저자: MeetKevin · 외국인
요약 보기
시장 바닥 신호가 아직 나오지 않았다고 주장. VIX 40 이상 급등(투매)과 2년물 실질금리 양수 전환 등 조건이 충족되지 않았으므로 바닥은 멀었다는 입장. 장기 채권금리와 기대인플레이션은 비교적 안정적이나 경기침체·스태그플레이션 우려 존재. 현금 비중을 두고 분할 매수(DCA) 및 조건 기반 매매 전략을 제시. 테슬라 기가팩토리 일시 중단 기사는 자동화 라인 업그레이드 목적으로 과도한 우려라고 해석.
다듬은 글
Hey everyone, Meet Kevin here. Have we hit market bottom yet? Or what should we look for to determine whether or not a market bottom has happened? Well, folks, let's take a look at the following and talk about what's going on in this crazy market because we just started off the second half of the year, right again.
Folks, let's get right into it right after I mention that if you want to get a free stock worth all the way up to $1,000, make sure to go to meetkevin.com/public, deposit any amount of money, and you'll get a free stock worth up to $1,000 with Public. Great trading platform that does not use payment for order flow.
meetkevin.com/public. Okay, folks, one of the first things that we really need to hit a bottom is what we call a cathartic flush out. And this is really when the volatility index gets to a point of such height or such extreme, which in this case is actually represented by a decline over here, and that's because of the measure we use, but in other words, when these lines here were at lows, the volatility index hit substantial extremes.
And you could see right here in this inverted chart that we really haven't hit extremes yet. That we hit extremes over here in the dot-com bubble when we bottomed out at the beginning of 2003. We hit extremes here in 2009. We hit extremes during the COVID pandemic. And really, what was incredible is the COVID pandemic wasn't that long ago.
And you might remember that during the COVID pandemic, we saw price drops in the stock market of the Dow and the S&P of 3, 4, 5%. At the same time, we saw stocks plummeting across the board, 15 to 20%. Now, in case you don't remember the COVID pandemic, take a look at this screen right here. This is a screen grab.
Look at that. Amazon down 7% Disney down 13% Zillow down 15% Tesla down 13%. You see the Nasdaq in here over 8% down. The Dow 9.3% down. This, folks, was March 12th, 2020. I have a screen grab recording of this, and it just really reminded me of, "Wow, that's kind of what a cathartic flush out looks like.
That's what it looks like when all of a sudden the volatility index goes from this insane a low uh where things are relatively benign like they are now, and it just feels like we're bleeding out, uh and we actually get to a real cap itulation point. That yet hasn't occurred in this market. Now, part of the reason for this is we still have relatively low longer-term inflation expectations.
Sure, over the next year folks have a lot of fear that inflation is going to be quite substantial, as they should. This is a consumer sentiment expectation here. Uh and then of course we've got the 5-year expectations here. We're not really expecting what we saw in the '70s, and this chart does such a great job of showing us that difference of expectations because if you look over here, look at this, this massive slope that we have here.
This represented the expectations of individuals for 1 year ahead and 5 years ahead back in the '70s when we got Paul Volcker. So, you could really see that missing anchoring of inflation, which we have today. We have an anchoring of inflation. Uh and that look at these long-term expectations at the 5-year.
They're relatively anchored here along with history. Sure, the 1-year is higher, but that five that three to five year term out uh is relatively anchored. And we're seeing this not just in consumer expectations for inflation as well. We're also seeing the same uh phenomenon occur in the bond market.
In fact, if we jump over to right here, uh you'll see towards the bottom here, look at this recent decline we've had here, this plummeting. This is a plummeting that has really been unique to the end of June and end of July here in the bond market's expectations for inflation. If I go all the way over here, you can kind of see this January, February ramp up.
This sort of aligns with the markets just having a horrible time, right? But look at this plummet over here, where sure we had a commodities boom, we had expectations that inflation was going to go to the moon, but those expectations have really subsided. So, you're kind of in this weird environment where it's like, okay, so we're not having a cathartic flush out where the VIX explodes and inflation expectations run away, and this is really the end of the world because maybe it's not really the end of the world.
But then again, it depends whom you ask because if you take a look at this chart, you can see this spread between on average or in the median here, the middle in the middle, inflation expectations are anchored. But if you look at the people who believe that inflation, the top the 25% of people who think inflation will be the highest in the next five to 10 years, that's the 75th percentile item here.
If you talk to these folks, inflation is a runaway problem, and we're going to have a disaster. These are generally your low your really vocal inflation is going to kill us folks. And then you look over here at the bottom 25% and these are your and this is not bottom 25% of income, it's just of those with the lowest inflation expectations.
These folks say, no, no, no, we actually think inflation is likely to be even less going forward because it's so high now. So, you look at the middle, most people nowhere near what we saw in the 70s or in this in this particular chart doesn't even go back to the 70s, it just goes back to the 90s. Historically, still relatively low.
We've got this divergence between the vocal folks, the inflation is transitory folks, and then the Peter Schiff we're screwed folks. And so, to some degree it makes sense that we don't have the conditions for like that kind of big pain that we saw in the 2020 pandemic again, at least not in in a very short period of time.
It's more like a slow bleed out, but we've got to also be real. See this segment right here on the chart, this lower area to the right of the chart here. This is a representation of real two-year yields. So, what's the two-year Treasury bond yielding minus inflation and you get to the real estimate.
What you can see here is it's still in a miserable position. It's super, super low at -6%. And one of the things to know is throughout this chart over here, the Federal Reserve has never, ever ended a tightening cycle without positive real yields. You can see even right here in the middle roughly where I am, we see this positive, which is kind of above where my arms are here, positive.
That's when we last ended a tightening cycle back in the mid-2000s. Although, I will say we did also end a tightening cycle briefly when we kind of took a pause over here in the 2018 era. And again, you could see that yields were just barely positive there. But, we don't have that now, which actually to many market experts says we're quite far away from a bottom.
Because not only do we need to have this chart be positive, which means the Fed has to talk these yields up, which right now yields aren't going up, they're actually going down. They're falling today. Why they're falling? Because we have recessionary fears and folks say, "Oh, we'll flee to the safety of the bond market and we'll be safe in the bond market." Well, great.
The more people flee to the safety of the bond market and more those yields go down, the more the Fed has to work to tighten. So, you've actually got a pretty terrible setup of conditions that suggest no, the the bottom's not even close. Why? Well, let's write those out. First, the VIX has not had a flush out yet.
We really need to see a VIX of 40 plus to say, "Okay, yeah, this this is capitulation. This is a bottom." We know that retail hasn't capitulated yet, although the amount of money that they're able to contribute to the market is trending down. This makes sense. We talk about this regularly with course members about what's the best balance between cash and being invested.
Of course, everybody has to make their own decision, but it's a question that we're asking on a daily basis. And if you're not part of the program yet, check them out. Link down below. We've got a 4th of July week a coupon code fireworks down there. We're adding new lectures with our beautiful board here daily now up until Friday.
So, we've got a big plans coming for a massive release of lectures. Check them out. Again, link down below. So, we don't have that flush out yet. We've got retail with less money to contribute. We do not have, we'll say no positive yield on that shorter term, which is the two-year. And with people, every time you see like the 10-year Treasury going down like it is now, anytime that 10-year goes down, it's somewhere around 2.81 right now as a yield.
Anytime you see that, you should be thinking to yourself, "Crap. That's actually bad. This should be going up, not down, because the more it goes up, the more financial conditions are tightening. The more it goes down, the more financial conditions are loosening, right? A decline in this Treasury yield represents also a decline generally in mortgage yields, which makes it more affordable to go speculate on housing again, right?
And so, these are conditions the Fed is going to look at and say, 'Well, folks, we got to talk up the two-year, the short end of the curve. We got to talk this up, which means more pain coming from the Fed. We got to talk this up to actually tighten things in the market. We've got to get retail to the point where they're out of money, and then we got to get them to a point of capitulation where that VIX flushes above 40 or to create a flush out.
We still haven't seen these conditions. Unfortunately, when we map this out, it doesn't really matter if our economy is such that potentially it's going to move into a recessionary territory. Many of us think we're already in one. Starting in about February, I realized as well myself like, "Yeah, no, this probably is the beginning of the recession." Recession doesn't have to be two quarters long either, right?
We could end up having a four to five quarter long recession. And this is what's creating fears of stagflation is that we could potentially be in a recession right now, which would be represented by Q1 and Q2 being in a recession. But then at the same time, we could see growth come off this crazy sugar high that we've been on and we could see growth negative at companies.
Nike's already got negative growth year over year. And you see that two quarters in a row, now you've got an earnings recession. And when you couple an earnings recession with high inflation, what do you have? A stagnating economy. You have stagflation. And so it's very likely that we could be facing this stagflationary disaster over the next half of the year here.
A lot of folks are convinced that this this second half will find its bottom. I'm in that camp as well, but I have to tell you, you know, I go through my notes and I'm not always right. I look back at last April and last summer and I said to myself actually I I wrote this down in our course member alerts.
It was one of the things I I remember saying is first I mentioned, "Hey, I'm going to sell Shift Technologies because I think if when there are lack of used cars, you can't advertise and bring new customers into a platform." So I've been out of Shift since somewhere between $6.50 and $7 because of of just the the macro changes that we've seen in the used car market.
Terrible place to be as a used car manufacturer. So at the same time I was talking about this in our course member notes, one of the things I mentioned was, "Hey, you know, if we have a prolonged bear market, there are certain stocks that we want to be out of." And at that time, the odds I thought of a prolonged bear market within the next year were closer to 20%.
Well, unfortunately, the odds of a well, a prolonged bear market, I should say, came. All right? We've been in a bear market now for coming up on 7 months here. So, obviously, that can happen. At least, though, you want to have a manuscript for what are you going to do, right? So, for example, you can't hold on to a company like Affirm going into a recession at least until the allowance for losses at a firmer financials maxes out.
And then that's when you want to hold companies like this. But these are This is why it's so important to write down what your expectations are. So, that way you can see an inflection point in your expectations. And it's okay to to be wrong on a projection. What's most important, though, is that you notice changes coming in those projections.
And unfortunately, we're just not yet seeing an inflection point other than some things that suggest, "Hey, the market's slowing down. Take a look at this." Global semiconductor stocks falling to the lowest level since 2020 relative to the overall market right here. So, this means you've really squeezed out all of the semiconductor premium in the semiconductor market, which is quite phenomenal, especially since most folks have looked at semis as as the next innovative play to to really be within.
You can go over here and take a look at commodities. And that's this blue section right here, this lower blue here. What you can see here is commodities seem like they may be peaked here towards the end of May and beginning of June. Maybe we're getting some relaxation in commodities, which might take some pressure off of inflation.
But how could you take pressure off of inflation when you still have an increasing set of of lagging housing inflation coming via owner's equivalent rents. And at the same time, single stock volatility is still substantially below what we had during the dot-com era. And then certainly, of course, even during the recession over here.
This is single-stock volatility here, coming in at about .38. And look at this, we were almost double that volatility in the dot-com era, and substantially above that both in the COVID pandemic and the 2008 recession. So, does this mean we're at a bottom? Probably not yet. We've still got a lot of work to do.
Is it possible we could bleed up? Maybe, that'd be nice, like sort of instead of bleeding out, like slowly maybe bounce around the bottom and slowly start trending up again. Maybe, but again, if you look at the conditions of the Federal Reserve and what they're trying to set, they want positive real yields.
They want a higher 10-year Treasury. They want tighter financial conditions. Those are things that actually spell for more pain to come when the Federal Reserve has its meeting in a couple weeks, at least more tough talk. And they'll be going in a blackout period before their next meeting, but expect they'll have their meeting, we'll get some tough talk at the meeting, and then after that we'll get even more tough talk.
Because again, as we see these bond yields come down, the Fed's thinking, "Dang it, market's going in the opposite direction again. Time to talk dirty to the markets again." So, write down your expectation. This is sort of my overarching tip to you, is write down your expectations though. In my opinion, if I were, let's say, 50/50 cash right now, okay?
So, let's say we're 50/50 cash. What would I be writing down? Well, if I were looking for a bottom to deploy some of that cash versus, you know, easing characteristics, what would I be looking for? Well, easing characteristics obviously would be CPI coming down. Unfortunately, right now the expectations are this week, when we get our next CPI read, we're going to have the highest CPI ever.
It's going to come in at a read of something like an 8.8%, which is even higher than we had before. So, at least the Bloomberg consensus estimate. Again, to get that bottom, we need that that VIX probably to be above 40 again, maybe even above 50. In addition to that, we need a positive yield on the the two-year.
That's a positive real yield on the two year. We certainly in order to see some more easing, we need to see commodities continue their trend down and we probably need to see oil sub $75 per barrel. Though JP Morgan just released an estimate that a worst case scenario could be that it come winter season, we could we could end up having oil run up to $380, right?
So a lot of this is hopeful that CPI will actually peak meaningfully, that we'll see commodities continue to trend down, that we'll see oil come down, maybe that the war ends in Ukraine. Unfortunately, what you have, you've got a situation where Putin doesn't even seem like he's interested in negotiating.
He's going to keep going until he gets what he wants. And so far, at least in the last few weeks, it looks like Ukraine is quite frankly running out of weapons and running out of money and running out of soldiers and things are leaning a little bit more in favor of Russia right now. It's not great. Again, we've been talking about the conditions for a bottom, which we haven't really seen yet.
So, we're in a tough spot to say with certainty that yeah, now's definitely the time to take all that extra cash and flush in. But at least now you have some ideas of things to track to know when to adjust. No matter what stock you're in, you should always be asking yourself, what should I be looking for for a red flag?
Now another thing you might just end up doing with leftover cash is what I've been talking about since January, which is just wait for a U-turn from the Federal Reserve. The problem is the following. Right now we have year-end estimates that the federal funds rate will be at 3% by the end of the year and by early 2023 will rise to about 3 and 1/2% with a U-turn of the Fed going back from 3 and 1/2% to about 3.25% sometime in the summer of 2023.
The problem with this, folks, is you've got people like Bill Ackman. Okay, now keep in mind Bill Ackman it for some reason every time it seems like he comes out yapping it's on a bloody red day and he's shorting that day. Now, you can't guarantee that it just happens to be something that Bill Ackman likes doing.
Maybe he calls it hedging but he likes to get out of the money puts essentially. Not necessarily could be using other derivatives but something to this fact to where if he gets a short-term spike he makes some big money. But anyway, he came out this morning conveniently and he's like, you know, the Fed's really got to get to 4 to 5% to kill inflation and that's going to be better in the long run for everyone he says.
Well, folks, if Bill Ackman is right and the Fed even has to get to 4% that means the market has to price in another half percent of tightening and delay that U-turn which the market also would have to price in. Anytime the market still has to price in bad news and we approach that bad news you get more pain in the markets, right?
So, folks, I I I don't know. I I I think if you're in this market I hope you're just DCA'ing in and and this is another thing that we talk about uh in in our courses as well as look, the market cycles do this and you really have a choice when the market goes down. Of course, you could try to sell here and buy here, right?
But timing is difficult. I mean, even if you sell there and you buy a little bit earlier, you know, you buy halfway down or 3/4 of the way down the cycle even if you do that you still have to offset the fact that sure you may have reduced your cost basis but now you got to pay taxes, right? So, there's lots to consider when you're doing this.
But for most people it seems like trying to do buying in this this a lower section here is actually a beautiful opportunity. Unfortunately, a lot of folks who sit on cash that do end up selling no matter where they end up selling often times they end up missing this and then they end up really waiting for confirmation because any kind of bounce they just end up calling a bear market rally Uh, or a dead cat bounce that that's just going to end up giving back and and going lower.
But, for me, it's these highlighted periods right here. Here, this is really where I want to be buying. And it's periods like November, uh, which is what I was doing as well. Uh, I like to trim, selling, you know, 10 to 20% of the portfolio and doing a little bit of trimming. Obviously, in hindsight, it's like, "Should have just sold everything, dad." Right?
Hindsight. But, uh, but this generally can be a a good strategy. In your forward times, you trim, and uh, in painful times, you just slowly add add add add, not to any kind of breaking point where, uh, obviously, you're you're going to get margin called or something like that. But, certainly in a position where where you're taking this extended period of pain, which that could be a year right there.
It could be longer. It could be 2 years. Uh, you know, dot com bubble was 3 years. So, it could be a while. Uh, and uh, you're using that as an opportunity. Anyway, some more thoughts. Uh, I'll give you this because we just had some click bait over this from, uh, Bloomberg. Bloomberg was suggesting, uh, via a headline that Tesla is pausing gigafactories.
That was their headline. Tesla pausing gigafactories. I'm like, "Uh-oh, that's actually one of the worst things that you could say because what we want, and it's a catalyst for Tesla, is we want Tesla to produce more gigafactories, not less. We want to see them copy and paste the model of giga, uh, Berlin and giga Austin, Texas all over the world.
Let's get 10 more gigafactories within the next 5 years." And so, the this idea that, "Oh, no, Tesla could be pausing factories." is actually terrible, and it's one of my conditions for, uh, massive warning signs for for potentially getting out of a position like Tesla is is us not being able to continue to expand the, uh, the giga factory setup.
Of course, when you actually read the article, you see that a a lot of it was, well, really just click bait. So, here you could see the title, "Tesla Pauses Plants." And I hear that, I'm like, "What? What are you talking about? Tesla pauses plants." Uh, but then, of course, all they're really doing here is they're actually upgrading their Model Y assembly line in Shanghai for the first two weeks of July.
So, just one of the lines they're pausing, so they'll keep producing the three. Then they're going to switch and they'll pause the Model 3 line for a 20-day stretch starting July 18th, and they're going to work to upgrade factory output for both of these vehicles expected to be completed by early August.
So, you're going to have that mid-Q3 kind of temporary shutdown pain point there. And then we also expect that Berlin will take a two-week break starting July 11th. And now, so to me, that's a completely different story than a catalyst that says, "Oh, yeah, we need to dump Tesla." If anything, that's like, "No, this is great." So, what you're telling me is, "You know, we're now initiating upgrades to increase production, and we potentially could more than offset the the delay in in having paused these lines by producing more vehicles once these lines are upgraded.
I actually think that's considered investing. It's not really pausing gigafactory expansion plans. Yeah, some of these are temporarily taking a break on some lines for upgrades, but totally normal for me, totally frustrating headline there. But, anyway, so these are things that I'd be looking for. I think it's always important, and I would do this right now is I would write down what are my catalysts to say, when am I going all in with my cash?
Write these conditions down so you could actually compare them, and you should do that for every stock and every individual stock that you own as well. So, that way you know what's like a red line for you. What's the worst-case scenario for a stock? I mentioned Affirm earlier. Affirm, a big thing for me was, "Hey, Affirm is great in a bull market.
You do not want to own Affirm in a recession, at least until you get to max allowance for credit losses, and quite frankly, a max default rate." Which, guess what, folks? Buy now, pay later has not been through a recession yet. It's not necessarily a play I'd want to hold through a recession. But, anyway, we'll see what happens. . Bye.
Comments 0