The Danger of the 2022 Recession.

[Music]

you definitely know the fomo days are

back when gme and amc are both halted

you're going to want to get into real

estate investing in those courses on

building your wealth through real estate

after you watch this video everyone meet

kevin here we've got to talk about the

reality of a recession when it comes to

the stock market and real estate because

historically we've always been told that

the bottom of the market is when the

federal reserve u-turns this is like

clear as day history now consider the

fact that when the federal reserve

u-turned in 1987

during the crazy stock market pain we

had towards the end of the year what

happened as soon as the fed u-turned and

set the precedent of bailing out markets

markets went up this is when the federal

reserve actually first initiated the

idea that hey if things go bad in

markets don't worry the fed will be here

to rescue you and that's exactly what

they did in the first quarter of 20 uh

2003 that is 20 003 doesn't sound as

good as like 2020 but anyway 2003 when

the federal reserve also u-turned

marking the end and bottom of the

dot-com bubble and when the federal

reserve u-turned in february of 2009

marking the bottom of the great

recession for stocks at least though

very important note about real estate

that we're going to talk about in just a

moment which is actually really really

interesting uh as well in terms of when

real estate actually bottomed

and then of course when the federal

reserve u-turned at the end of 2018 and

on march 23rd 2020 all of these marked

bottoms for the stock market and i this

information has become so crystal clear

to markets that markets are now trying

to pre-read any potential sign that the

federal reserve's job has been achieved

and it is now time for them to indeed

u-turn now we don't actually expect a

u-turn in the federal reserve's

trajectory of raising interest rates

really until like the summer of

2023 which is next year but we also know

that the

stock market tends to be forward-looking

and the stock market is looking at risks

and data and suggesting that wait a

minute ordinarily at least historically

a recession which we're now technically

in

should mean that we should have even

more pain to go in the stock market we

right now sit approximately

here which means we still potentially in

the event of actually being in a

recession

should see markets decline even more

that's because this black line

represents the decline in the stock

market

after declines begin

during drawdowns dating all the way back

to the great depression and this is an

average of all drawdowns but dating all

the way back to then and when we have a

recession we tend to see more pain for

longer and the gray line represents

market trajectory when we're not in a

recession now i know we could argue

about the definition of recession which

just makes this chart a whole lot more

complicated but what's really

interesting about why maybe this time

could be different even though the four

most dangerous words in investing are

this time is different why this time

could be slightly different at least is

that wait a minute our stock market this

time around

fell

three times as fast as the dot-com

bubble

that is something that should really

sink in see after all when we look at

this chart that says wait a minute the

market should go down more for

technically in a recession it shows us

this based on

days before and after uh bear market uh

peaks and uh or i should say bear market

troughs and bull market peaks right

before that right

so if we had three times the decline and

this is how this time could be different

right if we had a decline three times as

fast in this bear market that is this

seven month disaster rather than like a

21-month disaster or 24-month disaster

like what we saw during the dot-com

disaster and recession

then maybe this time could be different

that is the stock market has crashed

substantially faster but not only that

markets are now potentially predicting

that aha the bottom is when the fed

u-turns

and that's being priced in to happen

next summer so let's start buying the

dip

now

now some say kevin there's a reason why

the most dangerous words in investing

are this time is different and so even

though i believe it's right to be

bullish on the market and even though

i'm 95 in this market there's a

substantial danger

and that has to do with the chart

that is right

here this particular chart tells us that

payrolls

lag a recession we've known this before

we've talked about this on the channel

many times before but payrolls go down

after a recession in fact take a look at

this this is the average monthly changes

in or average monthly change the blue

box here in payrolls and what you'll see

here is there's this dotted line right

here in the middle which i just made red

that dotted line in the middle there

represents when a recession is

determined and what's fascinating is

look at all these positive payroll gains

before a recession then you have the red

line then you have another period of

positive payrolls here after the

recession is announced and you don't

actually get negative payrolls until

usually

one to three months into a recession and

this is when you get negative payrolls

but what's also substantially

interesting about this because we think

that this could lead the market lower

is the following

that the biggest

negative revisions to payrolls

are actually seen around recessions now

this is important because see the

government comes out and tells us oh

don't worry we had 500 plus thousand

jobs last month we're fine

but

the government is really bad at being

accurate

around times of recession and actually

tells us one month oh no things are

great and then the next month revises

them down and the spread between how

much they're off is really really

negative around times of recessions

those are these red circles on this

chart uh well the recessions are around

the gray bars of the chart and you could

see these peak revisions to the negative

almost always align with those gray bars

around recession times so that actually

gives us

cause for caution so we've got reason to

be bullish here okay the stock market

declined faster and maybe this time is

different because we're pre-pricing in

the fed's moves a year early that's good

right that's a reason to be bullish

but reasons to be bearish or well a the

fact that maybe this time won't be

different because those are dangerous

words and even though we might think

payrolls are fine kevin like we can't

like this this can't be that bad oh just

wait it actually can be now there's

something else that's really really

powerful here that we have to talk about

and it has to do with real estate in the

lag remember that i told you the bottom

of the market for stocks was in february

of 2009 during the great recession

the stock market started booming after

the beginning of 2009. you should have

invested in 2009 and this was still

while we were in big old pain mode

and real estate took another

two and a half years to bottom out in

fact real estate in most markets did

actually not bottom until november of

2011

and that sets up some remarkable

opportunities because during the great

recession real estate only fell at a

maximum pace of about 1.9 percent per

month real estate is incredibly slow

relative to the stock market and real

estate is driven oftentimes more by fear

rather than this pre-pricing of what the

fed is going to do next and so this is

where

when i tell you hey there's an

opportunity for you to really learn a

lot and make big dalahalas no guarantees

of course but

in real estate you want to prepare

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people bundle these all the time it's

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now of course people are taking

advantage of the coupon code that

expires on august 19th but folks the

most important thing that you should be

thinking to yourself right now is kevin

i'm watching a stock video why are you

talking about real estate because real

estate tends to be not get rich quick

but it's often get rich for sure and i

really believe that every single person

watching my content on youtube should be

really really really motivated to get

their butts into real estate in fact if

you need a side hustle get a real estate

license the best time to focus on making

more money is during a recession the

best time to become a real estate agent

is in a real estate crash because guess

how easy it is to sell real estate in a

bull market when i was selling real

estate in 2011 it was hard because the

market hadn't bottomed yet and i was

still living the freaking bottom

everybody i told oh i'm a real estate

agent like a trader joe's all of a

sudden they're the expert on my job

they're like oh wow that sucks and i'm

like no this is and when everybody is

telling you that's a crappy job to be in

that's the time to be in that job so

yeah we've still got risks for this

recession but hey it's up to you

depending on what you believe will this

time be different will those uh

inflationary figures actually come down

the way the bond market is predicting as

bond yields are or at least the

break-even yields are plummeting

indicating a huge head and shoulders

pattern for inflation but that gets a

little bit more complicated and we've

actually got to talk about a few more

things now before this other important

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let's get back to the video like

cpi okay cpi comes out in two days folks

today is the eighth in two days we get

cpi and we've got

a lot of concerns that this cpi is

supposed to come down but could miss

dearly look this is what the suits see

that is the wall street suits when they

look at what the cpi expectations are

and look folks the expectation is that

the month-over-month change in inflation

that again comes out 5 30 a.m i'll be

live for it on uh wednesday is going to

be 0.2

that is such a low read and these

estimates are almost always wrong if i

could draw you sort of a quick little

bell curve of what oh this ipad change

it but anyway imagine that's a bell

curve of uh usually there you go now

it's a little more bellish

of of where the economists think

inflation is going to come that would be

the midpoint inflation almost always

either comes in here or here

or like even sometimes way outside of

where the predictions are uh that's

because this is a consensus read of

essentially an average of a bunch of

economists who are like oh no we're

tracking this it's supposed to come down

a lot yeah well what if it doesn't then

we could be setting ourselves up for a

big miss and that's another reason to be

cautious and so what should we

potentially do when we have data coming

out

that that signals whether it's ppi or

cpi you know this expectation that

headlines yeah ppi is going to come down

a lot uh or that month-over-month ppis

and cpi's are going to change what

should we be doing if we do believe that

maybe this time is different but we

don't want risk well my opinion the most

important thing is staying out of debt

we have to be out of debt otherwise we

could end up with big big problems

because you don't want to get margin

called you don't want to get wiped out

in a recession because that is

guaranteed how you end up getting killed

by fomo and really never building wealth

now we do have some other good news and

bad news of course today we had the

energy bill pass the inflation reduction

act that provides over 300 billion

dollars in tax credits and incentives

for energy extending solar tax credits

to january 1st 2025

providing 7 500 tax credits for most

commercial and passenger ev vehicles as

long as much of their battery packs are

created in nafta territories like the

united states and canada and mexico

which i'm sure manufacturers will

finagle to make sure that we can get the

tax credit that is offered up to forty

thousand dollar tax credits for

commercial vehicles although that gets a

little bit more nuanced kamala harris

had to come in to break this tie because

republicans and democrats were fighting

so much i mean you even had wharton that

came out uh which i tweeted about you

should follow me on twitter at real meat

kevin by the way but i tweeted about

this wharton came out and said that well

it kind of looks like the inflationary

impacts of the inflation reduction act

are uh indistinguishable from zero

that's literally right what they wrote

here is uh not statistically different

from zero the inflationary impacts but

oh well i mean leave it to the

government to say they're going to do

something great and really have no

impact at all but then again that's the

way it works medicare is going to be

able to negotiate drug costs for the

first time in america which should lead

to some kind of savings for our

government 80 billion dollars more for

the irs one percent excise on stock

buybacks which is interesting you've got

stocks like enphase going up and tesla

going up on uh news of this energy bill

passing the inflation reduction act but

emphasis is a big fan of doing stock

buybacks now they're gonna have to pay

those one percent uh excise taxes you

know

once this actually goes into effect

that'll take some time 15 corporate

minimum tax and what else do we get this

morning we got

and this is why you got to be careful

playing with earnings because playing

with earnings is playing with fire

playing with margin is doubling up that

fire palantir missed and so did nvidia

nvidia blaming a gaming slowdown which

probably related to crypto down eight

percent palantir down as much as 16

percent uh also big miss on earnings

this comes after palantir was always a

company where peter thiel told us hey we

will not have a sales team and now

they're hiring salespeople like crazy

and they also bragged about how last

week they were planning on expanding

their workforce by about 30 percent

going into a recession which seemed a

little odd leading a lot of folks to

believe that pallentier would run but we

did miss but there's the belief that the

worst might now be behind us for

palantir and nvidia folks thank you so

much for watching make sure to check out

the sponsor and the courses linked down

below especially those on real estate

investing and folks we'll see in the

next one bye