Why Stocks just Dropped

hey everyone kevin here so a lot of

folks are wondering why the heck did the

market

somewhat drop this morning there were a

lot of stocks that were up a lot higher

than they are now and all of a sudden we

saw this inflection point in the market

and it came out all of a sudden right at

the same time as we got a news headline

that read

u.s job openings hit a record 9.2

million

now ordinarily you might be thinking oh

okay we got a lot of job openings

that's really good for businesses if

businesses are hiring

that means businesses must have enough

profits and enough profit margin to

spend money on more employees

so that way they can fulfill more demand

and make more money and hopefully

improve their business efficiency by

hiring more people

this seems like it would be a very

positive thing right so why would the

market in many sectors

pull back and this isn't to say that

some sectors aren't

up today you know the dow is still green

today we still got some tech stocks that

are up today

but they were up a lot higher earlier

like what happened why would we see this

pullback

on this jobs data well here's why

right now at the amount of reopenings

or or open positions we have for jobs it

would take us

over a year of job gains

to get back to pre-pandemic levels of

employment

that means even if we have good jobs

growth

for the next year once you include the

people who are going to quit are going

to leave the workforce every month

naturally anyway

it's going to take us over a year to get

back to pre-pandemic normal in terms of

filling these jobs

that's creating a little bit of heart

palpitations or even heartburn in the

stock market

because folks are wondering wait a

minute wait a minute we're kind of

pricing these stocks right now in such a

way that we're expecting big growth but

wait a minute

if you can't find people to fill these

jobs

whether that's because they're receiving

300 unemployment boost which ends in

september

or it's because schools aren't open yet

and they don't have the child care or

they can't afford the child care or

because their skills have changed

whatever the reason

the slower people go back to work the

more

spread out these earnings that companies

are going to be

and so this means that all of a sudden

if let's say at the cheesecake factory

you are expecting a 10 earnings growth

but because they have

employee uh limitations they don't have

enough employees to service enough

people

and you end up having tables that go

unweighted on because they don't have

enough

employees then maybe instead of seeing a

10 growth you only end up seeing a

four or five percent growth now all of a

sudden you're still growing but you're

not growing at the rate that wall street

expected so all of a sudden you see

when expectations get missed stocks pair

back and stocks have kind of started to

pair

back a little bit in anticipation that

estimates could get missed

now don't get me wrong we're pretty much

expecting tech and recovery and and

casinos

and restaurants and all these companies

to smash

to do really really really well with

their earnings but

when we hear that businesses are hiring

we know demand is there for the

businesses

but when those jobs get filled that

demand doesn't get serviced

which means that demand never or

potentially doesn't fully

become realized revenue the stock market

wants realized revenue

so the longer it takes to get people

back at jobs the

softer the stock market is going to be

likely to run

where the low or the slower the stock

market is going to be like later on

this is one of the reasons that i've

been very very nervous and

increasingly nervous over the last few

weeks about holding call options

i've been selling puts and i've been

selling calls but i'm nervous about

holding calls right now

because i think the theta decay is going

to eat us alive

i think we've gone from a face of oh my

gosh we have vaccines oh my gosh

you know the world's not ending from

from covid march 2020

uh and and then oh it's okay once we get

the vaccine everything's gonna reopen

again everything's gonna be great

and we've gone from this phase of the

stock market being fueled by nothing but

hopium to the stock market now having to

prove itself businesses having to prove

themselves to the stock market

and that proof is coming slower than

expected

especially with the lack of people being

able to go back to jobs or going back to

jobs for whatever reason

it's a problem and that's bad for call

options

call options do really really well when

you get compressed

quick earnings growth or not even

earnings growth just opium or momentum

or whatever

you want that fast because otherwise you

get eaten alive by theta decay

so very very important things to me to

keep in mind

if our economy is going to recover

slower and earnings growth is going to

be great

and companies are going to do great but

they're going to do great slower and in

a more

moderated pace then you want to keep in

mind that it's going to take

longer for stocks to regain to previous

highs or to new highs

consider this i flew on jetblue for the

first time in over a year and a half in

fact it was the first time i was on a

commercial flight

in a year and a half since uh since we

flew to

uh disney world right before the

pandemic which was crazy because

we were on a disney cruise and on the

disney cruise in the lounges

they had tvs that are like coven uh

spreading through wuhan

it was it was crazy uh so we were on a

cruise during that time it was kind of

freaky we're looking at each other like

what is somebody else covered

oh my gosh like and it's not something

to laugh about either it's just by more

laughing at a nervousness or that

feeling of like oh gosh that was weird

but anyway consider this i flew on

jetblue

my flight out was delayed two hours

things were broken things didn't

function the lavatories were broken on

the plane or at least one of the

lavatories was broken on the plane

uh they had to use an auxiliary power

card to start up the plane which

ordinarily the plane be able to start

itself but some

starter or whatever was broken and

they're like oh don't worry we'll we'll

be fine

and it's like oh okay all right whatever

uh and

uh did anyone think about it and then on

my flight back

there's so few people working at the

airport which the person that

one of the workers at los angeles

international was talking to me going

we can't we can't get enough people back

fast enough so we just can't keep up

with demand so we're

we're you know not able to efficiently

use all of the gates that we usually

have

i come back and i land and my plane sits

at the gate

at the like in front of the gate for 42

minutes

waiting for the plane ahead of us to

leave because that flight

was getting boarded too slowly because

they didn't have enough staff

so it's like that doesn't make me feel

great about flying that doesn't make me

feel great about

going out and spending money again which

is something we've talked about on this

channel

is that here's what happens when travel

like when there's a travel boom and all

of a sudden everybody goes back to

traveling

you have so many people at disney world

or at the airports or at the restaurants

that it actually potentially becomes

unsatisfying to travel because there's

so many people at the same time

so rather than just prices going up

which would be inflationary right

maybe prices don't go up as much and

when prices don't go up as much as maybe

they should

what happens people end up paying not

with their money but with their time

and then they spread out when they fly

when they travel

and boom there you go you spread out

earnings potential

you spread out that earnings growth at

companies you slow down the stock market

and you end up getting screwed if you're

sitting on too many call options

it's just something to keep in mind i'm

very very transparent with my thoughts

on this channel and i think that's

hopefully why you subscribe and support

the channel

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40

off and folks we'll see in the next

video thanks bye