The Big Inflation & Market Crash Danger.

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below if you listen to our government

and the biden administration inflation

is not an issue they say that consumers

aren't paying more because they can't

pay more because they're not able to

purchase anything that's literally what

gensake just said about inflation that

inflation isn't a problem because people

are just saving their money because they

can't buy anything but let's be real we

know that prices are going up cpi is

sitting at 5.4 percent which means that

consumer prices year-over-year up 5.4

percent and at an annualized rate on a

month-to-month change we're still seeing

inflation above five percent jp morgan

surveyed uh respondents businesses and

individuals and found on october 13th

that 42 percent of respondents believe

the united states is quote careening

towards a stag inflationary future the

imf warned that the prospects for

inflation were so highly uncertain

specifically because soaring energy

costs will end up pushing up consumer

prices in the near term wages are

skyrocketing as well in the last cpi

report we saw that wages are increasing

at an annualized rate of 4.6 percent

in earnings reports the word supply

chains usually in reference to supply

chain issues and problems have been

mentioned 3

000 times so far in 2021.

inflation is also coming up in earnings

reports as recently as yesterday and

today

ge for example said that inflation and

supply chain challenges are quote

negatively impacting their businesses

and that they're seeing industry-wide

shortages and had they been able to

actually get product their growth would

have been nine percentage points higher

so they could fulfill their orders as a

result they're seeing prices going up

for not only their products but products

that they're or or materials that

they're sourcing

and so their priority next year is

trying to run a more efficient shop but

on top of that also raising prices next

year

hasbro says they're also raising prices

now they defend this and say that hey

we're able to retool our lines though

because we're really used to making new

products every single year working with

different uh sort of input materials

even if we have to find new sources

because toy trends change all the time

so we're used to this sort of retooling

but still prices are going up 3m says

that quote inflation is coming faster

than anyone thought and to make up for

these pressures they're raising prices

jack dorsey from twitter just had the

following to say quote hyperinflation is

going to change everything it's

happening now kathy wood tried slapping

back and saying hey but the velocity of

money is down the same thing happened in

2008. sure the velocity money is down

and that is a hedge to inflation the

less a single dollar circulates around

the economy the less inflationary

pressures we have however

elon musk replies and says yeah i don't

know about any of that long-term stuff

but quote short term we are seeing

strong inflationary pressures

the federal reserve bank of san

francisco says it's all

because of the american rescue plan that

led to a substantial amount of higher

inflation and the supply chain shortages

that we're seeing now because people had

more money to spend

ned davis research

suggests that overall inflation at 5.4

percent year-over-year and slowing

growth makes it feel like we're heading

towards inflation i'm sorry stagflation

and cy inflation's not good since 1960

goldman sachs says there have been 41

quarters of high inflation and weak

economic growth that's stagflation lots

of inflation with stagnating growth

during those periods the s p on average

returned negative 2.1 percent well below

the average of 2.5 percent growth for

all quarters high inflation of the early

to mid 70s was

also ultimately solved through quote

a painful series of interest rate hikes

and recessions that the u.s was then

finally able to get through

the bank of england is so worried about

inflation

that jp morgan thinks the bank of

england is going to begin raising rates

earlier than expected this year rather

than next year and this has some folks

saying hey it's time to invest in

companies like 3m or vulcan materials or

procter and gamble typical consumer

staples that might do well during an

inflationary period of time or just go

straight into commodities look at

aluminum look at lumber i mean these

prices are ridiculous even in lumber's

slow season and even though we had a

pause in the summer which is odd because

that's the busy season

in prices lumber prices fell in the

summer after skyrocketing now they're

skyrocketing again

so folks what we've got to talk about in

this video is first are we experiencing

stagflation

what about jobs because jobs and job

shortages really seem like they're going

to continue to push inflation up and

if we can figure out what's causing the

job shortage maybe we can figure out if

we're going to continue to expect to see

inflation

and then is there any sign that

inflation is actually starting to

subside so let's break this down one at

a time number one look even though

growth is slowing we're still growing

we're growing at elevated levels we came

off running our treadmill really really

fast and now we're slowing down because

we're a little exhausted

basically that's normal during reopening

right

so right now we're still at elevated

levels of demand for goods and services

and nobody actually looks at the

situation that we're in in terms of data

researchers who are pointing to oh yeah

we're in stagflation instead what data

scientists are calling this is a

different phrase and it's kind of neat

it's called an inflationary

boom it's a place where people who have

money are spending money and they're

spending money even though prices are

higher reiterating that higher inflation

but we still have growth we're still

growing again maybe not as quickly as we

were earlier but we're still growing so

definitely too much growth to be

considered stagflationary right now but

wait a minute kevin if we're not seeing

stagflation why are yields going through

the roof i mean look at the fact that

the 10-year treasury yield saw a peak

earlier in the year things cooled down

but now it's back over 1-6 the 10-year

break even inflation rate also just hit

a record high at the end of october 2.66

this measures the difference between the

10-year treasury yield and the tips

which is a treasury

inflation protected security uh bond and

the difference here is often seen as a

measure of inflation right and so or or

potentially the market pricing in for

more inflation coming it's not directly

a measure of inflation

and this makes some folks worried that

wait a minute like okay if this

inflation is going to keep happening we

got to get out of tech stocks which

sidebar on tech stocks

it's kind of interesting when we look

into the research on this a little bit

even though when the treasury yields

skyrocketed last time here between

february and may we saw tech stocks sell

off there's an interesting note here

capital and their chief investment

strategist says the following quote the

correlation of tech stocks relative

performance to the 10-year yield has

historically oscillated from negative to

positive in other words very very bad

correlation and they say that there's

quote no real pattern here then they say

in fact

tech stocks outpace the s p 500 during

five of the previous periods of rising

rates and rising inflation and more

recently tech has outperformed the s p

500 directly since the pandemic so in

other words f yields just focus on the

things that are potentially creating

inflation so we're not worried about

stagflation but we are worried about an

inflationary boom right because

inflation's not so great

then disconnect tech earnings

potentially from the treasury yields but

do focus on inflation and so when we

want to focus on inflation a big thing

right now has to be jobs so let's talk

about jobs behrens is suggesting that

the pandemic changed people's attitudes

and priorities it changed where people

lived and it changed how people feel

about going to work see covid isn't the

only thing that's affecting people's

jobs their personalities their

preferences have changed in high coveted

areas mobility data is increasing in all

areas

except places of work

in areas where covet is neutral or at

normal levels public transportation

traffic is up

but workplace traffic is

down and if people are worried about

covet public transportation probably

wouldn't be up and so barrons is

suggesting that the labor market is

actually probably far tighter than it

appears and as a result inflation

essentially has nowhere to go but gets

squeezed up

and they believe that the federal

reserve is actually well behind the

curve on raising interest rates and

tapering that's because the fed keeps

looking at the jobs report going well i

mean we're still you know in the five

percent range for unemployment we got to

get this down let's stay accommodative

but baron suggests those numbers are

wrong that the pandemic

promoted quote a record number of

business creation

and that business creation is hard to

measure in the jobs report in fact in

july 2020 they report that 600 000 new

businesses were created that's up 100

from the prior year in 2019.

today we're still creating new

businesses at a rate that's 50 percent

higher than before and economists say

that counting entrepreneurs is

incredibly difficult when it comes to

the jobs rates also the government has

this birth death model that's used to

try to establish payroll counts

barons believes that they fail at

accurately counting new businesses

appropriately in this measure so it's

actually quite possible that more people

are working but that people are working

in a different way than traditional

measures have been set up to account for

and that household income is already

back to pre-pandemic levels

at the same time we have stock markets

and household markets like housing price

markets at all-time highs making

households feel a little bit more flush

with cash so there's also the potential

that there are not only people creating

their new business ventures or whatever

but they're all there's also this

potential that two-income households

because they feel wealthier have become

one income households because they can

afford to do so and maybe they can

afford to start a business whether that

makes them feel like they're employed or

not yet

we're also at the same time seeing more

people retire which is also reiterated

by a soaring stock market which pumps

people's retirement accounts and their

real estate value stimulus help people

sock away more money savings are at 10

of gdp right now so there's really

enough reason to not go back to work for

a lot of folks people very fortunate

that have been able to save or invest

during this time and they don't feel the

need to go back to work now we did think

that people were going to rush back to

work as soon as unemployment expired at

least the unemployment boost expired in

september but at the same time as we

took away the unemployment boost of 300

per week

joe biden

started the child tax credit of 250 per

child under 18 and 300 per child per

month under six

so it's not a surprise

that individuals are

choosing potentially not to work or

delay going back to work or they're

living off their wealth while they're

starting new business ventures

so all of a sudden you're in this place

where

wow now it makes sense

why there are less people working

but add to this

now new vaccine mandates at not only

many corporations but any business that

does contracting work for the government

or any government office is now

requiring vaccine mandates and this is

leading more people to

stake

sick outs where people are calling in

sick as a way of protesting that they

don't want a vaccine or they're quitting

and so we're actually potentially making

the jobs numbers even worse and worse

and worse so

child tax credit making things worse

vaccine mandate making things worse the

fact that people feel like they have

more wealth and don't have to go back to

work making things worse the government

statistics probably not measuring new

business creation as well as they should

because new business creation is through

the roof and it's even possible that

people who are creating new businesses

just report that they're unemployed

because they don't feel like they're

actually working at like with a steady

income yet so some people report that

they're unemployed anyway even though

they've created a new business and

they're just trying to start getting

revenue coming in now goldman sachs is

trying to adjust these numbers and

they're suggesting that workers are now

more productive that they're doing more

with less they're using new technologies

zoom they're hybrid working at home and

in person or whatever and that

productivity is going up but if you

thought it was hard to measure wage data

it's even harder to measure people's

productivity that's very difficult to

measure and so now all of a sudden we're

in this place where wait a minute wages

are going up there are a lot of reasons

reiterating why wages are going up and

according to barons wages are probably

not going to slow down their

inflationary pace anytime soon which

will probably lead inflation to continue

to go up

this is why we say we're in this

inflationary boom i mean consider this

credit card spending is up people are

really excited about retail ironically

people are really excited about brick

and mortar so much so that macy's store

sales were such a blowout that their

stock is up 36 in just the last three

months

at the same time macy's and kohl's only

trade for seven times estimated 2022

earnings so they look a little bit on

the cheap side who knows if that'll last

though right

okay so we've we're not stagflating

we're inflationary

booming

that's a word we're having an

inflationary boom

we don't think wage pressures are going

to go away anytime soon because of all

the reasons that we mentioned which is

not great

so what's going to be the first thing to

tip and is anything even close to

tipping well fortunately the answer to

that is

yes there's a little bit of light at the

end of the tunnel delivery time frames

for our supply chain crises

are starting

to

slow their pace of gains delivery time

frames in october posted their smallest

gain in nine months a signal that

finally supply shortages might begin to

ease container prices have also started

coming down get this the current lead

time for semiconductors

is 21.9 weeks so you order a

semiconductor you gotta wait 21.9 weeks

that's like a little over five months

however that measure only went up a day

in the last reading that's the smallest

increase that we've seen in all of 2021

we're starting to see a flattening curve

here an inflection point

and in the past periods of shortages

have typically led to painful periods of

oversupply

and so this is where we have to shift

from okay being worried about inflation

which we're still going to be worried

about with wages but shift to a concern

of over supply and the concern is that a

lot of businesses are actually double

ordering right now because they have to

wait so long and they're frustrated so

they're double ordering product and that

we might end up seeing cancellations or

stocked shelves and really stocked

shelves for quite a while

not yet probably got to get through this

holiday season first but we could see

and be struggling with oversupply by

2022. so let's try to consolidate all of

the madness that we just talked about

are we in a stagflationary environment

no not stagflationary are we in an

inflationary boom yes do we expect job

prices to continue to go up

yes absolutely and ironically well maybe

not ironically i mean expectedly i

should say the more wages go up the more

unions like labor unions get together

and demand higher wages next year or the

next time a negotiation comes up so more

inflation leading to more inflation

right wage price spiral up wages go up

input costs go up prices for products go

up leading people to demand higher wages

again

okay so inflationary boom with wages

going up

is there light at the end of the tunnel

yes and that is with the supply chain

crisis when the supply chain crisis when

and if it goes away and when we get to a

potential area or period of over supply

businesses are probably going to be

tempted to lower prices to clear out

inventory leading to probably amazing

revenue indicators or revenue numbers i

should say not indicators like actual

revenue results for companies because if

they start clearing their shelves even

if they drop the price a little bit and

there's a little bit of deflation and

products they're gonna have record

revenues because people will see price

cuts and go shopping like crazy and

continue to spend because again savings

are up and circling back to circle back

saki jensaki who says that people aren't

experiencing inflation because they

can't buy anything well they're about to

potentially next year have the

opportunity to buy lots of different

stuff

and so that's where maybe maybe and

hopefully

by the middle to end of 2022

we might actually expect to see prices

begin to moderate

if not slow

but fall

they're still going to be buoyed by

wages probably still trying to push up

so we're going to have a little bit of

that struggle and that means we could

still see higher inflationary numbers

potentially into 2023

but

then we expect inflation to finally

start chilling out so was inflation

transitory no it's been pretty

persistent inflation's been here and

it's staying right now but there's light

at the end of the tunnel and out of all

of this if there's any recommendation

that i would make hashtag not financial

advice it is of course to continue to

buy and huddle high quality companies

like tesla and face etsy apple amazon

lemonade you can't in my opinion go

wrong with these very high quality

companies not financial advice by the

way right after i filmed this video

listen to this as i suggested with the

stocks that i love amd crushed it with

earnings amd beats on eps revenue net

income google

beats revenue eps margins beep beep beat

beat microsoft win uh what was it uh

surface sales like tablet sales went

down kind of potentially makes sense

regarding the chip shortage but revenue

beat net income beat big big big beats

from microsoft end phase

super affected by potential supply chain

constraints right

beat on earnings revenue net income and

guidance

and margin mega

beats visa more spending than expected

more revenue than expected and a beat on

the bottom line folks

if that doesn't convince you that these

companies are killing it despite these

fears i don't know what will just like

you can't go wrong with checking out on

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thanks so much

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