Yikes: The Fed's Favorite Gauge BOMBED Today :(

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now folks we've gotta talk about

pce the personal consumption

expenditures numbers come out in about

20 seconds prepare for the expectations

pce month over month is expected to be

0.5 by some estimates 0.6 year over year

5.0 Core month over month point four

year over year core 4.3 and the numbers

will be coming out within the next 10

seconds this is gonna move the stock

market today let's see what happened

it's been like 10 seconds and still not

out

waiting uh usually they're pretty on

time

Earth is out personal income comes in at

an actual 0.6 versus the survey of 1.0

personal spending however comes in at

1.8 versus 1.4 so more personal spending

but less personal income here we go pce

numbers in month over month slightly hot

at that point six although some

estimates did hit that year over year

comes in hot 5.4 versus 5.0 this is just

like the January CPI report all over

again core oh that's not good core comes

in at 0.6 that's 7.2 percent annualized

that's terrible the prior read was 0.3

and the last serve and the survey was

0.4 that's a nice beat uh in in a

negative way uh core year over year

comes in hot at 4.7 okay now we got the

revisions year over year core of the

last reporting period so December was

revised up from 4.4 to 4.6 core deflator

month over month revised up from 0.3 to

0.4 for last month

uh year over year revised up from five

percent to 5.3 percent

pce month over month for the last report

revised up from point one to point two

percent so what do you have well you

literally have people showing now these

new reports showing less income

more spending and higher inflation uh

than than anticipated by survey and

certainly higher than what we had last

month so much in line with the CPI

report it's not good it's it's all

hotter it's all hotter than expected uh

and uh no surprise but at least at this

point the market is taking a little

poopsie dupsies now

I I kind of I have to I just put my own

little spin on this for a moment while

we pull up the pce report and we go

through some of the details here

personally I'd just like to say that I

feel like this is redundant I feel like

this is just a redundancy till what we

saw

and the CPI report but for some reason

we have multiple of these reports like

PPI reports and pce reports I get it so

it's no surprise to some degree that

this one's coming in hot because we had

the heads up that it was going to come

in hot by the last again the Beats on

PPI the Beats on retail sales the Beats

on uh CPI okay now that aside let's see

what Wall Street is saying about it

obviously it's an algorithmic easy sell

trade it'll be really interesting once

the humans actually start reacting to

this data if we end up buying this dip

that will be very interesting because I

want you to know right now it's Algos

firing off it's it's a very simple

formula if expectations or the results

come in higher than expectations so if

they come in lower than expectations buy

very very simple algorithm you could

program probably yourself as well so not

too terribly much of a surprise again

that this data is hot but hey whatever

61 sir Economist of okay here we go only

six of the 61 economists surveyed by

Bloomberg forecast a personal spending

gain of 1.8 or higher another hot

January report no question yep agree

with that pce core accelerated to 4.7 in

January above all estimates and the

month on month gain match the high

forecast

inflation again coming in hotter than

expected okay we've talked about some of

the headline numbers here let's go to

the actual release as well and see what

they've got

here so here's the actual report

uh so what do we have here we've got uh

personal income

for January there we go 0.6 personal

disposable income 2.0 percent on current

dollars expenditures 1.8 so again this

is where you can see we're spending more

than we're making right now and this

kind of reiterates what we're seeing

with the credit card data right the

credit card data suggesting people are

spending more than they're making this

is where there's a lot of uh I'd like to

say clickbait because I like to say it's

really it's kind of just like basic but

like there are a lot of folks going oh

but Kevin the personal savings rate has

plummeted yeah no [ __ ] like we're

probably going through some degree of a

recession so people go into their their

savings that they have and they spend

money to get through the recession

businesses do that and people do that no

duh people's incomes go down in a

recessionary environment when stocks go

down and when you know people are

getting laid off duh so showing the

chart of the personal savings rate going

down is just it's redundant it's like

childish it's it's it's simple what we

need to pay attention to is how much

excess savings people have and most

people still have four to five times as

much money as they had before the

pandemic so so we we have a long Runway

of still being able to spend through

this I'm not saying that's a good thing

it's actually one of the reasons we're

seeing some of these inflationary

numbers coming hot obviously combined

with the fact that you've got crazy

seasonal adjustments that happened in

January uh so so February is going to be

even more important because January is

like seasonal adjustment month but

whatever

obviously this is a hot report obviously

that's not good obviously this is not

the trend that we want uh and and

obviously that's why the stock market is

taking a little poopsie doopsy

immediately after the report however I

went to see how the day evolves because

I'll tell you one of the most important

things that you're going to get as an

investor in those stocks today is if the

stock market ends up green today

that's a sign in my opinion that

institutions realize we're not going to

get Paul volckard and any dip is

starting to turn into a buy the dip

opportunity now I'm not saying this dip

is a by the dip opportunity I'm just

wanting you to observe the market today

and if for some crazy reason we somehow

rebound from negative one and a half

percent on the QQQ to positive at the

end of the day it's a sign that

institutions are realizing oh damn we've

been offsides for too long it's time to

start allocating more cash to these

levels grab these before they're gone in

February when maybe those seasonal

adjustments are gone I'm not thinking

it's all in time because obviously if we

get a hot Fab you know you're going to

be like oh why did I buy right not Feb

would be like worst case scenario

because then you're reiterating the

January Trend and the argument that

January is just a seasonal adjustment

disaster or maybe January is hot because

January was a lot warmer than December

and people are buying spring spring

clothes in January that goes away

instantly look I don't know I mean if

you follow me Instagram on Instagram

it's basically at this point like

following my only fans okay I don't have

an only fans but on Monday I was skiing

without my shirt on because it was hot

it was I mean it's like February in Lake

Tahoe and I'm like I'm sweating my butt

off over here and even after I get you

know splashed with snow uh I'm still hot

it's weird it's like um it's just uh it

is it's a weirdly warm winter I know

obviously that's just an anecdote but

that is also what we're seeing in the

data right so that motivates you to buy

different clothing right and then leads

to more retail spending and people have

more anyway okay so so take that as

you'd like but obviously prey Market

here and maybe at the beginning Market

open whatever we get some red if we

continue to close right okay then this

is a legitimate concern if we can if we

actually rebound like we did yesterday

off of this because yesterday was insane

I mean yesterday was just like straight

down and then just like straight back up

to close higher basically than where we

started today insane but anyway what do

we have here we go increase in personal

dollar income in January was led by

compensation reflecting private wages

and salaries obviously these are just

the lagging uh uh Embers of inflation no

surprise

uh government social benefits decreased

in January reflecting a decrease in

other benefits fine one-time refundable

tax credits Social Security Cola

adjustment oh that's another thing to

remember too is you have uh you have uh

the cola adjustment that took effect in

January so people's incomes actually

Rose thanks to getting more Social

Security money starting in January

remember when they announced the cola

adjustments and like when do they do it

like September August or something like

that they're like oh yeah you know 8.7

bomb people were like oh great inflation

is wonderful my social security is going

up almost 10 percent you know uh

obviously inflation's not great but but

anyway uh that that could be what we're

seeing some of in January as well Cola

cost of living adjustment and not Coke

okay

anyway uh so what do we have here 3 12.5

billion dollar increase pce reflected

spending on 162 billion and spending for

goods 150 for spending for services

within Goods the increase was widespread

led by motor vehicles and parts as well

as other non-durables durables or like

cars washing machines dishwashers and

stuff with Services the largest

contributor first for the increase was

spending for Food Services that's

interesting because Food Services is

actually part of core

but food is not part of core see what

I'm saying so it's like even if food

increases and then you're like oh well I

want to look at core which takes out

food and energy you still have food

services that are affected by food

prices and so if Food Service prices go

up because they raise menu prices that's

an increase in in basically Food

Services

and it's related to food going up even

though it's supposed to be part of core

which is excluding food and energy it's

the same thing as saying like you know

oh uh you know my delivery fee for my

new gym is a hundred dollars more

expensive because gas is high but my gym

shows up as more expensive on my CPI

report even though the core CPI says

here's your gym without the uh energy

costs right so so you could see how in

like food and energy which is very

volatile still continues to flow through

even in core but anyway personal outlays

increase personal savings uh decrease uh

from prices from a program blah blah

blah okay real okay let's uh let's see

here let's look at some of the other

data or related materials that we have

here full releases and tables yes this

is what I want let me get this up uh in

the meantime let me quickly see what

Wall Street is saying

uh pce reflected an increase in both

goods and services is spending food led

the way yeah see they're picking up wall

Street's picking up on this as well hey

they just picked up on that 30 seconds

ago maybe they're watching us right now

hey fine with me hey if you're watching

me hi

anyway so there was really no

disagreement across the raft of

indicators in January strong for the

economy jobs consumption inflation will

this be sustained that's the big

question right now a lot of strategists

right now talking about will is this a

re-accelerating of inflation is this the

second wave that everybody's been

fearing that's maybe why the stock

market is falling and then sort of

selling off a little bit right now yeah

that is a very fair question that's why

January or uh well the report that comes

out next month for February would be so

important okay is there anything else

interesting in some of this data I do

think that food services item was very

very interesting uh and quite important

no not really I mean we'll get some

tables here oh yeah yeah okay okay okay

this actually will be really interesting

so let's go to I want percentages please

give me percent changes because now we

can see categorically what's happening

here we go percent change from

proceeding month

uh this is so bad I'm like choking and

dying uh anyway

so uh uh here we go wages and salaries

oh good lord uh 0.9 seasonally adjusted

monthly rates that's absolutely horrible

0.9 good Lord you realize how high a 0.9

Reed is oh my goodness gracious it was

0.4 in November and December 0.9 I mean

this is going to make people scared of a

wage price spiral that's 10.8 percent

annualized but again some of that has to

do with like Cola going up but damn 0.9

that's not that's bad

uh personal interest income wow with

rates this High it basically you're

sitting at point one percent of an

increase that's nothing personal

dividend income boy that's a volatile

category right there uh rental income of

persons with capital consumption

adjustment I don't even know what that

is uh we can figure that out

so this is yeah this is percent change

from prior month so these numbers are

just nutty what is this uh

personal contributions from government

social insurance yeah there you go look

at that one point five percent I mean

that's a massive boost that's the cola

adjustment taking effect

uh okay can we get a little can we get

percentages on like specific Goods

maybe food really popped off over here

percent change this is from a year ago

one month but a year ago this is from

one okay yeah I mean that's fine eleven

point one percent that's sort of what

we've been expecting for food ah this

table not too terribly insightful but um

let me see a little bit more of what

Wall Street is saying and then let's try

to

fed swaps okay yeah here we go fed swaps

are now fully pricing in rate increases

in March May June yeah we've kind of

been expecting that already though three

more 50 basis point hikes right that

brings us to five and a quarter percent

so from 4.5 percent to four point seven

five percent uh in in the next meeting

to five in the next and then five and a

quarter in the next you know that kind

of is what we've been expecting so the

question now is is the terminal rate

moving up it probably will on this the

terminal rate was before this report at

a high of 3.7 or

3.3 what am I saying 5.37 was the

terminal rate before this

and okay it's moving up a little bit

there's now this expectation that

potentially there's a rising risk for a

50 BP move in the next meeting I

disagree with that I think if anything

they would just add a 25 BP or the

market will start practicing in a 25 BP

for uh July if it needed to but I don't

really honestly like bottom line that

all is I don't think this really changes

anything because again it's just like

it's literally like replaying the

nightmare of uh of of a personal

consumption or uh PPI retail sales and

CPI for January it's literally like

we're playing the same movie over and

over again for January like we get it

the January numbers are hot we get it

like how many more times are we gonna

play the same movie over and over again

it's like watching the Titanic on repeat

and being sad that people are dying it's

literally what these reports are it's

over and over and over again for January

it's the same crap we get it January was

hot I know it was hot for winter as well

next month's data is going to be very

important we want to break this trend

because the last thing we want is all of

these reports next month to be

confirming this trend that's what

matters at this point I don't think this

changes anything in terms of the FED

going for 25 BP next meeting I don't

think there's any way they go for 50. uh

I I'll I'll you know I don't know I'll

I'll make a we'll have to make some kind

of bet on that because I feel so

confident on that but uh sure you know

like if this stuff is a trend it's bad

if it's not a trend it's a buy the dip

opportunity which I still believe that

we want to pay attention to what the

market does today because even if it's

super red at open if it recovers towards

the end of the day

the more the institutions and they could

be wrong too institutions are wrong all

the time institutions could be yelling

at you going

especially if that boost happens towards

the end of the day remember that most

ETFs do their transacting at the end of

the day so if you get well that could

also be representative of some

retail info since rep ETFs or an

institution but they get both retail and

institutional Investments right but

often if you see big inflows at the end

of the day or big kind of moves up or

down at the end of the day it's usually

institutions pulling the trigger so they

come up with sort of their strategy uh

for for the opening belt and then the

closing bell so you usually get the most

volume at those times because of the

institutional strategies going in kind

of interesting kind of fascinating play

the by the dip video well let's see what

happens throughout the day see but

remember you know like Alex Courier says

disinflation is transitory poor jpal

this is just a reiteration of the same

crap from January right like this is

this is not a trend uh QT yeah look

Steve's talking about QT you know

yes the Federal Reserve is

quantitatively tightening right now it's

similar to what we saw in 2018 and 19 uh

in terms of the runoff uh the

contraction of the money supply the

contraction of the money supply from an

Austrian economics point of view could

actually be providing us all of the

evidence we need to suggest that

inflation will end up being transitory

uh but uh yeah I mean that's that's part

what nobody really knows how

quantitative tightening is really going

to affect the broader Market nobody

really knows and I think that's why the

FED is going as slow as they are on that

they don't want to break anything so

we'll see a little really interesting uh

but yeah it'll be fascinating to watch

the institutional reaction today watch

how the market closes today and

obviously 10-year treasury yields still

holding on to that 3.94 we saw a pump

when uh in real estate when treasury

yields fell to 3.3 percent because

people were under the impression that

this is it this is the bottom I'm like

not so fast we'll see Bottom's not in

yet for real estate in my opinion so you

know I I don't ever want to come across

as like I'm only a bull like I'm

definitely bearish on certain parts of

this economy but anyway uh we'll see

what the next data sets show for but in

terms of PC and am I really like oh my

gosh this changes everything

no this is just like again it's Titanic

all over again like I saw this movie I

saw this movie on jobs report I saw this

on the PPI report I saw this on the CPI

report why am I shocked that PC came in

hot it's like the last indicator of the

month it's boring it's like thank you