*The BIGGEST* Bear at Morgan Stanley JUST Flip Flopped

Morgan Stanley is a flip-flopping I

would have not expected this not at all

but Morgan Stanley's Mike Wilson the

mega bear okay remember he's the guy who

says stocks are going to hell the

recession's gonna stop suck it's going

to be way worse than you expect and

basically anybody who's a bull right now

is essentially sucking air on Mount

Everest which is so oxygen depleted that

clearly you're getting delusional

because you're not able to think clearly

because obviously the stock market's

going down that's been Mike Wilson's

argument and I remember I made a video

about that amount Everest a piece that

he put out and I thought it was so

ludicrous I thought to myself holy

smokes now the Bears are getting

delusional in other words the Bears are

starting to run out of crap to say about

this economy because the reality is is

the consumers and businesses have a lot

more money than anybody previously

thought and it's lasting a whole lot

longer than anybody ever thought it

would so yes while things are trending

bad we seem to have more fuel in the gas

to keep this plane flying for a lot

longer than we thought a lot more fuel

in the gas tank

uh which would essentially coincide with

this idea of well maybe the plane

doesn't have to land yet and maybe we

can be patient in getting inflation down

before markets actually go into that

sort of Mike Wilson recession but anyway

my opinion aside Mike Wilson actually

just changed his tune a little bit and

I'd like to read you a quote take a

listen to this

Equity markets survived a crucial test

of support last week that suggests this

bear Market rally is not ready to end

yet he specifically pointed out the Spy

basically bouncing off of the SMA 200

line which you could see that

specifically here we've talked about it

many a time before but here's your SMA

uh 200 line your simple daily moving

average and that 200 daily moving

average showed you support at about 390

we ended up getting to a low of about

392 before bouncing off and closing at

about 401 a pretty uh pretty pretty

traumatic uh moves we've seen over here

uh anyway I mean boy that is actually

pretty dramatic I mean if you had a low

of 392 and you ended up closing at 401

what is that uh 401 divided by 392. okay

yeah it's about a 2.2 percent swing from

from previous low to to next state close

that's not even next day high which was

404 that's more like a three three and a

half percent that's remarkable but

anyway Mike Wilson is now calling this a

short-term pivot he does however still

reiterate that once the fundamentals

deteriorate then the real pain will come

he says this doesn't change the quote

very poor risk reward ratio currently

offered by many stocks

given valuations and earnings forecasts

that remain way too high in other words

Mike Wilson is saying look people are

just going to run out of money people

are going to have money for for to

sustain earnings anymore and then

earnings are going to disappoint margins

are going to disappoint and you're going

to have a pretty nasty crash and that

the real pain is still ahead of us

that's the Mike Wilson point now he says

the gap between reported earnings and

cash flow a cash flow is the widest that

it's been in 25 years driven by excess

inventory and capitalized costs that

have yet to be reflected in earnings per

share so in other words

when you spend a bunch of money but you

capitalize it you basically spread the

expenses over time and so when those

spread expenses hit in the future when

people finally stop spending as much

money we're going to the hell is

basically what Mike Wilson's trying to

say and now he's trying to hedge his

argument that everything's going to Hell

by basically saying okay well fine maybe

maybe the rally will last a little bit

longer but don't worry the bear Market's

coming I promise I think that's really

interesting because yeah they've they've

been you know Mike Wilson has been sort

of a bear for quite a while now he was

right about uh you know the bearishness

that we saw last year but then again

every bear was right last year at one

point I spent two months as a pair I

posted pictures of me skiing uh uh last

January and it was basically just a

picture of a bear with skis on the ski

lift all alone a very sad lonely bear

uh but what I always like to do is I try

to look at some of the other information

that we're getting from other analysts

specifically even within Mike within

Morgan Stanley I personally wonder if

all these people at Morgan Stanley are

in the same office and they've like put

Mike Wilson in a corner and then you've

got like the level-headed people on the

main floor that are kind of like there's

Mike again ah poor Mike like I I don't

know I don't know and who knows maybe

he'll end up being ripe but here's yet

another piece from Morgan Stanley which

is basically the opposite uh and what I

thought was interesting about this one

and I I try to read everything right I

try to read the bear case and I tried to

read the bull case and when I hear the

Bears arguing that don't worry the pain

will come and you must be on Mount

Everest because the oxygen is getting

thin it makes me think like dude you're

running out of facts and when you're

running out of facts to support the bear

case the bear case is going to go away

like so far people and businesses still

have lots of money and and I think

that's the big thing that everyone is

missing is just I want to just grab them

by the shoulders

now on one hand that could be really bad

because we could actually confirm a

meaningful re-acceleration of inflation

right if in January if the January

numbers uh re-accelerate in or continue

to prove and re-acceleration here in in

February with the data we're getting in

March we're screwed

Mark Mike Wilson's gonna be right then

okay and in fact look you already know

this right you already know that coming

up we have a jobs report on the 10th we

got CPI on the 14th and then we get the

FED on the 22nd you already know this

but something that we haven't talked

about before is that you should not pay

attention specifically to those reports

you know what you want to pay attention

to you want to pay attention to the

following

the revisions I want you to look at the

January revisions when this data comes

out pay attention to the January

revisions because here's the best case

scenario in my opinion best case

best case we get the Feb data the Feb

data comes in slightly soft okay I mean

the softer it is obviously the better

but you want the FED data to come in

soft but then you want the Jan data to

be revised down because the Jan data was

so ridiculous with seasonal adjustments

I'm really hoping for revision down

I just want to be really clear here

before I keep going through this Morgan

Stanley piece if the data for January

gets revised down

and you get soft February data I think

we break through the next levels of

support on the retracement levels for

everything Bitcoin spy Tech Tesla I

don't care what you're investing in AMC

oh you know it's not my fault if you

want to invest in bankrupt code I mean

in AMC uh you know like it's all going

up that would be great so

revisions pay attention to those really

really important but what's Morgan

Stanley saying over here so Morgan

Stanley suggests that hey in the coming

weeks we'll get more data duh we know

that but Morgan Stanley believes right

now that the FED will only require two

more

price hikes or or interest rate hikes

now that's interesting because we've

really been talking about this idea of

maybe a pause after March until that

January data came out after that January

data came out everybody's like oh crap

yep we're going to end up seeing rates

go up higher for longer and so now we're

pricing in that uh that hike in um in

may as well in fact if we look at

Futures pricing we're about a 71 chance

of getting a 25 BP hike oh wow that's

actually bullish uh in a uh a 28 chance

of a 50 BP hike now I think that's

ludicrous I think there's almost no

chance we get a 50 BP hike unless of

course the data comes in like terribly

bad the data would have to be so so bad

for jobs and CPI to get a 50. because it

would just shoot The fed's credibility

and foot for what they have left and

then when we look at May

we're looking at probably a somewhere

between a yeah it's about a 90 95 chance

that we're gonna be up at five and a

quarter to five and a half so yeah it's

actually closer to like 97 but anyway

pretty pretty much a foregone conclusion

that by May we're gonna be at five and a

quarter on the low end and uh 5.5 on the

higher end that's that's essentially a

foregone conclusion right uh so but

anyway what do we have here so they talk

about after these two more Cuts they

think the FED will pause so they're

setting this up to say that okay June

pause and then March of of next year

that's when they actually think you get

your first cut and you're gonna start

seeing 25 BP hikes or Cuts rather now

this is pretty far out so what we've

noticed is that everything has taken a

lot longer than expected unfortunately

uh and patience is really really

important in this sort of Market but if

this ends up playing out uh the way it's

expected here as long as people continue

to have money to spend between now and

then

yeah

we could be okay in in a crazy way we

could be okay to sustain this economy

out of a recession it would be I'll tell

you it like fate loves irony as Elon

Musk always says it would be the most

ironic thing to see that the most

predicted recession

and the steepest hiking cycle in in 40

years

does not end up turning into a recession

yeah I that Jerome Powell will go down

as an absolute hero now I've also been

reading some fed papers and it's

important to to remember because some

people keep talking to me about like oh

the fed's definitely going to rug pull

us I'm like I don't know man the FED is

pretty acutely aware

of of the pain that their activity

causes in fact let me get to the

conclusion on this paper I was just

reading this this morning here look at

this my favorite line was actually right

here where they said such policies uh in

in other words if you okay so they talk

about keeping rates for too low for too

long blah blah but anyway if if you

create the risks of financial crises

uh then you want to avoid creating the

risks of financial crises because of the

social political and economic costs that

come with them and I thought that was

fascinating because it really shows sort

of the fed's awareness this is a Fed

paper by the way it shows the fed's uh

awareness of of look you know if you

tighten too hard people lose their jobs

people go bankrupt you ruin businesses

that potentially could have otherwise

thrived so you really impact humans uh

you you create misery and depression and

increase suicides right like it's

terrible to put people through a a nasty

recession right this is the Fed

themselves does not want to have to pull

vulceros because the costs are too high

it also hurts our standing of the US

dollar and and then of course it hurts

the long-term economic uh prosperity of

America as well anywho continuing on

here fed has made less progress towards

disinflation than previously thought for

any additional insight into the main

meeting we would need to see the

evidence that the re-acceleration is

real this is basically saying look for

us to even remotely think we're going to

end up getting uh 50 BP we're going to

have to somehow prove that oh yeah

everything's re-accelerating and even if

you look at Costco's earnings call from

the second you're not look you're

obviously seeing that prices have gone

up uh but uh they're not meaningfully

continuing in fact most companies even

Costco aren't talking about more future

uh you know hikes for wages instead what

are they talking about they're talking

about autonomy and efficiency I'll just

read it to you because I'm not gonna I'm

not making this up look at this

notwithstanding the two to three

off-season wage increases we had over

the last 15 months

uh we are our which has impacted some

slight D leverage D leverage basically

this gets a little complicated D

leverage means basically their Opex and

their cost of goods sold went up a

little bit higher than the rate that

Revenue increased so notwithstanding

this information given that we've only

slightly deleveraged is actually pretty

impressive given that labor is our

biggest expense so then what do they

talk about they don't talk about more

wage increases instead they talk about

it's our productivity we're getting

better at productivity and then over

here you have an analyst that's saying

so if compensation is rising six percent

and inflation like nominal prices are

going up six percent for goods but

traffic is only up three percent then

that means you should be seeing revenues

down three percent right he's basically

saying six and six

with offset by three shouldn't be a

negative three right and they're

responding well people are spending more

money on more expensive things so not

necessarily uh in other words not simply

price inflation it's mix now mix is a

really important phrase to remember when

you're talking about Finance because

it's basically saying people are buying

higher margin items at Costco rather

than somewhere else so that's good

that's a benefit to a car score that

actually shows some level of pricing

power that can increase average selling

prices they're not actually just talking

about increasing prices in fact when

they're asked about the elasticity of

price they say well we don't really

analyze price elasticity we basically

just focus on this if we lower prices we

do more sales

so I think it's really interesting

because if you go through the earnings

call and I'm just going to sum it up

because it's a little Arcane but if I

make it simple the simplest way to put

it is Costco is telling you in my

opinion basically the same thing that

almost every other company is they're

telling you look yeah we had to raise

prices but you know what we're doing now

we're focusing on the fact that if we

want more Revenue we could lower prices

if we want more margin we focus on

productivity and automating that's

really what you're seeing at almost

every single company that I've been

analyzing I'm trying to find where that

automate here it is oh found it look at

this uh so inflation has gone up we know

that it's gone up in the past we know

that and I think the focus now this is

important now what are they focus on is

trying to figure out how to do things

more efficiently one of the things we do

religiously every four weeks at the

budget meeting is the operators are

talking about certain Focus items

whether it's improving overtime hours in

other words cutting those or things

we've done to automate something

physically improving the flow of goods

in the warehouse so what is pretty much

everyone talking about everyone's

talking about

efficiency automating becoming more

productive that's what everyone's

talking about nobody's talking about hey

we still got a lot more uh you know wage

inflation to pass on we still got a lot

more price increases ahead of us and if

anything they're like yeah like if you

want to increase Revenue we could just

cut prices

in my opinion that's actually very

bullish and and that's it's very bullish

because it shows even though we're going

to go through some volatile hell over

the next bit here it's very bullish

because the last thing you want is

evidence that companies are starting to

make you think Paul volcker is coming

right this is stuff we look at almost on

a daily basis in our course member live

streams when we do fundamental analysis

we try to understand what kind of

pricing power do companies have I

encourage you to join those by the way

any of the programs comes with lifetime

access to the course member live streams

but anyway to me this is fantastic this

is very good it's also fantastic that uh

Goldman Sachs for the first time ever

has just turned bullish on Apple saying

it has a 32 upside from here 199 dollar

price Target they talk about apples

widening and increasing install base

basically leading to this moat of people

not leaving Apple uh and uh really the

more people the Venus fly trap in the

better that was pretty interesting

so uh we'll see we'll see uh but uh

pretty excited about that uh you know I

know I know some people here uh say

things like Paul volcker can't save us

either I I mean what I always respond to

stuff like this is hey uh what evidence

do you have like where where where is

the bad because I'm I'm looking for it

and people send it to me and then I make

a video on it explaining how what they

think is bad is actually not that bad

you know that's all that's all like

usually the bear argument is but but the

prices are still up like 10 I'm like

yeah no [ __ ]

that's how inflation Works stuff gets

more expensive

done

you know like uh it's it what's what

matters is the stickiness of that right

so

um

someone here writes Costco croissants

are so good wow yeah you mean like in

those the white clam shells that were

the clear clam shells where you kind of

get like that giant box right sup

investment Joy what's up man

investment I love this guy uh I gotta

come back to Chillicothe and visit you

super curious what happens if rates hold

with 32 trillion debt you can't tax your

way out of a one trillion dollar Debt

Service yeah here's here's the and it's

it's totally understandable because

central banks are losing money like hand

over fist right now because the yields

they're getting on their Investments are

substantially lower than what they're

having to pay out in the overnight repo

facility and really what happens is

that's where politicians sort of just

basically write a blank check to to

print more money and offset those losses

now that sounds ironic because it's sort

of like hey but if you print more money

doesn't that create more inflation not

necessarily if that money isn't being

then circulated through the economy if

it's just going to sort of potentially

pay off this deficit that the FED has

created uh and and the idea there is

well well then won't people lose trust

in the institution of America well yeah

eventually I mean at some point in the

long term every currency generally tends

to go to zero because its government

loses power power and Trust

but in the near term I don't think it's

likely that that's actually something

that's going to you know sort of destroy

our economy I think people have people

are so much better off today in in

aggregate not everyone obviously uh than

they were before the pandemic that uh

that that really uh once we get back to

a normalized economy I don't think that

uh markets will terribly care about the

rejiggering that happens at the FED

don't get me wrong there'll be some fun

things that are going on over there but

another thing to keep in mind too is

that not uh every set of interest uh or

or debt essentially the bond or the the

our government has is uh attached to the

interest rates that are being paid today

right so you got two institutions you've

got our government and you've got the

fed the vet is paying money hand over

Fists in the repo facility like they're

losing money right the government has a

lot of their debt uh that needs to roll

into higher yielding debt and so it

basically means the average interest

paid is actually still very low for the

for the U.S government in fact if you

look at here we can look this up St

Louis Fred

uh debt payments as a percentage of GDP

it's still lower than where we were in

the 90s interest as a percentage of GDP

all right so look at this this chart

goes all the way back to the 1940s right

so going back to the 1940s what do you

have over here you actually have in the

1990s our interest rate or or the

interest we were paying as a percentage

of GDP was basically around three

percent so in other words we're paying

three percent uh of our GDP towards

interest right now we're only paying

about 1.86 or roughly half

of our GDP and interest now that is

expected to go up but even if it goes

back up to the 90s did we really have an

economic Calamity in the 90s

not really in fact many say to 1994 was

really aligned with a soft Landing yeah

you had a technical recession in 91 but

it's not one ever ever taught anyone

ever talks about because it's really not

that big of a deal so uh I think that's

pretty fascinating yeah so we'll see hey

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