The Fed is in CRISIS | Depression Panic.

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building your wealth hey everyone me

kevin here this great reset and

recession which is probably already here

is confusing everyone and in this video

you're going to get a complete update on

what's going on with the latest data

we'll see the tension at the federal

reserve and we'll learn what we just

heard from earnings at companies like

delta and jp morgan we'll talk to on

trade desk and go ev as well and we'll

touch on valuations let's get started

first jobless claims came in at 244 000

this week the estimate was 235 this is

the highest that we have seen in jobless

claims since november and it makes sense

because the federal reserve wants to see

some tightening in jobs they want to put

pressure on jobs so that way they can

try to put pressure on inflation if

people become less uncertain that their

job is secure maybe they'll spend less

money and maybe we'll actually see

demand go down so that way pressure on

jobs pressure on inflation this is why

you've seen companies like compass lay

off 10 percent of their workforce redfin

six percent of their workforce jp morgan

laid off a thousand people and mortgages

in june which is actually no surprise

because when they reported earnings

today we learned that they lost a ton of

money in their mortgage department tesla

is laying out folks on their all

autopilot team with mr carpathy now

leaving who is essentially the de facto

leader of the entire autopilot team

leaving bulls and bears questioning does

that mean autopilot is actually much

further away from success or does it

mean autopilot is much closer to success

the debate will rage but google is also

essentially freezing hiring for the rest

of the year and facebook has given us

multiple warnings of layoffs coming so

no surprise that we're starting to see

the jobless claims number sneak up now

jobless claims rising was just part of

the problem that we got this morning

because the ppi or the producer price

reading came in completely off of the

chart and this isn't good because it's

just another inflation

pressure look yesterday we were

expecting eight point eight percent

inflation year over year what did we get

we got nine point one percent today we

look at producer prices did we get any

con

any sort of consolation anything to calm

us down we were expecting 10.7 what did

we get we got 11.3 which is the highest

level since march because remember we've

kind of seen inflation do this weird

thing where it's run up to this peak in

march uh and then it's kind of come down

a little bit in april and then now it's

kind of shooting past it

and this is kind of reiterating now a

lot of people's belief that oh no folks

if inflation keeps pulling this off and

we don't actually get a strong u-turn

down in inflation this is kind of like

what michael bury told us 50 to go which

is also what we're seeing in documents

like this which say phase one of the

bear market might be complete but we got

phase two to go so naturally after these

numbers yesterday the swap market

started pricing in this potential for

even a 100 basis point hike or a one

percent hike now some of this has been

walked back because even the federal

reserve doesn't know how to respond to

this mr bostic told us last night that

after that cpi read everything is in

play essentially implying that yeah 100

basis points is in play loretta mester

tells us that we are going to go way

beyond neutral and when the market

freaked out and started pricing in 100

basis points the federal reserve sent

out mr waller today to try to soothe

everyone and calm everyone down but

every time the fed tries to calm

something down i feel like they're just

getting ready to hit us over the back

side of the head when we're not looking

with some other bad news mr waller comes

back and says well well well hey look

let's not let's not get carried away

here we're in a very unique situation

we're in a situation where if we hike

too fast we could actually end up to

leading to very high unemployment and

our nightmare scenario would actually be

having very high unemployment while

we're trying to push down high inflation

that would be the nightmare scenario and

so waller actually just supports a 75

basis point hike because he says that'll

bring us to neutral right now we sit at

1.5 hiking 75 would bring us to 2.25

which he believes is the neutral level

now most people actually believe that

2.5 is the neutral level all this does

is just lead to more confusion in

markets because it's like okay so what

is it like some people say it's two and

a half some say it's 2.25 j-pal says

it's i don't know it's somewhere around

there but we don't actually have a

science that says what neutral is and

again when you've got loretta mester and

bostic saying everything's on the table

and we're going to go above neutral come

on bro what is the answer well all we

know is what markets are telling us and

markets are right now pricing in that

we're going to get to 3.7

as a fed funds rate by december this

2.25 potentially via the next meeting

which would be a 75 basis point hike and

we'll be there as soon as

july and this is what markets are

reacting to right now this is why we're

seeing qq back to that 280 level which

seems to be roughly and i'm not going to

use the word floor because every time i

do we break it seems to be roughly a

place that the qq just likes to relax a

little bit now to some degree you can't

really blame the federal reserve right

now because they're trying to

realistically fight extremely high

inflation while unemployment is really

really low so they don't actually have

to worry so much about that nightmare

scenario of having super high

unemployment so we don't really actually

have to listen to waller we can just go

ahead and hike hike hike because we're

not even close to facing ultra high

unemployment that would be very very bad

it's very stagflationary but we're not

facing that look at the u6 level of

unemployment now the u6 measure is a

broader measure of unemployment it

includes folks who are marginally

attached kind of like

you know i don't really need to be

working right now but i am or i'm about

to lose my job right that's your

marginally attached folks it also

includes people who are discouraged

from looking for a job because they've

tried and they just can't find a job

anymore maybe because their skill set

became uh you know useless or whatever

they got replaced by a robot and they

turned into a luddite i don't know

whatever anyway so you've got marginally

attached discouraged and then you've got

under employed that's your u6 measure

this would be like hey i'm not able to

work enough to make enough money right

this measure is at 6.7 which obviously

is higher than the unemployment rate

where it is now 3.6 it's quite a bit

higher

but it's still the lowest ever on record

so this is why the market is so confused

because it's like why well like

yesterday we're good like the market was

pricing in as high as high as

an 86 chance of a hundred basis point

hike and i was all forward i'm like just

give it to us already just do it rip the

freaking bandage off now you get waller

to try to walk back this stuff going

well we don't want to cause super high

unemployment we want to be careful we

don't want to be too drastic here

meanwhile they can't get a grip on any

kind of the inflation problems we have

and so now markets are only pricing in

we saw a little bit of a rebound

intraday in the stock market now markets

are only pricing in a 50 chance of a 100

basis point hike so i don't really

understand fully what the fed's trying

to engineer but it just seems like the

fed is really really nervous about

actually putting on their big boy pants

and doing what needs to be done now to

some degree and this is the other flip

side to some degree we actually do see a

lot of measures of inflation that are

kind of saying maybe the fed's going to

be right i mean after all you've got

commodities falling even iron ore is now

following copper down and these are

industrial metals which are waving flags

of a recession red flags of a recession

right supply chain constraints are

relaxing and break evens are falling

very very quickly you could see these

graphically as well don't just take my

word for it take the floating heads word

for it which is supply chain pressures

are easing and you can kind of see what

supply chain pressures look like we can

look at the cova disaster right here

when we first had our supply constraints

index spike then of course into 2021 we

had omicron and delta roughly around

here and then here we sit now sort of in

the beginning of 2022 and yeah we had a

bump in supply chain issues because of

the war but we're actually falling to

levels that we haven't seen since

roughly the first quarter of 2021

meaning supply chain constraints are

beginning to ease graphic cards i mean

every single analyst that i read a

report on is talking about how we're

expecting a massive flood of graphic

cards and a big oversupply of chips soon

of course we don't have that oversupply

yet they just talk about it and who

knows analysts aren't always right but

here's the commodities price index you

could see

q2 compared to last year q2 we're

actually seeing metal oil food prices

commodity prices in general they're all

going down to again so again to some

degree maybe the federal reserve is

going to be right here i mean this is

that chart again with the 10 and five

year break even right here showing us

that the bond market is saying hey cpi

should be coming down soon it just

hasn't yet it's over here peaking at the

same time we're seeing yield curves

invert that haven't been inverting like

the five year 30 year just inverted

again this morning briefly and these are

all recessionary signals so the fed is

really stuck between a rock in this hard

place where if we have to keep hiking

aggressively to deal with that high

inflation number and we're going to keep

hiking we might literally be hiking

while we're in the midst of a recession

and that's scary for markets that

creates even more uncertainty and maybe

they think hey if they think we're so

dead set on inflation and the market's

like wow the fed's not even paying

attention to the fact that commodities

are getting less expensive or the bond

market says inflation's going to go down

well gee they're going to be hiking

substantially during a recession let's

lay off more people you know maybe

they're playing 40 chess with us the

other example of what they could be is

they could be this computer code id10ts

i don't know let me know in the comments

what you think but we got some really

important things to think about and talk

about right now starting with jp morgan

so jp morgan is warning us of awaining

consumer confidence and the largest

quantitative tightening cycle that we've

ever seen along with a war and high

inflation jp morgan's profit fell 28 in

the second quarter and they bumped their

allowance of four losses more than they

did in the first quarter i mean here's

your q1 allowance for losses which is

just under 500 million here it is just

above 500 million doesn't remotely hold

a candle to the over 10 and over 8

billion dollars in losses and reserves

that jp morgan took back at the

beginning of the pandemic so really it

doesn't seem like they see that big of

fears but then again even jamie dimon

tells us they might just not know this

first note was fascinating on the

consumer from the jpmorgan earnings call

they note that yeah the consumer is

spending 35 percent more year over year

on gas and six percent more on recurring

bills and non-discretionaries but what

they really want to point out is despite

these greater spending areas the

consumer has quote yet to pull back in

discretionary spending and this includes

the lower income segments with travel

and dining growing at 34

year over year

overall this is incredible folks so even

the lower income segments aren't pulling

back on discretionary spending yet

they're still spending on travel and

dining let's go to the next one while

home lending revenue was down 26

year over year and credit card

outstanding balances were up 16

as folks probably had less stimulus

money to maybe pay down their debt or

keep their debt down jamie dimon seems

excited he says look even though we have

storm clouds ahead of us even though

we're going to be going through a storm

we think that the storm provides us with

opportunities the economy is going to be

bigger in 10 years our company is going

to be bigger in 10 years despite all of

this jamie dimon goes as far as saying

right now the consumer is in great shape

so even if we go into a recession we're

entering that recession with less

leverage and in far better shape than we

did in 2008 and 2009 and sure jobs may

disappear because things happen but the

consumers are in great shape so golly

man this is just you know i hate to say

that this time is different but let's be

real we've got this insane

inflationary environment where both cpi

and ppi are off the chart but the bond

market is telling you no no don't worry

just be patient inflation is going to go

down but you've got investors freaking

out going fed

do something the inflation is running

away like even i say fed put on your big

boy pants but i think the fed's not

because they're trying to play this 4d

chess of going uh we actually think the

consumer is pretty strong they're going

to survive we think that jobs are pretty

strong and we kind of still even though

we don't want to say it we kind of think

that inflation is going to be transitory

and we don't want to kill these things

because these things are actually good

and the last thing we want to do is get

really aggressive against the consumer

and jobs if inflation does end up being

transitory so let me put it this way if

the federal reserve ends up hiking 75 in

july even though everyone's screaming

for a hundred the fed actually still

believes

that inflation is transitory but there

are some people at the fed who's like no

just hike already and then wait but it's

this kind of confusion that makes the

market so topsy-turvy right now it seems

like bad news is bad news and good news

is good news for a few minutes and then

it turns into bad news and then we have

a few days of a rally like what a week

and a half ago the nasdaq rallied five

days in a row and everybody got excited

and then oh it fell right back down so

then i figure okay well maybe maybe the

delta earnings will give us a little bit

of insight and so delta by the way says

they remain confident that they can earn

seven dollars per share by 2024.

now that i thought was really incredible

because for a company with a 29.28

share price at the time of this

recording that seven dollars in eps

works out to a multiple of 4.2 x for

2024 earnings that's really really low

now look they got a whole lot of debt

and this is a company that tells us

bluntly that they want to take their

extra cash flow and pay off debt at the

same time they're still buying extra

planes though so they're also investing

in their fleet but they make it very

very clear that debt reduction is a big

big big priority of theirs but what else

do they tell us and what do they tell us

about the consumer are we seeing that

recession yet over at delta and what do

they say is actually that looking

forward quote we are seeing strong or

seeing demand and pricing strength carry

into late summer and fall as demand

remains strong

well great the more these companies talk

about pricing strength the more

inflation we're probably going to be

getting from the airlines and that's

probably one of the last places we need

more of this and they also mention

that what seems to be driving a lot of

their revenue right now isn't main cabin

purchases it's actually their premium

products

which i thought this was really

fascinating because if we jump over to

this section right here they suggest

that 60 percent of their revenue comes

from premium products and non-ticket

revenue sources

this is incredible because if you think

about it they and they say this just

blows my mind they say that only 10

of their total revenue

comes from the main cabin so if you're

like one of those people who gets on a

plane and you're just like dude just

give me like the 200 ticket to new york

i'm gonna sit back here i'm gonna bring

my own peanuts i'm not gonna buy

anything i'm not getting the extended

leg room i'm not checking a bag i ain't

doing jack squat you're one of the

people that's only contributing 10

or or to the 10 section of their revenue

60

comes from things like their credit

cards where you know you they partner

with american express for credit cards

like the delta reserve card

or or seed upgrades or baggage or other

miscellaneous fees

that get them more money this i thought

was incredible and the fact that delta

doesn't see demand weakening is a sign

that people are still paying for these

upgrades people are still paying enough

they also acquired another record number

of sky miles members in the quarter and

achieved record spend on their amex co

brand in fact they expect to get 1.4

billion dollars from american express

because again they co-brand a credit

card a few credit cards together i think

it's a platinum in the reserve

which is 35 higher than june of 19.

that's before the pandemic so before the

pandemic like comparing to right before

the pandemic they're getting 35 more

money from their partnership with

american express which just a fun

additional note in the uh uh in an

analyst review of american express that

i was reading i was reading that

american express excuse to its highest

end customers with the highest fico

scores and american express gets most of

their money from transaction fees on

spending volume versus other cards so in

other words if delta is making a lot of

money on the american express card and

kind of a revenue share of how much

people are spending on the american

express card then that means people are

still spending like crazy certainly in

the premium sector but then we combine

that with jp morgan we're like no even

jp morgan says even the lower income

demographics are spending more what's

really happening is just everyone is

spending more money and so then i

decided okay well can i figure out like

how much money do people have

on hand right now in in their checking

accounts and here you go top 25 percent

you actually have

more you're actually almost at a peak

here in terms of money on hand just

above uh six thousand dollars for the

four-week rolling average for households

in the bottom quartile you're not seeing

a substantial decline in cash on hand in

fact over here in the second quarter you

see a tick up in cash on hand for every

single demographic of course it's not as

high as what we saw during the pandemic

peaks here

but it's still ticking up not down so

people have more money in their bank

accounts like

this is so weird and i think the fed is

looking at this going we don't want to

kill this man this is a good economy

like if we could just get inflation to

disappear this is a booming economy

it's kind of crazy uh now i mean that's

not to say we're not gonna have problems

because we're fighting the fed here but

boy oh boy this is somewhat of an

interesting set of data but then delta

airlines analysts bluntly asked delta if

they see any weakness in the consumer

from the american express side in their

discussions with american express and at

delta and they see that we're not seeing

any indicators yet and we're looking for

that again reiterating that the consumer

remains strong and the fed behind closed

doors is panicking because it's like got

high inflation but we don't want to

crush what behind the closed doors what

behind the curtains it's actually still

a pretty strong consumer now just a side

note i thought this was fascinating it

looks like just the american express

co-brand deal that delta has with amex

it's probably going to end up working

out to 10 of their total revenue that's

kind of crazy that literally just a

credit card co brand makes up 10 of an

airline's revenue but uh it does so fun

fact okay wow now you have to know this

things are different in europe and the

reason things are different in europe is

why the us dollar and the euro actually

fell below parity today that means the

dollar at one point this morning was

actually worth more than the europe

right now they're teetering at basically

a dollar is equal to a dollar which i

haven't seen at any point in my life and

i like traveling to europe and usually

i'm like i'm used to the euro being like

a buck 30 or a buck 40 or whatever you

know before the pandemic and and you

know it cost you more money to trade the

dollar for those but no now they're at

one to one and this morning the dollar

was actually stronger than the euro at

one point the dollar is something that's

very interesting right now and if you

want to see something crazy about the

dollar i'll pull it up for you it is

absolutely nuts but the dollar is

trading in this really really long-term

uptrend and this is probably going to

beget a larger much larger video i would

say but if you look at this crazy

inverse etf on the dollar this is what

you get and this is the weekly inverse

etf on the dollar so as this chart goes

down the dollar is actually getting

stronger and you could see we are on

this crazy trend line that goes all the

way back to about 2010

and we're literally sitting

at one of these bounces at the bottom

over here absolutely wild how strong the

dollar is right now pretty crazy now how

much longer can i last who knows

personally i don't think it's going to

last for more than a year but it's

something that could last for quite a

while especially since we've got a lot

of concerns that europe is going to go

into a deeper scarier recession which is

ultimately going to drive more people to

the dollar and u.s denominated bonds as

a flight to safety the shell ceo came

out this morning and says worst case

scenario we might have to ration gas

it's going to be a really tough winter

in europe side note the north stream one

is down for a 10 day maintenance it's

offline for 10 days so guess what

germany is doing germany has to go into

their stockpiles and when they go into

the stockpiles depleting their

stockpiles of natural gas while the

nordstrom one is down for maintenance

putin's probably just laughing his butt

off because he's like

you go through your stockpiles and maybe

i won't even turn on the new stream one

again you'll just be screwed which is

leading and helping lead german investor

confidence to fall to its lowest levels

since the debt crisis of 2011.

that's way back when the acronym the

pigs came up

if you know what this means say it down

in the comments it's i'm just going to

tell you portugal italy greece and spain

right these are considered the depth

pigs at least of europe or war back in

2011

and so you've got a lot of uncertainty

in europe and this means we could

actually end up being in this weird

situation where while we face super high

inflation and we have to hike rates here

in the united states we could end up

being in a situation where europe says

you know what we just have to hold still

because we're in a recession and so

that's why you're seeing more of that

flight to safety again to the united

states

really really really weird times but

again the fed can't pay attention to

europe the fed has to focus on america

we just know that we're probably going

to see a deeper recession in europe than

in the united states and but the fed

doesn't want to make the mistake of

trying to uh be so aggressive that we

also end up in the muddy pit with europe

like ideally which is very hard to do

probably not gonna happen but ideally we

have a soft landing and i mean you know

best wishes to the other folks but if

they have a hard landing it's not our

problem if we can have a soft landing

here in the united states and i think

that's sort of where the fed's like

uh what do we do man like europe is

having problems they got really high

inflation but they've got all these

other things that basically are going to

push them into recession especially

these high energy prices which they have

really no control over because

countries like germany are like oh let's

shut down our nuclear power plants we

don't need those we got cheap gas from

russia and then putin goes crazy and

what do you get you got oh no turn the

nukes back on

it's crazy okay now folks now this might

leave a lot of you wondering what do we

do jack what do we do

yeah i mean look you're either short the

dollar or you're going long on equities

if you think the fed is going to be

right

if you think they can actually engineer

a soft landing or a recession that's not

so bad if you think the fed is going to

fail if you think their confusion is

because they're little pansy babies and

they are going to fail then you should

not be in equities it's that simple now

we just have to talk about a couple of

other crazy things going on the first

thing that's going on is evaluations of

private companies are likely to get

slashed a lot now the fed doesn't really

pay attention to some of these things so

probably done really talking about the

fed but these are just some other

important things for you to know is that

valuations at companies like stripe are

getting slashed a stripe just cut their

internal valuation twenty eight percent

from forty dollars to twenty nine

dollars you've got uh about twenty five

to thirty percent of americans saying

their next vehicle will be an electric

vehicle which hopefully is exciting for

tesla and there's a lot of excitement

right now going around uh go ev

go ev of course is canoe the stock

ticker is go ev they got signed up for a

military demo which is really worthless

like okay yeah show off your vehicle but

hey i don't want to sound like just a

fudster bear or whatever on canoe but

let me just say i know they got their

little walmart partnership and stuff but

i'm just going to throw this up on

screen this is a company with 104

million dollars in cash and don't even

bother going over their cash flow

statement because they just burned 125

million dollars as a debt loss in the

last quarter using 120 million dollars

in cash but having a net loss of 120 the

uh oh that's delta going over here

though you look at canoe it's like yikes

ma'am in my opinion the only way this

partnership makes sense is if walmart

gets some kind of substantial stake in

canoe and if they don't end up ramping

their manufacturing walmart's going to

get burned on the steel i think walmart

had to have ended up giving canoe some

kind of large set of money like maybe

200 million dollars or whatever just to

fund the next quarters of growth to

actually start trying to see some

vehicles come out of the factory line

and if those don't come out within the

next year this company could go bankrupt

or walmart will just own an ev company

that's my expectation but at least i

will say it's better news than what

happened to trade desk which is down a

good chunk today what happened to trade

desk they didn't get the netflix

partnership instead guess who did

microsoft i don't know how many people

saw that one coming especially since we

saw the cfo from netflix end up working

at trade desk maybe they didn't like

that cfo but folks were in crazy times

check out the programs on building your

wealth link down below and we'll see you

the next one