6 Critical Warnings for Investors | Inflation, Ukraine, & Stocks.

hey everyone we kevin here in this video

we're going to review my investing

concerns for march and april of 2022.

we're going to review quite a few things

number one we're going to start with the

war in ukraine note we're going to touch

on some brief things regarding current

events but mostly we're going to be

talking about five to six broader

concerns and implications out of the

russia ukraine net conflict and we'll

also be talking about some stocks and

sectors related to this conflict then

we'll move on to talking about inflation

especially concerns amongst food oil

fertilizer and so on and then we'll talk

about stock sectors and how i'm

allocating i'm changing some allocations

these are all in my opinion very

important topics and let's get right

into them after two quick messages one

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dot com now let's get into ukraine okay

i'm going to start by talking about the

six bigger issues that are being talked

about now that could last over the next

couple months here then we'll talk about

some more current events so first we've

got concerns over the type of weapons

that are being used in ukraine and the

more and more we hear about the

potential use of either cluster

munitions hypersonic missiles these are

missiles that travel four to five times

the speed of sound and all give rise to

the theory that maybe putin will lose

his mind just far enough to start using

smaller scale nuclear weapons i believe

this to be a relatively smaller risk but

it is one that i have to mention that i

do believe the market is pricing in at

least 10 percent of fear of what i think

will create more anxiety for markets

though is a second risk and that is the

polish proposal the government of poland

is formally expected to propose this

upcoming week that is the week of march

21st

that polish troops should begin to

control

western ukraine or at least peacekeep in

western ukraine this would be a way for

poland to essentially create a buffer

between themselves and the russians who

have already invaded substantial

portions of eastern ukraine and are

starting to slip into the territories of

western ukraine with attacks already

starting in areas like leviv not too far

from the polish border now this is in my

opinion not likely to actually be

approved by nato members because this

would essentially put poland a member of

nato in direct uh potential

confrontation with russians which would

then be a confrontation between nato and

russia so in my opinion this is unlikely

just like a no-fly zone is highly

unlikely

but and of course it's also worth noting

that poland originally joined nato in

1999 specifically to protect it from

russia but as this polish proposal is

made and then discussed it wouldn't

surprise me to see some near-term

uncertainty around this just in the

event that nato for example says okay

sure yeah let's get polish troops in

western ukraine markets are probably

unlikely to appreciate that we'll see

now number three an unified economic

response is another broader issue in the

global environment for fighting

essentially against russia so far the

united states and other countries have

been vastly united we only had two

representatives corey bush and elon omar

who were against

essentially multilateral sanctions

against russia for their invasion of

ukraine the argument that ilhan omar

gave was that sanctions will lead to too

much economic damage and really are just

a moral evil especially to poorer folks

worldwide but otherwise so far the world

has been quite united against russia and

so even though there's this slight risk

that we're going to start seeing some

countries potentially take the foot off

the gas in terms of being aggressive

towards russia so far we haven't really

seen any of that with the exception of

in the fringe of some politicians in

this case the further left politicians

in the united states this does however

bring up concerns about china and this

is probably one of the more realistic

concerns that individuals have and this

is the concern that

all of this this crisis in ukraine could

potentially embolden china to start

taking over aspects of taiwan or

potentially just invade taiwan for

example as russia began their invasion

in ukraine china flew some chinese

aircraft military aircraft in taiwanese

airspace of course taiwan is seen as

somewhat of a separatist or cut out

region or carved out region of china

much like individuals in russia believe

that ukraine is a section that

originally belonged to the soviet union

and should go back to the greater

republic of or

sort of russian federation if you will

no longer the republic that's more early

1900s issue but anyway

china in my opinion here is is really

unlikely to do anything because as long

as we have what we just talked about in

the last issue a united front against

russia china realizes that the world's

unified response would be a disaster and

travesty for

china see remember this china's smart

and they're quietly probably pressuring

russia for an end to this conflict

without escalating tensions globally

because they recognize how

interconnected the global economy is

china's suffering substantial declines

in consumer sentiment a real estate

bubble consumer spending declines and

upheaval from technology companies in

china and of course china has done their

best as a sort of a one-party rural

leadership to intervene to try to reduce

some of these issues but the last thing

they need are really more issues showing

a potential failure of one party rule

right now they have actually what a lot

of folks see as a great opportunity to

compare how strong one party rule is

against democracy in the west and really

the best thing for china to do here is

really just lay low and be as neutral as

possible and that so far is exactly what

they're doing so individuals who say the

russian invasion of ukraine is likely to

embolden china to invade taiwan and that

could lead to a greater conflict with

america i think is highly unlikely just

like i believe the rumors that china

might want to take over taiwan

semiconductors is also equally unlikely

sure putin and xi jinping see themselves

as allies they've together declared that

there will be a rising east as the west

declines but the reality is china does

not want to further

conflicts

with the global economy because we all

know that compresses consumer spending

and growth and china like i said is

already having issues with exactly this

now something that was very interesting

is in research about this chinese risk i

i found a quote from henry paulsen who

once said back this is years ago henry

paulson once said that a chinese

official came to him and said you have

quote all the good allies and this is

really interesting because when you look

at all of these things in the context of

the globe china and russia sure they're

powerful but their allies together are

nowhere near as powerful as western

allies and this is another reason why i

believe that china is likely to lay low

here think about it this way

if you look at china's global gdp or

their impact on global gdp china makes

up about 18 of global gdp even though

they've got you know the largest

population in the world

with their allies russia kazakhstan

belarus pakistan

north korea cambodia laos maybe you get

up to 20 but the problem is a lot of

these countries are poor countries or

have slow or slowing growth this is not

ideal and this is what motivated this

quote that of china essentially saying

you have all the good allies why because

when you look at the united states and

their allies you go okay well united

states itself accounts for 24 of global

growth but then you combine them with

their allies what do you get you get the

united states the european union japan

taiwan australia canada britain new

zealand and now guess what you're at 59

of global gdp so you have the western

bloc that is substantially stronger than

the eastern bloc and the eastern bloc

china knows they're reliant on the

western bloc especially for exports so

sure is there this this concern that

these actions of russia to invade

ukraine will somehow embolden china to

take uh some form of wild action yes is

it likely no so so far a lot of the

larger concerns in my opinion are

concerns that are being priced in the

market but are not ones that are highly

realistic again hypersonic you know

nuclear weapons yes the we've seen the

potential use of hypersonic missiles

we've seen cluster munitions used and

we've seen this lashing out by putin is

that likely to lead to nuclear weapons

being used

probably not are we likely to see that

polish proposal go through probably not

are we likely to see an unified economic

response

from

western nations probably not are we

likely to see china lose its cool and

try to join russia and its military or

do something crazy with taiwan probably

not it's possible but it's not probable

what's more actually probable is that

russian chip manufacturing is going to

get screwed and that's because they

pretty much don't manufacture their

chips and maybe that actually creates

more of an investment opportunity into

companies that do manufacture chips see

russia itself produces too few chips

themselves especially on the high end

taiwan's semiconductors produces a lot

of those chips

but taiwan's semiconductor's peak export

to russia was about 33.8 million dollars

in 2018 and it's only declined since

then uh and really that's a fraction

of the revenue that taiwan

semiconductors makes taiwan

semiconductors last year at somewhere

around a 50 billion dollar year so

you're talking about less than one

percent of their revenue actually going

to russia this is really

quite frankly non-issue should we put it

it's actually less than one-tenth of one

percent let me correct that

another option potentially for russia

could be getting chips from samsung but

south korea also has an export embargo

to russia that kind of closes the door

on that and taiwan semiconductors and

samsung have a monopoly on five

nanometer chips so really russia's

reliant now maybe on lower-end chips

that could come from china but that's

not going to help russia get ahead with

ai and quantum chips what is that

instead going to do it's probably going

to increase the dominance of again

western countries via amd nvidia

qualcomm and taiwan semiconductors

in their advancement of ai and quantum

chips to the demise of the eastern bloc

china and russia

unfortunate what's not unfortunate

though is that russia does have power in

some key supplies like palladium and

neon gas both needed in chip making

ukraine for example controls about 70

percent of the market for neon gas so

we're likely to see a rise in

semiconductor prices

but these rises in semiconductor prices

are probably you know we're going to see

that inflation here probably being

conducted in industries that have

substantial pricing power these ship

manufacturers are going to continue to

be able to sell their products in my

opinion at increasingly high prices

making really buying the dip in the chip

manufacturers probably a good idea not

financial advice but personally i'm

looking at increasing my allocation to

industries with pricing power and i

believe that to be taiwan semiconductors

which is narrowly impacted by russia

narrowly impacted by this potential

china taiwan takeover and any increase

in input costs would probably just be

passed along to the consumer and i don't

see the semiconductors having that big

of an issue i think a bigger driver in

the semiconductor pricing or performance

really comes down to what's happening in

crypto currencies especially since

that's a very common use of of sort of

over-the-counter asics or graphic cards

that we can buy but because crypto

prices have come down

they're you're seeing a potential

weakness in current sales but that

weakness in my opinion will probably be

temporary creating a nice buy the dip

opportunity for this for the

semiconductors uh okay great so in my

opinion not a big concern here either

what's another potential concern well

this is probably the realistic and most

scary risk and we've got to talk about

that but we before we talk about that we

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okay let's talk about the sixth and

largest potential issue

from this ukraine crisis and in my

opinion that has to do with the disaster

of food supplies and this i think is

probably the most realistic issue out of

all of the six that we've discussed

in terms of being an investor in global

markets right now because we have

massive massive issues in not just wheat

but corn and fertilizer and of course

the highest food insecurity in over a

decade not only are we at the highest

levels of food insecurity in a decade

but we reached these levels really

before

the invasion of ukraine so this is

likely to get substantially worse and be

substantially worse than we've ever seen

it before and there are going to be some

larger implications to

how this ultimately ends up unfolding

for global markets the biggest harm

though according to the economist is

likely going to be concentrated in parts

of north africa the democratic republic

of congo nigeria and southeast asian

countries that's because they rely

directly on russia and ukraine for a

majority of their staple crops for

example egypt imports 85 percent of

their wheat from russia and ukraine

brazil will also likely be substantially

impacted as they are very reliant on the

import of fertilizers a lot of which are

now banned from russia this is a problem

because

brazil is a large exporter of coffee

sugar and soybeans and all of these

foods and inputs will likely see

inflation thanks to this crisis now

there are some historical implications

to this which just kind of give you an

idea of how bad things get when food

prices rise in world war one in 1918 we

saw food rationing people starved in

countries like turkey

the russian revolution had its roots in

food riots which began in 1917 and

lasted six years through 1923 it ended

the russian monarchy back in world war

one the bolshevik victory or the

majority victory uh which was founded by

vladimir lenin had its roots in this

food crisis and we're seeing a similar

food crisis

now which is kind of scary because this

food crisis also helped set the stage

for the massive over-expansion of

production of food commodities which

helped lead to the great depression

in 1928 and 29 in the turn of the 1930s

the food crisis of world war one also

helped establish the soviet union but

less of the historical context let's

consider the current you've got

ukrainian ports being bombs bombed ships

that are picking up grains getting hit

by

missiles from russia in the black sea

future harvests are a problem because we

now think that only about 30

of the farmland or cropland in ukraine

will actually be planted this year so

we're going to see food-based inflation

probably coming

for the next 6 to 18 months and this all

comes after already poor harvests in

recent years especially during the

pandemic which have lowered stockpiles

making it harder to offset the temporary

inflationary impacts of war this is

terrible especially when you consider

that fertilizer comes from two things

well it heavily relies on two things one

form of fertilizer is made using natural

gas and of course russia is a key

supplier of natural gas this is why

europe is trying to become substantially

less reliant on russian natural gas

and potash which is a potassium type

fertilizer

uh 21 of this comes from russia and

another 18 comes from belarus which is a

russian proxy and both of these have

limited their fertilizer exports so now

you are left with three massive impacts

that are real here these these aren't

like perceived fears these are real big

issues you've got export issues it's

hard to get commodities out of ukraine

and the russian area whether by military

blockade or actual sanctions or

restrictions by putin or whomever you've

got future harvest issues that we're not

planting as much because now farms are

becoming battlefields

and you're getting lower production in

other parts of the world because of

fertilizer problems as input costs go up

right this is going to have a

substantial impact on the price of food

and in my opinion there's going to be a

shift in the kind of spending that we

see and potentially the kind of stocks

that individuals want to to invest in i

mean consider this when it comes to food

if you break up people in america into

five buckets of income or quintiles

then

the top 40 percent like the richest 40

spend less than 10 of their wealth on

food but the bottom the poorest

quintile 20

spends about 27 of their income on food

and so what happens well poor

individuals

are moving to less nutritious foods

they're cutting back on fruits and

vegetables potentially they're going to

cut back on staples like corn and wheat

which are huge sources sources of

calories and starch and

essentially energy in our foods right

and maybe they have to move over to

other things like frozen chicken who

knows maybe that's a good thing for

tyson foods or they'll just have to pay

the higher prices but potentially shop

at cheaper stores this is where stores

like

consumer staples like dollar general

costco and

walmart become very interesting as

opposed to more expensive companies that

might sell these commodities like target

and whole foods and that's because

food commodities like

corn or wheat are

essentially griffin goods griffin goods

are a type of good that as the price

goes up people actually have to

buy more of that that is they end up

having to cut back on other things in

their life and buying these non

they're called non-luxury goods griffin

goods where when price goes up demand

goes up well as the price of these

commodities potentially goes up people

might have to cut back on other spending

like buying nike clothing or under

armour clothing or subscription models

or trips to disney or or fruits and

vegetables and things like this and

instead become more reliant on paying

the higher prices of corn and wheat

products and potentially trying to shift

towards more maybe even slightly

unhealthy products like frozen foods

from say a company like tyson foods so

interestingly

companies in my opinion like grocers

like albertsons or kroger won't

necessarily see a shift here in broader

revenues because money will just go from

one section to the other but i do think

that you could end up seeing higher

revenues for companies like a tyson food

or

general mills and potentially costco and

walmarts and so these become interesting

in this sort of environment where you're

going to see a lot of food inflation

and that food inflation will get passed

on to consumers consumers will be forced

to pay those prices because again these

are griffin goods and what happens

consumer spending in other areas goes

down now of course individuals in

america for example have substantially

more savings than individuals around the

rest of the world this is why a lot of

this impact is probably going to be

you know

sort of more

localized i would say to areas like we

said southeast asia or africa which

quite frankly could create famines i

mean you could see horrible food

insecurity around much of the world but

when it comes to the point of view of an

investor

these are some of the thoughts some of

the initial thoughts that run through my

mind when i think of companies and where

to invest again potentially the walmarts

the cost goes less of the targets less

of the whole foods of course owned by

amazon

and and potentially those food

substitutes where people are going into

the frozen food aisle more uh

specifically not the expense of frozen

food aisle so probably not so much the

lower calorie you know vegan style

options or vegetable style options but

more of that higher calorie chicken and

lower quality food like tyson foods

might offer unfortunately

again less nutritious

but i mean when you look at the type of

food inflation we're already seeing it's

probably just going to get worse

if you look at core inflation which is

when you look at all the inflation that

we're seeing less food and energy

it's it's not horrible it's i mean it's

still very high but it's like five to

six percent right if you do the opposite

and you just look at essentials which is

looking at like food shelter utilities

gas meat bread right things like this

you're up 16 year over year on inflation

it's insane you have an insane inflation

rate month over month you're up 2.2

percent that's a 26.2

annualized inflation rate i mean the the

nutrition part

uh globally of this ukraine crisis is

probably going to be one of the biggest

implications and it's one that i think

investors should pay attention to

because you're going to see a sectoral

shift especially amongst poor

individuals

going away from

spending on consumer goods because

they're spending more money on gas and

foods now that's going to be different

for luxury buyers or i would say that

maybe the upper 50 of individuals so the

upper 50 percent of individuals are

probably still going to be buying teslas

they're still going to be buying apple

products it's the bottom 50 percent

we're probably going to be less likely

to buy those acer computers or nike or

under armour or go shopping at target

because they just have less money left

over

just examples things to think about now

this of course you know is all

exacerbated by the fact that we still

have these oil problems right consider

the fact that biden is now looking to

saudi arabia to pump more oil maybe ease

sanctions on iran and venezuela to pump

more oil while at the same time just

arguing that well we have 9 000 permits

here in the united states to ramp up oil

production but i don't think quite

frankly the biden administration

realizes that we have some massive

challenges when it comes to oil

production first of all

it's very difficult right now for oil

companies to open up new pumps because

we have huge supply chain issues to

actually create them and even if we

could it takes six to eight months to

bring a new rig online the supply chains

are making all of this more difficult

this is why we're only producing 11.6

barrels per day today down from 13

million barrels per day since march of

2020. it's slowly gone back up but it's

going slow because supply chains are

really hurting the oil production

industry on top of that we got a worker

shortage i don't think the biden

administration realizes this that

employment in the oil and gas industry

fell from 137 thousand workers to about

125

000 workers so we're short about 12 400

workers this makes it harder to staff

oil rigs that's 12 400 workers think

about it that's a lot i mean if you had

let's say a hundred workers per rig

that's a lot of rigs

twelve thousand four hundred

twelve thousand four hundred divided by

a hundred workers let's just say per rig

is a hundred and twenty four rigs that

you can't staff because those workers

are now gone doing other things or no

longer in the workforce right big

problems on top of that you've got this

this concern that hey well what if we

just have a shorter term boom in oil

prices and then we crash again kind of

like we did in 2014 when or you know oil

production exploded but then

that led to a crash in oil prices you

know oil companies don't want to lose

investor money again like they did

during the last 2008 2009 boom and then

crash so you've got some hesitancy here

to use those permits as well all in all

all this leads into is you're going to

see more inflation and food and oil

longer the longer the war goes on the

worse this gets so of the issues that

we're talking about when it comes to

ukraine and investing i'm less concerned

about nukes i'm not so concerned about

the polish proposal i'm not so concerned

about an ununified economic response not

concerned about the china risk i'm not

so concerned about the chip

manufacturing risk because i do think

that these industries have pricing power

and that makes me interested investing

in them under this regime of fear i like

it when there's fear because i like to

invest when there's fear

but we do have extremely important and

massive issues in food inflation and

energy inflation and these things are

going to sap consumers ability to spend

specifically poorer individuals the

bottom 50 percent of individuals

whatever they spend money on and you

could think about this yourself what is

it that they're buying are they buying

private rides in a private jet

probably not are they buying lower end

stays in hotels or motel chains or uh

you know less expensive cars less

expensive computers less expensive

phones right these these markets less

expensive clothing these markets are the

ones that are going to get hit more

target by the way has some great

clothing and they've also been

undercutting the spend on on uh products

or i should say they've been uh trying

to take market share from companies like

under armour and nike so maybe maybe and

this is kind of a weird twist maybe you

end up actually seeing more people

shopping for clothing at target rather

than at the big name brands uh like

under armour and nike or the lulu's

right things to pay attention to so

those are areas i'd be a little bit more

concerned

now uh i i'm going to talk a little bit

more about uh some catalysts and

uncertainties but i do just want to

quickly give a shout out to obviously

some of the recent things that are

happening in ukraine this section here

will be a little bit more current event

style so keep that in mind so right now

today as of march 20th there is a

substantial advancing of russian troops

in mariopol in fact uh russians

have given ukrainians a deadline within

the next 12 hours to throw down their

arms and essentially surrender this

comes after a theater and arts center

holding hundreds of civilians were

shelled this is despite the fact that

the theater in mariopol actually had the

words kids or diti in russian written

outside of the building didn't stop

russians from leveling it which is

terrible unclear about survivors from

this because there was a bomb shelter

underneath that building that was

leveled

uh of course you're still seeing images

of buildings

on fire or blown out windows bodies on

streets destroyed russian armor endless

endless horror scenes here death toll

currently 847 civilians dead 64

children's dead so far according to the

united nations 1399 wounded 3.3 million

refugees

europe's complaining about running out

of space i mean add this to all the

other issues that are going on right

ukraine claims 14 000 dead this is

russians are dead this is twice the

pentagon's estimate of about seven

thousand but now there's discussion that

russians are taking people from eastern

ukraine and throwing them into

filtration camps where their phones are

being seized their documents are being

seized and russians are essentially

forcibly deporting people from poorer

regions of ukraine to poorer regions of

russia

this is ridiculous at the same time

people who are being

evicted essentially from ukraine or

leaving ukraine are walking and driving

past bodies littering the streets

because there aren't even ambulances or

workers or water and power in certain

regions it's terrible on negotiations

turkey's present mr erdogan

is probably the the biggest

negotiating support here along with

individuals like emmanuel macron and of

course olaf schultz from germany

turkey says that russia's putin isn't

ready yet that positions are not close

enough to have a face-to-face meeting

between the two

it is worth noting that turkey is in

nato but still a close ally with russia

but uh it does appear

that uh putin right now recognizes the

power of zelinski and respects that

zelinski is the ukrainian's leader and

it's unlikely that we would see some

form of zelinski overthrow unless of

course some form of accident happens

which is always possible but in terms of

negotiations his stepping down does not

appear to be a priority what appears to

be more of a priority for putin is the

recognition of the russian annexation of

crimea largely seen as illegal in

ukraine

neutrality no nato for ukraine and some

form of carve out for the donbass

we'll see of course in conversation with

olaf schultz putin says ukraine though

in the meantime is making unrealistic

counter proposals so there's clearly

still work to be done here so in in you

know this is where we can move towards

catalysts and we have to evaluate these

catalysts of uncertainty

and the first one is how long is this

war going to last i i'm personally

expecting that this war comes to some

form of a conclusion by may 31st

hopefully by the beginning of may

i do believe that is likely still and

i'm investing as such but there's always

a

likelihood of a cons you know some form

of a flip to death to the downside again

i think my biggest concern has to do

with food and energy inflation though

this is a new form of transitory

inflation and i'm not so worried about

the other issues that i outlined in

terms of catalysts for concerns and and

i do think that these issues will will

collapse as soon as uh war ends in

ukraine though uh food and energy

inflation will likely remain for some

time

the pressures the upside pressures on

them will begin to wane when war ends

so we've got to evaluate this

uncertainty and really find companies

with pricing power in my opinion when it

comes to oil there really is no pricing

power here when the fear goes away i do

think we're going to see prices crash

here on on food

look i already talked about this idea

when it comes to walmart and costco

versus some of the others but another

one to consider is potentially starbucks

starbucks has substantial pricing power

and ironically even though starbucks

continues to raise their prices they're

not at least according to the their last

earnings call seeing any kind of

meaningful decline in consumer spending

so that shows you how much pricing power

a company like starbucks actually has

now of course another form of

speculation could be investing in

companies like well etf's rather

exchange-traded funds like wheat w-e-a-t

and c-o-r-n corn but uh these are likely

to fall down

once war ends i'd be much more prone to

investing in a company like starbucks or

costco or walmart

again we've talked about taiwan

semiconductors nvidia the chips maybe

buying the dip on some of the chips of

course not financial advice

but i am more interested in potentially

preparing to short oil whether xle or

uso in the event that we start getting

closer to a resolution with russia and

ukraine than with each other

at the same time as potentially prices

are elevated which i believe that

anything over 105 under or on over 110

dollars per barrel for oil on brent is

is relatively

uh

inflated so we'll see

a quick note there is a note that just

came through that russia i'm sorry

ukraine has rejected russia's call for

surrender in mercr

this is probably likely to in the short

term at least weigh on concerns for the

market uh a lot of folks are also asking

me what i will feel about the the fed

and the reality is the fed has been very

very consistent here uh and i don't

believe that the federal reserve is

going to react to inflation especially

the forms that i've discussed here

really until september and don't get me

wrong volatility will remain inflation

will go up the concerns will rise but i

don't see a huge shift from the federal

reserve here until september regarding

the inverted yield curve uh i i do think

that there is a lot of uh dumping of

bonds happening right now to the extent

that some uncertainties in the market

are beginning to fade

this means that people are dumping their

flight to safety and bonds so both 10

and two year bonds are being sold more

than they're being bought and that

drives yields up

but unfortunately the two year is being

sold more than the 10 year and this is

likely because as the war in ukraine

started investors fled to short-term

bonds for safety like two years more

than they fled to 10 years because worst

case they hold on to them they get their

yield they get their money back right

they don't have to trade the contract

but now because they're dumping out of

those because we're seeing some fears

start you know lifting as we saw in the

stock market last week

then uh then this somewhat implies a

flatter yield curve makes sense uh but

it's i think it's too soon to really

determine how long the inverted yield

curve will remain uh well it's not

inverted yet but the ten-two yield curve

will potentially uh remain as as flat as

it is we know that there have been some

inversions already in like the three and

the five but i think the ten two is much

more of a predictor

and uh while it's worth paying attention

to this it's it's not personally what i

i paying much attention to because i do

think there's a lot of manipulation

happening in bonds here so for me i have

a much

better in my opinion focus on what's

important in the market here and this

has to do with inflation expectations

this i think is where the real downside

risks are so you want to write down

these five things to pay attention to

number one five-year break evens these

are market expectations right uh

five-year break evens are are the

difference between the five-year

treasury bond and tips here's just a

quick example of what that chart looks

like not the best picture here but it

gives you the idea here we peaked around

march 11th and march 17th here so we're

hoping to see that this this level

around 3.6 does not get exceeded here or

3.6 3.7 right here does not get exceeded

otherwise that means inflation concerns

are actually getting substantially worse

which would be bad the biggest spike

here came during the invasion of ukraine

otherwise we had actually been

relatively flat that inflation

expectations were if anything starting

to somewhat rotate down of course war

with ukraine has screwed this up some

markets have priced this uh this higher

inflation expectation in now the

question is will it continue to rise or

will we stay flat i think this is the

market telling you what to expect in

terms of inflation i think it's very

important to pay attention to that

monitor consumer inspections number two

monitor month-over-month changes in cpi

by the way consumer expectations for

number two that would be consumer

inflation expectations monitor the

longer term ones if those get

unentrenched like they got unentrenched

in the 70s well then you're going to

have big issues in fact take a look at

this this is a note from the 70s this is

from look at that july august edition

from the philly fed of 1977 and one of

the quotes here was mushrooming

inflationary ins

expectations however are only part of

our problem and that's because there was

more inflationary uncertainty and losing

control over inflation and things like

this

and so the last thing we want to see is

any kind of mushrooming of inflation

expectations

which we're not seeing it fortunately of

course we want to watch for a wage price

spiral which we're also not seeing and

then of course watch for earnings

forecast revisions down especially in

the

consumer discretionary sector and this

is why i personally am increasing my

allocation to consumer tech

especially the the higher end which is

less affected by energy and foods

the uh i'm putting more of my money into

services consumer services it's like

advertising and i'm considering larger

investments into staples than i ever

have before so we'll keep an eye on

those either way we're on a massive

tightrope and this gives you a broader

kind of view of my thesis here a lot of

the things that i'm not concerned about

with ukraine a lot of things that i am

concerned about with ukraine of the

things that i am concerned about with

ukraine where i think that impact will

actually be placed which stocks i find

interesting in those markets

and then of course my broader outlook in

terms of uh the five things that i'm

paying attention to

for uh the potential downside risks to

the market so we'll see we're not

out of the woods we're still you know in

a big mess and poop show here but this

gives you a very thorough outlook for uh

what my thoughts are over the next

couple months here and we will be

revisiting these parts i highly

recommend that as you go through this

potential video or even if you watch

certain parts again write down your own

expectations it's always important to

write down your own predictions because

if you do not make predictions you can

become a victim of the future because

you have no way of seeing changes and if

you become blind to changes then you

become a victim of the future rather

than somebody who can prepare for the

future anyway thanks so much for

watching check out that coupon code for

the programs linked down below on

building your wealth make sure to check

out public by going to mattkevin.com

public and folks we'll see the next one

thanks so much goodbye