Transcription
Oh boy, horrible data on the economy this morning suggesting stagflation. We're going to dive deep to see if that's actually what's going on, but in the meantime, it is leading futures funding spreads and hedge funds to indicate that institutions are dumping stocks.
They're not just dumping stocks to sell; they're dumping to cover all the debt they took on to buy stocks in the rally over the last six months. We got to talk about this and explain why the NASDAQ dropped 1.78% today.
Why was MicroStrategy down 99.9%? Coinbase down 8%? Palantir down 7.8%? Tesla was down 4%? Red Robin Gourmet Burgers down 6%? A lot to talk about here.
Mark Zuckerberg also wants to end censorship and move to Texas. Yeah, a lot to unpack on that one. I'll give you the quick scoop on that and give you my opinion.
And Donald Trump apparently wants to take over Greenland and the Panama Canal and may use the military if necessary. We'll talk about that. Don't worry, we will go deep on these items.
We've also got some folks talking about losing money on real estate investments in Austin, Texas, and debating whether they should sell the property or rent it out. I'll give you my opinion on what's going on in this video.
California is also on fire again, with winds potentially up to 100 mph later today. Right now, gusts are around 50 to 70 mph, knocking down power lines, especially around the LA area, causing the Pacific Palisades to now catch fire.
Oh boy, there is a lot, so let's get started on this Meet Kevin report: news that makes you money.
First, let's start with macro data. Like I said, wow, this hit hard. Now, I went deep on this with course members this morning as the data came out. We were standing by with almost a thousand of y'all course members live together and many more thousands of you afterwards who watched it on replay already.
But the ISM numbers and JOLTS numbers that came out this morning really shook markets. Things were green until this data came out. Oh boy, so what happened?
Well, we had more job openings than expected, which should be a good thing. In fact, we had significantly more expansion in professional and business services in November than we expected. Now, keep in mind this JOLTS data references November, so it's kind of post-Trump election. People think it's sort of the Trump bump, and so it indicates white-collar hiring, which is good because that's been an area that's been lagging for a while.
So, it's unclear if this is going to keep going, if these job openings are actually going to turn into real hiring. But both on the seasonally adjusted and on seasonally adjusted, we saw a significant bump in professional and business services hiring, which seems to be good, right? This is a good thing. We see more potential hiring.
We did see the quits rate move down to 1.9% from 2.1%, which usually you see that in rougher economies. People don't want to quit their job because it's harder to get a new job. I talked a lot about that yesterday.
And the layoff rate did tick up a smidge to 1.1% from 1.0%. None of that is really a big deal. If anything, this JOLTS report should have been nice. It was kind of a good JOLTS report. I mean, really, if you look at what Nick T wrote this morning, there's really no major fear that should be coming out of these numbers in terms of the JOLTS report telling us one thing or another, other than the layoff rate remains low and the job quitting rate is pretty low, which we usually only see tank in a recession.
The hiring rate is pretty low as well. We're back at 2010-2009 levels in the hiring rate, which isn't great, but you did see a take-up in the opening rate. So, this should be optimistic, where the market should be looking at this going, "Oh, okay, you know, maybe things are turning around. Maybe the job market is stabilizing," just like the Federal Reserve wants.
Well, unfortunately, the ISM data for December, which came out this morning, gave us much better insight into what's actually going on. And I'll tell you, it's exactly why the market took a little tanky-dud today, and it ain't great.
So, the ISM Services data came out and led to almost an instantaneous sell-off on stagflationary fears. Why? It's simple. The services index came in a little bit hotter than expected. No big deal; everything was a little warmer than expected, frankly, in November and December, thanks again to the Trump bump.
But the prices paid section came in at 64.4 versus 57.5 expected and 58.2 prior. In English, the market hates the idea about the Fed potentially keeping rates higher for longer because of an inflationary impetus. So, this is really bad.
The employment and new order numbers came out as expected, but the market absolutely hates seeing that rates could go even higher. And higher is exactly where they went. The 10-year is almost at 4.7, which is wild. The 2-year is only sitting at 4.29, but that's also pretty decently high.
But when you spread those, you get a spread of 40 basis points. Remember what happens between 50 to 90 basis points of a spread, which we're rising towards? Pain in markets, usually. In fact, sometimes, actually almost always, after an inversion of the yield curve, a recession. We're at 40 now, so we keep getting closer and closer to that breaking point.
Now, why? Like, what was in this data? Because what this data really feels like, or what the market is reacting with, is almost this feeling that you're in a... and I apologize in advance for the constant aviation references, but I feel like we're in a plane and everybody's kind of looking at the plane like this, where it's like, "Okay, it's nose up. Oh, it must be climbing. Look at that beautiful plane up there, look, nose up, it's climbing."
And then you get some of this hot data. It's like, "Oh, look, look, it keeps tipping its nose up. It's nose up. Oh, look, it's climbing. This is wonderful." You know, everybody looking in from the outside, including the Federal Reserve, is like, "Oh, look, the economy is doing great. It's gaining altitude. We're not coming in for a soft landing. We got no landing, baby."
But pilots look at this, or a lot of economists looking at the data, and they're like, "You're setting up for a stall." And stalls don't happen gently. When a plane stalls, the nose of that sucker tanks, and things happen extremely rapidly in a stall. It's not good.
I mean, that's also how you cure a stall; you nosedown, right? We can talk all about that later. We'll do that in an aviation video. But the point is, the stall brings you to the ground pretty dang rapidly, and that's what people are afraid of right now.
That potentially everything looks like, as we're losing that speed and losing momentum, it looks like we're still chugging along. People are like, "See, everything's fine." But really, we're in such an unstable position that soon we might be feeling, "Why?"
Oh, because the Federal Reserve is telling us, "Oh, we got to be worried about inflation again, so we're going to keep rates higher for longer." Do we, though? Is that actually what this ISM data told us?
Well, not in my opinion, because when I went deep into the ISM data, I found the following: I found that on average over the last four months, the number of businesses reporting the same prices over the last four months was 73.6%. Today, in today's report, we had 73.4%. In other words, below that average.
But let's just call it the same: no change in prices paid. The vast majority of businesses, almost three out of every four businesses, said nothing's changing in prices. Okay, well then why did this index on the right side go up so much?
Well, it's because the number of businesses that reported lower prices fell in December to only 2.9%, and you had a little bit of an uptake, like in September, of the percentage higher, and that led this index higher.
Now, this doesn't actually suggest that there's a rapid expansion of prices. It suggests that in certain fringes, prices are moving, and we're getting volatility in this data. So, the market is potentially responding to stagflationary fears that aren't actually stagflationary.
I mean, look at Germany. Germany just came out with a hot CPI report, an inflation report. Everybody's like, "Oh my gosh, I thought Germany was in recession. This must be stagflationary." Well, nobody actually dives a little bit deeper. Did you know this? I'm going to guess you didn't, and it is okay.
But did you know that Germany doesn't actually report core CPI? Maybe you did, maybe you didn't. It doesn't matter. The point is, we're reacting to Germany's hot CPI, and when we pull back the layer, we go, "Oh, that's because of food and energy."
And why are energy prices going up? Well, natural gas is skyrocketing. Why? Because it's winter, and there are reports of potential polar winds coming in again. This is something that happens every few years. It leads natural gas prices, whether through speculation or reality, to skyrocket. That's just what's been happening.
So, what a surprise. But the point is, the market doesn't really care in the short term. The market's just going to trade based off of whatever the market thinks at that time and the move that's working at the time.
And the move that's working right now is, yep, everything stagflationary: sell bonds, and inflation's coming back. So, that is what's taking hold right now. And once that trade gets going, it accelerates.
There's a problem with that. We're going to talk about that problem in just a moment, and it has a lot to do with debt. Because there is a chart that is warning of really big change in the ways that institutions are responding to the amount of debt that they have outstanding. This is a big red flag. We got to talk about it, along with what Donald Trump said today, what's going on with Facebook, and the real estate topic.
A lot, but before we keep going on some of those other topics, we really got to finish this ISM talk. Because yes, there are stagflationary fears, but I want you to look at some of the commentary that's coming out over why there might be some fears about prices going up.
Let's look at what the ISM report actually said that respondents are actually talking about when it comes to inflation prices or business activity and services.
Quote: "Preparations are underway to diversify supply in anticipation for tariffs." All right, if in Q4 you buy a bunch of goods or you basically set yourself up for tariffs to affect your business, you might overstock in the fourth quarter. This is bad because if you don't sell out all of that in the first quarter, you end up with too much stuff, too many goods and supplies or service time, and then you have to cut your prices, and you actually end up with deflation.
So, it's weird, but the market always seems to work in these really contrarian ways. Today, everybody's like, "Oh no, oh no, oh no, stagflation." Mark my words, if things keep going the way they are, we'll be in Q1 or Q2, and we'll be screaming about deflation because maybe the tariffs didn't conduct the or cause the inflation that we were expecting or because people just overstocked in the fourth quarter because of fears over tariffs, which may not even come.
We talked about Trump and tariffs yesterday, but I'll tell you this: I know Trump looks at the stock market every single day. If the stock market's red, he ain't going to do tariffs because he'll threaten tariffs, but he'll be too nervous about the market crashing and then that being a scar in his legacy.
So, take a look at this. This is extreme. Here's a construction industry: tariff threats from the incoming administration have been making suppliers reluctant to hold pricing for more than a year, as projects can take two years plus. Budgeting is getting difficult, similar to 2021 and 2022 when supply chain disruptions caused chaos in pricing.
Wait a minute, so you're telling me the crisis we're seeing right now in stagflation is because of fear that maybe there will be tariffs and everybody's buying stuff like crazy now? Well, if that's true, then this prices paid level going up, new orders level going up, and basically, you know, numbers going up like ISM manufacturing or services, the headline numbers going up, those are all fugazi built up for the fourth quarter.
And I don't know that's going to repeat in Q1 because people are preparing for that uncertainty and apparently in an extreme way to where now all of a sudden there are quite literally, it's listed in a different section of this ISM report, but backlogs of containers that need to be unloaded because of so much buying.
Now, originally, or I should say ordinarily, we would look at that and say, "Oh, this is a sign of a really strong economy, right? Really good economy." But so far, everything everybody is telling us is it's because of tariffs, not because of massive demand.
If anything, what we see is we're moving workers offshore to save on costs. That's companies taking it in the margin because their P's too small. We are concerned about tariff activity, but we're hoping for the best. There seems to be a lot of uncertainty about tariffs and purchasing decisions. A lot of weight and customers are slowing down.
Okay, so a lot of anticipation of tariffs leading to potentially a bump of these numbers and some skewing of numbers that on average are not stagflationary. And forget the average for a moment. When you actually read company earnings calls, you should know that we're not in a reinflation era, but that's not going to stop markets from trading as if we are.
The problem is, the more the markets trade as if they're stagflation, the higher bond yields go. All we're doing is driving up the nose of that plane more and more and more. And the more we do that, the more we're pulling back on the stick, the more violent the stall is going to be, and those rates will come down plummeting rapidly, unfortunately, and likely with a recession.
So anyway, what does all of this mean? Well, in my opinion, the pendulum is swinging too far to the stagflationary side because of reports like this. Now, the bottom line here is the setup should be a cause for concern.
And when we look at something like the funding markets, we could see what's going on with institutional sales. Take a look at this. This is called a funding spreads chart. I'm going to try to explain this as simply as possible.
Let's pretend for a moment that instead of saying funding spreads, this said cost to borrow. Okay, that's a little bit easier to understand. When nobody wants to borrow debt, borrow, you know, money to buy stocks, what do you think happens to the cost to borrow? Well, it plummets because it's like, "Oh, nobody's borrowing. All right, let's lower the cost until people borrow again."
What do you think happens when everybody wants to borrow debt money to go buy stocks? Well, the cost to borrow goes up. Okay, the red line is the cost to borrow line: up, up, up, up, up, up, up, up, up, up. Notice how as the cost to borrow goes up because more people are taking on more debt—institutions, hedge funds, retail, you name it—everybody's going in on margin because the stock market can't fall.
I literally see comments of people saying things like, "You know, Kevin, I don't think there could be a market correction because everybody has an app in their pocket today where they can buy stocks, and they're just going to buy the debt, so therefore there could never be a stock market correction again."
Okay, there's sure as hell a sign enough for me. Anyway, as you notice, when the line goes up, it implies more people are borrowing to go buy stocks. And wow, what a surprise, the S&P 500 went up with that line.
Well, what's happened since December 18th? Well, according to John Marshall of S&T, who has published a quote significant warning, the funding spread plummeting is a really big red flag. The reason you have this really big red flag is because on December 18th, Jerome Powell flip-flopped, and it marked the peak.
The flip-flop in the funding spreads level on December 18th, Jerome Powell told us that they want to keep rates higher in essence because of impending tariffs. Two months before that, he told us, "We're just going to wait to see what happens with tariffs, and then we'll react."
All of a sudden now, it's, "Yeah, we're going to try to stave off the inflation ahead of time, so we'll just keep rates higher for longer basically and pencil in fuel rate cuts." Well, that led the markets to go, "Oh my gosh, Fed, you all could be making a massive and terrible mistake keeping rates way too high for way too long and ultimately push the economy into that stall point, breaking point, and potentially even into an unrecoverable stall because we have so little altitude."
That red line is a warning sign, Mr. Marshall. I'm going to show you what he wrote. I don't want you to think it's me; it's Mr. Marshall. He wrote this yesterday, mind you, before the market started selling off today.
"We view this chart as a significant warning sign for equity investors. The December move was not just year-end related. The episode continues to look like a December 2021 move in positioning when worries about monetary policy triggered professional investors selling ahead of the 10-month decline in the S&P 500."
In other words, he's forecasting a 10-month decline just like in 2022. He also says, "While equity valuations have been historically high for many months, this is the first time we're seeing significant selling in both of these positioning measures in years: hedge funds selling equities in each of the past five sessions and at the fastest pace in the past seven months."
And then, of course, that funding chart—this is a red flag. This is not good, and so it's something to pay attention to.
Now, is it saying, "Run for the hills, sell everything?" No, of course not. I don't ever like to come across as an extremist. In fact, I always like to come across as suggesting, "Hey, I'm going to keep giving you my advice every single day."
And one place you can sign up for free for more of this sort of stuff is to make sure you get my Alpha report every morning the market is open. Just click here if you're U.S. or Canadian, or here if you're international. You can also get my Daily Wealth email if you want. You can click on that; it's over at meetkevin.com.
I actually built the website myself, so don't make fun of me, but I kind of like doing stuff myself sometimes. But anyway, let me know if there are any bugs; I will fix them.
But anyway, sorry for all the aviation analogies. Let's keep moving on with what's really important.
Oh, history! What does history tell us? Usually, when the Federal Reserve starts cutting rates, rates fall. But rates have now risen 110 basis points as the Federal Reserve cut interest rates 100 basis points.
There were two times this has happened in history before. One was 1998, which did not come after an inverted yield curve, and it came while employment was expanding. The 27 weeks unemployed number was actually declining, like things were actually good in the economy in '98.
The other time absent that good data was 2001, leaving us similar to the 2001 level in history, which isn't great because obviously that led to about an 18-month sell-off in the stock market and a lot of people pissed about investing in stocks all of a sudden.
All the people with apps in their pockets are pulling the apps out anymore. Howard Marks, in his latest credit memo, has five cautionary warnings: valuations, an enthusiasm bubble around AI, MAG 7 concentration, passive index buying, and suggests that a sharp and sudden sell-off is possible, just like the tech bubble, which to me feels exactly like the JOLTS measure—or not the JOLTS, the stall measure I've been talking about.
Anyway, enough about the market. Let's talk a little bit more micro. Mark Zuckerberg had a lot to say today about censorship. In fact, they're now going to copy Community Notes. This is very interesting. He literally shouted out X.
I mean, obviously, everybody was going to make the comparison anyway, so we got ahead of that by saying, "Hey, we're going to do Community Notes, kind of like how X does it. We're going to get rid of fact-checkers, and we're going to simplify our policies because complex systems censor things mistakenly too much, and fact-checkers are too biased," according to reports from employees inside of Meta.
A lot of people say that inside of Meta are suggesting that Meta is trying to suck up to Trump and that Meta is sending a message that facts no longer matter and that there's going to be an influx of racist and transphobic content.
But Mark says, "Hey, we're just going to bring politics back. We're going to get rid of the filters. We'll solely focus on illegal and high-severity issues, like serious threats that are illegal, even on X, like threatening to kill someone, for example. We'll remove that, but on the rest, we'll just Community Note stuff."
And I have to say, in my opinion, this is actually a great thing. I am, as somebody who has the ability to write Community Notes, I've written very few Community Notes, but I like to read them.
What I really enjoy about having that feature, though, is I get to see proposed Community Notes. For example, here, Customs and Border Protection announced they seized a rocket launcher and two rocket-propelled grenades hidden in a car headed to Mexico.
Again, these rockets were heading to Mexico from the U.S. Okay, so if I click on the proposed Community Note, the rockets featured in the photo lack the booster charge and are inert, nonfunctional. The RPG shown is non-functional and is a replica training aid.
I mean, that's kind of a useful note. And then they sort of give you a link over here in terms of, I guess, where you could buy inert RPG replicas. Kind of interesting. I like that extra detail.
I wish some more of these proposed Community Notes were visible, and what I really like is when you go through this, sometimes you could just see a debate going on in the Community Notes.
Like here, I'll just look at Elon Musk, for example. If we go to Elon, he gets Community Noted like every single post. Okay, there's the first one. See, there's a debate over here. Oh, like the time Starmer called Donald Trump a racist.
And then you get responses over here, adding some details about who's who. Starmer has supported senior members of the Labor Party, and people are leaving links and citations to things. You can see these go on for, I mean, there are like six or seven of these.
And then you always get these people who just write "nnn," which is "no note needed, no note needed, stop abusing Community Notes." Honestly, it's kind of like a messy forum, but usually, the top ones add the most context, and people can kind of vote up or down on whether these are useful or not.
And it's kind of a cool system because it mostly gives people an equal voice, especially if you're a Community Notor. Which, I mean, theoretically, anybody should be able to just join the Community Notes. I put a little app in, and in like three weeks, I was approved. Didn't do anything special, and I haven't done anything with it, but I think it's kind of cool.
So anyway, I'm a big fan of that. Also, Mark Zuck slammed California by saying that they're going to move their safety and content moderators to Texas instead of California, where there will be, quote, "less concern over the bias of our teams."
I think this is mostly a PR move. It's basically saying, "Hey, everybody thinks that because we're a company based in California, we're a woke company." Maybe that's true to some extent. So by moving our safety and content to Texas, that'll balance us out.
I don't know if that'll actually make any difference at all, but big fan of using, well, frankly, Community Notes.
Now, this is interesting. The Associated Press just reported that the cyber truck bomber outside of the Las Vegas Trump Hotel apparently used generative AI, including ChatGPT, to help plan the attack.
Now, that's an interesting one. They don't really give details on this, not at all. That's just sort of like the intro paragraph, and then they just give a summary of what happened.
But apparently, searches on ChatGPT indicate he was looking for information on explosives, ammunition, where fireworks were legal, where he could buy them, and some other aspects. Again, no exact quotes given, just rough ideas that he was using ChatGPT to help plan his attack.
This is actually one of the reasons that I've mentioned to a lot of people before, especially those in finance or banking, that it's actually not a bad idea that if you use services like GPT, that you go into them every so often and just delete all your chats.
Because I do believe that in the future, these chats are going to be subpoenaed. And so if you ever get into a lawsuit and you know you put all of your weaknesses or whatever into ChatGPT, what if somebody can—one, I don't even know if I can delete it. It's not giving me any kind of confirmation that things are deleted.
Oh no, oh no! Who knows? Maybe it's all stored somewhere anyway, right? And this is why people say turn off the memory in the settings for these sorts of things. But just keep that in mind that your data is out there when you use these apps, and that's sort of a good reminder to go in there and, you know, delete some of the history that you have.
I like doing it, and it actually worked. It deleted all my history. I think it's a good idea for everybody to do that every so often, maybe even weekly.
Okay, maybe not so important for everybody, but we'll see. Anyway, so that's a little bit on Meta. I mean, really, is it a big deal? Yeah, it kind of is. I mean, it's a win for Elon Musk, it's a win for Donald Trump. It's basically a shout-out to Musk and Trump.
It'll probably help move the stock up. It'll make the stock maybe to some seem sort of less woke, and maybe you could even put the Meta stock in a Trumpan ETF or whatever, right? So it's probably a good move all around.
I think Zuck did a great thing here, and I'm a big fan of the Community Noting idea because then the public can sort of vote up the best notes. I like that, and I think Community Noting is a lot better than what you've seen over at Wikipedia, which is basically just controlled by people who mostly lean left, at least in my experience.
Okay, a little bit of drama circulating. What's going on with Carvana? This is mostly because of the Hindenburg hit piece suggesting that some of their growth numbers have been entirely misleading or potentially even fraudulent.
The CEO went on to CNBC for an interview, and when he was asked about how they're becoming more profitable, he basically said they're working on efficiencies at the company.
And basically said, "Hey, actually, I shouldn't even say basically." He said, "I don't want to bore you with the details of how we're becoming more profitable." And so that led a lot of people to sort of scratch their heads going, "I don't know. Is it that hard to find out, like, to explain? Is it that complicated?"
So what are you doing that's making you more profitable then? Does Hindenburg have a point? All I know is Carvana was up 5% today, so I don't know how much of a difference it's making. It's down 1% year-to-date. Obviously, it's down from its 256 peak, but it's way up from where it was at like $4 a share at the end of 2022 when the company was about to go bankrupt.
Had it not been for renegotiating with its bondholders, they would have probably gone bankrupt. And obviously, in renegotiating, they were able to reestablish themselves, so good for them.
And we could do a deep dive video on Carvana. Leave me a comment in the notes down below if you want. But just a super quick look at what's going on at Carvana, you could definitely see growth in top-line revenue, which people generally like looking for.
This is a 30% growth rate in retail vehicle sales, and when you look at net income, you can see net income, well, is a lot less. But part of that has to do with some of their debt extinguishment and the gain that they realized because of their debt extinguishment.
So they were actually, if you remove this, losing money from their operations at the end of 2023, and they're actually making about 69 cents in a month period, which isn't bad because it means they're making some money again, which is great.
As far as their valuation, well, this is something that a lot of people have different opinions on. Look at it this way: if you take Carvana as a company trading for $198 a share with $1.37 of earnings per share expected for Q4, you know, ending December 31st, which is already over, they're trading for about 144 times earnings.
In fairness, though, they are expected to grow earnings in excess of 70% per year for the next four years, so that only puts them at about a tweg with that really high PE ratio if they could keep that growth going.
So who knows? Maybe a deep dive for Carvana is in store, and leave me a comment down below if that's what you're looking for.
As far as China, it's interesting to look at this chart to see what's going on with the percentage of vehicles in production in China, especially as a percentage of next-generation vehicles.
Look at this: in 2023, China produced over 33% of all next-generation, which would be hybrid or battery electric vehicles in the world, and this number is skyrocketing. I would guess that if it weren't for restrictions on importing Chinese vehicles into America, we'd probably all be driving Chinese vehicles.
Then a real estate question came up. So on Reddit, somebody posted the following: "We need to sell our house that we bought less than two years ago." That's always a bad idea. The selling costs alone to sell your house are insane. I don't recommend this.
"We need to sell our house that we bought less than two years ago. We are looking at a loss of around $22,000 with where the market is right now in Austin. So honestly, their loss will probably be greater than this once they start getting hit with requests for repairs, vacancy, moving costs, furniture costs, repairs. Some need a roof replacement. Honestly, they'll probably lose somewhere around $50,000. How devastating is this? We were first-time home buyers and admittedly didn't quite know what we were doing. Have any of you taken a loss like this?
We could rent it out; however, the rent wouldn't cover the mortgage. We would be at a loss of about $3,600 over the year if we rented it out. And then sold it next year, we would probably be at less of a loss. However, it could take a while to sell, and I'm not sure I want to gamble having two mortgages at once. Any thoughts or advice?"
All right, look, here's the answer. Rachel Silver, first, I don't know what your personal income situation is, but if y'all can afford the $3,600 a month, in my opinion, consider this $3,600 a month an investment into the property.
Because frankly, you're probably paying down more than this in principal every single year. If you're paying down $500 a month in principal on your loan, you're probably paying down $6,000 off of your loan every single year, and you're only putting $3,600 into it.
So you're actually up; you're just rearranging where your money is—in the house piggy bank or in your savings account piggy bank or, I don't know, in your sock drawer or wherever you keep your extra cash.
The downside of selling it now is, frankly, your loss is going to be a lot higher than this. Again, I expect it's going to be $50,000, but let's just say your loss is $22,000. Well, divide $22,000, which some of this you've already lost because of equity, potentially, but it could also just represent the selling cost: 2.5% to one agent, you know, maybe 1% if you hire a discount agent yourself.
But then you still got 1% for escrow, title. You still got to pay for repairs and vacancy and transition costs. You're going to be spending somewhere around 6% to 8% to sell your house. That's probably where most of this loss is.
So if you kept it, you're probably at zero, which is good. But if you sell it, let's just say it's $22,000. Well, divide that by $3,600. It would take you six years of paying $3,600 to get to a $222,000 loss.
So just keep it for six years. You think it'll probably go up again in six years? I don't know, maybe not. It's Austin, after all. What happened in Austin?
Well, Austin is an easy place to build. One of the reasons why my real estate company, House Hack, did not buy in Texas, specifically in Austin, is because Austin was a COVID boomtown, where everybody moved to because of the freedom away from mask mandates and, you know, America work from home, whatever.
It's also very easy to build. So when the population shot up during COVID, a lot of people got into speculating on building in Texas, and now you have an excess of supply because now, since it takes two to three years to get that construction to come online, you basically had a bunch of people come in, prices shot up, and now you don't have a bunch of people coming in, but supply—real estate supply—has shot up because all that building is coming online.
So now this mismatch is leading prices to fall. Could it keep going? Of course. In my opinion, keep it. Forget about it. You got a built-in 30-year fixed-rate mortgage, and if you got it two years ago, honestly, you probably got a pretty good rate on the interest rate as well.
My guess is they have an interest rate of under 4%. Goldman Sachs suggests that real estate prices are roughly flat year-over-year, with inventory continuing to moderate. This is now nationwide rather than just Texas.
They see an uptake in real estate activity coming as prospective buyers move off of the sidelines post-election. Personally, I've only seen this in the higher-end market, not so much in the lower-end market because the lower-end market still can't afford to buy a damn home.
It's also cheaper to rent right now and recover from hurricanes in the Southeast. Existing for-sale supply was 23% below November of 2019, so still low supply leading prices to rise 4% year-over-year, which I guess they somewhat consider roughly flat.
But anyway, new single-family home sales were 14% above the 2015 to 2019 average, up 2% year-over-year. That's new construction, so you're getting a lot more new construction rather than this existing supply, which is below.
That's in part due to interest rate lock-in. This is in part due to accelerated new construction, thanks of course to the pandemic.
Then we get into quiet layoffs. Apparently, JP Morgan is expecting to force everybody back to work five days a week. People basically say this is a way of quietly trying to fire people without openly firing people. It's a quiet way of doing layoffs.
You also had, I think it was, oh, what was his name? You had a big set of layoffs this morning at Ray Dalio's firm. That's right, Bridgewater. Bridgewater layoffs—that was a little bit of a surprise.
That came as a bit of a surprise to me. Bridgewater Capital cut 7% of its staff in an effort to remain nimble. I mean, to me, that's just a colloquialism for saying, "Yeah, we want to have money available when things change in the marketplace."
You're cutting about 90 employees, said the person. This hasn't been publicly announced yet. The firm, whose headcount is now going back to 2023 levels, will continue hiring selectively. Blah, blah, blah. They're focused on their goals. Blah, blah, blah.
Let's be real: the companies want more money in their bottom line, so in the event that the market tanks, they have money to go shopping.
Now here's an interesting one: there's a meme stock ticker RR that's been rocketing over the last six weeks. It's basically 10x over the last six weeks. And don't feel bad that you missed out on it.
Frankly, a lot of these have so little liquidity you couldn't really get a meaningful amount of buying done in them anyway. But what's really interesting is that a stock like this can 10x, and then when you look at their latest SEC filing, they tell you, "Hey, sorry, we're going to be late on filing our annual report."
Part of the reason is we expect a 52% decrease in revenues, and our margins are down 69% compared to last year. But don't worry, it's because we're getting into robots as a service.
Jeez, man, kills me. Donald Trump made an announcement today suggesting that a Dubai-based developer, DMAC Properties, will invest $20 billion in the United States.
The individual from the company actually came up and spoke with Donald Trump, just basically said a few words. They said that they're a luxury property builder. They've delivered 45,000 units; they've got another 45k coming. They're in 10 countries for data centers, and they're going to build data centers in the U.S.
They also say that they've been waiting for four years to invest in the U.S. because they didn't want to invest during the Biden administration. Big slam on the Biden administration.
But anyway, Donald Trump says, "If you invest a billion dollars or more, maybe less, we'll push you through the environmental process. Sometimes people are held up 12 to 14 years. We'll make sure to push you through the environmental process."
I will also reverse Biden's ban on offshore drilling immediately. We're going to drill, baby, drill! All right, you get the idea.
Donald Trump then went on to talk about some other priorities, like, "We'll end counting ballots at 10 p.m. on election night." Some states do take like 12 days to count, like Arizona. California is another one that takes a while to count.
He says, "We'll rename the Gulf of Mexico the Gulf of America." And there's talk about Donald Trump trying to take control of the Panama Canal or Greenland, potentially using the military in the event that, quote, "he has to," or I guess the quote was, "he may have to," which was kind of interesting because it's just not something that was on anybody's radar.
And this is kind of classic for Donald Trump: take things that were on nobody's radar and go, "Oh yeah, we're going to take over Greenland and the Panama Canal, and we're going to rename the Gulf of Mexico."
Greenland, by the way, is well, about two-thirds of its government budget is funded by Denmark. So Denmark and Greenland say that Greenland is not for sale. The Kingdom of Denmark wants Greenland, but Donald Trump says if Denmark doesn't agree with the takeover, then he'll issue very, very high tariffs on them.
Okay, I still don't understand the full scope of all of this, so we're just going to sort of table that for right now because a lot of things are said very often, and usually, they're just all part of a big negotiation.
Justin Trudeau also said that becoming the 51st state of the United States has a snowball's chance. What does he know, though? He's resigning soon.
Jack Smith has also been preparing to file a final report on Donald Trump, basically putting together everything and all the evidence or whatever that they have against Donald Trump. However, Donald Trump is arguing this isn't fair and that this is just an improper new indictment of Donald Trump.
Some people reviewing the report say it contains false accusations, and so a judge has actually today blocked the release while an appeals court evaluates what's going on.
Anthropic plans to raise $2 billion at a $60 billion valuation at the same time as OpenAI announces they're still losing money hand over fist.
And then, of course, when we look at the famous lines, the lines, the lines, the lines, what do we see at the lines? We see that Tesla today lost the very important 414 line. We were expecting to come for a retest, and we did retest that line over here.
Remember, you can get my trade and trend alerts. Trend alerts are very important, so that way during times that I'm not trading, if I still see something very desirable or something that I think is desirable, I'll still send you a trend alert that I see.
You could get those in the Trumponomics course for any of the courses over at MeetKevin.com. But look at that rejection perfectly on my line on the one-minute chart.
And if you zoom out onto the one-day chart, this is a pretty critical level. In fact, my next level for Tesla doesn't hit until 607. And when we lost that or failed that breakout, we did retest 414, but we've now lost 414 for the second time in a row. Not ideal from a technical point of view for the time being—short-term bearish.
If you look at Bitcoin, you're also going to see a pretty important line get rejected very clearly here on the one hour, and is that 102 line important here?
And I don't recommend speculating in near-term rocket ships unless we can actually confirm that 102 level. I think that 102 level is very, very important. Let me know what you think in the comments down below.
Okay, so then we have, I think there is also Nvidia. I just wanted to briefly mention that Nvidia today, after its CES announcement, did at market open start tanking—not because of the announcement. In fact, it was running more because of the announcement, the 5,000 series chips, AI computers bringing AI home—all this really exciting.
I thought we were going to try to test 164. We ended up capping out at about 153.74, and then thanks to that ISM and data, we ended up selling off down to 140.
Now we need to hit the Daily Wealth. So, as usual, you could get this over at MeetKevin.com. But yesterday, I did send an email called "Failure," and I wrote "Fail Fast."
I said when it comes to business, everybody always says do what you're passionate about. Let's refine that: on top of things you're passionate about, focus on the ones that make money with the least effort.
This sounds obvious, but I've caught myself distracted by new businesses many times. Sometimes they make more money, and they're worth pursuing, but often business ideas take too much time, lose too much money, or just don't gain traction or end up losing traction after an initial boost.
And this is where, in my sort of Daily Wealth vision, I always like to say fail fast. And this isn't necessarily failing fast. I call this instead: let the market decide. If the market doesn't care about your product, kill it, move on.
If it's a great product and it's a great service, it will make you money. It might take time to build it, but you'll see the trajectory. It's kind of like when I became a real estate agent.
I mean, I thought the service I was providing was really good. It took me 10 months to get my first deal—well, close my first deal. But I had upward trajectory the entire year. I went from no clients to my first three clients within 30 days to eight clients by the end of the first year.
I only made $10,000 my first year in real estate, but the second year I made just over $50,000. The third year I made over $140,000, and the year after that I broke $300,000. The year after that, I broke $500,000.
Obviously, the trajectory of me selling real estate myself and helping people learn how to buy real estate and invest in real estate was a good idea. That was a sustainable idea. The market was telling me, "Yes, Kevin, people like the no-pressure agent who's providing more value. Do more of this."
I was letting the market decide. When I offered a service as a licensed contractor to my real estate clients, I noticed the adoption wasn't that great for what it was costing me to run a contracting staff.
That was the market telling me, "You're not getting enough demand for the infrastructure you've built out." So what did I do? I killed that business. That doesn't make me a failure; that makes me responsive to the market.
And the faster you do this, the better. And this is why in the Daily Wealth email, I wrote, "Do not delay. The market is exceptionally good at telling you if you're on the right path or not."
You could use this for relationships, like a boyfriend or girlfriend, a dead-end job, a career, an education. It doesn't matter. Listen to the market; the market knows.
Now, with that, I got to leave you with the regular ending, which this is only the second Meet Kevin report we've done, so we'll make it the regular ending: the dad joke of the day.
The dad joke of the day goes as follows: "I'm really worried about the calendar; its days are numbered."
Why not advertise these things that you told us here? I feel like nobody else knows about this. We'll try a little advertising in CR.
Congratulations, man! You have done so much. People love you; people look up to you. Kevin P.A., their financial analyst and YouTuber, Meet Kevin. Always great to get your take.