The Fed’s Dangerous New Spiral.

hey everyone me Kevin here coming to you

from some random Hotel in Los Angeles

Lauren's got surgery this morning so I

just wanted to do a quick little video

update because we got some good news and

we got some bad news well the bad news

wasn't so terrible but I I do want to

spend some more time talking about good

news but let me just get the the bad

news out of the way really quick you

probably already heard this one not that

huge of a deal but the pce measure of

inflation which is the one the Federal

Reserve prefers came a little hotter

than expected but you know what you look

we got to be real about this Jerome

Powell when he last talked about the pce

he talked about how what he's looking at

is the core pce level over a three six

and nine month period starting to Trend

down that's going to be what he's

looking for that was sort of a hope at

least of his but look the part about

let's be real is I don't know how much

right now Jerome and I know this sounds

wild but if you've watched my last

videos you know this a little bit more

in detail I don't know how much he

really cares right now about every

individual inflation report what it

seems like he cares most about his jobs

he's trying to crush the amount of job

openings we've had we have they've

really flip-flopped their their sort of

Metro sees in their last meeting to

focus on we want to see job openings go

down and we want to see wage inflation

go down I I personally haven't quite yet

figured out why they've flipped from

inflation to jobs I think it's because

the FED is now convinced that the only

way to actually get that core inflation

to move down is by making sure wage

inflation goes down which a little bit

makes me concerned that the FED actually

thinks we could be at the start of a

wage price spiral and what's remarkable

about that is you know I read the

Cracker Barrel earnings report I read

the Nike earnings report I read the

Micron earnings report all just over the

last day here uh that came out day day

and a half that came out and what was

remarkable is Cracker Barrel and Nike

for example they told us yeah hey you

know we're seeing some relief and

freight costs we're seeing some

inflation go down right Nate Nike

specifically talking about this but even

Cracker Barrel talking about some

softening and inflation the prices for

certain foods still staying High Nike

definitely talking about excess

inventory about how they have 60 more

inventory than the last year they have

to have aggressive markdowns basically

before they get into the winter sales

cycle because they're starting to get uh

you know clothing that's essentially

dated now like they got to get rid of

this stuff they way over ordered right

and they are now officially in an

earnings recession I mean if you look at

their year over year uh net income for

the last two quarters it's well negative

and the only reason their Top Line

actually grew was mostly because of

inflation so you're definitely still

seeing uh uh well oh yeah and then if

you keep going into their earnings

report what they do is they blame

inflation on high labor costs so that's

the interesting thing is you're seeing

kind of like that inflection point down

on Goods inflation but you're not seeing

that inflection point down on wage

inflation yet and remember back in

January of 2020 my biggest fear was that

the FED would have to pull volkras for

fear of a wage price spiral so the

numbers that came out this morning this

sort of pce deflator numbers you know

the survey was for a month over month

gain of 0.1 percent it came in at point

three percent okay whatever that's 3.6

annualized year over year survey was six

percent and came in at 6.2 the one that

Jerome Powell likes to look at is the

core month over month well you know if

the survey was 0.5 it came in at 0.6

which is not great because that's 7.2

percent annualized so those those

numbers just weren't great so this is

the like the slight bad news and and

we're going to talk about expectations

in a moment which is actually where we

get some slight good news but but think

about that for a moment

Jerome Powell and the FED are

transitioning over to this idea that uh

it's it's yeah it's jobs it's like a

jobs potential spiral we need to make

sure we get jobs pressed down and that's

exactly what we're starting to see in

the earnings reports not so much

complaining anymore about inflation

remember yesterday I talked about how PP

is now turning into a new version of pp

that is companies pricing power their

ability to raise prices is essentially

gone back in January of last year every

single earnings company uh every company

they reported earnings that I read

almost every single one of them I was

able to put up I didn't care if it was a

steel manufacturer an auto manufacturer

a restaurant a clothing company like an

apparel company right Healthcare didn't

matter every single company said we have

pricing power we're great don't worry

we're able to pass on all the inflation

to our customers that's pricing power

well now that has turned into a new form

of pp be a much worse one which is uh

pricing pressure right they have to drop

uh prices or keep prices or maybe not

raise them as much as inflation that

hits margins and that's how you end up

getting an earnings recession like what

we're seeing with Nike right earning

substantially worse than they were last

year and they weren't like horrible

earnings it certainly wasn't like

micron's guidance micron's guidance was

absolutely miserable I mean theirs was

just beyond terrible uh but uh you know

again this is where we want to look and

think okay if the Federal Reserve is

really changing the game here and now

wants to focus on wage inflation then we

want to start looking for quite frankly

some Unemployment uh well the jobless

claims that just came in yesterday

didn't help at all right the jobless

claims came in 27 000 jobs fewer in

terms of losses than than we expected

which again sort of reiterates strength

in jobs sure Facebook is firing people

but but Facebook kind of sucks bucks you

know like I never liked Facebook I never

invested in Facebook and nothing's

dropping Like a Rock now they're

freezing hiring why why let me quickly

just a quick note on Facebook for those

of you investing in Facebook you know

I'm not just trying to kick this thing

while it's down let's be clear what's

happening in Facebook and then let's

talk about the the only good news we

have

what's happening at Facebook is you have

a company that realizes after the Apple

uh iOS changes and the Apple

transparency the Apple tracking

transparency changes you have a company

that realizes they can't make money like

they used to because they can't track

people like they used to and they can't

promise the conversions like they used

to if they can't do that then they're

not as profitable for their clients to

use and so clients that is advertising

clients or are more likely to

potentially move over to like Apple's

advertising ecosystem or Google's

advertising ecosystem where a lot of

people who are signed in or rather who

are using Google services or apple

services are signed in well if you're

signed in you know what what people are

doing around the internet right uh now

the hope is that that same would be true

on Facebook because after all people are

signed in on Facebook but people just

aren't logging in to as many services

anymore with Facebook around the

internet and the cookies that used to be

able to follow you to stuff that you

you're not logged into anymore aren't

useful anymore thanks thanks to the

iPhone changes anyway okay so so the

point is let's keep that very simple now

forget all that technical stuff just

think about this Facebook is now

scrambling to adapt to a new reality but

they don't know what that new reality is

so they're hoping it's the metaverse

they're hoping it's virtual reality and

advertising in the metaverse this is why

they're they're expanding their research

and development budget for the metaverse

this is why they're all about let's go

metaverse let's add all in on this is

why they changed their ticker to metal

right

is because they hope that's the new

advertising Frontier because the old

world order is kind of dying for them

and they realize that that writing is

clearly on the wall the New World Order

is hopefully the metaverse for them I

don't know I don't think it's going to

be the metaverse but anyway uh okay the

good news

sentiment okay so first of all we had uh

an expectations so well it's also good

news and bad news so the sentiment

actually came in a little bit worse than

expected in the last University of

Michigan sentiment survey uh it came in

at 58.6 versus 59.5 expected but the

part that's actually slightly good and

and this is what has me so curious is

again inflation expectations fall we had

inflation expectations that in the long

term we would see inflation expectations

uh be consistent at 2.9 I'm sorry 2.8

percent and we've consistently about the

last three months been sitting at about

2.8 percent with the University of

Michigan inflation survey 2.8 percent

was the survey came in at 2.7 the one

year came in a little bit higher came in

at 4.7 versus 4.6 so another like sort

of mixed report here but what I find so

fascinating is not only are longer term

inflation expectations plummeting with

the University of Michigan consumer

sentiment survey but they also are via

inflation break evens we watched my

video yesterday at the end of my video

yesterday where I talked about what's

the one reason potentially not to sell

your stocks in this environment

it's inflation expectations plummeting

look at that five-year break-even chart

I showed you at the end of the FED video

yesterday it's the only thing the only

thing we could look at and say this

suggests that inflation should plummet

in the next three to four months fingers

crossed that it does because if it does

then the FED will back off the idea

about a wage price spiral and they'll

back off this idea that we really need

to have an unemployment crisis anyway my

thoughts any of this uh is helpful for

you make sure to subscribe coupon code

expires today for the programs on

building your wealth and make sure you

get in for the deadline on house hack

sign that subscription agreement today

get in on that subscription agreement

today upload your W-2s tax returns

whatever to prove you're accredited if

you can get a letter from a CPA or

attorney today it's fine househack.com

to make sure your income is such that

you are accredited and again we will be

working on a continued working on

getting non-accredited investors in

thanks so much for watching we'll see

you next one bye