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special meet kevin link down below hey

everyone kevin here we've got three very

important things to talk about in this

video number one we're going to talk

about the consumer which makes up over

70 of our economy consumers spending

consumers spending trends are they going

to fall off a cliff when the number two

why is consumer credit exploding and

then this is a big potential red a flag

for markets going forward and what just

happened with one of the key signals

that the federal reserve looks at when

it comes to hiking and crushing any life

in our markets

let's talk but first i want to mention i

appreciate you being here all right

let's get right into this this is a bank

of america research piece it shows that

consumer spending is up about seven

percent year over year uh in july

roughly in line with june so no large

decline between june and july in summer

spending total credit and debit card

spend making up about 20 of payments was

up about 8 year over year and now a lot

of this is probably due to inflation but

we're not seeing that trend decline if

inflation really started biting we'd

probably start seeing july kind of trend

down versus june for example but we're

not actually seeing that yet instead

consumers are holding up and one of the

reasons for this could potentially be

lower gas prices see one of the

fascinating things about gas prices is

we are now experiencing a reversal of

something that has been very very

damaging to the consumer yet consumers

still held through that now i know that

gas prices have gone up from like a

national average of like two bucks to

four bucks so we're still at a double

even though we're down from five we're

still way higher than where we were

right

but the trend of gas prices going down

is very important because of this chart

right here this particular item here

this note from a jpm research report

tells us that consumers

spend

1.60 cents less for every gas

dollar that gas goes up so let's make

that crystal clear because it's so

important and you should screenshot it

to remember it okay for every one dollar

that gas goes up

consumer spend goes down by a buck 60

well

now reverse that trend if gas goes down

by a dollar then consumer spend actually

potentially goes up by a dollar sixty

that's actually a very very good thing

that could give us tailwinds to

consumers actually holding on to

spending or potentially spending more

going into the second half of the year

versus the thesis that course member

steve this morning brought up course

member steve this morning in our market

open live stream video where we covered

consumer sentiment numbers live together

and went through some earnings together

and fundamental analysis steve mentioned

hey there's this potential that in the

second half of the year we're actually

going to see consumer spending while it

held up in the first half plummet

because this was really the first summer

where we haven't seen coveted

restrictions and steve's right like he's

100 right this this has been the real

first clear summer where people are like

let's go let's we're tired of being

inside i'm inside for two years i mean i

i was a victim of this i feel like

myself i feel like i was inside for two

years minus the campaign last year i

feel like i was inside for two years and

gained like 45 pounds so it was like

covet 20 times two and a half it was

terrible anyway i'm really glad to get

back out there and like lose weight and

anyway be normal again but anyway uh

what's interesting is that this

fact about gas prices could potentially

actually help us maintain that consumer

spend throughout the rest of the year

and we've got some really important data

here to cover look at some of these

charts so the first thing that we're

noticing is the daily spend

card spending per household when you

exclude

gas and grocery prices it's charted

right here

now what's really incredible

about this chart

is it shows us that

wait a second

consumer spending after july's low is

actually rotating up

that's right and this is excluding gas

and groceries right

but if you consider the fact that gas

prices have gone down over the past

month

it actually makes sense that oh look at

that as gas prices have gone down

consumer spending is going up in line

with the research that for every dollar

gas prices go down consumer spending

could go up by a buck 60. this is

actually a really good trend and

potentially suggests that consumer

spending could be strong going into the

second half of the year but it's

something that we want to pay attention

to and it's something that we research

regularly now keep in mind if you want

to be part of the course member live

streams where we cover things just as an

example like this toast earnings call

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take a look at this

toast which is a credit card processing

company or payment processing company a

terminal essentially a terminal platform

for use at restaurants they tell us or

at least their ceo tells us that they

have not seen any pullback in consumer

demand yet

now there's a lot more that we talked

about regarding toast including some of

their fundamentals which we'll skip for

the purposes of this but what's really

incredible here is the consumer is

holding up take a look at some more

information that we have right here

the consumer while they're spending less

money overall and they're still growing

their spending

look at this this shows you that online

spending popped during amazon's prime

day

and it's actually now positive still

after prime day despite being negative

year over year for online spending

between march and essentially the

beginning of july

that's fascinating because this right

here was really our recessionary period

right this is where everybody's like

that's it we're going to heck and online

spending actually had negative

year-over-year growth whereas total

spending still had positive

year-over-year growth but that's now

moved to positive even after prime day

it's still positive we're also seeing an

uptick in leisure spending which is very

incredible

we are seeing median household savings

and checking account balances still well

above where they were in 2019. look at

this folks that right here was 2019.

look at this this is where we sit now

sure it's not as high as what we saw

over here in 2021 but for all income

groups consumer savings are higher now

they're slightly trending down but we're

still at 140

1.4 times essentially what we were in

2019 this is actually a good thing and

on top of that median household savings

and checking account balances

by age group

are also all higher than where they were

in 2019. every age group and every

income group is seeing higher account

balances and as gas prices go down

they're expected to spend more money now

we are seeing credit utilization go up

and this has led to a lot of folks

saying uh oh kevin credit utilization is

going up people are taking on more debt

this is dangerous maybe but look at this

take the under 50 000

of income demographic

you're still lower

by four basis point actually four

percent rather uh you're still four

percent lower in credit utilization than

where you were in 2016. or really at

least two to three percent lower than

where you were on the average between

2016 to 2020

and this is the same uh the same is true

for all of the different income

demographics here

which is again incredible now some

people say but wait a minute kevin wait

a minute

total consumer loans outstanding are at

a record high and this is true they are

in fact you can see total consumer debt

outstanding peaked around the beginning

q1 of 2020 but we've actually peaked

past that now we're at the highest

levels of consumer loans outstanding

right now and that's leading to concerns

that that's it we're just waiting for

defaults but wait a minute we just saw

that consumer balances of savings are

higher checking account savings balances

are higher and so when we look at this

chart and we look at debt as a

percentage of disposable income that is

the money people have to spend to

service their debt what is that as a

percentage of their income so if your

income's a hundred dollars and you have

ten dollars of debt payments you're uh

you know well

let's save you a hundred dollars of

leftover disposable income which just

means you have money that you could

spend on whatever the heck you want and

then you have ten dollars of debt

payments you would have this percentage

would be ten percent right the average

right now sits around five point six

percent and what's crazy is it's well

below what we saw during the dot-com

bubble it's below what we saw going into

the 2008 recession and it's even below

what we saw going into the pandemic so

yeah consumer lending is going up

but people have more money and more

capability to service this so this is

actually quite

bullish and in my opinion gives us some

credence to this argument that we might

not see that summer cliff of of of

spending plummeting now it's possible

that back to school spending led to a

surge of certainly online spending in

july and maybe we'll go back to negative

online spending growth uh year over year

towards the second half but overall

spending might continue to be above

zero percent we'll see but even toast

telling us that even at restaurants

they're not seeing any indication of

slowing consumer spending

things so far looking pretty good that

the consumer might actually stay strong

throughout the rest of the year and in

my opinion that's really really bullish

this is potentially one of the best

recessions ever it's incredible and that

also gives us insight into this

following chart which is something that

the federal reserve

really pays attention to and it's this

right here it has to do with inflation

expectations

so this is the consumer sentiment survey

from the university of michigan we were

expecting the longer term inflation

expectation to go down from 2.9 percent

down to 2.8 it actually came in at 3

which is slightly bad news because it

means that expectation for consumers in

the long term for inflation went up by

about 0.1

not great however the one-year inflation

target

which was expected to come in at five

percent

came in soft at or it was expected to

come in at five point one percent it

came in at five percent and the previous

was 5.2 so what does this mean is we

really just got a mixed report here that

suggests hey consumer expectations for

inflation are actually quite stable and

if anything consumer sentiment

improved coming in at a rate of 55.1

versus 52.5

expected so consumer sentiment beat and

is improving and inflation expectations

are still relatively stable which is one

of the most important things that the

federal reserve looks at what are

inflation expectations and how are they

changing over time the biggest risk to

our market is de-anchoring inflation

expectations because when inflation

expectations go to the moon like they

did in the 70s then paul volcker comes

out raises interest rates to the moon

and really crushes our economy that's

not what we're seeing right now in fact

if anything what we're seeing right now

is good news is finally becoming good

news or bullish the news that earnings

are coming in strong is supporting this

bull market rally we're seeing the news

that a consumer sentiment survey is

coming in stable and consumer spending

is holding strong

is being seen as good rather than bad

because we're coupling consumer spending

staying strong and earning staying

strong with inflation finally inflecting

down which is what the bond market has

been predicting for the past four months

and we've been covering on this channel

pointing to september uh well august and

september

as uh very important months for

inflation inflecting down and that's

what we started seeing so folks

personally i think this is great i think

this is great news and explains why

we're seeing the market today decently

green now while the market tends to be

quite volatile take a look at this uh

qqq chart here we've gone from you know

nearly flat to up about one percent on

the nasdaq and we've been bobbing around

tesla's been bobbing around between plus

half percent and minus half percent

overall markets appear relatively

enthused that hey the consumer's still

strong consumer sentiment and

expectations for inflation are stable

and in my opinion this could be a longer

term sign that this bottom is in for

stocks now i don't want to say that we

don't have a chance of retracing back to

the two uh the 318 line for qqq or even

the 299 line by having a retracement

back to some of these other support

levels but i just don't see the

catalysts of uncertainty that would drag

us all the way back to what we saw in

june or july which was the nasdaq

somewhere around 268 which was pretty

dang low these are my thoughts let me

know what you think in the comments down

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today thanks so much bye