Transcript of The Market Collapse Shock
Meet Kevin
0:00may have just figured out why the market0:02is at extreme fear. And if we're wrong0:06about this, then we're blind to what's0:09actually happening. But we think we0:11might be on to something. And it has0:14implications for investing over the next0:16few months. But why is stock price0:19strength at extreme fear? Why is breath0:23at extreme0:25fear? So the number of stocks rising0:27versus declining. Why is the equal0:31weight S&P 500 rolling over? So, in0:35other words, the vast majority of stocks0:37are rolling over while the NASDAQ 100 is0:39doing okay. You know, it's really0:42holding on to 735, which I'm grateful we0:45bought the dip heavily around the 715 to0:47700 range. That's great. But why is it0:50getting stuck? Why is this getting0:52stuck? And why are financials falling0:54off a cliff? The XLF ETF rolling over as0:58well. I mean, the XLF, the financials1:00ETF here, is looking as bad as it looked1:06during the height of the war with Iran1:08in March and as bad as we were sitting1:12around liberation day, roughly getting1:15to that 100 DMA, daily moving average.1:19What's going on?1:21And so, we think we might be on to1:24something in terms of what's causing1:27this. It's not just Micron. It's not1:31just what's going on or cooking with1:33GPUs. We'll talk about that or the1:36economy. It's something else because the1:38underlying economy seems to be doing1:41okay. And that's not to discredit that1:44there is pain amongst the lower earners,1:47but it's a way to say, hey, if we go1:49look at what's happening with the1:50economy, and we got a few notes over1:52here we'll look at. We can see that1:54technology1:55uh layoffs are on a relative basis.1:58They're up year-over-year or from2:00August, but they're actually relatively2:03low. Technology layoffs are low2:06according to the Challenger Gray report2:08this morning. And this has actually led2:10overall job cuts. And given that we're2:13not seeing this massive disruption, some2:15disruption, but not massive disruption.2:16We're actually seeing overall job cuts2:19in September down 18% from September or2:22from August. So over the last month, and2:24from last year, we're down 20%. So in2:27other words, we're seeing declines in2:29the number of people getting laid off.2:30The Challenger job reports actually2:32implying that hiring intentions are up.2:35So the economy doing okay, at least from2:38a layoff point of view. the economy from2:41a PMI point of view. We got another2:43report this morning consistent with2:45prior reads that things are bullish. PMI2:48hitting its highest level since May. The2:51biggest issue that we have are that2:53we're seeing price pressures. September2:55saw the pace of manufacturing pickup2:57growth. Again, this is the strongest2:59reading since May of 22, which is just3:01like the information we saw last week.3:03However, backlogs and increasing demand3:07are leading prices to rise, which, you3:09know, is an inflationary concern. But3:12this rise in the 10-year Treasury yield3:14just seems extreme, like there's3:16something else that's cooking, something3:19else that's creating this pressure. So,3:22it's not just the S&P, but it's also the3:27ISM report that came out this morning3:29that told us the same thing. The ISM3:32report for September which came out you3:34know maybe 50 minutes ago at this point3:36uh indicated the same thing here. We had3:39another month of growth on uh the3:42manufacturing PMI, new orders growing,3:44production growing, employment growing,3:46all those things good for the economy3:49indicating hey3:51shouldn't have major issues. So why is3:54there so much nervousness?3:56Is it tightening lending that3:58potentially is going to slow down the4:01artificial intelligence buildout? I4:02mean, we just had Broadcom promise over4:05$40 billion of lending to Anthropic,4:09which of course is circular, right? The4:10lending goes to Anthropic and then4:12Anthropic spends it on custom spends it4:14on custom chip designs at Broadcom and4:17that does lead to some nervousness in4:19the markets where people are like, I4:20don't know, man, it's too circular,4:21right? But so far seems like the spend4:25keeps going. You look at lending4:28standards at banks, lending standards4:31from banks to large and middle market4:34firms are loose. We're not seeing4:37tightening. As this chart goes down, it4:40means a loosening of lending conditions.4:43If I look at the net percentage of4:45lending to small banks,4:48lending conditions are also loosening at4:50small banks. If I look at auto loans,4:52loose lending conditions. If I look at4:55real estate loans with construction,4:57loose lending conditions, you could see4:59the rise in lending conditions like the5:01tightening over here when rates were5:03going up in 22 23.5:06So what's going on then? Why are we5:08seeing this bizarre rise in not just the5:1110-year but also the 102 spread? I mean5:14we are now knocking on the door of shock5:17territory and we were at like 20 just a5:20week and a half ago. We were at 21. So5:23all of a sudden this has skyrocketed to5:24where it feels like something is about5:26to break. And that's not great. We don't5:29want something to break. We want the5:31underlying economy to keep going because5:33it means people can keep getting jobs.5:35People keep getting hired and people can5:36milk this AI boom for what it's worth5:38even longer. Now one of the places we5:41can see that the AI boom isn't rolling5:44over yet in my opinion is when we look5:46at GPUs. And I mentioned this. I want to5:48build this economic foundation first5:50because people say, "Well, Kevin, that5:52that circular lending that's going to5:53roll over." But it's not yet. Look at5:56the H100 pricing rental index.6:01It's actually gone up again. So after6:04H100 started seeing a deterioration in6:08rental prices and the H200s mind you6:12they've actually started to inflect up6:14again in the first and second quarter of6:16this year despite the fact that we are6:18now sitting at somewhere around 90% of6:22openweight models being leading6:23openweight models being Chinese about6:2650% of token spend over 50% of token6:28spend right now is on open weights so6:30you'd wonder like why why are Nvidia6:33chips getting more expensive with all6:35the open waves. Shouldn't shouldn't it6:37be the other way around? Shouldn't these6:38chips get depreciated more? And that's6:40one of the great ironies that actually6:43props up this economy, which leads again6:46into where we're going with what is6:48potentially actually causing the6:49problem. But you need to understand this6:51first. So, let's just grab a beautiful6:54whiteboard over here and we're going to6:55write down something.6:57When you think of this AI boom, I want7:00you to think people have built out7:03hardware. So, we'll draw some boxes here7:06and we'll call it the H100.7:09We'll call it uh the A100, which is7:11actually an older chip. Uh we'll call it7:14the H200. You know what? So, this is out7:16of order, okay? But it doesn't matter7:18for the purposes of this. Uh and then7:20you come out with a brand new chip,7:22which is going to be like, I don't know,7:24your your uh Reuben Ultra, let's say.7:28Okay, so that's going to be your next7:30generation highest bandwidth chip that7:33could do way more freaking work. I mean,7:35we're talking about over here at this7:38end, we're talking about 10x the7:41throughput of something like an H100.7:44So, if this can do 10x, why are these7:48going up in price?7:50Well, that's the crazy thing about this7:52economy that keeps this bubble going is7:55the more we can use openweight models,8:01the more we could just put these older8:04chips to work on openweight models. So,8:08in a weird way, these guys prop up the8:12frontier. So, Anthropics, uh, Fable, uh,8:1751, GPT, uh, 61, Gemini 40, that's your8:23frontier or the latest Grock models,8:26whatever. That's your frontier on latest8:28and greatest. The openweight crap is8:31coming though, making the older crap8:33more expensive, which means rather than8:36the AI boom collapsing, it's actually8:40getting more extreme. It's getting more8:43bullish, which implies we're in this8:44sort of midcycle period where the party8:47ain't over yet. But it's actually it8:50just feels like somebody's winding the8:51clock back. You know, when I look at a8:53chart like this, I'm like, man, I feel8:55like, you know, on on the decline phase,8:57I'm like, oh, I feel like the party's8:58getting to midnight and somebody just9:00came in and wound the clock back 29:02hours. Nah, man. We had a time change.9:04It's actually only 1000 p.m. It's like,9:06okay, so then what the HECK IS GOING9:08[screaming] ON? WHY are Treasury yields9:11skyrocketing? Is it really an inflation9:14concern? I mean, yeah, I get it. You9:17know, prices on the ISM read and the9:19S&P, they're like, "Yeah, there are9:20pricing pressures, but one of the9:21biggest drivers of pricing so far hasn't9:24been these inflationary pressures. It's9:27actually been oil." But what's9:30remarkable is pricing pressures on oil9:32have slowed.9:35So, look at this. Since September 9th,9:37we've seen pricing uh uh for oil, you9:39know, peak out at 107 to 109.9:42Yet, during that same period of time, we9:46have seen the bond market suffer. You9:49look at that same period of time going9:51back to September 14th over here, the9:5410-year Treasury yield was sitting at9:554.959:57to 4.99.9:59We're up half a percent. Well, 30 basis10:02points, not quite half a percent. We're10:04up 30 basis points on the 10-year10:06Treasury. It's gone straight up. So,10:08something else is happening. Something10:11else is screwing it all up.10:16And we think we found the problem. It's10:21the coupon code at meetke.com. Okay, I'm10:24sorry. [laughter]10:26I I had to throw something annoying in10:28while I pulled up the document because I10:29wasn't ready to pull it up yet. IT'S THE10:32JAPANESE10:34>> [laughter]10:36>> YEAH. NO, SERIOUSLY, look at this.10:38Here's a a piece from TS Lombard which10:41suggests that uh Japanese investors are10:44quote unquote going back home. And this10:46has happened a few times before. The red10:49line right here is US bond purchasing.10:52And when we had this decline going into10:55December of 2018, the stock market had a10:58poopy dupy going into December of 18.11:00And the Fed had to calm stuff down. JPAW11:03had to flip-flop. You go in over here,11:06you had the same problem in 2022, and11:08you've got roughly the same problem11:10here, but it indicates we haven't even11:12gotten to the worst part yet. So, why is11:15this happening? Well, why this is11:17happening and the fact that it is11:19happening are two different factors.11:20We're going to look at both of them, but11:23I want you to quickly see that uh last,11:26you know, last month now, I guess,11:28because it's been um what's it called?11:30Uh we're already in October. Happy11:32October, by the way. But look at this.11:35You've got last month uh a decline in11:40the foreign assets at Japan of about11:42$79.6 billion. The expectation is that11:46this was driven by a record reduction of11:50US treasuries and that this potentially11:53is still ongoing. I literally have right11:58now, this very second, I just got US12:02Treasury will buy back $6 billion of 1012:05to 20year debt on October 1st in12:07liquidity buyback. Fine. We think some12:10of that is already happening because we12:12got up to 5.32 here on the 10-year, but12:16there is a chance that the Japanese12:18continue to dump US treasuries just like12:21they did in 2022 and just like they did12:24in 2018. Now, I put my balls on the12:28number that is on this, and so far it12:30looks wrong, but I think I'm going to12:33end up being right and I'm going to12:34explain this. 5.27 is when I called the12:3910-year Treasury as we are pretty damn12:42close to peak. Like, I'm going to put it12:44I'm going to say it like, well, this12:45should be pretty damn close to peak.12:48Why then do we still have these Japanese12:50issues? Okay. And what does it mean12:53going forward? what violence is about to12:56occur. That's what we're going to talk12:58about. I'm just going to take a moment13:00to shout out our platform, Reinvest One,13:02though. Reinvest One is a really cool13:04product. I recommend you check it out.13:07Uh you could go to meet Kevin.com if you13:09want to see it, but it's everything that13:10we have together. Our alpha membership,13:13our trade alerts, we just gave an update13:16on a sold put a couple hours ago, this13:18morning. reinvest stocks, our our13:20briefing every single morning on the13:22setup for the day, trade, short-term,13:24medium-term, long-term, the lines to13:26watch, the strategy for the day, uh our13:28re reinvest stock software, our reinvest13:31homes product, everything we have to13:34offer in one price. And lifetime access13:38for this goes away at the end of the13:39year. We're going to an annual13:41subscription model, but if you lock in13:44lifetime access now, you'll never have13:46to pay that annual subscription. you get13:48everything, all the nine courses, every13:50course member live stream, and an13:53entirely new product we've got coming13:55out. Well, not only the terminal build13:57that's coming out in Q4, but you also14:00get uh our 10th uh course, which is the14:05seventh product on this list, and it's a14:07new uh business blueprint buildout. It's14:09going to be really fun about agentic AI14:12and business. It's going to be a really14:13great product, and that's coming in14:15Q127.14:16You get all of that uh all at one price,14:20all in one terminal. Go check that out14:21over at meetcaven.com. We think it's14:23going to be a really great product. And14:25uh the full terminal comes out in the14:27fourth quarter here. But let's14:30understand now the violence aspect here.14:34Typically, when the 102 spread gets to a14:38point of 50 basis points, we go into14:41shock territory. And there's something14:43that can actually make that shock14:45territory happen sooner rather than14:47later. And it aligns with what we heard14:50from Fed Williams two days ago. So Fed14:53Williams two days ago said, "Hey, we're14:55not certain we need to hike in October."14:59Well, guess who does plan on hiking15:02every freaking 3 months? Not certain15:05yet. It's considered live, but Japan.15:10If Japan hikes in October and the United15:14States stays stable, then the spread15:18between US and Japanese yields widens.15:22It makes Japan yet again more desirable15:25than US and that could be contributing15:28to this repatriation of capital back to15:30Japan just like we just saw on that TS15:33Lombard chart. So in other words,15:35ironically, the Fed holding in the US15:39could be accelerating15:42the flight of capital back to Japan.15:46That's not good in the short term.15:49Now, there's obviously one thing that15:51could bail this out and end all of the15:53pain and the buying the dip opportunity.15:56Obviously, that's a deal with Iran. We15:59know that already. But think about the16:02potential catalysts that we have right16:04now. Let's break this down and what's16:07hitting us here. So, economically, GPU16:10rental prices and values skyrocketing. I16:13was just talking about how we spent some16:14I don't know, we spent like 50 grand on16:16some more chips in August for my16:18startup, Reinvest. It's part of what16:20we're building with with the the suites16:22that we're building. We think we're16:23doing a really great job and we can't16:25wait to show you everything we've got16:27cooking. It's going to be really16:28exciting. But we just bought another 5016:30grand of hardware and that hardware is16:32already worth 40% more than what we paid16:35for it somewhere around 50. I can't16:36remember exactly what it was. That's16:39insane. But that's an indication that16:43the economy on an AI side is still16:45booming. It's not just us that's seeing16:46it. We see it firsthand, but uh we're16:48seeing it in the data broadly when the16:50suits talk about it as well. We know GDP16:53is booming, capex is booming,16:54construction is booming, hiring is16:56booming, jobs are booming, retail sales16:58are booming, manufacturing is booming,17:00services are booming. All this is good.17:02We know available credit is great. We've17:04got oil declining back to $100. And17:07honestly, it's probably once we get an17:08Iran deal, it's going to go even lower.17:11The problem right now, the sole problem17:12we have right now is the 10-year17:14Treasury, which could be driven by17:16Japan, driven by that that uh Japan17:19spread or repatriation.17:23So, what happens? What are we left with17:26when17:28uh Japan is done repatriating17:32and Iran war ends? If you don't think17:36those two things are going to end, you17:38are right to be bearish.17:41But my balls say we go straight to the17:44damn moon. Because why? Once this17:49Japanese nonsense is done17:52and the Iran war ends, which I believe17:55with 90 to 95% confidence, I will I will17:59I'll have to like strip naked or18:01something. I don't know. I'll have to go18:02like I I have to go do something really18:04embarrassing. I don't know if if I'm18:06wrong about this, but I'm so damn18:08confident we are going to get a deal uh18:10by uh uh by the election. And I'm okay18:13being wrong, but I I do think I'll have18:15to do something embarrassing if I'm18:16wrong. We'll have to make a challenge.18:18Maybe leave a comment. Tell me what what18:19needs to be done. But anyway, the Iran18:22war ends. Okay, that's my take. When we18:25remove those two catalysts, and yes, can18:28something break between now and then? Of18:30course, every single time we've had this18:32magnitude of treasuries going up for 718:34months in a row with the volatility that18:35they're going up right now, 16 out of 1618:38times, something has broken.com or uh18:40you've had the well, you had the dot18:42crash, you had the black uh Monday18:44market crash of 87, you had bank18:46failures like Silicon Valley Bank.18:47Something always ends up breaking. That18:49doesn't necessarily mean the economy has18:51to roll over. Something can end up18:53breaking. But once you remove those two18:55pain points, what are you left with?18:59What are you left with? You're left with19:01oil on an Iran deal comes down. So19:03that's not even an issue. You are19:05available with loose credit. You are19:08available with GPU uh increasing in19:11value and an accommodative circular19:14financing world, whatever you want to19:16call it in this bubble that we are19:18building. It is a bubble, let's be real.19:20But there's still money to be made in19:22the bubble. plus an economy that's doing19:25well, capex that's booming, retail sales19:28booming, manufacturing service, all of19:29this is doing well. Obviously, yes, some19:32of the lower end is hurting and19:33suffering. We know that. But to me, the19:36only potential outcome if we get the19:39Iran deal and that Japanese repatriation19:41stops is bond yields down, US stocks19:47rocket ship up. We started this with how19:50breath is really bad right now in the19:52market. The RSP is bad. You know, it's19:54the equal weight. There's certain stocks19:56that are carrying things right now,19:57whether it's AMD or Nvidia or whatever,19:59that's helping the cues get up. That's20:01great. We bought the dip on that. We20:02sent buy alerts on that, and we'll20:04continue to send buy alerts or sell20:06alerts, whatever we think is20:07appropriate. We'll send those to20:08everybody over in our reinvest reinvest20:11one membership. You can go to meet20:12Kevin.com to see it. Uh we had a little20:15poll as to what website domain we should20:18use either because we'd have to spend a20:20lot of money to buy reinvest.com. So,20:22we've gotten very cold on that idea, but20:26there's meetreinvest.com,20:28there's reinvest.com.20:30They're all going to redirect to the20:31same thing. We don't know yet, but we'll20:32figure it out. But the point is, uh, we20:37feel like we are at the frontier of20:40small startups in AI.20:44And20:45it makes me very bullish. Not only20:47seeing what we're doing and building,20:50but seeing it align with the economic20:52data, to me, it makes sense. Yeah. Can20:55it all come crashing down at some point20:57in the future? Of course. And this is20:58why we have no debt. Like, we don't want21:00we don't we we don't want bank debt21:01right now. That's that's what we don't21:03want right now. Uh because it can take21:05the elevator down. But I think we've got21:06a nice boom coming. And that's why I21:09think by, you know, by the end of the21:11year, we'll probably not only have21:12record highs on the Q's, but the NASDAQ21:15100 will probably exceed, and I know on21:17a day like today, it's like, Kevin, it's21:19a red day. How could you be so bullish?21:20Uh, we'll probably exceed 800 on the21:23NASDAQ 100 by the end of the year. Uh,21:26so I'm very excited about that, but we21:28need those two catalysts to end. And so,21:30yeah, right now, we can blame the21:32Japanese. And let's take a look more at21:34this right here. For the rest of the21:37world, upward pressure on yields comes21:39at an inopportune time. Uh we are seeing21:42greater repatriation in the yen.21:46And so uh what you have over here is21:48that historically people would stay away21:50from the uh uh these Japanese bonds21:52because people didn't want to catch a21:55falling knife so to speak.21:57Uh but now people for whatever reason22:00seem more interested in bringing dollars22:02back to the economy uh in Japan. And22:06this is interesting right here. They22:07talk about a new phase in monetary22:10policy where the bank hikes once every 322:12months. December is TS Lombard's base22:15case for uh a next hike. But October is22:19live22:21and we think markets misinterpreted the22:23September move as a dovish hike leading22:27to another impromptu speech scheduled22:29for October 5th potentially to signal22:32you know more strength of more hikes22:34coming again more hikes in Japan fewer22:37hikes in the US especially post Iran22:39deal does make the Japan issue worse22:42before it gets better. So, you have22:44those two damn issues still cooking. The22:47Japanese issue uh and what you have with22:50Iran. Small note on Iran. President of22:53Iran open to more dialogue. That's fine.22:57But Donald Trump this morning, we had a22:59small update from Donnie T this morning.23:01We'll scroll to it over here. But the23:04update was really that he wants more.23:07And I found this very very interesting23:09as well right here an hour ago. Iran not23:11challenging US Navy escorts because it23:13doesn't want the resumption of23:14hostilities. This is like the big bad23:16wolf who's like, I could kill you all in23:19in one squeeze if I wanted to. I just23:22don't want to right now. It's a sign23:24that uh negotiations are actually or23:27pressures on Iran are such that Iran23:29really wants a deal right now. And I23:31think what Trump is doing is waiting23:35because he doesn't need to make a deal23:37probably for another three weeks, which23:39means we do still have volatility23:41potentially for the next 3 weeks. But I23:43think that is the last opportunity. You23:44know, this sort of period that we're in23:46ends that opportunity to buy before a23:48big resumption. So, I don't know. I23:50could be wrong, but uh that's what I'm23:52seeing. And I could see both of these23:54issues ending this uh Japanese23:56repatriation issue that fades out in23:59addition to the Iran deal. Iran made an24:01offer regarding the opening of the24:02straight of four moves. I've seen some24:04aspects of it but not all of it. We have24:06a lot of weapons. Our situation is24:08excellent, says Donald Trump. Although24:10reports of shortages were somewhat24:12false, some of them were correct, which24:15is interesting because they've regularly24:16been denying that resuming attacks on24:18Iran is possible after the election. But24:21Iran did make an offer and you know it24:24could work but it's just not enough. We24:26just want a little bit more. [laughter]24:28So we'll see how this goes.24:32So that's my take. That's my bottom24:34line. Go to meet mekevin.com24:37and join us in the reinvest one. You24:41will never have to pay a monthly fee if24:44you join that reinvest one product. And24:47that I think is a very powerful pitch24:48because [music] you get everything in24:50one beautiful button.24:52>> Here we go. Come on.24:55>> If you like that video, check this one24:57out. I think you're going to love it.24:59>> Why not advertise these things that you25:00told us here? I feel like nobody else25:02knows about this.25:03>> We'll we'll try a little advertising and25:04see how it goes. Congratulations,25:05[music] man. You have done so much.25:07People love you. People look up to you.25:08Kevin Praath there, financial analyst25:10and YouTuber. Meet Kevin. Always great25:12to get your [music] take.
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