The Inflation Crisis is Worsening.

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code hey everyone me kevin here in this

video i'm going to talk about the sad

reality that inflation might end up

coming in in october as a september

reading worse than we expect in this

video i'm going to break down exactly

why and the catalyst for this we're

going to talk about cars we're going to

talk about oil wages important pieces

that go into this and importantly as

well we're going to talk about what i'm

doing about it let's get started right

after i mentioned that if you want to

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all right let's get started so

first things first the bloomberg

commodity index just hit a record high

part of this has to do with the fact

that we currently spend a dollar per

gallon more on gasoline than we did a

year ago we're also spending two and a

half times as much money as we used to

on natural gas food is up 33

worldwide commodities are through the

roof cotton has been skyrocketing

recently

aluminum skyrocketed over 40 percent

recently and commodities across the

board

are not only inflating in their price

but they are staying high longer than

expected for example take lumber with

lumber we were expecting lumber prices

to go up as we had supply shortages we

saw this coming then we saw lumber

prices go down and we thought to

ourselves ha

see

inflation is transitory everything's

going back down it's all good but folks

there are weird things happening lumber

prices skyrocketed to about 1750

lumber futures fell to under 500 to

about 480 but what's weird is folks now

they're coming up again going back to

642. we are inflecting back up again

certainly not as violently as we saw in

april and may but we're seeing an

inflection point up again but lumber's

not even the one that we care about

mostly right now because home building

starts have started to slow down maybe

taking a little bit of pressure off of

lumber it's all the commodities together

which have been skyrocketing staying at

higher levels for longer than expected

and they're not showing signs of

relenting take for example the manheim

used a vehicle index which is outside of

the commodities index which is showing

the same type of pattern we saw this

insane run up in in used vehicle prices

at the beginning of the year potentially

as a result of all of the stimulus money

that has flown into the economy despite

the fact that factories shut down during

a recession expecting that people would

be saving money and buying less cars

when exactly the opposite ended up being

true driving up the cost of used cars

and then leading them to skyrocket here

leading into march but what's insane is

take a look at this folks first we had a

lot of economists talking about the iman

heme index and about ah look it's

inflecting down

maybe it'll stabilize a little higher

here at the shelf but eventually it'll

just keep trickling down but folks look

at what it's doing again once again it's

inflecting up the same thing is

happening with wages we're seeing wages

go up and yeah we hope that productivity

goes up to offset this but folks the

things that we're expecting to be

transitory are lasting a lot

longer

this creates issues look for example at

oil kathy wood for example was cheering

the fact that much like her expectations

for lumber oil prices would come

crashing down well unfortunately that

has not happened oil prices have not

come crashing down in fact if we look at

a chart of brent crude just to see what

the pricing is of brent crude we'll see

we haven't been at these highs for

years take a look at the view for brent

crude we'll go out to the max view over

here on the right and we're going to

take this brent crude chart all the way

to 2017

where we could see that we hit a peak of

83.91

here briefly in october of 2018 came

crashing down at one point oil was

trading negatively during the recession

and we are straight back up to these

high 2018 levels which is interesting

because

in the fall of 2018 is also where the

federal reserve was talking a lot about

raising rates to rein in inflation and

this always creates the debate of wait a

minute do

we blame the chicken or the egg here

what came first inflation and then oil

prices going up or oil prices going up

and then that leading to there being

inflation because oil is measured in the

cpi who knows but the point is you got

used cars inflecting up you've got

lumber slowly inflecting up again you've

got oil prices inflecting up natural gas

up food up a lot of inflationary issues

pushing up kathy wood obviously takes

the reverse argument it says but we're

in longer run cyclical trends of

deflation and i'm going to talk about my

thoughts on this in just a moment but i

want to pay a little bit of homage to

oil which is something that i've not

paid a lot of attention to because i'm

not a commodities trader and so i wanted

to find out why is it that oil prices

are doing this are oil prices going to

potentially be temporary right i expect

that once we get our supply shortage

dealt with that used car cr the used car

crisis will abate and prices will come

down but i want to know are we in it

with longer or higher oil prices for

longer and this is very important

because it would keep inflation higher

for longer

and so the economist did a piece and

indicated that there are three reasons

we have higher oil prices one has to do

with the start stop uneven recovery that

we've been part of for example china was

killing it now it's slowing down coming

out of the recession uh and this is the

coveted recession america is going full

steam ahead and europe is trying to

catch up to america but it's doing so

slower while poorer countries have yet

to pick up at all

covet factory shot downs hurt a lot like

taiwan shutting down factories losing

nike about 10 days worth of production

note it is worthy to mention that 50 of

nike's footwear is produced in taiwan

freight futures have obviously

skyrocketed as we've got almost 80

vessels part uh docked outside of the

port of los angeles when usually on

average day we have one we now have 80.

copper has skyrocketed partially because

of mine closures in south america thanks

again due to covid right so this is

constant like covet pressure right we're

seeing this over and over and over again

but this sort of stop

start of our economy affects oil because

oil producers can't just turn the valve

on or off or on or off or on or off it's

frustrating so if they just keep

production steady but lower then if

prices go up great it just means more

profits now usually what happens then is

someone around the world just ends up

turning on the tap to produce more oil

american fracking companies frack more

or opec produces more oil but everybody

together is refusing to do that they're

not doing that and there's potentially a

reason for that we'll talk about that in

just a moment but another factor that's

affecting oil prices is the fact that

you have governments pushing this green

transition villainizing oil and really

favoring natural gas as a transition

fuel now this is not a video to talk

about how we should transition or should

not transition from oil to green energy

i think the green energy has a long way

to go before we can actually transition

and quite frankly i get frustrated when

i hear people on the green side make

arguments like we should be 100 green

today great but we don't have the chips

we don't have the technology yet i can

get behind batteries and windmills and

solar all day long if they support and

sustain our grids but as long as

california keeps having power outages

because california refuses to invest

more in improving our natural gas

efficiency while at the same time we're

shutting down a nuclear power plant that

supplies nine percent of california's

electricity don't talk to me about not

wanting oil and natural gas because we

need it to survive as humans okay so

again i'm a big bull on ev but it's

going to take way longer than we expect

and politicians just like to be all

we're going green we're going to punish

natural gas and oil

it doesn't do anything when we can't get

to the energy sustainability that we

need yet i'm all for i want to make this

clear more investments this is why

lithium for example is up 21

but in part natural gas is skyrocketing

because of this green transition push

away from oil into green but we're not

ready for that green transition yet so

you're also seeing oil go up on top of

that but look it's not just the stop and

go of the economy especially with

coveted shutdowns and things like that

and it's also not just politicians

pushing green it's also the fact that

we've got a lot of crazy geopolitical

tensions going on in the trade world

which creates uncertainty remember

uncertainty generally leads to pain in

pricing and in oil pain and pricing

tends to mean pricing of oil goes up

like it's one of those things that goes

up with uncertainty uh because it's it's

uh it's a commodity that we use

regularly when we have certainty that

there's plenty of it then prices come

down when we're uncertain about the

future of oil like are we going to have

enough prices go up and so here are just

some examples that are helping mess

things up russia is purposefully

limiting the sale of gas to europe

allegedly to help them get their desired

pipeline through china and australia

usually have a good relationship but now

china has embargoed australia on their

mining and farming expert exports

increasing prices for materials and food

leading to inflation in prices for

things like iron ore coprocuts and

aluminum oxide we've seen aluminum

skyrocket europe's natural gas costs are

up 80 percent since literally august

which is a month and a half ago now iron

has fallen about 40 percent but that's

partially because china is reducing

steel demand but now

coal is skyrocketing because mongolia is

in a coveted lockdown so it's like even

if lumber or iron falls coal or other

things just take their place in this

sort of inflationary argument but these

sorts of commodity uncertainties also

lead to pain

in oil for people who consume oil which

means higher prices which is actually

good for people who produce oil now oil

is also over 80 because opec

and its allies are being pretty

disciplined in not raising more usually

you have somebody who goes rogue and

just starts producing more because they

want to profit more opec is the

organization of petroleum exporting

countries it is a group of 13 of the

world's major oil exporting nations opec

wants to manage the supply of oil it's

kind of like a cartel it's kind of like

they collude to set the price of oil so

they can all establish production and

not go through these crazy stop and go

waves of production on production off

that's that's really bad for oil based

it's hiring engineers and it's firing

people or laying them off it's a mess

it's a disaster so because there's so

much uncertainty in economics and the

commodities market right now just giving

you some of the other examples that i

have a lot of folks in opec nations are

saying let's just keep production

on a slow growth trajectory and if the

price of oil goes up so be it we'll make

more and again usually somebody breaks

the rules and just

produces more oil but right now

everybody's being pretty much in

agreement on this nobody wants to go

through this stop and go so countries

are agreeing with this this also follows

the fact that we got an announcement

that opec plus which includes some

countries like russia are purposefully

increasing oil production by about 400

000 barrels each day for about a month

but they're going to do so gradually and

quite frankly this current rate or this

newly announced rate is nowhere near

enough to meet the demands that the

world has for oil right now especially

as things start reopening see delta

going away actually helps

boost potential inflation concerns

especially in oil again

now the united states can try to

negotiate it can do a lot you know saudi

arabia is one of our biggest allies big

member of opec but reality is america

itself isn't drilling more and this is

another big issue remember how earlier i

mentioned that hey our oil producers are

purposefully not producing more because

of that stop and go cycle what they're

doing instead of drilling more is

they're paying off debt they're actually

deleveraging and instead returning money

to shareholders and this is why we're

seeing energy stocks up about 40 they're

doing stock buybacks they're raising

dividends folks we have just 528

operating rigs in the united states

right now that is half of what we had in

2019.

at the same time you've got biden

talking about maybe cutting his push on

biofuels to prioritize other issues

and you've got hsbc

forecasting that we could see pain in

oil until 2025

folks this is nuts

some of these inflationary factors are

just going to be more persistent we hope

that the supply chain issues wane and

this video wasn't much about the supply

chain issues that we did talk about the

manheim used vehicle index this video is

mostly about commodities unfortunately

commodities make up a big part of

inflation and so we might continue to

see inflation from the energy side now

when we look at inflation we generally

look at headline inflation and then we

look at inflation like cpi less energy

we do that on purpose so we could try to

extract the crazy volatile fluctuations

that we get in energy

but lately inflation and commodities

have kind of been moving in sync and

that's because at the same time as we're

having these

issues in commodities we're seeing rents

increase in some cases 10 to 15 percent

year over year we're finally seeing

rents move up at a higher pace we're

seeing those used car vehicle prices go

back up that's going to hurt we were

expecting used car vehicle prices to go

down to offset rents but now we're

seeing both of these go up and we're

seeing wages go up plus energy go up

plus food go up the inflation crisis

persists and so even though i've been

very hopeful for september and october

readings of inflation to come in lower

than expected we might be in a situation

where we actually end up having higher

expectations for inflation right now

we're expecting to see inflation come in

at a headline reading of 5.2 percent

this data comes out next wednesday it's

the cpi release it's possible we're

going to beat this again

month over month inflation expected to

come in at 0.4

we might beat these numbers and here's

what that means for our investments if

inflation comes in hot again the typical

trade is crypto rotates up and tech

stocks rotate down that is the typical

rotation that is what i would expect

however that is not changing ironically

my investment thesis my investment

thesis is stick with the teflon tech and

innovative growth companies the enphase

the etsy the tesla the companies that

benefit from the innovations and

transitions of our world because in my

opinion

even if this inflation crisis lasts

longer than expected all it's going to

mean is i'm going to have more of a

longer term by the dip opportunity in my

favorite investment opportunities again

like envase tesla palantir you name it

my innovative growth companies yeah

these have higher earnings multiples but

that's because they've got innovation

and growth they're not making cheap lame

frozen food and sitting on an aisle

somewhere and having to convince their

customers to come back every single

month just to try to meet earnings these

are companies that have recurring

revenue these are companies that have

real and actual growth and solve real

problems that we have in our society not

pump people full of cheap salty foods

and so without being salty about

inflation i want to make it clear i'm

staying the course i'm going to keep

loading up on what i believe in i'm

probably not going to sell my bitcoin

again now for some of you who didn't

hear that i did sell my bitcoin just to

lower my cost basis which i successfully

did thanks to the evergrand news i sold

my bitcoin at about 44.8 and i rebought

most of my crypto while bitcoin was

sitting around

41.9 so i got a little bit of an

adjustment to the downside there

probably wasn't worth the risk it worked

out but i also like trading i enjoy the

challenge that worked out great but i

probably will keep my crypto and

continue investing in real estate as my

two hedges for my innovative stock

portfolio now

i've got a big position of my stocks in

tesla end phase right some of these high

growth companies

and some of them are part of the green

energy in fact both of these are part of

the green energy transition which is

great but they're going to suffer

potentially from the chip shortage and

other issues

for the near term uh near term could be

the next six months it could also be the

next 12 months so we'll see if their

growth is and ends up being capped

because of some of these

inflation headwinds potentially we're

going to see treasury yields rise but so

far treasury yields have been stable

which somewhat indicates

that bond markets expect inflation to

stay high longer and as a result the

10-year treasury is staying stable but

we're not actually expecting an

inflection point to the upside so again

we'll probably stay in the same sort of

windy situation where we are where

inflation just remains high you have the

consistent headwinds against uh

technology stocks which creates buy the

dip opportunities you have some back

wins for crypto which is good not super

strong but maybe helps us kiss stay

above 50 000 on bitcoin and overall i

think the investment thesis stays solid

the longer of an opportunity we have to

buy the dip the longer of an opportunity

we have to go make money and then invest

in so folks these are my thoughts on

what has happening with the inflation

crisis no matter what happens i am

staying the course with my thesis and i

see opportunities of inflation actually

helping me get discounts on the

companies that i want because even if

this inflation does last much longer

than expected six to 12 months longer

maybe even 18 months longer or two years

longer i'm game i'm in it for the long

run a minute to win it but i'm going to

stay away from call options on these

particular companies that i'm making

those long investments in i'll go for

shares or sell puts and then if i get a

signed share it's great if i can farm

the credit that's also great

folks thanks so much for watching this

video if you want more insight check out

the programs linked down below and

building your wealth and folks we'll see

in the next one thanks so much bye

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