uh okay powell, we have a problem

hey everyone me Kevin here let's be blunt the Bears keep delaying their

recession prediction because they're waiting for Jerome Powell's pressure on

the economy to actually pressure earnings leading to an earnings

recession and potentially even GDP Crush that's what he what is keeping Bears

relatively unallocated to stocks and even though we've seen sentiment shift

in Tech we haven't actually seen investor positioning from cash and from

underweight positions go into Tech and mass yet so really this rally that we've

had over the last three four months keep it quiet okay it is barely a sign that

investors have positioned from cash to Tina remember the days of Tina that's

when you wanted to sell when everybody in November of 2021 is like there is no

alternative all in Old stocks but right now there is an alternative

you're getting paid five percent on two of your treasuries and that hasn't

really changed since November which is remarkable there's been some periods

where it's gone down a little bit but surprisingly yields are saying hot

they're also surprisingly not crushing the economy we look at the massive beat

this morning that we had from durables and durables X Autos the massive beats

and capital goods orderings suggesting the economy is actually

it's just fine so what is the leftover pair argument and what is this new data

that the Federal Reserve is probably using in addition to five year Break

Even inflation expectations to determine to what extent they should act well

first we know the Federal Reserve wants the five-year Break Even stable and

trending down it somewhat stopped trending down in the last three months

which isn't great we've also seen as of a couple weeks ago Jerome Powell sound a

bit more hawkish especially in conjunction with this summary of

economic projections sign they're either frustrated by the

stagnating of inflation expectations or what I'm about to show you

some economic research directly from the Federal Reserve board

or a combination of both of these I expect it's likely to be a combination

of both five-year Break Even inflation expectations not trending down as much

as they should right now they're stagnating a bit and also what this

particular economic research shows us now it starts off really boring and you

think oh my gosh Kevin why are we reading this let me just get to the

juicy stuff for you and save you lots of time because that's what I like to do

with course members as well remember coupon expires a Friday that is after

pce morning big inflation catalyst so make sure you mark that on your calendar

and then we'll have a big lecture release set this weekend refreshing a

lot of uh content with new content and adding a lot of value to the stocks and

psychology the zero uh to millionaire real estate investing even more value to

the AI and productivity course bring in a lot so stay tuned and buckle up for

that so what do we have here Supply and oh yeah and if you lock in

your price now you get the best price going forward price match guaranteed uh

that's a way of rewarding existing course members so what do we have here

supply and demand driven contributions you're over your headline PC let's go to

core here it is core year over year so when we're comparing headline year over

year this isn't going month to month but looking at this all the way through

April of 2023 we have a problem yes Houston we have a problem the problem is

demand driven inflation is actually starting to slightly Trend up let me

show you that by taking a screenshot of it and then we can play with an

annotation here ready for this watch this so let's use a nice red juicy thick

color here and look at this trend

on demand driven inflation this is not good and this has been consistent since

about April of 2021 so for about the last uh two years we have seen demand

Drive inflation what's remarkable is the Federal Reserve started raising rates

here and they raised rates 500 basis points

they've not changed this trajectory of demand-driven inflation now what's scary

is demand-driven inflation alone is already at the two percent Target and

that's just for core that doesn't even leave any room

for non-core like your energy inflation that's not good so then you have

inflation driven by either Supply or demand items and then you have Supply

driven inflation now the neat thing about this tool is if we zoom in we can

actually see here how much is contributed by Supply we can

see it really depends on where you're looking at it Supply chains really were

contributing around 2.3 2.5 2.6 percent here at the beginning of 2022

and that's declined and stabilized at about one five but once again it's not

compressing it's really not compressing it's staying stable one six one four

seven one five one five one one five four while at the same time this demand

driven inflation is somewhat on a minor uptrend if we zoom into just here I

would call it a minor minor uptrend uh hopefully it's flat the problem is if we

end up flat what do we end up with with Total Core inflation well about 4.6 4.7

percent it's not enough that is the Fed isn't really hitting what they're trying

to hit yet I mean in theory after raising rates 500 basis points demand

should be slowing in terms of its contribution to

inflation but it's rising it's doing the opposite now we're seeing the overall

inflation rate fall and a lot of that is because of year over year base effects

problem is we're still going and so while the numbers are coming down right

we're coming off like nine percent right we're going down to under five percent

that's fantastic but the problem is what happens when in the second half we

potentially get stuck at these levels well what we need is an economy that's

resilient so far we're getting an economy that's resilient people are

still able to get jobs anytime there's a layoff those people seem to manage to

get jobs again job openings aren't really plummeting suggesting there is

still some redistributing of jobs that's happening and again you had changes in

the participation rate could end up changing the unemployment rate but even

if that takes up slightly and the unemployment actual nominal level of

people unemployed doesn't change much then it doesn't matter so much and the

economy in many regards is showing signs of strength now I'm not suggesting this

is like a booming economy I get those comments where people are like oh Kevin

you think it's absolutely booming no I I think we've had our sort of slow down in

2022 and we're probably you know doing this sort of you slow u-shape recovery

this the data we're getting is consistent with an economy that has

slowed down but that is already starting to re-accelerate so the leftover bear

argument then is not actually recession and earnings recession it's actually

okay well what's j-pal going to do next is j-powell actually going to have to

rug pull us or are they finally going to accept fate

that's what I hope that they will do that is the flexible inflation Target

policy of saying look if the economy is doing well and we're at 500 basis points

of rates five percent or 5.25 or whatever they end up at we're just going

to kind of chill out here until inflation actually comes down it

will just patiently wait remember how long it took inflation to go away in

1982 probably not but really to get to two percent it took about 40 years okay

maybe not totally four years it was more like 20 years but uh we've just had the

highest inflation in 40 years that's because we never hit higher levels but

realistically it took about 20 years to get down to about two percent and you've

had fluctuations around the number after about 20 years that's a long time that

that's other that's like a savings and loan crisis in that to help bring you

down that's a uh 2000.com bubble in that to bring inflation down to two percent

so it did take quite a bit of time which is which would definitely throw cold

water on the idea that inflation ends up proving to be transitory certainly if

you look at that chart I just showed you that Federal Reserve pce data it doesn't

look like it's going to be transitory the question then is just is the Fed

going to remain patient now Jerome Powell speaks tomorrow so we'll see how

aggressive he gets I think the FED can afford to remain patient as long as

inflation break evens are low but once those disancher it's a problem so

they're really stuck between a rock and a hard place but personally what what do

I think about all this well personally I think that as long as the economy is

recovering and at least doing relatively strong compared to a recession that is

not indicating that we're definitely in the midst of a recession

then I'm okay investing in great companies and looking for Great Value

looking for price to earnings growth levels of under ideally two to really

add I prefer around 1.6 if I can get a company with a peg at around one I'm

interested you have to be careful sometimes there's a red flag or a sign

that the industry is really suffering look at Canadian Solar super low Peg I

don't have any exposure to it but that whole energy sector is just getting

smashed and faces like a 1.2 uh PayPal is around a one ubiqua it's under one

ubiquities under one these These are companies with potential growth ahead of

them had great valuations so anyway all of that aside

my thinking is as long as we keep getting data that says we're going to

keep delaying the recession I'm willing to be patient on these rates now

eventually that that is going to crush whom

well mostly commercial real estate in the refinancing disasters coming up but

beyond that is it really so terrible that companies have a slightly higher

interest expense not if they're still able to make more money and their

margins are growing they just absorb the higher interest expense and you keep

going so kind of fascinating some folks are calling the recession canceled of

course the inverted yield curve would highly disagree with that but today was

a good news day and I think that's why the stock market went green it's finally

actually starting to price in lower odds of a recession this it's not by a lot

but we actually saw the odds of recession from uh the Bloomberg tracker

the consensus tracker go from 65 to 64. and it's always kind of been trending up

and the fact that it's now trending down is a pretty neat inflection point I know

it's like super minor it probably doesn't make a difference but it's

because everybody keeps delaying their recession forecast because every time

they would say the recession's coming we're looking around going what we're

sashing again that's not to say prices aren't

High and the economy isn't a weakened certainly is without a doubt is but uh

these are some of the considerations I'm looking at and when Jerome Powell speaks

tomorrow I'll be covering it live uh his uh discussion with Sarah Eisen begins

first thing in the morning after the bell and uh I'm gonna be looking for

specifically what is stronghold's take on patience they have available for

getting inflation down because otherwise the economy could just keep going as

long as j-pow doesn't ruin it the good news is 2022 you know starting in March

and a year out we went up about 500 bips now we're talking about maybe another 25

or 50 like marginally who cares that's like five or ten percent of the pain

that we got previously big deal anyway thanks so much for watching check out

the programs on building your wealth link down below we'll see you in the

next one goodbye now I want you to know this when it comes to AI time is what's

going to make you money and if you can prove that value to an employer you'll

always be able to be employed so this is another way of making sure that you

don't get replaced but

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