Yikes | The Bears are Doubling Down on a Dangerous CRASH.

the Bears what we're going to do in this

bearish video is we are going to take my

bullish bias and respond to what some of

the Bears are saying we're going to talk

about BlackRock we're going to react to

video from a chief Economist interviewed

by CNBC and we're going to see what

people think about the terminal fed

funds rate we are going to look at what

the financial times thinks about the

probability of higher rates and how much

higher and we are going to look at some

of the pain presented by T.S Lombard and

their Parish opinions so if you are a

bear you want to watch if you are a bull

you want to watch and if you are a human

you want to take a look at the Saint

Patty's Day coupon dare I say link down

below for the programs on building your

wealth lifetime access to the course

member live streams access to all the

beautiful content and perspective on

building your wealth whether it's

through stocks real estate being an

entrepreneur being employed how to make

more money tax benefits llc's risk

liability everything and Q a with me

take a look at that linked down below

let's get started

BlackRock and Mr Rick reader thinks it

is reasonable that the Federal Reserve

will easily get to a six percent

terminal rate markets are presently at

the time of this recording pricing in a

5.65 rate and now BlackRock believes it

is not only reasonable to get to six

percent but also stay there for an

extended period of time potentially as

long as a year the probability of a half

Point High increase from the Federal

Reserve is now sitting as high as 73.5

percent according to a CME fed watch

tools that is not great for the March

22nd meeting and it is a Big Boon to the

Bears unless of course we get 25 and if

we've been pricing in bearishness then

that means Moon okay maybe not quite

moon but it would be positive anyway it

does show that the 50 BPI is very much

on the table uh BlackRock is really

comparing the US to uh to a chemical

like polyurethane now I I think this is

sort of a weird comparison but but he

says markets can be stretched bent and

stressed and flexed without breaking and

and really a six percent rate shouldn't

break our financial institutions or our

financial systems which are very strong

so while it's bearish to argue for six

percent it's really saying like the odds

of us really breaking something by going

to six percent not that high now it's

also worth taking a listen into what

this this particular interview here from

CNBC I think is uh pretty fascinating so

let's let's jump into this here hey this

video is brought to you by me my courses

on building your wealth linked down

below where you can learn everything

from tax benefits to investing with an

LLC or not using an LLC insurances how

to negotiate with real estate agents and

vendors and contractors or even your

boss build more wealth by understanding

the perspective of what you're not

taught in school all linked down below

extremely affordable prices and you can

now use the Saint Patty's coupon linked

below and we'll listen to this together

okay ready for this here we go what

we're missing right now there's some

guidance that says how much is going to

be enough because Pals clearly said

where we are where we were telling you

we're going is not enough and I think

the one thing that Steve and other

people haven't mentioned is the guidance

that the Federal Reserve report itself

gave us it said that given the kind of

policy rules that people have been using

to assess different types of policies we

need rates somewhere on the order of six

and a half seven percent to get enough

of a Slowdown in the economy I I just

like to say what the FED is talking

about

is this Taylor rule the Taylor rule as

you can see on screen here adjusted for

current conditions suggests a Fed funds

rate closer to seven percent if this is

basically the Federal Reserve has about

four or five different versions of the

Taylor rule they use and the Taylor rule

really says you could be at a terminal

rate of five percent you could be at a

terminal rate of over seven percent

and it just depends on which measure of

the Taylor rule you're looking at I

don't know how much it really matters

back in the covet pandemic the Taylor

rule actually told the Federal Reserve

that they should go negative

so when you hear Taylor rule think about

it like a suggestion but I would pay

more I would give more Credence to what

the FED is actually saying which is look

hot jobs hot CPI report rates go up

softer expected 25 and pause sooner

simple we'll see let's keep get us back

to two percent inflation those numbers

are not even on the table right now and

I think the message is Yet to Come and

we might actually see is that this

inflation story disappears on us and the

economy actually is hotter than we

thought we may be seeing six and seven

percent numbers uh between now and the

middle of the year yeah we were I Steve

and I both thought we were just talking

to Professor Taylor about this not not a

couple of days ago I think he was at six

percent bill but

um either way it seems let's talk about

kind of the the yield current version

the 10-year yield at uh

uh four percent now I have to like think

every time I say these numbers because

we've been whipsawing around so much so

you're saying we're going to six maybe

seven percent on the FED funds rate the

10-year is now at four percent and not

going back to the highs we saw in the

fall have we started the process whereby

the higher the FED funds probability

goes the lower the 10-year yield might

go because it's so concerned about where

that growth trajectory is taking us

one of the things to keep in mind is

that the FED is not focused on the

inverted yield curve they're focused on

what it really means for the economy if

we have a Slowdown in inflation If

people really adapt their expectations

adaptive behavior and we get the kind of

soft Landing they're hoping for we have

lower 10-year rates but if you have a

crash and a hard Landing we also get

that the lower 10-year rates the the the

the the FED itself of course prefers

that soft landing and they're hoping

that through this jaw boning and early

jaw boning they're going to be able to

get people to change the behavior early

enough so that we avoid that hard

Landing but the the the inversion of

yield curve gives us two scenarios and

and which scenario is going to be let me

just pause there before he talks about

the two scenarios uh what what's really

important to remember about the 10-year

yield curve is the 10-year yield curve

crashes housing right the or the 10-year

yield the more it's around four percent

or higher the more pain you have in real

estate now the Federal Reserve to some

extent to some extent wants real estate

to soften because as Robert Schiller

tells us the wealth of effect is most

affected by real estate which means if

real estate values come down people

finally stop spending money what is the

Fed always told us they want to control

Demand by reining in demand they can

reign in inflation they cannot solve

supply chain problems they can only

fight demand the easiest way to do that

is Crush housing so in my opinion the

more the FED teases the idea that we're

going to go higher for longer the higher

the 10-year goes the higher the 10-year

goes the reason it goes up is because

people think well if we're going to go

higher for longer then maybe I should

wait to buy bonds less people buying

bonds higher yields higher yields more

paying for Real Estate it's simple the

only way that 10-year goes down is when

yes either we are in a recession and the

FED has accomplished getting rid of

inflation or we're going in for that

soft landing and inflation is going away

without a recession but until then the

more the FED says higher longer higher

longer higher longer the more these

10-year treasury yields go up the more

pain you you have for housing in my

opinion it's very simple it's very clear

let's keep going

upon how credible the FED statements are

and how much Wall Street takes it to

heart probably one of the worst pieces

of news Steve this week was the unit

labor costs and productivity report or

maybe it was last week but when it shows

that for the quarter unit labor costs

think we're still six and a half percent

productivity is now falling so it's now

showing evidence of Labor hoarding you

know that firms are just reluctant to

let people go which means inflation is

higher uh for now than it otherwise

would have been and that we could end up

seeing more hikes and then a deeper

downturn resulting in the next I don't

know what the time frame is now 6 12 18

months I mean this is going to be a long

period of waiting waiting and waiting

for these conditions to fully set in

hey Kelly I've given up a lot of my

optimism here but but one thing I've not

quite given up just yet as my optimism

on productivity

um and and I can we can go through that

and I think you and I probably should do

a segment on this down the road but

right now there's a lot of volatility in

the productivity numbers because we had

this surge of productivity at the

beginning of the pandemic when some of

the lower wage and lower productivity

workers uh were let go and now they've

come back so I'm not quite ready yet to

give up the ghost I think we've maybe

had some improvements in productivity

from different business processes that

have come out of covid so I'm a little

bit I remain optimistic on that front I

don't think we're quite giving that up

what does concern me though is the issue

of whether or not we have enough workers

in the workforce and that was discussed

and and I think that we are still

several million short of where we should

be relative to have it and quick note

there this is actually where my talk

about women coming back to the workforce

from That Wall Street Journal article is

really important we talked about this

idea that a lot of women are stopped

working during the pandemic because of

child care needs or otherwise or or fear

of of covid because women are more

represented in Leisure and hospitality

and travel and health care and education

and these really affected by the

pandemic however those folks now fearful

that you know their spouse or otherwise

could be losing their job in

manufacturing construction or Tech might

end up seeing themselves go back to work

to help prop up their household's

ability to sustain during these

expensive times and and difficult times

which that would actually put downward

pressure on uh the the sort of labor

rate of inflation uh downward pressure

on a wage price spiral increasing the

supply of labor is is a phenomenal way

to ensure that we don't have to get Paul

volckert but uh you know it certainly

does indicate yeah yeah going through a

little bit of a tougher time but hey if

we could fill those jobs we can remove

that labor tightness fantastic the

Federal Reserves that much closer to a

soft Landing

workers to do the job and you know I

thought it was interesting Bill P is

getting asked now more about pockets of

the economy where we have problems we'll

talk about this later but commercial

real estate was one of them um and just

this idea of you know when Warren

president and he tried to say you know

we don't think we have to have a

worsening labor market to bring

inflation down but I'm not sure that's

true because it's now unit labor costs

that are driving inflation higher this

is not about the supply chain anymore

um this is directly an issue of the

types see what Kelly's saying here right

if labor cost is the problem it's labor

cost inflation is the problem how do you

solve labor cost inflation you increase

Supply well we are seeing a surge of

Supply the leading indicators no matter

what that jobs report says tomorrow the

leading indicators are telling us the

supply of labor is surging regardless of

whether that's women or men look at the

earnings calls from companies whether

it's Lyft Uber Chipotle Starbucks right

we've gone through this before don't

want to sound redundant the leading

indicators of saying the supply of labor

it's rapidly expanding

there it seems unavoidable

well Kelly you have to watch out that

the unit labor cost is an aggregate

number there are some companies that are

really doing quite well in keeping

keeping their costs down and changing

their their business models and and

using technology to make workers more

productive other parts of the economy

have lag behind on that and so you have

this big spike in um you know labor

costs in part because we have seen the

flip side of the huge uh downward drop

in in unit labor costs at the beginning

of the uh of the of the recovery but one

thing you have to keep in mind is that

the disinflationary forces have are

still in place like that going all the

way back to the last 10 years because

technology and the changes in

globalization are changing the way

business models are going about doing

their their their business and I think

going forward we're going to see that we

will have uh better profits and better

uh results if we can keep up the pace of

productivity growth and I think Steve is

absolutely right productivity is really

the heart of what the future is going to

hold for inflation

yeah very very good points there uh that

companies are now and if you read the

earnings calls uh or just listen to me

give you the summary of them uh what

you'll find is almost every single

company I mean even Costco which has a

massive labor expenses uh every single

company that I'm looking at they're not

talking about raising wages they're

talking about yes wages have gone up but

you know what they're talking about uh

we are working on increasing

productivity and more automation because

we believe if we can have more

Automation and more productivity as we

will be able to make margins better

right uh that's uh that's that's a lot

of what we're seeing right now which I

think is phenomenal uh and uh it

actually is somewhat bullish now uh we

do need to look at uh a little bit of

what um

a TS Lombard is saying they are a pretty

classic traditional bear here and uh you

know as much as I like to you know put

on my bullish hat I have to be realistic

so I always always pay attention to the

Bears I like I say you might be a bear I

might be a bull I'll still have beer

with you it doesn't matter and we could

have different opinions

uh okay so what do we have here

uh the uh Powell versus reality uh this

this author argues that the the idea

that 50 basis points is even on the

table next week according to this bear

is a tacit admission that the downshift

in Hikes was a mistake the FED slowed

thinking they were closing in on Peak

rates they are in fact no closer to

understanding where Peak rates reside

than where they were a few months back

because they have no idea where

disinflation will settle without a

recession

February Employment Number obviously

those are coming out here look at this

fed hiking Cycles measured in days and

rates heading into a recession and it

kind of just shows you sort of different

eras here the 1991 2001 2008 2009 and

you can see climb led to recession climb

led to recession climb led to recession

climb led to covet so that was weird so

what do we are we weird well probably or

are we going into recession this is just

sort of your traditional bear case here

anyway the modify here we go with this

this Taylor rule again uh see this is

yet another version of the Taylor rule

oh let's look at the modified Taylor

rule well if we do the formula what do

we get well we need to get to a 7.7

federal funds rate hey which you know

what In fairness everything the Federal

Reserve has told us in terms of

projections has been wrong so far wrong

so far everything every time they give

us a summary of economic projections

it's too low you know and I remember

when the last summary of economic

projections came out in December we're

like oh my God 5.1 percent fed funds

rate that's insane that's that's higher

than even the markets price again right

now and the market sold off

and and I remember saying this is

actually really bad because the fed's

been low on everything so far are they

trying to get ahead or are they going to

end up being low on this again

well if we had to decide today they're

low again

scary always wrong now if we get really

good labor reports tomorrow and and good

inflation reports next week then maybe

that's not that big of a deal uh either

way next week is St Patty's Day and

there's an awesome St Patty's Day

opportunity for you linked down below

for the programs I'm building your web

remember we don't have any sponsors on

this channel so if you appreciate that

we're not talking sponsors it's just my

own products link down below I think

that the easiest product to sell is the

one that you believe in the most it's

usually your own product so I'm a big

fan of of the quality and and what we

have there for you but anyway uh this is

the second headline of today's testimony

okay fantastic uh hold on there's one

more piece from TS longboard we need to

talk about and it has to do with the

bond market see TS Lombard continuing

with sort of the bear case here he

argues that uh while while there is some

optimism optimism on disinflation he

argues that it is a fantasy to return to

two percent inflation without a

recession I do think this bear is

forgetting that it just needs to be two

percent average right I think I really

think the FED is just waiting to pull

out the uh the the average argument we

know it's coming we know fate is coming

because well it's fate

flexible average inflation targeting

anyway to it Compares basically to the

inversion of the yield curve that we had

in 2000 where the FED funds rate topped

out at six and a half percent but

inflation was running at two point four

percent now inflation is running at six

percent and we're maybe going to top out

at 5.1 he's basically like yeah right

this is the same person who's like we're

probably going to top out in this seven

percent range yikes the 1970s was the

last time we actually had this misguided

optimism on inflation's course and fed

policy being priced into the yield curve

remember though how are things different

from the 70s inflation expectations

today and we didn't just leave the gold

standard like we did in the 70s

does give this example for inflation

basically always going away through

recession but and then specifically

refers to the Korean War but the Korean

war is actually an example of a soft

Landing so I wrote this on the side the

Korean war was deemed to be a tiny

recession that was actually cheered as

solving inflation as a near-soft landing

unemployment peaked at about 6.1 percent

and that recession was really called a

v-shaped recovery and it was deemed to

be relatively mild and brief so I

personally love it when people compare

it to the compare us today as a bull

here I love it when people compare us to

the Korean War era and that recession

because it was like it was a fantastic

recession like if you're going to have a

recession that's the one you would hope

for

however as I have regularly said on the

channel hope is not an investing

strategy and there if there's no return

to two percent inflation without a

recession it says this individual uh

then it's likely well actually the

individual here suggests we're going to

have to see the unemployment rate rise

to about five and a half percent we're

probably going to see that reflected in

the next updated summary of economic

projections coming out on the 22nd from

the FED he does not believe that we are

going to see the world mend itself back

to what it was what it was this is even

though as we just saw in that CNBC

interview and what Jerome Powell

reiterated the disinflationary forces

that were in effect in the last decade

are still in effect today uh that's

that's important to remember that's at

least what Jerome Powell is telling us

and institutions are telling us and I

believe that as well right the

disinflationary forces where you whether

you call it globalization or

re-globalization artificial intelligence

technological innovation whatever

automation you name it my mid-year

recession call is still a 55 product a

probability rooted in the flip to

negative carry for real inventories uh

leading to more layoffs and financial

services no longer being able to build

on high and Rising Equity prices yeah

I'm not a big fan of financial services

right now I think they're going to get

hit by lower incomes really getting

stretched substantially more but anyway

uh the individual here says that the 5

to 10 curve usually usually actually

turns positive before a recession so

that implies that we should have to

start seeing the steepening of the yield

curve before we're actually officially

in a recession which is interesting

because you know what if we get the

steepening of the yield curve in like

June or July well then it reiterates the

idea that maybe we won't actually get a

recession until like q1 of 2024 right

six months before so I think this is

really an interesting sort of leading

indicator here air travel dropping back

to 2019 levels I actually thought that

was bullish because it kind of suggests

that we have this peak of air travel and

we're going back to lower levels which

is good because you put less

inflationary pressure on something

that's been very much inflating

a little bit of talk about how we're

seeing less financing of inflation lower

loans we saw a lot of credit being

pulled in the middle of 2022 but you're

actually actually seeing less financing

happening right now uh the market

remains convinced that the world will

repair itself back to pre-covered levels

according to this bear it won't ignore

the chatter about no recession needed

you know I don't know that we can say

that we're definitely not going to have

a recession I just think the question is

like

what stocks can you hold on to that will

do well through hopefully what will be a

mild recession now everybody says every

recession is going to be mild but so so

we don't know how deep it'll get but I I

mean personally what I'm just saying

with with not only the excess savings

people had not to be compared confused

with excess savings rates but also with

wealthier folks and businesses spending

through the recession I think you could

really set yourself up with pricing

power stocks that'll do well through a

mild to moderate recession I don't think

anything does well in a bad recession so

so that is something to keep in mind but

yeah I don't I don't know that we have

to believe in Immaculate disinflation

which this individual calls a fairy tale

basically a fantasy as long as we have a

trend down and we're not getting Paul

volckerd I remain bullish on pricing

power style stocks yeah I really like

big PP uh the bigger PP the better I

just I just want PP all around me uh and

I think that's very very important uh

but uh you know this is this is your

bear case and I think the bear case says

good arguments uh I pay attention to it

I don't think those arguments are strong

enough like they were in January of

2022. uh that's that's really when we

had leaning indicators letting us know

that poopsie dupsy was coming but uh

anyway that gives you a little bit of

the bear case in terms of what's going

on what the Bears