Buckle Up: The Frauds are Back [Fed Warning]

well you better buckle up for tomorrow

but before we go into tomorrow I want to

talk about yet another set of deception

except this time it's from Larry Summers

the guy who's always on TV Harvard

professor and this is just disingenuous

and in my opinion borderline fraudulent

to be saying this and it's fine to say

it this is obviously uh a true chart but

the implications are wrong without

proper context so that's what I'm here

for he says this picture should be

sobering to anyone convinced that we

have reattain price stability and what

he's doing is he's implying that because

the Blue Line went up and the Orange

Line went up the Orange Line being today

the Blue Line being the 1970s then the

Blue Line paused for a bit and then went

right back up that we might be on the

same exact path so the question now is

are we on that same path or are there

some key differences of context to note

well ultimately the question is for you

to answer but I will give you the

context that the harer professor did not

and I don't think this is that

unreasonable to consider this context

because it is very important in the 70s

we had unanchored inflation expectations

which were driven by an oil price shock

and leaving the gold standard that had

never been done before the Trust In Fiat

did not exist now that it really exists

today but at least we've played the game

for the last 20 years and it's at least

somewhat functioned right whereas in the

7s uhoh we're going to wheelbarrows of

cash and that of course is with recent

oil price shocks in the 70s which we did

have at the beginning of the Russian

invasion but so far is gone we did have

multiple waves of inflation already

right original coid Delta Omicron war

and oil shock but a lot of those were

compressed around the same time that we

printed endless amounts of money and so

expectations are absent those shocks

again we should not see another Spike

Like Larry Summers is talking about as

long as inflation expectations remain

anchored but in the 70s we a

significantly key difference to today an

un anchoring of inflation expectations

so bad that when Paul vulker sat down

with his staff at the Federal Reserve

board in the early 80s they said folks

we have failed to control one thing

inflation

expectations now we need to put the big

boy pants on thanks to the second wave

of inflation and Crush those

expectations and once expectations were

crushed guess what the economy grew the

economy grew and we didn't have new

inflation until we had the shocks of

coid again we had no inflation declining

inflation all the way through the coid

pandemic so keep that in mind leaving

the gold standard oil price shocks

expectations we also had the removal of

price caps in the early '70s worth

noting that in the late' 60s we actually

had price caps on uh certain goods and

especially gas price caps and when you

remove those you create a lot more

inflation in a short period of time

rather than allowing prices to go up

that's because it's politically popular

to prevent prices from going up and

putting in price caps there were

actually politicians recently who wanted

to Institute price caps again but

finally we had smart people say no we

don't want to repeat the mistakes of

the' 70s that's why we're stuck with a

lot of the inflation that we have now

that's why the FED is dealing with it to

the extent obviously that they can now

this doesn't mean we're not going to go

in a recession it doesn't mean the yield

curve isn't inverted it doesn't mean

we're not going to have a stagnated

economy it just means that taking one

picture out of context once again is

stupid it's unfair it's designed to get

clicks on social media these people are

lying to you they're trying to evoke

emotion without giving you the

additional context I ALS I want to shout

out one of the commenters here Mark

Ferrar Mark Ferrar 12 also how about the

fact that we have some of the largest

structural deflationary Tailwinds coming

out of Technology over the next 10 years

electric vehicles continue to drive down

the total cost of car ownership AI in

general uh can 2 to 10x productivity in

the next 5 to 10 years across the

industry Robo taxis can reduce

Transportation cost by 70 to 80% let's

not even get Ed by talking about

humanoid robots it's all quite frankly

true in fact I talked about the Tesla

bot on my Twitter earlier but any who

point is even if things aren't as

deflationary as Mark here suggests those

are Tailwinds not headwinds the

investment that companies are making

today into artificial intelligence are

not inflationary headwinds they are

disinflationary

Tailwinds and what have we been seeing

and talking talking about over the last

few weeks not only what we talk about

with course members but what I talk

about on the channel think about Walmart

Target the employment agencies all of

the earnings calls we're looking at

Capital One American Express you name it

what are they all saying wow a lot less

inflation than we thought I mean we

don't think we're going into deflation

but wow the inflation's going away you

want to read that word for word look up

John Deere an industrial manufacturer

from AAG business this is good now that

is not to say we're all in bullish

everything's going to the Moon look at

uh better the spack today that just

plummeted

93% Spa basically goes public at $10

right plummets 93 uh% down to like a

buck uh it's up like 45% in after hours

but that doesn't bring you back to

halfway back right you're only at a buck

50 instead of $10 one of the reasons for

that by the way is a lot of the spa

shareholders redeemed their shares

before the

spack that's not going to make any sense

let me simplify it basically a lot of

people are like wait you spack people

are going to spack a mortgage company in

this

environment I'm going take my money out

of this deal and just slowly walk away

and so you're left with no liquidity so

as soon as you actually IPO and somebody

wants to sell stock just tanks that's

kind of what happened there anyway then

you've got Jackson Hole 7:05 tomorrow up

be live streaming it I'll be back I need

to fly back I'll be back 7:05 tomorrow

be in the studio we'll be covering

Jackson Hole what are we expecting at

Jackson Hole well obviously guidance

from jpow that's why the market sold

down today because people were nervous

about oh my gosh why's jpow going to say

tomorrow well we need jpow to start

recognizing some of the disinflationary

forces and if he just simply reiterates

look if the disinflationary forces we're

seeing now at businesses and jobs and

wages

continue then we're good then we don't

actually have to keep raising and we can

start planning Cuts that's all he has to

do and then it's conditional on what

actually happens he doesn't have to tell

us oh it's definitely happening just as

long as it continues you know if INF

inflation on anchors then we'll hike duh

but it hasn't been dis anchoring it's

been disinf lating for the past six to8

months well really since last summer but

more predominantly over the last 6 to8

months and what did they say in the last

minutes in the last minutes of the

Federal Reserve they suggested hey um we

actually think that the majority of the

disinflation is still ahead of us for

the next six months rather than the

first six months so we'll see what JP

says we'll see what he says about Wages

that's going to be a big deal as well

how much uh of uh job loss is he willing

to accept uh hopefully very little to

cause as little economic pain as

possible to get rid of this disinf or

the to get rid of the inflation that

we're facing uh we'll obviously be

talking about this in the course member

live stream tomorrow I have set up uh

Myself by the way in such a way that I

have a little bit of extra cash LA

because I think there'll be some

volatility but only a little bit like

probably somewhere around like 8% or so

so that way I can uh buy them dips on

some of the companies that I think have

big PEB cuz you nobody knows big PEB

better than I do nobody we got to get

that pricing power that's what we want

that's why my plane says 69 for PP okay

big BP is what we want lots of pricing

power those are the companies we want to

be making investments in now I'm about

to get run over so instead I'm going to

end the video check out the courses I'm

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easy mode while making YouTube videos

thanks so much folks we'll see you in

the next one goodbye