Holy Crap | This Inflation Report is VERY Bad (Biden vs Trump)

holy smokes not even life insurance

prevented the disaster that we just had

in CP I mean CPI this is bad we

basically just fully unpriced the March

rate cut uh the odds of a May rate cut

have been reduced to about a third we've

got now maybe a full rate cut set for

July uh and we'll go through what

happened with the numbers but what I

think is most important here is I think

the Federal Reserve is gearing up uh for

we got to get past January which as

Goldman Sachs says which I believe as

well could be your January kind of price

hike a lot of personal services hiking

prices in January uh funeral services

accounting services financial services

veterinary services medical care servic

I mean across the board we saw Services

really move up in January which was

unfortunate because you know one of the

things JP Morgan warned us about was

that if we got a read of somewhere

around. 3 to4 we would really be

concerned about potentially this core re

acceleration of inflation and that's

exactly what we got we were looking for

277 on CPI core month over month that's

what we were looking for we ended up

getting

3.9 well I shouldn't put it as 3.9 it

should actually be written as uh. 39

there you go but the point is that's

quite hot if you annualize that figure

just uh sort of on the monthly basis

which which is you multiply it by 12 you

don't go exponential you're at core

inflation of

4.68% but what's worse was supercore

supercore came in so hot and is to some

extent reaccelerating that some folks

are wondering oh no is this exactly what

the Federal Reserve fears remember I

throw this all over at ec.com check it

out ec.com but what do you have here and

what is this going to mean for the

election as well we'll touch on this but

look at this this is a a chart of super

core inflation the Federal Reserve wants

to see inflation come down meaningfully

we really want to see super core

inflation probably settling somewhere

around uh higher in the twos that way

you can get Goods disinflation drag you

down but what you actually have here is

a re

acceleration of uh super core we have

not seen a super core this super bad in

two years and I'll tell you there's

almost zero doubt that today whenever

Donald Trump is awake we're going to be

getting some Trump truth social posts

about how bad inflation is uh and how

it's essentially getting worse and at

the moment Donald Trump is going to have

uh a leg up in using that as a weapon

he's going to use that as a political

weapon because of course why would you

not that's what we're dealing with right

now so the question then is what why is

is it possible that this is just a

January number we have to balance that

out first of all we get seasonal

adjustments in January so if this spike

is just a January Spike we actually have

to have more of a January Spike than we

had in Prior months uh or or I should

say prior years right because if every

January you have a spike well that gets

seasonally adjusted away if this January

which was a warmer

January you get a larger price hike

above your seasonal adjustments you end

up getting this kind of reacceleration

we also as we went through the actual

CPI release we wanted to see hey you

know were these numbers hot because of

potentially weak seasonal adjustments uh

and as we were going through the actual

item Page by Page over here we compared

the red highlights to the orange

highlights the orange or the seasonal

the non-seasonally adjusted numbers the

red or the seasonally adjusted numbers

the numbers were not that different

which is a sign that no this this was

not an issue of adjustments this was

just an issue of broad-based inflation

which is not good again it could be hot

January uh people spending money in

January still more than expected uh but

it is going to be a political Hot Potato

that Joe Biden has to deal with and I'll

tell you after kamla Harris yesterday

suggests hey make sure you remember the

warrants have been called for house hack

at house hack.com no that's not what she

said she KLA Harris yest said I'm ready

and fit to serve a lot of people are

scratching their head going wait this

after the doj report on on a decline for

Joe B wait is this the plan are we

voting for KLA Harris as president

anyway sorry that that sort of a little

side note uh but but basically CPI is a

very important measure which uh folks

will look at for when it comes to voting

because inflation really frustrates

people we even had grocery pric take up

again in January now that does come at

the same time as GDP is sitting at 3.4%

on its current estimate for q1 the first

quarter the first three months of the

year this is great this is a great sign

that the economy is doing well and

moving strongly but prices are still

moving up at an unacceptable pace and

it's a broad-based spread too uh you can

see some more of the details that we've

thrown over at ec.com but it's it's a

broad-based spread it's various

different categories so the question now

is what does this mean for the Federal

Reserve a lot of folks come here to see

my opinion on the Federal Reserve and

I'll tell you I think here's exactly

what the FED is lining up for okay look

March 20th only gives you the January

and February CPI reports that's not

enough if January is going to be a

one-off and hot you're really going to

need three to four CPI reports to argue

that January is hot and everything else

is not that's the only way you can argue

that so may is going to give you January

February and March but that only gives

you two to balance out one hot probably

not enough you're probably leaning

towards SE uh June that way you can get

the summary of economic projections in

March and June 12th is a really special

day because you get the fomc meeting so

the FED meeting where they make their

interest rate decision you're going to

get the summary of economic Pro c s and

you're going to get CPI the morning of

the meeting so the meeting takes place

at 11:00 a.m. California time inflation

is going to come out at 5:30 a.m.

California time so uh you're you know

whatever 4 and a half hours or whatever

beforehand you're going to end up

getting or five and a half hours

whatever you're going to end up getting

the inflation report that morning now

some folks say maybe we'll be looking at

the July meeting right now July is fully

priced for a rate cut June's not June's

only at about

77% but this would make sense because in

June you'll have February March April

and May CPI reports those four reports

could offset a hot January however if

all of those four reports are hot and

they actually reiterate January you're

staying at these higher rates now City

Bank actually thinks there's a chance

the FED might have to start talking

about interest rate hikes again which

would be wild but I suppose it's

possible if you end up getting multiple

CPI reports that reiterate a potential

acceleration again in inflation now

what's bizarre is we're not actually

seeing this in inflation expectations

inflation expectations coming in

substantially lower uh over the last

year and not only are inflation

expectations coming in substantially

lower but when you look at uh earnings

calls of what we have with uh with with

companies raising prices uh throughout

our actual economy and what they're

forecasting you're not actually getting

uh forecasts for price increases that

would suggest growing or or Rising

inflation uh here are the year ahead

inflation expectations you can see these

here one year ahead is this light blue

number three years ahead is the uh

darker blue number you've got stable

fiveyear inflation expectations stable

10year inflation expectations which we

could look at as either the 10-year

Break Even or you could go the fiveyear

forward that's just a fancy way of

saying what's inflation five years out

and then the next 5 Years From that

point all of these numbers are very

stable very anchored which suggest when

you combine earnings calls and inflation

expectations you suggest that the

January number could be a one-off hot

figure it has been a wet winter but it's

been a lot warmer we haven't had the

snow this year like we've had last year

uh or quite frankly many years before

that like if anybody out there is a

skier you're probably like man this has

been a warm season uh and it's not great

you know the snow hasn't been that great

so it's a little bit of a bummer uh but

what does that contribute to more

service spending people getting their

tax returns done earlier people getting

uh you know whatever kind of services

they need done earlier in the year than

usual and that can lead to pricing

pressures Consolidated into January now

that's just an idea that idea does align

with what Goldman Sachs believes Goldman

Sachs actually pulled off the estimate

the best they thought that inflation

would come in at 3.8% it came in at 3.9

for that core figure so they were

closest and as you could see Nick T

suggested here uh well 38 again I I

always kind of move the decimal there

when I say this but anyway they had a

quote we expect a temporary boost to

core CPI from start of year price

increases which we expect to be most

pronounced in prescription drugs car

insurance tobacco Medical Care Services

we did see all of that but what you also

have to remember is housing disinflation

still isn't really coming the way we

expected it would we've been expecting

rents to come down more housing

disinflation instead we just had housing

contribute 67% to month over Monon

inflation a 6% from the 4% we had 2

months in a row uh so you're now seeing

those 3mon and 6month numbers move up

which I WR here did the FED know I kind

of think the Federal Reserve did know

why do I think that well because Dr

Powell refused to talk about the three

and six-month inflation figures in the

last fed conference until he was finally

backed into a corner to talk about it

and he's only interested in that 12mon

figure which I think that's because he

probably knew January was going to come

in hot now it is a benefit that Jerome

pal suggested hey the numbers don't have

to be as good as they have been they

just have to keep trending down on the

12 month and that's probably why they're

going to wait until June for those first

Cuts so this is just going to take some

more patience again we you know with a

super core coming in at 085 which

annualize out to 10.2% which is insane

nobody sees an an additional 10.2%

inflation right now on an annual rate

right it shows you how extreme January

is it really shows you how bad this

report was but I'll tell you who's it

ammunition ammunition for Donald Trump

it's ammunition for Donald Trump and uh

this is it it'll be accurate ammunition

for him you you cannot tell Donald he's

going to be wrong by using this against

Biden for the next uh you know

essentially month or potentially even

multiple months thereafter because it's

going to push our averages up that

stickiness that is what the FED is most

concerned about the FED is concerned

about the shelf right here here that

this number is not going to continue to

Trend down it doesn't even have to

plummet like it did here it just needs

to Trend down to like 2 and a half%

basically to be around this level over

here pre- pandemic and any of this

shelving bad really bad so uh anyway

that gives us a breakdown on CPI it's it

was a bad morning it's a bad report it's

not good there's a chance it's a one-off

but that could be hopium either way

we're probably and realistically now

looking at June or July so in case

you're wondering why a lot of stocks are

red today there you go oil up to 825 on

Brent gold down Bitcoin dropped a little

bit off its 50k rough numbers risk

assets selling off today 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 paffrath there financial

analyst and YouTuber meet Kevin always

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