Welcome back to the daily late night bludgeon session with your host Charlie. Yes, another very, very red day. Who would have thought that a red day in 2022? Weird bad day for pretty much every sector. That said, I am very, very bullish on the psychiatry industry, if you know what I mean.

But when I started prepping this lovely video, you have to dow down about three percent or 1100 points, which is the worst loss since 2020.. you had the S P 500 down 3.64 the Nasdaq down four point, three, four percent. And then you got Target. or as I used to say as a kid to make people think I had designer clothes Target Negative: 25 Plus, when Target goes down 25 in a day, you know you've got some big problems.

The market sent a loud and painfully clear message today that nothing is safe. If you're in the market right now and you're in something that's not a short fund, then the market's telling you, hey, your time's coming soon The message was loud and clear. Not even the low beta. Very very low volatility.

Affordable shopping, discount store companies that are in the consumer defensive sector and are usually the last to go in a bad time. Not even those are safe. A 25 one year downtrend for a consumer defensive stock is a disaster and would indicate that you're going into a very, very rough time. Or at least you're in a really rough time.

25 plus down day. Not a year, but a day folks. But when you think about what made this so bad, you have to understand the context. Here you go all the way back to February and March of 2021, when inflation and fear talk started and tech had its first outflow, especially Growth Tech.

They used that capital and rotated everything really into consumer defensive and some of these so-called safe inflation-safe stocks that would be able to endlessly pass on costs to consumers no matter how much things inflated because consumers just have unlimited money, right? The mistake number one was assuming that they'd always be able to pass on these costs, but mistake number two was that they didn't really check the valuation too much. A lot of these consumer defensive companies had already recovered well, well, past pre-coveted highs. And a lot of them, while they were doing good in 2021, they're still pricey by basically every fundamental metric, But people said no. these are value stocks value stocks.

You don't have to check the valuation, you just say okay, it's a value stock. Buy it at any price. So people pour it into companies like Target after that original March 21 dip and it saw more insane capital flows along with its entire sector all the way until the broader downtrend in November started. and then even as late as just a couple months back, you had markets make that same mistake again, with Target all over again to really over allocate capital back into it as a safe haven trade, despite again, a disregard for valuation or market sentiment, or the fact that we're heading increasingly into a very, very rough period for the American consumer, which of course has set it up to be extra catastrophic.

Now that we know that Target ended up not being that good of a safe haven, Now, I know what you're thinking: Charlie: Only 25 down? What are you complaining about? If this was a tax knock, that'd be a bullish day. I'd kill to only be down one-fourth my limbs. Or maybe you're thinking okay, Charlie: Yes, it's down big, but if Darth Powell wants Target down 60, 70, 80 more percent, he could make it happen on a dime. This is Not our market.

Charlie, This is Darth Powell's market. Why, yes, you are right. All Jerome Powell has to do is tighten financial conditions to rates that make even basic items that Target sells basically unaffordable. When the Fed starts tightening markets, nothing is spared, and we're seeing more and more evidence of this every single day.

First, you see it in terms of capital actually leaving the market because the Fed is draining liquidity and making risk more expensive to take on, But then you start seeing it on the actual economic number side, which we haven't really seen a lot of yet. But you're just starting to see some of the trickle ins. and when you start getting the economy slowing down at the same time there's not as much money to invest in companies, then you get hit from both sides. The numbers are worse, and people aren't paying as much for even good numbers.

And it's up to the Fed to decide how much pain is necessary. That's true, but to see this much pain in some of these names this early in the process is very discouraging. I'm not going to lie, this is what Cnn Business reported: Targets earnings didn't hit the mark far from it. The retail giant reported a stunning 52 drop in profit for the first quarter, badly missing Wall Street's forecasts.

The company blamed higher expenses due to continued supply chain disruptions. Consumers are also holding back on non-essential purchases because of rampant inflation. So there's four massive issues here. Number One, they reported a 52 drop in profit.

Do you know how extreme that is? Imagine if your employer, for example, tells you, oh, you're going to bring home 10 000 this month or 5 000 this month and they end up giving you half that amount. How would you feel about that, And how would you react? That's basically what Target just pulled on their shareholders. The second big issue here is that Wall Street didn't see this coming at all. I think that unfortunately, a lot of analysts have been very, very slow to accept the headwinds that are very, very likely to cause a strong economic pushback that is probably going to be a recession.

In fact, I think right now we're probably already In a recession. We'll see what happens when the Fed really starts putting on the brakes. But the bigger issues here, and the issues that actually send a warning sign for the rest of the market, is that Target experienced high expenses and consumers are holding back at the same time. That means that you have the worst of both worlds.

Profit margins are going down while demand is also going down so consumers don't want to spend as much and consumers don't have as much to spend. and you're not making as much money when they do spend. And I believe that's what sums up the economy that we're starting to be in, and also the one that we're increasingly heading into. The implication here is that at least in the short to medium term, we're in a lose-lose situation.

Number one: if the Fed has a prolonged inflation fight and they lose to inflation for a lot longer, companies are going to feel dramatic pain because consumers aren't going to have as much money to spend on products, and profit margins are going to go down now. Number two: if the Fed starts winning with inflation relatively quickly like in the next couple of quarters, what companies are still going to feel insane amounts of pain because multiple crunching is going to continue and we're likely going to be in a recession. Which means that consumers aren't going to again be able to afford products or at least the same number of products that they otherwise would have in something like a 2021 environment. So this inflationary problem is really a lose-lose situation.

You add that to the rhetoric that the Fed has been spewing yesterday. Powell said it's been good to see financial markets reacting in advance based on the way we're speaking about the economy, and the consequence I mentioned is that financial conditions overall have tightened significantly. What is he saying here? He's saying that he's glad that capital is retreating on its own dramatically from the market and the overall financial system because that makes his job easier. But of course, by extension, when capital is draining from the financial system, what does that mean? Well, it also implies that he's fine with seeing massive, massive destruction of wealth from the overall stock market.

If you're somebody who's an investor and the Fed is going out and saying, okay, well, we are willing to destroy, destroy massive, massive mounds of wealth in order to get inflation down, you're thinking, okay, well, I'm not going to want to invest in the middle of this. Wake me up when the Fed starts the money printer again and again, going back to Target. When you see such a big player in a safe haven area of the market do badly, it starts freaking out everybody else in that sector, and really, the implications for the rest of the market are very, very severe. If something safe can go down this much, what about something that's not so safe? What about some that's a little bit more spec and some of the big stocks that got their 2022 Massive Dip special are still dropping dramatically.

You look at something like Netflix which reported a decently bad quarter and just got obliterated after already being obliterated. It went from 700 to 340 before earnings and then it dumped to like 214 and people said, oh no, this is way way too far down. But it's continued continued selling off since then, and it's like even at the current price of 178, I don't want to be a pessimist, but that's incredibly incredibly expensive depending on how aggressive the Fed's going to be, and if we're going into a recessionary environment. Let me tell you, people are going to be a lot more picky in terms of what they're spending to get subscriptions to boring content.

By the way, even Squid Game, which is one of the Netflix series that I actually liked a lot. What's really the competitiveness of watching that when you can literally just be in your own squid game by playing in the 2022 stock market, you go over to some other sectors and some sector pillars and you look at them say, for example, Tesla, Tesla is a pillar for not just electric vehicles, but also growth tech. Overall, it's the King Grove stock and the one that made it to massive, massive valuations, and today it was down like seven percent, but from highs it's down like 42. Which is a lot.

But when I think about where the next future big market surprises are, it feels like to me that Tesla is a prime candidate. I know if you say something bad about Tesla on stock, youtube, or finance Youtube, you're going to get a lot of people upset and you're going to lose subscribers. so nobody ever wants to say anything bad about it or critical of it. And just to be clear, I'm no Tesla hater.

I bought one of their cars recently. It had a few problems, but they fixed it and I love the car. Overall, I've covered Tesla stock on the channel for years. I'm a fan of the Muskmeister, and I believe that a lot of the best growth opportunities for Tesla are just in the beginning of the woodworks.

But when it comes down to what Tesla's valued at right now, when you put the growth stories away, which the market increasingly doesn't care about, Well, at the end of the day, it's still been pumped with easy money like everything else, and that easy money is betting on the continued, consistent, extreme growth of their current enterprise, right? But the way that I see it as easy money is going away rapidly and there's going to be headwinds to their current enterprise, just like there have been in the past. Yes, they've done a killer, killer, job with manufacturing and dealing with their supply chain issues. I think one of the best in the world, but we haven't really seen what happens if you actually get a setback in terms of demand. Right now today, Tesla is a luxury vehicle manufacturer.

Luxury vehicle manufacturers, like the rest of the car market have ballooned to insane degrees again, propped up by easy Money policies. When you have dirt cheap interest rates, that means that you can borrow more car. But what happens when for example, the 3.24 Apr on even their cheapest model, the model three goes up to four Five six. What about if it gets to Seven, Eight Nine, or ten? Hopefully we don't see it go up that high, but it's very, very possible depending on how crazy the situation gets.

Even a small increase in the interest rate takes out a whole segment of demand and a new group of people can't afford it anymore. Elon Musk said, we're heading for a recession. What happens in a recession? People have less money to spend on things that are luxuries if you have less money to spend while borrowing costs are getting more expensive. How does that really help the demand for Tesla? You could be bullish on electric cars all you want.

I'm bullish on them. Very, very bullish on them. Just look at all my videos, but when shite hits the fan demand goes down and it goes down dramatically. Great opportunity for folks who are too late on Tesla to buy the dip when it gets really bad, but also something that you need to realize is a strong possibility.

I don't understand when people say no Tesla's immune people will buy Teslas at any price, even if they don't have money to do so. Sure, I do think there's a sizable portion of people that actually would rather have a Tesla than eat three meals a day. The Colts brand value is strong. I'm not even being sarcastic, but it's just another situation where I think the market hasn't factored in what it's going to do.

If you actually see a slowdown in demand, it's just so expected That Tesla always always always has more demand than expected. It always always has extreme levels of demand. Has a supply problem, not a demand problem, right? But the minute that you have a couple quarters where all of a sudden people aren't demanding this because everything's going bad, or even if these aren't terrible and demand just weakens a little bit, how do people react in terms of the stock price? There's this idea that goes around that you can't be bearish on something and bullish on it at the same time, but you can be. You could be bearish on something over a short to medium term time horizon and also bullish on it over a very long time horizon.

You can look at an overall trend and say, okay, well, yeah, this dip in the trend is because of macro factors. It's because of this or that, but the overall trend is still upward. But I'm just saying I think the market isn't prepped for even that dip. I think that even with the 40 dump and even with the massive earnings beats that we've seen the last couple of quarters, I think the market's not ready to see any sort of disappointment in Tesla and we'll see when next earnings come out.

We've got some ways for that though. Obviously there's also some drama with Elon, Musk and Twitter and whether he's buying it or not. And of course they got kicked out of the Esg index today, which I'll let you form your own opinion on that. but I think bigger picture people want to see the growth of this company and the demand.

the consistent and insane demand that other companies just can't seem to get. And the minute that you see that cool off a little bit, people start getting worried, especially in these market conditions. so I don't know folks. Great great company over the long run.

Really really tough right now in the situation. But anyways, in totality, what you're looking at with this market is pretty damn surreal. It's like knowing that you have this big train track and some of the rails have been removed and trains are going to keep going down this track. and one by one they're going to fall off the track and implode and you're there watching to see how big the explosion is and how much damage it causes.

We can look at them and speculate. we can feel bad about them. We could wish we shorted some stocks or bought some put options, but at the end of the day it is what it is and this is the cycle we're in. Every really good time turns into a really bad time and every really bad time eventually turns into a really good time.

So keep your eye on the ball, look at the bigger picture and enjoy. Anyways, folks that caps off today's video. If you have any questions, feel free to reach out to us below or join us on Ziptrader Circle. Make sure to hit that ravishing like button and also subscribe if you're looking or not to trade rather violently.

I'll put a link to Zip trader you below coupon code. Charlie Fever will get you a sizeable discount if you're looking to get up to five free stocks with Moomoo a great trading app, I'll go ahead and put a link to that below. Have a good one folks and I'll see you in the next video.