Can the market rally keep going - or will it crash

hey everyone me Kevin here can markets

continue to head towards all-time highs

or is it possible that things might get

a little poopy

Max I had no idea it did that Max put

this on my desk and I had no idea it had

a sound effect in

it that's actually kind of cool anyway

that was surprising uh anyway uh well

let's understand a little bit of Market

cycles and try to help understand where

we might sit so this morning in the

course member live stream we were uh we

did like an hour and 20 minute deep dive

on Sofi this morning and Sofi is a bank

uh and uh I was talking a little bit

about well actually quite a lot about

the different fundamentals of Sofi the

margins and where they make their money

and but one of the things that inspired

this video right now is just just sort

of talk about a market cycle uh and so

this is my sort of take for a market

cycle is that usually the rapid decline

in a market cycle is about a 3 to 6

month proc process and really all stocks

sort of get heard in that environment

but what I was talking about with Sofi

is how there's probably going to be a

delay in in the max pain for Sofi

because of the type of loans that they

have you know personal loans student

loans these and student loans which can

actually get discharged through

bankruptcy because they're private

student loans uh these sort of wash outs

or cleanups in a recessionary

environment these could be two to threee

processes so it takes a lot longer to

really feel max pain uh yeah I was

making the reference to how a lot of Max

pain didn't hit for certain companies

and corporations until you know 2010 11

and 12 uh even though technically the

recession of ' 08 occurred between March

of '08 and March of 09 so a recessionary

period doesn't necessarily mean max pain

for a particular corporation so we're

starting to have those sort of

discussions in our course member live

streams where we're looking at like hey

when do we think certain companies will

hit max pain uh and then of course we're

looking at you know balance sheet and

cash flow and price to earnings you know

we're going through margins and where

growth is and and and all this I mean

again I'm summarizing uh a very small

portion of an over hourong live stream

this morning with course members

answering questions and this but I think

this is very interesting because we can

sort of apply something like this to

broader markets as well so let's just go

here to a little blank page and let's

just draw for a moment uh let's draw a

similar cycle so if we just call this

the broader Market cycle generally what

we try to identify is when

are claims for unemployment the highest

and so let's say this is you know as we

said over here uh in the sofa example

let's call this Max uh you know this is

where stocks really get hurt right in

this sort of three to six month falling

period so this right here is the fall

from

Euphoria uh to stocks getting hurt this

generally happens rapidly uh I see this

is a 3 to 6 Monon process because it can

happen very very quickly this sort of

decline this rapid portion uh this

portion up here can actually take a

little longer this portion so you I

guess you could say might even be a

little bit higher you know if we maybe

move Euphoria over here sometimes this

portion of getting off of euphoria this

could be you know two to three years as

well potentially uh and this is why I I

want to mention like hey can can this

Euphoria keep going well yeah

potentially you know I'm not okay I

don't know what's going on with this

right now oh there we go I'm not saying

like hey you know recession's going to

happen tomorrow sell everything this is

actually very interesting because you

could stay in euphoric period for a

while

you know 1998 1999

2000 right it and it can it could take a

lot longer and you can even Bob around

for a while long and every cycle is not

going to be exactly the same but I'm

more referring to where we sit today

which you could say that we've kind of

had some of uh uh the Nike Swoosh

recovery if you will since probably

November of 22 which does put us about

two years into that sort of cycle of

euphoria if you will in fact my thesis

regularly has been that we'll have this

sort of Nike Swoosh recovery as people

see that inflation isn't much of a

problem anymore uh and what's really

happening now is you're getting this

sort of hockey stick of euphoria at the

end of it which is interesting but it

also comes with some risks right this

comes with risk so uh if you have a more

rapid sort of decline at some point

where stocks really get hurt what are

some leading potential indicators of

this well something that generally is

not a leading indicator would be initial

claims for employment usually High

initial claims for unemployment

insurance they usually happen later in

the cycle so think uh like Midway

through a recession so think more like

2009 as opposed to say you know if this

is 2007 over here right so call it 05 to

07 and then this is like your you know

Q3

q48 your 3 to 6 months of pain over here

uh then you know stocks really get hurt

some companies are going to have max

pain in that sort of like 2011 2010

period uh so anyway the highest initial

claims for unemployment and we'll look

in just a moment tend to come after uh

that max pain in the stock market and

this is why initial claims for

unemployment are all lagging indicator

now a lot of people are going to hear

that and say yes we know that already

but you know every time I mention this

there are people that say Kevin initial

claims for employment they're a leading

indicator well it depends for what

initial claims which came out this

morning they come out every Thursday

they're a leading indicator

indicator for what the next jobs report

that's really it because you add up the

four weeks of initial claims and you try

to sort of predict what the next

unemployment you know jobs report is

going to be

uh however they are a massively

lagging indicator uh for uh recession uh

in fact you could see that here if you

just look at initial claims and then you

zoom in for a moment you know look at

where claims Spike see this right here

the claims really took off they started

taking off uh let's actually let's make

this uh this is weekly let's show it

monthly because it'll just smooth it out

a little bit there we go uh they took

off here late in ' 08 so actually about

August you know Q3 but where did they

Peak Peak claims right here March of

2009 this is basically when the

recession was over you know this was the

last quarter of the recession right here

is when you peaked but they didn't

really tell you much about the recession

coming until it was kind of already too

late you were already seeing that stock

pain when they were actually

meaningfully climbing above numbers that

you had seen before right so you'd have

to go above levels that you had seen

before cuz otherwise you kind of just

just cast them aside you have to get

above these

levels and what level is that yeah

August of' 08 you know you already had

massive pain in markets at this point so

uh this is a sign of a lagging indicator

and you could see this in really any

recession over here yeah in 2001 you

already had pain substantial pain in the

stock market you peaked out October of

01 I mean the recession was basically

over when you peaked out on claims again

hence a lagging indicator but you know

what's interesting is continuing claims

continuing claims tend to rise into a

recession and fall out of a recession

this makes sense continuing claims are

basically a sign that it's harder to get

a job you could also see this in the 27

weeks unemployed these are people who

have been on continuing claims for so

long that they are now uh not even

counted by the continuing claims number

anymore but if the continuing claims

number is rising it means the number of

people who are less than 27 weeks

unemployed keeps Rising so you actually

see this rise going into 90 uh and then

of course you you know the recessionary

environment there if you then go into

the dotc Bubble look at how it rises in

early 2000 and really just climbs climbs

climbs until the recession is over when

it Peaks out really doesn't come down

until recession is over in recovery

periods it comes down this is when you

have true Euphoria 2004 5 six

everything's great and then look it

slowly starts Rising again until you get

to that that sort of climax at the end

of the recession this rising action here

happens before every recession this is a

leading indicator and what do we have

over here rising action it's slow though

look how drawn out that is that rising

action it's not very rapid although it's

starting to pick up more and more over

here you know over here this shows you

coming out of the 2020 era out of 21 and

22 these were the eras here where it's

like yeah this is where you want to buy

stocks right because it's declining

declining declining you buy stocks at

huddle uh this when you're moving up

it's more of a sign that you're moving

into more of this sort of recessionary

uptick kind of like over here almost

like we're at the beginning of an ' 08

uh or maybe even over here so these are

somewhat things to watch for so can

things keep going of course one of the

reasons things can keep going is because

you know even if we say I mean how long

of rising claims have we had we've had

about two years now of rising claims so

let's go back and just compare how much

longer can the boom sort of go on well

how long have you had Rising claims over

here uh call it from right about here

yeah two years would put you at May of

09 I mean you already went went through

that recession that period right so how

about over here Rising claims Rising

claims from about here 2000 two years

later you already have the recession so

you're almost kind of like overdue

almost based on this sort of metric

right let's look at Rising claims from

here oh here's a little slower okay

let's call that the bottom November 88

let's go to November 90 yeah you were

just in it all right just in it for the

91 uh and then of course you can kind of

keep going back and looking all all

these uh Rising claims over here 81 to

83 yeah you're already through the

recession so there is an argument for

you know where where does new money get

out at now uh and what I generally like

to say is uh new money

allocation at at at highs with claims

and 27 weeks unemployed and all of this

new money allocation to me it it just

seems more logical uh right now with

with where valuations sit uh logic

probably says new allocation of capital

ought to consider cash uh you know

obviously we've been you know the bond

market which is sort of like a dam I was

talking about this in the alpha report

this morning sort of like a dam that

that that blocks pressure guess it would

be more like that a dam that blocks

pressure uh and you know the FED cut

rates 100 BP and what ended up happening

uh rates in the market went up 100 BP so

we have now basically

tightened uh uh by 200 bases points

versus what the FED wants that's crazy

right because the FED wanted to loosen

by 100 but we got 100 of tightening

which means you have 200 basis points

more of tightening than where the FED

really wants things to be which isn't

great uh and I think this is sort of

just a dam that's going to break and and

I think some of this like the you know

people are arguing oh it's cuz inflation

is popping back up I don't think so

because if you look at gold gold should

be sensitive to True inflation fears

going up it's been flat for 3 months

this a sign that the market doubts

inflation as an issue and it's more

likely that uh you know inflation is is

being resolved more than enough by these

high rates over here the question is

what damage does this do and so for me

you know my my thesis this is just my

personal take it could be totally wrong

is

uh wait for January to March because

what does January to March show

you uh q1 layoffs maybe maybe even call

it April right because then you're going

to get the March data you get the March

data in April so q1 layoffs how bad the

other thing any kind of profit taking

honestly I don't think people are going

to try to take profits in

2024 because why would you if Donald

Trump like Donald Trump isn't expected

to raise taxes so why would you take

profits this year like he's certainly

not going to raise taxes that's the

Assumption can't guarantee it but that's

I think we can all agree that's probably

the case but even if he reduced his

taxes 1% you'd be better off taking the

profits after January

1 now uh there's a so you know profit

taking in 2025 much more likely but

something that I do think is a little

bit of a risk factor is actually what

you're seeing with uh micro

strategy and Bitcoin because we know

that micro strategy is open to issuing

more stock to buy more Bitcoin but the

problem is micro strategy stock has kept

getting rejected by 400 and as it keeps

getting rejected by 400 there's going to

be less appetite for convertible bonds

in the $600 to $800 range which is where

they're issuing them right now which is

wild uh and and so that means the market

in bitcoin's pricing which is now you

know sticking around 96k under

100K I think the market is somewhat

starting to say hey there's a limit to

how much we're going to be able to issue

shares at micro strategy since we're

getting rejected at 400 and so that

means the future buying pressure that

order book of buying pressure at Bitcoin

is potentially going to be lower and

that creates some potential issues for

getting us back over

100k so uh there there are some factors

here that for me you know obviously I

don't have a crystal ball but for me

building cash uh and maybe

diversifying uh is is desirable right

now especially into private you know I

really like that idea of of diversifying

into private right now uh you know but I

mean we've talked about this plenty

before so these are just some thesis

that I have but I thought talking about

the unemployment numbers was quite

useful because this morning we did get

unemployment data you if we look at this

morning's Alpha report we got uh

unemployment claims data this morning

and continuing claims came in at a

three-year High 1910 versus uh 1881

expected and uh weekly claims were

roughly uh a little bit lower than

expected 4K lower than expected to see

what the revisions were so I mean

nothing was like a major red flag but

the three-year high on continuing claims

is something to pay attention to yeah

know revisions were roughly in line so

uh something to watch a little bit of

where my head is though especially in

the face of valuations where they are uh

earnings could explode next next year so

it's possible that things just keep

going right so this is the alternate

argument is that okay well can things

keep going of course how do things keep

going well things can keep going if

earnings just explode next year and

normalize some of the high valuations so

really in order for things to just

balloon next year let's briefly touch on

that uh balloon in 20125 well you would

need because over here you're also going

to have Trump uncertainty

uh Trump uh uncertainty around

geopolitics you know Russia for example

just declin uh a a rapid ceasefire for

Trump in Ukraine that doesn't mean it

can't get resolved within 24 hours As

Trump has said but what if it doesn't

right so geopolitics tariff uncertainty

but also policy uncertainty you know yes

they have control of all three chambers

but does that actually mean you're going

to get things through as rapidly as you

hope not

necessarily so uh balloon in 2025 it's

really going to take earnings and low

layoffs uh in q1 uh and low profit

taking in

q1 so uh to me I just like for new

capital for me my take not personal

advice for you right my take new capital

uh right

now cash uh you know unless of course

you're like funding a retirement account

or whatever which theoretically you

could fund a retirement account and just

leave it in cash so some some you will

have to automatically allocate to to

like certain funds but which I guess you

could choose a cash fund but

whatever uh so new capital right now

cash is my take uh does it make sense to

trim on Holdings that you have depends

where your earnings are you know if

you're if you're making enough money why

like why sell why why pay the extra in

taxes at this point you could always

sell some calls if if if you were

worried but then of course if things

fall rapidly then the calls only protect

you a certain percentage and and then

the rest you're kind of holding the bag

on but uh yeah I mean things could

absolutely keep going it would be very

unusual especially with this sort of

like Dam this pressure building against

this Dam of these higher yields uh and

what we're seeing with continuing claims

but hey could keep going you know I mean

I like I know recessions are very very

painful so I I hope I hope you you just

don't see one but it's my take anyway

sorry I've been gone for the last few

days became a licensed pilot

I made a whole video on it if you want

to see it it's it's a pretty Niche topic

it's pretty in depth but if you want to

see it it's on the channel anyway thanks

for watching folks see you in the next

one appreciate you all goodbye and good

luck out there why not advertise these

things that you told us here I feel like

nobody else knows about this we'll we'll

try a little advertising in SE go

congratulations man you have done so

much people love you people look up to

you Kevin PA there financial analyst and

YouTuber meet Kevin always great to get

your take