 In this video, we're going to see where the stock market is going to go based on these two guys. Hi, this is MXUX. I'm going to do a piece here on a comparison between Kyle Bass and Tom Lee on the outlook of the banking crisis. I think these two guys are some of the sharpest analysts or whatever you want to call on the economy and the Fed and the stock market of any of them out there. And there are more than this. And I mentioned them in a previous video as well, Kathy Wood, Hedji, and so forth. But let's just go through this. And I'm going to start here. And this is a comparing contrast. And I'm going to make some observations at the end and tell you what I think about this. Now, Kyle Bass is right here. He's based in Texas. He is very bearish on China. He feels that China is going to take military action at some point, that they are inevitably drawing towards that as one of his positions. He's presently working on a wind farm, I think, in Texas, putting one together. And to contrast him to Tom Lee, Kyle Bass does not feel there is any room for another form of currency in the world economy. And he is anti-crypto. Tom Lee, on the other hand, is bullish on crypto. So let's get started. Now here's one thing. Here's a picture of Kyle. Now this is from four months ago. And these are his last comments on the economy. He has been quiet. I can't find anything from him recently. Now he could be working on his own investments, consulting with private clients, working through this wind farm deal. He's had some legal problems. But these are four months ago. In my initial video, some time ago, I made two of them on the macro economy. And I used Kyle Bass in that evaluation. Kyle Bass said that the Fed was going to stop rate hikes in Q1 of 23. They have not. And that is the starting point for this. And again, this is from four months ago. So let's take a look at what Kyle Bass has to say. And this is the best I could come up with in trying to analyze his last position anyway from four months ago on the economy. Now here's what he says, the Fed balance sheet doubled over COVID in 18 months. And he feels that the Fed balance sheet, the size of the Fed balance sheet, is what needs to be controlled non-interest rates. I'm not a Fed expert, but I think what he's saying here, and you can correct me in the comments, is the Fed balance sheet is getting so big it's crowding out the economy. And it needs to take a step backwards and not have so much influence over the economy. He goes on to say raising rates this fast, which is what Powell has done faster than Volcker. 20x, I think, Kathy Wood said. Raising rates this fast was as bad as doubling the money supply over 18 months. So equally, you know, the COVID stimulus, which I think actually in my mind was a positive. The rationale there was it's easier to spend the money now than bring the country out of a depression. Now raising rates is as fast as they've done to counteract this is just as bad as, so the medicine is just as bad as the cure anyway. And he says something will break, and I addressed the medicine cure issue later. Something will break, so his position is the Fed's going to break the economy. Was that Silicon Valley Bank? Is that commercial real estate? I just watched an analyst today said the world banking sector cannot operate with 4% Fed rates. And as I said in my last video on the Fed, I believe they're going to raise on May 8, whatever their next meeting is. Since this statement the Fed has off the books using the FDIC, pump more money into the balance sheet after the SVB fail and covering all deposits. So Kyle Bass said, this is what you need to watch. And Larry says, this is what you need to watch, not employment figures. So again, Kyle Bass says, you know, the glass is only so big and now the Fed is getting so big it's taken up too much room in the glass. This was his prediction four months ago. In three more months, let's just say June 2023, the economy will hit the brakes hard when the legs from Fed policy come into effect. And I've seen multiple analysts use the same timeframe. So Bass is kind of a traditionalist following the Fed and he deals with current, I believe, current situations in the Fed, whereas Lee is more of a historic. He analyzes things with a historic perspective as we'll see. He says Europe will have an aggressive recession. He says the USA is already in recession and Asia also is going to have a recession. So that's a world recession and that's in June. And he says the European recession is going to be aggressive. So you know, they don't, they don't have the mass capital and the Fed and so forth that we have here to backstop these banks and so forth. So forth. And the rest thing he says, USA is already in recession. All right. So 40% money into the supply in 18 months with the COVID stimulus need to concentrate on that. They shrink the balance sheet, not raising the Fed. He says that raising the Fed rate is not the issue. The Fed needs to shrink its balance sheet. It has, I guess, too much money on the books as assets or liabilities. And they need to get that money out of the economy, quick crowding out the regular economy. This is my take on it. You guys can mention in the comments what you think. But I think it's interesting here that he thinks raising the Fed rate is just pushing on a string and it's going to cause more harm than good. And it's an inflationary recession, according to his terminology. Employment is a lagging indicator. It's the wrong indicator to watch. And I know we're waiting for employment data, the AP report has come out and so forth. I see 235,000. In the past I've said the growth, real growth is at 250,000 plus. So that's kind of a neutral reading from my take anyway on the ADP report. So that's it. He says the Fed's going to break something. The problem here is the Fed balance sheet. Raising the Fed rate isn't going to solve things. Forget about watching employment data. That's a lagging indicator. And this is four months old. Has stated that in June 2023 the economy will hit the brakes hard. And this is, you know, the Fed raises rates and then, you know, I don't know what it is, a year, nine months later, whatever that, those things go into effect. So anyway, Kyle Bass has said here that everything's wrong. Something will break. Again, I heard an analyst say today that at 4%, the world banking system just can't operate at a 4% Fed funds rate. It's just not built that way. So according to these guys, Will Powell Get Fired, Will, and they have stated, unless there's some kind of emergency, they're going to raise rate. They said that to a delegate of Republicans that met with Fed representatives, said they're going to raise on May 8. So after that, will there be a pause where we have really fast cuts? I don't know. But Kyle Bass is really down on the Fed and this is his take. You can pause this and read this. I think it's interesting. He's saying the Fed balance sheet is out of control. This is, I think, his main message and because the Fed balance sheet is out of control, they're going to break the economy, they're going to cause the recession, so on and so forth. Interesting also, employment is a lagging indicator. So this is the wrong indicator to watch and I think the Fed is putting a lot of weight on this indicator. So that's Kyle Bass. That's what Kyle looks like. Looks a little PO'd right there. And again, these comments are four months old, but they seem to be right in line with current thinking from, I would say, the majority of analysts slash economists that are on the business press right now. Now let's move on to Tom Lee. Here's Tom Lee. Tom Lee has been the most right of any analyst I think over the past few years and he's kind of a permeable. He also interestingly said either the economy broke, either inflation broke or something broke in the economy with these Fed rates. Just as Kyle Bass said, the Fed is going to break something. So I think they're both agreeing with the guy that said the World Bank system can't operate at a 4% interest rate. So here's these are Tom Lee's most recent comments on March 31st, 2023. This is from a UK publication. He said there's a uniformly bearish sentiment. There's 85% of people are bears or analysts or whatever. There's a lot of cash on the sidelines. He said also that pros and hedge funds also short. So everybody's bearish, everybody's short, everybody's running the T-bills, everybody's running the gold, money market accounts and so forth. Now this is the key points of his analysis. The S&P 500 was up 7% in the first three months. That makes back to back quarterly gains for the S&P 500. That has not happened during any bear market for 40 years. And again, Tom Lee takes this historic, he compares present conditions, this is my analysis of him, to historical data and makes conclusions from that. So he's saying that no bear market has produced this. So he's saying it's not a bear market. So he's saying that the sentiment is wrong. He's a contrarian. He says, you know, the historic data says that this is not a bear market. It's the beginning of a bull market. Stock momentum is strong. This is another historic quote of his on the data. The stock momentum is strong. Of 14 bear markets, only two also saw back to back quarterly gains. So again, the number and the timeframe both say, according to him when comparing the data, that this is not a bear market. He says it is the bears that are trapped and could fuel further gains in April 2023, which is the present time. And I'm not sure what he means by that the bears are trapped. I don't know if those are trapped perhaps in short positions. He's talking about a short squeeze or perhaps because they're trapped with cash on the sideline. They're missing the momentum of the coming wave. He considers the S&P 500 October 22, October 22 low as the start of a bull cycle. And he doesn't say a bull market. He says a bull cycle, which implies a longer period to me. So October, November, December, January, February, March, April, so seven months we've been in. And again, these back to back increases and so forth. So Lee is definitely seeing glass half full. So he's front running the market and he's saying that everybody's too bearish. And if and when sentiment shifts, cash will flow into stocks and into the NASDAQ. So you know, there's going to be a big tidal wave of money running in when the sentiment goes from bearish, full on bearish to bullish. And you know, there's truth to this when everybody's bearish, you know, that's a problem when everybody's bullish, that's a problem so forth. Right now cash and T bills are paying 5% keeping cash there. So I guess he's implying bed rate cuts, but he says that the bears are trapped. Maybe this is what he means by that. They are trapped in T bills, which of course are bought it for time or deposits over time. So that may be something to consider in your personal investment. This is not investment advice, but according to Tom Lee, there's going to be a tidal wave or a bull cycle starting and it looks to me like he's saying don't have your money tied up and 5% is not going to be enough of a return to justify keeping it out of the market. But with a fed pause or cut, definitely a cut would lure cash into the market again. Lee says front run, this bull run, short squeeze. So Tom Lee, there he is, he's saying risk on bull cycle and that implies growth companies. I've already heard some people talking about the fang. The fang is going to produce returns, but the growth isn't. I don't know about the growth being there in the stock prices, but I think that might all be drained out. I don't know. I'm not an analyst. Don't listen to me. Okay. Make your own decisions. But anyway, Tom Lee says front run, the bull cycle, you know, he is again pretty much a permable. He's been right most of the time on most of his calls have been right. Kyle Bass also has been right about a lot of stuff. So you have two contrasting views here. Tom Lee's is the most current up to date. So you can take your pick there. Kyle Bass says there's work to do to reduce the Fed balance sheet to get things back in working order. Tom Lee is totally ignoring all that. And he's kind of implying that the Fed is going to soften. But I think he sees an irresistible bull cycle starting because everything's so bearish. There's so much cash on the sidelines. It's an inevitability, I guess. And based on historical performance in the past, he sees the start of a bull cycle, which, you know, some of the investments I cover that would that would favor, you know, risk on investments, you know, Lordstown Motors, perhaps, or Faraday Future, some of these fringe outlier BV manufacturers, Fisker, these are more risk on, I think of course Tesla is going to be in there too. But anyway, Tom Lee, bullish, Kyle Bass, bearish, Kyle Bass says June 2023, breaks are going to hit hard. Tom Lee says run this bull run slash short squeeze. So you got two different views there. As I said, Tom Lee is one of my, I mean, I like both of these guys and, wow, it's a coin toss, but you know, Tom Lee has been right a lot of the time. That's not a recommendation. Do your own DD. Look at his stuff. See what you say. But anyway, that's his most reach in March 31st, 23, right off the pot off the presses. That's his take. So risk on bull cycle, risk on implies, you know, growth companies, smaller cap, I guess. Again do your own DD on that, not financial advice, not recommending that you buy, sell, or hold any security. That's not what I do. Anyway, now I just wanted to go through this. Everybody's talking about, Jamie Diamond says, this is not 2008, which was the mortgage based crisis, and it's not. This is 2008 versus 2023. And I just wanted to show the differences, you know, between these, how much the world has changed in, you know, 20 years, whatever. Okay. Now in the past, junk mortgage and derivatives based on those mortgages were so bad that it dwarfed global GDP. I think it was 10 times global GDP. That was the problem with the past, the 2008 crisis. It was risk management. Today, rapidly rising inflation. Now, I believe this is profit inflation. I mean, we did have inflation that was transitory based on the supply chain and recovering from COVID. I think where we are now is profit inflation forward, for example, raising the price on all its trucks, claiming inflation. I don't know if it's there. I don't think they can say the chips are the cause anymore. You go to the grocery store, prices rise weekly. I don't know if those are justified. I think these are companies that are looking to make up for lost business during COVID and they're simply taking advantage of what's going on. And I think that one approach to this could be a price control regime by the federal government. I can't agree on everything versus Fed rate increases. So anyway, just a quick story. I remember I lived in a neighborhood that had rent control at the time and they did away with rent control and I went to the grocery store the day after that every single item in the grocery store that I bought regularly. The price was raised by $1 overnight and I think that's what we're looking at here. They're just seeing the opportunity to do it and they're doing it. So we have Fed historic rate increases. We really didn't have that in 2008 and the COVID stimulus and the Fed balance sheet totally are the causes of this crisis, at least one interpretation in my case. So totally different, of course we have the commercial real estate mom going to blow up here but totally different. This was banking risk management. This is just macro economics I think. Okay, what we did in 2008 tarp massive balance of finance followed by Fed rate crunch cuts is essentially zero Fed rates for years to follow. Residential mostly mortgage failures, housing crash and a stock boom followed the bailout. Okay, now we have SVB because of the unrealized losses and a bank run. All deposits were covered over and above the 250K limit. As opposed to tarp, we've got another crisis going to happen with commercial real estate. When these loans come due and to be re-up the mortgage rates are going to double triple. Again unrealized losses on bank balance sheets. This is globally and if there are bank runs globally then these banks are not going to be able to cash out these bonds and get par and they're going to be short paying people back. The pandemic bond purchasers are all underwater with Fed rate hikes. So before the Fed rate hikes they weren't with rate exit at zero. They had locked in a pretty good now with the rate rates at five over five soon. So we've got a situation here basically that bank runs will produce bank failures worldwide. That is where we are because their collateral is underwater. We had the banks incompetence and lack of risk management greed. I knew a risk manager at the time. They were all told this is outside the risk parameters, dating care, they were making money. In this case they were kind of following the rules laid out by the Fed and the Fed did a rug pull on everybody and did a massive, massive interest rate increase and that's what's broken something. Now I want to compare the media that was available in the 2008. We had nightly news, newspapers, magazine. We had basically dumb cell phones. The iPhone was just coming out. We had cable TV finance. I remember I used to watch a guy in Orch County called Skip Linderman who had like a public access finance show. And the web, the web was up since 97 but I mean it was still in its infancy. It was nowhere where it is now. So we were working on a whole different news cycle back then and there were special reports on TV and things of this nature. So the information that was available was much more limited than it was kind of delayed and we didn't get the behind the scenes of all these Fed things and all these analysts and everything. Now today, all the sources we had in 2008 previously mentioned plus Facebook, Facebook wasn't a thing there. YouTube, YouTube wasn't a thing then. Just starting, Instagram, TikTok didn't even exist, Internet of Things. We had like dial up 28K internet at that time. We got AI, chat, GBT, we did not have that. iPhones, iPads, smartphones, this stuff may have just barely been coming out. There probably were no apps at this time, okay? There was no brokerage apps or banking apps are very limited, okay? Now we have instant money transfers via apps and brokerage apps and Robinhood and all the rest of them, Moomoo and all that. And this is instantaneous, okay? And we have Bitcoin and Ether blockchain and again this is money transferring almost instantaneously, but under full control 24 hours a day using apps. And none of this, you know, the velocity of money and the velocity of money movement, this is all different now than it was. Again this was broadcasting a bank run via Twitter, Teal, that's what Teal did. He came out and said get your money out of SVB, that I mean unheard of, okay? In 2008, you know, you might have read that on the newspaper, the inside guys would have been calling each other up on Wall Street, but you know, you would get all this news, you know, a day or two later as the public. This is on Twitter if you follow Teal, you saw what was happening. Now we have nearly all real time finance news and stock quotes almost 24 hours a day really. There's online Fed information, plenty interviews with all the Fed governors on YouTube, this stuff, none of this stuff was available. You had Paulson, you know, dropping to his knees begging Congress to fund TARP. That's what you heard, you know, you didn't hear these Fed governors and all this. So we have an accelerated rate of change via technology, okay? Technology has changed the nature of financial crises in total and the question I have is will technology accelerate the resolution of this crisis? And I'm talking about communication and I think this look at communication kind of favors Tom Lee's view of things that we might be in a bull market and not even know it. And this accelerated rate of change and accelerated velocity of money, again, this may also, I mean, let's put it this way, you know, if there's a crash, it's going to be fast and if there's a rebound, it's going to be fast. So hold on to your hats anyway. Those are two conflicting views, Tom Lee, bullish, Kyle Bass, four months old, he's bearish. So I'll let you guys make up your own mind on this. This is MXUX, kind of favorite, Tom Lee, not financial advice, not suggesting you buy, hold or sell any security. This is MXUX. I hope you liked the video. Thanks for watching.