WTF *JUST* Happened | Inflation Disaster & CPI Numbers.

everyone meet Kevin here okay so here's

exactly what happened with CPI and why

we had a miss the expectation was that

we were going to have year-over-year

inflation come down from eight and a

half percent to eight point one percent

we got 8.3 so it's in the right

direction suggesting that inflation

might be peaking but the real Hope was

that inflation would come down to at

least 8.1 if not even more so that way

we could clearly Define a peak even

though we're kind of like making that

turn and we're rotating down the concern

now is that well crap what if we're

going to sort of plateau at higher

levels now at first read I was a little

nervous and I only started feeling a

little bit better when I actually looked

at the details of the numbers and those

are what we're going to go through in

just a moment with some charts uh month

over month headline inflation was

expected to move up Point uh two percent

and we ended up getting point three

percent and core inflation was expected

to move up point four percent that's

because as food and energy comes down

the other core sectors were expected to

uh to sort of uh come down to the effect

where when we take out food and energy

we'd have the larger increase on on the

headline numbers for month over month

but when we look at core we thought we

would uh by not removing these sort of

negative hits to gasoline and food we

would end up seeing uh not as great of

an improvement in month of month course

so we're expecting 0.4 but we got point

six so we missed on Headline year over

year by point one the headline month

over month by point one and core by

point two that's the bad one though

because that's the one the Federal

Reserve told us hey we want core to go

down and it went down from last month

last month we had a 1.2 percent gain

right that was insane that was

potentially a peak but still 0.6 percent

pretty hot because point six percent

means core inflation is still moving at

seven point two percent that's sort of

the speed that we're going at that's

called the annualized rate uh and so

when I looked at uh the actual CPI

report we could see this is sort of the

reflection of what it looks like when we

see CPI starting to rotate down we were

hoping again to have more of a rotation

down and we really got kicked in the

butt right here with this core uh number

which is this section right here that

really kicked us in the butt and there's

a particular reason that I believe core

came in so high and it actually remember

this is the weird thing okay core is

supposed to strip out it's supposed to

be minus energy

and food now energy and food includes

gas right but here's the problem

part of core is actually Airline and

public transportation

both of these price their fares based on

how expensive Gas and energy is and we

know that Brent crude and WTI Crude are

still above a hundred dollars a barrel

each and that leads to some expensive

gas prices obviously off the peak but

take a look at some of the gains we've

had here on airline prices in January we

had 5.2 percent increases in airline

prices in February 10.7 percent and in

March 18.6 percent you'd think that may

have peaked but because we're also at

the same time as we have relatively high

gas prices seeing a surge in demand what

did we end up getting we got

21.9 of an increase in Airline uh ticket

prices public transportation went up one

point a 14.4 percent which is right

above it look at these two numbers right

here if we just take the weight of

airline prices which is taking this

weight right here the relative

importance rate of about a half percent

multiplying that by the increase we get

we can explain about point one two

percent of the Miss solely from Airlines

if we then include public transportation

by going

0.00836 which is the weight multiplying

it by 14.4 we get another

1.2 percent so you're literally getting

or or 0.12 in this case you're you're

getting a combined uh

0.24 increase to core

solely because of Airlines and public

transportation now when we take a look

at visualizing some of the changes here

look at this this right here tells you

how much rent contributes to inflation

that we're seeing and it's been

consistently coming in at about point

five percent month over month but it's

becoming more of that stabilizing force

in CPI that's actually keeping inflation

hot in the fact that while while rent is

still going up 0.5 percent other things

are coming down so this is carrying more

weight

uh so that's something to keep an eye on

uh and then here are your leading uh

decliners so these are things that went

down in price from the last month and so

we could see admission to Sporting Goods

down here uh gasoline down about 6.44

motor fuel down 5.81 uh energy

Commodities laundry equipment

information technology these are things

that came down look at this one

televisions came down uh apparel like

women's suits men's apparel jewelry

personal computers and peripherals these

are things that came down somewhere to

the anywhere between eight percent and

two percent month over month two percent

declining computers by the way month

over month that's actually a pretty good

move because that's somewhere around if

we do 2 times 12 to annualize that

that's like a 24 year-over-year decline

what do you get a two percent decline

month over month on computers so you

kind of see some of that weakness

potentially in the chips you know that

makes me sort of think of like Corsair

it makes me you know when we see washing

machines laundry equipment I think of

Whirlpool I think of Nvidia uh you know

not so much looking at potentially

apparel although you have a big apparel

section within Target and then apparel

stores themselves whether that's

Nordstrom or whatever else uh going to

the upside you really see that disaster

here in uh in airline fares public

transportation eggs margarine window

coverings sewing machines milk

transportation services so again the

more we look at things like here

transportation services Airline fare

public transportation this is

interesting I want to actually see what

the weight here is for transportation

services I think that's the category

right here though yeah it is it is look

at that this uh category moved

3.3 percent as a full category here but

I prefer to just look at these right

here because these are sort of they give

us a little bit more detail they really

tell us that this inflation read again

missed probably by about 2.4 percent

well I should say like it makes more

sense to look at like this 0.24 there we

go uh percent solely because of these

two things here now personally I

actually don't think that's as scary uh

however the Market's gonna hate this

right the nasdaq's selling off we've got

the uh tend to spread down the 10-2

spread is now I'll show you a screenshot

here 10 2 which is our yield curve

remember zero means an inverted yield

curve take a look at this right here uh

we we were actually steepening nicely

we're at 30 basis points right now which

is still higher than where we have been

uh since uh since essentially March

which was a disaster April 1st when we

had our inversion of the yield curve

this was really the beginning of the

stock market sell-off we've had the last

five or six weeks here now but but uh

you know we've come down not down as

much as we were which is good but

10-year yields back up to over three

percent and if we look at the break

evens uh take me a second to get it here

and get the break evens up five year

Break Even which is sort of the bond

Market's expectation of inflation here

we go we get the following chart

and we could see that we've really been

seeing this nice decline here inflation

this is really really good in the

Market's expectations for inflation

really really good to see this but

really bad obviously that uh you know

now now we're getting that pushback to

the upside it's just breaking that trend

of falling a falling Break Even

expectation which it happens you know we

get these little breaks to the upside

hopefully it ends up being transitory

but that missing course sucks and

unfortunately the Federal Reserve can't

just look at this and say oh well it was

just Airlines no big deal

well it actually is a big deal because

you know you've got a situation where

the Federal Reserve has to see okay well

this crazy Airline spending clearly

means that Airlines have pricing power

and if Airlines have pricing power it

means the consumer is still spending

like crazy and it just solidifies the

fact that we need continued 50 basis

point hikes which really sucks now if

you jump on over to the actual QQQ here

you can see uh this this essential

disaster Happening Here the NASDAQ now

down 1.85 you actually see a less of a

degree of pain in Tesla than you

ordinarily would Tesla usually has a

beta of two to the NASDAQ which would

mean we would expect Tesla right now to

be down about 3.6 it's down about 2.3

percent so you're actually seeing less

of of pain here and I'm not exactly sure

why but that's what the Market's doing

sitting at about 782 right now NASDAQ a

1.59 my suspicion is you know reads like

this are probably going to almost with

certainty push us into uh recession in

Q2 here and we're going to look back at

this time which we won't actually know

probably my guess until

let's see the second quarter ends April

May June probably late July early August

we'll have the next GDP data and that

GDP data is going to tell us you know

potentially that we're in recession and

which we could be at the entire year now

it's also worth noting that tomorrow we

have PPI numbers that are coming out

PPI uh final demand is expected to come

in month over month at 0.5 percent down

from 1.4 uh the core is expected to be

0.6 and and I mean if we get a miss here

as well to the upside

it's just it's not going to end the pain

for the stock market anytime soon so I

do think this puts you know essentially

cold water on on hopes for a short-term

rally here kind of disappointing and uh

all thanks really there to uh Airlines

which really good measure though of

consumers right you know so uh here's

here's your report you could think uh

you could thank consumers for traveling

speaking of which I have a flight today

yeah flying to Florida got to go to

Tampa then I gotta fly to Miami uh then

after that I got a flight of Florence

Italy so there won't be a market closing

live stream today because you know I'm

flying around uh sorry I guess that

means I'm contributing to inflation

which contributing to inflation you know

I guess I guess maybe I'm also hurting

with that by by reminding you that we're

gonna have the largest price increase

ever on the programs on building your

long-term wealth link down below this

probably feels quite insensitive to be

talking about this in the CPI report so

I'm just going to kind of like slowly

back away from that one uh yeah