You Didn't Listen: The Stock Market is about to Plummet -- WARNING.

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are we gonna give some Credence to the

Bears and of course every time I give

the Bears some credit and show reports

from the Bears like what we're going to

talk about here whether it's Mike Wilson

from Morgan Stanley guess what position

he's thinking he's a bear man we're

gonna go look at what Bloomberg

economists are forecasting we're gonna

look at some of their models we'll look

at transitory Goldilocks and we'll look

at the vibe session we'll have a lot to

talk about but I have to first disclaim

any time I may make a bearish video

there are losers that of course we're

not going to mention by name but there

are these losers who like to take

screenshots of my channel and they're

like look at Kevin one day he's British

one day he's bearish and it's like

you're just another idiot who doesn't

watch to the end of the video so and

honestly not even through the end of the

video I mean I'm on honestly when I

cover the bearish stuff I'm like look

I'm covering this but obviously I'm a

bull and here's my take on it right like

it's like it's like I I don't know I

think sometimes people are just like

miserable in their own lives and they

have to find a reason to hate on someone

it's like I think I've been pretty damn

consistent about my my Nike Swoosh

thesis right I I don't want to make that

clear up front okay you don't even have

to make it to the end of the video I

think I'm very clear uh that while we

had that v-shaped recovery and by the

dip was great in in the covet pandemic

this is a probably an elongated Nike

Swoosh we're gonna have a lot of ups and

downs and plenty of by the dip

opportunity communities and no massive

Panic rush to to be all in uh you know I

I've been saying for a bit you know I

don't think 10 to 15 cash on the

sidelines and no margin is is a bad idea

uh you know so those are my takes but I

I don't know those are those are the

same people who who try to allege things

like oh well Kevin was selling while he

was telling you to buy that never

happened I like if I tell you I'm buying

that's what I'm doing I would never do

that first of all I'd get in trouble by

the FCC I'm SEC regulated folks okay

that would be terrible uh now I might

change my mind very quickly like I did

in January of 2020 and I get that like

in fairness it went fast okay it went

from me buying like January 18th to like

January 21st oh [ __ ]

like I finally put the pieces of the

puzzle together right uh which ended up

being the right call to flip right thank

God but uh but anyway so uh let's talk

about some of the the drama we've got

here so Bloomberg economics suggesting

that Powell's preferred recession

indicator skyrocketed in January now

from a bearish point of view that means

oh crap we're going into recession from

a bullish point of view that means hell

yeah Jerome Powell's preferred measure

went dirty that means he's gonna spank

us less hard

uh anyway so then you've got uh the the

indicators so what they are basically is

you have three potential yield curves to

look at you have the twos and tens which

is the two year ten year you've got the

three and ten which is the not the three

year okay it's the three month ten year

uh and then you have the three month 18

month yield Curve Model and Powell's

preferred is the three month 18 month

model I'll throw that up on screen right

here and I'll keep myself off of it so

you can actually see it so I'm not

blocking it so and this this chart is

honestly a garbage chart uh someone sent

this to me and I'm like dude this is

such a complicated looking chart but

anyway on the far right you can

basically see Powell's line goes up okay

it's the deepest inverted yield curve

we've seen with the Powell preferred

indicator which suggests recession

coming right the two is ten is pretty

high the 310 obviously pretty inverted

as well but nowhere near as bad as as

Powell's as powie good old powie then

you've got the Bloomberg economics

12-month recession model and it's

basically at a hundred percent which the

last time it was at 100 was in 2019

which obviously then we got the coveted

pandemic it was at a hundred percent in

2006 and seven which obviously we got

the Great Recession uh it was at a

hundred percent in the.com Era which

obviously we that that all com bubble

but we did have a false indicator in

1998 where you actually had uh the

indicators suggest uh we had a hundred

percent probability of going into a

recession within the next 12 months and

it was actually wrong we didn't end up

going into a recession within the next

12 months we ended up going into nothing

we were we were fine in 1999 and it

really wasn't until a year later in 20

2000 in 2000 that we started seeing uh

oh it looks like we might be heading

into a recession and then sure enough we

did uh by uh like 2000 uh 2001 2003 uh

obviously recessionary era so it shows

you that these these indicator there's

are not perfect right they have false

starts and that's okay and that's to be

expected that these indicators have

false starts but I think one of the

things that we also have to be very

clear about when we look at these models

is that they're not necessarily telling

us we're going to hell right like think

think about that for a moment in fact

one of my by the way and this is sort of

a tangent one of my favorite Warren

Buffett quotes is tell them to go to

hell tomorrow uh very good tool by the

way for uh if you're ever in business uh

tell them to go to hell tomorrow like

relax your expectations but uh anyway

this uh the idea uh that oh we're

definitely going to hit a recession okay

fine so the models say we're definitely

going to hit a recession how bad is the

recession going to be oh well I don't

know well sure the models don't really

tell you how bad it's going to be now

you can try to suggest when or or how

bad the models are going to be and the

way you do that is you kind of look at

okay well if uh if we're going to see a

recession uh how much is the Federal

Reserve going to have to cut and if you

line that up on the charts right now the

fed's looking at potentially cutting in

the event of recession by 5.25 percent

because that's how deep the inverted

yield curve is and if you stack that up

with a linear regression model to what's

historically happened that's what you

get you get you know basically 525 basis

points worth of cuts which is wild but

maybe that's exactly what we end up

getting over the next few years so it

could end up playing out but it could

also be that the recession we see is

like oh no we're down point one percent

in GDP like okay that's pretty benign

right and that's actually what some of

the high frequency signals are showing

us as well uh this is sort of like some

of the the uh mortgage pre-approvals

you're actually seeing an increase

suggesting okay maybe people are still

resilient to buy which is really

fascinating you're seeing uh sure

manufacturing and Industrial is losing

steam but you're seeing Services

consumption still pretty dang resilient

you look at the cruise lines you look at

the airlines like people are still

spending you've got American Express

saying people are spending through the

recession or whatever it may be consumer

demand generally stable I like this one

bookings at open table as of January are

actually up at the start of 2023 now

it's possible that if they're comparing

to 2022 you had you have to remember you

had Omicron in 2022 and nobody was going

out to restaurants in 2022 that was

pretty crazy uh but uh then you've got

uh you know consumers still traveling

that's a big deal uh the beige book

shows the same thing it's not just

earnings but it's the Federal Reserves

beige books showing that consumers are

still traveling and yeah you've got

leveling off of of job listings and

potentially job openings but the jolt

suggested job openings actually opened

indeed.com is telling us they're

leveling off but joltz is saying oh

they're still going up at the same time

as you you've got uh you know more of

this consumer travel demand you actually

have the number of oil rigs down own 4.5

percent since December at the same time

as the Chinese reopening potentially

pushing oil demand up and you've got a

lot of pessimisms that pessimism levels

at households like consumer and business

sentiment is pretty a pretty poor uh the

gap between where consumers feel right

now and what they expect for the future

is huge it's the largest that we've seen

since the 2008 recession and then of

course you got people like well Morgan

Stanley's Mike Wilson basically saying

look all of this combined is going to

turn into a very ugly earnings season

he's of course our staunch bear he says

look sure we're seeing rates go higher

but the Market's just not pricing in

what higher for longer actually means

and what's going to happen is when those

bad earnings come in markets are going

to sell off and you're going to see

broad declines on the indices because

right now Morgan Stanley's Mike Wilson

says look prices are just straight up

disconnected from reality and maybe

tomorrow's Pi report will end up being a

reality check he calls it of course this

is also leading to a lot of calls that

hey we're going to end up going higher

for longer and by going higher for

longer the Market's basically not

pricing in that EPS is going to get

screwed now that's That's Mike Wilson

he's the bear at Morgan Stanley

interestingly though not everyone at

Morgan Stanley actually agrees with uh

Mike Wilson so what do you have over

here uh the no Landing let's talk about

that right after I mention that I need

to take a sip of coffee bet you weren't

expecting that one

um

thank you all right so what do we have

over here before we look at that take a

look on screen here we've got the

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take advantage of that 69 off flash sale

through Valentine's from the desk of the

chief Economist of Morgan Stanley in the

year ahead Outlook we present our

expectation for a soft planning this

year with a forecast of just 0.3 percent

real GDP on a Q4 basis we hardly call

for a stellar growth but four saw a

positive outcome nonetheless we stood

well beyond the more pessimistic

consensus at the time economists and

markets have moved in our Direction well

except for Mike Wilson

uh but basically they're they're saying

look our conversations suggests the

phrase isn't clearly defined it tends to

gloss over policy implications but seems

to most closely resemble a soft Landing

in English Morgan Stanley other than

Mike Wilson think we can get a soft

Landing which is really interesting

because Morgan Stanley is kind of

playing both sides here it's kind of

like oh we're Bulls but we also have a

bear at our company so like if the bear

ends up being right we could put him on

a pedestal and if our chief Economist

ends up being right we could put him on

a pedestal kind of interesting I don't

have that luxury because I think I'm

very transparent and I'm very like clear

about my position I can't play Both

Sides unless of course you only read the

titles but if you only read the titles

you're a [ __ ] I I think the true people

who are here to learn watch the videos

and they watch the majority of the

videos uh and through them and I

hopefully you pick up a lot of info and

value that's my goal right provide more

value and whatever business you're in if

you want to make more money remember the

number one rule of thumb is provide more

value do not be a yomi ayomi is the kind

of person that's like well you you owe

me more pain maybe if you pay me more

money I'll work harder uh no you're

fired if you're a yomi you're an idiot

anyway and that's not how capitalism

Works work hard then you shall receive

the harder you work the luckier you get

hard Landing scenario so they suggest

that a hard land ending is basically

anything with less than zero percent GDP

now I think that's really interesting

they're basically saying anything hard

is a recession

anything and that they also call this

potentially the FED over tightening

anything soft they actually I think is

just slow GDP growth right below GDP

Trend growth which would be zero to one

point five percent uh Trend growth uh

resilient growth they think is this no

Landing scenario where the plane just

doesn't come in for the landing right

and what is the uh no Landing scenario

well the no Landing scenario is the

economy doesn't slow down but inflation

goes back to Target this is a version of

the world where a potential is simply

higher than anyone thought I include

this scenario however it's unlikely that

it plays out this year but they're

including it to cover a full range of

possibilities so this is really

interesting so the Morgan Stanley is

basically saying look we're not going to

get a like a no Landing scenario where

we're a recession or GDP growth is over

1.5 I mean I kind of agree and I don't

think

that the economy is going to grow at

more than 1.5 percent I I my base case

is the soft Landing right or like is is

that basically we're just hitting even

if we have no growth it's still not

necessarily going to be a recession or

if it's a recession it's gonna be like

0.1 like it's gonna be the most benign

recession ever uh I really don't see

this as like an 08 we don't have the

massive structural disasters that we

have and and it's still possible even

though the word is really disgusting it

is still possible that inflation could

prove to be transitory and that's what

I'm seeing in sort of leading indicators

from earning calls from earnings calls

from companies now that doesn't mean we

won't have a bad CPI read tomorrow

that's sort of a very short-term uh

Outlook uh but but for the next year I

think the trend is very clear down

uh so uh balance of the data coming out

is starting to be mixed uh GDP and

Manufacturing data so far are lining up

with potentially flat growth uh flat GDP

growth for the year which I I don't

think flat GDP growth is really flat I

think it means no growth it means zero

uh consumer or a rather uh conference

boards leading economic indicators Lei

uh suggesting definitely a recession

within the next 12 months that's very

similar to what Bloomberg says but then

again it's like like okay well how bad

is it going to be you know is this just

statistical noise Morgan Stanley talks

about these indicators potentially just

being noise it's like okay well sure

we've got a really inverted yield curve

but how bad is it going to be now this

was interesting because Credit Suisse

actually started talking about PP

uh they talk about this idea that even

without a full blown recession we can

expect corporate earnings to suffer this

is the Mike Wilson argument right but

this is at Credit Suisse as much as you

can trust them for what it's worth but

anyway they think that earnings will

fall significantly below current

consensus expectations they think that

waning growth waning here it is pricing

power and increased interest rates

provide an unfavorable mix of factors I

actually agree with this I think broadly

many of the companies in our indices

especially the S P 500 are going to see

pricing power evaporate and that's

mostly because companies are going to

either have to cut prices or keep prices

stable in the face of still Embers of

inflation which basically means Rising

costs which means that these companies

take it in the uh in the margin

basically so their margin absorbs some

of the pain uh and and that is generally

aligned with a lack of pricing power now

don't get me wrong I think every company

is going to lack pricing power relative

to 2021 no company is going to have the

same PP they had in 2021. you know they

all got a little bit older their PP just

doesn't function as well anymore now

that they're all a little bit older but

there are still some PPS that are bigger

and stronger than other PPS uh so and I

think the goal is to find the largest PP

in in a tough time anyway so a big fan

of pricing power and finding that now

should wage growth remain elevated as PP

wanes and get smaller you would end up

having another drag on earnings so this

is again suggesting if you're looking

for companies again your goal is to try

to find uh the biggest PP that's a

Credit Suisse piece I'm actually really

impressed they started talking about PP

because I think it's very very important

it's actually the first piece I've

really seen talk about PP uh in in this

cycle I'm pretty impressed by that uh

now this is interesting they called a

Goldilocks scenario potentially

transitory here's just another Credit

Suisse piece

uh they do not expect a sustained upturn

in some industrial production numbers

and uh even though we're we we've seen a

contraction we're expecting a rebound

they just don't see that rebound to be

very large now what is interesting is

they think the impact of covet zero

going away in China will be relatively

limited uh on uh inflationary impacts

that maybe there'll be some inflationary

push through to European industry like

Industries like German manufacturing and

Autos but otherwise they say that so

eurokovic was not a major impediment to

Chinese industrial activity I kind of

scratched my head a little bit about

that because I do feel like a lot of

factories were suffering because of zero

covet uh and sort of the lockdowns but

they really think the biggest move up is

Services which is true I mean that's

what we're seeing so far in the Boom in

China is travel and entertainment much

like what's booming obviously over here

as well and they think there are clear

risks to see oil over 90 dollars a

barrel but then again at the beginning

of January everybody's like oh oil's

gonna go to uh a hundred dollars a

barrel and it just like never ended up

happening who knows it could still

happen and now I'm starting to see their

estimates fall though business surveys

fall in uh to levels consistent with a

severe slump and that maybe momentum

will stabilize the Credit Suisse here

warning and this aligns with sort of

their their small PP argument smaller

pricing power argument they expect that

consumer strength will fade in the

months ahead along with retail sales

trending sideways biggest risks being

furniture and Appliance demand as home

sales continue to deteriorate as well as

business fixed investment likely

struggling and we do not expect a a

sharp contraction though so again this

is really in line with this idea of like

a shallow kind of recession right

inventory is still pretty high you saw

the same complaint about inventory still

being high at companies like Energizer

batteries uh this is hitting companies

like Target and Walmart and so on uh

however you're still under stocked in

autos and the argument is that you might

be seeing uh I hate using this word but

potentially transitory bump in inflation

for Autos uh potentially because of the

under stocking that we're seeing uh they

do expect that household consumption in

China will improve this year but again

likely in Services structural headwinds

will remain and goods demand will remain

below pandem pre-pandemic levels a part

of this is because of an increase in

precautionary savings by individuals

because of wealth lost thanks to lower

property prices remember their real

estate a disaster was somewhere in the

effect of uh you know 35 to 40 percent

price decline so you've got some major

hits over there from China so Emerging

Markets X China generally people are

pretty bullish however inflation is

still present sent in Emerging Markets

so you have to kind of be careful in

Latin America they think you're you're

still seeing supply side issues uh

that'll really hurt the pace of

disinflation and I see that when I

analyze Embraer I mean they're still

suffering man with with uh increasing in

prices and supply chain shortages and

stuff uh which in the short term does

give them uh some more pricing power for

for selling Jets but uh yeah you know

that's uh that's oh yeah oh yeah and

then there's this idea of a Vibe session

okay I'm gonna be very brief about that

the idea of a Vibe session is that

basically uh everybody feels like we're

going into a recession but maybe we

don't actually end up hitting a

recession that's sort of consistent with

the idea of a soft landing and I thought

it was really an interesting phrase like

really A vibe session that sounds pretty

lame but okay I'll address it so uh

you've got you've got really in my

opinion if you kind of look at this like

all this sort of more bearish analysis

anything pointing to a recession is kind

of like okay yeah earnings are gonna go

down but how much and and it's really

like okay so we might go into recession

but how much and it's kind of like

nominally like it doesn't really seem

like people are really like that worried

that this is gonna be uh fall off the

cliff style recession although who knows

uh and I think tomorrow's CPI will give

us a little bit of uh of uh of uh an

indicator yeah take it in the margin man

take it to the margin