the real reason stocks are falling

hey everyone we kevin here let's talk

about what the heck is going on in the

market and what i'm doing about it

because here's the thing the market is a

very red and usually i hold a to the

moon coffee mug in my right hand but now

i have to hold a buy the dip coffee mug

in my left hand folks let's talk about

this we're going to talk about inflation

we're going to talk about oil we're

going to talk about energy food we'll

also talk about what i'm doing in terms

of my investments as well as a little

update on ever a grand and some of the

other madness going on

okay folks let's get into this so one of

the first causes for concern has to do

with new reports out of brazil that we

might expect to see substantially more

inflation in food prices than ever

before in fact the u.n index on food

prices is showing that we are up 33

for a lot of food sources year over year

brazil in particular got decimated with

a horrible drought this year and then

after the horrible drought killed off

many plants we got a crazy arctic frost

that killed off even more in other words

you had this double whammy of

potentially well climate change

destroying crops and leading to massive

increases in food pricing and more

supply chain disruptions as you've got

vendors around the world looking for new

potential exporters for orange juice soy

ingredients sugar coffee and corn which

are some of brazilian's biggest exports

in fact or brazil apparently supplies

75 percent of our orange juice 54 of our

soy products 50 percent of our sugar 32

percent of our coffee 22 of our corn

that's crazy so yeah you're going to see

some food prices go up it's not just

food prices unfortunately and remember

anytime we hear inflation the market

kind of gets a little freaky right so

that inflation report out of brazil not

so good now some you know local sources

say this is just fud don't worry we're a

big season we got plenty of uh or we're

a big area for farming we're a big ag

industry we've got plenty of water we'll

be fine this is just a one-time event

whatever it just happened to happen

right after the covet pandemic where

supply chains are already screwed up

then you've got this energy crisis going

on in the united kingdom for example

can't get enough natural gas and they

can't get enough energy from renewables

in the meantime this means the price of

natural gas is skyrocketing as demand is

going crazy in the united kingdom this

has made commodity markets a lot more

tenuous and essentially nervous and at

the same time in the united states where

fortunately we do have a diverse supply

of energy sources

we're not so concerned about natural gas

prices skyrocketing but instead we have

insanely high oil demand as we're

reopening at the same time as we're

still recovering

and

suffering essentially from strained oil

production from the gulf's two

hurricanes this year that contributed to

oil prices going up

so now you've got an energy crisis in

the united kingdom you've got oil prices

going up over here in fact if you look

at uh brent accrued oil and you look at

the day chart you'll see that we crossed

eighty dollars for the first time uh in

many years so that we've crossed eighty

dollars in fact let's go out here to the

ten year and just see when the last time

was that we hit uh eighty dollars the

last time we broke 80 was briefly in

2018 just very briefly but you see we

really haven't been sustained above 80

dollars

since about 2014. so 80 this is a pretty

big recovery from the the bottom of the

coved recession here where at one point

we actually went negative on oil prices

but now we're seeing quite the opposite

and so this is obviously leading to

pressure on the 10-year treasury yields

and just treasury yields in general if

we look at the one month chart for

treasury yields we'll see that we've

moved up nicely here on treasury yields

which is usually associated with uh oh

if treasury yields are going up that

means inflation fears are going up and

that means the stock market sells off

over inflation uncertainty now

interestingly if you go down to the one

day we actually peaked around 1.56

we've since pulled back on this uh this

treasury yield the 10-year treasury

yield here we've also pulled back on

this sort of peak crude pricing

and so you'll see this is the day chart

so we're at bottom of uh crude pricing

for the day we're at bottom of 10-year

treasury for the day at the time of this

recording but yet look at this the dow

jones industrial is also at bottom you

would think if brent was recovering and

treasuries were recovering because

people were fearful of inflation that

the dow jones would be going up again so

it kind of leads some of us to think

maybe it's not just inflation that

people are fearful of in fact if you

look at something called the 10 year

break even curve let's do this type in

saint louis fred 10-year breakeven slap

that into google here pull it up take a

look at this this is fascinating what's

happening here we're going to zoom in to

just the last few months over here so

what this chart here is is the 10-year

break even inflation rate and basically

takes the 10-year treasury rate

subtracts off tips which are treasury

inflation-protected securities which is

basically a way of saying i'm just going

to bottom line this and fast-forwarding

a little bit here okay the higher this

chart goes the more the market's

freaking out about inflation

so the lower it goes the less the

market's freaking out about inflation

well it's been flat

so if we're really worried about

inflation because of energy costs in the

united kingdom oil costs in the united

states or throughout the world a food

costs in brazil

or oh no you know treasury yields shot

up but then came back down like why

isn't the dow recovering it's probably

because inflation is actually not the

real concern that people have right now

even though jerome powell says supply

bottlenecks are bigger and longer

lasting than expected and drone policy

reiterated that this morning reiterating

again that

these inflation expectations uh are

probably temporary they're just lasting

longer the issues of of where we're

seeing inflation are in categories where

we do expect them to be temporary we

think they'll last a little longer yes

but we think they'll go away and

honestly i think the market's starting

to believe him in fact when we look at

these charts it makes sense this is

actually not a sell-off due to inflation

energy crude i personally think all of

that is just noise it's noise noise

noise noise you know what i think is

really happening folks it's ever grand

it's my opinion there are lots of

different opinions going on people are

like oh it's the debt ceiling oh it's

the budget deficit uh you know get the

united states budget getting extended oh

it's going to be are we going to get the

three and a half trillion dollar package

and the tax increases or not sure i

think all of this noise can contribute

to volatility and uncertainty i do

believe that but i think the real

catalyst here is actually evergrand

because listen to this on october 3rd

which is a sunday so really october 4th

260 million dollars of notes mature

against evergrand from a company called

jumbo fortune enterprises now this

company holds bonds in evergreen uh one

of their owners which is such a weird

loop is actually uh also an owner or a

subsidiary of evergrand which is this

like really bizarro lupo it's a disaster

what's going on over there and the

transparency is horrible but the point

is 260 million dollars of bonds mature

come due on october 3rd which is a

sunday so october 4th and folks october

4th is like next monday it's crazy this

friday is already october 1st we're not

getting jobs data this week though we

get jobs data next week and we get cpi

data next week and you know if you

thought maybe the market was being

tenuous because jerome powell and janet

yellen were talking maybe they blabbered

and we kind of saw the market fall but

it didn't really either recover

afterwards and they didn't say anything

you know super spectacular

they said a lot about a different many

different things but if anything

i thought some of the things that jerome

powell was saying about interest rates

were actually potentially bullish go

watch my video watch your own power and

what janet yellen just said if you

haven't seen that yet go watch it but

what's more important folks i think

these ever grand due dates i'm going to

put something on screen here from my

ipad look at this okay these are the

evergrand due dates please take a moment

and screenshot this okay i put this

together uh you know from from research

uh i think the source here is bloomberg

for what it's worth uh but uh i put this

into a little chart here no it's not

really a chart it's a bubble it's a

circle anyway screenshot this okay

evergrand due dates china evergreen

march 23rd 2.03 billion dollars these

are the

2022 due dates so here hold on before

you screenshot uh and this comes after

the uh the remaining catalyst of 2021 so

the 2021 catalyst is the 260

so i'm gonna put after 260 mil in

october or on october 4 2021. okay there

that'll that'll be a little better for

you to take a screenshot of okay alright

ready so take a screenshot of this right

here so you've got evergrand 2022

due dates after the 260 billion due on

october 4th 2021 you have china

evergrand march 23rd 2 2 billion

april 11th 1.4 billion dollars hanged da

real estate which is owned by evergrand

and that is for july 8th 8.2 billion

renminbi uh which is the chinese

currency uh about

1.269 billion usd so the top two are

denominated in usd the that july 8th

ones are nominated in redmond b that's

why we're changing currencies since the

currencies fluctuate uh scenery journey

journey and then you get these these

others here 2 billion in october 645

million in november anyway this

company's going gonna go bankrupt like i

don't see this company not going

bankrupt some people say oh it'll get

federalized uh some people say no their

contracts will get distributed to other

developers and the other developers will

get really sweetheart deals and

partnerships with local governments

the point is things just aren't good for

evergrand i personally think if things

get better with evergrand the market's

going to perform a lot better

and i really believe

that inflation is not the sole concern

here and we start training below the

yellow line which is the 50-day moving

average sometimes we can get continued

pain uh or continued bouts of pain not

always but just go ahead and look at

this year for example trade below the 50

over here it kind of signals a little

bit of pain to come two to three weeks

later where we get a bigger dip in

february you get this dip over here you

get these other dips now obviously dips

happen but look sometimes you get these

dips above the 50-day moving average

it's really not a big deal it's when you

break that 50-day moving average

sometimes it can kind of forecast a

bigger dip see even a small dip forecast

a bigger dip uh here you didn't really

get that so it's not foolproof obviously

but we're trading substantially under

the 50-day moving average

and so that's i think what's worth

noting is that we really haven't traded

this substantially below the 50-day

since september of last year or october

of last year and those are really good

dips to buy in hindsight and so in my

opinion since we rarely do trade with

the s p 500 under the 50 day moving

average it's a buy the dip opportunity

that's just what i'm a fan of i'm a big

fan of uh buying this dip i'm buying my

favorites end phase a firm

palantir

now these are uh tech exposure fintech

exposure high higher valuation right uh

you know energy exposure things that uh

you know uh can tend to sell off when

there's uncertainty in the markets but

that's great because it creates an

opportunity for me so i'm buying this

dip i would keep an eye on that 50-day

moving average for the s p 500 though i

think it's a perfect buy-the-dip signal

for you uh when you're shopping but uh

that doesn't necessarily mean the dips

are going to get you a better deal than

if you bought uh sort of at least for

the s p's purposes on a green day i mean

sir look if you bought on a green day

let's say right here

depending on when you bought within that

day you'd probably be

below the biggest dip over here right so

it just gives you an example you know

time in the market beats timing the

market generally right but i like buying

the dips i like when there's fear buying

i don't see massive fear catalysts

outside evergreen and the way i'm going

to judge that selloff is by looking at

evergrand stock 3333.hk

just type that into google or

6666.hk that's the ev division i'm going

to watch those i'm going to watch the

bond payments i'm going to watch the

crypto markets and i'm going to watch

real estate prices in china that is

going to give me sort of a heads up in

terms of potential issues here now

crypto is falling here today and that

could be why we're also seeing a red

market because that is a warning sign

for our market so in my opinion this is

evergrand fear uh i am not going all in

with my cash but i may be deploying

about

seven percent of the available cash that

i have in buying the dip so just for

example if i have uh you know three

million dollars i probably deployed

about 250 000

roughly that's roughly what i deployed

so just to give you a thought as to

where i am and if we keep dipping with

throughout the rest of today i might

even buy a little bit more but i'm

bullish on kind of buying this dip

because that's kind of what our markets

have been really good at it's just

buying the day alright folks thanks for

watching and we'll see in the next one

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