why the market just tanked

So, what the hell is going on in the stock market today? Because this is a little weird. Well, honestly, the market seems to be pricing in some more growth fears as well as the Fed Beige book that just came out. But the Fed Beige Book and what happened in the Treasury market doesn't necessarily entirely align until you really look beneath the surface at okay, what's what's really cooking over here and why are people starting to get nervous? So, let's try to break this down and understand exactly what's going on. So, first the beige book. Okay, obviously we had a CPI report this morning that was not as ideal. You had Goulsby calling it discouraging. He says prices and costs were really the worst part of this economy right now. Bargain comes out that we'll end up getting some color from PPI tomorrow. That comes out at 5:30 a.m. Uh, as well as retail sales which come out at 5:30 as well. We are looking for 6 on the headline PPI tomorrow and 3 on core tomorrow as well as.3 on the control group for retail sales. The issue that you're seeing right now is most of this economy is saying look we are willing to keep paying the prices. You can see that here over half of the districts noted that consumer spending was driven mostly by higher inome households. Tourism continued to grow and while there were some reports of lowerincome consumers being more cautious with their spending mostly and overall firms have a positive outlook and people keep spending. This is a little bit of a problem because obviously we know that the Federal Reserve cannot handle or really do anything with oil prices or artificial intelligence spending. There's just nothing they could do about that. And so a lot of people say to me, and I see this on X all the time, but this is why I feel like you come here is to get that deeper nuance that, you know, the the headline readers don't don't really pay attention to. So what is that deeper nuance? Uh well, here's how it works. uh when we have two large inflationary impetuses right now coming off of you know yes last week it was tariffs uh last week last year it was tariffs then in uh January it was tariffs again this was after the uh tariffs were ruled unconstitutional and then we got rejiggered tariffs right that's all coming after this the main sources of inflation right now are the artificial intelligence buildout because AI itself long term will probably be deflationary. Unfortunately, for a lot of workers, it'll likely be very deflationary. So, you've got the AI buildout and then obviously you have oil prices due to what's going on in the Middle East. The Federal Reserve cannot control these two things at all. There's there's nothing that the Federal Reserve can do here. So, you could really just draw a line over this. This right here is mostly going to lap out once we get to January, February. We're less worried about this because it's already happened. Best case scenario, those tariffs just go away in the future, which I suspect in 2029 under a new regime, all these tariffs will go away. Uh, and honestly, they could either contribute to a big boom or help us out of a recession once you get rid of those if we happen to be in a recession. Knock on wood that we're not. These things right here, the Federal Reserve cannot control, but the Federal Reserve can control what happens next. If people look at these price increases in AI infrastructure and in oil, uh they they make a choice. There are two choices. Choice number one is they keep spending. Uh choice number two is they stop spending. Okay? If people keep spending, so this one right here, if people keep spending, then that's how you're going to end up getting rate hikes. So, this right here is going to be associated with find them. We'll hike, we'll show you who's boss, baby. Uh, and then over here, you're going to get no hikes if people stop spending or you'll get cuts. All right, so that's what they're trying to affect. And this could be summarized by inflation expectations. So, tomorrow's data is somewhat useful. Well, not so much PPI, although that will give us what we need for PCE, which is a combination of CPI and PBI. That's a producer price index. People care about that one a little less, but it is part of C PCE, which the Fed cares about. Uh, so that'll give us a little bit color tomorrow. Retail sales, though, will be more useful. Retail sales will tell us, okay, are people still spending? And historically, these have been coming in hot because people are like, prices are up. This is horrible. Let's keep buying stuff. And the Fed looks at that and says, "All right, if that's your response, then we're just going to have to hike prices." Of course, that gets people nervous. And then they're like, "Ah, insurance cost. You know, this is why you should shop for insurance." By the way, if you haven't yet checked out life insurance that I use, go to meet Kevin.com/life. They've done a great job for me. This life is doing all right, but go check it out. meet Kevin.com/life. It takes as little as 5 minutes to sign up and you can Apple Pay or Android Pay for it. So, we go back to the Beige Book over here. What do we got? They're a paid sponsor of the channel obviously. So what do we got over here? We have to get to prices. That's where things get interesting. So the price section is right here. And here they say the second order effects are what they have to pay attention to because higher oil prices are permeating through district reports. And companies are passing on those increased costs through the supply chain. That's obviously problematic because while some people might resist price hikes, other people are still paying. and as other people pay still pay, we might have to act and respond to that. That's not good. That's not ideal. That's not what the market wants to hear. Now, if you look over here, this kind of gives you a little bit of an outline of what we're seeing with, in my opinion, with the bond market. So, war goes up or or war happens, oil prices go up, which leads inflation, and then you get hike expectations that go up for the Federal Reserve. Then the bond market uh yields go up, right? This would be bond market yields go up with it. Then you get increased concern because yields are higher about whether or not neoclouds are actually going to be able to afford those higher yields. Yesterday we were looking at the core balance sheet and we did a whole video talking about how debt is not looking good right now. Uh and you've got a lot of concern about companies like coreweave to even where uh Elon Musk is now tweeting. This video is this sponsor is brought to you by meetkevin.com/silo. Wait a second. Points for stocks. You may have heard about our sponsor, Silo, today. It's basically what Built did for rent, but this time it's for investing. So, if you're not familiar with this, here it is. Silo is the first and only investing platform that gives you credit card style points, but on your brokerage account. Every month, they give you points based on your account value. you get an annual multiplier of 0.5x points on your total account value. So if you got $500,000 in an investing account, you'd earn 50 bips. That's 250,000 points every single year. Dang, I'm missing out on some points. Points are redeemable for cash. You know, a lot of us are probably thinking that we're like, man, wait, what? I want points. What can I do with them? And here you go. points are redeemable for cash at 1 cent per point or you could use their travel portal to book at 1.3 cents per point depending on your membership tier. So here's the big thing. They're also now launching their very first transfer partner and it may even be live by the time you're seeing this integration. Now, what is really worth noting is that while I can't yet reveal the airline, I can say it is a Star Alliance partner at a onetoone transfer rate, which is pretty neat because Star Alliance partners allow you to book flights with 26 different airlines, including United, Turkish, Swift Air, Lufanza, Singapore Airlines. And so if you're clever with how you redeem and use these points, you could fly around with some uh you know pretty nice seats, business class or even first class simply because you had your portfolio at Silo and they were paying you basis points on your portfolio. And so with the launch of their very first transfer partner, Silo is officially exiting beta and switching to their long-term points earning rate of 0.25% in November. But anybody who signs up this month locks in those 50 basis points for at least the first year. And you might even get grandfathered in. But of course, check their program details. So, if you want to lock in.5x points on your stocks, 50 bips, and earn up to 250,000 points as a new member, make sure to use my link meet.com/silo. It's easy. meet.com/silo silo to get started by the end of this. like Cororeweave to even where uh Elon Musk is now tweeting on X going yikes in response to Cororeweave's debt that uh you know the actual bond values are falling off a cliff over here now trading below 80 cents on the dollar. Now, the CEO of the company, allegedly, per Bloomberg, which uh you've actually got Grock doing a nice little summary of over here, quoting, "When you are building a new type of technology company, there will be periods of time when markets misunderstand and act irrationally." You know, this is kind of where like that Elizabeth Holmes meme has to come up. Yeah. When you're disrupting the world. I can't do an Elizabeth Holmes accent. But anyway, it's um the reason I say that is because he then you know the next line here is he expressed confidence in the business model, customers and execution quality and says the relentless discipline around the financial engine we have built. Okay. The problem is the financial engine that they have built sucks. They talk up that they have a backlog that could support all their spending, but their balance sheet sucks. They're $8 billion short. They don't have the money that they need to pay their bills. It's no surprise that Elon Musk is saying yikes on X. It's not good. You've got over 50% of CPI categories over 3% year-over-year, which just accelerates those yields going up, which makes it more expensive for those AI data centers to actually build out their data centers, especially the smaller Neocloud ones that don't have underlying massive cash flow businesses outside of the hardware. And then that leads people to question the whole hardware cycle. Which is why in our alpha report this morning, we talked about hardware is going to have problems until we get a deal with Iran. That's it. After we went live this morning on CPI, we're like, look, you have to be bearish hardware with the exception of Apple really because they're not spending on data centers like this until uh we end up getting a deal with Iran. this sell-off actually does put pressure on Donald Trump to do something sooner. But it's obvious because if the Neocloud yields are higher, then there's a concern that they're going to go bankrupt and somebody has to absorb their hardware. And if somebody can absorb a bankrupt company's hardware, maybe you have to buy less and therefore it slows the whole cycle down. This is unfortunately coming at the same time as the CTMX or CMTX China situation. Now, that's really a whole topic and a video that we should be making on uh Chinese memory, but uh just a short spoiler on it. I've made videos back in May and June and July about how I'm kind of bearish the memory cycle and that I think 2026 is the year that memories peaked out. Part of that is because not only are we going to start getting supply on in America from companies like Micron, uh whether it's Idaho or New York or otherwise, which most of Micron supply right now is coming out of Taiwan, uh Taiwan Semiconductor mostly, what you'll end up finding is you'll get more international competition on a commoditized product like DRAM. Okay, well this isn't great. And now you've got a Chinese statebacked company that is somehow managing managing to produce DRAM and is expected to take as much as 17% of global market share with Chinese manufacturing, which Elon Musk rightfully tweets and says, "Hey, you know, usually when they get good at doing something, they do it really cost- effectively." They're doing that without the most advanced EUV lithography machines. They're they're doing it with multiprocessing on DUV, older DUV machines. And so like to simplify all that in English. So the Chinese are being very creative with how they are competing with this memory supply crunch. And so expect not only US supply to come online from Micron or some of the other big players which is going to be more expensive than the Chinese. So ironically you'll get more supply but it'll be a higher cost supply in the US. While the Chinese will bring their supply online which is also a downward pressure on overall prices potentially. But at the same time, they're probably going to be able to do it at better margins than us. So, we're kind of like, you kind of got a double-edged hit there on a on a memory play like a micron, right? But the point is all of those fears are happening at the same time right now. So, what's my take on that? My take is that until you get an Iran deal, and if you don't get an Iran deal, you know, then then obviously it's even worse. So, I'm not here to to lecture you about how I think we're going to get an Iran deal. uh it's that until you get an Iran deal, hardware is probably going to suck wind. Not just because of these higher yields creating concerns about companies like Corewave, but also because of this new competition from China that people just weren't paying attention to for commoditized product. Now, once you get through yield fears that the neoclouds are going to be okay or they go bankrupt and absor get absorbed, once you get through that and you get through the memory fear, then who benefits? Apple, AMD, Nvidia, basically anybody who's packaging their logic next to memory that benefits from cheaper memory. Because like if I'm going to sell you a house for rent and you know the heating and air system cost me 50% of the house I'm supplying to you, you know, I'm going to be upside down supplying that home for rent. If the heating and air cost goes all the way down to 1% of the value of the home, great. You know, now I could profitably rent you a property. It's the same thing as memory except in this analogy memory is the heating and air right. Uh and so you know Nvidia benefits when a major component of their you know livable system or functional uh GPU system or uh CPU systems their new Varys stuff come down. The same is going to be true for Apple. They'll just pocket it into the margins. Now, you know, we we go through a lot of this thesis and and sort of like, you know, what our take is in investing in this sort of volatility, which we expect volatility until really between now and the 27th, which is when we expect an Iran deal. But anyway, we talk a lot about that in our uh in our course member live stream this morning. You're welcome to go check that out. Remember, you can always go to reinvest one.com. Uh you'll get access to our super intelligence and one terminal coming out this uh winter. We're really excited about it. It comes out in Q4. the terminal launches. Then you'll get everything in one membership, the alpha membership, the uh trade alerts with the portfolio, reinvest stocks, reinvest homes, reinvest research, course member live streams, the new modules, the courses, you name it. Uh there's a lot of pretty incredible stuff. So go check that out at reinvest one.com. And if you have questions, you could always email us at staffmeke.com or staff atreinvest.com. It doesn't matter. It goes to the same place. All right, so let's keep looking over here. Inflation concerns obviously and the bond market. That's where we got to pick up now. So, where do we go with the bond market? Well, the bond market is right now seeing the yield curve flatten. And the yield curve flattening is I mean, we're down what 10% today. Look at this. 11%. We're down at 38 basis points. We were just over shock territory. So, why does this happen? Well, first of all, the actual chart isn't loading, but the point is it's going down. Why is it going down? Well, it's going down because the tenure is falling. So this morning on the public live stream video that we did and the inflation video I suggested that the 10-year would might while it might temporarily rubber band above I think of the anchor point is 5.27 might temporarily rubber band above 5.27 I think it'll snap back down. I still maintain 527 is the ceiling and so far we have lost all of that insane gain that we had this morning. It's all gone. The yields are right back down to where they were which is great. You're actually net lower than where you were yesterday after the CPI report, which is crazy, right? Well, not really. This right here is a sign that people are getting nervous or more nervous about recession or growth falling. Why? Because the inflation expectations really are going to show up here on the 2-year. The Fed's responsibility to hike to respond to inflation are going to show up on the 2-year, which is at 4.81. and the 10-year Treasury is coming down, which is your sign of growth and long-term inflation fears. So, people are worried about a recession, then that 10-year could actually start getting bought. You start getting bids around that 527 more. And so, those Neocloud concerns are actually now turning into Treasury market buying opportunities that is actually creating the floor in TLT. So, the more people get nervous about hardware, the more TLT actually confirms its bottom. Look at that. We just recaptured the 7877 line, which is an insane line right here that, you know, we go back on the week chart. We keep bouncing off of. So, when you put all of this together, what does it mean? What it means is expect volatility on hardware until an Iran deal. Number one. Bottom line. That's bottom line number one. volatility until a neuron deal. In other words, you'll get buy the dip opportunities until a neuron deal. Uh, and I'm not even excited about this dip. Like, you got to bring me back to like 712 or 700 on the NASDAQ 100 and then I'll get excited about buying the dip because that's where I called peak fear last time. And I don't think we're going to go back there. But if we do, I'll buy the dip there. Okay, that's bottom line number one. Number two, I'm bearish memory and the memory cycle. I'm also bearish uh SanDisk, sorry. So, I'm bearish both of those commoditized products. I'm actually bullish a hardware recovery once we get through the Iran situation and once we get through uh the memory situation. Okay, both of those uh longer term you've got to be really careful that you are not overallocated to one thing because you are going to panic. You're going to get margin called. You're going to freak out and do the wrong thing in your investing journey. Don't be overexposed to one stock or one sector. Diversify. We literally what Monday morning bought an $890,000 house with my company Reinvest because that's what we do. Uh you know if we ever raise money again in the future it's like we expect 90 plus% of whatever we raise would go into real estate. And I'm saying that not as oh yeah you know go check us out and invest in us. This is not a pitch. This is not a pitch for anybody to invest. There's no offering uh right now. The idea of this is that I believe that uh when you have exposure to the stock market, you should also have exposure to cash. You should also have exposure to low debt in this environment. You should also have exposure to real estate. Now, I don't know your situation, so I can't tell you personally what to do, but that's my belief. Like, I think, you know, if I had a mortgage right now or car loan or whatever, would I want to buy the dip in the stock market or do I want to pay those off? I'd probably be paying those off. I'd like to be in a position of low debt. And the options plays that we've been doing in the uh Reinvest One group. You join us at reinvest one.com. Those have mostly been taking advantage of when we find higher volatility options. We sell puts. I don't have any sell sold puts open right now, which is, you know, I picked up the premium on the sold puts that we did. And so, we'll do some more sold puts soon, but there might be an opportunity here in the next couple days. So, we'll send some alerts out on that. But uh you know th those are some bottom line takeaways. Now what about coreweave? Can it go bankrupt? Of course. Yeah. The their balance sheet is horrible. Am I worried about the hyperscalers? No. The hyperscalers would actually benefit from these little guys just getting absorbed. Remember Microsoft is like a 62% customer for coreweave. and Microsoft picking up all those servers at a discount or somebody else consolidating them like Amazon or whatever probably be pretty desirable for the companies. They get the hardware that somebody else built at a discount. That's also not that easy to run a data center. I mean, a smaller company not just has to run the data center, but you have to run the software to manage the hardware. And I know that sounds surprising, but like hardware doesn't run itself. you actually need experts and people to operate the hardware and you know restart it, plug the Ethernet back in and out. And I'm obviously oversimplifying. That's probably offensive to people who work in the uh you know the the the coding around managing these data centers. It's hard work and these people deserve to be compensated well because there's a lot to it and I don't even know everything that's to it. I just know it's hard. It's a lot harder than it seems. But anyway, that's actually where we get over here to the labor market side of the Beige Book. So the beige book argues that there's still a shortage for specialized technical and skilled workers. Okay. So what does that mean to me? To me what that means is if you are an AI coder, a really good researcher, like honestly if you're like it sounds offensive, but it's not. It's supposed to be a compliment. If you're like autistic about research in memory or semiconductors or stocks and like all you want to do, this sounds insane to some people, but some people love this. Like I'm I'm kind of of the love this mindset. You just like sitting in a room and reading and studying stocks. Consider joining us. Okay. Uh our reinvest terminal is going to have an army of researchers making this terminal the greatest terminal that exists. And so if you want to be a part of that uh and you'll be eligible for stock comp after year two which is really cool uh send us an email at uh staffreinvest one.com include a little pitch video uh you know why you're here's why I'm an autist I I don't know how else to say it. I'm going to end up people people are going to take this out of context. But anyway, uh so specialized trades such as uh that type of human research like a human using AI, right? I don't I don't need a copy and paste of a research summary from AI. I could do that myself. You need humans, uh HVAC, electrical texts, low voltage techs, all of these fields are crushing it right now. for worker pricing power. But that's not true of all sectors. In fact, if you look over here, you can see five districts reported that some firms had either reduced staffing levels through attrition, delayed hiring, or anticipated uh less job creation after increased productivity from AI. You know what I actually think is going to be a huge beneficiary of investing in artificial intelligence? Netflix. Netflix. Yeah, it's pretty crazy. So, uh, Netflix just laid off a thousand workers and I think that is the exact example of what's going to end up happening with artificial intelligence le deflation where AI leads to so many efficiencies for workers that you end up getting uh weaker pricing power for workers which we saw in the CPI report this morning as well down negative.7% which is not good. Uh, and as a result of that, companies will make more money, but people will make even less money. Unless, of course, you're in one of these specialized skills. That is a concern for the Federal Reserve. And I actually think, interestingly, that might be why expectations for a Fed rate hike have in a weird way actually fallen. So, this morning we were at a 5050 chance of getting a rate hike in October. We now sit at a uh 65% chance of a hold. So only 35% chance that we're going to get a hike in October and December sits at a 7.8% chance of a hold. So almost certain that we're going to get a rate hike at this point for um for the Fed markets or or the bond market futures here uh judging the Fed markets. So that I think is very interesting. We've lowered our rate hike expectations from this morning's shock after the shock. And I think part of it is because the Beige Book came out and said, "Hey, whoa, whoa, whoa. Yes, inflation expectations are broadening, but be careful, boys and girls. We don't want to hike us into a depression over here." That would end up being a problem. I am an electrical engineer working on power grids, and I get insane job offers almost daily. Yeah, I bet. Yeah, I bet. Somebody says, "I like reading, but get distracted easily." So, you would not be a good fit for the job. You've just disqualified yourself. I get distracted easily, too. I actually find a little hack for that is uh I I call it uh micro DND. So, I have a shortcut on my phone. Uh and so when I swipe down from the top, I press turn on micro or I also made a little desktop app for it. It just says burst, like micro burst. And so when I click it, it turns on do not disturb for 30 minutes and then it automatically turns it off again. So that way I don't get distracted by notifications or tweets or, you know, whatever garbage. It's just like, "Leave me the f alone for 30 minutes." You know, you get a new cup of coffee, you turn on your little micro burst, everybody shut the f up and leave me alone for 30 damn minutes. And and then you could actually surprisingly get a lot of work done. You know what? Usually what makes people unproductive is that you can't get even 15 minutes of silence before you get distracted. And if you can actually sit down and not get distracted for just 30 minutes, you could probably get three hours worth of, you know, BS productivity out. So, I I don't know. That's just a little hack. You know, you you come here for the clickbait, stay for the insight there. How's that? Uh I'm black, but also have good credit. You're hired. Uh and then we've got, let's see, somebody else. I wish I had those abilities. Gold goes burr on an Iran deal. That's an interesting thesis. Gold goes burr on an Iran deal. Um, I don't think so. I actually think bonds go burr on an Iran deal. TLT goes burr on an Iran deal. So people buying bonds, mind you, you have to think about the counterveilling signal. So the counterveailing signal is if bonds are skyrocketing in value because yields are going down then that means that sends a signal to some of the gold bugs that people are getting less worried about the sustainability of US fiscal deficits which actually gives you less momentum on gold. I could be wrong uh but um but but that's that's just an initial reaction to that comment. So okay good. So that's my take on on sort of what just happened in the market today. Uh there's also a lot of fear obviously that people are waiting for anthropic numbers to tell us that the canaries are still alive. You really have two main canaries. We already know this. It is the labor market which the Fed is flagging risks on as they should. I'm glad they're aware of that. It'd be bad if they weren't. Number two, anthropic and open AI. And then of course the underlying neoclouds are just like little early little warning signs and you know Cory's situation is unsustainable and really bad and we made a video on it yesterday and you know now it's down 10%. I don't think it's a horrible surprise but it's also not just them it's also what's going on in the private credit market. uh you know remember we made the video yesterday about how private credit debt is up double debt defaults effective shadow defaults are up 2x roughly uh what they were earlier. So you know this is just another red flag. Of course if you like these insights always make sure to join us over at reinvest one.com. If you like that video check this one out. I think you're going to love it. >> Why not advertise these things that you told us here? I feel like nobody else knows about this. >> We'll we'll try a little advertising and see how it goes. >> Congratulations man. You have done so much. People love you. People look up to you. >> Kevin Praath there, financial analyst and YouTuber. Meet Kevin. Always great to get your take.