😱 Texas’s FRIGHTENING Crash Sparks PANIC—What Happens Next Will SHOCK the WORLD!

Texas just dropped a bombshell and it's a wake-up call for the world. I'm Steve Van Meter. The Texas service sector is tanking, sparking fears of widespread fallout. And what that's indicating is that hell is coming. Now let's head over to the Dallas Fed where we pick today's story up. As Texas service sector activity contracted in May, even worse, the revenue index fell nine points, intercontraction at minus 4.7. And the reason this indicates that hell is coming for a lot of American households, because when demand goes down and revenue for businesses fall, well one of the first things they do is cut hours, and then they cut jobs. But for the moment, they're not cutting yet, as labor market measures suggested both employment and work weeks were unchanged in May, as both of them only dipped just slightly. And this is a good sign for workers, because a lot of employers said, we're going to hang on to employees as long as we can. The problem is, the longer this trade war goes on, the more likely we're going to see hours start to get slashed, and the next thing you know, it's going to mean jobs are cut, and once that happens, it spirals out of control. But wait till you see what else happened in Texas. Perceptions of broader business conditions worsened in May, but uncertainty moderated. The general business activity index and the company outlook index rose, but remained in negative territory at minus 10.1 and minus 8.3, respectively. So what businesses are telling us is, look, while their uncertainty has gotten a little bit better because they're believing that the trade war is coming to an end, they still see demand going down. And again, for the moment, they're holding on to their workers. That's unlikely to last. Selling at input price growth eased in May, while wage growth remained stable. What we're seeing here is one of the major issues that we've been pointing out is that they would be unable to pass on higher prices. We're seeing that now in the Dallas Fed Services sector. Businesses in Texas cannot pass on higher prices, and as a result, this is a major problem for workers who desperately need to see their wages rise. And what we're finding out is that even wage growth for employees are moderating, and it makes perfect sense. If employers can't pass on higher prices, they certainly can't pass on higher wages. And the selling price index fell three points to 5.2, and the input price index fell to 20.5. Both indexes were below their respective series averages. So while many people have been pointing that inflation was coming and it was going to be a problem, we've been saying that the cure for higher prices is indeed higher prices. And the evidence is very clear as we flip to this chart. Let's take a look at the consumer price index in blue against average hourly earnings of production and non-supervisory employees in red. And I want to take you back to the early 1990s. What happened? Inflation went on the rise as you see the blue line heading up. But the problem is, employers did not pass on those rising costs into more hours to their employees. That meant paychecks relative to inflation shrank, and we went right into the 1991 recession. You can see the same effect that energy prices had going into the global financial crisis. You can see coming out of that, we almost faced a double-dip recession. The reason why? Inflation took off, but wages didn't. Now what are we hearing? The issue is that inflation could go higher, we've been saying it wasn't likely to go up much. Sure enough, now the evidence is mounting. The problem is, we're likely to see hours getting cut. We saw that effect here at the peak of inflation. Remember, it went away because hours dropped. But despite the fact that Texas employers are saying, look, we're not really cutting jobs here, we're not cutting hours. There's a different part of the Texas services sector that's cutting in a major way. Response to expectations regarding future business activity were neutral to positive. The future general business activity climbed 16 points to a near-zero reading. And what we're hearing, and continuing to hear from employers and in surveys, is that everybody believes that once the trade war ends, which they don't know when it's going to end, but they're optimistic that within six months this is all going to be over, that business is going to go right back to normal. And that's why you're seeing these future expectations rise. The problem is, right now what we're seeing from consumers is their expectations only in terms of stock prices are going up, because in reality, their spending is going down in a major way. But you should be profiting big time, just like our CTA timer pro subscribers, our uranium trade, up as of close of business yesterday a whopping 37.49%. And here's the best part, you could have gotten in on this trade for free. All you had to do was sign up for the free 30-day trial back in April and you could have jumped in on this trade. Grab those links in the description below, use the coupon code for your free 30-day trial, stay tuned to the end of the show to find out how you can trade against machines and win. But while the broad Texas services sector is saying they're not really laying off or cutting hours, one part of Texas is saying we're slashing them. Retail sales activity contracted sharply in May, and this is a major problem because again, we talk about the cure for higher prices being higher prices, and now we're starting to see some evidence of that. We've been hearing from central bankers that have been worried that higher prices were going to lead to inflation, but we kept maintaining the point that if wages aren't growing and workers aren't getting more hours they can't afford it, they'll have to cut their spending. That's now exactly what's happening in Texas. The sales index, a key measure of state retail activity, plunged 33 points to minus 30.5, its lowest level since April of 2020. Retail inventories pushed further negative, with the May index falling to minus 10.7 from minus 2.4. So before we've even seen the effects of inflation from the tariffs, what are we finding out? That consumers cannot afford prices where they're at, their wages are shrinking, and that means they're cutting their spending. This is exactly what we said would happen. Retail sector labor market indicators suggest a continued contraction in employment and work weeks. And this is exactly what we expected to see. As demand goes down, and we see spending goes down, the demand for labor goes with it, and now we're seeing that happen right in the retail sector here in Texas, and this is going to spread all across the country. The employment index remained at minus 8.1, indicating a decline in employment. The part-time employment index increased 4 points, but remained negative at minus 3.6, and here's the big one. The hours worked index was unchanged at minus 3.8. So while some lost their jobs, those that kept theirs saw their hours worked get cut. And again, this makes perfect sense, because when you see a decline in demand, the initial response from employers is again, cutting hours, and then jobs. And the evidence is clear as we take a look at real retail sales, that's inflation adjusted in blue, against average weekly hours of production of non-supervisory employees in red, because when people start making less money, well the initial response is, they're going to spend less until things change, and then if it doesn't, well their spending drops significantly. Let's go back to the 90s, where we find out that hours worked are on the decline, and what happened? Retail sales dropped right in line. Happened going into the dot-com bubble. The same effect during the financial crisis in the years leading up to it. We saw hours worked plateau, retail sales on the decline, and the reason that happened was everything had to do with energy prices. May remember that oil prices were rising, gasoline prices were on the way up. That tapped out people's discretionary spending, and that meant if their hours weren't going up and they didn't, they had to cut, and sure enough, that's exactly what we saw in the data. Let's go back to 2022 now, and what do we find out? That hours are dropping dramatically, and despite this recent pop, what we're seeing in the Texas services sector is demand fell, and again, this is a major red flag, because while some employers are going to hang on to people, they can't afford to hang on to them indefinitely. They need to see the trade war end and fast. Of course, the risk is the longer this goes on, the more workers are going to face fewer hours, some people are going to lose their jobs, and as those incomes drop off and the spending from the economy falls apart, next thing you know, it's going to spiral right out of control. And then we're going to have the major problem. This is when we talk about hell is coming. It's not just about seeing hours get cut, it's about seeing the unemployment rate rise. Let's take a look at real retail sales, still in blue against the unemployment rate in red, and what do we see? Very clear signs that as demand goes down and hours get cut, at some point, employers prioritize keeping their key employees and start laying off the other ones. They hit the unemployment line and have no other options because the economy is slowing. We see that effect in the global financial crisis, and we're starting to see that now, despite this recent increase in retail sales, it did not lead to a big increase in hiring employers, instead giving out more hours to their employees. But now what we're finding out is they're cutting those, at least in the retail sector of Texas. And if they're cutting them there, that means we'll find out soon enough that it's being cut all across the country. Meanwhile, perceptions of broader business conditions deteriorated further in May as a general business activity index declined deeper into negative territory, dropping to minus 23.7 from minus 14.8, and price growth eased while wages were stable in May. So good thing for employees, they saw stable wage growth, but the problem is price growth is falling. So what we continue to see signs of is businesses say, look, we're going to raise prices. We say they can't, and then they try to, and what do they find out? That they get rejected, and the only course of action is to lower prices. Now for employees, this is a major problem because again, what do they want to see? Their average hourly earnings go up. They want to see more hours, but if employers can't pass on higher prices, well, it's going to be a huge problem because the selling prices index fell 16 points to 5.2, input prices declined 14 points to 21.3, and you can see the differential there. They very clearly cannot pass on higher prices to their consumers, and that means that wages are not going to be able to go up at all. But let's turn to the fifth district or the Richmond Fed, and what do they note? That service sector activity declined there in May as well. The local business conditions index increased from minus 30 in April to minus 18 in May, still contracting, but at a slower pace, but here we can see the current employment index decreased from eight to zero, suggesting they're not laying people off, and the wages index increased to 20. So while we didn't see this in Texas, here in Richmond, what we find out is they're giving people raises and they're not really cutting hours. Well, at least not yet. The average growth rate of prices paid and prices received were nearly unchanged in May, so that meant, of course, the increase in inflation did occur, but they couldn't pass it on. So again, this is a major issue, but while some people are saying this is great news that companies are going to give out higher wages, it's going to come at a sacrifice of The evidence is clear as we take a look at average hourly earnings of production of non-supervisor employees in blue against average weekly hours of the same group, and what do we find out? That typically, employers tend to give out wage increases at the same time they cut hours, and you can see that happen in the 80s, here in the 90s. It is very clear going into many recessions. You see it happen here through around 2012, 2016, and even before the pandemic, and right now we're hearing employees say they want higher wages. Some employers are saying we'll do that, but the sacrifice is going to be a cut in hours, and when total paychecks continue to shrink relative to inflation, that means, of course, spending power is going to drop across the economy, and in a consumption-based economy, this is a major problem because, once again, it hits the discretionary side of the economy and leads to other people seeing their hours get cut, their job lost, and next thing you know, as spending across the country starts to dry up, recession, because of foregone conclusion, and that's only the best case, and here we're finding out that companies cannot pass on higher prices. As Macy's CEO says, some prices of tariff cut into profits. What we're finding out now is companies are realizing what we said long ago, that they wouldn't be able to pass on those higher costs. They're going to have to eat it at the margin, but there's going to be a problem for that. Again, we talk about hell is coming. The U.S. labor market, this is only the beginning. You're dealing with on both the demand side as well as the increased cost side, so what Macy's clearly is telling us, look, we want to raise prices, we need to raise prices, but when we do that, demand goes down. That is the issue here, and so navigating that, we have a series of different scenarios to try to figure out what kind of what will be the reality, and we want our guidance to reflect the flexibility of that uncertainty so we can react in real time to how we serve or better serve the consumer. Spring said the company will be, quote, surgical with price changes, meaning they're going to raise prices on things to see what people will pay for more for, and then if they don't, they're going to drop them right back down. What Macy's doesn't realize is that broad-based consumers can't afford any form of higher prices, meaning we're likely to see inventories continue to build in the near-term future, and with them already at bloated levels, we're setting up for a massive inventory recession, possible disinflation, if not outright deflation in the cards, because when companies take it at the margin, well, what that means is they're going to pass that right on to their workforce. Let's take a look at corporate profits after tax in blue against continued claims in red, and we can see that when corporate profits decline and even contract, what happens? They put people on the unemployment line. You can see that happen again here in the early 2000s, it happens going into the financial crisis right before the pandemic, and it's happening again. We know companies realize now they cannot pass on higher prices, they're going to have to take it at the margin, but the fear is, of course, that will send their stock price crashing, so to defend it, you're going to watch them lay people off, because if they don't have any foot traffic, well, you certainly don't need any employees. And now Goldman's jumping on the bandwagon as they kill the right tail, no longer expect sustained tariff inflation, and this is a case we've been making. Everybody's been believing that we're going to see significantly higher prices, and then year after year, they're going to continue to go up. We've seen this in the sentiment surveys. We said, look, that's not how it's going to work because wages aren't keeping pace. And sure enough, now Goldman jumping on the bandwagon. Unless a company by a massive fiscal stimulus, as it was the case in 2020, which is ultimately disinflation or outright deflation, as increasingly more economists now admit, including the St. Louis Fed, what we're facing here is that tariffs will not spark inflation, they will lead to absolute demand destruction. And here's some of the evidence prices that major U.S. retailers have dished slightly since the May 12th tariff pause with China, both imported and domestic goods. Our updated paper now includes data through May 23rd covering 330,000 products across four large U.S. retailers, and again, we said they would not be able to pass on higher prices because people wouldn't be able to afford it. Businesses said, look, we're going to do it anyways, only to find out they can't. And despite the fact this is all means that the Fed was worried that they might actually have to further tighten monetary policy. What we're finding out now from central bankers is they're beginning their next pivot. And the Minneapolis Fed now has a working paper titled Under a Stiff Tariff, Boosting the Economy Takes Priority Over Inflation for a Central Bank. And what they noted here is there's a third response to tariffs. One is called Expansionary Monetary Policy in the paper. They suggest that there's possibly a 30 basis point cut to the funds rate that needs to happen. Keep in mind, the Fed only cuts a quarter at a time, meaning what this paper is suggesting is the Fed might need to cut at least once or twice to deal with demand destruction from the tariffs. We said this was likely the case. And now what you're seeing is they're prying to put out information and papers to support that view, telling us that at some point in the future, we're going to start hearing Powell talk about how he's not going to raise rates or keep them steady. He's going to be forced to cut. And as we take a look at what Goldman had to say, they only expect a one time inflation boost from tariffs and for good reason, because you can raise prices all you want. And what we're already seeing, at least in Texas, is they cannot be passed on. We expect tariffs to provide a one time price level boost that causes core PC inflation to rebound to 3.6% later this year before coming back down next year. The main reason we're less worried is we expect the economy to be weak this year with solidly below potential growth and a modest rise in the unemployment rate and forward looking wage indicators have continued to fall and household spending power is no longer elevated by fiscal transfers. And again, all they're saying is, look, wages are not keeping up. Paychecks are not rising. People cannot afford higher prices. And so, yes, there is going to be a shock from the tariffs. Prices on certain things are going to go up and then people are going to reject them and demand destruction begins. And that's very evident as we take a look at the consumer price index against average weekly hours of production and non-supervisory employees. We can see that almost in every instant when hours work go down, inflation comes down with a lag. You can see it happen throughout history here. And that is the real issue, because when we look at the global financial crisis, where we see energy prices rising, which I think is a great example of where we're at now with the tariffs, tariffs are going to cause prices to go up. But if paychecks don't keep pace, well, we could be in an all out financial crisis. And that's the risk we're facing now. We see the retail sector of Dallas is already cutting hours. That's just the beginning. It means retailers all across the country are going to respond. And then next thing you know, as those people spend less money in the economy, you're going to see hours get cut all across the board. And that means the unemployment rate is set to rise. And for inflation and central bankers, well, when you start seeing people at the unemployment line, you can forget about inflation. They'll be slashing rates like crazy. You can see the relationship here clearly in the 90s, into the dot-com bubble, the financial crisis, when unemployment goes up, spending and inflation eventually come down. And then it's game over for the economy. But something that should be going up is your trading account. Let's check out this trade on uranium. We saw two major gap updates, and this thing is on fire. And that's why we told our subscribers it's time to raise their stop loss levels. Now, how did we do this each and every day? We want a screen of the machine position across the broad equity, bond, currency and commodity markets. And we have back tested all of our signals. So when we see machine positioning move, we can tell you which trades have a high probability of generating a positive return. And they show up right on our hot list every day. But in addition to that, you also get the machine position across all the broad sectors. You get the daily report, you get all the tradable signals, my opinions on the best trades, risk control levels, a full tracking of all open trades returns, a weekly update. And here's the best part of all. You could have gotten out on that uranium trade for absolutely free. You call. You had to do is grab those links in the description below. Use a coupon code for your free 30 day trial. If you want to start trading against the machines and winning big, we'll jump in and grab our next big trade. And with that, I'm Steve Van Meter. Thanks for watching. Thanks for being fans. Bye now.