Down we Go | The Bearish and Coming Hell.

the Bears are back and we're going to

start with a report by who is now known

as the cocaine bear we're going to start

by looking at a perspective from the

cocaine bear we'll talk about what's

actually happening in the bond market

it's a massive red flags that are

popping up in the bond market but those

red flags could potentially turn bullish

I'll talk about how those red flags

could turn bullish we'll also look at

Morgan Stanley's bear case so if you're

looking for fun this is probably your

video but that fun could actually turn

bullish and I'm going to show you how it

could turn bullish towards the end of

the video so if you want some fear

uncertainty and doubt and see what the

Bears are saying but you always want to

elevate your perspective let's get

started with the cocaine bear from

rubberbank

I get quite a lot of direct and indirect

feedback to the global daily some of it

positive some of it negative however

yesterday for the first time I was told

I was on cocaine for arguing that higher

rates can in some cases lead to higher

inflation okay this is actually a very

traditional argument that initially when

rates go up the cost of doing business

goes up and therefore you end up

actually in the short term increasing

inflation when you start increasing

interest rates this is not wrong and

it's not actually the fundamental point

of what I want to show here however what

I want to show is that this individual

reports

what exactly what I'm seeing in the bond

market as well that Bloomberg or

finitive Reuters we are seeing all over

the place that Traders and journalists

are and analysts are betting that U.S

interest rates may go as high as six

percent which is the opposite bet that

we have been seeing getting made now

unfortunately this is starting to

actually materialize in the fed's

terminal rate we have been sitting at a

Fed terminal Reign we've been pretty

much range bound I'm looking at the

chart right here between October

and the end of January so January 31

October 1 and January 31. we have been

range bound between

5.13 and 4.9 as a terminal rate of where

the Federal Reserve is going to end so

basically pretend it's been very very

volatile between that on rate

projections well since the jobs report

this terminal rate has actually taken a

solid leg up and that's what it looks

like now is a solid leg up to currently

the fed's terminal rate being priced in

is actually 5.33 Which is higher than

what the Federal Reserve projects of a

5.1 percent terminal rate now that's

actually interesting because the Federal

Reserve use usually likes to massage

markets and dialogue before they

actually make any kind of rate decisions

now this move up was on jobs data Jerome

Powell's already tried to explain down

the jobs report by suggesting oh will

Financial conditions tightened as soon

as the report came out which is not

wrong about financial conditions did

tighten right afterwards but it's not

stopping people for making bets that

rates could go up as high as six percent

and some are even going as far as

calling for eight percent rates now

what's interesting as well is this

individual is basically making this

argument that we might end up seeing a

structural shift in America that

ultimately we build more of our things

at home he calls this the global Neo

mercantilism basically hey you know what

we're going to encourage sending stuff

out and selling stuff to other people

and we are going to discourage bringing

stuff in because we want to create more

at home it's basically the

deglobalization argument so here you've

got one particular bear who says look we

could face higher uh rates which will

actually push inflation higher a

combined with deglobalization now you're

in a situation where you have a recipe

for disaster rates go going up

inflation's still going up leading more

inflation pressures because rates keep

going up and what ultimately ends up

happening well you end up in a situation

of stagflation this is your classic

stagflationary argument right

unfortunately the problem is you're

actually seeing now the market try to

start pricing in more inflationary

concerns and higher rate concerns in

fact yesterday's Bond auction was

terrible suggesting that markets expect

rates to go higher when rates go higher

bond yields fall or sorry a bond prices

fall bond yields go up right rates going

up prices fall now that's interesting

because yesterday's auction was so

terrible why well because basically

people think that why would I pay that

price for your auctions I think the

price of those bonds is going to go

lower so I'll just wait until it's lower

and sure enough if you look at the

10-year treasury yield today what do we

see we see a

3.69 this morning we're sitting at a 3 7

7 handle we're basically trending back

to that four percent level on the

10-year treasury which is not only bad

for the cost of doing business for

companies but it's also bad from the

point of view of real estate and this is

why money is pouring into option bets

betting on higher rates this is a very

clear and consistent belief across the

board uh from a Wall Street right now

and one of the reasons is that CPI

forecast for next week is not fantastic

the fact that that CPI forecast for

Valentine's Day is suggesting we might

see CPI month over month data reads

coming in at 0.5 percent which is a six

percent annualized rate is leading a lot

of people to say holy smokes when that

print comes out the Market's going to

sell off especially if we beat it and it

comes in higher right worse the number

comes in higher uh then then we want to

be positioned and hedged so what are you

starting to see you're seeing a lot more

inflows into hedging you're seeing a

very negative of Outlook in terms of

where where the stock market belongs to

go or should be going and even this

morning there was a lot of talk from

Wall Street analysts about how the only

reason we had a rally in January was a

short covering temporarily under

multiple expansion which the last thing

you want if you're going into a

recession is multiple expansion since

usually the first thing that collapses

in a recession are stock multiples then

earnings fall and stocks fall even more

but if you're getting multiple expansion

then you're kind of having this bat that

everything's good you're betting on sort

of the fairy tale that inflation's going

to come down jobs will stay strong which

means we won't go into a recession it's

a you know that's obviously the hope

that's the soft Landing bet but people

aren't buying it they're not buying it

so much so that previously as of just

eight days ago the implied policy rate

curve looked like this on screen now you

will see the implied overnight rate and

the number of hikes that you expect to

see from the fed and what you see is a

Peak at 4.9 percent with cuts starting

in July and then you have this bar that

goes really low on the right because

those are the number of uh Cuts

basically cumulatively Incorporated and

you're looking at over 1.5 percent in

cuts by January that's pretty consistent

with the belief that we have over 1.7

percent in Cuts priced in by the end of

the year that chart has completely

changed in the last eight days since the

jobs report the chart does not look

anything like what you just saw or heard

about depending on if you're listening

to this on Apple or Google podcasts or

Spotify this particular chart right here

shows you what things look like as of

last night you can see Zero cumulative

Cuts priced in and this is why we've had

a few red days over the last few days

here what do we have

zero Cuts priced in that's not great

what do we have over here January 31st

no Cuts priced in and look at that Peak

that peak in July actually potentially

suggesting a 25 basis point hike in June

and July that Peak now sitting around

that 5.3 level uh oh

so what does this mean again more

bearish bets being made on the CPI

report coming out now I mentioned to you

that there could be a reason that this

would end up going bullish right yes and

stand by for that we're going to talk

about that but first we gotta talk about

what Morgan Stanley says and

particularly I want to look at what Mr

Wilson says now Mr Wilson is your big

bad bear he's not the cocaine bear he's

just another bear he is a pretty big

bear and this individual says that look

while it may take longer for the market

to price in materially are below

consensus view on earnings and the fed's

restrictive policy we reiterate that

this new bull market is nonsense and

that is essentially the market is going

to go down a lot more this individual

suggests that forward earnings

expectations are way higher than they

should be we're finally getting negative

revisions and ultimately MO multiple

expansion is not why we should be

rallying right now now it's worth noting

and I wrote this on the side here that

sixty percent of s p companies that

reported through January 27th beat and

69 uh beat on on EPS uh at 69 60 beat on

Revenue 69 beat on EPS I gotta fix my

little note there on the side but anyway

uh He suggests that hey look based on

their research forward EPS growth is now

negative for just the fifth time since

2000 and history therefore shows that

price downside is in front of us not

behind us and he creates this chart over

here which shows you uh that we've had

negative forward EPS in 2001 and sure

enough prices via the S P 500 fell

afterwards you had a negative hit in

2008 lower stock prices afterwards you

add a negative hit in two thousand and

15. now this one I'm going to call a

little bit of a false flag this is

interesting because yes even though

there was some temporary turmoil in the

stock market that turmoil was really

nominal you're talking about maybe three

two to three months of a little bit of

pain but that negative signal right here

was a bad time to sell because the

market is up way substantially from that

so that was a bad signal that's where

his chart and graph falls apart

obviously negative forward EPS in the

coveted pandemic and then now but if you

take out let's do this for a moment

let's try to dismantle this if we take

out covid if we take out now because now

has not happened yet and if in 2015

we're like well this is bull crap let's

take that out because nothing happened

in 2015 like you would have been better

not to have sold then right that would

that would you would have missed out a

lot so if you take out what hasn't

happened yet covid and 2015 his chart

doesn't look that impressive anymore now

you're only suggesting that hey well

stuff was still worse in the pan or in

in the.com bubble sure but our stock

market today has fallen three times as

fast as the.com bubble and if you look

at the structural problems of 2008 you

kind of Wonder like are we really going

to face a 2008 or if inflation goes away

could we potentially avoid that right so

you know obviously the Bears have their

arguments and the Bulls have their

arguments and that's fine EPS surprise

he says uh on in terms of growth even

though it's positive it's the lowest

that we have seen since the great

financial crisis uh and he does actually

suggest night this is not actually what

I'm seeing a lot of but but you are

seeing a a more long exposure here in

January than you have seen since

September now this is true though

because you and based on surveys you

have a lot of Institutions suggesting

they want more exposure to like Tech and

growth for example in January than they

did in September but it's still lower

than what we've seen throughout 2021 and

he kind of cuts this chart off in

September of 2021 because quite frankly

in my opinion the chart would be a lot

higher to the left of that than to the

right of this but but whatever so he's

obviously he's trying to make his case

over here he also then talks about while

some of the upside surprise can be

attributed to okay this I think is the

jobs report yes this is the jobs report

Friday's blowout jobs report while some

of the upside surprise can be attributed

to seasonal and longer term adjustments

to the data it's hard to argue the labor

data is not strong which means there's

really no reason for Equity investors to

get excited about cuts and rates now In

fairness the market has already removed

rate cut pricing over the last few days

so like if you think the Market's still

excited about Cuts in 2023 wrong it's

already been removed which on one hand

and this is kind of leading to where my

conclusion goes but but by conclusion

don't worry it says some more to it uh

it's actually kind of bullish in some

degree because like if the Market's

already removed price cuts from 2023 and

how much has the s p Fallen like

nominally I mean let's look for a moment

let's go to the Spy and let's go to the

day chart on the spy and what do we have

on the day chart of the spine I mean

look at that there's like no downside

movement over here so we ran to 418 for

a moment at Peak within the day we

didn't even close at that we closed at 4

15. right now we're at 405. okay well

405 divided by 415 what are we down two

and a half percent or well big whoop who

cares right if if a two and a half

percent downside on the S P 500 is all

it took to price in no Cuts in 2023.

it doesn't sound too bearish to Me Maybe

we're all okay with higher rates for

longer you know uh but anyway this

individual makes the the very strong

claim or in their opinion that hey look

no rate Cuts 23

. we all got more pain coming that is

their argument right and if you combine

that with the cocaine bear you have a

story that's kind of like yes this isn't

good right now what you also have is

this potential that yeah rates could

stay higher longer in fact Ken rogroth

who is a Harvard Professor suggests that

look generally as populations grow and

economies mature and democracy is mature

generally looking back over the past 700

years generally over the history of

financial markets we tend to see a

downward Trend in the natural rate of

interest however in that 700 year span

we actually go through substantial

periods as long as 15 years where you

have deviations from Trent

15-year deviations from Trend or a long

time and basically Ken is making the

argument Professor Ken is making the

argument that hey keep in mind

it is possible for rates to stay a lot

higher for a lot longer than anybody

expects we could be at a higher rate

regime for five years potentially

changes everything we don't necessarily

have to go back to zero in 2024. so

interesting argument and there's also of

course the potential that well there are

really

three outcomes and any of these is

possible at this point look sure we can

have orderly disinflation and basically

inflation goes down towards two percent

you don't cause substantial damage to

jobs and growth and things are better or

you have sticky inflation inflation

Falls to like three or four percent but

then you get stuck then you kind of hope

that the Federal Reserve pulls up fate

out of the bag which they've been kind

of refusing to mention because I think

it's a tool on their tool belt that

they're not telling the mainstream media

in the world about but I've been yelling

about for the past six months like it's

gonna come they're gonna pull that Genie

out of the bottle or you can have you a

u-shape of inflation where basically

these higher yields do exactly what the

cocaine bear says and you end up seeing

a second wave of inflation right

higher rates with higher inflation it's

all possible it's all very bearish now

personally I think this bearish

positioning that we're seeing getting

priced into the market right now that

actually is barely moving the indices as

I mentioned the S P 500 not that far

down down two and a half percent simply

by removing raid Cuts in 2023 that's a

nominal move to the downside for what

seems to be a lot of bearish positioning

and this is just my opinion but I think

there's a chance we have a lot of

bearishness today and Monday going into

the CPI print and if we get a a good CPI

print you could end up seeing another

rally to the upside now another another

large leg to the upside I don't even

think that a big Miss on CPI would bring

us back to a new low like October or

below I don't think most individual

investors or institutional investors

actually think we're going to break a

new low I do think it makes sense to bet

uh or Hedge for the potential another

leg down but you do have people like

Mike Wilson who are like oh no no no the

real big leg down is still coming look

at my charts which obviously I've

dismantled one of the charts one of his

primary charts but hey you know what

that doesn't mean I'm going to be right

I just want to share the perspective

again write these numbers down CPI month

over month projection 0.5 that's way

higher than the negative point one that

we had last month that's a problem

that's headline inflation went up up

right headline inflation that's led by

energy it's really led by energy but you

also have core oh they just revised core

oh that's fantastic uh they uh the

survey for core is now 0.3 that is in

line with the 0.3 previously that is a

revision down from yesterday which

actually suggested core would be 0.4 on

a month over month basis

CPI headline 6.2 estimate and CPI core

estimate of 5.4 interesting we will see

obviously we'll see but uh anyway uh

let's uh I want to see what some of

y'all are saying here are Cuts Not a Bad

Thing usually the economy crashes after

the FED pivots God damn it

anybody who watches

my videos is like oh no here we go again

dude foodle funnel man you might be new

around here I appreciate you being a

member but I think I have made like 17

videos talking about how the FED pivot

and the market crashing after the FED

pivot is straight [ __ ]

I'm gonna just simplify it like my I

mean and you can just type this into

YouTube and get my details on it but

literally yesterday morning I talked

about it the day before in the morning I

talked about it and you could just type

into YouTube meet Kevin fed pivot and

you'll see me dismantle it but let me

just try to sum it up in in 30 seconds

yeah people are Charlie's like foodle

has to be trolling maybe maybe I'm

getting trolled here but but let me just

try to sum it up in like 15 seconds okay

the FED will only pivot down in this

recession

when inflation is convincingly falling

inflation is the only reason we are

going into a recession

If the Fed pivots it means inflation is

getting conquered which means the

problems are going away which means we

go up not down

and and watch my other videos for for

why the FED pivot is just nonsense

oh God

Lord Hey Kevin how can I send you a gift

9452 Telephone Road Ventura California

93004

oh yeah yeah fed made it clear that they

needed to tackle inflation otherwise

people will lose face faith I'll I'd say

higher for longer exactly but the higher

for longer argument actually reiterates

why when the FED actually does pivot

it's actually a good thing right

also tell us where you got that jacket

this jacket was a gift from my father

it is a Robert Graham jacket

you know Robert Graham usually puts like

a

a number

on each of them of of how like all of

the products he makes are numbered and

uh yeah it's a really cool jacket but

but they they have like uh uh how many

they've made or whatever I don't I don't

know I mean this is probably this is one

of my favorites because it makes it look

like you're wearing a double jacket but

it's it's click bait it's the best uh

nobody knows clickbait better than I do

foreign

anyway uh what are we gonna title this

video something about uh prepare for the

market crash I don't know I actually I

think this stuff is a really good video

I mean I I think the content's really

good uh but uh some people just read the

titles and and they don't actually watch

the video and and for those people sucks

for you