f*$k | This Changes Everything. The Recession is Here.

every time this chart goes under zero

Kevin's saying we're never session it

essentially says we're screwed

congratulations man you have done so

much people love you people looked up to

you Kevin path right there financial

analyst and YouTuber meet Kevin always

great to get your take this is not good

we need to call a spade a spade there's

a chart the current economic indicator

chart that averages together 12 economic

indicators

and it essentially says we're screwed we

have a recession that we're dealing with

let's call a spade a spade

let's address this head-on so first of

all the chart that we're going to

address I'd like to mention that it was

brought to me by a course member so

shout out to them they brought it to me

this morning in our course member live

stream private course member live stream

for over an hour and one of the reasons

they brought it is because I've been

asking everybody to find me the most

bearish information that they can so

that we can analyze it and understand

okay where does this mean we are in the

economic cycle should we be thinking

about buying real estate should we be

thinking about buying stocks or is it

better to wait because more pain is

still ahead of us

and so I'm going to bring up this chart

and explain it but let's just start

again calling a spade a spade it starts

off bad and bearish let's analyze it

together do keep in mind that on the

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courses so let's get to this particular

chart the chart that we're going to look

at is the current economic indicators

chart it's basically uh an average of

about 12 indicators so we'll look at the

weightings for these in a moment but as

you can see this particular chart here

goes from

2023 all the way back to 1962. and the

first thing that I did when I looked at

this particular chart is I wanted to

know where the zero number is so I went

ahead and added the zero number as this

red line going across and then I thought

okay well it is decisively negative that

doesn't look good that actually looks

quite bearish now what we should do is

we should Circle every single time we

went into a recession and see if there's

any correlation between this chart and

recession so we'll go ahead and circle

that in this blue marker here so first

of all we know that we went into a

recession right here because we had the

coveted recession then we had the

2008 housing market crash then we had

the.com crash then uh this was sort of

like the 91 recession which kind of came

after the Savings and Loan crisis some

of the built up speculation from that

and then you ended up having your 90 91

recession was deemed a relatively

shallow recession followed actually by a

soft Landing in about 94 but you notice

that even in 94 which is about right

here where you had this steepening you

didn't actually cross that zero level

for the soft Landing uh don't mind where

we sit right now anyway then you had

your uh two uh your basically your 79

and your 81 recession right here your

mid 70s recession and then of course

your 69 to 71-ish recession so

if you look at the chart now it's kind

of like go

well every time this chart goes under

zero Kevin's saying we're in a recession

and where do we sit right now below zero

and we're technically not in a recession

great so what does this also tell us

well what this chart also told us upon

further analysis was that most of the

time this chart inverted out of a

recession

was at a very particular point I'm going

to draw those points to you to kind of

bottom line it you could fact check it

and kind of see it yourself but right

here and watch what I'm doing this is

when we were near we were within three

months of the end of the recession where

I'm drawing

you kind of see the pattern already

and if you don't see the pattern yet it

should be pretty obvious here there we

go now this one was a little rougher so

we're actually going to do something

more like that okay uh and then over

here

and then over here so what do you notice

well the near end of a recession was

typically where this line started going

up again

with the exception of

2001. we hit the bottom in the uh fourth

quarter of 2001. we sell at about 90

percent or nine months of paying ahead

of us the NASDAQ fell 40 in those nine

months now worth noting that in the

early 2000s the NASDAQ behaved kind of

like an index of spax because quite

frankly these were newer not profitable

companies but some people argue that the

company is making up the NASDAQ today

are newer and unprofitable and are going

to have their earnings smash so anyway

you have this precedent in 2001 that

stocks could still fall 40 but that was

the NASDAQ okay in all of the other

cases

the inflection of this indicator

actually aligned with stocks having just

recovered or being about to recover and

then basically going straight up from

there until the next recession you can

see when you zoom out it's not actually

very volatile now when we zoom into this

chart back in 2001 this actually felt

like it had bottom started recovering a

little bit and dropped even more in 2002

and so there is a chance that could

happen over here as well but what I got

to thinking about was wait a minute if

this indicator bottoms out

when the recession is over and then

starts trending up is it possible

that we're actually in the recession or

are coming out of the recession that

everybody keeps talking about

imagine that we know that we had a

technical recession in q1 Q2 of 2022

that was a TR technical recession we

know that because we had negative GDP

we also know that we are generally not

deemed to be in a recession until nine

to up to 36 months after the recession

occurs that's because the economists who

decide whether or not we're in an actual

recession yes maybe they're politically

motivated who knows but they take a long

time and use a lot of data analysis to

say yeah that was actually uh consistent

with a recession so is it possible then

that economists could tell us that oh

well the recession actually was q1 2022

to Q2 2023 and by Q2 2023 the recession

was over

yeah

and that's it the recession that the

inverted yield curve is talking about

has already come and gone is that

possible well should be seeing a lot

more of a steepening of the of the yield

curve then right we've had some

steepening but not that much so is that

possible that the recession is over

before it's actually come well to help

understand this we should look at what

goes into this particular chart that we

just talked about this by the way were

some of these by the way were some of

the notes that we talked about in the

course member live this morning and if

you zoom in right here this was

something that I thought was very

interesting look at this I wrote down

how interesting that in Q3 2021 you got

a sell signal a fall

and then by q1 of 2022 you had this

slope right here that portion right

there since this is quarter over quarter

data and it was your second warning to

sell and then obviously stocks bottomed

about three to nine months later

well what we think is the bottom who

knows maybe we'll get a new bottom

anywho so this is what this economic

indicator the Lei the leading economic

index is made up of you can see there

are two components there's a financial

component and a non-financial component

we are at negative 4.2 however over 70

percent of this indicator is being

driven by

this

non-financial components so the biggest

portion of the financial components has

to do with credit

so in other words tightening credit

but credit will probably loosen when

some of these other things turn positive

you also have the S P 500 in here which

is interesting so let's ignore the

financial components for a moment and

just focus over here on these

non-financial components so what do we

have huh interesting we actually have

consumer expectations and then the

institute for supply side management

index of new orders as well as building

permits although a very small portion

being building permits most of the

weight here the negative weight is

coming from expectations and

Manufacturing orders now I want you to

think about this this is the breakdown

of the leading economic indicators

of these which do you think is the most

leading of the leading 12.

while you think about that remember

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love to bundle you up so what's the most

leading out of all of these well in my

opinion what would be most leading would

be consumer expectations consumer

expectations are important because when

consumers and smaller businesses or

otherwise think that we're not going

into a recession what expands spending

so new orders because people are like

probably going to avoid a recession so

we don't need to save as much no orders

credit then starts expanding stocks

start going up risk Premia start going

down then you get all these other things

ideally start trending in the right

direction as well although these tend to

be smaller weight over here at least

they're presently smaller weight so the

biggest leading indicator of the leading

indicator is probably expectations which

makes sense because expectations are

frequently self-fulfilling so what do we

have about the consumer confidence index

well we have the following the consumer

confidence index shows that consumer

confidence actually bottomed here

between July and October with Jackson

Hole right about here where Jerome

Powell really gave us a spanking well in

that period of time a lot of stocks were

darn near bottom so there was almost

this alignment with consumer

expectations and consumer confidence

with the bottom of the stock market

nearly some stocks didn't bottom until

December but you notice that once we got

into 2023 we actually had pretty bright

expectations and even the AI push which

we really got about here didn't really

push expectations much more positive the

trend was already substantially more

positive now I find this very

interesting because right now the

consumer confidence level is sitting

below 100. 100 is actually right here

year so that means we have this deficit

right here where consumer confidence is

still negative that means it's weighing

down that leading indicator right

remember the weights right here see how

consumer confidence is negative and then

you're going to jump over here and then

that negative number helps push us down

but what happens when that negative

number becomes less negative

well then this becomes less negative so

let's draw that out let's say that

number Trends back to 100 which is the

trend we are on right now expectations

going up right

what if that Trend Trends up like this

and then all of a sudden the other

indicators start trending up well that's

probably why this chart moves in such

violent lines like it feels like almost

straight up or straight down because one

of the leading indicators leads the

other indicators to flip ah take a shot

every time I say leading indicator

anywho so

what is this potentially mean well I

don't know let's zoom out let's compare

consumer confidence today to where it's

been in the past well here's consumer

confidence today this is the rebound

charted out and if we draw this over we

could see that we're actually sitting

around similar levels of consumer

confidence as where we sat in 1980 when

we were getting Paul volckert

and which is not great and we're sitting

at similar levels as to where we were in

2010. now I'm going to use the more

recent example here even though this

ended up being good right we had a

strong recovery after our Pro volckering

after we had our spanking we had a

strong recovery we got our spanking so

far today that's probably what led to

this massive decline that we have here

but what was interesting about 2010

I'm going to give you an anecdote about

2010 you ready for 2010 I got into the

real estate industry towards the tail

end of the crash so I still experienced

enough of the crash to see how miserable

it was and it was so odd because people

would come up to me and go we're looking

for a three and two I'm like I got a

hundred you can look at there was so

much inventory we had excess Supply

everybody was afraid because everything

was a short sale foreclosure if you had

a standard listing back there they'd

advertise that they'd be like Equity

sale standard listing not a short sale

that was like bragging rights back then

today is the opposite no real short

sales and foreclosures like half percent

of the market

so what's interesting about 2010 well in

2010 when I started getting ready to buy

my real estate and then started buying

my real estate everybody told me don't

buy a house right now and they told me

don't buy a house right now because

there's about to be a double dip

recession all of the banks are holding

all their inventory back it's a shadow

inventory of foreclosures and they're

gonna dump them all onto the market as

soon as prices start Rising because the

banks are trying to rip us off and the

suits are trying to rip us off and

everything's rigged boy doesn't that

sound familiar to the kind of stuff we

hear today don't trust the data

everything's rigged wait for the next

crash The Big Black Swan is coming the

great reset's coming

and then it didn't

and then we had a 10-year bull market

where of course every single year the

people who got the most views were the

people talking about how every single

year there's going to be a mega crash

oopsies

didn't end up happening so bottom line

what is this data tell us right now well

the data is actually telling us that we

might be at a leading indicator

inflection point not only may we be at a

an inflection point but the recession

may have already happened that may

already be behind us

which is really interesting now that

does set us up for volatility during the

steepening of the yield curve but the

recession may have already occurred

the inflection point is already

occurring in leading indicators

suggesting maybe we're already in the

recession or we're just at the end of

the recession

and that would align with history except

we won't know if we're in a recession

now or we're just in a recession for

maybe another two years whether it's

politics or what that's just the way it

works that we could argue about

potentially being rigged but if that's

the case

then that potentially takes what looked

like was a bear argument from the course

member it actually makes it look like

something we need to pay attention to

because it could get worse

or if those leading indicators keep

pointing up will inflect up and continue

to inflect up

relatively quickly and signal that the

worst is already behind us of course

what can destroy all of this well

obviously a big old Black Swan what was

a Black Swan that actually delayed this

indicator from recovering if you zoom

into the charts by the way you'll see

something like this

in 2008 and then you see another crash

and then sort of the recovery

why did you have this pause in 2008 well

you had this pause because you had a

Black Swan called Lehman Brothers that's

where you had the real Lehman Brothers

collapse and then you had to flush out

the true excesses of the system don't

get me wrong I think at some point in

the future where you're going to have to

flush out all of the excesses the

defaults that need to occur will happen

but I don't necessarily think that we

have enough systemic risk at this point

that the entire system gets screwed

we'll have bankruptcies we'll have

foreclosures we'll have office defaults

we'll have funds blow up and companies

blow up and go under

but most of the companies just like

Property Owners today that are set up

and prepared for this will survive like

our Mega Caps or like our single-family

homeowners who have 30-year fixed rate

mortgages

in which case the potential for a

systemic Black Swan is actually

minimized don't get me wrong those

bankruptcies are going to come but if

the recession is behind us I know that

sounds weird to say

and we're at an inflection point to the

upside

and this Black Swan isn't present yet

and if it occurs it might not be that

bad to some extent the banking crisis

was kind of a Black Swan and we're like

that wasn't that bad okay you took out

four or five banks we got four thousand

more

kind of interesting so

if you like my perspectives make sure

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market is open and we'll see you soon

thanks so much goodbye so you're here

tomorrow to ring the bell oh

congratulations man you have done so

much

I took my enthusiasm for the market and

money and started learning everything I

could about real estate I would be the

most transparent to Governor that would

exist and you'd have my commentary every

single day I became a licensed financial

advisor why not advertise these things

that you told us here I feel like nobody

else knows about this we'll try a little

advertising and see how it goes always

great to have you on Kevin paprat their

financial analyst and YouTuber meet

Kevin always great to get your take