not what you think

hey everyone we kevin here boy oh boy

stocks might turn green once in a while

but we've still got three massive

headwinds of first oh capitulation we

just reported the first net outflows

ending wednesday for the us stock market

outflows from equity funds hedge funds

etfs you name it saw 16 billion dollars

leave the stock market ending wednesday

now personally this is i'd like to hear

this kind of thing because the more

people capitulate the more it's a sign

of a potential bottom but it's also

still a headwind in the meantime we've

got the largest outflows happening in

the financials sector which is really no

surprise i mean brokerages and brokerage

revenue these guys are the ones getting

beat up and this is why you got to get

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tasty but yikes okay outflows big first

negative outflows in seven weeks in

addition to that capitulation we're also

seeing a lot of movement to cash which

is weird because when we're sitting at

like the 280s and the qq why are we

moving to cash then should have been

moving to cash substantially earlier but

then there's always the woulda coulda

shoulda and according to bank america we

still saw 10.8 billion dollars go to

cash and only 0.6 billion dollars go to

gold so cash is definitely really being

seen as the safe haven asset though it

seems like it's a little bit late in the

cycle really to be moving to cash but

then again you need capitulation to find

a bottom let's talk about retail

capitulation this is debatable now jp

morgan believes that retail traders sold

a net

negative

633

million dollars in the last week and

that average retail volumes were down

8.3 percent for large caps and small

caps were down about 15

so you've got a move in not only funds

but also with retail traders

if you take a look at some of the other

charts that we have from banda track on

what retail is doing we have a retail

tracker based on daily transactions not

for the week ending but just for monday

and just monday you do also start seeing

this purple line here on the right we're

trending down on retail trades and

if we compare

the retail investing at the beginning of

this week compared to all other sessions

look at the red box this is where we sit

right here that i just colored green

that little red square right there that

is a sign that potentially i wrote here

we're starting to run out of cash to

keep buying the dip

and if you look at retail one thing

that's interesting that you can do is if

you take the monday numbers and then you

subtract

the money that people put into like sqq

the triple short nasdaq retail flows for

monday on a green day were

one of the lowest positive figures we

have seen in a while but they're still

positive so even though we're seeing

outflows from stocks and even though

we're seeing some lower volume from

retail

vandatrack believes no retail traders

have not yet capitulated

but maybe we're finally starting to get

closer to capitulation here's your

retail capitulation chart going back to

december of 18 the negative bars over

here are signs of capitulation those are

what you want to pay attention to as you

can see we don't see that yet for etfs

the blue and then the light blue being

single stocks and over here we had that

capitulation happening in march of 2020.

we still don't actually have that

happening yet in this environment so

quite fascinating to look at this now

one of the other things that we've

really got to pay attention to is

spending and then some big other issue

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price goes up again now the next one

that i really want to pay attention to

is real spending okay real spending is a

problem because when when you have

spending you can compare it to last year

and even though we might be seeing

declining growth we're technically still

growing right and so then that begged

the question some of you asked

rightfully asked this question in the

comments yesterday you're like hey how

is

inflation-adjusted spending all right

well here you go inflation-adjusted

spending according to bank of america

this morning the blue line is nominal

spending the red line is inflation

adjusted compared to last year you can

see furniture is almost down 20 percent

gas spending is down about 12 percent

inflation adjusted even though nominally

it's clearly making up a lot more of our

spend

clothing is down just like furniture

both nominally and inflation-adjusted

same for jewelry and then if you look at

over here restaurants lodging in

airlines it looks like these numbers are

absolutely blowing up on the nominal

level and we know that it's mostly

wealthier people that actually have the

money to travel right now but when you

adjust for the inflation that we're

seeing we're actually only seeing

somewhere between six to ten percent

more spending in these categories so

we're really starting to see that slow

down in the consumer and it's worth

noting this is data based in may of 2022

and again numbers we talked about

yesterday from barclays also started

talking about slowdowns at the beginning

of june which also reiterates what

lennar told us about the home building

environment seeing a lot more

cancellations in june than in the actual

quarter that they were reporting that's

a problem what else is a problem is a

potential for a labor disaster now now

that might sound boring like all right i

want to hear about jobs it's actually a

big issue for inflation

the reason we could have a big labor

issue is take a look at this right here

and no it's not get life insurance in as

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link for the courses are tasty it's this

right here u.s moderation of wage growth

is probably a mirage and so we have this

report that hey why is it that right

here we have this black line which

represents the year-over-year growth for

wages why is it that it looks like it's

actually slowing down and this report

tells us that it's probably slowing down

because originally the jobs that we lost

during the pandemic when we had this

fall over here were probably low wage

jobs like catering hospitality leisure

and so on and so forth and so now as

those jobs come back into the market as

we see substantial hiring in the service

sector we actually could be just adding

more lower price jobs making it seem

like wage growth is going down when in

reality wage growth might actually be

going up and this is a warning shot here

this is a warning shot that says

we might think we don't have a wage

price spiral when we actually do have a

wage price spiral and so

the argument here is that hey fed good

luck getting inflation to two percent

either wage growth must slow or there

has to be a productivity surge or both

neither looks to be in the cards right

now or in the near future to some extent

yikes this is not the kind of stuff that

we want to hear and it's not just uh you

know something that's going to continue

to add to inflation dynamics over the

next six months until we actually

balance this out and really maybe start

seeing inflation come down but you see

the same thing at even fedex who just

reported yesterday fedex reported about

a 300 million dollar impact due to wage

issues higher wages and

higher needs for compensation now they

do also expect to see some level of

slowing in their freight business which

is pretty high margin for them uh and so

that could see we could see some slowing

there at fedex again freight very high

margins like 22 margin which is great

and that's because they expect companies

to actually order less because they have

so much inventory which is actually a

disinflationary dynamic right so we have

these like

balances that are like well we have a

lot of inventory so that's

disinflationary but we might actually

have secret wage pressures and then of

course we have inertial inflation which

is what we talked about in the real

estate and renting sector so even though

you might see inflation come down in

certain elements if wages and

you know start outpacing inflation and

we see the inertial inflation of real

estate we're going to have big issues

with the fed for a while longer now if

you don't remember what inertial

inflation is it has to do

with

what what we got from j.p morgan over

here which is that

evidence shows that when you have

tighter monetary policy what you do is

you move people from home buying and you

move them into renting and when renting

supply can't keep up rents go up the

problem is 30

or 33 percent actually of

cpi around one-third right here of cpi

comes from rent so it's like the fed's

trying to fight inflation by raising

rates but in doing so they make people

buy less homes and they just drive up

rent costs which drives up one-third of

inflationary costs so again we can see

disinflation from

inventory but don't get too excited yet

that we're going to go into a

disinflationary time anytime soon

because of these wage pressures and then

also the pressure of inertial inflation

so

now we've got a little bit of an update

that we just talked about regarding

capitulation we talked about fedex we

talked about

inflation inertial inflation uh on top

of this we've also got some we also

talked about retail spend mostly

declining we uh now this morning heard

that ballard thinks it's a good idea to

front end load that means hike a lot up

front and then maybe pause later once

we've hiked a lot up front

it's not a surprise when you have these

sorts of wage and inertial inflation

pressures that they're going to be more

aggressive although in the short term

they could actually just make things

worse which is the problem we do also

see the spread on the a 10 2 curve down

to just 3.85 basis points that's pretty

close to seeing the inversion of the

yield curve again and we're starting to

finally see a little bit of a flight to

safety on bonds again you see the 10

year is down to 3.09

this is well down from the 3.4 that we

saw a while ago

actually as recently as like nine days

ago and it's a substantial decline in

rates and it somewhat signifies a little

bit of a flight back into the bond

market that maybe we've finally seen

total bond market capitulation remember

when we talk capitulation it's usually a

sign of a bottom in fact here's a chart

on bond market capitulation you can see

we've got massive negatives over here on

the right and it's really consistently

the first time we've seen that bond

capitulation since the covet pandemic

and it makes sense that when you see

full capitulation

that's when you start to see a bottom

just like we did at the end of 2018. so

if anything i'd be a little bullish on

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thanks for watching we'll see in the

next one goodbye