*Major* Wall Street Bull JUST Started FLIPPING

This morning we did some recessionary

analysis and TS Lombard who's been a

bull is still a bull on soft landing but

they're seeing some cracks and they give

you an outline of what to pay attention

to. It's worth noting that so far I've

been studying the earnings calls of a

lot of different companies and while the

International Monetary Fund doesn't see

a recession on the horizon although they

do suggest slower growth and even

companies like Paychecks don't see

indicators of a recession at the moment.

It's worth noting that a lot of these

businesses refuse to tell you in advance

if they think a recession is coming.

Because usually if one company is like,

"Yeah, we think a recession is coming."

People think that company just sucks and

then they sell the stock. If people

don't think a recession is coming and

they're like, "Ah, there's a recession

coming." People might be more likely to

buy those publicly listed stocks. So, I

think there's some, you know, reading in

between the lines you have to do with a

lot of these companies. and you're

finding the general theme now is slowing

and uncertainty. Now, we're going to see

some things to look for from TS Lombard

regarding the brittleleness of the

economy, but it's also worth noting this

morning, Bloomberg Intelligence

suggested that Q4 was peak for global

earnings growth as now tariffs have

increased volatility, sky-high AI

earnings growth is slowing, and higher

rates start to bite. Now, obviously, we

could get a lot of enthusiasm that

rapidly comes into the economy if Donald

Trump ends up striking tariff deals,

which we'll separately talk about some

tariff deals that I think could be uh on

the horizon. But first, let's talk about

TS Lombard and some of their data, which

is quite interesting. as well as

considering that while JP Morgan is

seeing some deceleration in spending

growth from consumers, they on their

card platforms are still seeing growth

of around 2.6%. With Gen Z and

millennials really driving most of that

growth, Gen X and Boomers really

accounting for almost flat growth to

slight growth. JP Morgan, it's worth

remembering, is a much harder credit

card to get access to, or any of their

cards are a lot harder to get. They're

not gonna really appeal to lower credit

scores, lower income individuals.

They're a little bit more of like a

bougie bank, if you will. So, it's worth

noting they're not the the uh I think

best cross-section of America. They're a

little bit more of the bougie

cross-section of America. That's my

take. Uh and yeah, we bank with JPM.

Sorry. But anyway, uh let's go into just

worth knowing that because I remember

being 18 and applying for credit and

it's impossible to get credit from JPM

and it took years to get in. You'd have

to go to, you know, Wells first or city

discover, you know, those are usually

your your found. So, everybody goes

through it. Uh but um that's a note from

uh JP Morgan. And now let's take a peek

at this TS Lombard piece on the

brittleleness of the economy because

they're going to give us some more

insights into this slowing as well uh in

their opinion on this slowing. So let's

take a peek of this. Uh so Trump 2.0 is

proving a lot less reflationary than the

consensus assumed with the threat of

tariffs and Doge spending cuts

undermining confidence. We think the US

economy can withstand these shocks. A

soft patch is likelier than recession.

But budget consolidation is risky

without a monetary offset. So it'll be

important to monitor the labor market.

So we need to explain this uh and and

there's a lot of detail in this. So

we're going to go through this and see

this here specifically. So what do we

have here? Uh while we would not

describe the latest US data as

recessionary, they see a growing sense

of anxiety about where things are going

and they think the most important place

to watch is the labor market. I just

want to remind everybody the problem

with the labor market is it's very very

slow to it give you any kind of leading

indicator. Uh in fact it's more likely

to provide you lagging indicators than

any kind of leading indicators which is

quite unal. Uh I'm trying to find where

this comet is. Uh that's okay. We'll

find that later. So we'll go through

this line by line here. Oh it's stupid

Apple. That's why zooming in my pages

like this. Okay there we go. Today, the

sense of optimism that we got from Trump

has disappeared. And there's this

question uh about, hey, are we just

unwinding the animal spirits of what

Trump brought us with the election or

are we going to see more of this where

this is more than just a reversal and is

there potentially more damage coming to

the economy? And their point of view is

nobody expected Donald Trump to inflict

pain on the economy. In fact, they go as

far as saying that they thought, as well

as a lot of people, that Donald Trump

would be arbitrated by the stock market.

Now, think about that phrase for a

moment. It's a really interesting

phrase. An arbiter is is a a form of a

judge, right? Uh but it could also be

somebody who who sort of dictates

proceedings and how things are to go,

right? So, imagine this arbiter over

Donald Trump. No, Trump, don't. Here,

hold on. We need a we need a

prop. No, Trump, don't do that. the S&P

500's going to go down. Okay, that's

what people thought was going to happen.

The reality of what we've been getting

is, "Hey, Trump, did you see the stock

market is down 2%." Huh? What? Oh. Oh.

To today or or in general? No, it's down

2%

today. It'll sort itself

out. That That is not the Trump that

that by the way is exactly what happened

yesterday. That's not the Trump markets

expected. And TS Lombard is is basically

saying this is an adjustment for

markets. We don't have somebody who's

bound by what the stock market is doing.

And this idea that uh we have a

essentially a government that's willing

to inflict pain or detoxify the economy

is a risk. And so they provide three

recession risks even though they are not

forecasting a recession. They say first

we don't have a monetary offset. This

basically means we don't have JPAL

printing. Okay, easy enough. Uh, number

two, they think the combo of Doge and

tariffs is dangerous because Doge

creates negative fiscal spending to the

extent that it's successful and tariffs

encourage the Fed to hold because of the

refl the inflationary

risks. In addition to that, while the

broader private sector is really

healthy, including larger businesses

that are doing very, very well, small to

medium businesses have really big risks.

And the risk is increasing. It's worth

remembering that about half of

employment in America is small business

employment. That's a really big deal.

So now they argue that three months

after the election, it's really hard for

investors to start dismissing the bad,

especially since tariff deport tariff

deportations in Doge are happening now,

whereas tax cuts and deregulation won't

happen until 2026 or beyond. How funny.

Who if only there would have been a

YouTuber that told us, "Be careful. The

good that Trump is bringing you isn't

going to hit until 2026 or later. And

the bad is gonna hit up front. And you

should be really careful of

Q1. Oh, that's what we did. It's okay.

Sometimes you got to pat yourself on the

back a little bit, but we don't want to

get cocky here. Nobody's perfect and we

we don't we don't want to crash. Uh I

know some people do because they think

it's going to it's going to be good. I

let me put it this way. No economic

recession is good. Everything sucks. Uh

it doesn't matter. So anyway, uh okay.

So what else do they say here? Optimism

giving way to genuine genuine investor

alarm. If so, why? So basically they're

arguing here that author

authorities within the Trump

administration when it comes to tariffs

are basically going beyond this, hey,

we're going to use them as a negotiation

tool.

tariffs. There's actually this, they

call it an ideological belief that the

Trump administration is going to go

allin on rebalancing global trade. Uh

and and that the ideology is the world

must pay for America's taxes. uh and

that this this is not just a short-term

pain or detox because you know after the

Biden admin but rather this is some

long-term transition that's just not

going to happen overnight. TS Lombard

sees that as a longerterm risk because

they say here short-term pain is a real

possibility and the promised long-term

gains are speculative and based on

specific political ideology. Now, this

is really interesting because it it's a

way of essentially saying, "Hey, like

you know, if you're MAGA and you're all

in on Trump, like, ah, it'll be fine.

It'll be fine." Great. But it usually

isn't because when things in the short

term start compounding in a bad way for

longer, you end up quote feeding on

themselves. Like these issues feed on

themselves and can even leave long-term

financial scars. Does and they they

write this. Does anyone seriously

believe, for example, that an economic

downturn would lead to an improvement in

public finances? Uh, spoiler alert, no.

They're going to print print money in

the and we'll be in more debt than we

ever have been in before until the

entire financial, you know, monetary

system collapses and the economic ponzi

is over. Now, I don't think that is

imminent. I think it'll be in a few

hundred years. It'll happen eventually,

but I don't think that is imminent.

That's just my opinion, though. Uh, but

I also don't like holding cash. You know

what I really prefer over cash? And

we're going to keep going with this

recessionary article here. Although

they're more of a soft landing argument,

is house hack. That's because I think

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ads over. How was that? I think it was

good. Now, let's go uh

to this piece again. Cool. The reality

is that once a recession starts, nobody

knows just how bad the situation is

going to be or how long the downturn

will last. And once US unemployment

starts to rise, it usually rises a lot

further. There is no doubt recent US

economic data has been soft,

particularly compared with bullish

expectations. The macro surprise index

plunged at the start of the year. Retail

spending has been subdued and confidence

has clearly deteriorated.

It seems that uncertainty is encouraging

businesses to postpone hiring and

investment decisions while talk of

economic pain is never good for consumer

sentiment. You know, I heard this is

just an anecdote, but I heard somebody

was applying for a job and I was hoping

they'd get it uh at a at uh like a

certain mag 7 company and apparently for

that job there were 1,500 job applicants

for the same damn job. I'm like, "Oh,

no. This is this is a

fundamentally bad thing." Especially

when when people that I actually, you

know, think are quite smart, uh, you

know, high IQ, high high effort, high

energy individuals who deserve the job

can't get it because of macro. That's

what pisses me off because, you know,

now like that's why I say you shouldn't

cheer for a recession because you can be

the smartest person in the world, you

could have the best skills or talents in

the world, but the data just gives you a

middle finger and then it's like, bro,

this is some bull, you know? Uh now that

said, so far we've been doing okay. I

mean if you look over here as they say

the labor market has been stabilizing uh

back to 2019 levels when we thought

payrolls were slowing down. Over here we

bounced both times we've had a slowdown.

So maybe this is all part of just you

know an adjustment phase or the

normalization phase. I don't think so.

But that's what a lot of people think

and that's okay. May maybe maybe that it

will be like that. I hope so. That would

be Goldilocks, right? Here's your

challenger job cut layoffs chart. Uh and

here's their thesis on Doge. So, their

thesis is Doge will fail. Now, they make

the argument that Doge will probably uh

not cut anywhere near as much as they're

capable of cutting uh because their wall

of receipts has been mostly fugazi. But

let's say they're even remotely

successful. Losing 300,000 workers at

the federal government would equate to

an extra 20 basis points of the

unemployment rate, which in a healthy

economy the private sector should be

able to absorb. But the job losses will

be larger if we take into account the

shadow government employees contractors

or those who depend on government

contracts and subsidi subsidies. Since

there are two shadow workers for every

federal employee, that could bring the

total job losses to over 800,000 or an

extra 50 basis points of unemployment.

And that's where things start to get

interesting because why, as they say,

well, it triggers the SOM rule again.

You remember that like false indicator

that we got uh in August and then we

revised away the SOM rule? Well, usually

when we actually break the SOM rule and

we're not just revising it away, thanks

Biden, we add 50 basis points to the

unemployment rate over the last 12

months uh low, uh, you know, three-month

moving average low. Then what happens?

Well, once that joblessness increases

that much, it usually keeps rising by

likely another 1.5 points, percentage

points or more. We also know that the

jobs market is currently in a fragile

equilibrium. I agree with that. both

layoffs and hiring at very low levels,

which means that former federal

employees might find it hard to secure

new roles. And it won't take much of an

increase in layoffs to unsettle the

current equilibrium. This is the thing.

This is why Jerome Powell, you know,

people people listen to JPL and they're

like, "Oh, he sounded doubish." And I'm

like, "Did you pay attention? He

literally told you to your face that

layoffs are the last line of defense. We

are literally at war with the

economy and the last line we have in our

tower defense of the economy is a low

layoff rate. The second that low layoff

rate breaks, it's like a levy. And that

unemployment rate skyrockets fast

because then it becomes normal for

businesses to announce

layoffs. Half, roughly half, it's like

45%.

uh our labor market is built by small

businesses. Small businesses are getting

hosed right now. Small to medium are

screwed. It sucks. You know, does Apple

give a flying hoot or Birkshire

Hathaway? No. More money than God that

they're sitting on. Fine. It's because

God doesn't believe in paper currency.

In fact, he told me that he believes in

house hack and investing in diversifying

to house hack.

Househack.com sponsored by God. All

right, where were we? So, here we have a

government decision to trim the size of

the workforce. Uh oh, yeah. So what

they're saying is normal recessions have

their root in some form of fundamental

or or like underlying macro financial

imbalance and then that's where things

become unstable and then there's a

painful adjustment phase that gets

triggered here. This adjustment they say

is sort of more like

self-imposed. It's basically a, you

know, Trump move that hopefully does not

turn into a spiral because if this is

enough of a tipping point to trigger a

broader private sector retracement or

retrenchment with jobs, you have to you

have to be careful basically. So in

other

words, let me rephrase this. If job

losses are bad, job law and the private

sector picks up those jobs or even city

or local governments do or state

governments do, not that bad. No

spiral. But if the government layoffs

spill over into private layoffs,

especially in that small and medium

sector, you're screwed. Just bad. Now,

obviously, uh tariffs are already

impacting and slowing down spending. Uh

you know, best case scenario is

companies just pay the tariffs and we

move on. Uh what else do we have here? I

really hate that this is not a

progressive scroll. There we go. Oh,

thank goodness. Oh, that's so much

better. Apple, who would ever scroll by

page? If you're a page

scroller, leave a comment so I can make

fun of you. We need continuous scroll.

Anyway, all right. So, where were we?

All right, here we go. Consumer

confidence minus uh minus fewer job

opportunities. If this breaks lower, it

could signal recession. Okay, not a good

chart. Got it. uh it would be a stretch

to say the econ the economy is already

turning to recession or that such a

downturn is inevitable. Right? So in

other words, it's not a foregone

conclusion that we're definitely

screwed. It's just starting to smell

like we're

screwed. I kind of agree with that. Like

if I thought we were definitely screwed,

I'd be a one on the Bearbull scale. I'm

like a 29. You know, I have I have some

hope left. They're like, "Ah, you know,

maybe Trump will make a deal with the

Canadian prime minister or, you know,

Claudia Shinebomb of uh Mexico, you

know, whatever. We'll talk about that

soon." Uh, but anyway, uh, let's take a

look here. Uh, again, with this back of

the envelope calculation, we're not

taking a recession sized hit to the

economy with potential Doge related

layoffs. Muck around and find out. Okay,

that's like a reference to Musk. hidden

vulnerabilities. US and corporate

financials, US households and corporate

financials show a surplus. And it's rare

to see uh this, you know, going into a

recession where everybody's got good

cash

flows. Uh but the trickier question is

are we hiding vulnerabilities? And the

vulnerabilities to pay attention to the

most are here outside of superstar

companies which may be fault flattering

the aggregate data. Many small tomedium

enterprises are struggling. If Trump's

policies prevent the Fed from cutting

interest rates, those companies will

face an additional monetary squeeze over

the next 12 months with debt servicing

ratios set to rise. Poopy dupy. So,

what's the bottom line? Well, TS Lombard

says a soft patch seems much likelier

than a recession. Well, just keep in

mind, this is me adding my own little

salt. salty

Kevin. They were really bullish a couple

months

ago. Sorry. I I actually do respect the

TS Lombard folks. Uh and and I I think

this is, you know, this isn't like a

Maya Kulpa, but this is this is a

reasonable response to the data. So,

Dario Perkins, you perked me up with

this one. I think you're aligning. I

think this is a very fair take and I

think it is entirely fair to be more

bullish on soft landing. Now, maybe if

he had a bare bull scale, he'd be at

like 69. Okay, 69 and I'll be at 29. All

right, fine. Everybody can have their

own opinion, right? This is not like a

an on or off light switch where it's

it's yes, recession 100%, no recession

100%. It's uh it's it's, you know,

degrees of certainty and we'll see how

things evolve. But my concern is that

their monitor, what they want to pay

attention to, the labor market is just

going to lag. And by the time the

unemployment rate goes poopy dupy, which

you know could happen within the next

six months, it's too late. Stock

market's already gonna be mega freaking

pissed. Uh so we'll see. I I actually

think that's one of the reasons we keep

seeing these fades in the stock market,

mind you, because I think people are are

realizing that there is actual weakness

coming. that this is not this isn't like

some clickbait over oh my gosh it's

definitely going into recession

tomorrow you know this is all about odds

and being prepared and then keeping an

eye open with perspective so that way

you in your life can look around and go

okay you know like how do I actually

feel about my debt situation or my cash

flow situation am I diversified enough

for this whole point is just to give you

a little bit of a heads up so you can

kind of start thinking to yourself hmm H

all right you know yeah these these are

issues and some of the you know staunch

bulls are turning a little bit more

bearish now my favorite time to invest

is when all of them are mega bears you

know when when all of the institutional

analysts are like this is the worst ever

it's never going to get better great

time to invest mostly I think that's

true because I remember back in 2022

when I launched um you know my my my

fund uh I'm like dude we're launching

this at the bottom of the market. This

is great. Everybody's so bearish. People

are like why are you getting into that?

Uh and it's funny because I purposely in

part closed it in February because I'm

like I think we're about to fall off a

cliff. So I handed people basically a

giant egg of cash that had grown in

value you know 24 25% or whatever it was

since December of 2022 which is pretty

good you know for for the two and a half

years or whatever it was up. That's we

that's including the hedging that we had

to protect against the downturn. That's

sort of like, hey, I think things are

about to fall off a cliff. Here's an egg

of cash. Good luck. You know, we grew

it. Uh I I mean, I think that's uh

that's quite interesting uh in terms of

macro timing and it gives you it gives

you a view of where my head is, but

maybe I'm too negative. I I hope I am.

Uh, and you know, so so you know, maybe

it'll turn out that being a 29 on the

bear scale was was just too bearish and

I should have been around a five or

maybe I should have been with Daario at,

you know, uh, whatever 6ix9ine or what

whatever he's at. Everybody should have

a bull. We should all have t-shirts that

are mandated. We walk around wearing

those t-shirts and they tell everyone

what like what level bull bear you are.

So when Peter Schiff walks in and his is

at zero, you know, cuz he's that

bearish. Well, well then we know the

sort of the disposition and then we can

listen to

why. Uh so uh anyway, congratulations by

the way. House hack yesterday. The house

hack investments exploded. I'm looking

at it right now. I'm like, man, we

didn't think we'd break those numbers

this quickly. So pretty impressive.

Again, I think this is what we're seeing

is we're seeing a fading of risks in the

stock market and people are diversifying

to other opportunities. Uh anyway, all

right, good. That's that. Why not

advertise these things that you told us

here? I feel like nobody else knows

about this. We'll we'll try a little

advertising and see how it goes.

Congratulations, man. You have done so

much. People love you. People look up to

you. Kevin Praath there, financial

analyst and YouTuber. Meet Kevin. Always

great to get your take.