Why the Stock Market is Tanking: AGAIN

[00:00] Well, holy smokes. The market is nervous

[00:03] yet again. Not sure if that's because

[00:05] Kevin extended his vacation or if it is

[00:08] because of SpaceX record issuance.

[00:11] What's going on with Google, the Fed, or

[00:14] worse, the Japanese carry trade. Yes,

[00:17] back to the Japanese carry trade talk.

[00:20] Boy, we've been talking that about the

[00:22] Japanese carry trade for almost 2 years

[00:24] now when we had that first real shock in

[00:27] August of 2024. And here we are in June

[00:30] of 2026 still talking about it. Well,

[00:32] I've got some updates on all of this for

[00:34] you, including the fact that Google just

[00:37] got included into the Dow Jones

[00:40] Industrial Index, replacing Verizon,

[00:43] which is a really convenient time for

[00:45] Google because Google stock has been

[00:48] falling as of late given their record

[00:50] $70 billion of issuance that is starting

[00:53] to hit the market here in late June and

[00:56] is likely going to hit the market for

[00:57] the rest of the year. Getting included

[00:59] in an index like the Dow Jones

[01:01] Industrial might be a nice opportunity

[01:04] for Google to get that liquidity they

[01:06] need to dump those shares on retail as

[01:10] usual. The suits have it out for us, it

[01:13] seems. But while Google is down 14% over

[01:16] the last uh five weeks, it is up about

[01:19] 1% in after hours. Doesn't make anyone

[01:21] feel better though given that the NASDAQ

[01:23] 100 rejected down 3.29% 29% today.

[01:28] Bounced off of 7:15 uh twice actually

[01:31] which we had in our alpha report as a

[01:33] critical threshold level and uh now

[01:36] closing at 713. Not great. Why is this

[01:38] happening? Part of the reason this is

[01:40] happening could be just again not just

[01:42] Google issuance but also SpaceX issuance

[01:45] which was oversubscribed. So it does

[01:48] somewhat suggest maybe issuance isn't

[01:50] actually that big of a deal. Here's

[01:52] basically what happened. And SpaceX

[01:54] said, "Yo, we want to refinance $20

[01:56] billion of debt we have by issuing

[01:58] bonds. Anybody want it?" So many people

[02:00] wanted it to the tune of nearly $90

[02:02] billion, which is a great sign that

[02:04] there's still ample liquidity out there

[02:06] that you actually ended up seeing SpaceX

[02:09] accept $25 billion

[02:12] with a spread of 1.4 point percentage

[02:15] points over equal duration treasuries.

[02:17] That sounds complicated. Let's just

[02:19] simplify that into English, which is

[02:21] exactly what we like to do in our

[02:22] courses as well on building your wealth

[02:24] with real estate, stocks, property

[02:26] management entities insurance

[02:29] liability, social media, sales, you name

[02:31] it. You can always join those over at

[02:32] meetke.com. We've got a coupon expiring

[02:35] on June 30th. It's coupon code pope. Uh

[02:38] but let's focus on explaining this

[02:40] simply really quickly. When you say

[02:42] equal duration treasury, what we're

[02:44] really trying to say is, hey, if SpaceX

[02:46] is issuing a 10-year bond, how much are

[02:50] markets demanding for a yield? In this

[02:52] case, it landed around 5.9% for a

[02:54] 10-year, that is about 1.4 percentage

[02:57] points over the equivalent 10ear, which

[03:00] is sitting at 4.5. So 4.5 for the US

[03:03] government, risk-free debt, risk-free

[03:05] SpaceX at 5.9. That spread is the extra

[03:08] that SpaceX investors are being paid for

[03:11] those SpaceX bonds. Uh that is one of

[03:13] the highest spreads we've seen in a

[03:15] while, which does suggest some

[03:18] uncertainty around SpaceX. Obviously,

[03:20] they're losing money. They just got a

[03:21] triple B rating, which is actually

[03:23] surprising that they got that even

[03:24] though they're uh losing money. One of

[03:26] the first ratings, I think it was Morgan

[03:28] Stanley rated them. Was actually

[03:29] surprised to see such a quick rating. Uh

[03:31] but anyway, not a surprise given also

[03:33] the fact that Morgan Stanley tends to

[03:35] underwrite a lot of debt for SpaceX and

[03:38] Elon Musk. So they're kind of all in

[03:40] cahoots together. Imagine that. The

[03:41] suits and cahoots. It almost rhymes.

[03:44] That's perfect. Don't. Anyway, um so

[03:47] basically SpaceX paying even more than

[03:50] what Intel was raising at, which is

[03:52] somewhat surprising, but uh it does

[03:54] indicate that even though investors are

[03:56] demanding a higher yield for SpaceX,

[03:58] there's still plenty of liquidity out

[04:00] there. I the fact that you had $90

[04:01] billion of demand pretty impressive. So

[04:04] there is still money out there. But why

[04:06] then are we seeing all this volatility

[04:08] in markets? Because yes, we expect more

[04:11] issuance and likely more volatility. In

[04:13] fact, UBS argues we could see as much as

[04:15] 200 to $350 billion this year of IPO

[04:19] issuance with secondary offerings at

[04:21] $400 billion or more. Just a quick

[04:24] clarification on what that means. An IPO

[04:26] issuance would be like SpaceX. Hey, we

[04:29] did $85 billion. Cool. That's a majority

[04:31] of that. But then you're going to add

[04:32] Open AAI, Anthropic, and other IPOs like

[04:35] Aloe wants to go public now, right?

[04:37] Everybody's trying to get money. Well,

[04:39] it's easy to raise money like it is for

[04:41] SpaceX. Everybody wants to join, right?

[04:43] Anyway, then secondaries are like Google

[04:46] going, "Hey, uh, we're going to do the

[04:48] largest secondary ever and try to get

[04:51] our hands on an extra $80 billion and

[04:53] Warren Buffett's company, Bergkshire

[04:54] Hathway, is going to anchor the first

[04:56] 10." Cool. Clearly there's appetite for

[04:58] that. Clearly there's appetite for

[05:00] SpaceX. Will there be appetite for all

[05:01] this money? Who knows? My take is as

[05:04] long as the economy holds up. We can

[05:06] absorb all this. The problem is we're

[05:08] now getting additional volatility

[05:10] because of the Japanese carry trade. The

[05:11] Japanese carry trade. The way you have

[05:13] to understand this is basically American

[05:15] hedge funds go to Japan and they borrow

[05:18] money in Japan uh at cheaper rates.

[05:22] Okay. Why? Well, if you could go borrow

[05:26] in Japan at 2.5% or 2.6% on the 10-year,

[05:30] why would you borrow here at 4.5%.

[05:33] Right? Most regular investors don't do

[05:36] that. But companies like bigger hedge

[05:39] funds who have offices in Japan, they

[05:41] borrow money for 2 and a half% or 2.6%

[05:43] in in Japan. They're borrowing that in

[05:48] yen. That's a problem though when the

[05:50] yen weakens because when the yen weakens

[05:53] or you type in USD to JPY into Google

[05:58] and when that number goes up it means

[06:00] the yen is weakening. Problem with that

[06:02] is if you have debt in Japan you have to

[06:05] spend more dollars to pay that off and

[06:07] that pisses you off. It means as a hedge

[06:09] fund you're losing money, right? You're

[06:11] getting hurt on that trade. Okay, great.

[06:14] What's the problem here? Well, hedge

[06:16] funds don't like getting hurt. So what

[06:18] do they do? They sell. And what do they

[06:20] sell? They sell things that have run

[06:22] like freaking crazy. Micron is down 13%

[06:26] today. MU stock, the memory chip stock,

[06:28] 13%. I made a warning video on Friday

[06:31] and even yesterday. Yesterday before

[06:33] this 13% selloff, I said there's no way

[06:36] in heck I would touch Micron right now

[06:38] before earnings. I would not buy call

[06:40] options on this at all because the risk

[06:43] of it plummeting is massive. I said that

[06:46] in my video yesterday. go fact check on

[06:48] it and we did our full update on it. It

[06:49] was either Friday or Saturday, it might

[06:51] have been Saturday. We did a full

[06:52] breakdown on what to look for in

[06:54] earnings and why the company has the

[06:56] valuation it does. It's valuation if

[06:58] growth holds up is actually not

[07:01] expensive. So, I don't want to sound

[07:02] like I'm bagging on Micron, just saying

[07:04] right now in the moment that we're in,

[07:06] not ideal because you've got the

[07:08] Japanese carry trade plus issuance plus

[07:11] now the quote unquote communications

[07:14] vacuum from Kevin Worsh. not ideal. Now,

[07:17] when I talk about communications vacuum,

[07:19] it's actually kind of worth noting that

[07:21] we have this um uh alpha wire, we call

[07:25] it, that you could use totally for free

[07:27] right now. We just did a massive update

[07:29] on it, so there are even more news

[07:30] sources uh that should show up now and

[07:33] even more news sources that'll probably

[07:35] show up even later today. But if you

[07:37] look at that, which you could see it on

[07:39] desktop or the Meet Kevin app if you

[07:42] want it, you just download the Meet

[07:43] Kevin app. Uh it's totally for free. uh

[07:45] you can use it for free. That is go in

[07:47] the Android app store, just type in Meet

[07:49] Cavan app or the Apple App Store. And I

[07:51] pinned a couple of wire notes. So the

[07:54] couple wire notes that I pinned uh were

[07:57] right here. Communications vacuum

[08:00] increases that investor volatility.

[08:02] We're seeing green span echo as WASH Fed

[08:06] goes quiet. And then there's a whole

[08:07] article around it. I put my little notes

[08:09] next to it. I did the same with the uh

[08:11] ghouls speed comment and I'll read you

[08:12] those and explain those really quick but

[08:14] basically a communications vacuum is

[08:16] we're going from the era of Jerome Pal

[08:17] telling us hey like we're going to be

[08:20] patient we're good for now we're going

[08:21] to wait and be data dependent which is

[08:23] what we expected WH to do instead we got

[08:27] Kevin Worsh going yeah we're going to

[08:28] utilize tasks task forces to determine

[08:33] if we're going to make any changes and

[08:36] as far as forward guidance we're not

[08:37] going to give you any Great. So,

[08:40] basically, we are relying on the 2-year

[08:42] Treasury, which is high as a guide for

[08:46] what the Federal Reserve is going to do

[08:47] since they usually follow the 2-year

[08:49] Treasury. And this leaves us with a

[08:51] communications vacuum, which increases

[08:54] volatility along with the Fed, the

[08:56] Japanese carry trade. But here's the

[08:58] other problem. The Japanese carry trade

[09:00] gets worse when our Fed is hawkish. When

[09:04] our Fed is hawkish and it implies rates

[09:06] are going to go up in the United States,

[09:08] as our rates go up in the United States,

[09:10] the US dollar strengthens because more

[09:13] people want those higher yields. That in

[09:16] turn makes the Japanese yen look even

[09:18] weaker. It didn't help that the Bank of

[09:20] Japan governor is in the hospital who's

[09:23] a hawk and who replaced him at the last

[09:26] meeting was a dove. And so, of course,

[09:29] they sounded more doubbish and gave even

[09:31] less guidance about hikes coming to

[09:32] Japan, which again accelerates the

[09:35] Japanese carry trade because the yen

[09:37] weakens even more. So, basically, two

[09:40] things are making the carry trade worse.

[09:42] One,

[09:44] Bank of Japan isn't being as hawkish as

[09:46] they should, and they had a fill in

[09:47] who's doubbish. Okay. It's kind of like

[09:49] getting a you know if if you had like a

[09:52] you know a a real dove like a waller

[09:55] who's like or like my imagine if my got

[09:58] 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

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[19:01] released for course members, but really

[19:02] haven't pitched it at all. It's our

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[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.