[0:00] Well, holy smokes. The market is nervous
[0:03] yet again. Not sure if that's because
[0:05] Kevin extended his vacation or if it is
[0:08] because of SpaceX record issuance.
[0:11] What's going on with Google, the Fed, or
[0:14] worse, the Japanese carry trade. Yes,
[0:17] back to the Japanese carry trade talk.
[0:20] Boy, we've been talking that about the
[0:22] Japanese carry trade for almost 2 years
[0:24] now when we had that first real shock in
[0:27] August of 2024. And here we are in June
[0:30] of 2026 still talking about it. Well,
[0:32] I've got some updates on all of this for
[0:34] you, including the fact that Google just
[0:37] got included into the Dow Jones
[0:40] Industrial Index, replacing Verizon,
[0:43] which is a really convenient time for
[0:45] Google because Google stock has been
[0:48] falling as of late given their record
[0:50] $70 billion of issuance that is starting
[0:53] to hit the market here in late June and
[0:56] is likely going to hit the market for
[0:57] the rest of the year. Getting included
[0:59] in an index like the Dow Jones
[1:01] Industrial might be a nice opportunity
[1:04] for Google to get that liquidity they
[1:06] need to dump those shares on retail as
[1:10] usual. The suits have it out for us, it
[1:13] seems. But while Google is down 14% over
[1:16] the last uh five weeks, it is up about
[1:19] 1% in after hours. Doesn't make anyone
[1:21] feel better though given that the NASDAQ
[1:23] 100 rejected down 3.29% 29% today.
[1:28] Bounced off of 7:15 uh twice actually
[1:31] which we had in our alpha report as a
[1:33] critical threshold level and uh now
[1:36] closing at 713. Not great. Why is this
[1:38] happening? Part of the reason this is
[1:40] happening could be just again not just
[1:42] Google issuance but also SpaceX issuance
[1:45] which was oversubscribed. So it does
[1:48] somewhat suggest maybe issuance isn't
[1:50] actually that big of a deal. Here's
[1:52] basically what happened. And SpaceX
[1:54] said, "Yo, we want to refinance $20
[1:56] billion of debt we have by issuing
[1:58] bonds. Anybody want it?" So many people
[2:00] wanted it to the tune of nearly $90
[2:02] billion, which is a great sign that
[2:04] there's still ample liquidity out there
[2:06] that you actually ended up seeing SpaceX
[2:09] accept $25 billion
[2:12] with a spread of 1.4 point percentage
[2:15] points over equal duration treasuries.
[2:17] That sounds complicated. Let's just
[2:19] simplify that into English, which is
[2:21] exactly what we like to do in our
[2:22] courses as well on building your wealth
[2:24] with real estate, stocks, property
[2:26] management entities insurance
[2:29] liability, social media, sales, you name
[2:31] it. You can always join those over at
[2:32] meetke.com. We've got a coupon expiring
[2:35] on June 30th. It's coupon code pope. Uh
[2:38] but let's focus on explaining this
[2:40] simply really quickly. When you say
[2:42] equal duration treasury, what we're
[2:44] really trying to say is, hey, if SpaceX
[2:46] is issuing a 10-year bond, how much are
[2:50] markets demanding for a yield? In this
[2:52] case, it landed around 5.9% for a
[2:54] 10-year, that is about 1.4 percentage
[2:57] points over the equivalent 10ear, which
[3:00] is sitting at 4.5. So 4.5 for the US
[3:03] government, risk-free debt, risk-free
[3:05] SpaceX at 5.9. That spread is the extra
[3:08] that SpaceX investors are being paid for
[3:11] those SpaceX bonds. Uh that is one of
[3:13] the highest spreads we've seen in a
[3:15] while, which does suggest some
[3:18] uncertainty around SpaceX. Obviously,
[3:20] they're losing money. They just got a
[3:21] triple B rating, which is actually
[3:23] surprising that they got that even
[3:24] though they're uh losing money. One of
[3:26] the first ratings, I think it was Morgan
[3:28] Stanley rated them. Was actually
[3:29] surprised to see such a quick rating. Uh
[3:31] but anyway, not a surprise given also
[3:33] the fact that Morgan Stanley tends to
[3:35] underwrite a lot of debt for SpaceX and
[3:38] Elon Musk. So they're kind of all in
[3:40] cahoots together. Imagine that. The
[3:41] suits and cahoots. It almost rhymes.
[3:44] That's perfect. Don't. Anyway, um so
[3:47] basically SpaceX paying even more than
[3:50] what Intel was raising at, which is
[3:52] somewhat surprising, but uh it does
[3:54] indicate that even though investors are
[3:56] demanding a higher yield for SpaceX,
[3:58] there's still plenty of liquidity out
[4:00] there. I the fact that you had $90
[4:01] billion of demand pretty impressive. So
[4:04] there is still money out there. But why
[4:06] then are we seeing all this volatility
[4:08] in markets? Because yes, we expect more
[4:11] issuance and likely more volatility. In
[4:13] fact, UBS argues we could see as much as
[4:15] 200 to $350 billion this year of IPO
[4:19] issuance with secondary offerings at
[4:21] $400 billion or more. Just a quick
[4:24] clarification on what that means. An IPO
[4:26] issuance would be like SpaceX. Hey, we
[4:29] did $85 billion. Cool. That's a majority
[4:31] of that. But then you're going to add
[4:32] Open AAI, Anthropic, and other IPOs like
[4:35] Aloe wants to go public now, right?
[4:37] Everybody's trying to get money. Well,
[4:39] it's easy to raise money like it is for
[4:41] SpaceX. Everybody wants to join, right?
[4:43] Anyway, then secondaries are like Google
[4:46] going, "Hey, uh, we're going to do the
[4:48] largest secondary ever and try to get
[4:51] our hands on an extra $80 billion and
[4:53] Warren Buffett's company, Bergkshire
[4:54] Hathway, is going to anchor the first
[4:56] 10." Cool. Clearly there's appetite for
[4:58] that. Clearly there's appetite for
[5:00] SpaceX. Will there be appetite for all
[5:01] this money? Who knows? My take is as
[5:04] long as the economy holds up. We can
[5:06] absorb all this. The problem is we're
[5:08] now getting additional volatility
[5:10] because of the Japanese carry trade. The
[5:11] Japanese carry trade. The way you have
[5:13] to understand this is basically American
[5:15] hedge funds go to Japan and they borrow
[5:18] money in Japan uh at cheaper rates.
[5:22] Okay. Why? Well, if you could go borrow
[5:26] in Japan at 2.5% or 2.6% on the 10-year,
[5:30] why would you borrow here at 4.5%.
[5:33] Right? Most regular investors don't do
[5:36] that. But companies like bigger hedge
[5:39] funds who have offices in Japan, they
[5:41] borrow money for 2 and a half% or 2.6%
[5:43] in in Japan. They're borrowing that in
[5:48] yen. That's a problem though when the
[5:50] yen weakens because when the yen weakens
[5:53] or you type in USD to JPY into Google
[5:58] and when that number goes up it means
[6:00] the yen is weakening. Problem with that
[6:02] is if you have debt in Japan you have to
[6:05] spend more dollars to pay that off and
[6:07] that pisses you off. It means as a hedge
[6:09] fund you're losing money, right? You're
[6:11] getting hurt on that trade. Okay, great.
[6:14] What's the problem here? Well, hedge
[6:16] funds don't like getting hurt. So what
[6:18] do they do? They sell. And what do they
[6:20] sell? They sell things that have run
[6:22] like freaking crazy. Micron is down 13%
[6:26] today. MU stock, the memory chip stock,
[6:28] 13%. I made a warning video on Friday
[6:31] and even yesterday. Yesterday before
[6:33] this 13% selloff, I said there's no way
[6:36] in heck I would touch Micron right now
[6:38] before earnings. I would not buy call
[6:40] options on this at all because the risk
[6:43] of it plummeting is massive. I said that
[6:46] in my video yesterday. go fact check on
[6:48] it and we did our full update on it. It
[6:49] was either Friday or Saturday, it might
[6:51] have been Saturday. We did a full
[6:52] breakdown on what to look for in
[6:54] earnings and why the company has the
[6:56] valuation it does. It's valuation if
[6:58] growth holds up is actually not
[7:01] expensive. So, I don't want to sound
[7:02] like I'm bagging on Micron, just saying
[7:04] right now in the moment that we're in,
[7:06] not ideal because you've got the
[7:08] Japanese carry trade plus issuance plus
[7:11] now the quote unquote communications
[7:14] vacuum from Kevin Worsh. not ideal. Now,
[7:17] when I talk about communications vacuum,
[7:19] it's actually kind of worth noting that
[7:21] we have this um uh alpha wire, we call
[7:25] it, that you could use totally for free
[7:27] right now. We just did a massive update
[7:29] on it, so there are even more news
[7:30] sources uh that should show up now and
[7:33] even more news sources that'll probably
[7:35] show up even later today. But if you
[7:37] look at that, which you could see it on
[7:39] desktop or the Meet Kevin app if you
[7:42] want it, you just download the Meet
[7:43] Kevin app. Uh it's totally for free. uh
[7:45] you can use it for free. That is go in
[7:47] the Android app store, just type in Meet
[7:49] Cavan app or the Apple App Store. And I
[7:51] pinned a couple of wire notes. So the
[7:54] couple wire notes that I pinned uh were
[7:57] right here. Communications vacuum
[8:00] increases that investor volatility.
[8:02] We're seeing green span echo as WASH Fed
[8:06] goes quiet. And then there's a whole
[8:07] article around it. I put my little notes
[8:09] next to it. I did the same with the uh
[8:11] ghouls speed comment and I'll read you
[8:12] those and explain those really quick but
[8:14] basically a communications vacuum is
[8:16] we're going from the era of Jerome Pal
[8:17] telling us hey like we're going to be
[8:20] patient we're good for now we're going
[8:21] to wait and be data dependent which is
[8:23] what we expected WH to do instead we got
[8:27] Kevin Worsh going yeah we're going to
[8:28] utilize tasks task forces to determine
[8:33] if we're going to make any changes and
[8:36] as far as forward guidance we're not
[8:37] going to give you any Great. So,
[8:40] basically, we are relying on the 2-year
[8:42] Treasury, which is high as a guide for
[8:46] what the Federal Reserve is going to do
[8:47] since they usually follow the 2-year
[8:49] Treasury. And this leaves us with a
[8:51] communications vacuum, which increases
[8:54] volatility along with the Fed, the
[8:56] Japanese carry trade. But here's the
[8:58] other problem. The Japanese carry trade
[9:00] gets worse when our Fed is hawkish. When
[9:04] our Fed is hawkish and it implies rates
[9:06] are going to go up in the United States,
[9:08] as our rates go up in the United States,
[9:10] the US dollar strengthens because more
[9:13] people want those higher yields. That in
[9:16] turn makes the Japanese yen look even
[9:18] weaker. It didn't help that the Bank of
[9:20] Japan governor is in the hospital who's
[9:23] a hawk and who replaced him at the last
[9:26] meeting was a dove. And so, of course,
[9:29] they sounded more doubbish and gave even
[9:31] less guidance about hikes coming to
[9:32] Japan, which again accelerates the
[9:35] Japanese carry trade because the yen
[9:37] weakens even more. So, basically, two
[9:40] things are making the carry trade worse.
[9:42] One,
[9:44] Bank of Japan isn't being as hawkish as
[9:46] they should, and they had a fill in
[9:47] who's doubbish. Okay. It's kind of like
[9:49] getting a you know if if you had like a
[9:52] you know a a real dove like a waller
[9:55] who's like or like my imagine if my got
[9:58] up there instead of Kevin Wars or Jerome
[10:00] Powell. All right boys we need to cut
[10:02] rates one percentage point right like
[10:05] that would be so doubbish. It's kind of
[10:08] to a lesser extent what happened to
[10:09] Japan.
[10:11] All of that increases volatility is what
[10:14] I'm just trying to say. So issuance more
[10:17] volatility. Fed wash communications
[10:19] vacuum increases volatility which
[10:21] increases rates in the United States or
[10:23] rate expectations which increases the
[10:26] Japanese carry trade which again
[10:27] reiterates more volatility. None of this
[10:30] has any economic impact. In fact, we
[10:35] sent a trade alert that we bought the
[10:37] dip this morning. Now if you're not part
[10:39] of that, you could join us and you can
[10:40] see exactly what we bought the dip in by
[10:42] going to meet mekevin.com and you can
[10:43] join join the courses. you get lifetime
[10:45] access uh to the trade alerts, the alpha
[10:48] report, all the courses we mentioned
[10:49] earlier. Uh and you can see that over at
[10:51] meetke.com. Now, what's also very
[10:54] important to remember is that we just
[10:56] had FedEx earnings and I always like to
[10:58] look at earnings to see if there are any
[11:00] hints of, you know, problems in the
[11:02] economy. The answer is no. Their
[11:04] guidance is pretty much okay. They've
[11:06] got some extra cost because of obviously
[11:08] the uh tariff issues, but the biggest
[11:10] thing that happened in their actual
[11:11] earnings that I saw was fuel. Their fuel
[11:15] costs were up 66%
[11:18] year-over-year in the first quarter,
[11:20] which makes sense because fuel prices
[11:22] were up about that. So, it's really not
[11:24] a surprise. If I adjust out and take out
[11:27] $500 million of that increase of the
[11:29] fuel cost, which is almost all of the
[11:31] increase, I left about a hundred million
[11:33] in there because they went from like864
[11:35] to 1434
[11:37] million, right? It's 1.4 billion.
[11:39] Anyway, if I adjust that out, I get
[11:42] roughly a stable margin at FedEx with
[11:44] the higher fuel cost. Their margin fell
[11:46] and that's probably why FedEx is down in
[11:48] the after hours because their margin did
[11:50] go down. They're down like 6% in the
[11:52] after hours. But economically
[11:54] it's not really a signal. What was a
[11:56] signal this morning actually was we got
[11:58] the ADP weekly data. The first time we
[12:01] got weekly data for June uh since the uh
[12:04] June BLS data that we got was based on
[12:07] May's data. Right? So uh we just got the
[12:11] first week of June all the way through
[12:12] June 6th came in at 30,750.
[12:16] If I multiply that by four, which is a
[12:18] rough approximation since there are 30
[12:20] days on average in a month, right? Uh
[12:22] that puts us at a bullish 123k jobs per
[12:25] month. Keep in mind I also pinned that
[12:29] in the newswire service. So like you
[12:31] could use that and what a lot of people
[12:33] are actually doing is they're
[12:34] downloading the app. They're signing up
[12:35] for the app and they're using the
[12:37] newswire service to check the news
[12:39] instead of relying on something
[12:40] distracting like Twitter. So they're
[12:42] checking the news on there. Uh and then
[12:44] I can pin things that I could add my
[12:46] comments to. In addition, after you sign
[12:49] up on the app, you could use that same
[12:51] login if you want and you could go to
[12:53] app.mekevin.com
[12:55] and you could have the desktop version
[12:57] of it, which I think is honestly pretty
[12:59] cool. Uh, and then you can get the
[13:01] desktop updates on it. So, stay tuned.
[13:03] We're going to have more uh new source
[13:06] updates coming in. So, it's going to
[13:08] keep growing and getting better. It's in
[13:10] pretty early beta. We're excited about
[13:11] that. Now another economic thing that uh
[13:15] happened well data point we got is we
[13:17] got the US global flash PMIs they h they
[13:22] were okay we got US business activity
[13:24] growth improved for a third month in
[13:26] June growth rate remained weaker than at
[13:29] the start of the year things you know
[13:31] because of this volatility we're seeing
[13:32] we're seeing some uncertainty
[13:34] elevated uncertainty always ends up
[13:37] leading to lower growth forecasts but
[13:40] still doing okay at least on these flash
[13:43] surveys for Junet companies. Still
[13:45] seeing inventory building at
[13:47] manufacturers. Not sure how long that's
[13:48] going to last. And this is always a good
[13:51] one. The service sector continues to
[13:53] grow, but it is growing at a subdued
[13:58] pace, reflecting push back from
[14:00] consumers over higher prices amid lower
[14:03] levels of consumer confidence. Now, some
[14:05] of that we expect a U-turn because gas
[14:07] prices are coming down. In a weird way,
[14:10] the longer end of the Treasury curve is
[14:12] also coming down, so weakening some of
[14:14] those mortgage rates, which small note
[14:16] on real estate. I thought this was
[14:17] interesting. I might make a more
[14:19] detailed video on this, but UBS actually
[14:21] noted, quote, "We expect overall real
[14:24] estate values to continue to
[14:25] appreciate." I agree with that. Maybe
[14:26] it's confirmation bias, uh, with further
[14:29] rental growth anticipated over the
[14:31] medium-term. medium-term is usually one
[14:33] to two years unless interest rate costs
[14:36] rise significantly amid heightened
[14:38] volatility. They actually find US real
[14:41] estate, Singapore real estate and
[14:42] Australia real estate attractive right
[14:44] now. They do not find Japanese, Hong
[14:47] Kong or continental Europe real estate
[14:50] attractive. And they also do not find
[14:52] the United Kingdom uh region attractive
[14:56] for real estate. I don't know if that
[14:57] has to do with Carrie Charmer or you
[15:00] know bailing out. Who knows? Maybe that
[15:04] is by the way probably all still a
[15:06] symptom of Brexit. A lot of people very
[15:08] frustrated by Brexit because Brexit
[15:11] promised lower immigration and they
[15:13] actually ended up getting more
[15:14] immigration except instead of getting
[15:16] more immigration from other European
[15:18] countries, they actually ended up
[15:19] getting a lot of immigration from like
[15:20] Africa and the Middle East uh refugees
[15:23] and otherwise. And so a lot of people
[15:25] have been really frustrated about the
[15:27] impact of Brexit. The estimates are that
[15:29] their GDP probably shrunk by around two
[15:31] to two and a half percent after Brexit,
[15:33] you know, over the years afterwards. Uh
[15:36] but it is what it is. And the economists
[15:38] actually had a really good and blunt
[15:39] message. They're like, "Hey, listen.
[15:41] Y'all got to get over the fact that
[15:42] Brexit happened. We were against Brexit.
[15:44] It happened. Oh well, it's over now. The
[15:47] best thing you could do right now is the
[15:50] United Kingdom needs to get people off
[15:52] of benefits. get him back to work, grow
[15:54] the country, stop overregulating AI, and
[15:57] focus on capitalism. I'm like, "Wow,
[16:01] that was pretty blood from the
[16:02] economist." Well, they're pretty
[16:04] capitalist. Uh and uh they, you know,
[16:06] which is interesting because it kind of,
[16:08] you know, some people say this doesn't
[16:10] align, but they're also very anti-Trump.
[16:12] Uh they bag on them every day. It's
[16:14] hilarious. If you want a publication
[16:15] that just bags on Trump, The Economist
[16:17] is for you. Go sign up. I don't have a
[16:19] link below. They're not sponsored. I I
[16:21] do think they're a great publication
[16:23] though. Uh and you know, you could read
[16:25] a publication even if you disagree with
[16:26] someone's politics. Okay, then this is
[16:30] interesting. UBS is the first in uh
[16:34] investment bank that I've seen come out
[16:35] to actually agree with me Kevin on the
[16:38] Federal Reserve. They basically have an
[16:41] entire institutional piece which you can
[16:43] see in the data tab for free of the uh
[16:45] Meet Kevin app. They have an entire
[16:48] institutional piece that says, "Hey,
[16:51] meet me. Kevin is right. We agree with
[16:53] him." Okay, maybe this is confirmation
[16:56] bias. It doesn't actually say that, but
[16:58] it does say the following. We believe
[17:00] market pricing for rate hikes is
[17:02] somewhat aggressive.
[17:04] They say that we believe the Fed is more
[17:07] likely to keep rates on hold rather than
[17:09] hike them. I agree with that.
[17:11] Reiterating what I've said before, I
[17:12] think WASH is an anchor. Uh, I think
[17:15] when you put all of this together, oh,
[17:17] and the fact that they argue slower
[17:18] growth trends and disinflation in the
[17:20] second half should help us pivot towards
[17:22] lower policy rates in 27. Okay, 2027.
[17:25] When I put all of this together, here's
[17:27] my read on all this. SpaceX, big
[17:29] liquidity suck, lots of volatility. It's
[17:32] a big suck. Then you've got Japanese
[17:35] carry trade and the lack of
[17:37] communication from WASH that extra
[17:40] volatility economically flash PMIs
[17:44] weekly jobs data earnings so far so
[17:47] good. Even the bad bad Broadcom earnings
[17:52] like a week and a half ago, they weren't
[17:54] really that bad. You know, I broke those
[17:56] down to detail. I have a video on the
[17:58] channel somewhere on like they're not
[17:59] that bad. You can actually see my full
[18:02] Broadcom breakdown. I'll I'll do you
[18:04] I'll give you a quick solid here and
[18:05] give you a quick little summary on uh I
[18:07] go back to my Broadcom uh summary and in
[18:12] my opinion I write down no signs of an
[18:15] AI slowdown. This is an overblown
[18:17] selloff likely as people pick up
[18:19] liquidity for the SpaceX IPO next week.
[18:22] See I wrote I'm not a fan of the
[18:24] Broadcom balance sheet. It's not my
[18:26] favorite choice of a company, but I give
[18:28] credit where credit is due. And it's
[18:30] overall quite exciting for AI hardware.
[18:32] And I see little evidence of anything
[18:34] other than some loony Wall Street
[18:36] expectations being modestly missed on
[18:38] the timing of ASIC chip deliveries,
[18:43] application specific integrated
[18:44] circuits, right? Specific chips made for
[18:47] specific customers. But anyway, if you
[18:49] want to see my full ThrodCom note, uh if
[18:51] you are a course member, you join over
[18:52] at me.com, you can not only see my stock
[18:55] notes like that, much more detail on
[18:57] there and my fundamental analysis, but
[18:59] you can also use this new tool that we
[19:01] released for course members, but really
[19:02] haven't pitched it at all. It's our
[19:03] stock AI tool. Uh, and it's designed to
[19:06] utilize sort of the Kevin mindset of
[19:08] stocks, our PEG ratios and how we look
[19:10] at stocks and apply AI for red flag
[19:13] analysis and our algo for where the best
[19:16] deals are in the market and you can now
[19:18] use that inside of the me Kevin app.
[19:21] Thank you so very very much for
[19:22] watching. I love you all. Consider
[19:24] subscribing. We'll see you in the next
[19:25] video. Goodbye and good luck.