry that the Federal Reserve will not

pivot because the labor market is such a

lagging indicator of any kind of

recessionary cycle the FED is really

blinding themselves to keep rates higher

for longer to make sure they don't lose

any more credibility because they were

so hurt in the first cycle that the FED

is probably going to keep looking at

lagging indicators like jobs and

hopefully they don't but if they do

they're going to cause a deep recession

and that's going to hurt and that's why

potentially a pivot from the FED could

aligned with pain now this is where they

show tightening lending standards okay

fantastic

but this I think we'll see here that is

the employment cost index showing you a

little bit of leveling we think it's

unlikely the FED is going to cut anytime

soon great okay these two charts right

here are the ones that I think are a

little bit misleading which they are

using as a bearish argument take a look

at this they show this chart here of U.S

mortgage payments as a percentage of

income and they show you this massive

massive skyrocketing of oh my gosh U.S

mortgage payments as a percentage

because this is so freaking high so this

is not true though because most people

have fixed rate mortgages so this chart

actually only shows you U.S mortgage

payments as a percentage of income for

new purchases oh come on man that

doesn't affect the vast majority of

people right now that just affects the

current housing market which I already

agree I think the current housing market

is screwed but that's not a surprise

right now but I think this is a

misleading bear piece

uh and so I think you can dismantle that

just like I think you can dismantle this

idea that oh the U.S savings rate is so

low that means you know the Market's

going to go into a deep dark recession

find the U.S savings rate is low but

where is your mention of a survey data

and Bank of America survey data which we

know you're seeing as well because Jamie

dimon talks about it Jamie dying Diamond

literally said in the earnings columns

is a JP Morgan PC or Jamie Diamond

literally says hey uh yeah lower income

consumers might actually run out of

their excess savings by the end of the

year but higher income consumers still

have plenty of extra savings there's a

reason why Bank of America says people

who had two and a half to five thousand

dollars of excess savings now have

somewhere around 12.8 thousand dollars

in excess savings which is only down

three point uh or 4.4 percent from last

year where they had about 13.3 thousand

dollars of xcases so in other words you

get like this insane amount of excess

savings still available to where in my

opinion JP Morgan's bare arguments here

really narrow down I don't think you

could use the savings rate as a bear

argument I don't think you could use U.S

mortgage payments as a bear argument and

Consumer Debt Service payments as a

percentage of disposable income are

roughly at the same levels we saw in

2015 16 17 18 and 19. so I don't know

the biggest bear argument that I can

agree with them on uh and and then of

course we've got this like blurriness

about the idea of what is the inverted

yield curve really mean it's not

entirely clear that slightly tightening

lending standards are really going to be

a bear argument I think the one thing

that we could really agree on is the

Federal Reserve seems to be convinced

that they need to look at lagging

indicators so a lot of the bare argument

that JPM is making here I personally

dismantle but the one piece that I

really give them Credence to is this

idea that The Fad is looking at lagging

wage indicators and this is why in the

FED fomc minutes today I'm really

looking for any indicators that they are

aware of the laggingness of wages and

that really they should ignore the jolts

and the labor reports and such because

they may have already gone too far with

tightening and they may break something

that is the bear case the Federal

Reserve breaks something they then have

to print money to bail out markets they

print money and bail out markets and

then after they print money and bail on

markets they actually re-induce

inflation because now the money supply

is expanding again it's exhausting so

that's the big red flag is is a Fed that

goes too far but but like this this idea

that that inflation for sure is is

getting ridiculous I just don't see it

it's just not in the data