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Cliff Notes: SIGNS OF A RECESSION · Earn Your Leisure

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  Speaker 2: Let's get into this.
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  Speaker 3: So do you you talked about they curve a lot,
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  Speaker 3: the yell curve inverted this past week? What does that
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  Speaker 3: mean for the economy and the stock market? A Do
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  Speaker 3: you want to just explain what the yell curve is?
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  Speaker 2: Yeah?
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  Speaker 4: So, when the so let's say if you have a
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  Speaker 4: two year bond and a ten year bond. Normally, what
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  Speaker 4: happens investors will put more money into the ten because
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  Speaker 4: the longer term investment usually pays or yields gives more.
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  Speaker 4: And when it inverts, when the two year begins to
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  Speaker 4: pay more, that's when we.
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  Speaker 2: Know there's a sign of a recession.
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  Speaker 4: So last year, ironically enough, on a marked keeping episode,
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  Speaker 4: which is one year from last week, we talked about
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  Speaker 4: that being the second most important indicator. So the top
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  Speaker 4: three indicators are quantitative easy from the Federal Reserve that's
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  Speaker 4: gone away, Number two, the inverted yell curve, and then
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  Speaker 4: number three holding in the market for twenty years. So
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  Speaker 4: the two curves that matter the most, please write this
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  Speaker 4: down the two year and ten So that's one pair
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  Speaker 4: and a five and thirty. So if both of those
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  Speaker 4: ever across to zero or blow and we're going to
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  Speaker 4: have a terrible recession. Now one of them hit last week,
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  Speaker 4: please put in chat which one it was. But if
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  Speaker 4: we have we see the two and tenure bond drop
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  Speaker 4: and the five and thirty drop and they cross underneath,
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  Speaker 4: that is a sign that a recession is gonna come now,
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  Speaker 4: So lagging indicator. So it doesn't mean that the next
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  Speaker 4: day is gonna immediately go into recession. It takes around
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  Speaker 4: twelve to sixteen months for a recession.
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  Speaker 2: To kick in.
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  Speaker 4: But when I did my analysis, I have it at
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  Speaker 4: eleven months before we hit potential recession area in the market,
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  Speaker 4: So please keep your eye on that.
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  Speaker 2: But those are the two that mattered the most.
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  Speaker 4: Now I know, Jamal this week talked about the three
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  Speaker 4: month and the eighteen month is less reliable. It's like
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  Speaker 4: the equivalent of trading like on a one minute chart.
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  Speaker 4: It's like it can flicker. Is not the most important,
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  Speaker 4: but if all three hit, you have a one hundred
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  Speaker 4: one hundred percent guarantee for a recession. But I look
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  Speaker 4: at the two and the ten and five and the thirty,
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  Speaker 4: those are the two most two parents of the R curve.
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  Speaker 5: Yeah, that's interesting because you said that most people say
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  Speaker 5: twelve to eighteen months, and so there's there's plenty of
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  Speaker 5: analysts who are saying that this year could still be
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  Speaker 5: a positive year, right, And even if you count that right,
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  Speaker 5: there's still eight months left in this year, so that
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  Speaker 5: can still happen and we can still be headed toward recession.
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  Speaker 2: Territory.
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  Speaker 3: So you're saying that's going to get worse. You think
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  Speaker 3: the ecomomy is going to get worse.
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  Speaker 2: I think we're gonna spike up.
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  Speaker 4: And we can segue from one of your favorite conversations
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  Speaker 4: with politics. And then after we have the midterms, because
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  Speaker 4: Biden's approval rate is solo, the probability of the Democrats
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  Speaker 4: keeping those seats right now is less than probably thirty percent.
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  Speaker 4: And then usually I want you to we talked about
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  Speaker 4: it maybe last year, but does do we have a
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  Speaker 4: greater chance of going into a recession if we have
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  Speaker 4: a republican lead or democratically? Historically it has been republican.
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  Speaker 4: So when you study the cycles of everything, you understand,
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  Speaker 4: given the economic climate that we're in, plus mismanagement of
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  Speaker 4: presidential cabinet and some of the economic affairs, the Russian
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  Speaker 4: Ukraine situation, quantitative ease and going away when this power
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  Speaker 4: grabs shifts, I think we'll going for the rest of
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  Speaker 4: the year. But then that year would be pretty tumultuous,
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  Speaker 4: to say the least.
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  Speaker 5: All Right, So, I mean Friday was the beginning of
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  Speaker 5: the second quarter. So let's just I'm going to give
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  Speaker 5: you some statistics, really crazy so people understand how what
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  Speaker 5: we look like for the first quarter this year. So
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  Speaker 5: the DAD was down four point six percent, SMP was
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  Speaker 5: down five percent, and you know our favorite, one of
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  Speaker 5: our favorites, the nastack was down nine percent for the
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  Speaker 5: first quarter. However, however, April is historically the best month
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  Speaker 5: of the year for stocks.
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  Speaker 2: Now March kind.
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  Speaker 5: Of brought us backward. That we were way lower than
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  Speaker 5: nine percent, five percent and four point six So the
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  Speaker 5: S and P has averaged over the past since World
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  Speaker 5: War Two, a one point seven percent gain in the
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  Speaker 5: month of April. So that's seventy percent of the time
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  Speaker 5: on average, it has about it in April, depending on
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  Speaker 5: how the first quarter went. Now, the interesting you brought
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  Speaker 5: thing you brought up just now was the midterm election.
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  Speaker 5: When there are midterms, I think like sixty percent of
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  Speaker 5: the time, the second quarter usually is down and.
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  Speaker 2: Then the third quarter.
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  Speaker 5: Now, so these are this conflicting indicated.
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  Speaker 2: But it's interesting.
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• 8:08
  Speaker 5: Because usually, like we said, April is the best month,
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  Speaker 5: and we kind of saw that last year a little bit,
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  Speaker 5: and then May kind of you know, went down, and
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  Speaker 5: we saw a June there was a spike again, so
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  Speaker 5: interesting to keep your eyes on.
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  Speaker 4: Yeah, and if you're looking at the short term horizon,
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  Speaker 4: that may be scary, but if you're looking at the
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  Speaker 4: long term one year, two year, three, you're going to
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  Speaker 4: be fine. Also, hedge funds had an inclination to buy
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  Speaker 4: in the middle of March and towards the end of March,
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  Speaker 4: so that's why we started to see a ramping up
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  Speaker 4: where January and February it felt like who was just
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  Speaker 4: like falling off of the empire built state building, and
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  Speaker 4: then March we took off to the upside. Same with
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  Speaker 4: on booking buying, so on Mondays and Fridays after hours
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  Speaker 4: is when most our institutions will begin to buy in
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  Speaker 4: a never midday, so when you know they're buying.
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  Speaker 2: Towards the end of that quarter cycle.
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  Speaker 4: That was some of the reason we got some of
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  Speaker 4: the ramp up, like wants to fear and stuff went
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  Speaker 4: a way, but you keep your eyes over the next
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  Speaker 4: couple of months. If you're new to investment, I know
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  Speaker 4: this may be scary, but please just hold.
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  Speaker 2: For the long term. We have to.
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  Speaker 4: We have the same considerations and concerns during uh the
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  Speaker 4: election with Trump and Biden, and everyone was worried and
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  Speaker 4: then we just took off to the upside. So if
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  Speaker 4: you hold for the long term, it really won't matter. Yeah,
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  Speaker 4: these next three or four months will be pretty interesting,
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  Speaker 4: to say the least.
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  Speaker 5: Yeah, the most most analysts are predicting anywhere between point
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  Speaker 5: seven to one percent increase in the SMP. Well some
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  Speaker 5: people even saying that, you know, they could end at
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  Speaker 5: fifty one hundred by the end of the year. But
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  Speaker 5: that's still like you said, if recessions are lacked and
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  Speaker 5: they go anywhere from twelve to sixty eighteen months out,
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  Speaker 5: we can still be in that. So just everybody just
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  Speaker 5: be mindful of that. And so another thing, another thing.
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  Speaker 5: So I know a lot of times.
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  Speaker 2: People like can be time, When when should we invest?
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  Speaker 2: What's the best time to invest?
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  Speaker 5: If you invested, I believe it was February twenty fourth
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  Speaker 5: or twenty twenty two this year when NASA, I know
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  Speaker 5: the S and P got to it though, you've actually
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  Speaker 5: made an increase on so you know what I mean.
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  Speaker 5: Like when we talk about watching charts and then just
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  Speaker 5: get your points of when you're gonna buy in, this
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  Speaker 5: is exactly what we're talking about. So you could be
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  Speaker 5: having a great year right now based on everything that
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  Speaker 5: we're saying, even with all the industries being down. If
• 10:08
  Speaker 5: you got in at that point, you're up a pretty
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  Speaker 5: good percentage.
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  Speaker 4: Absolutely, And anytime anyone panics, it is your chance to
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  Speaker 4: profit as long as you get in at a good price.
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  Speaker 4: So for example, like that amazing hoodie with shot has
• 10:21
  Speaker 4: on and we' on sale for nine bucks, the upside
• 10:26
  Speaker 4: is infinite because I'm sure it's retelling for one fifty
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  Speaker 4: two hundred. Everything is about the price that you get
• 10:33
  Speaker 4: in plus length of time that you're willing to hold.
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  Speaker 4: So if you better bought that bad price, you've got destroyed.
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  Speaker 4: But the same thing I said in the eighty five
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  Speaker 4: South interview, I'm like, hey, tuls is going to drop
• 10:41
  Speaker 4: the eight forty three as of today, it was a
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  Speaker 4: onenty twenty four. When everyone else's panicking over good assets,
• 10:49
  Speaker 4: you should be looking to buy and that's how you'll
• 10:51
  Speaker 4: be able to make money even when most people are
• 10:53
  Speaker 4: losing in the current market.
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  Speaker 3: Yes, so let's let's go into this. What are some
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  Speaker 3: other signal for a recession to look out for when
• 11:01
  Speaker 3: things are getting bad?
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  Speaker 4: So number one, when valuations the startups are being cut.
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  Speaker 4: So like, for example, instacart, the value got about thirty
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  Speaker 4: eight percent on March twenty fifth.
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  Speaker 2: The business model of Instacart hasn't changed.
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  Speaker 4: And let's be honest, if you looking at top line
• 11:17
  Speaker 4: revenue or bottom line revenue, that hasn't changed much. But
• 11:20
  Speaker 4: people were chasing. So same with momentum stocks. Everyone was
• 11:23
  Speaker 4: chasing at a high. The same thing was happening in
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  Speaker 4: VC and Angel and the other indicator.
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  Speaker 2: That have a Federal Reserve probability recession model that you
• 11:36
  Speaker 2: look at.
• 11:36
  Speaker 4: If you just go to Google, you can just put
• 11:38
  Speaker 4: recession probability model and updates the thing every two months.
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  Speaker 4: But they'll tell you the probability in which we have
• 11:44
  Speaker 4: a chance of going into a recession. So if you
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  Speaker 4: compare that two year and ten, five and thirty and
• 11:49
  Speaker 4: if you look at the startup vehicles and see how
• 11:52
  Speaker 4: many are increasing in value or decreasing. Plus with this
• 11:55
  Speaker 4: probability model and listening to market mondays, you should.
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  Speaker 2: Never get confused when we're going to hit a recession.
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  Speaker 4: But those are like the main four that I will
• 12:02
  Speaker 4: look at to tell if we're going to have like
• 12:04
  Speaker 4: a full on collapse in the market. My graduates from
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