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this video is going to share a really good insight into stock picking and we're going to talk about fundamentals versus the beam stocks or the momentum stocks as well as short interest now we're going to cover two bare pieces uh who or bears who used to be bears and we'll see what kind of commentary they have from Bank of America now there are two pieces there's one called bye bye bear and then there's another one that analyzes uh the potential trajectory of our Market into recession and three potential outcomes the first that I'd like to start with is bye bye bear it's actually from last week but it's worth still covering and then the other one is just from today so the other one is Super Fresh so we'll get through two of them one one that's a little bit older and one that's super Super Fresh so let's start uh with this one this one right here is called bye bye bear and this used to be a very bearish analyst and they've just had a change in tone let me go ahead and throw up my little Banner here for that coupon expiring tonight there we go okay good so the new bull market has likes says this analyst the bear Market is officially over now remember we had a warning from Cameron Cruz over at Bloomberg that just because markets have risen by 20 is not a signal that technically we are out of the woods in terms of potential downside going forward given that during the.com bubble we have three escapes via a 20 end to the bear market and we still had downward pain ahead of us anyway we don't put a lot of stock pun intended into arbitrary definitions okay good but note that after crossing the 20 mark from the bottom the S P 500 continued to rise over the next 12 months 92 percent of the time uh versus 75 overall so just ignore the 2000s era which would be that eight percent of the time returning on average 19 versus 9 on average earlier dating all the way back to the 1950s so when you basically extract the.com bubble coming out of a bear Market with a 20 rally in the S P 500 is historically more likely to be good than bad in fact 92 percent of the time the market goes up like 19 more thereafter that's good that's bullish sentiment positioning fundamentals and supply and demand support that being under invested in stocks and cyclicals is a key risk today wow Savita was always a big bear and she flipped she flipped into now saying well the bigger risk today is being underexposed to stocks this is what I've been talking about for like nine months that people were like Kevin when are you gonna buy crypto I go the biggest risk right now is being underexposed to stocks with real fundamentals here we are nine months later in a massive rally later and now the analysts are finally waking up let's go uh okay the more likely direction of surprise is still positive we here provide our views on the most asked questions from advisors and clients quote or question oh sorry my uh my short shorts pulled the HDMI cable out of my bed or am I wearing short shorts maybe I'm naked today anyway what will it take to get investors bullish again the official end of the bear Market might help but the wall of worry could continue until investors feel pain in Long bonds or fomo oh that's actually a really interesting argument this first one here pain in Long bonds now that I find interesting let's see pain in Long bonds when are you going to feel pain in Long bonds but for you to feel pain in lung bonds you'd really have to see yields go up because that would make your uh your your prices go down for bonds that you're holding how else could you feel pain well I think you could also feel pain in Long bonds by realizing that maybe your bonds are stable so let's take a look at this sure bonds could feel pain like price could go down as yields go up but we don't necessarily think that yields are going to go up what if yields just stay flat well if yields stay flat then the value of your bond stays flat and if at the same time the stock market is going to do this I think what she's actually saying is it would be a combination like your long bonds and your portfolio is flat and everybody in stocks is running away that'd be a little bit of a pisser right but anyway Ai and morbula but a broader bull case for stocks can be made we are off zero interest rate policies and re real yields are positive again volatility in rates around inflation have subsided no longer for Creative inflation I'm Not Afraid anyway estimates uh estimate dispersion as in earnings uncertainty has declined and companies have preserved margins by cutting costs and focusing on efficiency even Adobe today revising up their guidance leading Adobe to actually rally in the pre-market here as another software stock set to benefit from artificial intelligence now very fast hiking cycle the FED has a Latitude to ease the equity risk premium could fall more from here notice she italicized fall that's because a lot of people are really frustrated that the equity risk premium is already relatively low people like it should be much higher that's actually an argument that the Bears are making show shorts that show the shorts and I'll sub you'd have to watch my other my only fans for that they'd have to pay for that come pay 4.99 a month and you'll get that anyway okay which Equity index equal weighted or cap index okay so let's get through a little bit more of this quick reminder because I don't think I've said it yet and I'm only going to throw the banners up really quick uh yes we have a price increase tonight phase one of the price increases happens tonight for the build the courses on building your wealth here are all of those courses you can just pause there if you want to see them they're amazing and we're basically adding a ton more lectures so we're very excited about those okay now and the first phase of expiration is tonight so I'll just leave it there okay so which Equity equal weighted or cap weighted index so anyway the equal weighted S P 500 could deal double the returns of the S P 500 Index based on various signals this includes breadth revision value blah blah blah they're basically saying today the mega caps like the apple and Microsoft may have already rallied a lot and it could be the rest of the S P 500 that rallies more remember like somewhere around 95 percent of the gains the S P 500 has shown this year have been driven by like seven stocks like you know Tesla and apple and Microsoft and Google and Facebook anyway if stocks are viled uh why is the s p trading at 20x forward earnings okay so this is a dangerous or I don't actually know that that's forward earnings I think that might be trailing earnings so the dangerous thing about using price to earnings ratios in a recession is that price to earnings ratios are calculated by looking at Price oh my gosh imagine this over earnings well if you look at the last 12 months what have earnings done oh my gosh they've been in the gutter and when the number on the bottom gets smaller the total number gets bigger oh look at that it's fifth grade math yay so all the frankly idiots looking at trailing 12-month p e ratios don't understand simple math and that's okay but when you look at forward earnings the valuations of a lot of stocks are actually still very reasonable at C and phase uh you know your your ubiquity uh Tesla's starting to get a little richer again but it still has likes to go anyway so we'll see how do I invest in AI oh yes oh well that would be through Kevin's AI course on productivity where it's not about what tool to use but it's about mastering how to be productive with AI in your business or as an employee recent developments in generative AI Herald a sea change the obvious beneficiaries are capex takers the ones I just mentioned uh and then you have semis and software companies that can provide AI services but not all Tech wins many need to spend to remain competitive the large benefit may be had by old economy inefficient companies that can increase their earnings power more permanently from the unit from the efficiency and productivity gains that's an interesting argument that maybe you know what companies are actually going to be able to deploy the productive AI rather than the software that's maybe providing the AI I'm very bearish AI software but I think many of you already know that mostly because we don't know who the winner is going to be at uh okay so here's a chart of various different cycle Market bottoms what will it take to get investors bullish on stocks we believe we are back in Bull territory which might be part of what it takes to get investors enthusiastic about equities again this is crazy basically as of a week ago and in the fund manager survey we just looked at a few days ago everyone is still bare like under allocated to stocks and that is great if you want long stocks right now if investors feel pain and bonds via lower returns or negative opportunity costs there it is that's what we explained on the prior page real rates rising from here they should be inclined to return to equities right and then they sell bonds they actually lower the price of bonds potentially keeping yields higher crazy why would real rates rise a shift from that buying to net selling of the 10-year treasuries yep by Foreign buyers or individual holders yep very very true as people move from bonds to cash who actually drive yields higher that could mean the stock market could go up as yields go up that sounds crazy does it uh but anyway it's possible rates mean revert lower okay well it's just some random chart here should I index or invest in actively managed funds we like both by the choice of index is Paramount more below we like active investment amid today signs that this may be the best time for fundamental stock Pickers for a host of reasons ooh they're suggesting they like people who look for companies with big PP uh you know big pricing power okay interesting reasons why resources and eyeballs allocated to active fundamental investing has shifted from passive uh or private Equity arguing for less efficient market that is basically higher Alpha in other words in English like There's an opportunity today to pick stocks that there hasn't been in the past okay good uh then we have let's see here uh mean reversion evaluations fine 46 of large cap active funds are ahead here today uh a five-year High assets under management and ETFs is now at a critical mass client data shows that the tide may be turning for most of this year's investors have sold ETFs and bought single stocks finally breath is indicating a mean reversion for more ETF buying basically wow interesting okay so what else here uh this is about index recap waited okay here if Equity sentiment is bearish why then is the S P 500 doing well well if Wall Street is dominated by buyers remember the line I said there are no sellers like who's really selling Tesla the only reason you'd really sell Tesla right now because I do think they're stolen legs or if you're rebalancing a little bit or you have to like some funds have to rebalance a little bit because there are various different compliance rules and laws that say Hey like if a certain thing has happened we have to rebalance uh certain sectors can't be too overweight or whatever but but beyond that like who's really betting against in video right now as an another example what's hard to bet against it that's why it's only one percent short but anyway it's people don't want to sell these things right now because we don't know but anyway uh bonds and cash have been favored over stocks but they're a lack of sellers because they're a lack of sellers you're seeing more of these price increases but how did what happens then when you actually get real inflows into these now that'll be quite interesting and that's roughly what they're they're prepping for right here can I make money off AI heck yeah you can uh obviously the benefit or companies that provide AI Services we already talked about that so that's a little redundant so they give a little bit of uh some projections over here by 2026.
they think the AI total uh or the AI software Market wow will represent this item here and then you've got AI Services as a smaller segment AI Hardware is a small segment wow they really see software spend as being the highest now I agree with that I just don't know which companies are going to be the beneficiaries of that uh at this point it's a little too early to tell okay so uh so you could see here's a bear that's flip-flopped but we have another piece that we have to talk about let's look at this one this one just came out uh today actually and it's called The Bear of little brain all right so what is it so scores on the doors crypto 36 stocks 13 well that's the s p it must be and that must be BTC what is it or I don't know yeah these are year-to-date returns okay fine me I'm never wrong wife you should explore that my experience of you is you're always wrong biggest picture cyclical breakouts of non-us stocks versus global fixed income all right let's get to where they actually get away from their summary and they get into some actual talk here some some English is what we want to see all right here we go ready for this so first thing I always like doing is I like looking at this bold bear indicator so right now you've moved off of the extreme bearishness scale but notice we're actually not at the extreme bullishness side and this is what I've been talking about this idea that yeah it may feel like uh you know the stock market has been rallying so much but it's because of a lack of sellers not because everybody is piling on so I agree with this chart uh and and you know if it were different obviously I would say so you know I I'm not trying to just use this as a way of reiterating my opinion but I would agree with where this is you know I don't think we're extremely embarrassed right now where people are dumping the people have stopped dumping and there's a lack of dumping there's no dumping happening anymore that's just any incremental buying it's leading to prices going up so what do we have here bears like us have been wrong in the first half of 2023 because okay so in other words bears like us have been wrong I love that line there's it's just music to my ears but then you have to be careful because as soon as the bears become Bulls does that mean it's time for the Bulls to become bare so no okay anyway Goldilocks Trump recession neither the q1 EPS recession or this the first half uh recession happened actually that would be the second half recession nominal GDP remained supercharged by fiscal stimulus that would be like the chip sack your inflation causation act or reduction act depends on what side of the aisle you are on uh labor market impervious to monetary policy in the post-pandemic world so far pretty true interesting comparison after the uh Spanish Flu chart eight oh I want to look at that I want to see a comparison chart eight here it is Spanish no way look at that that's so cool 1920s or uh sorry this is not the Spanish Flu what was the Spanish Flu was it 1920 yeah whatever the Spanish Flu yeah yeah it was over here like 1919 or something like that wasn't it I'm pretty sure it was but anyway the 20 Spanish Flu era was also impervious to monetary policy oh that's interesting let me see what what date was this uh yeah 1920s after the Spanish Flu okay chart eight what are they showing here because there's a little bit of a bump here in the U.S unemployment rate uh uh let's see here let's do this when was the Spanish Flu let's find out so we can do it February 1918.
okay yeah 19 18 19. okay well that's what I thought all right well that's interesting because you did get a little bit of a bump here in the unemployment rate I suppose maybe not as as high as expected okay fascinating anyway no credit crunch the uh Regional banking crisis threatened a credit crunch but was averted thanks to the feds by the FED pivot facility it's actually the bank term funding program but anyway uh no no QT no liquidity drain quite the opposite we basically added money to the markets which as we've seen AI Bull Run unanticipated event in half in the first half was the AI run uh which caused basically This Magnificent incline of uh you know seven stocks rising and driving up the s p uh so basically the Bears are like hey we weren't wrong because of our opinions were wrong these crazy things just happened like oh my gosh we didn't go into a recession and we didn't have an earnings recession so in other words you were wrong there was no credit Crunch and while AI is why we were wrong it's actually a little bit of a cop-out I have to say uh no no this is still bearish right here we see a Max 100 to 150 Point upside versus 300 Point downside this is for the S P 500 between now and labor day which is in September we are not convinced we are at the start of a brand new shiny bull run you know this person sounds salty we're not convinced we're at the start of a new shiny bull market this still feels more like a combination of 2000 and 2008 a big rally before that big collapse but until the FED reintroduces fear via the terminal rate going to six percent to crack embedded inflation core CPI around five percent treasury yields over four percent uh a signal of financial conditions tightening and then unemployment over four percent signaling a recession we can still end up having equities elevated maybe this could be true right I mean if the FED does end up wanting to go to six percent and real rates stay high Maybe but the big thing for me that keeps me bullish right now is that break even chart uh now we'll have you know consumer sentiment data uh that that will be paying close attention to but so far expectations for inflation are staying relatively uh relatively low and anchored and that's good you see a breakout of expectations that's your sell signal no Landing plays limited trading upside okay limited trading upsides because the Magnificent Seven have already run so much is what they're arguing that's what they're arguing uh okay cool so a semiconductor say no Landing but PMI says otherwise yeah this is another bear argument people are using the purchaser's managers index uh isms which are right here in the negative contractionary territory while semiconductors are skyrocketing because of AI and chips yeah you are seeing some form of recessionary environment for manufacturing certainly even Freight uh and a lot of that makes sense you know a lot of companies have uh spent a lot of money on capex and have over allocated and now there's a limit to how much more they can spend on capex with the exception of AI Style capex what do we have here consumer savings are only 4.1 percent that's true but if you actually zoom into this consumer savings have started rising Rising again and consumers still have excess savings so yes well that is bearish it started actually ironically Rising again which is remarkable now of course they wouldn't want to show it Rising again because it's much you know better for their argument to to go all the way back to you know I don't know 100 years ago that's all right same store sales suggest weakening yeah I do think that Staples uh and and uh store-based consumer discretionaries the targets the best buys and that may have some pain coming I actually think internet discretionary like the etsias is undervalued right now but we'll see after July year-over-year comps for inflation get tougher that's true but that means we still have one really good report ahead of us potentially and those are for year over year numbers not month after month fed cred credibility on the ropes again well duh uh that's why I don't think they're going to start raising rates again because it affects their credibility even more Magnificent Seven bubble Magnificent Seven market cap as a percentage of the s p this is basically showing you that uh you know the biggest stocks in the S P 500 are the biggest allocation of the S P 500 again at 28.2 percent again compared to the highs of 28.9 percent in 2021 and the lows of 20.1 uh in uh in 2022 so outflows from cash in the last eight weeks money market outflows uh I mean this doesn't look this here's the four week moving average you actually still have in noise oh let's see here money market flows positive versus negative yeah okay first what do we have here first outflow from cash in eight weeks uh okay okay so what this is saying is the average flows for money markets right now are still in that's the dark blue line that's your four week moving average people are still putting money into money markets anytime this number is up or the bar is above this line it's an inflow into money markets it's going into cash but we have our first outflow in eight weeks here again and I would be surprised if that money is these outflows we're seeing are going into equities wouldn't shock me at all all right what else here some more charts you can kind of pause on some of these some of these are a little boring I went through them a little earlier uh bull bear indicator all right what do we have here uh hedge fund positioning neutral you've got Equity flows very bullish Equity Market breath bullish uh blonde flows neutral okay whatever Bank of America bull bear indicator oh look at that see even though this guy's a bear you could see that this is not we're not sitting at these euphoric levels of of what you saw at the end of 2021.
so this is why I still think this rally does have legs uh and they just compare winners and losers over here that's fine so it's interesting to me it's sort of a summary of these two things you have uh two bears you have one that flip-flopped away from being a bear and it's like yeah I know this rally has legs there are just too many there's too much money on the sidelines there are too many marginal buyers still available and you know people are hoarding too much cash basically that's one on one hand an issue uh and then so you have this they are flipping bullish and then even the bear is kind of like struggling to find an excuse for why they were wrong but then rather than doubling down on talk of the earnings recession they're like well the Magnificent Seven are overvalued oh well that is the market bearish right now no it's just slightly above bearish but it's not extremely bullish so it's like the Bear's own arguments aren't really feeding into a reason to be even more bearish here they do give us a warning that well you're going to have higher inflation comps after June and you know maybe that earnings recession will come but he barely mentions that and suggests maybe there's a 300 Point downside for the S P 500 between now and uh Labor day but what's 300 points you know 300 points out of uh where the s p sits right now is like maybe a seven percent downside and uh He suggests maybe there's a two percent upside so I guess we'll have to see but uh you know I I personally think the more bearish people end up getting on bonds by an opportunity cost the more people are going to dump their bonds ironically keeping yields higher and then when they keep yields higher they're just going to drive people into stocks uh because the value of the bonds will go down and that's why here let's go higher because the value of their bonds goes down sure it's nice to farm that yield but again if you're farming four or five percent but then you're seeing you know stocks do that in a week it's a little bit of a pisser so anyway that gives us a little bit of a look into what the Bears are saying a reminder that we have a price increase tonight on the courses on building your wealth and we're releasing a lot of new courses uh or of course lectures rather not new courses new course lectures for the existing courses at the end of our four phase increase so buckle up for that so uh we have to go to the course member live stream here I'm just going to look at some comments here does the fear and greed index support uh the change in sentiment um well I I think what happens what you could see is you could start seeing an early inflection of a change in sentiment because what you're doing is you're moving off of they're super bearish environment uh and that's a change that's an inflection point right so as sentiment changes from everybody's a super bear to uh oh okay less people are becoming Bears or staying bears and more people are starting to flip flop well that's an early indicator of you moving away and seeing a sentiment change it's not saying that everybody is bullish that's
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