someone's WRONG

everyone meet kevin here look look

somebody is wrong in the market and

there are some weird things happening

here in the marketplace that show us

that there is a very very big divergence

between what the market expects will

happen and in my opinion there's only

one possible explanation for this

but what i want to do in this video

first is give a little bit of an

introduction about

what we could see happen in the market

over the next year in terms of economic

growth

then i want to talk about this weird

divergence in the market that in my

opinion is a recipe for really only one

thing

let's get right into this right after i

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wealth all right folks let's get into

this and check out those programs before

the end of christmas day okay first we

got to talk about the paths that we

could go on and then we got to talk

about what the market is spelling

because the market's spelling something

very very strange so take a look at this

so this here just blank sheet okay we

have a few opportunities in terms of

directionality here we know that when

the pandemic struck our markets did a

lot of this it was sort of a v-shaped

recovery is what we called this right

here and then we had kind of this uneven

recovery uh coming back mostly because

covert really struck the world at

different times and different severities

and we had different waves and surges in

different places now it feels like we're

probably all going to get army however

broader markets have really kind of come

to terms with already living with covid

we expect that factories aren't going to

shut down as much as they did with the

delta surge that we're not going to see

as many port closures with omicron as we

saw with the delta certa uh we're we're

essentially much more prepared for

another wave of covet that now we've

almost started learning to deal with

covet now this is not a coveted video

but it is worth noting that there are a

few things that could happen uh

regarding omicron so let's say right now

we're we're on this sort of slower path

of recovery there are a few directions

that we could go with omicron

one direction would be that omicron's

surge is so strong and uh governments

restrict travel so much that we do end

up getting a contraction again uh before

we start kind of getting back on that

path of recovery it's worth noting that

this would be global economic trade here

and that we're still

a good chunk below where we kind of

should be

and that's because we're kind of working

our way back to the growth that we used

to be on see right now where we sit here

is roughly equivalent to where we sat at

the end of 2019 which basically means

we've had zero economic growth or like

well yeah economic grow essentially

since the end of 2019 that we're just

now getting par

but there's a chance we're going to

stall here because of omicron again

there's also of course another scenario

that maybe we won't have much of a stall

at all and then we'll kind of just

continue on this slower recovery and

some folks even indicate that hey you

know what this could be the beginning of

the end of the pandemic and that rather

than having a v-shaped recovery down we

might actually

accelerate growth and and have a boom

time in 2022 2023 so you have these

three paths right now uh that we could

go on and it's worth noting that at this

very moment where here at the end of

december where all you know our indices

have been down and there's been a lot of

fear uncertainty and doubts

in the market

this in my opinion is generally the time

that you want to invest

and it's really when people are clueless

as to which direction we're going to go

like i don't want to invest when we're

here already on the path to the moon i

really don't want to invest when we're

on our on our way up over here uh i'd

i'd rather invest here

well i guess there we go i'd rather

invest here uh when we're just trying to

understand okay what are the potential

scenarios so it's worth noting yeah look

we don't have the answer yet in terms of

which direction our economy is going to

go

but now is a potential time to

build that portfolio and build it back

better your portfolio

uh because the other buildback better

plan ain't happening and as we mentioned

in the live stream this morning folks

it's worth noting the buildback better

plan was a massive set of stimulus just

solely not only we're not even talking

like ev credits or energy credits or

whatever just solely in the form of the

child tax credit the child tax credit

would cost somewhere between 14 to 15

billion dollars per month right before

unemployment expired at the end of uh or

at the beginning of september of 2021

here uh say in the summer months we were

spending about three to four billion

dollars per month on unemployment and

unemployment was blamed as a reason for

people not working well why is labor

force petition participation potentially

lower in markets now well how about this

massive child tax credit that's been

going out to the tune of 14 to 15

billion dollars per month that's uh

broken down to 3 000

per year per child under 18 or 3600 per

child under six years old per year now

this expansion just got killed

with uh with of course our uh uh

build back better cancellation or so

much or should i say the death of the

buildback a better plan thanks to joe

manchin but

yeah let's put this aside so this could

be another reason for some of this this

pain and uncertainty right here and this

bubble of pain and uncertainty right but

what's more interesting folks is this

this weird

other divergence that's happening in the

market right now

the market is anticipating that

inflation will be two and a half percent

by

2023 not 2022 2023 and then of course on

one side you have kathy wood and on the

other side you have michael bury who

probably think that inflation will be

substantially higher and kathy thinks

we're going to go to deflation okay got

it fine so the market thinks that

inflation is going gonna be about two

and a half percent on average by the end

of 2023 the fed thinks it'll be around

2.1 percent to 2.3 by the end of 2023

fine the fed's always on the lower side

no problem that's not a big deal but

this is where things get a little weird

because

the inflation rate is expected to be a

little bit higher than that two percent

long run goal

we do expect the federal reserve to hike

interest rates in 2022 we expect three

rate increases and in 2023 we expect two

rate increases that would get us to

about to 1.6 percent this makes sense

but wait a minute

the market right now is only

anticipating that the fed funds rate

which is the overnight lending rate will

be 1.27

if the market price is in a 1.27 but the

actual cost is 1.6 that means you have a

negative overnight real rate now don't

worry if that doesn't make sense the

point is just to say the market is wrong

somewhere

somewhere the market is wrong the market

is either wrong about

how high rates will go

that is the market is under pricing that

we actually are going to have the growth

in inflation and the fed is going to

jack rates up to 1.6

so option number one

market

wrong

and rates

will

be

higher that's option number one

or

option number two

is the market is right

and ultimately inflation

the bond market is right because the

overall market is thinking that

inflation is going to be two and a half

percent inflation will actually be lower

which if inflation is lower then rate

hikes

uh will be lower but folks this is the

weird thing if the market's wrong and

rates are higher that makes sense fine

the market was wrong rates end up higher

but wait a minute if the bond market was

right

and inflation is lower and rates go down

then that actually means the broader

market

is wrong

and that inflation estimates right now

are too high

inflation estimates are too high so

this means somebody's got to be really

wrong here again either the bond market

is wrong

and rates are indeed going to be higher

they're going to be that 1.6 percent so

either the market's wrong here

or

the

market is wrong about inflation which

would make the bond market right or the

bond market is wrong about inflation

which would make the broader market

right about inflation the point of all

this is to say that right now we are in

this bizarro freaking place

where the market itself does not agree

with itself that's the big bottom line

the market does not even agree with

itself

on one hand we think inflation

inflation's going to be high on the

other hand we think rates are going to

stay low

it doesn't make sense

it doesn't make sense

and so there's only one

possible explanation for this

in my opinion and uh when i say the

phrase there's only one possible

explanation for this

you know that means there are other

explanations we just don't see them so i

want to be crystal clear about this i

said this going into december as well

when i made my video on negative

catalyst for december and i started

selling stocks and started shorting

stocks especially the things we talked

about in the course member live streams

which you should definitely check out

those programs i'm building your wealth

down below they come with those private

live streams lifetime access to the

content of the course as well but folks

we could be wrong

but in my opinion

the reason we are seeing the bond market

uh price in

lower yields

is because for some reason people are

fleeing to safety

and people are

parking

cash which both fleeing to safety and

parking cash

imply that people could be buying bonds

to a fleet of safety and b park

cash if people buy bonds then that

drives up the price of bonds

the price of bonds goes up

the yield goes down this is literally

what's happening right now okay so that

means we have a check mark here and a

check mark here that's exactly what's

happening

so if people are fleeing to safety and

parking cash that could potentially also

be associated with

the stock market

going down which is literally what we

have happening because of uncertainties

in the marketplace

so maybe the reason we have these weird

market distortions

isn't particularly because

anybody's necessarily wrong

in the long term

but that in the short term

the market is doing a lot of cash

parking

flattening the yield curve

lowering rates on bonds

lowering future expectations for bond

yields

but maybe when we

end up rotating back out of bonds we go

back to a normal market and so what does

that look like

well we potentially rally

in the stock market

all of a sudden we see a flight from

bonds and we get a bond sell-off so we

get a bond a sell-off

and at the same time as we get a bond

sell-off maybe we get a

normalization in in expectations if we

get a normalization and expectations

then we can actually look to the bond

market as a predictor again but maybe

right now we can't actually use the bond

market as a predictor

because

we're having so much fear and stocks and

so much flight to safety that really

we're just setting up for an eventual

rally in stocks no guarantees

but i would not be surprised if what

we're seeing happening right now is a

massive hoarding of cash on the

sidelines people are pulling money out

of stocks

parking money and bonds and on the

sidelines it's creating distortions in

the way the market

is trying to understand the future

pricing of events whether that's

inflation or where rates will be for the

federal reserve

and once we get out of this fear

uncertainty and doubt mentality we get

back to a more normalized market then we

can actually maybe start trusting the

indicators of the bond market again so

right now i don't think i can really

trust the bond market to tell us oh the

yield curve is flattening we're heading

towards recession or oh the 10 year is

going down therefore we're expecting

inflation expectations to be lower

or oh the fed funds futures are

you know way lower than what the

federal reserve expects their rate will

be in 2023 well a lot of this could be

because of the distortions again of

people fleeing to safety in which case

it opens the door to the thought that

well maybe we should be building our

stock portfolio in stocks that have

maybe started hitting some bottoms like

lemonade seems to be hitting a bottom

around 40. docusign seems to be hitting

a bottom around 140. so 514 beyond meat

62 to 65. cloudflare 129 end phase 180

hood 18 matterport 21 pton 40 carnival

cruise line 1780 firm 92. just some

examples but it does seem like we're

hitting some bottoms

that are hard for us to break through if

we break through some of those numbers i

just listed

all right we're going into the basement

that means uh that means some of these

bottoms were quite wrong but otherwise

this is my understanding of what's

happening in the market right now a lot

of cash building up causing massive

distortions in the bond market causing

expectations to be very very funky and

weird if we break through these floors

that's not that great but my fingers are

crossed that we don't end up breaking

through these floors my thoughts on the

weirdness going on the market here if

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we'll see in the next one thanks so much

goodbye