the bears are back

look at the the continued Reliance on

the bank term funding program I think we

are at 97 billion now so this continued

Reliance means the tension is there and

um and and the front end all right

honestly this constant blah blah blah

about the banking crisis and liquidity

and the reverse repos it's all such crap

like

give me like

give me some real like click pay please

like give me something good to talk

about not this crap it's such garbage uh

people like oh but Kevin this week the

treasury is gonna have to sell a bunch

of bonds and the banks are gonna have to

take money out of reverse repos and buy

it okay

who cares

they got plenty of money to do it with

the 2.1 trillion dollars sitting around

to go buy stuff with 2.1 trillion

dollars in cash that banks have access

to right now these are massive

institutions who use the reverse repo

facility people are worried about a lack

of liquidity what do you call the sack

of cash

I I I I

don't know the Bears just they have to

have a a bearish take that's what it is

you know what this is the perfect time

to give you Morgan Stanley's bear piece

you ready for the bear piece I'll give

you Morgan Stanley's bear piece and in

this bear piece you're gonna find out

exactly how much Morgan Stanley thinks

the market is actually going to fall by

the end of the year brace for it okay

you remember the days of like you know

the headlines like stock market to fall

50 percent stock market to collapse 90

percent

just wait for Morgan Stanley's updated

bear thesis on just how bad things are

going to get all right let's start with

this piece

it's by Andrew sheets

it's one heck of a last name anyway

our mid-year Outlook soft landing hard

choices U.S unemployment is the lowest

since 68 core inflation is higher than

83 while UST builds yield the most since

Jan of a one in other words things is

weird right now

we see global GDP

GDP slowing to 2.9 percent this year so

this is all of Morgan Stanley they see

GDP slowing to 2.9 percent this year

notice that's actually a positive number

they actually see the risks skewed to

the downside but their base case is

actually now a soft Landing one of the

big bears of Morgan Stanley is actually

talking about a soft Landing now but

wait a minute I thought this was a bear

piece yeah it is because they actually

think the S P 500 is going down from

where it is now buckle up for how bad

this L is going to be

now they do think that Europe and the

United States will avoid a recession

they think that resulting growth in 2024

and for the rest of 2023 will end up

being subpar leading to basically an L

of a recovery which is basically no

recovery it's kind of like stocks go

down and then they just trade sideways

that's in contrast with what a Nike

Swoosh would kind of look like which

would be something like fall rapidly

down recover and then in the longer term

you somewhat just keep recovering right

my thesis is obviously the Nike Swoosh I

do think it'll be volatile but boy the

last couple weeks here since the AI

craze it's been anything it's been just

like straight up and less volatility but

that volatility will come back to some

extent tatter policy is a key driver of

this subdued backdrop core inflation

remains too high and in our view it's

not necessarily about the Federal

Reserve raising hikes again raising

rates in the near term but rather

keeping rates extended for a period as

an inflation moderates now this is

actually I wrote yes next to this

because I've been arguing for for

probably months now but certainly weeks

that I don't really care where the

Federal Reserve stops what I actually

care about is when is the Federal

Reserve going to cut that's the part

that matters to me because my thesis is

hey rather than send these confusing

signals to the market where you

basically pause in June and then hike in

July so you get an extra 25 BP and why

don't you just delay your first 25 BP

cut by another month rather than send

such confusing signals so in other words

higher well or these levels for longer

so these levels for longer

uh now they do talk about that if the

FED does this they would actually be

raising the real policy rate and that's

true they would technically be raising

rates if rates are stable at five

percent inflation expectations full then

real rates would rise just by the

formula of calculating real rates which

incorporates future inflation

expectations

in English

Morgan Stanley's like oh they'll keep

them high just to keep fighting

inflation down I actually think they'll

start cutting but it's so they can

maintain a real policy rate rather than

raise but ignore that part for a moment

that part does not so much matter that's

more of opinion what we care about is

how much how much is do the Bears think

the Market's gonna fall

well that comes up here on the next page

so they do talk about China's recovery

uh re-accelerating they think that

potentially the market for China is uh

is seeing a bottom right now but uh here

you go markets many Market risks appear

front loaded oh this is interesting the

weakest growth is more likely to occur

in the near term rather than in the long

term so think about all these different

risks they're talking about here the

weakest growth is coming up now the

highest inflation going forward would be

now the tightest policy with the banking

crisis and fed rates now the largest

shift in the fed's about or central bank

balance sheet yeah fed balance sheet now

in other words they say it's crunch time

now now I wrote next to this yup gets

clear after well that's because I have

this belief in the Nike Swoosh that

quite frankly once we get through some

of these near-term catalysts in

inflation is it gonna be sticky or not

and and you know the banking crisis uh

the subprime Autos disaster the

commercial real estate disaster we've

already got through the debt ceiling

once we get through some of these

near-term disasters as I wrote here I

believe it gets pretty clear afterwards

in other words we're we're really out of

negative catalysts if inflation goes

away and the commercial real estate

crisis goes away because maybe rates

start falling or whatever or maybe

offices default big deal then you really

potentially don't have many catalysts

left for negativity it's hard in my

opinion to actually validate being

bearish right now

consider for a moment that even in the

commercial real estate market uh a lot

of people like oh but Kevin you know

Charlie Munger says there are a lot of

bad loans and Commercial Real Estate is

is really at risk of dangers uh well one

of the things that everyone actually

highlight yeah actually that's what I

wanted to go to is look at this I pasted

this from the financial times

so the financial times wrote that Pac

West last month sold 2.6 billion dollars

of construction loans at a loss now that

sounds really bad right A Bank selling

2.6 billion dollars of loans at a loss

sounds terrible right but what's

remarkable is look at this right here

they sold those loans for 92 cents on

the dollar and as soon as they sold

those loans for 92 cents on the dollar

which is only a measly eight percent

haircut their stock moved up 20 which

the financial times argues might lead

more Banks to want to make these sort of

deals but if there's an appetite to pick

up these loans for 92 cents on the

dollar that's barely a discount so I

really I'm I'm trying hard to find a

bear case here right so we're looking at

this bear argument and the bear argument

according to Morgan Stanley as well all

the leftover catalysts are now yeah

because after that there aren't that

many leftover catalysts that are that

negative and I understand the yield

curve is still inverted and that should

be signaling a recession at some point

in the future fine whatever there was

going to be a recession in 2019 as well

and then covid made that happen okay

maybe there'll be another disaster like

that whatever

so so anyway uh they talk about muted

returns going forward and how they

believe that defensives will actually

outperform now we'll talk about that but

first let's talk about how much they

think the market is going to crash

right after I remind you to check out

the programs I'm building your wealth

link down below especially the how to

make more money and get sh9t done faster

of course featuring artificial

intelligence those lectures drop at 6 00

pm tomorrow June 6th at 6 PM we'll be

dropping all those lectures they'll be

really really cool I've been working on

those for quite a while with the team

and I think everybody will really enjoy

those so uh check those out link down

below at least click the link go to meet

kevin.com down below and see what kind

of courses we got there because there's

some really good ones and I really don't

believe uh or I should say rather I

really do believe that uh there that

nobody really continues to add as much

value to courses as I do so I'm very

excited about that anyway here's uh

here's

what Bloomberg reported so Bloomberg got

the full research piece on this I only

got the first two pages and apparently

in the full research piece Bloomberg

reports that Morgan Stanley thinks that

there's going to be a 16 profit drop in

S P 500 companies now I have a thesis

about that I'm going to talk about that

but Morgan Stanley sees the market at 3

900 at the end of the year

do you know how much of a miserable drop

3900 is from where we are now you

remember when the Bears are like we're

going down 50 you remember this right

Bears say we're going down 50 you know

how much the Bears think the market is

going down today is it 50 nope can I

interest you in negative 40 no how about

negative 30 nope how about negative 20

15 no 10 no the Bears literally now are

quite frankly forecasting that by the

end of the year the S P 500 is going to

go down a very very dramatic and scary

nine percent

come on man what is this this like

Morgan Stanley you know what y'all have

just done what's the lead

this is ridiculous that's the most

bearish you got in fact Bloomberg I

wrote this quote down Bloomberg

literally said that a 16 profit drop

which is different from the nine percent

SPX Target a 16 profit drop for the spy

Spy SPX same thing basically

is quote one of the most bearish

predictions of economists on the market

right now

stupid

quote we think the downside risk to

earnings is now

while deteriorating liquidity back the

liquidity and backdrop is likely to put

downward pressure on Equity valuations

over the next three months we also see

earnings per share disappointment ahead

as Revenue growth slows and margins

further contract these people are so

bearish and they're so negative all the

freaking time and yet their bare thesis

gives them a total of a negative nine

percent

from now return for the S P 500 bro the

S P 500 has already returned 12 this

year

so even if that happens the s p would be

up three percent by the end of the year

that's wild

about okay I know there'd be a little

bit of a math adjustment there now they

talk about defensives so what are

defensives generally generally if

defensives are going to be your health

care consumer staples and cash

I can get behind cash to some extent

especially after this like AI hype rally

I think it makes sense to have a little

bit of cash on the side again uh just

after some things have really you know

gone a little quickly here uh and

potentially some things are getting a

little detached from fundies

but aside from cash do I really want to

move my money into Staples right now no

I've kind of been bagging on Staples and

the likelihood of the missing earnings

for a while and now you're starting to

see it Home Depot Lowe's Costco they're

not having great results

maybe a place to actually look could end

up being retail because when we were

talking about this with course members

on Friday retail actually has really

sold off when you look at the stock

market but retail is a is a

discretionary that's not defensive

that's the opposite of a defensive uh

retail is a cyclical which is again the

opposite of a defensive defensives would

be again like real estate uh you know

utility REITs

cash Health Care Staples and so uh and

then they do think that Commodities will

end up continuing to like so I find it

actually widely or wildly encouraging

that you could have a company so bearish

yet their bearish forecast is a whole

negative nine percent I don't know

Andrew maybe you all need to be a little

bit more bearish maybe you all can get

out there and and find me a little bit

more of a bear thesis now look I get it

there are a lot of people that are like

but Kevin we're going to see rates go up

higher okay all right and the market is

pricing in too many rate Cuts okay let's

take a look at exactly what the FED is

pricing in or rather markets are pricing

in right now so what we could do is we

uh let's do a couple things here let's

press this button to begin with here you

go right now there's an 82.7 percent

probability of a uh pause in June and

then for July we're actually at a 56.2

percent chance of a rate bump now I'm

not the biggest believer that

any of that is a very big deal for the

market I think the market is going to be

a little bit more interested in fundies

than that and those are not uh the

scariest Fundamentals by any means so I

don't know I really believe the bear

argument here is relatively weak uh you

know I know people again I I see these

comments all over the place about you

know I see the Twitter threads I see all

this nonsense about the uh uh the the

student loan repayment stuff I don't see

the student loan repayment stuff as

being a big Catalyst it's so such a weak

Catalyst that even the Morgan Stanley

Bears aren't talking about it uh and

that's again in part because

expectations are the student loan pause

would really only affect consumer uh GDP

by maybe a tenth of a percent uh that's

that's nothing to care about here uh I

mean really it's it's like who cares uh

I I mean sure we could try to we could

try to flip around and see if we can get

some kind of bear case on these student

loan repayments I'm trying to see if I

could find one here really quick yeah

here's the JP Morgan case on uh on

student loans ready for this like let me

actually show rather than these these

trash Twitter threads

uh yeah I shouldn't be so negative okay

some Twitter threads are good but oh my

gosh the amount of Twitter threads

though just devoid a valid context just

makes me angry

but it actually I think gives me the

opportunity to to speak hopefully in an

educated manner here I try my best I

really do we really try our best every

single day to bring great perspective

here but let's look at some reality okay

here here uh of some like real estimates

rather than just people hypothecating on

Twitter here's at least a financial

estimate and I'm not suggesting these

economists know what they're talking

about I mean just just to be clear look

at this little note here I wrote as I

was reading about this I saw a headline

that UBS

uh is still forecasting it wasn't

actually a headline it was uh it was I

was listening to Bloomberg and this was

a senior Economist at UBS and he's like

yup recession Q3 and the ladies looking

at them like really you realize Q3 is

like

a month away

and there's no indication we're going

into recession you you recognize that

right remember April May June is Q2 we

are three weeks away from Q3 UBS says

the recession is three weeks away that's

it there's the title of the video

recession three weeks away it's complete

garbage nonsense there is no recession

three weeks away but anyway let's go to

uh the JPM piece here on the student

loan

student loan student loans U.S prospects

Heroes this was at least an educated

argument so I I can get behind this so

student loan debt repayments are going

to require recur 60 days after June 30th

and so that means payments are going to

resume at the end of August that is

within Q3 In fairness

uh the uh Bureau of economic analysis

believes that this

could have an impact of around 0.2

percentage points

on a consumer savings

and then here you have potentially a

lowering of GDP by around point one

percent however they did give a slight

warning about the student loans and I'll

give them this

they did suggest that most of the impact

could end up being front loaded right so

what this really means is that it you

might almost hit the market with a

little bit of a shock that uh that oh

you have to go back to making those

student loan payments and so you could

see a sudden uh uh uh

pause in spending so to speak versus the

reality of this being basically nothing

I mean if GDP is what's the Atlanta fed

now let's see Atlanta fed now real GDP

forecast should be like 2.6 or something

like that GDP now forecast

oh two percent oh that's actually ticked

down a little bit so uh you've got a

tick down in the GDP forecast now to yep

two percent I'll show you this right

here here's the Atlanta fed GDP estimate

two percent for June one that is

actually a tick down but again consider

0.1 are we really even going to notice

that in any direction unlikely is it

possible again that that if it's front

loaded maybe it's more of like a point

four percent impact yeah that'd be a

little bit more noticeable but at least

we do still have some room here which is

nice so yeah of course there's always a

risk with everything but I suppose my

belief is that you know this is just

another sort of bear thesis that's being

thrown forward about like oh that's it

you know here it comes

I also have to wonder like what kind of

consumer does this affect more and well

here you go the beneficiaries of the

student loan forbearance program are

likely to be young people who have a

higher marginal propensity to consume

rather than older households in other

words they spend all their money because

they don't invest about 20 percent of

the outstanding student loan balances

for those between 18 to 29 years old

this makes student loans the largest

form of debt for this group compared to

other forms uh in other households like

credit cards auto loans in other words

Pence we think assuming a relatively

large multiplier with a more immediate

impact after the forbearance end date is

reasonable especially amongst wherever

you think those 18 to 29 year olds are

spending so where do we think 18 to 29

year olds are spending well they're

probably not many of them are probably

spending money on Teslas probably more

of that money I I would guess would be

going into some form of either travel

entertainment hotels restaurants and you

know I doubt many of them are buying and

phase products and video products uh

Tesla products it may maybe Apple maybe

uh who knows right so it's an it's

something to think about but again it'll

probably smooth out to being something

more like a nothing Burger so I'm not

very negative on the student loan issue

now if you look at the world interest

rate probability

I enjoy looking at this this gives us

another look at sort of the Fed

and I love the forecasts here because

they give us a little bit of a an idea

of okay well like how bearish is the Fed

right now and uh when it comes to or the

market on behalf of the FED I should say

this is the world interest rate

probability chart right now

it looks like uh that Peak is being

priced in right now for July

and you price in the first potential cut

as early as September

but certainly your pricing in Cuts uh to

uh back down to uh the five percent

range uh by December that could all be

one cut by the way and then you're

looking at your second to third cut over

here in January

so uh and that does not necessarily mean

the economy is going into a recession

this just simply means the fed's going

to follow real rates down as inflation

expectations rotate down so I guess the

long and short of this piece is Morgan

Stanley and UBS are bears their bear

arguments are relatively weak yeah we

could try to stretch the explanation

that maybe uh you've got uh these this

student loan segment that's going to

hurt some people in in August and

September will it be the end of August

so more realistically September October

yeah that is when people are forecasting

a recession is that alone going to be

what does it know

but we'll see personally I think it's

just more bearish news and nonsense on

it I don't really think the Bears have a

lot going for him right now but yeah I

guess nobody can fault me for being

clear about my opinions and hey if some

real bearish news comes out I'll be the

first to flip-flop because nobody knows

how to flood flop better than meet Kevin

but that's a good thing I think that's

that's no way when the data changes we

change our opinion now I want you to

know this when it comes to AI

time is what's going to make you money

and if you can prove that value to an

employer you'll always be able to be

employed so this is another way of

making sure that you don't get replaced

but

foreign