Why the Market is CRASHING.

holy bully this market is a complete

disaster and it's also quite interesting

because the yield curve is quite frankly

steepening very strongly we have only

inverted for about 36 hours back on

april 1st and ever since then the market

well since the inversion has essentially

been going kind of straight down it's

kind of if interesting if you actually

look back and think about it it was

essentially right when the yield curve

inverted that that's it that was the

beginning of the slide

straight down we've been kind of crazy

since though that yield curve has

inverted we are now at the steepest

level of the yield curve that we have

been at uh since uh about the middle of

february since about february 17th with

a spread of about 49 basis points

which ordinarily would signal hey if we

only had an inversion for a day how

could we have a recession

but interestingly the argument is that

oh don't worry the recession's already

here

and so the yield curve is just like no

well if we're gonna have a recession

gotta quickly invert and let everyone

know anyway at the same time we've got

break-even inflation rates dropping

still which these should be good signals

right a steepening yield curve should

signal a strong economy uh and not a

recession a uh declining a break even on

the five-year treasure or even the uh

you know short-term treasuries should

indicate to us

less

runaway inflation or more anchored

inflation expectations right now those

levels are down again we're at uh now

levels of inflation expectations are on

february 28th obviously still elevated

but rotating down just like used car

prices are rotating down fright prices

and shipping prices are also indicating

signs of rotations down you've got

though unfortunately the 10-year

treasury yield sitting now at about

3.13

and yields just across the board rising

there's really no way to go to safety

you've got emerging markets that are

getting hit value stocks are getting hit

you've got bonds that are just getting

decimated and the expectation is now

that we broke three percent and i've

kind of gone from three percent on the

10-year to now 3.13 that oh my gosh

maybe we don't need to cap out around

those 2018 levels this is actually

something that we've been talking about

on the channel that i don't actually

think 2018 is going to be any kind of

resistance point for treasure yields

because we didn't have inflation back

then now we do

so to me it just wouldn't be a surprise

to see the 10-year treasury yield rise

to something like

i don't know three and a half percent

now do i think we're going to see a four

handle on the three and a half trash who

knows i have absolutely no idea but i

think three and a half percent is

entirely reasonable after that hey maybe

the market can get a little bit more

excessive uh it no markets tend to do

that right we go excessive to extremes

in either direction whether that's

excessive to extremes in the positive

direction or to the negative direction

so what do we have right now well we've

got a futures market that indicates the

dow is going to open up down one point

one percent the s p down one point five

three percent nasdaq down roughly two

percent actually now 2.02 percent uh at

the same time we've also got a little

bit of a fall in oil right now you've

got oil actually rotating down slightly

about two and a half percent both on wti

and

and brent now uh this also then of

course brings up what happened with

putin and victory day remember that's

what i talked about yesterday was when

you wake up see what happened putin and

victory day and so of course as

scheduled putin day occurred as we

suspected putin called his

denotification of ukraine a special

military operation and remember these

are some of the largest troop losses

sustained since uh military operations

in 2014 in the donbass region when the

existing uh ukrainian government was

overthrown in 2014 again

now uh this parade is the most watched

parade in ukraine uh sorry not in

ukraine probably definitely not in

ukraine in russia uh and uh and and

putin didn't really give us any kind of

guidance on what was to come next

instead he gave brief justifications

suggesting that without providing

evidence that the united states or the

west uh potentially just referring to

ukraine here but implying in addition to

western countries maybe just with

western help we're preparing for the

invasion of our land including crimea uh

there were multiple hacks as well at the

same time as this broadcast was going on

and putin was suggesting these things

including one hack

that took control of smart tvs in russia

and then changed the name or the title

of every program to quote and it was

sort of like a scrolling name because

the name was a lot larger but imagine

how when you're scrolling through the

channels it might say like bbc right or

fox news or whatever well that title was

changed to quote

on your hands is the blood of thousands

of ukrainians and their hundreds of

murdered children

tv and authorities are lying no to war

now russia was also planning an air

display but that was cancelled due to

weather reasons they say

and they have been training these uh air

defenses uh or sort of signals of air

superiority strength uh over the last

few days but that was possible for their

show yesterday again apparently due to

weather

uh again nato uh was was referenced as a

quote obvious threat to russia and

ultimately quote urged europe to find a

fair compromise

and at the same time as you've got this

you had zielinski who released a video

uh saying we won on victory day we won

we will win now too and this is him sort

of referring to the past but then also

kind of sending an innuendo today that

no no we we've got this in the bag too

uh and uh that uh that that will have a

parade of victory as well but that uh

victory will come to ukraine and we will

not give up any bit of ukraine or any

land and this is of course where folks

are like oh no this does this actually

mean things got worse not better right

because we you know maybe about a month

ago we're in this position where hey

maybe this war will be over by me

uh you know ukrainian officials

mentioned by may by victory day we had

uh i've sort of been expecting by the

end of may but now you know here we are

two and a half months in and

no no real talks here on compromise of

oh yeah okay uh let's carve out

certain areas as a buffer zone or

demilitarize maybe the donbass and

figure out how we can operate these

neutrally and provide

assurances that ukraine will enjoy nato

these things were talked about

now just aren't coming up as much

anymore so potentially leading to some

of the red that we're seeing in the

morning today but in addition to that

you've got kind of this really

interesting uh

shift happening at companies but the

question is are these companies

companies that are really companies that

we need to worry about like for example

you've got robinhood

laying off nine percent of its workforce

you've got facebook

freezing hiring and at the same time

uber has now released a letter

after earnings the ceo writes i spent

several days meeting investors in new

york and boston and it's clear the

market is experiencing a quote seismic

shift and we need to react accordingly

he says my meetings were super

clarifying and i wanted to share some

thoughts with all of you as you read

them please bear in mind that while

investors don't run the company they do

own the company and they've entrusted us

with running it well

we get to set the strategy and make

decisions but we need to do so in a way

that ultimately serves our shareholders

in and their long-term interests so this

is very interesting here you have a ceo

going hey um just a heads up our bosses

are saying we gotta clean up ship a

little bit here so uh be prepared for

what's next

sound like the guy from family guy

anyway in times of uncertainty investors

look for safety they recognize that we

are the scaled leader in our categories

but they don't know how much that's

worth uh channeling jerry maguire we

need to show them the money we have made

a ton of progress in terms of

profitability setting a target of five

billion dollars in adjusted debit for

2024 but the goal posts have changed

it's now all about free cash flow

remember this is something we talked

about last week as well if you're in a

profit list company or a money losing

company

we'd probably get out right and get into

profitable companies because that's just

been the trend over the last four months

here

there will be companies that put their

heads in the sand and are slow to pivot

the truth is that many of them will not

survive so now we're talking about the

potential forecasting of business

bankruptcies

coming in this sort of next wave here

unless of course you uh you adapt

uh uber ceo here talks about how the

average employee at uber is barely 30

which means you've spent

your career in a long and unprecedented

bull run you know i love it when the old

folks are like oh you don't know

the next period will be different and

will require a different approach rest

assured we're not going to put our heads

in the sand we will meet the moment oh

here we go number two investors finally

understand that we are a completely

different animal than lyft ooh slam or

other ride-sharing platforms they're

incredibly excited about the pace of our

innovation yeah

how how could you in how much more could

you innovate uber but all right whatever

uh

huge growth opportunities uh like hail

bulls and taxi okay i think he's talking

about auto taxis robo taxis right and

they acknowledge that we are winning

okay yet they don't know the size of the

prize their questions run

the gamut of has anyone other than you

made money in on-demand transport to

ride sharing has been around for a while

why isn't anyone else profitable and

they see how big the total addressable

market is and just don't understand how

this translates

into significant profits and free cash

flow we have to show them it's really

interesting

you really got the uber execs here

i think they really believe that oh

don't worry we're the best

tesla's robo-taxis have no chance

anyway keep going investors are happy

with delivery's growth coming out of the

pandemic and see we have performed

better than most other pandemic winners

i must admit and i was a bit surprised

because i firmly believe delivery should

be growing even faster the primary

questions were is delivery a good

business and what i mean honestly if

these are the questions the executive of

uber is getting quote is delivery a good

business and why he's talking to some

morons

like who has these stupid questions but

anyway uh like have you not read a

single one of our earnings reports

right anyway um

their delivery is doing quite well in

fact that's why their drive they have so

much more driver retention than lyft at

least that was sort of what we what we

analyzed last week in the earnings call

so i guess it's surprising to me that

some of these questions seem so bland

anyway um

so talking about uh you know what

happens if we enter a recession okay

this gets more interesting right and so

this is where he then goes into talking

about investors who asked about freight

love freight however less than 10 of

them asked about it freight needs to get

even bigger so that investors recognize

its value and love it as much as i do

number five meeting the moment means

making trade-offs ooh here come here

come the trade-offs the hurdle rate for

our investments has gotten higher and

that means some initiatives that require

substantial capital will be slowed in

other words probably bonuses

uh we will have to make sure that our

unit economics works work before we go

big the least efficient marketing and

incentive spend will be pulled back ooh

pulling back on marketing spend that's

not great we don't like to hear that

uh we will treat hiring as a privilege

and we'll be deliberate about where and

when we add head count we will be even

more hardcore about cross costs acosta

across the board

number six uh we have started to

demonstrate the power of the platform

which is a structural advantage that

sets us apart as you know our strategy

here is simple bringing consumers either

on mobility or delivery encourage them

to try another

and tie everything together with a

compelling membership program the

advantage here is obvious but we have to

show the value of our platform and real

term dollars

all right so kind of interesting talking

a little bit about maybe preparing back

on marketing talking about paying back

on hiring or really being deliberate if

they do hire someone this follows robin

hood cutting follows a meta sort of

freezing jobs right so we got to think

about that and then the last thing the

uber execs here say is we have to do all

of the above while continuing to deliver

an outstanding and differentiated

experience for consumers and earners

whether someone is looking

is a booking rides for a summer trip

with friends or a new parent relying on

ubereats for everything from groceries

to dinner and diapers it's on us to make

sure the experience is excellent the

same goes for anyone who comes to uber

to earn we responded to the pandemic by

becoming an earner-centric

company essentially but we're innovating

for earners literally blah blah blah

whatever okay whatever

so that's a letter to

employees yesterday that obviously was

like instantly leaked to the media and

it really signals this this sort of

malaise of oh no we have to

you know batten down the hatches and and

be a little less

spendy and frothy

and you know this makes sense right this

is sort of what you would expect if

you're in a recession or going into a

recession now for me what what i think

is fascinating about this is generally

you see the most hiring cuts or job loss

when you're already in a recession so if

we start seeing other companies start

saying oh no maybe we too need to start

cutting and removing people from

positions because we're overpaying or

whatever

maybe

maybe

that's an indicator that you're actually

starting to see

more evidence that no no the recession

is now now who knows we'll see what

happens going into the q2 gdp uh report

especially since you know we've now

broken low levels uh and levels that

we've been bouncing off previously on

qqq and spy and so this creates a lot of

fear

and so then the question becomes how

many layoffs do we potentially see and

they said just reiterate the fact that

maybe we're already in the depths of

that recession now my thesis as to why

the market is reacting the as horribly

as it is that we're about to have this

full candle break on the day chart on

qqq below the zero percent fib is really

because we're not getting

great news from the big catalyst that we

were expecting at the beginning of this

month

think about the catalyst that we've had

so far we had a jobs report that

reiterated the federal reserve can

continue to hike when the federal

reserve came out with their federal

reserve fomc meeting we didn't hear hey

we're going to do 150 basis point hike

and then go back to 25 no we heard we're

going to do three 50 basis point hikes

which may as well have been a 50 a 75

and then a succession of uh

of i'm sorry a 50 a 75 and then a

succession of 25s right you may as well

have had that now we did have a little

bit of hopium this weekend that the

federal reserve was suggesting hey well

you know we've already tightened quite a

bit we don't necessarily have to get

extremely more aggressive here problem

is nobody really believes the federal

reserve right now right when we get

catalysts that come and go and the

market gets worse you get this almost

self-fulfilling dyna dynamic that the

direction we're going is down why

because the fed's behind the curve and

they're failing and they can't be

trusted they've lost that credibility of

trust that when the fed actually makes a

statement over the weekend that we've

already tightened a lot like we're on

the right track now people don't believe

it and so probably the strong jobs

report combined with not believing the

fed is a very strong catalyst for

suggesting this market should be read

beyond that victory day to some extent

was a little bit of a nothing burger you

kind of ended up with a victory day that

gave us no clarity

in terms of putin's intentions to

potentially scale back his operation but

on top of that folks what do we have in

two days

cpi numbers and most investors in my

opinion are not looking at the cpi

numbers going oh yeah they're going to

you know the the

estimates for cpi are substantially

lower and that this wednesday could

actually mark the beginning of a turning

point in inflation which ultimately

leads to the federal reserve likely

taking a dovish u-turn at some point in

the future which any time the fed takes

a device u-turn that's usually your

signal to be like okay time to go all in

right it hasn't happened yet you know

they've kind of suggested that they're

getting ready for a double-shoe u-turn

but they haven't actually made that

double-shoe turn yet

and uh uh but but what's what's the

market doing right now nope nope nope

don't believe it don't believe the cpi

lie

uh so i mean we'll see but this

wednesday will obviously be very big

with core cpi expected to sit at 0.4

percent month over month and headline

cpi month over month expected to be 0.2

percent it's going to be some of the

lowest numbers that we've had in uh in

at least six to eight months so quite

wild probably looking back to that time

frame when we had a low inflation in the

summer of 2021 before of course all this

disaster really took off

anyway that's probably why at least in

my opinion market's selling off along

with the fact that we're breaking that

upper bound on the 10-year treasure so

welcome to payne