Critical *FORGOTTEN* Fed Danger | Prepare for THIS.

Bond deals are going down oil is going

down stocks are going down Jamie dimon

just warned about hell we've got a

terrible warning coming from Jamie

Diamond we've got a CPI report coming

and next week we've got this idea

floating around that could Sofi go

bankrupt and cause a bank run we'll

briefly talk about that in this video as

well and we've got things to talk about

regarding expectations and curves so we

all like curves around here hey everyone

me Kevin here I'm a licensed financial

advisor I'm a real estate broker I have

courses on building your wealth they're

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New York Stock Exchange for closing bell

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outside 5 00 pm on December 9th at 5 PM

again but folks this video is not

personalized Financial advice for you so

let's get into the news first J medai

talks up about how we're the strongest

economy in the world this morning in an

interview with CNBC tells us that

consumers are spending 40 percent more

money than what they were spending

before coven tells us that households

combined still have an additional one

trillion dollars of money sitting in

there checking and savings account and

that even this Black Friday and this

year to date we have spent 10 percent

more than last year now inflation's been

knocking on the door of 10 so maybe in

real terms we're not actually spending

10 percent more but what did Jamie

Diamond warn us of well he actually gave

us two warnings one's a little bit more

generic kind of expecting this one the

other one's a little bit more ominous

so warning number one was that Jamie

Diamond expects consumers to run out of

their excess savings by the middle of

2023 and that could cause a mild to hard

recession which is a pretty wide range

mild to Heart recession and that kind of

Echoes The Narrative that the Federal

Reserve tells us that well we are

probably not looking at a soft Landing

anymore the door to the soft Landing is

substantially closing

and we could be in a nice little

recession doodle after all 70 percent of

the economy is driven by and seventy

percent of GDP is driven by the consumer

so if the consumer stops spending what

happens GDP goes negative growth goes

negative year over year and earnings per

share at companies go down which is the

second half of a valuation Crush in the

stock market the first half is a

multiple Crush where people pay less for

future earnings because their discount

rates go up in English and simply put if

you were used to paying 50 times

earnings for a stock maybe now you're

only willing to pay 25 times earnings

for a stock that leads to the first 50

Decline and then if all of a sudden

earnings go down 50 percent well then

that multiple is now multiplying a

number that's half as big so the stock

goes down to another 50 simple

of course that simple is very painful

and if a recession does come in Q3

around Q3 Q4 of 2023 well it would align

with the potential Peak that's expected

for the FED funds rate and it would

align with what the bond market is

suggesting via the inverted yield curve

which is screaming that we are about to

enter a recession potentially as soon as

Q3 of 2023 now many folks think we've

already been in a recession q1 Q2 of

2020 uh two had negative GDP so why is

it likely that we wouldn't already have

been in a recession well depends

sometimes those GDP numbers could get

conveniently revised up and maybe we

weren't actually in a recession we

actually technically won't know if we

were in a recession until generally

about a year after the recession begins

so determining how you're investing

based on whether or not we're in a

recession is usually a Fool's errand

because we have no idea until it's

already too late and it's already

happened so what's the bigger warning

though that Jamie Diamond gave not that

we're potentially walking into a

recession I think that's pretty much

confirmed at this point that the FED is

basically forcing a recession to stamp

inflation out of the market we know that

this has been their game plan and their

MO since the beginning they just haven't

been very transparent about it and

there's actually the potential that

maybe they've substantially over

tightened in fact in a video I made a

few days ago I talked about massive

potential rate Cuts coming from the FED

I want to be clear I expect those rate

cuts to come after they finish hiking so

we're still on the trend up we're still

going to get that 50 basis point hike in

December we're still expecting

potentially two more 50 basis point

hikes thereafter so that way we end up

around a uh five and a quarter percent

fed funds rate and then we'll stay there

maybe for three months six months nine

months who knows it all depends how much

how soon inflation comes down but when

it comes down I expect massive raid cuts

from the fed the problem is while those

rate Cuts could come or are we going to

be in a dirty recession and could that

recession actually be fueled

by Jamie dimon's second warning

Jamie Diamond's second warning is that

never in our lifetimes have we actually

been through a phase of quantitative

tightening I think this is really

interesting because Qantas Titan

quantitative I should say it

appropriately quantitative it's such a

weird word never in our lifetimes he

says have we been through quantitative

tightening although there has been a

little bit so I think Jamie Diamond was

being a little hyperbolic about this

because we did have a little bit in 2018

this 2018 cycle over here was actually

where the FED began raising rates and

then they started running off their

balance sheets a little bit here in 2018

which actually led to quite a bit of a

panic in the market we had quite a bit

of a crash in December of 2018 and this

tightening cycle became so severe in

2018 and 19 that Donald Trump threatened

to fire the chair of the Federal Reserve

Jerome Powell over rate hikes and the

tightening cycle so we did have a little

bit of offloading here but Jamie dimon

the CEO of JPMorgan Chase says look we

you've never been to a real QT cycle so

we have no idea what could happen in

fact he goes as far as saying look if we

have two percent inflation it would not

be unreasonable to have bond yields stay

at four percent for a very long period

of time and if bond yields stay at four

percent for a long period of time

mortgage rates are going to stay high

for a very long period of time and

they're going to cause a lot of pain to

the real estate market the more pain you

cause in the real estate market the less

consumers spend right now Moody's is

projecting that real estate prices are

going to fall 15 from their peak in q1

Q2 of 2022. they've already fallen about

six to ten percent in many markets and I

think we're going to go as far as 15 to

25 percent and if Jamie Diamond is right

we walk into a recession and yields stay

high because of quantitative tightening

then mortgage rates could stay high for

a very long time and the real estate

bust could take years to buy bottom out

not a quick v-shaped recovery last time

the real estate market collapsed in 2006

prices started falling prices really

collapsed in 2009 we didn't bottom Until

the End about November of 2011. that's a

really big down cycle of about five

years of a Down cycle and fear could

exacerbate that right but not only that

let's understand quantitative tightening

a little bit quantitative tightening I'm

just going to say QT now because that

word is such a mess spell it it's crazy

I.T there I just spelled it knee slapper

oh so good got him anyway uh QT is the

running off of the FED balance sheet and

which basically means they're buying

less treasury bonds and potentially in

the future they'll even sell

mortgage-backed Securities now what

happens when the FED provides less

demand for treasuries by letting them

expire and roll off essentially well

less demand for treasuries means the

price goes down

so more q t means lower prices for bonds

lower prices for bonds and more QT means

higher yields for bonds higher yields

for bonds means higher costs of

borrowing higher costs on credit cards

car loans student loans housing loans

and any kind of corporate borrowing

everything gets more expensive so the QT

cycle could actually keep rates High

even as the Federal Reserve starts

slashing rates so we could be in a

really weird position where next year we

start seeing what the world looks like

when the FED actually slashes interest

rates

but at the same time ramps up QT to keep

rates in the market High

we are about to enter a very Bizarro

world now I'm very optimistic about

America I personally believe bad on

America but by no means am I saying if

you need any of the money you have

invested in the stock market in the near

to medium term which means anywhere

between six months to two years

all bets off we have no freaking idea

what's gonna happen but we're watching

the movements so we could try to

position as best possible I personally

like investing in companies that I

believe have what I call PP I like it

when PP goes up okay I like a strong

thick paper PP is purchasing power

that's it pricing power purchasing power

interchangeable but generally I like

investing in companies that have pricing

power expanding margins look at a

company like Nvidia forty percent net

margins in some quarters look at AMD

gross margins really powerful and phase

solar Edge really strong growing margins

growing revenues Tesla growing EPS the

largest Automotive manufacturing uh

margins that we've ever seen now some of

that pricing power could Wane so you

have to be careful but I personally

believe that is the entire Market sort

of collapses companies with high free

cash flow and pricing power or PP can

actually outperform on the rebound

everything's probably going to hurt in

the meantime as everything sinks but

when the rising tide comes back up I

think the ones that stand strongest are

ones with the most PP okay so always

look for good strong Papi now

Jamie Diamond's warning about QT I think

is one that's really understated in

markets right now and it's one that we

have to pay attention to not just here

in the next few weeks but honestly for

the next months two years but in

addition to that in the very short term

here a lot of folks are wondering Kevin

why is the stock market going down and

what do you have to say about Sofi okay

so look

I've been saying this for about a month

now because a month ago we were just on

about to have the uh release of the

October CPI numbers in November and I

said what's likely to happen if we have

a good CPI report is the stock market

will run until we get to about a week

within a week of the next CPI report

because once you get within a week of

the next CPI report which this is being

filmed within a week of the next CPI

release in December December uh 13th we

have the next CPI release for the

November data anytime you're within a

week of a really big report like that or

a Fed decision which happens the next

day the 14th what happens well

institutional buyers stop buying they

start selling why because how the hell

are you supposed to justify to your

investors now you're on a buying spree

right before critical data comes out

this is so easy to play if you want to

trade the market in my opinion you

should know before a data release

volatility goes generally well I mean it

depends the volatility I should say

volumes plummet volatility and

uncertainty goes up so right before a

data release like the week week before

volatility up volumes down which is

usually associated with prices go down

it makes sense because less people are

buying people are fearful like what if

the report's really bad whether you

don't want to be in if the report's

really good you could get back in and

then you get a rally that's the way it

works so what are the expectations for

that CPI report next week well the

expectations are for a month over month

CPI gain of 0.3 percent I hope we come

into the low side of that point three

percent is three point six percent

annualized I'd like to be closer to two

percent but I have no idea core CPI 0.3

month over month year over year we're

expected to go from 7.7 down to 7.3 how

nice it would be to get under seven

percent again it's terrible it's a very

high level of inflation and core you're

over you're expected to go down to 6.1

so those are CPI expectations next week

and right now the break-even rates for

uh for the market are a little volatile

they're up more than they've been down

over the last few weeks and

unfortunately that's been leading to

some pain in the stock market keep in

mind break evens are the Market's

measure of inflation and when the market

believes that inflation is potentially

going to Trend up we see break evens go

up uh so this is kind of what that chart

looks like right here and if you see the

trend here since the war we have a

downtrend but if you zoom in where I am

blocking the screen right now you see

this volatility over here we had a spike

at the end of October a nice relaxation

after the October CPI read in November

nice plummet here but going into the CPI

print we see this uncertainty again

that's what this is It's the tumor of

uncertainty and uncertainty is exactly

what's also Weighing on a company like

sofa

look do we actually think sofa is going

to go bankrupt probably not but what's

an interesting thing to do if you want

to understand a company like Sofi well I

have a very and we reviewed this in

detail in my course member live stream

this morning remember if you join any of

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some people join the courses just for

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consider that take advantage of that

code PP linked Down Below in honor of

pricing power but uh in our course

member live stream this morning and I'm

just going to speed this up I do I have

a very strict way of how I analyze cash

and so I put

sofi's asset position when I strip out

things like servicing rights good will

intangibles when I discount their loans

I discount their loans which are an

asset for them because they make Loans

Discount their loans for credit losses

beyond what they discount them to I

discount them to about 10 point uh 10

billion dollars I give them a cash of a

position of about 1.2 billion dollars I

say they have assets around 11.12 11.2

billion dollars that's the Kevin asset

math okay that puts them around a book

value of about a buck per share so at

about a dollar per share about a billion

dollar market cap after their

liabilities that's kind of where I put

so-fi at like okay if they're trading

for under a dollar per share they're

like four dollars per share right now

that's when they're under Kevin's

version of Book value they're actually

knocking on the door of Book value if

you use their company's Equity but I

think that gives too much value to

potentially inflated loan values and

potentially inflated Equity So based on

Kevin's crazy math I think a safe level

of equity is around 1 point two billion

dollars for the company when I take out

demand deposits and payables and

long-term liabilities okay this is being

very aggressive it's a large Warren

Buffett style margin of safety all right

so what I am concerned about though is

if so if I were to trade under a dollar

I would be fearful that the market is

potentially trying to start pricing in a

bank run risk I don't actually think

Sofi is going to go under a dollar it it

is possible if that were to happen

though I would think oh wow you could

buy Sofi at a discount to their Book

value which is a really good deal

potentially unless of course the market

is pricing in a bank run a bank run

would occur if let's say uh if if so far

has uh five billion dollars in customer

deposits which they roughly do and 30

percent of them said we want our money

out that would be them demanding 1.5

billion dollars but they only have 1.2

billion dollars in uh in in actual cash

and cash equivalents they've got 1.2

billion dollars

uh well well then sulfite runs out of

money in a bank run commences now you do

have FDIC Deposit Insurance because so

if I did get their banking license you

can verify that information on their

website so am I really concerned about a

bank like so because they are a bank now

running out of money no not really I

mean it's common for banks to lend out

their deposits I was a I did think they

had more cash though I was a little

surprised I thought you know hey they've

got all these loans they're using

people's deposits to make loans

fractional Reserve banking I get it uh I

you know my belief is that the real Bank

Run risk for Sofi gets priced in

when and if that stock Falls even more

you start knocking on the door two

dollars for the stock or under three

dollars then it's like okay are people

really starting to get fearful about the

platform I don't think that fear exists

right now in fact I think sofa is doing

great things uh they're doing I think

they're they're getting ready to

announce the 3.75 yield on their

checking or savings account or whatever

it's actually not that terrible right

like that's pretty dang good you don't

have to deal with the headache of

treasuries uh seems kind of Epic to me

but then again you wonder like do you

want to keep your money in the safest

places today and is that potentially at

you know you know under your mattress

maybe is it in Gold maybe or is it a JB

Morgan you know when you just put your

money in the big Banks I have no idea uh

but I've been asked about this so I

wanted to provide just a little bit of

my brief look on this I actually do

think sofa is growing very nicely and

they're doing a lot of personal loans

but then again personal loans I think

are very risky in a recession so

something to keep in mind the then

what's going on with yield curves look

the yield curve is in the crappiest

position that it's been at since really

the uh 1980s when we got Paul volckard

now you could see on this left chart

right here that I've just now zoomed

into see that blue line going under the

white line yeah that's how much the

yield curve is inverted look how much it

inverted in the 80s and yield curves can

invert for two reasons one they invert

for monetary reasons which is basically

the fat is just going into an aggressive

tightening cycle that we don't think

will last very long or it's just

straight up fear that the economy is

going to go into a deep recession

we don't really know what the reason is

for this yield curve inversion it's

probably a little bit of both that is

we're probably going to go in a

recession and the FED is after all

hiking very quickly so I just wanna

encourage anybody who's investing right

now

to just be extremely patient there's no

way you can judge a stock or a company

based on what's happening on the stock

price day to day I think the best thing

to do is if you want nothing to do and

you want the most safety cash if you

don't need the cash you have enough

income to support your expenses and you

don't need what you're investing

but put your blinders on to what your

net worth is try to ignore that I know

it's very hard to do I know the losses

make you feel like you know you get that

lump in your throat and your your eyes

water up and it's like damn you know

lost one yeah even though you haven't

sold yet to realize it it still hurts

you it makes you feel like you're making

mistakes right

that's what a recession is a recession

is designed to make you feel like [ __ ]

and if you feel like [ __ ]

the recession's working

that's what this is supposed to feel

like yet if you can have that power

within yourself to zoom out and and look

at the last 100 years of the stock

market and you had to pick 10 points to

invest in

I can almost guarantee you you would

pick a recession to invest in every

single time

are you gonna be perfect with your

timing absolutely not are people going

to give you [ __ ] for being exposed to

the stocks in this sort of environment

absolutely when I started buying real

estate in 2011 everyone gave me crap

they're like oh real estate is such a

terrible investment why would you invest

in housing oh my gosh what a scam that's

fraud

best time to invest

but we won't have that feeling

potentially for another five years maybe

in five years we'll all be able to look

back and go damn that PP got big God I

love pricing power

good luck everyone