The Next Dangerous Catalyst | A 20% Massive Correction.

um yes regarding AI lectures we're

putting AI lectures in the stocks and

site group and the zero to millionaire

group and you still actually have a few

hours left before we start changing the

pricing mostly because I'm still

recording lectures and I just haven't

gotten to it yet so it's my fault but

I'm working on it

let's get into the video hey everyone me

Kevin here in this video I'd like to

talk about an opportunity ahead of us

specifically with regards to inflation

and what that could do to the stock

market yeah and that in order to suggest

There's an opportunity means there might

be a negative Catalyst ahead of us and I

think there actually might be and I'd

like to talk about that so that when and

if it occurs we're prepared in America

and people don't freak out although

there is a chance people will freak out

I do think there's a chance there could

be a short-term buying opportunity

coming up if what we're seeing in Europe

ends up happening in the United States

now no guarantees that this is going to

happen but let's make this very clear

obviously the banking crisis did not

tighten credit conditions more than we

well were somewhat expecting them to be

tightened by in other words credit

conditions were already tightening going

into the banking crisis I'm coming out

of the banking crisis credit conditions

have continued to tighten at roughly the

same level which means the banking

crisis was really an edge case and area

of banks yes on a nominal value greater

in size than what we had during 2008 but

then again we have a lot more money in

circulation today hence inflation

but really in terms of a systemic crisis

and a lack of credit availability

haven't quite seen that yet we've seen

continued tightening on Broad credit

availability for subprime loans but

that's been happening going into a

tighter economy that's the first thing

to tighten so that's not a surprise the

problem with that though is it gives the

Federal Reserve more ammunition to say

okay well then we'll just keep hiking

rates because if credit conditions

aren't going to tighten the economy then

we will

by raising rates which is another way of

tightening credit conditions all of that

to say is with that

and anchored inflation expectations but

not low inflation expectations the fed's

going to have a license to do more

but the near-term Catalyst that I really

think everybody should pay attention to

is the following

on this yeah this is a ripped section of

the financial times this is a newspaper

somebody comes by at five in the morning

and throws it in front of my house and

then I read it the beautiful thing about

it is it's a day late

but that's okay

um but what it reiterated was something

a lot of us missed in the news and this

is actually why I personally like the

newspaper people like Kevin why why do

you bother with the newspaper like

that's stupid like no it's actually not

because it doesn't change unlike the

front of the New York Times or the Wall

Street Journal or whatever online which

changes every like five freaking minutes

this doesn't change so you get a

snapshot of everything you missed all

the good research you missed the day

before in the paper form anyway

remember how I'm going to talk about

this because it's important it's going

to set up the Catalyst here remember how

the United Kingdom saw this happening

this is the

really concerning jump in core inflation

we've talked about this like 20 times

before so I'm not trying to regurgitate

the same crap here what I am trying to

suggest is this de-anchoring of core

inflation is a problem

but look what just happened in the

Eurozone broadly I'll let you uh read

the title here if the camera is so

inclined to focus on you Eurozone core

inflation rise tests European Central

Bank fantastic

rebound and key consumer figure

increases chance of higher rates Arizona

inflation fell more than expected to 5.5

percent on the headline in June its

lowest rate since the start of last year

but excuse me any relief for policy

makers was tempered by a slight Rebound

in core Consumer Price growth

uh-oh core inflation which excludes the

more volatile energy and food categories

was 5.4 up from 5.3 percent year over

year in May and this increases the

chance of maybe seeing more

hiking from the central banks okay this

is understandable and to some extent

reasonable we would expect that

however what does this potentially mean

for America now that you've got the

United Kingdom seeing core rise more

than expected although much worse than

what we saw here I mean this was a tenth

of a basis point it's not that big of a

deal but what does it potentially say to

America well to understand that we have

to first try and this is not a science

we're just trying to do our best try to

understand why core inflation is

de-anchoring in European regions

and

personally Lauren and I were considering

traveling to Europe

but one of the reasons we actually

decided probably not to this year

is the following

take a look at this going to Europe this

summer you're not alone after three

years of pandemic restrictions Travelers

are flocking to Europe in record numbers

despite High airfares limited

accommodations and crowded sites here's

what you might encounter and basically

they talk about how even though Europe

in the summer is always like sweaty and

crowded this is probably going to be an

exceptionally sweaty and crowded summer

I'm oversimplifying the article but

whatever it's it's the times and we're

not going to spend too much time on it

uh although I know a lot of people give

the times crap they do have pretty

decent stuff so

that led me to think okay well if Europe

is blowing up with travel and people are

paying for travel no matter what and

travel is one of the biggest parts of

guess what core inflation then who's

tracking just core inflation can I get a

little bit of insight into just core

inflation and these categories and so

nerd wallet actually has what they

called a travel inflation report and I

found this very interesting I'm just

going to slide to the part where it

matters look at this change in travel

prices and this Compares travel prices

back to the pandemic and you really have

to draw a line right about here at the

zero percent marker and obviously

everything's up you can see that flights

are only up about five uh you know ten

percent last month five percent this

month so prices for airlines are

starting to decelerate but what you're

finding is food away from home staying

strong at about 25 more expensive than

before the pandemic hotels at about 15

to 19 percent more expensive than before

the pandemic and car rentals up nearly

50 percent and if we compare that uh to

the past year we could see airfares are

down about 13 but hotels still up 3.4

percent compared to last year you've got

car rental prices down 12.4 from last

year but still way up from the pandemic

as we saw and a food away from home

prices up 8.3 percent as well as movie

theaters concerts uh and entertainment

of 6.6 so what you're finding where's

hotels here hotels and motels yeah up

3.7 so outside airfares everything else

airfares and car rentals everything else

is pushing up that core at least

according to nerd wallet so then I

thought okay well let me see if that's

corroborated at least to some extent are

we starting to see some of those signs

in the CPI data that we last got

obviously we've got a new CPI data set

coming out soon but what do we have over

here this is the last CPI data was

released from about two weeks ago next

one comes out again in about two weeks

duh we're at the midpoint airfares

slowly starting to decline that's great

but how are other services going well

transportation services right here

leased car rentals are down which

reiterates what the uh nerd wallet site

indicated here but in terms of Motor

Vehicle maintenance and repair Motor

Vehicle Insurance parking fees uh public

transportation let me actually see if I

can pull that yeah public transportation

way up which is much more common in

Europe I understand this is American and

CPI right but there are some

similarities much more common in Europe

to see this public transportation

transportation services over here up 0.8

percent so potentially some similarity

where else can we see some similarities

well alcoholic beverages you're seeing a

rise in CPI here you're seeing a rise in

alcohol away from home at 0.7 and

understand the weight of alcohol away

from home is really just under one

percent of CPI but still it's a

contributor along with all of these

other aspects transportation services

makes up almost six percent of CPI it's

actually a big deal public

transportation being part of that

airfares again we know is going down but

there it is Intercity Transportation up

shift fare up you're seeing more of

these prices going up as well for cruise

liners as well uh what else is going up

well of course your miscellaneous

personal services uh whether those are

legal funeral or otherwise expenses but

I'm specifically looking for travel

items right here so we're going to look

for maybe food away from home and see

where that is calculated food away and

then we want to look at lodging so food

away from home index Rose 0.5

and then what about lodging let's pull

lodging in here so lodging away from

home

here we go lodging away from home look

at that large bump here 1.8 percent uh

and this is going to be look at this

other lodging away from home including

hotels and motels 2.1 percent as we're

going into the summer months so I think

what's potentially happening I'm going

to try to bottom line this here and then

let's talk implications I think what's

really happening is the following and I

can't know for sure but let me put it

this way

individuals excess Savings in the upper

60 of income is still vastly positive

the bottom uh this is going to be the

bottom forty percent the bottom two uh

quintiles they call them are negative uh

compared to the savings that they had

pre-pandemic and I always like to write

in Red so it contrasts from like reports

for reading and stuff but anyway

individuals excess Savings in the upper

60 are still vastly positive uh I mean

thousands of dollars positive we're

talking to the tune of probably three to

five thousand dollars still positive if

if not more so I'll put K plus again

bottom two quintiles negative

okay so these folks prob not going to

travel but who's going to travel anyway

to Europe prob these folks going to

Europe right so now what we're doing is

we're actually taking the excess savings

and we're actually taking that and

contributing to core inflation because

the economy

for a normal American isn't actually

that bad

as a result

we're contributing to core inflation

around the world

and in America uh because you're not

just gonna obviously travel in Europe

you're going to go to Vegas you're going

to go to Texas you're gonna go to the

Florida beaches you're gonna go to New

York with the exception of all the

smoking crap they have over there I'm

gonna travel again and this makes sense

in in an element of like if if we're in

2030 and we're looking back and somebody

told you that

you know we printed a ton of money and

then we had a lot of goods inflation

people be like uh yeah that makes sense

you guys printed a lot of money and then

that Goods inflation went negative

people were like yeah that makes sense

people bought all the stuff they need

they got their new gaming computers they

got their new Lululemon pants or

whatever they got their you know meet

Kevin short shorts uh dude I love these

things they're like 18 bucks anyway so

so then what happens if we're in 2030

and somebody's like Okay cool so what

happened after that you know as if

you're telling the story of living

through 2023 and somebody's like so so

what happened then and then you're like

well you know after the pandemic people

were still somewhat afraid to travel but

then all of a sudden people who hadn't

spent all their money on Goods or were

still making money at jobs because jobs

were readily available even if they lost

their job they got another job and maybe

even got paid more or at least the same

what ended up happening

well then they decided they wanted to

live a little so they went traveling

especially to Europe because they

haven't been there for a while

especially since Europe had covered

restrictions a lot longer than America

did so what ended up happening oh we got

this boom in travel inflation afterwards

and then that ended up normalizing after

people spent the rest of their money by

the way we would probably be like right

here you know there'll be some

normalization of actually Goods

inflation that you're going to see and

so we're probably somewhere you know

right there at that messy kind of line

where we're still in the summer period

where we're going to see probably a

boost in core inflation because of

travel

and so I think this sounds reasonable if

you're a 20 30 looking back you'd be

like yeah that makes sense why you had

Goods inflation now that makes sense why

you had travel inflation so what does

this mean to you well what it means to

you is there could be a near-term

problem in the next few inflation

reports uh so if I had to if I had a

crystal ball I'd probably say June

should be mostly okay because of the

year-over-year comps for the

year-over-year numbers however that core

which is expected to be 0.3 percent

could miss

however uh where the most likely miss

will occur and this is what I think is

really important I think it's most

likely we'll have a Miss for July and

August

and then at September you'd probably

have some kind of plummet plummet in

core inflation so I would expect uh in

core month over month so high core month

over month and over here I'd say High

Core month of month now what is the CPI

schedule of releases and what are these

dates that we have to pay attention to

well we know this one here is July 12th

we know that

these next reports come out on August

10th that's Lauren's birthday August 10

and then September

uh sep 13 and you're gonna have a few

fed meetings over here the September fed

July fed meeting probably more benign

this will be a little bit scary probably

and then OCT 12. so this is where maybe

you see the plummet so frankly what does

that mean that means some volatility

uh could be high that is high likelihood

of potential stock pain as people think

inflation is de-anchoring again uh

between August 10th to really

oxed about

12.

this would be maybe your hedge period

something to consider uh it could also

be by the dip uh whatever but if I was

looking for a potential Catalyst coming

up it'd probably be in this range and

it's all based on that sort of core

inflation that I think might explode so

hopefully that's insightful and useful

to you and um I wish you the best of

luck and I will be here with you either

way with whatever happens thank you by

the way to stream yard for always

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