The Market Crash is Starting.

well the oil crisis the oil crisis now

and massive oil price cuts are probably

exactly what are leading oil or in five

year Break Even inflation rates to start

skyrocketing Again The Five-Year

break-even rate remember what this is

this is a difference between

inflation-protected Securities and

yields on the five years okay that might

not sound like English either but

basically the higher this chart goes the

more Angry Jerome Powell generally gets

so this is why over here in February

after that hot January data we got these

five-year break-evens really ran away

and the Federal Reserve had to get quite

aggressive really fed speaking us into

this idea that hey we're gonna go a lot

higher for longer you know we said 5.1

percent remember what Jay pal said on

February no uh first and second he says

hey you know we said 5.1 percent as a

terminal rate in December yeah yeah if I

had to redo those numbers now I'd revise

them a lot higher partly because

realized the break-even rate of

inflation was started to Skyrocket you

know even though we just had good

numbers on the Breakeven or on on pce

which is the fed's preferred inflation

gauge why would this particular chart be

skyrocketing why why would this be going

up well it's of course now because we've

got OPEC Plus

cutting oil by over a million barrels of

oil a day now yes we have countries like

Brazil Canada and Norway in the United

States trying to increase production but

I just want you to understand the

difference here Brazil Canada Norway and

the United States are trying to increase

production to the tune of 100

000 barrels per day OPEC plus is now

trying to cut production by a million

barrels per day why is that well

basically because they want more money

per barrel of oil they that is the whole

point of OPEC to try to maximize profits

for oil producing Nations instead of

driving prices straight down the idea is

let's get as much capacity as possible

and basically print barrels when prices

are high if prices fall too low then

let's just cut production together and

prices will go back up and we'll all

make more money per barrel of oil

unfortunately that's quite inflationary

now one of the reasons these Cuts didn't

come so sooner is a because oil hadn't

been falling that heavily I mean beyond

the bubble of sort of that crazy peak in

the 120 Barrel range that we saw when uh

Putin invaded Ukraine oil's kind of in

bobbing around relatively decent levels

however in this last quarter oil

plummeted and it had its worst quarter

since April of 2020. uh that's uh that's

that's pretty extreme in fact oil fell

as much as seven percent just last week

which is pretty wild uh part of that had

to do because of um we uh actually let

me rephrase that uh so rephrasing oil

had its worst quarter since of April of

2020 but last week we did have some

drama that actually it didn't fall last

week we actually had a little bit of a

rally last week because of the drama

between Iraq and turkey those exports

are expected to resume uh that is some

oil exports were paused in the region

there Lee leading oil to actually

already run up nine percent now it's

moving up another six percent on top of

that maybe if that oil production

continues maybe we'll see that kind of

nine percent rally go away and sort of

extinguish that six percent that we're

seeing today but the point is a lot of

news coverage is focused on what OPEC

plus is doing and not necessarily just

what's going on between Iraq and turkey

why does that matter well much of oil

pricing has to do with speculation in

the Futures Market why is that important

well it's important because if people

again start trying to believe that oil

is going to go to a hundred bucks a

barrel we'll start seeing that pricing

into the market now we might not

actually make it to a hundred dollars

per barrel but you do tend to start

seeing that Trend towards it right now

Brent said 84.43 and uh WTI is basically

at 80 bucks seeing Brent move up another

10 bucks to 95 on these oil uh OPEC

price Cuts possible and the problem with

that is as oil Ryan sizes inflation

expectations unfortunately go up that's

why we're seeing the spike in the break

evens a because the financial crisis of

woes started fading away the fact that

oh yeah the banking crisis for sure was

going to destroy our economy that seemed

to have been a little bit more of a

passing moment here this financial

crisis and hopefully the riskiest Banks

uh have have now gone through their pain

and hopefully there aren't any other

Silicon Valley Banks out there hopefully

but then again remember hope is not an

investing strategy so you could always

expect for more of a banking Crisis

coming but this this surge over here and

break evens today really this this surge

on the right over here is clearly

because of uh the oil price Cuts over at

OPEC or sorry the oil production Cuts uh

and it is inflationary uh it's

absolutely an inflationary impetus in

fact let me show you a chart and this

chart is pretty neat because this chart

basically lines up inflation and oil

prices and it's pretty obvious so if I

grab this chart here from JP Morgan pop

it on screen right here what do we see

us CPI which is obviously our inflation

gauge and Brent that is the

international blend of oil not to be

confused with WTI when you hear WTI just

think western w Western and then also

think when and when you think win think

how you could win 12 free stocks with

Weeble by going to vetcabin.com free and

sponsored but anyway okay so CPI and

bread what do we have here percent

year-over-year gains okay so this is a

chart of year over year gains and it

looks like Brent is the first line over

here uh the the black line that is and

you see this pretty clear correlation in

some cases it actually looks like the

black line goes up first and then

inflation goes up now keep in mind this

is not core so it makes sense energy is

obviously a big part of headline

inflation so it does make sense that you

see the black line move up and when it

moves down CPI could potentially come

down so they're not perfectly uh it's

not perfectly clear that one leads the

other I think many of us will make the

argument though that obviously if oil

prices go up inflation is going to go up

and look at this oil prices have come

down and inflation has come down that's

great but what happens now if because of

these essentially production Cuts uh

inflation takes back up again well then

we're stuck with the higher for longer

regime of the Federal Reserve and maybe

we have to start undoing some of the

price cuts of uh the interest rate hikes

that we're expecting for the Federal

Reserve markets have started after the

banking crisis pricing in that the fed's

going to cut rates as soon as June

because of the banking crisis and after

they cut rates in June then by December

they'll have ended up cutting a

cumulative 100 basis points which is

essentially one percent so a start of a

25 BP cut it potentially in June and

then thereafter more Cuts that's been

heavily priced in because of the banking

crisis but if the banking crisis is a

nothing burger and we go back to

worrying about inflation and inflation

then gets accelerated by oil price cuts

and we end our oil production I keep

getting saying that wrong oil production

Cuts then we end up having larger

problems and we're not in the kind of

market right now where we really want

larger problems now so far even though

oil prices are generally speculative in

terms of uh Futures pricing so far

markets aren't reacting too terribly I

mean some tax stocks are down a little

bit more than you would expect Tesla's

down uh nasdaq's down about point six

percent even and after Tesla smashed its

delivery expectations which we'll talk

about separately but really I think the

fear now is okay banking crisis gone

means maybe less chance of fed cut maybe

time to sell but then again positioning

in the stock market is already terribly

low I mean consider the data we talked

about yesterday Bank of America told us

that a positioning in the stock market

is at an 18-month low uh Bank of America

also told us that cash positions are at

a a three-year high for individuals

Goldman Sachs says people haven't been

this little allocated to stocks since

the beginning of the 2000s so in other

words a potentially somewhere up to a

20-year low allocation to stocks and

Goldman Sachs surveys suggesting that 85

of their clients are either bearish on

stocks or neutral on stocks and that's

leading them to say where are the Bulls

so on one hand a lot of this seems like

it would be be bad news if we have more

inflationary pressures and we have to

start undoing the rate Cuts we're

pricing in maybe stock should fall but

then again if stocks have such little

allocation and people are already so

bearish on the market is it possible the

market can hold up well if we use

Bitcoin maybe as somewhat of a leading

indicator Bitcoin doesn't seem to care

that much now what's remarkable here

about Bitcoin is it has been sitting uh

at this uh 28 200 level which is one of

its Fibonacci retracement lines here off

of the low of 15-4 this is actually a

fantastic sign that maybe the fears of

this oil price disaster are a little

overblown not entirely sure but it's a

good potential indicator if you believe

that Bitcoin pricing is reflective of

maybe more of a market pricing you have

an open order book 24 7 rather than uh

sort of more of a market-based timing

when you're when you're just in the

stock market even though we have

pre-markets and aftermarkets liquidity

is so little in the stock market

sometimes Bitcoin could be a good

indicator and this would not be an

indicator of fear though Larry Summers

says we have a 50 chance of repeating

the banking crisis this could obviously

lead uh to fears that at the same time

as a new banking crisis we could end up

having sticky inflation we could even be

in an environment where we're still

doing and conducting quantitative

tightening while at the same time uh

cutting uh cutting interest rates which

then you wonder okay well which is going

to be worse and it's possible a

quantitative dieting could be worse you

could have low rates and a tightening

cycle uh and it it would be somewhat

confusing to markets because not even

markets understand and anytime there's

uh or what would happen with the fed the

FED itself doesn't even know what

quantitative tightening will end up

doing to the economy and generally when

there's confusion in the stock market

stocks tend to go down so that'll be

quite interesting uh at the same time

you've got the European Central Bank

warning look now we've got inflationary

concerns that could end up being sticky

we've got some Financial woes and on top

of that the real estate fund Market in

Europe has tripled over the last 10

years it's a 1.1 trillion dollar market

and if there's any kind of surge in

Redemption requests which we've already

been seeing in America then you could

end up seeing an increase of housing

inventory and Commercial Real Estate

inventory leading to real estate pain

which potentially real estate pain could

lead to Consumer pain as Robert Schiller

told us it's not actually stocks going

down that affect people's spending it's

actually real estate spending or or real

estate net worth that affects people's

willingness to spend that's scary

because if that's true then that means

the real pain is still ahead that means

the real estate price paying is still

ahead but if that real estate pain comes

to fruition then we actually get the

real EPS paying the EPS pain is of

course what Morgan Stanley's Mike Wilson

has been pounding the table about for

months suggesting hey hey whoa whoa hey

we're probably going down because once

those earnings prices are and well

earnings forecast for companies actually

come in

uh accurately based on the spending

we're expecting and people are have run

through the amount of excess spending

they are savings they have then we're

going to face real problems that's sort

of been Morgan Stanley's point of view

and it's not only just him it's also

other writers over and Morgan Stanley

here's another piece from Morgan Stanley

just out this morning and they're

talking about given the events of the

past few weeks we think guidance is

looking more and more unrealistic and

Equity markets are at a greater risk of

pricing in much lower estimates for

earnings ahead this is typically how

bear markets end I.E PE multiples fall

precipitously and unexpectedly catching

many investors off guard the recent

underperformance of small caps and low

quality stocks suggests this could be

imminent I mean now you've got Morgan

Stanley basically saying there's an

imminent massive stock market crash

coming and the oil price cuts and fears

around inflation start that with the

uncertainty of whether or not we're

going to get more banking right uh more

of a banking crisis and now now you've

got too many indicators lining up for

Morgan Stanley to be happy over here

suggesting hey hey hey we're going too

fast here inverted yield curve has never

been wrong before why would it be wrong

now and this is actually something that

JP Morgan reiterates as well let's go

back to that JP Morgan piece here and if

we go to their chart of the inverted

yield curve which you probably already

familiar with this

consensus view for a soft Landing but

the yield curve thus far has never been

wrong I suppose then the question is

okay well who says uh you know a soft

Landing can't just be a little shallow

recession like a little baby recession

but then the question is well there's a

baby recession actually going to be

enough to get inflation down that's the

big question because if you can't get

rid of inflation then uh then you end up

with higher for way longer and that's

something that nobody's looking forward

to so how do we reconcile all of this

well look I've I've been of the mindset

pretty heavily that the best way to get

through this is with pricing power style

stocks and a goal a Goldman Sachs

analyst here I think made an interesting

point they actually wrote here a bull

case for Tech and they talk about

basically how if there ends up being

growth scarcity that is if if the market

overall ends up having less growth and

that is basically companies that or

Staples defensives oops spelled out

wrong defensives real estate health care

and utilities if if these and even some

discretionaries

if these slow down and we end up having

a growth scare where all of a sudden a

lot of the S P 500 stocks are actually

starting to suffer what could do well in

a low growth environment or a slow

growth environment well Goldman Sachs

goes as far as suggesting it's tack it's

actually tech tech is going to

potentially be that Survivor where when

there's a lack of growth everywhere

investors just go okay well then let me

go back to growth stocks which is mostly

Tech right now now I personally refine

that further and I suggest you want

pricing power style Tech and that's

where I like investing in the miners so

to speak of uh of of

um pricing power artificial intelligence

which to me are high free cash flow

companies that are potentially getting

those big fat stemi checks from the

government whether it's uh energy like

an end phase or autonomy plays or AI

plays like Nvidia I think these are

great opportunities and I think those

are the ones with pricing power now some

people say oh Kevin it's Google but I

get really worried about Google as we

talked about in the course member

livestream uh just last week which

remember you can get lifetime access to

those course member live streams linked

down below the course member live stream

just last week we were looking at Google

and 69 of their revenues come from

search how the hell are you going to

tell me that if 69 of Google's revenues

vanish Google's gonna do good from AI

now yeah they could grow their AI income

but you're starting at zero whereas the

big bulk of your income is advertising

Revenue based around search but if AI

replaces 50 of search

now you've just lost like 34 35 of your

Revenue a value I replaces the need to

ever use a search engine you just lost

69 of your Revenue good luck growing

from there now all of a sudden you go

from looking cheap and like a value play

with your multiples to actually being a

value trap and people actually paying

five times the multiple they think they

are paying today scary things to keep in

mind fundamental analysis is a lot more

than just plugging data into an app and

then looking at the app outcome and

going oh the PE Ratio looks good oh yes

I've advised this stock because the

ratios look good like the story also has

to make sense around it and it doesn't

make sense for Google right now it's not

to say that Google can't float up with

the rest of the equity Market but all in

all yeah I mean these these are things

that create nervousness I personally

think most of the inflationary concerns

uh will will be that we require more

patience uh but that we continue with

downtrend uh and these fluctuations and

oil prices I think will be offset by the

fact that oil prices and oil demand

rather natural gas demand has been

declining since 2019. we peaked out an

oil demand in 2019 and we're obviously

trying to uh manufacture more or produce

more we can't produce as much as uh as

OPEC plus chem so we can't fully offset

it so we're going to have some price

increases but then the question is how

much of that is just pure speculation

because if we do end up trending towards

even a shallow recession oil prices will

probably have a lot more to fall one of

the reasons by the way you are seeing

oil uh not do so well at the beginning

of this year and one of the reasons it

had its worst quarter since April of

2020 which I realized that's a month

compared to this first quarter uh that

just kind of that was a magnitude drop

which was insane in April of 2020. the

point is to compare this quarter this

first first quarter and say it's been

bad okay it hasn't been this bad in a

while for oil one of the reasons is

because the speculation that China's

reopening was going to lead oil prices

to Surge and commodity prices to Surge I

remember pounding the table in December

going that's bullcrap it's not going to

happen sure enough it didn't happen now

uh you have speculation okay well

without oil Opex cutting whatever

eventually OPEC will be irrelevant yes

in the near term they're still very

relevant so yes there is some headline

inflationary impetus uh to this and a

lot of it I think is based off oil

speculation so it is a downside uh risk

however and hopefully it's transitory

now I don't like using that word but it

is entirely possible that the

speculation of oil is going to 100 oils

going to 100 leads to short-term rally

in oil

and then people start taking their

attendees just like they should have

done in January when oil kind of capped

out before this quarter began we'll see

all I know is this is a perfect

opportunity to remind you you get life

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by going to beckham.com life you get

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building your wealth linked down below

met kevin.com join or just go to meet

kevin.com you can see everything I got

there Affiliates the ETF I manage the

courses on real estate or stocks and

psych and really I'm sticking strong to

my strategy I put my money where my

mouth is I put my money all in my PP uh

uh you know pricing power stocks and and

I think we're gonna keep doing well so

we'll see I'm optimistic hope you are

too and I hope we're right

[Music]

thank you