PPI Report REVEALS CRACKS **NO ONE** Is Seeing

with China. We're very happy with it.

We're uh we have everything we need and

we're going to do very well with it.

We're rocking in terms of deals. Now, at

a certain point, we're just going to

send letters out and I think you

understand that saying this is the deal.

You can take it or you can leave it. But

we're dealing with Japan. We're dealing

with South Korea. We're dealing with a

lot of them. We're dealing with about 15

countries. You know, Brian, yeah, this

is a big problem. And I think it's worth

remembering what the PPI data actually

told us this morning because Trump, just

to put this together in a simple way for

those of you who didn't watch me explain

it this morning live, the PPI data had

underlying problems in it and

everybody's only talking about how great

the headline is. So, as usual, the Q's

are in their typical 90% of the time.

We're up over the last 60 days. So, it's

the easiest play. Just buy the dip on

the QES. It keeps going up. But what's

actually happening underneath the

surface and how does that compare to

what Donald Trump just said? Well, I

wrote that out and you could see this

kind of piece on the Meet Kevin app. If

you download that, not only can you

customize notifications for my videos,

but you could also see sort of some of

my my notes and thoughts on what's going

on in the economy. But PPI and tariffs,

this chart right here is very important

because this chart shows you core goods

pricing in the PPI report. The producer

price inflation report tells us uh not

only about goods pricing but it also

tells us about things like trade

services, food, warehousing, brokering

for trade and of course actual goods.

And what we found was a note from uh the

you know the PBI report that said that

over 80% of the May advance can be

traced to an index for the final demand

goods less food and energy. So basically

not brokering, warehousing, energy,

food, trade, services. No, not services

inflation. Instead, goods inflation.

Now, why is that a problem? Well, it's a

problem because goods inflation showing

up over here at the highest rate that

we've seen since 2023 is an under the

hood uh-oh because it pressures margins.

And remember that this is the first

month we're seeing margins just now

starting to be pressured while we have

actually probably stocked up on average

I would argue about 3 months of

inventory. If we've stocked up about

three months of inventory, we've got

inventory for April, May, June, which

means technically this early surge in

consumer good or uh producer price goods

pricing for May is really just a sample

of where this bar chart could go. Once

we get to July and that inventory really

needs to be fully rebought, we could see

this go off of this chart. The danger

about this going off of this chart is

that at the same time as producer price

costs go up and consumer prices like we

saw in CPI yesterday stay low, companies

take it in the margin. And when

companies take it in the margin, they

lay off. That's generally what happens

every single recession. And so when do

we get that? Well, we potentially get

those higher prices that fully hit in

July. You see layoffs in August and

September. By September, we'll have

June, July, and August data, not only on

inflation, but on jobs.

But any increase in layoffs, as we've

previously talked about with the

beverage curve, any increase in layoffs

is likely to normalize the beverage

curve. This is the beverage curve, which

shows you that when job openings are

very, very low, we we sit right here

where my mouse is right now. Okay? Job

openings very very low, unemployment

very very low. Very odd. Usually when

job openings go down the unemployment

rate goes up. That's why we have this

downward slope right here. Right? This

is a normal beverage curve. And you can

see kind of like these were the dot

bubble era years and these were the

years of the uh uh post great recession

recovery. The great recession was you

know over here towards this bottom side.

Uh and then you had the 2018 era over

here. Lots of job openings very low

unemployment rate. So you can see all of

these various different times. Do com

bubble, boom. Great recession, boom.

Very, very normal distribution on the

curve. This is what the situation looks

like now, which is a complete disaster.

This we're over here. So in other words,

any slight increase in layoffs

skyrockets the unemployment rate because

job openings are so low. So once that

beverage curve normalizes, which we

expect would happen sometime between now

and probably September, bearing in mind

that we might not actually see the

75,000

uh workers from the federal government

who took offers to resign with benefits

until September. Those job losses might

not show up until October or November or

December because of lags in filing for

employ unemployment. It's important to

remember that those are just going to

add insult to injury to any layoffs that

we potentially get. And this PPI report

actually starts signaling under the hood

cracks. Nobody's talking about it right

now, but when we have the highest

increase in producer price goods

pricing, sounds a little redundant,

since January of 2023, it's just a

matter of time for these PPI numbers uh

to continue to spike, especially as we

rebuild inventory at higher prices

and then poopy hits the fan with

layoffs. Think about a company like

Restoration Hardware for a moment. We're

going to go ahead and pull it up. I want

to show you this investor relations. Go

to Restoration Hardware. You could even

look at a company like Ubiquiti.

Ubiquity manufactures most of their

goods in China and Vietnam. This news

that we got on on this Chinese trade

deal from Donald Trump is fugazi. This

is this is a joke of a deal. It's a very

limited deal that basically says, "Yeah,

we'll take your Chinese students. We'll

change nothing on the 55 and 10% tariffs

and we'll take some critical uh minerals

and we'll give you ethane and jet

parts." very very very nominal uh in the

way of actually providing us a full-on

trade deal. So the idea that this

Chinese trade deal is going great in my

opinion is fugazi. Then you've got the

Trump threat that we're about to assign

tariffs, you know, within the next few

weeks coming up on July 9th's uh 90-day

uh window. This is Donald Trump's method

of trying to say, "Hey, you know, we're

going to uh limit uh or or we're trying

to pressure our negotiations. We're

trying to get other countries to realize

like, hey, we're about to assign you

tariffs, so you may as well negotiate

with us because we're about to assign

tariffs to you. All of that hurts. A

company like Ubiquiti manufactures most

of its goods in Vietnam and China. A

company like uh Restoration Hardware

manufactures a lot of its furniture in

countries like Taiwan as well as a lot

of other uh Asian countries. Uh, and

when we look at inventories for them, we

could look at their balance sheet right

here. You hear that screaming out there?

If you could hear that screaming, it's

cuz they're screaming about tariffs.

They're pissed. They're tired of this

crap. But I want you to look at

Restorations Hardware Hardware's cash

position. Look at this. $30 million of

cash. That's all they have. Why? because

they plowed money into merchandise

inventories leading into the tariff

drama. Fine. So, you'll be able to

continue to sell this product for quite

a while. You've got a billion dollar of

inventory to go through. How long does a

billion of inventory last you? Well, you

have net revenues of about $3 billion a

year. So, we have a billion dollars of

inventory. It lasts us one/ird of a

year. Restoration Hardware, assuming

revenues stay stable, has about four

months of inventory as of February 1st.

Now, assuming they're out of cash and

they basically, you know, probably

didn't build up much more inventory.

We'll give them the benefit of the doubt

and we'll say they have inventory for

April, May, June, and July. That means

Restoration Hardware starting probably

in July needs to start stocking up again

at higher prices to have inventory for

August. Otherwise, you're going to have

empty shelves at Restoration Hardware in

August. Restoration Hardware has way too

many locations to have empty shelves.

So, they are going to get hit by tariffs

in July. In July, they start honestly,

they probably need to start putting the

orders in now because it's going to take

45 to 60 days for you to get your

shipments from Taiwan or China or

whatever. So, you're going to start

paying those higher producer prices and

those are going to show up in this

chart. This is an early warning sign

right here for May, mind you. Also, it's

not me, you know, who's bitching about

the Trump tariffs. I mean, this is old

news. Okay. Wow. Kevin says tariffs are

bad. Okay. Old news. Look at the Wall

Street Journal editorial board. Trump

has no chi China trade strategy. I

understand this says opinion. I want you

to know this is the editorial board. So,

it's not just some schmuck. It's the

editorial board. So, instead of being

one schmuck, it's a group of schmucks.

All right? So, it's a little different.

It's a group of schmucks from the legacy

media. All right. President Trump on

Wednesday hailed the result of the

latest trade talks with China as a great

victory. But the best we can say is that

the truth, it's a truth that tilts in

China's direction. Details are few, but

the countries appear to be resetting

their trade relationship to where it was

a few months ago before the tit for tat

escalation. Trump has agreed to reduce

tariffs to 30%, including those from the

first term. So we're basically at 55%.

and China dropped its tariffs to 10%.

Which obviously Donald Trump brands as a

win because it's 55 to 10. But, you

know, it misstates how much we import

from China relative to China imports

from us as well as of course the

individual categories that are being

affected by this. But anyway, but

Beijing continues to to leverage its

strangle hold on rare earths, right?

They're only providing a six-month

reprieve on rare earth exports to the

United States. So they still hold this

hammer over our head. Donald Trump

didn't mention that we're only going to

get exports for six months on rare

earths because that's kind of an L. All

right, which are used in medical lasers,

drones, electric vehicles, blah blah

blah, motors, you name it. China export

controls force some automakers into idle

plants to idle plants. This is true. Uh

slow production for drones needed in

Ukraine and threatened US manufacturing.

Beijing will ease its restrictions on

rare earth minerals and magnets for 6

months while the US will relax its

restrictions on the sale of jet engines

and ethane to China. Okay, we already

covered that. The US will keep its

export controls on advanced chips which

have been a hind which have been a

hindrance to Xiinping's ambitions. Of

course, we expect that they're just

going to import them through Singapore

or, you know, some other BS way. The

administration also rescended

restrictions on Chinese student visas.

Fine, we already heard this. trade wars

are mutually destructive. And mind you

that the um foreign affairs has a really

good piece where they talk about trade

wars usually lead to

actual military warfare. Not always, but

they can. And this is where people were

worried about Taiwan and China. Maybe

that's a little overblown at the moment,

but Jaime Diamond's also been

complaining about that. But then again,

Jaime Diamond and complaining kind of

goes hand in hand. I think it's because

the FinTechs have been reaming him up

the butt and there are way better

options. Like, you know, House Hack is

really excited because we're looking

like we just opened a QuickBooks bank

account because we think it's going to

plummet our accounting and auditing

costs because you immediately have this

sort of sync between QuickBooks and and

your accounting software. So, like the

bank and the accounting software, it's

one and the same, which is crazy.

#notsponsored by QuickBooks. I'm just

saying like the big banks don't

innovate. There's so many other

innovative products that you could win

from uh and and save massively if you're

a business. Something to consider if

you're a business owner. Trade wars are

mutually destructive where Trump's

export controls. Oh, by the way, did you

know that we have an offering going for

Houseack? If you're a nonacredit

investor, you can now invest in

Houseack. Earn 5% through conversion.

You get all the upside in the stock

after that downside protection. Well,

you've got a bond. So, obviously, you've

got preference in liquidation. Although,

you know, knock on wood, I don't think

that's an issue at all. very optimistic

on it. Of course, I'm biased. I'm the

CEO, but if you want to be part of my

real estate charter startup, we've got

uh over $70 million in assets, over 13

in cash, sitting ready to buy the dip

this winter uh or continue building our

ADUs, you know, depends on the market.

And uh we'd love for you to be part of

the ride. Uh no bank debt, which is kind

of incredible because when we go to

refinance, we can uh we could skyrocket

the size of this portfolio, which is

really exciting. But anyway, trade wars

are mutually destructive. Though Trump's

export controls harmed American

businesses as well as Chinese, China

relies on USF FA and a byproduct of US

of oil and natural gas production for

its prochemical manufacturing. Uh

because the US has few other export

markets. Trump's embargo could have

throttled domestic oil and gas

production. So it hurts us. Also, US

manufacturers will no doubt welcome the

rare earth reprieve, but China's keeping

the gun on the table. Fine. China is

weaponizing its dominance in rare earths

in a conflict with Japan. Fine.

Developing alternate supplies will take

years. We already know that a smarter

trade pri strategy would be to work with

allies as a united front to counter

Chinese uh predatory practices. I

totally agree with this by the way. Like

I'm not saying that we shouldn't do

something against, you know, IP theft or

China or whatever, but using tariffs

sucks. Like a united trade front between

our allies, Japan, uh, you know, Taiwan,

Vietnam, the European Union would be

great. Instead, what's happening is

China is teaming up with the European

Union, bringing and lowering tariffs on

BYD electric vehicles into the European

Union, lowering trade barriers with

China, increasing trade with China.

These these are all things that hurt us.

Instead, Mr. Trump has been has used

tariffs as an economic scatter gun

against friends and foes. I agree with

that. It's like scattershot in um World

of Warcraft, the Hunter.

Wrong game. This increases China's

leverage and like uh this week's trade

truths, there's nothing to cheer about.

I agree. I think China actually wins in

this trade deal. That's all they say.

Yeah, I'm curious what some of the

comments here on this. Can I sort by

top? Most liked. Let's see. Finally, the

editorial board has uh the the editorial

the editorial board has been itching to

write and no deflection to Biden or

Harris or the laptop. Kudos.

Interesting. Okay. The fact that there

wasn't a single pot shop at Biden is

actually jaw-dropping.

Oh my gosh. A Wall Street Journal

editorial that finally tells the truth.

You all just realized this. Taco is a

and got into fight not

understanding all the mech mechanisms of

trade. His 2 a.m. tweets and rants don't

show a level-headed deep understanding.

Well, people would come back and say

it's his version of the art of the deal.

uh strategy. Because of him, produce is

going to go unprocessed and food prices

are going through the roof. There is a

Blackhawk flying over the fields in

Ventura County. Hey, that's where I

live. I think I actually saw that

yesterday. That's crazy.

I was like, man, that's a loud puppy.

That's because I was working in my

garden with uh with with the boys.

Liberation Day, permanent car import

tariffs, moving goalposts. The president

is brilliant. He doesn't really mean

what he says. It's a clever negotiating

tactic. No, he's a pathological. It's

actually interesting to see the hate for

Trump here in the comment section of the

Wall Street Journal. Surprised because

if you go on X, everybody's shilling for

Trump. And remember, my POV is to be

hated by both sides. So that's how I

know I'm in the middle when both sides

hate me.

Uh so I mean look to to me oh I'd love

to bring special s I love Jay he's great

uh but uh to me

this this PPI is a little bit of an

early warning. I'm not saying it's panic

today. You know this is not like panic

sell today, you know, whatever. I was

still a fan of the the trailing stop

strategy and frankly the trailing stop

strategy has been fantastic because you

shouldn't have gotten stopped out at all

between like midappril when I first

announced it and now. In fact, there

were people watching my videos that are

like, "Kevin, why are you saying set

trailing stops?" And my answer is

because I believe it. We could V-shaped

recovery from here. People were like,

"But you're so bearish on tariffs." I

go, "Yes, but that's for the second half

of the year." So,

you know, to me it's remarkably

transparent and and I I I try to convey

that on a daily basis. Of course, you

know, people like to say that, oh, well,

you're just saying that, you know, to

cover both sides. It's like if you go

through what I say, it's pretty damn

consistent every single day. Uh and and

if the facts change, obviously, you

know, we will change directions. Like, I

was really hopeful that tariffs would

have died when the uh when the courts uh

said that the reciprocal tariffs were

illegal. I was hoping that we would have

had an injunction that would have kept

them illegal for 6 months or whatever

while the negotiation goes on in courts

or the trial goes on in courts and then

Trump would have just walked back and

blamed the liberal judges or whatever

even though you know some of them are uh

uh Republican appointed judges

uh and and he would have just backed off

of tariffs. That would have been the

most bullish thing ever for this

economy.

But unfortunately uh the uh uh the the

tariffs were allowed to remain in place

during a now extended stay through July

31st where the court will first hear

oral arguments which is so dumb that for

6 weeks they're going to keep this

going. Now I understand the courts would

have rugpulled Donald Trump's ability to

negotiate but I was shipping that

trade pun. Anyway, go check out house

hack.com.

Read the paperwork and offering circular

and disclosures and risk factors cuz

there's risk with every investment. All

right, that's my take on trade and PPI.

Why not advertise these things that you

told us here? I feel like nobody else

knows about this. We'll we'll try a

little advertising and see how it goes.

Congratulations, man. You have done so

much. People love you. People look up to

you. Kevin Pra there, financial analyst

and YouTuber. Meet Kevin. Always great

to get your take.