This Won’t End Well

Summary

This 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

00:00

📉 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.

05:00

📈 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.

10:02

🚗 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.

15:04

💡 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.

Keywords

💡Hard Landing

Hard Landing refers to a severe economic downturn or recession that occurs abruptly. In the video, it is used to describe the potential impact on the economy and the stock market, with the script mentioning a doubling in the probability of such an event within five days, indicating a significant concern for investors.

💡Wingy Puts

Wingy Puts is a term used by traders to describe put options on the US Stock Market. In the context of the video, it signifies that large investors are betting on a downturn in the market and buying these options as a form of insurance against market declines, which is an alarming signal of market sentiment.

💡Secured Overnight Financing Rate (SOFR)

SOFR is an interest rate for short-term loans backed by US Government debt, serving as a benchmark for various financial products. The video discusses how fluctuations in SOFR can indicate the health of financial markets and serve as a leading indicator of potential economic downturns.

💡Economic Indicators

Economic Indicators are statistics that provide insights into the state of the economy. The script mentions several indicators such as the US dollar, treasury yields, and crude oil prices, which are flashing red and signaling potential economic trouble.

💡Equity Index Skew

Equity Index Skew refers to the difference in implied volatility between out-of-the-money put and call options. The video mentions that the put skew is steepening, indicating that investors are seeking more downside protection, which is a sign of growing concern about the market.

💡Manufacturing PMI

Manufacturing PMI, or Purchasing Managers' Index, is a leading economic indicator that reflects the activity level of the manufacturing sector. A PMI below 50 indicates contraction, and the video script highlights a drop to 48, suggesting a potential recession in the sector.

💡Orders to Inventory Ratio

The Orders to Inventory Ratio measures the balance between new orders and the existing stock of goods. In the video, it is mentioned that this ratio is at concerning levels, implying that manufacturers may have excess inventory and could face production cuts and layoffs.

💡September Effect

The September Effect refers to the historical tendency of stock markets to perform poorly in September. The video discusses this phenomenon, noting that since 1950, September has been the worst month for stock market performance on average, which could be exacerbated by current economic indicators.

💡Consumer Discretionary Sector

The Consumer Discretionary Sector includes companies that provide non-essential goods and services. The video mentions Tesla as a player in this sector, which could be vulnerable in a recession as consumers may delay major purchases like cars.

💡Fintech

Fintech, short for financial technology, refers to companies that use technology to deliver financial services. The video discusses Sofi as a fintech company, which could face challenges in a recession due to increased loan defaults and reduced demand for new loans.

💡Investment Opportunity

An Investment Opportunity refers to a situation where an investor can potentially make a profit. The video script ends with a hypothetical scenario about investing in e-commerce giants at a low price, illustrating the potential for significant returns from recognizing and capitalizing on investment opportunities.

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