This Won’t End Well
Summary
TLDRThis video discusses the rising probability of a hard landing recession and its potential impact on tech stocks like Tesla, Palantir, PayPal, and SoFi. It highlights market trends indicating big players are preparing for a downturn, with a significant increase in demand for put options. The video also explores various economic indicators, the manufacturing sector's decline, and the historical 'September effect' on stock performance. It concludes by suggesting that informed investors can find opportunities in market dips and invites viewers to a free trading workshop for further insights.
Takeaways
- 📉 The risk of a hard landing in the economy has doubled in the last five days, indicating a significant downturn is being anticipated by market players.
- 🐾 Winston, the 'four-legged financial analyst,' has identified a surge in demand for 'wingy puts,' which is a sign of panic buying in insurance against market falls.
- 📈 Despite market uncertainty, a specific strategy has been revealed to have yielded impressive results, with teaching portfolios up 80% this year.
- 🌪️ Economic indicators are signaling a 'perfect storm,' with a renewed demand for put options on the US Stock Market, indicating big players are preparing for a downturn.
- 💹 The Secured Overnight Financing Rate (SOFR) is a vital economic indicator that reflects the health of financial markets and is currently showing signs of a looming economic storm.
- 📊 A 24% chance of the Federal Reserve slashing interest rates by 1.5% or more by December is suggested by SOFR, which is a dramatic increase from a week ago.
- 📉 Three key economic indicators are showing red flags: a weakening US dollar, falling treasury yields, and a downward trend in crude oil prices, all signaling potential recession.
- 📊 The equity index skew is steepening, indicating that investors are seeking more downside protection, which is a sign of concern about the market's direction.
- 🏭 The manufacturing sector is showing signs of contraction, with the S&P Global flash PMI dropping to 48, a level that indicates a recession.
- 🛍️ While the services sector is resilient, the divergence between manufacturing and services is causing confusion for policymakers and investors.
- 🗓️ The 'September effect' is a historical phenomenon where September has been the worst month for stock market performance, which could be exacerbated by current economic indicators.
Q & A
What is a 'hard landing' in the context of the economic discussion in the script?
-A 'hard landing' refers to a scenario where the economy experiences a sharp and sudden downturn, often leading to a recession. It is likened to a pilot trying to land a plane in severe turbulence, with the runway getting shorter each day, indicating increasing difficulty and risk.
What does the script suggest about the recent increase in the demand for 'wingy puts'?
-The script indicates that there has been a significant increase in the demand for 'wingy puts,' which are put options on the US Stock Market. This suggests that big players are betting on a downturn and are buying insurance against market declines, signaling a potential significant downturn in the economy.
What is the significance of the secured overnight financing rate (SOFR) mentioned in the script?
-SOFR is a key economic indicator that reflects the health of financial markets. It represents the interest rate for short-term loans backed by US Government debt and serves as a benchmark for a wide range of financial products. An increase in SOFR suggests market expectations of a possible economic downturn.
How does the script describe the current state of the US dollar and its implications?
-The script suggests that despite its reputation as a safe haven, the US dollar is showing signs of weakness, which is often a harbinger of economic trouble. This, along with other economic indicators, is fueling fears of an impending recession.
What does the script reveal about the manufacturing sector's current health?
-The script reveals that the manufacturing sector is currently weak, with the S&P Global flash PMI data for August showing a significant drop. A PMI reading below 50 indicates contraction, which is a sign of a potential recession in the sector.
What is the 'September effect' discussed in the script, and why is it significant for investors?
-The 'September effect' refers to the historical tendency for stock market performance to decline in September. Since 1950, the S&P 500 has on average declined during this month, making it the only month with a negative average return over an extended period. This phenomenon is significant for investors as it represents a potential risk period that requires careful planning and consideration.
How might a recession impact Tesla according to the script?
-The script suggests that Tesla, being in the consumer discretionary sector, could be vulnerable in a recession as people might postpone big purchases like cars. However, Tesla's dominant position in the EV market, government incentives for EVs, diversification into energy products, and substantial cash reserves could provide some resilience.
What challenges does the script foresee for PayPal in a potential recession?
-The script suggests that PayPal might face challenges due to reduced consumer spending, which could negatively impact transaction volumes. However, the shift towards digital payments accelerated by the pandemic and PayPal's diverse product offerings could help maintain user engagement and potentially offset some of the downturn's effects.
How does the script analyze the potential impact of a recession on Palante?
-As a data analytics company with significant government contracts, Palante might be less affected by economic cycles than consumer-focused companies. However, a recession could lead to reduced government spending or delays in corporate digital transformation projects, potentially slowing down Palante's revenue growth.
What opportunities does the script suggest for investors amidst economic challenges?
-The script suggests that every market dip and economic challenge presents an opportunity for prepared investors. It compares it to being a savvy shopper at a sale, where one can get more value for their money. It encourages investors to keep a cool head, make informed decisions during downturns, and take advantage of lower prices to invest in quality companies.
Outlines
📉 Economic Turbulence and Market Trends
The video discusses the increased likelihood of a hard landing recession and its potential impact on tech stocks like Tesla, Palantir, PayPal, and SoFi. The speaker introduces Winston, a 'four-legged financial analyst,' who has identified alarming market trends, including a surge in demand for put options, indicating a significant market downturn. The speaker highlights a 100% increase in the probability of a hard landing within five days, driven by a 'perfect storm' of economic indicators. The discussion includes the secured overnight financing rate (SOFR), which serves as a vital economic health indicator, and its implications for market expectations. The video also covers other economic indicators such as the US dollar, treasury yields, and crude oil prices, all of which are signaling potential economic trouble.
📈 Market Indicators and Economic Concerns
The script delves into the equity index skew, which shows investors are seeking downside protection, suggesting a potential market downturn. The video mentions critical events such as the Jackson Hole Symposium, Nvidia earnings, nonfarm payrolls, CPI data, and Fed decisions, which could trigger economic changes. The manufacturing sector is highlighted as a leading economic indicator, with the S&P Global flash PMI data indicating a contraction. The services sector, in contrast, shows resilience. The video discusses the manufacturing orders to inventory ratio, suggesting potential production cuts and layoffs. The global impact of a US manufacturing slowdown is also considered, emphasizing the interconnectedness of supply chains. The 'September effect' is introduced as a historical phenomenon where stock market performance tends to decline, with various theories offered to explain this trend.
🚗 Impact on Tech Stocks and Investment Strategies
The video examines how Tesla, Palantir, PayPal, and SoFi might fare in a recession. Tesla's position in the EV market and potential government incentives could provide resilience, while Palantir's government contracts might make it less sensitive to economic cycles. PayPal could be affected by reduced consumer spending but could also benefit from the ongoing shift to digital payments. SoFi faces challenges due to increased loan defaults and reduced demand for new loans but its banking charter and focus on tech-savvy consumers might offer some protection. The video emphasizes the importance of being vigilant and prepared, suggesting that every market dip presents an opportunity for investors who can make informed decisions.
💡 Embracing Market Dips and Opportunities
The speaker reflects on the potential opportunities that arise from market dips and economic challenges, likening it to savvy shopping during a sale. They discuss the unpredictability of the economy, influenced by factors such as federal actions and government spending. The video suggests that regardless of political outcomes, spending and tax policies will likely affect the market. The speaker invites viewers to join a beginner trading workshop to learn more about navigating market downturns and achieving positive results, as evidenced by an 80% increase in their teaching portfolio. The video concludes with an invitation to join the workshop and a reminder to stay informed about market movements.
Mindmap
Keywords
💡Hard Landing
💡Wingy Puts
💡Secured Overnight Financing Rate (SOFR)
💡Economic Indicators
💡Equity Index Skew
💡Manufacturing PMI
💡Orders to Inventory Ratio
💡September Effect
💡Consumer Discretionary Sector
💡Fintech
💡Investment Opportunity
Highlights
The chance of a hard landing in the economy has doubled in the last five days.
A hard landing recession could significantly impact tech stocks like Tesla, Palantir, PayPal, and SoFi.
Market trends indicate panic buying of 'wingy puts', signaling big players are preparing for a downturn.
An 80% increase in teaching portfolios this year through a specific strategy.
A hard landing isn't just financial jargon; it's a scenario that could reshape the economic landscape.
The probability of a hard landing stood at 12% a week ago and has now doubled.
Economic indicators are pointing towards a perfect storm driving the alarming shift in the economy.
The secured overnight financing rate (SOFR) is a vital sign of the health of financial markets.
A 24% chance that the Fed will slash interest rates by 1.5% or more by December indicates a potential economic storm.
Three key economic indicators are flashing red: the US dollar showing weakness, treasury yields dipping, and crude oil prices on a downward trend.
The equity index skew is firming up, indicating investors are scrambling for downside protection.
Critical events such as the Jackson Hall Symposium and Nvidia earnings could ignite the economic downturn.
The manufacturing sector is showing signs of contraction, acting as a leading economic indicator.
The services sector is showing resilience, contrasting with the manufacturing sector's decline.
The manufacturing orders to inventory ratio suggests potential production cuts and layoffs.
The global nature of manufacturing means weakness in one region can spread worldwide.
The September effect is a historical phenomenon where September has been the worst month for stock market performance.
Tesla's position in the EV market and cash reserves could provide resilience in a recession.
Palantir's government contracts might make it less affected by economic cycles.
PayPal could be impacted by reduced consumer spending but may benefit from the shift towards digital payments.
SoFi could face challenges due to increased loan defaults and reduced demand for new loans in a recession.
Despite potential challenges, the innovative nature of these companies could provide insulation from economic headwinds.
Market dips and economic challenges present opportunities for prepared investors.
Transcripts
the chance of a hard Landing just
doubled in the last five days by the end
of this video you will know how a hard
Landing recession would impact your
favorite tech stocks including Tesla
palena Sofi and paper so you are
prepared for whatever the future might
bring now my four-legged financial
analyst Winston has been working over
time sniffing out the latest market
trends and I must say what he's
uncovered is rather alarming we're
witnessing an unprecedented search and
demand for wingy puts basically Panic
buying of insurance in case the market
tumbles and this isn't just Market noise
it's a clear signal that big players are
bracing for a significant downturn but
amidst this looming chaos there is a
silver lining you see while researching
these market trends we stumbled upon a
strategy that has been yielding rather
impressive results our teaching
portfolios up 80% this year alone fancy
learning how we achieved this for free
zero requirement you don't need to know
a thing well come and join my 2hour
beginner trading Workshop this coming
week link is down below and I'll break
it down for you exactly how we do what
we do but let's dive into the eye of
this economic storm a hard Landing isn't
just a financial jargon it's a scenario
that could reshape our economic
landscape imagine a pilot trying to land
a plane in severe turbulence that's our
economy right now and the runway is
getting just a little bit shorter every
single day just one week ago the
probability of this hard Landing stood
at 12% today it's doubled it's 100%
increase in just 5 days but what's
driving this rather alarming shift the
answer lies in a perfect storm of
economic indicators let's go through
them so you understand better what's
going on there than 99% of people first
we're seeing a renewed demand for what
Traders call wingy puts and these are
put options on the US Stock Market in
simple terms big players are betting on
a downturn in they're ensuring against
that event but that's just the tip of
the iceberg dig deeper we have a beating
heart of our financial system suffer no
that's not a new breed of dog that
Winston's been chasing Sr stands for
secured overnight financing rate and
it's I know it's what you discuss every
single morning with your children
Darlings how is the secured overnight
financing rate this morning um but on a
serious note it's kind of the PS of the
economy it's a Vital sign that tells you
how healthy our financial markets are so
what exactly is it well if you are a
bank imagine you were a bank and you
need to borrow money overnight to keep
operations running smoothly Sofer is an
interest rate or Sofi I should just call
it is an interest rate for these
short-term loans backed by US Government
debt it's like the cost of a quick
Financial energy boost for banks bit
like one of these electrolite thingies
I've got here now why would you care
about this seemingly obscure rate
because it's the Benchmark for
everything from mortgages to complex
Financial products it's the foundation
upon which trillions of dollars of
financial products are built but here is
where it gets crucial for our current
economic situation sofr doesn't just
tell us about overnight loans it gives
us a window into Market expectations and
right now that window is showing us a
storm on the horizon it's telling us
that there is a 24% chance that the
fed's going to slash interest rates by
1.5 percentage points or more by
December a week ago that was less than
half it's a fairly dramatic shift and to
put that into perspective a rate cut of
one and a half percentage points is
massive it's the kind of action central
banks take when they're genuinely
worried about an economic downturn it's
like a doctor reaching for the
defibrillator is that the word uh you
only do that when things are fairly
serious right you're not saying you've
got a cough have you you know hopefully
he doesn't do that now let's zoom out
and look at the bigger picture
three other key economic indicators are
flashing red the US dollar despite its
reputation as a safe haven it's showing
signs of weakness treasury yields
they're dipping often a harbinger of
economic trouble and then three crude
oil prices they're on a downward Trend
signaling decreasing Global demand which
would only happen in a recession
together these indicators are fueling
fears of a looming recession but there
is more the options Market is giving us
even more cause for concern we're seeing
something called the equity index skew
firming up put skew is re steepening
okay in layman's terms investors are
scrambling for downside protection
that's basically it and all of this is
building towards a potential unpleasant
scenario as we approach
September but it gets a little bit more
concerning and don't worry it's not all
bad news but I need you need to
understand these Basics so that we can
get to how do we make money out of this
if certain market levels are breached we
could see what's called an accelerant
flow in the downside sort of a domino
effect where one fall triggers a Cascade
of selling and all of this is happening
against the backdrop of critical events
the Jackson Hall Symposium just behind
us Nvidia earnings nonfarm payrolls CPI
data fed decisions they're all happening
right now and each of these has to
potential to be the spark that ignites
our economic powder kick now let's turn
our attention to what many consider the
backbone of our economy the
manufacturing sector and I'm afraid the
prognosis isn't that good the latest S&P
Global flash PMI data for August paints
a rather Grim picture the manufacturing
PMI has plummeted to 48 an 8mon low for
those unfamiliar PMI stands for
purchasing managers index and any
reading below 50 indicates contraction
read recession now while manufacturing
is stumbling the services sector is
showing remarkable resilience the
services business activity is at 55 a
two-month High a stock a stack contrast
is creating an economic tuck of War
that's keeping policy makers up at night
which way is it going to go but why does
this matter so much because
manufacturing isn't just any sector it's
a leading economic indicator think of it
as the canary in the economic Coline
when manufacturing sneezes the rest of
the economy often catches a cold
historically significant declines in
manufacturing have often preceded
broader economic downturns it's like
watching the first domino fall in the
complex economic Chain
Reaction but there is another piece to
this puzzle that's equally troubling
manufacturing orders to inventory ratio
this ratio tells us about the balance
between new orders coming in and the
stock of goods manufacturers have on
hand currently this ratio is at rather
concerning levels it suggests that
manufacturers are sitting on more
inventory than they have orders for and
this could lead to production Cuts
layoffs and a further slowdown in the
sector the impact of this manufacturing
slowdown isn't confined to factory flow
it ripples to the entire supply chain
affecting everything from raw material
suppliers to logistics companies and
timy and ultimately it could hit the
consumer in the form of reduced product
availability and potentially higher
prices so you get to get a slowing
economy and higher prices the worst of
both ones moreover this isn't just a
domestic issue manufacturing is a global
game and weakness in one region can
quickly spread to others the
interconnect nature of modern Supply
chains means that hiccups in one country
especially when that country is as big
as the US can cause disruptions
worldwide now while the service sector
is currently propping up our economic
growth we can't ignore the warning signs
for manufacturing it still accounts for
a significant portion of US GDP and
employs millions of people so what does
it mean for investors it means we need
to be vigilant the difference between
manufacturing and services creates a
compx Le Lex landscape that requires
careful planning but there is another
Factor at play one that has historically
made investors nervous year after year
let's talk about the dreaded September
effect dive into what's known as the
September effect it's not just folklore
it's a phenomenon it's backed by hard
data since 1950 September has been the
worst month for stock market performance
on average the S&P 500 has declined by
about half a percentage point during
this month it's the only month with a
negative average return over this
extended period now you might be
thinking half a percent that doesn't
sound so bad but in the world of Finance
where fortunes can be made or lost on a
fraction of a percent this is
significant it's like a persistent
headwind that investors have to battle
year after year so what's behind this
automnal anomaly well there are several
theories one suggests that as investors
return from summer vacations they
reassess their portfolios and make
changes we spend too much in the south
of France darling it's like a financial
version of spring cleaning but in Autumn
another theory points to mutual fund tax
selling many mutual funds have their
fiscal year ending in September fund
managers might sell losing positions
before year end to harvest tax losses
and this selling pressure could
contribute to the overall market decline
there's also the anticipation of third
quarter earnings reports as companies
prepare to release their Q3 results in
October investors might become more
cautious leading to increased selling
pressure in September but here is where
it gets truly intriguing the September
effect isn't just a US phenomenon it's
been absorbed in markets around the
world from the footy in London to the
Nic in Tokyo September seems to cast a
global Shadow on stock performance but
let's bring it back to our current
situation remember those economic
indicators we discussed earlier the
weakening manufacturing sector The
increased probability of a hard Landing
all those factors converging as we EP to
September potentially amplifying the
historical Trend we're seeing increased
demand for downside protection in the
options Market it's as if investors are
buttoning down the hatches preparing for
a storm they fear is coming so what does
this mean to all of our portfolios well
let's turn our attention to our four
stocks that have been catching the eyes
of many investors Tesla palena PayPal
and Sofi how might these companies fa in
the economic landscape we've been
discussing first up Tesla as a player in
the consumer discretionary sector Tesla
could be vulnerable in a recession
scenario typically when economic times
get tough people tend to postpone big
purchases like cars however Tesla isn't
your average automaker Tesla's dominant
position in the EV Market could provide
some resilience I government incentives
for EVS might continue to drive demand
even at a downturn although politics
might obviously turn that on its heads
and Tesla's diversification into Energy
Products and and so on could provide an
additional buffer and let's not forget
Tesla's substantial cash reserves and
ongoing improvements and production and
and everything else it could help them
weather this storm you could also argue
that given that Tesla seem to be the
cheapest cars to run out there as of
latest data people might actually switch
to a more affordable model because it
doesn't really matter who you pay that
500 $700 a month to in car leasing fee
and if at the same time you can actually
reduce your running costs through lower
insurance and lower maintenance cost
Perhaps it is actually the moment for
Tesla to shine as a car manufacturer but
let's look at the next stock here
Palante as a data analytics company with
significant government contracts Palante
might be less affected by economic
Cycles than consumer focused companies
it's as if they're playing in a
different League Al together however
paler isn't immune to economic headwinds
if a recession leads to reduced
government spending I think it'll
probably be the opposite but it could
lead to delay in corporate digital
transformation Pro projects Palante
could see some slowdown in Revenue
growth now on to PayPal as a digital
payment provider PayPal sits at an
interesting Crossroad in a a potential
recession on the one hand reduced
consumer spending could negatively
impact transaction volumes they're
basically a toall booth
operator and there fewer cars coming
through the road on the road through the
booth you get what I'm trying to say
then you collect less money on the other
hand the shift towards digital payments
accelerated by the pandemic could
continue to benefit PayPal even in a
downturn the diverse product offerings
including the recently discussed fast
lane could help maintain user engagement
even if overall spending decreases
lastly let's consider Sofi as a fintech
company offering lending in financial
services Sofi could face significant
challenges in a recession scenario
economic downturns typically lead to
increased loan defaults and reduce
demand for new loans which could impact
sofi's core business however sofi's
banking Charter could provide some
stability and and their focus on younger
tech savvy consumer might also provide
some resilience as this demographic may
continue to seek digital Financial
Solutions even in tough times and are
less affected because their incomes
levels are pretty good now it's crucial
to remember that all four of these
stocks have shown
significant up and downs you might have
noticed they're generally considered
growth stocks which can be more
vulnerable duing economic down terms as
investors shift to Value when they freak
out it's like the high performance
sports cars on an increasingly bumpy
road with some potholes however all four
companies are known for their innovation
in their respective field and it could
provide some insulation from the
headwinds and if you have a long enough
time Horizon you might actually enjoy a
recession with a bit of a market dip I
actually do and it's taken me years I
used to freak out my portfolio dipped
now I actually smile because I have an
extra income stream so I can put extra
money into the market and buy wonderful
companies at lower prices
now as we've explored today the economic
landscape is complex and potentially
challenging we've seen manufacturing
sector weakening acting as that Canary
in the cold mine we've discussed the
historical September effect and the
potential impact on market performance
and we looked at how all of these
factors might influence stocks like
Tesla Palante PayPal and soofi it's
crucial to remember that while these
scenarios are possible they're not set
in stone the economy is
a mash of lots of factors not least what
the fed's going to do how much money the
US government is going to spend and
those things could change the outcome no
matter who wins the presidential
election it looks like they're going to
continue with crazy levels of spending
and and possibly tax cuts if if if Trump
gets in both of which should be good
news for the market though the higher
corporate taxes Flo floated by democrats
certainly would not be but remember
every every Market dip every economic
challenge presents an opportunity for
the prepared investor it's like being a
Savvy Shopper at a sale you get more
value for your money history has shown
us time and time again that markets
recover those who keep a cool head and
make informed decisions during downturns
often reap the rewards When the tide
turns you want to learn more about how
we do that as I mentioned earlier we're
up 80% already on our teaching portfolio
this year you fancy learning how we
achieved those results come and join our
beginner trading Workshop this coming
week at 800 pm on Tuesday I want to say
but I'm not entirely sure if that's the
right date or time it is however Down
Below in the description so click on
that link and and grab yourself a free
seat while they're still available thank
you for joining me on this economic
journey through our favorite stocks and
until next time keep your eyes on the
markets and I hope to see you on the
next video have you ever kicked yourself
for missing out on a golden investment
opportunity imagine if you could turn
back time and grab shares of certain
e-commerce Giants for just $1,000 and
1997 you'd be sitting on Millions today
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