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hey everyone me Kevin here in this video you're going to take away two things number one you're going to find out how much research suggests the market could continue to fall and the second thing is you're going to take away exactly what the Federal Reserve is going to be looking at in their meeting that starts today and ends tomorrow and culminates with the Federal Reserve telling us exactly what they're going to do at 11 A.M Pacific time tomorrow so stay tuned I'll be live streaming that it's going to be huge tomorrow for the markets okay the very first thing though before we get into this is I just have to say two things one this video is brought to you by Titan link down below but also Andre Andre how could you do this to me Andres one of my buddies one of the homies and a lot of you on the channel know that I put together I'll put this together I thought about it I edited it I put it all together and I did it for free I put together a video on the Titanic right remember how the Titanic is kind of like the analogy of the market or the allegory of the market that video got like 300 000 views but I got nothing for it and that's okay that's okay I I made the video expecting not to get anything from it because copyright claimed it's ineligible right but my boy Andre come on dog come on made a video got over 200 000 views talking about what happens next in the Super Bubble and uses my entire Titanic clip without even as much of a hey good video clip Kevin now I still like you on trip but come on man come on man that is not cool that's all I gotta say I didn't even make a whole video using the Titanic Club maybe I should have let's talk about the fat it's more important we gotta talk about the FED all right uh first I said you'd get two things out of this video number one how much pain let's talk about that and then the FED okay uh so according to research when the NASDAQ drops more than four percent in a day which only has happened in.com bubble and during the Great Recession uh and then reverses to a positive that sort of big draw down and quick reversal happens in Bear markets it's very very bad I mean it doesn't necessarily mean it will always happen in Bear markets but it's a it's kind of a bad signal for markets right and I made a short on this you probably saw it yesterday maybe you didn't but anyway that is a statistic that came out uh yesterday and the research that went along with this was really interesting when I dove deep into it the research suggests that when we see the NASDAQ 100 go minus four percent to positive in one day the median NASDAQ return over the next month or I should say how much is the NASDAQ worth one month later the NASDAQ tends to be worth 5.5 less one month later that's the median term so that would be February 24th the market might be worth about 5.5 percent less the three-month median so a longer term mindset right longer term I mean look years I'm bullish on this Market short term I'm quite bearish anyway I think that's obvious by now but anyway three months decline the median expectation is a 7.9 decline uh after this sort of Correction and reversal first now I want to be very very crystal clear because there's a lot of misinformation uh I uh I'm only 0.6 short in the market lucid and RK that's it uh 0.6 it's 120 000 my portfolio uh nine percent long it's about 1.8 mil and the rest is cash that's it okay so you know sometimes people like oh Kevin's just 100 sure this is not true uh but I do send every single stock a purchase and sale that I mak okay now we got to talk about the Federal Reserve because this is a big deal so uh to understand the Federal Reserve we've got to do two things one we've got to look at the data that we've recently gotten and then we have to compare that to what the Federal Reserve said in December because what we're looking for is if the Federal Reserve was disappointed in December then maybe they've gotten happier and they're going to be dovish tomorrow they're going to U-turn and then the markets will be all Rosy again right maybe maybe I hope so because I want the Pain to End I want to buy back in once I have the Catalyst that says the pain is going to be over and we go to the Moon that's what I would love that's what I want because I want to make money and since I'm mostly cash and not long short I don't benefit from the market going down okay so here's the latest information that we know and then we're going to talk about the Fed so the latest thing that we know is that Banks expect slowing customer deposits for 2022.
all of the banks basically said this and their earnings calls I read the earnings calls they also recognize that the savings rate has fallen which which is not good because that lowers the amount of cash people have available uh we had a survey and when I say survey it's more like a study from the Federal Reserve this matters the New York fed uh came out and said look people are spending more money on Essentials and less money on non-essentials and plan to spend less money on non-essentials that's not good that's slowing consumer growth right the Netflix massive forecast reduction is probably going to be considered a coveted related drawdown so I'm not going to focus so much on Netflix but in my opinion the real issue is actually in earnings that we got today and it's it's a really big issue listen to this General Electric is quote grappling with worsening supply chain pressures and the effects of the Omicron variant leading the stock to fall six to seven percent in trading today they're dealing with supply chain issues across all businesses and issues that are becoming quote persistent that's a bad word persistent supply chain issues which is similar to persistent inflation right and they can't get orders out of the door due to component shortages and many other issues yet at the same time margins are expanding so the being the company's making more profit so it's not like the company's suffering or somehow unable to hire folks if folks were available to be hired but uh they're having so many supply chain issues that are getting worse because of Omicron now this is going to be a big deal when we talk about what the FED has to deal with in just a moment but first I have to send you to a message from our sponsor Titan which now let's talk about 3M so 3M says they are so confused with what's happening with Omicron and supply chain issues that they are actually delaying providing any forecasts until February wild in addition to that Raytheon all three of these companies reported today so this is fresh information I reported this morning Raytheon guided lower into 2022 does not believe that inflation pressures will ease until quote late 2022 and took a 150 million dollar expense in quote unexpected inflation related cost increases Labor uh shortages are also hitting Supply chains that they say and the supply issues will end up hurting deliveries for their company however demand is not slowing even despite Omicron at Raytheon so that's actually kind of like a worst case scenario where it's like demand is still strong from the fed's point of view right demand is still strong but they're having these labor and supply chain issues that are making things worse not great uh okay all right so these are from three companies that reported today all three of them in the industrial space which is where manufacturing is very very important this is different from like a snowflake reporting they're selling software or IBM who's now saying they're you know 70 software whatever the IBM earnings were like a nothing Burger they were so confusing with their guidance and I'm not the only one who's confused even the analysts were like this is weird y'all weird anyway okay now let's understand the Federal Reserve because this is a big deal here so the Federal Reserve uh in the last notes from their last meeting said that rates are their top priority as a policy tool Jerome himself said that Federal Reserve policy action with rates can act quicker to slow the market and we know that if we take like if we reduce the balance sheet there's so much money left in the system especially if you look at the reverse repo Market basically there's so much cash available that it doesn't really matter if they take some of the cash they start vacuuming up cash from the markets we're not going to feel that effect until like later in 2023.
the more immediate thing that's going to slow this Market down a little bit which is kind of what the FED believes we need is rate hikes but that's also what the stock market is afraid of is rate hikes so Jerome Powell says rates are a top priority and that we are better positioned for policy normalization than we have been in the past so in other words rates are our top priority and we're more prepared now than ever to hike rates now they don't actually expect to complete their taper until mid-march they said this in December so it would be a rug pull from the FED if they ended their taper or or sort of their their bond buying program if they ended that they completed their taper early in January that would be a surprise that would mean the taper ended two months earlier than expected that would be a rug pull I would expect markets to freak out tomorrow however the market might be going as Extreme as thinking that the fed's going to raise rates tomorrow which I really don't think is going to happen the FED has said they will not raise rates until they finish the taper so the expectation is they're just gonna say tomorrow hey look we're going to complete the taper by March then we're going to raise rates which kind of means they're kicking the can down the road and all those fears are getting kicked down the road a little bit which is not great okay then the Federal Reserve said that one of their big goals and this is very important one of their big goals is to limit yield curve flattening by potentially running off the balance sheet versus just using rates so I looked at what the yield curve is doing and what it has been doing since their December policy meeting and since their December policy meeting the yield curve has actually not flattened any further so the yield curve fault like flattening has stabilized so understand this for a moment If the Fed is worried about this line over here going down and maybe they won't raise rates if this line goes down too fast then it would be a problem if this line were going down fast it might actually be good news because the fan might say oh that Line's going down too fast that's a problem it's not high rates but it's not going down and If the Fed is saying they want to limit yield curve flattening and might you know not be so aggressive on rates if the yield curve keeps leveling then the reverse would be true that if the yield curve stays stable they could actually be set up to raise rates so look at the nastiness that we're setting up for here we're setting up for a big nothing Burger tomorrow kicking the can down the road to March or in March we hike rates and the FED says see yield curve stable time to hike hike hike maybe we even need to hike a little bit more than we previously expected that fear is going to eat away at this Market it's gonna be a slow bleed uh now the Federal Reserve is also calling for modestly lower growth over time but as they start raising the federal funds rates but they're okay with that so they're okay with slowing the economy to raise rates and the way I look at this is is by looking at their dual mandate maximum employment and uh stable prices well they're failing at stable prices right so their success is like failure failure inflation is a failure whereas on jobs they've succeeded substantially well so what they need to do is they need to fight inflation so they need to bring up their efforts against inflation now when they bring up their efforts against inflation they might actually bring down how crazy this job market is and businesses desires to keep hiring hiring hiring and paying more and more more more for people because there's so there's so many job openings but not enough people to actually take the jobs right now that it doesn't really matter you get so much meat on the bone so to speak on the job side that even if we fight inflation we can we can cool down the amount of hiring a little bit and not really affect the economy so the FED has this really big buffer right here whereas they're failing on the inflation side so in other words when people say oh no no the fed's not going to want to crash the economy because that's going to hurt jobs we have so much meat on the bone in terms of the job market that is there's so many job openings we could literally have 50 less job openings and still have a tight labor market like the markets people would still be able to get a job and still have wage increases like that's not a problem right now so the biggest problem is inflation and so wait a minute if you start putting these things together their priority is interest rates as long as the yield curve is stable raise rates we can raise rates without devastating jobs we don't mind if we have slower growth we also don't mind if valuations in the stock market come down because we believe that high valuations lead to excessive risk-taking excessive debt taking excessive speculation and that actually creates more of a risk to the financial system so when you start putting this puzzle piece together here you're like oh my gosh the FED is gonna in my opinion and and I imagine that you would might think the same way there's no way the fed's not gonna want to raise rates aggressively again raising rates is substantiated by the yield curve not falling more not flattening more uh the the inflation problems we're having the persistent problems we're having with the supply chain issues if we take some demand away we could finally give Supply chains a little bit of time to grow right or to just like breathe a little bit doesn't matter if valuations come down because that actually helps the fed's mission doesn't matter if jobs uh job openings constrict a little bit because we've got more than we need so all of a sudden when you put all this together it's like they're gonna hike rates a lot and this is going to be a painful year at the same time business mortgage card and Auto Loan defaults are at record lows there's more upside risk that inflation is going to continue running and put all together I think what's crystal clear about what's going to happen here as a bottom line is the Federal Reserve is going to finish their taper probably by March if they finish the taper early the Market's going to tank if they they come out tomorrow and say hey we decided to finish the taper early we got big problems in the market that's going to be a big issue to all the people who think the Federal Reserve is going to bail out the stock market tomorrow because the NASDAQ and the s p farted eight to twelve percent Dream on I I like really Dream on I I hope I'm wrong because again I want to be in a bull market I want to throw all my money back in and I want to ride the rocket ship okay but I I think it's it's totally wrong because if you go back to those minute meetings uh minute meeting notes from uh from December you could see where their their head is they are worried let's draw a little summary box here okay they're worried about supply chain constraints causing inflation they're worried about broadening inflation what did the uh IMF say today inflation is broadening they're worried about consumers spending more on Essentials we just got that report yesterday from the fed from the NY fed right literally the FED uh is reporting that on top of that they don't care if prices come down in the stock market it's a good thing next they don't mind uh if if uh jolts or slash job openings will say job openings decline because we have plenty because we have plenty we won't hurt the job market uh and and then as long as as long as the yield curve does not flatten more rates are the preference I don't understand how much more clear the FED could be like if I were like j-pow and and people are like oh j-pow you're going to bail us out tomorrow right I'd be like have you literally not paid attention to anything I've been saying we are desperately concerned with supply chain constraints being persistent and causing more inflation and broadening inflation which we got from the IMF today and we're hearing from earnings reports today I mean like the latest information is that things are getting worse not better and they're probably going to be bad through the end of 2022.
consumers are spending more on Essentials which means more inflation right energy costs food so on and so forth we don't really care if valuations go down because that reduces risk in the market we don't mind if job openings decline because we have plenty of job openings and as long as the yield curve does not flatten more rates or the preference literally one two three four five six all six of these reasons right here say fed hike rates hike rates hike rates hike rates and six times over right it's gonna set us up in addition to that price decline information that I mentioned earlier for probably either a slowbleed market over the next three to six months or a lot of volatility so don't be surprised to see your portfolio swing in crazy ways now bottom line I don't recommend you just pay an Excel Don't Panic sell I did not paying Excel I'm making a very strategic bet on Jerome Powell but don't look I study Jerome Powell I believe more than anybody in the world okay maybe there's some economists who study employment but I I believe I mean this guy comes up in my dreams uh and my nightmares okay in both uh he's like the most recurring character of of my dreams it's crazy and Nightmares uh and it's really really annoying but anyway uh look the bottom line is I'm bearish in the short term I'm bullish in the long term for most passive investors you're better off just buying the dip and dollar cost averaging for active investors who want to make a bet hey here's something to consider but what you should also consider is using that coupon code linked down below before my birthday before that expires and of course checking out Titan write the link down below thanks so much bye
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