FLASHING RED Warning Signs of a Mega Crash Coming.

well you all know that I'm a bull but I

love talking about the bear case because

I want to see what evidence the Bears

have to actually be those dirty lonely

bears that they are just kidding I still

love you no I don't no we could still

have a beard no we can't I just changed

that although I might flip-flop no maybe

I won't anyway let's actually talk about

this piece out from TS Lombard which

just came out on looking for the next

weakness you know why is it that it

seems the Bears keep having to come out

with new excuses for why the Market's

going lower than it did in October it's

almost like they're running out of

reasons but you know what they're still

bearish and I'm still gonna cover it

because I want to see am I missing

something because I'll tell you the day

I see something that that scares me uh I

I I'll have to weenie baby and sell

everything just kidding it usually takes

me at least a few weeks before I

flip-flop but anyway financial sector

cracks spread to the economy tightening

is likely to be strong longer and more

unpredictable the risks we know are less

worrying uh now that's interesting

because usually these folks are very

bearish right and I actually wrote that

little note over here I'm like that's

odd they're usually very bearish don't

worry they get bearish so first

regarding the banking risk their Chief

economists at T.S Lombard has a house

view which is that the main takeaway of

the banking turmoil is that we're likely

to see a credit crunch rather than more

bank failures and while there are other

risks out there the broad conclusion is

that a credit crunch will feed through

into the weaker real economic

performance which in turn could touch

off further Financial disturbances and

thereby compound the most likely

candidates emanate from China and more

broadly commercial real estate okay

quick note on China because everybody

keeps talking about how China is going

to go back and boom

yesterday Bloomberg did this live a Blog

on the Chinese premieres piece the

Chinese Premiere was saying the world is

at a Crossroads now what I thought was

really interesting is throughout this

piece the premiere talks about how China

is booming

and like their recovery is so stable and

so much better than the United States is

recovery well what do you have over here

I thought this was like the best line

ever Lee used hi nuns allegedly

Resurgence in tourism in the tourism

industry as an example of China's

rebounding economy while I generally

agree with Lee says the reporter that

things on the ground here in China are

good

I can say as someone who's been booking

hotel rooms there are a lot of vacant

rooms

I read that and I'm like of course China

is probably blowing smoke they're

probably doing a lot worse than they are

actually letting on they did the same

thing with covid why would they do

anything different for the recovery so

of course the recovery is probably not

as strong as this this is why I have

such problem trusting China and don't

get me wrong I don't trust our

government either but I trust our

government more than I trust China uh

I'm not saying something

uh but anyway going to uh this this uh

TS Lombard bear piece so uh China and

Commercial Real Estate the potential

targets for real pain okay tightening is

likely to be stronger and more

unpredictable okay so let's learn a

little bit why the hard Landing risks

have clearly risen why the economy

needed something to slow down growth and

thus inflation but the problem with

tightening lending comes from a credit

squeeze that is unpredictable the fomc

The Fad is unsure how much tightening

has occurred and notable Hawks like Neil

kashcari are getting understandably

worried

the curve is strongly signaling a

recession and after the curve reinverts

we tend to Signal a recession has begun

and Mark it's therefore are remaining on

edge but what's most important well

what's most important has TS Lombard is

this

shaken confidence in the economy has

this banking crisis now affected

people's willingness to spend recessions

can become self-fulfilling they say they

say headlines of Doom and Gloom and

recession and forecasts can negatively

impact the investor the consumer and

corporate Behavior feeding negatively

into GDP though the Bears on the floor

sorry the Bulls on the flip side argue

that well maybe we're so prepared for a

recession that a recession won't

actually happen because we hit the

brakes on our spending to allow us to

spend less so we don't have as bubbly of

a GDP but we could actually spread out

how long we could survive the fight

against inflation say I think about that

graphically for a moment because I think

it's interesting to potentially consider

so the Bears say okay if that's

recession so let's draw that straight if

that's recession right here in other

words that's the zero line right here

that's recession well the Bulls make the

the argument that hey look GDP is doing

so well oh recession's coming hey let's

moderate our spend and basically have

the economy do this this sort of like

u-shape right well the Bears say uh no

you're gonna have a recession people are

blind to the recession until all of a

sudden they're not like a financial

crisis and then maybe you get something

like that right and this is recessionary

whereas this is not

it's an idea

so anyway

as our chief Economist argues

jobs and income expectations have never

returned to pre-covered levels meaning

the damage to spending will be larger

now I have a counter to that but let me

make their argument first okay so here's

another TS Lombard piece which actually

goes into the details they're talking

about here basically what they're saying

is consumer confidence and consumer

expectations of the economy have never

actually gone back to the levels where

they were see here's a sentiment chart

and they do have a very interesting

chart here they make the argument that

when the FED Cuts rates which is

signified by this light blue line here

when the FED Cuts you see sentiment

plummet here's a cut sentiment plummets

here's a a a plummeted sentiment oh look

Cut in rates here's a cut in rates oh

look plummet and sentiment and look at

this downtrend on sentiment on the right

sentiment never recovered to 2022. now I

have a couple counter arguments to this

but let me just first finish their

argument their argument is because

sentiment is lower today in fact right

now we're sitting at like 2007 levels

basically this next recession is going

to suck even worse because we're going

into it with worse sentiment

okay well now it's important to know the

following I think that's really

important this is my counter and I'll

keep going with their bear piece okay

so my counter is the following it's

two-folded okay so number one counter

and the number two counter okay I'll do

I'm gonna put my little reminder right

there so number one counter I wrote not

necessarily If the Fed is cutting rates

because inflation is conquered

expectations in my opinion could

ironically rise

the reason for that and I give an

analogy it's like being on a ship

if you're on a ship that crashes into a

uh an iceberg you might be like oh my

God we're cutting rates because we just

hit a Iceberg oh crap we might die

but if you were on a ship for a year and

at the beginning of the cruise they're

like hey by the way we're fighting

icebergs and really high inflation

and then all of a sudden you see land

and you're like oh the inflation's going

away the signal is oh it's clearing up

the signal is actually positive in my

opinion your expectations actually go up

not down because in my opinion in this

rate cutting cycle when the rate Cuts

happen you're sending a signal that

inflation is conquered I don't believe

the FED will cut rates until inflation

is conquered

they will shove our faces into the mud

of a recession before they cut rates uh

and inflation is still high they will

not let inflation on anchor they will

keep rates High until inflation is gone

that's why in my opinion when the FED

starts cutting here

it's a signal it's a bat signal going

inflation's over yay that would be great

very good it's like seeing land and you

have scurvy you have scurvy and you're

like I need an orange it's a good thing

it should increase your optimism not

decrease your optimism

the second thing that is a counter to

this bear piece is they argue that hey

but sentiment hasn't risen who cares if

said of it hasn't risen you know what's

risen cash the amount of money people

have folks the amount of people the

amount of money people got in their

pockets in their bank accounts they got

more money

than they did

in 2019 people have more money today

than they had oh look at this there's

literally a story on this right now

raid hikes until inflation is killed

then return to normal let's listen to

this guy for a second no more runs on

banks I'll let it take the interest

rates to wherever he has to take them to

to kill inflation

and then we can get back to normal yeah

dude I swear that guy was probably

listening to my stream and then he's

like let me call in to CNBC really quick

and basically just say what Kevin was

just saying

I mean obviously everybody subscribes to

me

perfect

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um anyway where were we before I went

down this conceited rabbit hole that

everybody obviously listens to meet

Kevin hashtag don't sue me bro uh let's

go back to being humble uh where is that

oh I can't find it

uh okay so

okay so TS Lombard makes the argument

that the coming recession is going to

hit with overall sentiment and job and

income expectations below covet levels

pre-covered levels people did not buy

into the post covet rebound meaning

other than backing and failing to return

to approve whatever in other words when

the recession hits the damage to

spending maybe a lot more than most of

us expect and turn the recession into a

deep wood than anticipated there is

still a strong contingent believing no

recession at all but there were a lot of

very smart people in 2008 in the spring

of OEM who were arguing no recession was

underway

that is true there were a lot of people

in like 2005 six and seven that are like

oh real estate's just gonna level out

it's not gonna crash don't worry

oops so I don't I don't know I mean I I

have my bets placed but anyway uh so

they talk about being short and

underweight real estate uh you know Mr

Schiller actually came out with a piece

yesterday he was chilling on uh on

basically how he thinks real estate's

going to be much better in a much better

position to buy in six months and I'm

like wow even a Yale Economist Mr Robert

Schiller the founder of the case Chiller

index watches to meet Kevin report

because obviously if house hacks buying

a Q3 Q4 we gotta reiterate that

now it's true he actually said that

yesterday it's really interesting I

don't actually think these people

watched me Kevin report uh maybe they

should but uh but yeah I think that's

very interesting so okay so the bear

piece is is clearly established here

that uh these these expectations could

potentially lead to a worse recession

it's an argument

personally

I kind of think the Bears are uh like

grasping EX at straws at this point you

know what what what to me signaled that

the Bears had kind of lost the plot uh

it was when Morgan Stanley uh and Mike

Wilson Oh I have it right here had this

piece this to me is when I thought the

Bears lost the plot

you ready for this

the perfect analogy for where Equity

investors find themselves today and

quite frankly where they've been many

times over the past decade more

specifically either by choice or out of

necessity as a stock investors follow

prices to dizzying Heights once again is

liquidity just like bottled oxygen that

that lime into a region and where they

know they shouldn't go and cannot live

very long they climb into the pursuit of

the ultimate topping out of greed

assuming they would be able to descend

without catastrophic consequences but

oxygen eventually runs out for those who

ignore the risk because after all there

is a peak 3 000 feet above is known as

the start of the death zone at Mount

Everest and basically stock investors

are being morons who are going into thin

air expecting not to survive yeah good

one Morgan Stanley from February 19th

can somebody please send Mike Wilson an

email and tell him to watch the meet

Kevin report and stop being such a bear

we got we I would love to talk to Mike

Wilson about PP together pricing power

but anyway

ah I hope I didn't just get the guy in

trouble I I actually I actually like his

perspectives I think uh I think he has

uh you know we cover him very regularly

on here he gets a lot of coverage uh and

and I I like understanding and viewing

his bear point I actually do agree that

the S P 500 is probably going to go down

substantially uh but that's why I'm

ignoring the Staples within it but then

again Morgan Stanley's Mike Wilson's

going into the Staples like Walmart I

mean yesterday we were tearing apart

Walmart and Colgate Palmolive come on

Mike Mike we need to have a beer and we

need to talk about this and I haven't

had alcohol for like 12 days so that's

saying something I mean I'm basically

sober

with that said it's important to remind

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