Watch *BEFORE* 8:30 am THURSDAY!!

hey romikow here we've got to talk about

the cpi data release and expectations

and potential reactions or trades for it

right now but first we need a message

from max who's going to give us a little

bit of a preview for what to expect is

cpi going to come in high or low

high oh with the max indicator oh oh oh

it's the max indicator all right max

where are stocks going to go

to the moon

you rock max or

i will be like this

to the moon

well welcome back now let's get to what

the economists think is going to happen

so here we go first let's break this

down the economists believe that we are

going to see month over month inflation

come in at a point eight percent rate

now it's important to know that this is

a snapshot a speed it is not a measure

of distance traveled it is not a measure

of how much inflation will be over the

entire year but it tells us the speed of

how fast we're traveling and if things

stay at that level then we could see

whole lots of inflation and then we get

into exponents in that and the reason

i'm bringing this up is because what we

like to do to measure the speed is we

simply take this number and multiply it

by 12 this is called annualizing a

monthly data figure it's very very

common this figure means that the

annualized rate of inflation is actually

9.6 that's pretty substantial that's

pretty dang freaking high now that is

the month over month piece and in my

opinion the month over month piece is a

very critical piece because it is what

federal reserve board members look at

for changes or inflection points in the

data

remember folks and this is so critical

to understand that if we have a chart of

cpi data and we look at cpi data as okay

we're at one percent we're at one

percent and then all of a sudden we see

this sort of inflection point up which

is kind of what we're seeing here each

time we get a measure

sometimes we can actually get what

starts looking like a flattening like

this when we are right here

but we won't notice it on the

year-over-year data until we actually

get into hindsight looking at the

measure maybe three four six months a

year later the reason for this and this

is why the month over month data is so

impactful is if we zoomed into this

little spot right here and we said that

oh my gosh inflation has gone from a

year-over-year figure of 7.9

here and then a few months later over

here it's higher but it's you know 8.5

percent because it's higher along the

curve it doesn't necessarily tell us

anything about the trajectory of

inflation right but if we blow this

little box up we drew here and now we

just get to something that looks a

little bit more like this if we look

here and we see wait a minute right here

we had month over month inflation the

speed we were going at was something

like point eight percent or worse point

nine percent oh no we're accelerating oh

my gosh one percent holy smokes we're

going so fast and then all of a sudden

we get a measure like 0.5

or 0.4 and then we start seeing this

kind of slower speed then that can

oftentimes be a signal to us that the

annual inflation to come will be slower

so really the month over month is just a

tool just a quick way for us to look at

and understand aha things are actually

slowing down now nobody actually thinks

things are going to slow down we'll

understand these expectations as just a

moment here nobody actually expects

things to slow down probably until at

least

may or june at this point so this throws

a little bit of salt on this report

specifically because the shock in oil

prices and gas prices and food prices

for volatile commodities like wheat

soybeans coffee you name it input costs

for producer price inflation these

actual data points won't really be

picked up until we actually do the

snapshot of our march inflation well

today is march 9th tomorrow is march

10th and march 10th marks the day that

we're going to look backwards at

february inflation and any volatile

forms like commodity prices wheat oil

gas are going to actually be divided

into three categories sort of three

snapshots of the month they'll take the

average and the point of this is to say

that if prices of oil and gas and food

skyrocketed the last week of february

and in march this report that's coming

out tomorrow isn't going to actually

incorporate the big damage yet it's

going to incorporate some but it's not

going to tell us the worst yet instead

the april data set will be a lot more

important because that'll give us a look

into what march's inflation was like

that april could end up being a peak

assuming war has hopefully by then ended

if it hasn't then the peak of inflation

could end up rolling out to may june or

potentially longer we'll see now there

are two types of inflation and this is

also important to know because when we

go into the data set we got to be able

to parse this out oh but of course a

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coupon code expiring the next two and a

half weeks there's one type this is sort

of part one of inflation this is the i

like to call it the old transitory type

and the new persistent type so the old

transitory new persistent right this is

the stuff like the used cars the supply

chain issues the pretty much broad-based

inflation that we've seen because people

have so much more money there's so much

more wealth so much more savings people

are paying more for houses and real

estate and rent uh and apparel and air

travel in hotels and airbnb's you name

it

everything is getting more expensive

so

this is the old transitory which the

federal reserve has dumped the phrase

transitory and now because it's no

longer transitory what are we doing we

are basically saying yeah it's

persistent but eventually it'll go down

and the federal reserve mostly believes

that this will will start seeing a

decline in this old transitory inflation

sometime between

june 30th and december 31st this is

known as the 2h or second half of the

year a lot of companies agree with this

though some companies say it's probably

not going to be until the start of 2023

that we actually start seeing some of

these pricing pressures come down so we

could be dealing with these higher

levels of inflation for quite a while

and that's exactly why when we look

at the s p 500 or the nasdaq which an

easy way to do this you don't need any

major fancy charts to do this just go to

finance.google.com and type in spy you

go ahead and type in spy year to date

what do you get year to date a decline

of 10.53

of the spy you want to compare that to

the qqq boom just click it right there

qqq unfortunately down

16.6 percent want to compare it to some

other stocks there are great ways for

you to be able to do this just by

hitting the add comparison button we'll

throw in tesla here we'll throw in apple

and why don't we just throw in rk for

giggles here and so you can see here

tesla down about 28 so underperforming

the indices apple outperforming the

indices and arc also underperforming

just a quick example right but going

back to the cpi data set markets are

already pricing in a lot of fear that

the first form of inflation is going to

take longer to handle the federal

reserve originally looked like they were

planning to rug pull us and give us some

form of a 50 basis point hike or shock

rates up to one percent which sounds

insane because they're already so close

to zero like what's one percent it's

still actually accommodative but that

could have likely shocked markets and we

would almost certainly see substantially

newer lows

now the federal reserve has promised us

they're going to look at multiple

reports and they're not just going to

look at one-off high reports because of

the game-changer of war and they're

going to be a lot more patient that in

my opinion again also throws salt on

this report because now we have a new

style of inflation that comes up and i

call this the second form of inflation

the second form of inflation is what i

like to call the new transitory

inflation and that has to do with oil

gas

wheat

certain commodities

and certainly food now this is a problem

these these things affect a lot of

people throughout the world especially

those least able to pay for more

expensive food or more expensive gas

specifically people with lower incomes

this is a problem the new transitory

inflation is absolutely problem but we

expect that new transitory inflation

will eventually go away as

war either war fear goes away or the war

resolves itself at the same time as war

resolves itself we would hope that the

old transitory inflation can also go

away as supply chains resolve themselves

nothing's changed here a big thing that

has changed in recent weeks was that the

federal reserve has said we will be very

patient and diligent about looking at

these reports and making sure that we

don't just throw our hat in the ring

based on a single report that comes out

we're going to look for the data over

the next three to six months to evaluate

whether we need to essentially rug pull

markets and go for shock in awe raise

rates to get rid of this inflation

potentially force a recession

or if they're right and the old

transitory is indeed turning out to be

transitory and the war transitory is

also turning out to be transitory of

course if both of these end up being

wrong then we're in for a poop show and

you probably don't want to be in

equities at that time now let's get to

the actual estimates again right here so

here are the estimates we're expecting

that point eight percent on the month

over month the range here is anywhere

between 0.5 on the low side and one

percent on the high side and the

midpoint is really where most people

seem to be voting most of the economists

are voting somewhere between 0.7.9 this

means that in my opinion i would not

expect much of a dramatic movement in

the stock market if we get anything

between the 0.7 to 0.9 range i don't

think we're going to see much of a move

in the stock market i also do not

believe we're going to see much of a

move in the stock market if we get any

headline number between 7.8 and 8

7.9 is the current estimate for

year-over-year inflation and

year-over-year minus food and energy is

estimated to come in at 6.4 with a

similar range somewhere between 6.2 and

about 6.7 so anything in this sort of

mid-range likely to be relatively benign

usually where we see markets react

substantially is when we get some kind

of real crazy shock to one side and so a

crazy shock to one side would usually be

outside the range of anyone's estimates

so for example if we get a

month-over-month rate of inflation at

let's say 1.2 percent i would expect

risk assets to sell off crypto tech i

would expect yields to actually go up

now those don't necessarily have to

correlate but those two things could

happen i would expect more of a risk off

momentum and potentially a little bit of

a flight to safety which right now has

been the crowded trade of commodities i

think that trade is a little overcrowded

and it's something that i'm staying away

from

i don't know that we're going to see

this but if we do see this personally i

believe it's going to be a buying

opportunity because this report is

generally used as a weapon for

predicting what the federal reserve is

going to do and the federal reserve has

already told us they're not so worried

about bad one-off reports so if we get a

dip tomorrow in my opinion this is a boy

opportunity if we end up seeing

something to the low side which i think

is highly unlikely we probably

won't actually see much because a lot of

in my opinion the potential badness of

this report is being priced in getting a

good report is unlikely to mean that the

federal reserve is not going to raise

rates it's still going to bump them 0.25

or 25 basis points but a really bad

report over here is going to mean the

market starts pricing in that fear again

and then we start seeing those

uh fears again rise of a 50 basis point

hike that shock and awe so really

the report tomorrow

in my opinion creates the potential of a

buying opportunity if it doesn't create

a buying opportunity uh well first of

all if it does create a buying

opportunity i would expect futures are

going to look a lot like this or the

pre-market you get the report come out

if it comes in higher than expected

would not be shocked if we see sort of a

v shape down

and then that v shape up again really i

think the market's going to heavily

discount this report later in the day

that there could be some initial sort of

algorithmic trading that could be an

opportunity to buy the dip on year over

year again we would probably have to

have some kind of crazy shock like an

8.5 to really see a lasting dip if we do

get numbers like this which these are

going to be headline news

items for thursday and friday for the

mainstream media and so there could be

some red both thursday and friday as

people get freaked out oh my gosh

inflation 40-year highs all this

bullcrap whatever we get it we got it

but what really matters out of this is

that the fed

uh

and their response is going to be

limited and in my opinion not based on

this report at all this is not to say

that i don't feel bad for individuals

who have to pay higher gas or higher

rent that i think is a problem but i do

not think that it is any any kind of bad

signal for the federal reserve now in my

opinion if we do end up getting

substantially low inflation and this is

where it gets really interesting

in specific categories then there could

be opportunities for us to buy the dip

as well see really what i'm going to be

looking at is not over here i'm not

going to be looking at food because

that's all going to get destroyed next

month when we get the marched out i'm

not going to be looking at energy

because that's all again also all going

to get destroyed next month when we get

the march data thanks to war i'll tell

you what i'm going to be looking for i'm

going to be looking for declines over

here in new and used vehicles these have

about a four and a half to five and a

half percent weight each so combined

you're looking at about nine percent of

cpi right here new use new vehicles and

used vehicles last month we actually saw

the monthly rate of change for new

vehicles at zero percent and the monthly

rate of change for used vehicles at 1.5

which is a little elevated that's that's

quite substantial and so we want to see

those numbers potentially go negative

that would be great if they continue to

stay high that means that persistent

inflation is staying around longer and

it's not so bullish shelter and energy

shelter over here specifically rent of

primary residents this should really be

going up it is such a lagging indicator

it should be around one percent and so i

wouldn't be surprised to see that rate

rise substantially and if it doesn't

rise it just means it's kind of kicking

the can down the road more and it just

takes more time to get there

the other areas that we want to pay

attention to are this broader section

here of services less oops services less

energy right here came in at 0.4 percent

last time we really want to make sure

that this does not take off if services

start taking off it's actually a hidden

boogie ban because that could mean that

that persistent inflation is seeing its

way through the

uh

the services industry and that is my

friend's bat

the medical services industry is just a

sort of another byproduct of the

services as well as transportation

services these are things to pay

attention to transportation services

have been running hot uh and this makes

sense freight all worker shortages the

input costs make sense we could also

look at airline fares

and we can look at travel which i would

expect that certain travel sectors are

going to be pretty dang hot you could

look at furniture as well just to see

how individuals are spending apparel and

these are going to be the more sort of

uh detailed sections that when you get

into them the point of them is really

just to see okay what do we think

individual consumers are doing because

if demand goes down in apparel let's say

substantially we're going to see lower

month over month

price increases because well businesses

are very quick to adapt and if they

start seeing demand go down then we'll

start seeing those price increases go

down the rate of increases goes down

disinflation that would actually be

another way to reiterate that inflation

is transitory as

as we see disinflation come which that

would be perfect because we know

eventually that will drag the top line

number down so

bottom line out of all of this in my

opinion this report is probably going to

be a big fat by the dip if it comes in

bad if it comes in normal it's going to

be a big nothing burger until the fed

meeting and it wouldn't surprise me to

see some other big red days before the

fed meeting uh and given what the fed

has already told us

i see those by the diva opportunities if

you want to know exactly what i'm buying

the dip on of course make sure to check

out the programs linked down below on

building your world and folks we'll see

you next one thanks so much bye