Transcript of We have Problems.
Meet Kevin
0:00Some fear that negotiations between the0:01United States and Iran [music] are0:03stalled at the same time as US economic0:07data is really booming0:09>> [music]0:10>> and leading now to a shift in inflation0:12expectations.0:14There's a lot to break down here. We've0:16not only got to break down the economic0:17reports that are coming out, but what's0:19going on with oil and diesel data and0:21where negotiations stand between the0:23United States and Iran. So the first0:26thing that we should note is that0:27current US oil inventories are coming in0:30at 922,0000:32versus the 2.9 million previous.0:37This is well below expectations. This is0:40about 455,000 below expectations as the0:43United States has released more oil from0:45the Strategic Oil Reserve to sort of0:47bring oil prices down at least0:49temporarily during negotiations. It0:52seems like what's happening is the0:54United States is trying to make it seem0:56like everything is fine in the Middle0:59East and that Iran basically has no1:01leverage at all and that we're sort of1:03just ignoring Iran because they don't1:06really matter. They're just sort of like1:07a little fly that they're trying to swat1:09away as part of Donald Trump's1:11negotiating strategy.1:13The reason I say that is because Al1:14Jazeera1:16is reporting that these attacks are just1:19being ignored. See, take a look at this.1:22Here's a report that three tankers were1:24hit Tuesday morning in the Strait of1:26Hormuz1:27per the British Maritime Agency, the1:29Maritime Trade Operations Center.1:32And that these three ships were struck1:34by unknown projectiles, which typically1:37are rockets. They can be drones,1:40whatever.1:42But the United States has not been1:43fulfilling its tanker for tanker1:45strategy like we saw at the beginning of1:47September where anytime a tanker was1:49struck by Iranians or the IRGC, the1:53United States would end up executing a1:56jet attacks against ships docked outside1:59of2:01various docking islands or ports2:04where Iran was loading oil.2:07Now, the United States is just ignoring2:09these attacks2:11while at the same time we're releasing2:13crude and our inventories are now2:16critically low and there's still talk2:18about this diesel export ban coming from2:21the United States to potentially2:22temporarily rejigger diesel prices in2:25the United States in front of the2:26election. Though that would probably2:29just make things2:31worse and not better.2:34There's a lot here to unpackage. So not2:36only we're going to unpackage the2:37negotiations with Iran and and economic2:39data in the United States what has2:41happened with jobs and the Federal2:43Reserve and otherwise2:44but we have to start by understanding2:46the basic economics of diesel a diesel2:49export ban and this is just going to be2:51a really rudimentary overview. But what2:54I want you to think of is if the United2:56States imposes a diesel export ban, the3:00idea is oh okay, we're going to have3:02more diesel available in the United3:05States. So the idea is that diesel3:09prices will come down. That's the idea3:13for the United States. But3:15internationally those prices would go up3:18in the international community. So that3:20would hurt countries obviously like3:22Europe and benefit countries like the3:24United States.3:25The problem with this is3:27having a diesel export ban in the United3:29States assumes that you can3:32rejigger supply or production in the3:35United States efficiently3:38in the US from a refiner. And the3:41problem with this is if a refiner is set3:44up to let's say make diesel on this part3:46of the refinery plant and over here3:48they're going to make oh I don't know3:49gasoline for your cars, you usually3:52don't get a one-for-one conversion to3:55the other when you're like, "All right,3:56we're going to shift to making more of3:57this and less of this or whatever."4:01The goal is, "Oh, yeah, let's try to4:04mess around with the free market and get4:06prices to come down." That might work in4:08the very short term, but historically4:11these inefficiencies in both the4:13international trade community, but also4:16inside of refiners in the United States,4:18usually end up diesel and gasoline4:21prices to actually rise and go up. So,4:25there is a very real risk that a diesel4:28export ban by the United States, which4:30Donald Trump has suggested he's open to4:32and considering, although John Thune has4:35mentioned that in Congress he has not4:37seen any indication of a ban actually4:39coming.4:39This4:40has the very real chance of maybe4:42temporarily providing some relief right4:44before the election, but generally will4:47lead prices to go up even higher. And4:50that's not good, especially if right now4:52Iran maybe feels like they're getting4:54somewhat ignored in this negotiation and4:56therefore there are discussions that4:58negotiations are {quote} {unquote}5:00stalling. In fact, you can see that5:02here, "Oil rises as US-Iran talks stall5:05over Hormuz." Some of this could be5:08Donald Trump's style of positioning and5:11and I think that's what we're getting5:13here. Now, I I don't I don't like,5:15obviously, the idea of talks stalling,5:17but to me it sounds like Trump's point5:19of view is, "Hey, we've got 30 days.5:22We're in no rush to get a deal done, and5:25instead of running into a deal, let's5:28just pretend like the Iranian rocket5:30attacks on ships in the Middle East5:32don't affect us. After all, flows of oil5:36in the Middle East are deemed to be5:38about 98%5:40of pre-war levels."5:42Here you have shipments of crude oil5:44have rebounded to 17.5 million barrels5:46per day, or 98% of pre-war levels, while5:50flows of products such as diesel and5:51gasoline were about 3 million barrels a5:53day, 58% of prior pre-war levels per JP5:57Morgan. So, that would be refined,5:58right? So, you've got crude, which is6:00unrefined, and then you've got refined6:02or distillate products, which are lower.6:04The overall figure combined worked out6:06to about 89% of 2025 levels on a 10-day6:10moving average.6:11Now, why this matters6:13is because the United States here can6:16say, "Hey,6:17we're escorting ships and ensuring ships6:20through the Strait of Hormuz. The flow6:22is fine.6:23We don't care if your occasional rocket6:25hits us. We're not counter-attacking6:27you. We don't need to send a signal that6:29there's a problem because there's no6:30problem. We're just going to ignore you6:33and give you our response to your6:35demands, and then make the argument that6:38you better take it or leave it because6:39we don't care. You guys are the ones6:42getting screwed by a naval blockade,6:44getting screwed by an economic blockade6:46for air travel to various different6:48locations into and out of Iran because6:51now you have6:53aircraft servicing and fueling companies6:56who do not want to support Iranian jets6:58that come into land for fear of US7:00sanctions and being cut off of US trade7:03or US business7:04or otherwise.7:06The international community will want to7:07get cut off from that. And then you also7:09have truckers that are stuck and7:11stranded around the borders of Iran7:13because the borders of Pakistan to Iran7:17or Afghanistan to Iran are not7:19supporting a free trade because of7:21sanctions and fear of penalties. So,7:24Iran really has a really big squeeze7:27for its economy, and I think Donald7:29Trump is trying to send this signal7:31that, "Hey,7:32all is good. Our economy is doing fine.7:34Why do we need to strike them when we7:36can just ignore them?" Now, if we look7:39at a USD to a7:41Iranian rial right now and we kind of7:44zoom out in terms of what you get. The7:48higher this line goes the weaker the7:51Iranian currency.7:53And it's worth noting that right now7:57the Iranian currency has weakened even7:59more8:01just in the last two days we've had yet8:04another weakening in the Iranian real8:08indicating even more severe pressure on8:11the Iranian regime.8:13And so this is leading at least the8:16betting markets to believe that we are8:19going to get some form of a deal8:22before March 1st from a nuclear point of8:24view. This betting market has on Caliche8:27has a $21 million volume and right now8:30the one that I'm looking at is March8:331st, 20278:35indicates a 32% chance of a nuclear deal8:38before March 2027. Well, you'll notice8:41that this orange line right here has8:42recently jumped up quite a bit. So it8:45seems like just in the last8:48couple weeks here we've really seen a8:50movement up on the potential for a deal8:54by March, but of course we're all8:56wondering hey are we going to get a deal8:57by the election? And so that's where9:00it's sort of worth looking at where do9:02negotiations stand right now? So I've9:05gone ahead and put together a little bit9:07on where the demands are right now. So9:09here's the demand. Right now you've got9:14demands9:16from the Iranians. Let's see here.9:19Let me grab which where's my first sheet9:20here? Sorry about that. Here we go.9:22Okay. This is the Iranian plan. So the9:25Iranians want the United States to9:27release frozen funds, release sanctions,9:30and release the naval blockade first.9:33Do that for 7 days and then the Strait9:36of Hormuz will open and then we will9:39have nuclear talks. This is Iran trying9:42to indicate, "Hey, we have leverage. We9:43want this."9:45Donald Trump indicated that, "Hey, we9:46would have considered this9:49last year,9:51but now oil's flowing through Hormuz.9:54What rush are we in to strike a deal9:57with you when oil's flowing at 98%.10:01We're ignoring your attacks and you guys10:03are the ones getting screwed."10:06Donald Trump, I expect wants a deal10:08before midterms, but I suspect he's10:10willing to gamble a few extra weeks here10:13of pressure on Iran and the Iranian10:14economy10:15because here's what the United States10:17wants.10:18The United States wants10:20nuclear inspections and agreement on a10:22nuclear deal first,10:25as well as an open Hormuz with no more10:28attacks in Hormuz. This is what J.D.10:30Vance indicated as well. Hey, we need10:31you guys to actually show that you guys10:33are willing to comply with some form of10:35deal10:36and then we'll consider removing the10:39blockade, sanctions, and funds.10:43Now,10:44there are about 12 billion dollars of10:47frozen funds that are being held in10:49Qatar.10:51It's worth noting that these are10:53technically Iranian funds, but they10:54don't have access to that money and they10:57want that money. Donald Trump has10:59indicated he's not so sure that he wants11:01to give them that money. To me, all of11:03that is Donald Trump negotiating at this11:05point and I'm hopeful we can still get a11:08deal,11:09but I will say you do have some concerns11:12that the Iranians11:14aren't going to go for a deal as quickly11:17as people hope. In fact, here's somebody11:19who has a negative point of view who11:21argues that a US-Iran agreement over11:23Hormuz is unlikely. He says that the11:25Iranian-US positions are unlikely to11:28converge towards a deal despite11:30Washington's response to Tehran's11:32conditions. The US has been very clear11:34they want to reverse the sequencing and11:36they want to open the Strait of Hormuz11:38first, but the Iranians might not go for11:41that. You also have this comment right11:44here that the Iranians may have11:46diminished leverage over the Strait of11:48Hormuz,11:49but their ability to impose costs on11:52transit through the Strait of Hormuz11:54still exists and that creates problems11:56for the United States because again,11:59somebody's got to pay for that rocket12:00fire that's coming across.12:02Now, let's talk about this and what this12:05means. My mindset and I'm giving you my12:07opinion and we're going to talk about12:08the economy, we're going to talk about12:10yields, we're going to talk about how12:11Bezant just tried bailing out12:14the Treasury market again by setting up12:16a an October 1st buyback. We'll talk12:18about that. I'm just going to put our12:19sponsor on screen here. This is a12:21Kalshi. You can go to kalshi.com/r/mevin12:24and get $25 when you sign up for Kalshi12:26and make your first trade. That's the12:28betting platform that we just showed on12:30the odds for a an Iran nuclear deal12:33rising before March 2027.12:37Now, let's understand for a moment12:39this negotiation, my opinion, is Donald12:42Trump saying, "Hey,12:44I've got time before the election. I12:46don't need to make a deal today. I don't12:48need to make a deal next week. I don't12:49need to make a deal in 2 weeks. I just12:51really ideally want to make a deal12:53within the next month."12:54So, I think Donald Trump is purposely12:56being patient because I think he thinks12:59he could always accept the deal that13:01Iran has on the table today. Like he13:03could just decide today, "I've decided13:04to take the Iranian deal." But he could13:06do that in 4 weeks or he could do it13:08now.13:09So, what's the point of rushing into it13:11if you could extract a better deal by13:14waiting? Now, who knows? Maybe that's13:17hopium, but the underlying economic data13:20that we are seeing suggests that this13:22economy is holding up substantially13:25stronger than13:28people want to let on.13:30Uh and so one thing that we talked about13:32this morning in our Alpha membership was13:35that we are beyond not only the peak13:39fear levels that we saw when the NASDAQ13:40100 via QQQ was bouncing between 700 and13:43710. We are now riding above 735, which13:47is a bullish indicator that we might be13:49getting to all-time highs13:51by next Friday.13:53And we believe that today would be quite13:55bullish when we put together our Alpha13:57report. And so far the NASDAQ 100 has13:59been moving exactly the way we14:01anticipated. We also indicated a14:03software rebound today in our Alpha14:05report. Remember, you can always join us14:07in the Alpha report. We actually have a14:10new coupon code on our new website. You14:11should go check it out. Uh but we have14:14what's called Reinvest One, super14:16intelligence in one terminal. You can go14:19to meetkevin.com or meetreinvest.com.14:21Doesn't matter. Uh but what we're14:23offering now is lifetime access to14:26everything we have.14:28The Alpha reports, all of the courses,14:30the terminal that's launching in Q4,14:33uh Homes AI, Stock AI, absolutely14:36everything for one price. Uh and we will14:39be ending lifetime access to that uh at14:42the end of the year, but you can get14:44everything in in one price. The Alpha14:46membership, the trade alerts,14:48uh Reinvest stocks, Homes, uh Reinvest14:51Homes, uh all nine courses, the course14:54member live streams, plus we've got14:56another special course coming out in Q114:59of '27. That'll also be included in15:02Reinvest One. So we're really excited.15:04We really love the rebrand we've done15:05with the website, too. So go check that15:07out. Uh and there's a coupon you can15:08take advantage of there. And you'll be15:10part of those course member live streams15:11every morning.15:13Uh that said, let's now understand some15:14of this economic data. So while Donald15:17Trump is kind of messing around uh15:19taking his time, if you will, {quote}15:21{unquote} negotiating. We are15:23unfortunately seeing an uptick in the15:265-year break even, and we are seeing a15:28move up in the 10-2 yield curve, which15:33does put us closer to shock territory.15:36This right there was the 5-year break15:38even. This is the 5-year 5-year. Both of15:40them on the right side of the chart have15:42moved up recently. Now, why would15:44inflation expectations move up? Well,15:47you have this unfortunate duality where15:49you two things going on right now.15:52Whoops, dropped one of the whiteboards.15:54It's all right. I got the giant15:55whiteboard right here.15:57All right, two things are going on right15:58now. Actually, you could even call it16:00three things. So, three things16:02happening. One,16:04you just had Williams basically bail out16:09market predictions about rates,16:11basically suggesting that we can afford16:13to wait on hikes. That is a form of16:16trying to get Treasury yields to come16:18down.16:19Number two, Treasury Secretary Bessen16:23just came out and said, "Hey boys and16:25girls, guess what? We're going to buy $616:28billion of 10-20 year debt on October16:331st. We're going to go buy back bonds16:36and rearrange the debt we have."16:38On top of that, we have Trump delaying.16:43And then on top of that, we have strong16:47economic data.16:49Okay, we're going to go through that16:50strong economic data in just a moment.16:52But when you put this together, this is16:54freaking crazy.16:56This is a lot of pressure on yields17:00up.17:02All of the pain ends when Trump stops17:05taking his sweet damn time negotiating.17:08I don't blame him, okay? I'm not being a17:10little weenie baby trying to complain17:11going, "Just make a deal so the stocks17:13go up." I I we're already aware of this.17:16In fact, this is what we've talked about17:18in the course member live streams that17:19look17:20expect a deal before midterms.17:22Don't expect when before midterms. We17:25don't know when. It could be the day17:27before, it could be a week before, it17:29could be tomorrow. We don't know.17:31But all of that is on the table. So,17:33Donald Trump delaying is totally fair17:36game.17:37The market, by the way, is already17:39starting to price in that this deal is17:41more and more likely by the day. Keep in17:44mind, 2 weeks ago when I called for peak17:46fear, the Nasdaq 100 was at $700. I sent17:50a buy alert and I said, "Look, we're17:51putting like 250 grand right here when17:54the Nasdaq 100 is at 100."17:57Uh or sorry, it's at 700 because this is17:59a critical bounce level. Look at where18:01the Nasdaq is right now. This is an18:02index level. It's at 744 right now.18:05That's all included, by the way, in the18:07Reinvest One subscription. We just found18:10like if we have too many products and we18:13have so many really good products that18:16it's just easier to say, "Look,18:19lifetime access, you pay one time, no18:23recurring fees, you get everything in18:27one bundle. Next year, we'll probably do18:31like a join fee like Reinvest One plus a18:34monthly fee, but that'll be starting uh18:36likely in January.18:38Uh and so that way people who join18:40between now and the end of the year can18:41still get lifetime access.18:43Uh so what you have here is the delay18:46creates uncertainty in the Treasury18:48market. Bessent rearranging the debt18:51implies they've lost the plot.18:53Williams saying we'll wait on rate hikes18:56is basically like a way of saying, "Hey,18:58we know a deal is coming. Trump is19:00probably calling the Fed saying a deal19:02is coming. Don't raise rates at the end19:04of October, please. Everything's going19:06to be better once we make a deal."19:08Starts signaling that.19:10But But problem is markets want the19:12reality. They want this to actually19:13happen. Especially when you have really19:15strong economic data.19:17So what happened with economic data?19:21All right. So here's what happened with19:23economic data. And and this is actually19:25quite remarkable.19:27We expected a 75,00019:30read on the ADP employment report, which19:32would average just under 20,000 jobs per19:34week.19:35Which is great. It's a fantastic rebound19:37from the hole that we had this summer.19:39I said that as long as the report comes19:41in close to that 70 to 75,00019:44job estimate, but not more than 100,000,19:47we're going to go bullish on the market19:49today. This is what we said yesterday19:52in our course member live stream in19:53anticipation of the data today. This is19:55what you could get in the Alpha report19:57as well every day before the market19:58opens up.19:59Today we got 90. Which is bullish,20:01bullish, bullish. We got a 90,000 read,20:04and you can though see20:06some areas of concern starting. The20:10areas of concern are financial20:12activities and professional20:13and business services. These combined20:15lost 27,000 jobs. This is not good20:19because to me it's an early sign of20:21artificial intelligence causing job20:23losses.20:25Overall, in aggregate, we are more than20:27offsetting that by more hiring in20:29leisure and hospitality. People feel20:31richer, they're spending more money,20:32they're spending more money on cruises,20:34they're spending more money on travel,20:35they're spending more money on hotels,20:37they're spending more money on health20:38care, education, health care, or20:40otherwise other services. A lot of20:41hiring going on over here as well as the20:44artificial intelligence boom leading to20:46hiring in construction and20:47manufacturing. And so you could see if20:50AI saw a slowdown in construction and20:53manufacturing, you'd actually probably20:55be negative over here in construction20:56and manufacturing. Then you'd be20:58negative in financial and business20:59services because of the AI impact. And21:01then you probably wouldn't have as many21:02people spending money on leisure and21:04hospitality, and you would probably have21:05a very opposite report. But, what you21:08have right now is actually broad-based21:09hiring. 18,000 amongst smaller21:12employers, 14,000 amongst large,21:14mid-sized, 18 to 36,000, five over here21:17for 20 to 49. You know, we're a small21:20business, and we just hired more people21:22as well. We just hired three people. You21:24know, that's that's our startup21:25Reinvest, right? We we21:27build uh artificial intelligence21:30products like the Reinvest One21:32membership for stocks and real estate.21:34We reinvest that into real estate.21:37That's why we named the business21:38Reinvest. It used to be House Hack, and21:40people are like, "Why'd you Why'd you21:41change the name?" It's like, well, cuz21:43House Hack was only real estate, but now21:44we do so much regarding memberships and21:47software development and uh stocks and21:50housing all together.21:52And then we take extra money and21:54reinvest it into the real estate. That's21:55sort of where the name came from. So, we21:56we really like that name. Uh but anyway,21:59so, what we think is interesting here is22:01not only did the ADP data come in strong22:03this morning, but the Chicago MNI data22:06came in strong this morning. So, this22:08read came in here indicating uh the22:11fastest pace of expansion since May.22:15Uh indicating production up, new orders22:17up, supply and deliveries up, backlogs22:19up. They did see a little bit of22:21softening in employment uh in their22:23employment read, but people look at the22:25Chicago Business Barometer as a somewhat22:28a leading indicator for the economy. I22:30don't really consider it a leading22:32indicator, but they consider themselves22:33a leading indicator. Maybe they're a22:35little biased.22:36But, the point is, the underlying22:37economic data actually came in stronger22:40than expected this morning. Not only did22:42the underlying economic data come in22:43stronger than expected this morning, but22:45if you look at uh what happened with22:47PCE, a lot of folks were asking me,22:49"Kevin, are you worried about PCE22:51tomorrow?" And I answered this also22:53yesterday both on the live streams and22:55our Alpha report, I said, "No." Why?22:58Because PCE is made up of CPI and PPI.23:03Okay, we already have those two, the23:04consumer price index and the producer23:06price index. We already have the two23:07components, so we know what the top of23:09the triangle is going to look like23:10already. Except, not only did I I23:13expected it to come in at expectations.23:15It didn't just come in at expectations,23:16it actually came in better than23:18expectations. So, we ended up getting,23:20let me pull up the exact data here. Uh23:22on core month-over-month we were23:24expecting 0.3, we got 0.2. Lower23:26inflation on the core level, which is23:28exactly what you want. Core23:29year-over-year came in at three versus23:313.3.23:33That's lower than expected. That's23:34great.23:35You also got year-over-year23:39non-core that came in at 3.4 versus 3.7,23:43which was the expectation. 3.7 was also23:45the prior read, which was revised down23:48to 3.4.23:50Uh the prior PCE month-over-month level23:53was revised down from 0.2 to 0.1.23:57So, think about for a moment what you23:58had.24:00You actually had24:02employment data and24:06uh economic data. So, economic data came24:09in better than expected. Inflationary24:12data came in better than expected, lower24:16than expected. Jobs data24:19came in better than expected. All of24:21these things are bullish24:24for the economy.24:26The problem is24:28Bessent has no control over the Treasury24:31market right now because everybody just24:33wants a Trump deal. The problem is Trump24:35is delaying to get a better deal.24:39Got to let him do what he does, you24:40know, that's what he does.24:42Uh Williams and the Fed bailout, that's24:45great that they're indicating, "Hey,24:47we're not definitely going to hike in24:48October." That's fine, and that's24:50probably contributing to some of the24:52rise we're seeing in stock market, but24:53to meaningfully get yields down, we24:55still need this.24:56Because then we can actually have a24:58situation where the economy is doing25:00very well, which is bullish,25:02and yields can come down because the25:04pain of the Iran situation can fade.25:08So, putting all of that together,25:12you have an explanation for why you have25:16such good performance in so many of25:18these stocks today. I mean, look at25:19this. Snowflake up 4%, Salesforce up 3%.25:23We talked about this in our Alpha report25:24this morning that expect a rebound in25:27these software names.25:29SpaceX up one, Microsoft another two,25:31Apple up two five. Also, and and and you25:35can literally see these because we we25:37document these uh every single day.25:39This morning, we were also bearish on25:42AMD.25:43And AMD is down under where we were25:46bearish on it. And we actually talked25:48about selling calls on this uh at around25:50the 618 level. Uh so,25:54look, I I I know sometimes it could be25:57overwhelming uh with you know, how much25:59we do on the channel. I think the26:01easiest thing to know is if you go to26:04meetkevin.com,26:05you can get absolutely everything that26:08we have to offer. The Alpha membership26:10you get every single morning. You get26:12the trade alerts uh when we make them.26:14So, that's like sold puts, portfolio26:16allocations, the stocks we like to buy,26:19our fundamental analysis, our technical26:21analysis, our stocks platform, which26:23this is going to be part of our new26:25reinvest terminal that's coming out in26:27the fourth quarter. It's not out yet.26:29So, we have a whole new platform coming26:30out with a lot of really good data. I26:33mean, we think it's going to be like26:36a consumer grade version of the26:38Bloomberg terminal, but I think the data26:40in it will be better than the Bloomberg26:42terminal for a fraction of the price. Uh26:44plus all of the other things like the26:46courses and all of that. See, look at26:47this. The Bloomberg terminal costs26:50$2,500 per month.26:52You get lifetime access26:54to this for a fraction of the price. So26:57we think we have a very competitive26:59product and we're really [music] really27:00excited about what what we're building27:02with with Reinvest One. The Alpha27:04membership, Reinvest Homes, Reinvest27:06Terminal, all in one. And that terminal27:08is launching in Q4. So we don't even27:10have all the exciting products out yet.27:12So we're really really excited about27:13that. So go check that out27:15at meetkevin.com. If you like that27:17video, check this one out. I think27:19you're going to love it.27:20>> Why [music] not advertise these things27:21that you told us here? I feel like27:22nobody else knows about this.27:23>> We'll we'll try a little advertising and27:25see how it goes.27:26>> Congratulations, [music] man. You have27:27done so much. People love you. People27:28look up to you.27:29>> Kevin Paffrath, the financial analyst27:31and YouTuber, Meet Kevin. Always great27:33to get your [music] take.
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