The Market Bubble & Crash | TRACK THIS *BEFORE* Buying!

in this video i'm going to talk about

six very important things that you need

to pay attention to in order to evaluate

whether or not you should be short or

along this market

folks you don't hear this kind of

content anywhere else and i would highly

encourage you watch the entire video

because there is a lot in this

one-to-one package let's get right into

this quick note that this video is

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let's get right into this so

first earnings

a lot of folks are extremely optimistic

about earnings suggesting that we should

essentially reach all-time highs again

because of well positive earnings at

companies like apple or companies like

microsoft providing decent guidance take

a look at this particular commentary

here this particular person wrote apple

earnings are astounding in this crazy

market i think i'm going to put all my

money in apple for now this is literally

herd mentality this is the opposite of

the psychology of money now i know

some folks have been very confused as to

how potentially selling could be part of

the psychology of money

but we're going to talk about that in

this video but folks the last thing that

we want to do is in my opinion follow

the herd into apple but instead what we

want to do is use apple as an indicator

because here's the thing apple and

microsoft are two of the biggest weights

that are holding up the s p 500 and the

nasdaq the market turmoil market pain

has not yet fully spread to

daily mainstream discussions on the

streets and in coffee shops

and and throughout our society that's

when we know we have a real bear market

when there is literally blood on the

streets because people are freaking out

about what's happening in the market and

the potential for a recession right now

what we're getting is money managers on

cnbc playing a freaking violin saying no

this is normal this is normal all we're

doing is rotating into quality and to

companies with higher free cash flow

look just because a company does not

have profits today and is investing

substantially for the future does not

make it a low quality company that is an

excuse for money managers to keep money

under management because that's after

all how many managers get paid so keep

that in mind but what happened with

apple earnings apple earnings did crush

it right exactly they did apple earnings

were phenomenal the only item of sales

that was actually in decline was ipad

ipad sales which i was shocked by i

thought ipads were in incredible demand

and folks this is where

we have to understand what's actually

happening

ipad sales were in incredible demand

but apple of all companies in the world

one of the biggest companies in the

world is having massive supply chain

issues to where a lot of apple stores

don't even have ipads in stock

a lot of their products like new laptops

are back ordered and folks apples tim

cook himself

says that in inflationary supply chain

shortages have gotten substantially

worse and hopefully will start getting

better

but only because apple is doing their

best to navigate them better not because

supply chain shortages are actually

getting better

so add these two things together and

this is just the earnings part of this

video add these two things together

people spending more money like crazy on

stuff like apple products which was

reiterated by visa that people are

spending like crazy we know the bank

said people have more money uh in their

bank accounts we don't expect those bank

balances to grow this year because of

the removal or the lack of new

stimulative measures but people have a

lot of money and people are spending the

money like crazy but wait a minute what

happens when you add

more

demand for goods and services which is

literally what we're seeing

with

still persistent supply chain issues

which is literally why raytheon took a

150 million dollar loss it is why 3m is

delaying guidance because they're so

confused in terms of supply chain issues

it is why ge says they are having issues

with persistent supply chain issues and

nobody really sees this issue being over

until 2023. mcdonald's had a 15 increase

in operating costs why

because of these inflationary pressures

now look i used to be in camp transitory

and look i know that was not a very

popular camp because it was wrong it was

very wrong and it was wrong because we

got new waves of covid that made it

wrong that made the supply chain issues

unrecoverable

and the stimulus pacifier became larger

and larger and now we're under the

weight of this massive pacifier causing

a lot of freaking inflation

but that inflation is not getting better

it's broadening and this is bad

when inflation broadens

it means that the federal reserve has to

act quickly to fight to bring inflation

down and when companies are complaining

about worsening supply chain issues

you've got to understand that earnings

calls are your best leading indicator of

these problems they're not cpi looking

one month back they are ceos going to

answer the questions of analysts this

week

and next week saying supply chain issues

are disastrous even tesla's elon musk

said the same thing supply chain issues

are holding everything back so

when you couple strong earnings or

what's normally good news with supply

chain constraints you actually end up

getting bad news because this is a

signal to the federal reserve that

inflation has broadened and we need to

do more to control inflation which means

raising interest rates but i want you to

ask yourself this

when the federal reserve which is now

expected raises interest rates a half of

a percent on march 16th

do you actually think consumers are

going to stop spending how much demand

is actually going to go down and how

quickly is that demand actually going to

go down for goods and services by

consumers and businesses to actually

bring inflation down

my expectation is it's going to do

virtually nothing

and if a half percent did virtually

nothing then we got to get to the point

where yields on bonds uh start going up

even higher

and the discount rate at the federal

reserve goes up even higher to actually

start having a constraining effect on

the economy

okay

let's pause on that for a moment we'll

come back to inflation but i want you to

think about that how much do we actually

have to raise rates to get people to

stop spending like crazy the more you

hear about how strong our gdp is

the worse it is

let's now talk about the short squeeze

and then we're going to come back to gdp

and inflation we're going to wrap it up

with this and it's scary

but i i don't want to sound like a mega

bear here

number two

shorts

on the federal reserve

announcement date or meeting uh date

where we had the press conference from

jerome powell i expected that we would

see a short squeeze in small caps i was

wrong about this rather than seeing

shorts get offloaded for what could have

been a hedged event which would have

meant that jerome powell's actions were

priced in and that the market didn't

have any further to fall and if the

market didn't have any further the fall

and the fed's actions were priced in

then we should see shorts off load and

and uh we potentially see valuations of

small caps come back up right

unfortunately that's not what happened

what happened instead shorts actually

increased in fact we're starting to see

record levels of shorting in various

different markets not only the united

states stock market but other markets

like the hong kong stock exchange has

hit record levels of short selling this

is because short selling is not only

where the money is being made right now

but institutions are more and more

increasing the size of their hedge bets

that this market has the potential

falling

some of that has to do with the fact

that the yield curve is inverting and

it's a crystal clear sign that we have

problems but we'll we'll talk about that

in a bit we don't need to we haven't

inverted yet

there's just there's fears anyway the

fact that shorts are going up is bad

because it means more selling pressure

in the short

term that's not good so keep this in

mind

good earnings with high inflationary

pressures is actually the worst case

scenario

shorts going up is more selling pressure

and it usually manifests in retail

buying the dip and then getting screwed

by institutions later in the day

now

we need a we got to understand what our

next catalyst is but now for a quick

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that's where folk all right cpi data is

expected to come out on february 10th at

5 30 in the morning california time i

will be covering it live as usual

right now we do not have year over year

expectations out just yet for inflation

but month over month inflation

expectations are expected to be 0.5

percent which means inflation is still

moving at an annualized pace of six

percent it is substantially too high for

the federal reserve to ignore and i need

to make this so clear because people

still don't understand this the fed does

not care about your stock values

the fed only cares because jerome powell

said it himself about the stock market

to the point where it affects employment

and to the point where it affects

inflation and right now a roaring stock

market is or what had been a growing

stock market is just feeding people's

wealth impression and leading them to

spend more money

that is actually bad for inflation and

we've got plenty of job openings so even

if we raised rates and compressed job

openings a little bit we would still

have a massive amount of labor demand so

we have no issue with the federal

reserve needing to make businesses want

to hire people more they already want to

hire people enough they've got to deal

with inflation and the cpi read on

february 10th is going to be one of our

early catalysts for potentially a u-turn

so that we could finally go back to a

rallying and optimistic market

the problem with the cpi catalyst is if

the cpi catalyst comes in worse than

expected which is the trend that we're

on the federal reserve will start seeing

the bond market price in

more action by the fed

and this is what happens

more inflation comes in worse or the

worse inflation comes in the more the

market starts pricing in that the fed is

going to be much more aggressive and if

the fed's more aggressive stocks get

whacked don't kid yourself that you

could flee to safety in the financials

or an apple

those are good until they're not

now

i will say though one of the things that

has been doing very well are oil prices

and therefore gas or energy related

companies not only have oil prices and

gas prices been rising because

geopolitical tensions not just in china

but in russia and the ukraine but

because of fears

of a potential recession and attacks on

oil plants in the middle east

all of this is pure pressure on energy

prices and folks what is one of your

largest components within cpi

energy prices so in addition to

companies basically telling us people

are demanding more but supply is more

constrained energy prices continue to

rise home prices and rents have not

shown any sign of alleviation so in

other words the core components of cpi

are increasing

not

decreasing now there are some statistics

that suggest that used car prices might

finally be inflecting down which is fine

but if used car prices are just offset

by higher labor costs higher input costs

higher rent prices and higher energy

costs or higher food prices which

exactly what a mcdonald's is feeling

then it don't matter if used car prices

go down these car prices might start

plummeting because used car prices might

potentially go into essentially a

recession because the economy broadly

might go into a recession

which

just means we end up with inflation as

used cars get cheaper again it

does not matter anyway is what i'm

saying uh this is why originally the fed

and myself believed that inflation was

transitory ah it's just used cars it's

just travel like hotels and stuff this

is normal we expected those prices to

skyrocket

with the beginning of the chip shortages

and the reopening boom but now the

problem is

those aren't the issues anymore

everything else is the issue now

dangerous

very dangerous

okay something that's critical that we

have to pay attention to is known as the

relative strength index and a lot of

trading finance gurus and stuff are

trying to say oh

we're oversold right now

that means we're definitely in a buy

time and destined for a reversal because

what they do is say hey look right here

this was 2018 this right here was the

pandemic and look if we go right here to

the weak chart see the little blue lines

that means we were oversold anytime that

line goes below that horizontal right

here it means we're technically oversold

according to this one indicator which

you should never make a trading decision

based off just one indicator it should

be the confluence of the most important

factors that are going on in the economy

and with a particular stock or company

at a time right but anyway

this over here would be the overbought

condition

here's the problem though and people

regularly forget this they're like oh

look when it was blue here and here that

was by time well now oh look it's blue

so it must be buy time that's sort of

the logic right well let's hop on over

here and show you how that logic is so

flawed

let's go over here

and this is the march 2020 pandemic let

me show you uh where you would have

bought had you bought when we first

moved into an oversold condition which

is what we're in right now

all right let's follow this rsi chart

right here to the oversold territory ah

there we go we're oversold on february

25th we went to an oversold condition

and this is when the s p 500 fell uh

about three percent uh in a day uh and

in a week it probably fell somewhere

around ten percent so you got this nice

curve down from about 339

to

roughly the low 300s lost about 30

points there 310-ish 313. uh and so you

would have been buying the s p 500 or

the spy in this case at about 3 30. okay

cool you got 10 off oh wow we're

oversold by the dip right but take a

look at this we stayed bobbing along the

overbought condition from february 25th

all the way through the bottom for

another month

the problem is had you had patience you

would have saved another

30

you would have gotten another 30 off

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kind of logic and gives you a freaking

update when i think there are problems

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truth than ladies

oh sorry we're talking about the rsi uh

30

uh discount on the s p 500

uh okay so that's an issue keep that in

mind don't be misled by this garbage

next folks the yield curve is once again

flattening and this is bad all you have

to do is type in the 10-year two-year

curve on google and you will immediately

get the 10-year minus the two-year from

st louis uh the st louis federal reserve

and after the j-pal meeting and it's not

ideal but after the j-pal meeting it

started happening again folks the yield

curve started flattening flattening

basically just means going to zero and

the issue is when it trends towards zero

and ultimately becomes negative without

going into all the details of the ten

the the inversion of the earthquake

again it could signal a recession so if

we zoom out

you can see look at this downtrend right

here and then we had we did have a

pandemic recession here which is kind of

wild because nobody really thinks that

the the inverted yields curve could

predict the pandemic but it is an

indicator that maybe we might revert

back to this trend and have the

recession we were supposed to have

before the pandemic uh kind of delayed

everything with all the stimulus we got

now the last thing i want to talk about

is this video that i put together and i

created this and made this obviously not

the titanic video but this is a scene

from the titanic and i put the overlays

on and i just want to point out a few

things that's that are very very

important in this i pretend you've got

folks storming into essentially the

bridge of the titanic but it's as if

it's the white house and the fed are

like oh my gosh look the economy is is

freaking out and we've got all this

inflation in all these different

compartments in other words the ship is

filling with water we're sinking right

and impatient investors which is this

guy over here the impatient investors

are like come on man by the dip we're

going to the moon like stop this

nonsense like get get back to driving

the ship uh and and the person who

helped design this ship is like you're

out of your mind there is so much

inflation we've got massive issues here

uh and this is a critical part right now

right here

uh

and obviously he makes references to

water levels i make references to

inflation but

we could sustain certain levels of

inflation

in this case i wrote three to four

percent we could sustain that and rates

can push this down but the problem with

the titanic was water spread to too many

different compartments of the ship

and when too many different compartments

of the ship

fill with water you can't isolate those

and call the problem transitory anymore

it becomes a persistent problem a

broadened problem both the federal

reserve and the international monetary

fund have recently like within the last

weeks reiterated that inflation is

broadening and that's very very bad and

so this means and as i sort of

show here in the video that we have a

big flip here when the federal reserve

at our institutions start suggesting uh

oh we have an inflation problem that is

broadening well that could lead to a lot

of substantial pain and the pain comes

wave after wave after wave but you've

got to ask yourself where are we in the

cycle now

yes prices have come down

the ship got damaged we got hurt we

already lost some money we hit the

iceberg but are we going to put on our

fancy clothing now and go to dinner so

we can listen to music with the

orchestra and jim cramer telling us

everything is fine

or do we want to consider looking at the

lifeboats this question is for you

you have to make that decision i can't

make that decision for you

additionally you've got to ask yourself

where are we in this sort of cycle here

i think this is a beautiful

representation of what's going on

take a look at this uh i've got a stock

here that could really excel really

excel excel sell

and so where are we is the question

right where in this chart are we i'll

tell you where i think we are sell

sell sell so i was all right everybody

freaks out this this is when you get

blood on the street this is where you

want to buy right when everybody's

yelling sell

if everybody's yelling

by the dip

you're probably more

here where people excel

what

a cell why

well think about it

then you get this pandemonium which

that's the nature of the cartoon and the

nature of boom and bust cycles i can't

take this anymore this madness i can't

take it anymore somebody yells goodbye

goodbye bye bye bye bye bye here's your

momentum meme movement right

and then and then of course it always

cycles back i got a stock here

uh so anyway you got to ask yourself

this but put together the pieces of the

puzzle folks j-pow is no longer our

friend that's because he has to fight

inflation and i cannot buy in this

market until i get a u-turn on inflation

which we're not getting in earnings

calls cpi reports everything everything

is reiterating it's getting worse not

better

and i cannot buy until

j-pal u-turns so one of those got to

happen now some folks quick note are

thinking oh but but uh what about like

with omicron and how's omicron going to

affect inflation yeah the problem with

omicron is if anything people spent a

little less in january which means we

might get a little bit of a fake out of

a cpi read in february showing that

maybe inflation was a little bit less

bad in january but it would be a fake

out because when people go back to

spending and we start getting our

february data or late january data

averaged into february it's gonna be a

problem again anyway thanks so much for

watching check out the programs i'm

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