The Fed's Reset | NASTIER and LONGER | Jerome Goes Hard.

so how long will inflation take to go

down could we be facing a 10-year

process to actually get inflation down

and what is the potential that Kathy

Wood is correct that we might see

substantial deflation next year let's

analyze both of those so first this

morning Barons wrote a piece and

suggested that historically it takes

about 10 years and then they clarified

not a typo

10 years to bring inflation down to

under three percent once it rises above

eight percent well we've been over eight

percent for at least four months now if

not even longer and so a lot of folks

are saying we could be in for a very

long battle against inflation in fact we

could spend the entire next decade under

tight monetary policies where we have a

tight fed one that raises rates high and

stays aggressively High removing the

optimism the market is feeling now that

oh we're gonna go right back to reducing

interest rates and enthusiasm cheap

money and cheap borrowing abilities this

is exactly the kind of downside that

when we talk about in our course member

live streams you should be out of margin

and you should be prepared to weather

the storm for the long term this is why

because yeah the fact of the matter is

historically it takes a while for

inflation to come down now if you look

at the last period where we had

substantially High inflation obviously

the Paul volcker era the Federal Reserve

had this mindset known as opportunistic

disinflation and basically what they

thought was okay look we've raised rates

to about 20 percent to kill inflation

that was about 18 percent at its peak

and they succeeded in the next year to

Bringing inflation down over half to

well under 10 percent and essentially

what the Federal Reserve did is they

lowered rates following inflation down

but they really didn't squeeze inflation

down in fact they had a policy of you

know what we don't need to rush to get

inflation back to two percent let's just

wait and take opportunities when they

present themselves elves like Market

crashes or whatever to let inflation

naturally fall off a cliff and that's

exactly what it did except in that last

cycle it took 15 years to bring

inflation all the way down it took the

first year to have it and it took

another 15 years to bring it to the two

percent level which is really really

slow and is not what markets are pricing

in today and this does set up the

concern that well wait a minute the

Federal Reserve this time around

compared to back in the 80s is much more

committed that to the idea that we will

stop at nothing until we get rates to

two percent and so this idea that well

if inflation takes longer to bring down

and you have a Fed that has committed to

Bringing inflation to two percent this

idea combined creates this scenario of

we could just be in another bear Market

rally and we could be in a situation

where starting to speculate now on

bullish call options there's a lot of

short covering that's obviously

happening in the market as as soon as is

that CPI report came out we saw an

insane amount of short covering but but

a lot of people are also piling on new

shorts because they're like wait a

minute sure we've just rallied up but

we're rallying up at like a three to

four standard deviation move this isn't

sustainable let's just use this rally up

as an opportunity to place bets again

that will probably leg down again and so

I think in this first half of the video

the word of caution is be careful don't

go into margin and don't assume that

it's over because if the FED does stick

with their two percent policy framework

and the FED doesn't utilize

opportunistic disinflation which is just

a fancy way of saying have patience then

we're going to be stuck with an

aggressive fed for a while even though

the FED may not be raising rates anymore

starting in q1 of next year you know

maybe after the March meeting we don't

get any more rate hikes the longer the

FED stays where they are without

actually reducing rates the more upset

markets are going to get remember

markets are expecting the FED to go

negative with rates that is turned to

the downside like like let's reduce

rates a little bit as soon as May of

2023 I don't know if that's realistic so

what does Barclays tell us and how do

they paint the other side of the picture

well let's talk about that keep in mind

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going to be huge for 2023. so what is

Barclays tell us okay well so to

contrast what Barons was talking about

this morning Barclays has a pretty

interesting piece they talk about how

Global inflation is clearly decelerating

and they're very optimistic about the

abiding Xi Jinping meeting coming up as

it could potentially give us some

insights into the relaxation of covet

zero policies but in addition to that

Barclays has this really interesting

argument that not only are we

essentially now at Peak headline

inflation in that the forecast is

essentially average down here the us

being this darker Blue Line right here

with the UK seeing a little bit of a

potential Peak still coming up ahead

though we're gonna see how that end ends

up happening with this budget release

that we're getting this week from the

United Kingdom but when we look at core

inflation it looks like across the board

where or at least Barclays is expecting

mostly inflation to rotate down stable

inflation over in Japan but a rotation

down of inflation throughout many of the

uh economies here whether that's Europe

uh the United Kingdom or the United

States but what they mentioned here I

thought was very interesting and I

wonder if they're almost borrowing from

this fed phrase of opportunistic

disinflation and what they're now

calling it which I think is quite

interesting Barclays here suggests in

our view October's estimates show early

signs that many of these sustained

disinflationary influences that we have

been anticipating for some time are

taking shape now this is interesting

remember deflation means your 100 widget

is now actually selling for potentially

99 that's deflation right

disinflation means you're one 100 widget

went to a hundred and ten dollars and

now it's trading or selling let's say

for a hundred and eleven dollars 111

there we go so this would be one percent

inflation whereas this was ten percent

inflation so a lower inflation rate is

disinflation anyway they suggest that

there's this potential for a sustained

disinflation taking shape and they point

to not only easing supply chain

pressures but Goods demand reseeding

going down to uh pre-pandemic norms and

these declines appear to be taking shape

already in the last CPI report which is

particularly evident in things like used

cars household appliances and durables

and furniture and they suggest that

these decelerations could be so

meaningfully that we actually end up

missing quite well to the downside on

inflationary expectations or just

inflation in General on the next CPI

reports now what I think is interesting

is if we hop on over to let's say the

April 2020 C Pi report this is the PDF I

have what I want you to do with me is

just look for where we get three

negatives in a row like for example

three negatives in a row right here we

got a photography three negatives in a

row but you really don't have a lot

here's computer software uh here you've

got some three negatives in a row

telephones and smartphones this is back

in April of 2022 but really you see very

very few of these three negatives in a

row here and that's from the April

report and then I have some more data on

sort of the April report that I've

thrown in here this is back from April

when we're making a lot of videos on

inflation really taking off here you go

you've got a little bit more here

communication Recreation video audio but

otherwise mostly positive numbers like

the regions over here everything is

positive inflation right and so I

thought okay well let me look at the

October report just to see if I can see

what the uh the Barclays folks are

seeing so the way you do this is you

look up here and you want to look at the

right three because these are your

seasonally adjusted percent changes and

what I did is I put a green box around

any time we had a two or three negative

months in a row so beef we got two

negative months in a row but I get

really excited when we get three in a

row so let's keep looking and you notice

there actually aren't that many so far

we're in the food section and food is

pretty dang positive but it gets better

once we get out of food so we get out of

food over here

and look what we get over here window

coverings negative two in a row

Furniture bedding bedroom furniture

living room furniture appliances laundry

equipment uh you jump over here you got

non-electric cookware tableware apparel

men's suits boys apparel women's apparel

boys girls clothes watches set used cars

and trucks see that again right here the

negative for three months in a row and

while you still are surrounded by mostly

positive items here it is nice that we

are actually starting to see a lot of

negatives on that right column right you

can clearly see on the right side there

are a lot of negatives here again three

negatives in a row

another three right here for smartphones

information technology so comparing this

to April and starting to actually see

some minuses on the right side maybe

Barclays has a point maybe hey we are

actually potentially

at the beginning of seeing regular

declines in how quickly uh inflation is

accelerating and maybe that's actually a

reason to be bullish and optimistic

the problem is as the federal reservist

told us one report is too little to get

super optimistic about so we have to be

very very careful that we're not getting

overly or excessively bullish on just

one report and this is where I would

just urge caution that you want to stay

away from margin one report is not

enough to tell us to go on a margin

imagine we rally between now and the

next jobs report at the beginning of

December first Friday of December or the

CPI report and then all of a sudden

you're big on margin and then we we have

a bad inflation report in December and

we dog leg to the downside again

get wiped out last thing we want to do

is get wiped out this game is all about

surviving you don't have to beat your

friends and making the best or greatest

returns you just have to survive and get

through the tough times and use them as

an opportunity to build your quantity so

what's my take well I'm doing exactly

what I'm saying I'm making as much money

as possible that's why I'm launching the

elite Hustlers course to teach you also

how you can make as much money as

possible because now is the time to make

money so you can invest and then you can

really watch it grow when we go back to

Boom time of course I personally lean a

little bit more towards this inflation

will end up going away and I will end up

having a very bullish decade but we've

got to get through the pain first and

that's what we're experiencing right now

good luck