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this video we're going to cover a substantial amount of information we're going to start with a critical U-turn that's happening within the Federal Reserve then we'll touch on Bed Bath and Beyond and their impending bankruptcy we'll look at Michael Murray's latest warning we'll touch on the new gold and Ark invest's latest research letter we have a lot to cover so let's get started first the Federal Reserve is a very important institution because obviously their hiking of interest rates has led to the most predicted recession ever in the histories of recession it is why we are all experiencing as much pain as we are unless of course you're shorting and celebrating with champagne because the market has been trending straight down and the real estate market is following suit with about a seven month lag the real estate market seems to have peaked around May and the stock market seems to have peaked in November of 2021 and both of them continue to Trend it down though there is hope but remember hope is not an investing strategy and what I'd like to do is look at ship with the Philadelphia fed just set in terms of a potential u-turn at the fed and this is not the kind of U-turn you're thinking of it's not the kind of oh let's slash rates the bond market is already pricing that in the bond market is already pricing in 1.7 of rate cuts by the end of 2023 and 500 basis points or five percent of rate cuts by the end of this cut cycle which will probably take two or three years once rate Cuts begin in other words yes we are probably going back to zero but we don't have to agree on what the bond market is projecting right now what we want to do is start looking at where are cracks at the Federal Reserve and the Philadelphia fed just gave us an example take a look at this Pat Hawker from the Philadelphia fed just stated that hard data can be useful like employment growth numbers and GDP however there is a big issue with using hard data exclusively or worse over emphasizing hard data when you should not consider what's happening in our economy right now the Federal Reserve in my opinion is over emphasizing the hard data we're getting from the labor reports which suggests that somehow we're creating millions of jobs via the Bureau of Labor Statistics labor reports that hard data is actually leading Jerome Powell in the Federal Reserve to be more aggressive in fact the Philadelphia fed just a few weeks ago let's tangent for a moment here on this this might sound familiar but it's important to remind you that the Philadelphia fed is actually the one that has started waving the red flag suggesting wait a minute the hard data might be wrong we might actually be overstating how many jobs the U.S economy is creating in just one quarter of 2022 by 1 million that's because we're seeing less full-time jobs more part-time jobs and more multi-jobs leading to the indicators that at a glance labor looks like it's so strong but really what you're seeing are cracks you're starting to see people have to take multiple jobs because of the most insane inflation we've seen in the last 40 years but why do we in part have some of the most insane inflation in the last 40 years well because the Federal Reserve over at in Philadelphia thinks that there may have been an over emphasis on hard data that actually led to the inflation we're seeing today look at this an over emphasis says Pat Hawker candidly an over emphasis on hard data like GDP and employment growth can lead to policy errors hard data last year suggested to us that inflation would be transitory that was obviously a big mistake but what was Soft Data telling us last year ah well Pat Hawker tells us Soft Data said that we were actually seeing Rising prices that were proving to be much more persistent than had we than the FED had expected now had the FED listen to the Soft Data then they would have started raising rates and stop the money printing sooner potentially preventing some of the most insane inflation that we had to deal with in 2022 rising to nearly 10 percent in America and over 11 percent in Europe and over 80 percent in Turkey but that's the topic for a different video what is the Soft Data telling us today remember Soft Data are survey results that is ISM surveys uh s p PMI surveys expectations from the University of Michigan rent surveys labor surveys I kind of scribbled this one over here all of them are pointing to a deepening recession all of them now yes there is still mixed data and Pat Hawker in this report talks about how the data is mixed and that's because we are still getting some hard data that is saying maybe the FED needs to be a little tougher and some soft data that actually says uh hiring's still tough you know still seeing that we have to pay people more to come work but are those potentially just more blue-collar workers rather than white collar workers and what difference does that make for our economy well let's pause for a moment before we get to this Michael burry warning which relates exactly to this question and ask ourselves if we're starting to see cracks at the Federal Reserve where the FED is starting to say wait a minute maybe we are being too aggressively focused on the hard data we might actually prepare for a softer Jerome Powell come Feb one the next fomc meeting there's a reason the bond market is not only pricing in just a 25 basis point hike at the next meeting but a pause no later than June and cuts by the end of the year it's because the bond market is paying more attention the big money the smart money is paying more attention to these leading indicators which suggest the FED is going too far and the Philadelphia fed is realizing the hard data is starting to look misleading and it was misleading last year and it's time to start paying attention to what's actually happening in the economy this is a great thing but now we need to talk about Michael Murray's latest warning right after of course I mentioned that I thank you for being here thank you for watching this video and if you like this longer form video let me know in the comments down below I'm going to pay specific attention to the comments on this video because this is a longer form video versus the usual 8 to 12 14 minute video this video obviously a lot longer with multiple different topics that are connected with obviously an emphasis on economic news let me know in the comments down below if you like this or you prefer the shorter Style videos Michael Murray believes that we are in a white collar jobs bubble now this is more fascinating than the announcement that the next coupon code will be expiring January 30th yes you can for any of the programs where we conduct private live streams together I'm actually thinking about moving those back right up to the market open live stream we do a live stream every day the market is open course members really enjoy those we do fundamental analysis technical analysis q a together and a big emphasis right now not only on fundamentals but also on real estate investing so bring your real estate questions as well because there is going to be a huge opportunity to get value in real estate coming up soon so get educated check out the shadowing options for coming with me on a private jet as we explore real estate and we'll document the journey we'll have you have the opportunity to ask any questions you'd like in person follow me along grab a drink with us at the end of the day and as always check out the links down below for all of the information okay so Michael Murray talks about a white collar employment bubble bursting right before our eyes and the longer it takes for the redundancy to disappear the more permanent the decline in employment will be work from home will in time be seen as the culprit I see a bifurcated labor market developing as unskilled and semi-skilled workers remain in short supply but white collar workers having proven their redundancy during covet will find gross excess in the labor market pressuring wages at the end now this is absolutely fascinating because it directly corresponds to what Pat Hawker is telling us Pat Hawker and the Philadelphia fed are highlighting that the hard data suggesting that wages are rising are not paying attention to the fact that it's blue collar work that's actually Rising White Collar work it's blue color workers it's manufacturing it's fulfillment it these sectors are seeing wage growth it's accommodations it's uh services for travel Airlines that's where we see a lack of employment and a white-collar bubble bursting will be very likely to lead to a decline in wages that means disinflation in Goods a disinflationary environment in housing could potentially be combined combined with a disinflationary environment for wages now this is actually where Michael burry and I begin to differ because Michael burry then suggests that we are going to see rapid deflation but because the FED is going to rapidly U-turn and start printing money again we are going to create a second wave of inflation and this entire disaster we've gone through will all repeat itself so we actually align with massive deflation coming completely agreeing I defer with bury personally in that I don't believe we are going to see massive inflation again just like we did not see massive inflation again during the 2008 and 2019 era and I especially don't believe so as we actually in my opinion re-globalize where we actually have produced some of the most efficient Supply chains in the world and companies are actually scaling back on manufacturing but they have the capacity to rapidly expand with machinery and the factories they've built which suggests that when we actually reopen when China reopens when we as Americans start spending more in the next bull market what happens these companies are already hopefully ready to fulfill in a high demand environment because they suffered through 2021 where they could not they were not prepared for that sort of demand they never want to be in that position again I believe that sort of re-globalizing will keep inflation low but let's stick to some commentary from Michael burry at the moment and could he potentially be right well consider the following Goldman Sachs is laying off 3 200 employees that amounts to about 6.5 percent of their Workforce that's a little less than the eight percent they were predicting but it's still a big cut in finance White Collar jobs that's actually a big deal for Real Estate as well because if you're focusing on white-collar jobs as potential tenants and those are the ones getting laid off you have to be careful for your real estate startup which happens to be called House hack if you're an accredited investor make sure to check out how sacvia the link down below IPO issuance has dropped 94 from last year uh Goldman Sachs scaling back on consumer banking coinbase slashing 20 of their Workforce cutting a fifth of their workers that's after an 18 reduction in June more white color jobs evaporating expenses are being cut at White Collar companies Microsoft is freezing the expansion of offices in Seattle as I learned in my real estate Explorations yesterday in person Amazon cutting over 18 000 jobs scaling back on a lot of corporate and recruiting jobs White Collar jobs again having admitted hiring too rapidly during the pandemic which reiterates what Michael burry suggests that white collar jobs are proving to have been hired in EX in substantial redundancy that is we have too many people working in the corporate offices his warning is aligning with what we're seeing Salesforce cutting 10 percent of its personnel more than 7 000 employees and the co-ceo saying they're taking a more measured approach in business expenses this is a red flag for businesses that rely on cloud services because think about it as you look at Cloud companies growing 30 year over year what do Cloud companies rely on they rely on seats subscriptions for more white-collar employees but if we're actually shrinking the white collar Workforce uh oh software as a Services Industries could start shrinking that's a red flag but it's also a red flag for companies that rely on White Collar consumers I hate to say it but your average buyer of a Tesla is a white color purchaser it's a red flag Tesla's got to get less expensive vehicles to keep sales moving and that's exactly what we're seeing at Tesla but this is not to suggest that all of the excess we are seeing is exclusively in White Collar consider for example the disaster that's happening at Bed Bath and Beyond Bed Bath and Beyond is a fantastic example of a company that has failed in its corporate management and guess what did not take the warnings of JCPenney consider this the CEO of Bed Bath and Beyond completely failed to realize that removing coupons was a fatal mistake for retail in 2012 CEO Iran Johnson of JP Moore JCPenney came from Apple a store that had limited promotions and went and but also caters to a higher income individual with a higher margin product and moved from Apple running stores to trying to run stores at JCPenney Ron Johnson focused on everyday promotions and a limit and well everyday good pricing and eliminated constant couponing eliminated eliminated MSRP pricing and then showing discounts underneath that and also eliminated psychological pricing like ending pricing at 9.99 and just going to whole numbers like 10 dollars the result of removing people's perception of value that they were getting a discount off of MSRP which we all know is an inflated price anyway but yet people still go into Macy's and go wow I'm getting 30 off MSRP and I can stack that with my Macy's credit card benefits and I feel like they're getting 45 off MSRP I feel like I'm winning well when you remove that psychology from people what happens sales plummet JCPenney saw their sales plummet 3.3 billion dollars over 15 in just one year from growth to losses losses ramping up so substantially that that CEO was fired within a year and so the Bed Bath and Beyond CEO apparently didn't get it that one of the reasons people actually like going to Bed Bath and Beyond was because well a hopefully they had stuff in stock but B those white and blue mailers that gave you 20 off were a great opportunity to induce sales CEO didn't think so he thought no we should focus on more Niche Brands and we should focus on getting rid of of uh couponing and let's just focus on brands that we can promote as higher value and higher margin so what happened sales plummeted so much so that suppliers actually refused to provide Supply to Bed Bath and Beyond to where 43 of Bed Bath and Beyond's product was out of stock in October right before critical Black Friday sales so what happened now well now we're in a situation where activist investors like Ryan Cohen dumped their positions sales are down 33 percent year over year the stock is down 90 percent however it has rallied this week they're running out of cash substantially for the next quarter they're reducing uh white-collar jobs by laying off the uh corporate uh sector and closing 150 stores nationwide Shopper visits across the chain are down 26.5 percent and now they're considering potentially a chapter 11 reorganization bankruptcy filing personally I think based on the latest number they may as well just add numbers at least from their financials they may as well consider a chapter seven because the numbers just are not good this right here is the Bed Bath and Beyond latest earnings filing and what I'd like you to pay attention to is the massive massive declines that we're seeing in assets and revenues let's start with revenues look at net sales here last year net sales sitting at 1.87 billion this year same period down to 1.2 billion unfortunately last year when they had 1.8 billion in sales they were already losing money 86 million dollars gone now they've expanded that operating loss to 450 million dollars this is a company that is burning money the more product they sell the more they are losing money now that mostly is because I mean even though they still have a gross profit they are too bloated with their SG a expenses sgna alone being twice their gross profit so the more this company operates the more this company is trending towards bankruptcy you don't have to go far to understand that look at their balance sheet understand that inventories are going to get washed down at least some part by uh gift card liabilities that they have but let's just focus on hard cash right now because we already know that as a going concern this company even as it sells inventory is burning more cash on SG a than they actually get from profit from inventory so what I'm going to do is I'm going to ignore looking at inventories for a moment and I'm going to look at actual cash they have 153 million dollars now I'm going to look at actual cash outlays they have over the next 12 months oh goodness accounts payable and accrued expenses which are like paying for the inventories they have these are paying suppliers to get new inventory so they can actually fill up the shelves appropriately to make sure they can keep attracting customers uh oh one billion dollars of current liabilities they only have 153 million dollars of cash they have to sell product just to survive but every quarter they sell product they lose more money because of their operations being twice as bloated as their gross profit this company is a walking zombie and this was why when you look at the cash flow statement what are they doing to actually survive they're not surviving with operations we already know that because they're losing money substantially from operations cash flow statements shows a burn of 300 million so anybody looking at well they have inventory Kevin why aren't you using that they're burning money on operations 300 million in the last quarter but what do we have from financing to keep them afloat oh dear okay they borrowed another 375 million dollars and they didn't at the market stock offering diluting your shareholder interest by 119 million just to stay alive increasing their cash position by 59 million strictly by borrowing and issuing cash had they not borrowed and issued or stock that is had they not borrowed an issued stock this company would have been out of money they don't have enough money to survive this is not the company to make a fundamental investment in and it's certainly not the company to speculate on believing that it is going to be the next hurt remember that hurts when they filed for bankruptcy skyrocketed but the reason hurts skyrocketed when they filed for bankruptcy is because in bankruptcy they had multiple bidders for the used car company why because used cars were skyrocketing in value the product they had their inventories was becoming more valuable not less Bed Bath and Beyond's inventory is becoming less valuable not more valuable the company's liabilities in a liquidity crunch in a recession are becoming more damaging not less hurts was a special scenario but however it has led to meme movement in every time a company is about to go bankrupt like the Revlon group what do you end up having you end up having companies that Skyrocket you look at Revlon and Revlon fell to about four bucks two dollars to four bucks right as they filed for bankruptcy and they rightfully filed for bankruptcy their financials were a disaster I warned of investing in this company in a private course member live stream as we did a deep dive fundamental analysis on this company as it was running to seven dollars eight dollars nine dollars and I said this is pure momentum and it's not going to last the fundamentals will shine through on Revlon and sure enough they did stock that was ten dollars is now 50 cents the same is true of Bed Bath and Beyond these rallies are driven by temporary momentum purchasing and if you don't get out you're going to be left holding the bag a stock that will probably be worth well under a dollar I would exercise Extreme Caution at a company like Bed Bath and Beyond that's not to say you can't play the meme game but just zoom out at the chart and you see this company only goes up when volume goes up and otherwise it bleeds down and lower and lower and lower you don't even actually have to look at the fundamentals to tell you Bed Bath and Beyond is a complete disaster but what is not a disaster in my opinion is the future of the chips industry now I have been a big proponent of actually investing in the crash of Chip stocks AMD Nvidia Taiwan semiconductors I actually believe these companies have ridiculous purchasing and pricing power don't get me wrong in a recession everyone shrinks everything shrinks and it sucks nobody wants their PP to shrink we want pricing power to go up but companies that actually have substantially High margins like Nvidia AMD Taiwan semiconductors as a manufacturer in my opinion fantastic I personally think a lot of individuals should consider investing in potentially actively managed ETFs that have high exposure to chips I think chips are going to be explosive over the next 10 years and the reason I like actively managed ETFs is because of the massive tax benefits of holding an ETF ticker rather than holding individual stocks so that way when it's time for an active manager to rebalance they could do so SO trading stocks within the ETF without passing on massive capital gains to you when they sell a stock at a large gain that is run above and out of balance of the others it's a fantastic benefit of an actively managed ETF and I personally think pricing power style ETFs are the ones to look for and what I think is absolutely remarkable something that a lot of us are not paying attention to is this idea that look at over the next 10 years the amount of money in the United States that is being announced for manufacturing capacity we are looking at 186.6 billion dollars to put that into perspective of how much money is getting thrown into the chip industry I want you to think that an expensive gigafactory for Tesla like the Northeast Mexico one that is expected to be built will probably first see an expensive about four to five billion and maybe up to nine billion dollars in the long term now what I want you to think of is how 186 is 20 of those the chips industry is expected to explode and the United States wants to fight I hate to say it but Taiwan South Korea and China an explosive chip growth the United States and politicians are jumping at the opportunity to expand manufacturing for chips in the United States that's why Joe Biden Biden Administration and Congress in a bipartisan manner passed the chips act this year however Taiwan semiconductors does give a warning they say that it's still more expensive sometimes 50 more expensive to develop chips in the United States than it is to develop and manufacture them in the asia-pacific region now that in my opinion gives me a reason for diversifying my chip investments into not just American companies like let's say Intel who not only designs chips but manufactures them but stick with companies like Nvidia and AMD that actually have strong exposure to the asia-pacific region and use manufacturers like Taiwan semiconductors or Samsung to take advantage of their scale and higher margins to continue to deliver a product at lower prices than more people can buy that's a form of pricing power deliver more product while manufacturing it as efficiently as possible and do so more while cannibalizing your competition especially in a recession now this particular uh Wall Street Journal article suggests that oil was the foundation of America over the last 100 years but they go on to say that the semiconductor industry is expected to be the new oil going forward they give examples of how there are now so many more chips in everything we use than ever before like for example a 40 Cent chip that left 40 000 Ford trucks stranded in production because that 40 Cent chip for windshield wipers was in short supply in my opinion The Wall Street Journal here it makes it very clear that the United States is lagging to China and Taiwan and South Korea but as an investor I look at the broad chips industry and I look at companies that are taking advantage of what is happening not only in U.S Investments think about how Taiwan semiconductors is coming to Arizona and building a massive plant here but also in Asia and how can you get that sort of exposure again in my opinion really look at companies like Nvidia Taiwan semiconductors and AMD now we've got to talk about Kathy Wood she recently wrote an investment piece that was very optimistic on Roku and I'm going to dive into some research that we did with course members in our course member live stream remember there is a coupon code expiring soon make sure to take advantage of that by January 30th that's coming up soon but Roku in my opinion while all these ships and seas may arise as the rising tides of the stock market go up roku's not exactly my favorite play I'm going to show you here why take a look at this we do see 15 year-over-year growth in Connected TV spending on Roku over the last year which is great 15 however that's actually a deceleration of almost half from the prior nine-month period That's not great we went from 25 point eight percent growth to 15 percent year-over-year growth that's dangerous in my opinion for a company that is now losing money last year we were not losing money at Roku and this year we're losing 146.9 million dollars as look at this research and development nearly doubled but sales and marketing did well also actually nearly doubled both of these nearly doubled and this is crazy because if your sales and marketing expenses are doubling but you're only increasing Revenue by 15 you've got yourself a bit of a problem the trade desk increased their advertising 44 over the same period and revenues increased 30 percent in my opinion the trade desk is a fidea is substantially better investment than Roku I've also come to question the investment logic that some of the managers at Roku use when they suggest they want to get into TV Manufacturing why would you get into something that has virtually no margin there is no pricing power in TVs I would never invest in TVs but I would invest in a company like the trade desk which helps organize advertising on connected TVs and works with companies like Disney that's big especially since Disney is expected to be more of an advertising player than even YouTube and a big competitor to Netflix Who currently does use Microsoft for their advertising experiment still not sure where that'll go but we'll see now I do mention here uh that their stock based compensation did explode uh quite a bit but so there is a potential for a little bit of a one-time move in some of these numbers at Roku but they still make me nervous nonetheless especially since why are we spending so much potentially on stock based compensation for sales and administration and research and Dev and advertising when revenues are only growing at a 15 year-over-year clip for a company that's now losing money which means you have an infinite PE ratio during a recession it makes me nervous and it doesn't make me very excited so there you have my Saturday piece I hope you have found this super insightful let me know if you like this sort of longer form connecting the dots a video versus sort of the uh more individual piece uh videos that are uh potentially a little bit shorter hopefully this is a little bit more podcastable and something you can enjoy uh connected together and hopefully it provides an extreme amount of value let me know in the comments down below thanks for watching check out the programs we'll see you soon goodbye
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