Hey there my name is Tom Welcome to this beautiful Thursday We have inflation data out for December Six and a half percent year of a year point, one percent negative month of a month, right on the expectations. The good news is that inflation is easing off for sure. The bad news that a lot of it is already priced in because it's right on the expectations so it doesn't seem like a big rally is coming. But although, who knows at this point.

so what does this actually mean? Well, the first thing I want to mention is the dissection of this thing. If you actually look deeper into it, it basically is driven by the energy prices a little bit the FED but mainly energy price is four and a half percent down on energy. That's a lot that pushes inflation down again and again month after month. Other indices are a little bit more problematic.

For example, food is up 0.3 so we're dependent on Energy prices remaining low. As I mentioned this before, inflation in the U.S is obviously dependent on the monetary policy for sure, but mainly mainly mainly. We really need energy prices to stay low and as long as that happens, we should be fine. Now, for the past six months, we've been pretty much flat on inflation.

We started with 9.1 and basically you've seen what happened. We're down to six and a half in about seven months and at this point I Want to bring up Michael Berry He actually tweeted and said, hey, be careful of complacency So what he's referring to. Basically, he's saying that by the second half of this year we're gonna have negative inflation and that's going to cause the FED to ease off and actually start stimulating. Now look, he's not completely off historically speaking.

Of course, because that already happened in the 70s. In 1974, we had 12 and a half percent inflation. The FED stepped in, raised interest all the way to 12. Within three years, we were down to five percent inflation.

Beautiful. But then the FED reduces rates from 12 to all the way to 5. And then within the next three years to 1977, we go back up to another 15. So inflation not only came back, it came back worse than before.

Exactly what Michael Berry is worrying about. Paul Walker steps in and he has to raise interest rates, not to 12 to 20. Now to deal with this, now this is just to show that what Michael Burr is saying already happened in the past. If you're complacent about it, if you basically say hey, we're good and about five percent where you think it's over, no, it's gonna come back and bite you in the butt way harder than before.

So be careful, go in the history books and study what I'm saying that literally happened. So Michael Berry may be wrong here, but he's not completely taking, you know, blowing smoke up your bum or anything like that. He's actually very serious about this. Very, very very important to stay on track to stay hawkish until we get to two percent inflation.

Not giving up at five or four. Now Look, obviously this means a lot for the real estate market. The real estate market is aching in. you know, in in ways that can imagine.

I Mean the private reach sector is going through massive redemptions. One thousand percent more redemptions in the past nine months than the year before We went by a thousand percent more redemptions Blackstone Cinema Reaction caps Starwood So the entire sector is aching. We have 35 percent less existing home sales this year than previous years, just seven percent less in November than October. So it's still a lot of pain ahead now.

I Want to tell you something about what this means for the stock market, because at the end of the day, that's what we're here for. So six and a half percent good or bad for the stock market? Well, look. the problem is that I Think that this six and a half percent in the policy of the FED which is basically remaining very very hawkish is leading us to an inevitable session. And I'm going to actually show you numbers to prove that.

Look, the problem is that at this point, you might say, well look, Tom Inflation is flat, right? and unemployment is at 3.7 It's very, very low, so the job market is strong. Inflation is getting flat. There's not going to be any recession, but let me tell you something. if you look under the hood, you see that there's absolutely no way that this is correct and I'll explain why.

Look, you have to look at two data points. The first data point is called the personal savings rate. It's how much Americans are saving out of their income, how much money goes into the savings account, and how much they're spending. Basically when they're done paying for everything for leisure, for taxes for everything now, just in March March 2022, the personal savings rate was 26.

Which means that Americans saved 26 percent of their income because they had nothing to spend it on. that was in March according to the latest data which you have, which is November which is eight months later. we still don't have December data, but just eight months later, that rate has dropped to 2.4 percent from 26 to 2.4 I Mean that's as fast as my grandpa drops after a New Year's Eve party. Another good, You know what I mean.

So 26 to 2.4 within eight months. That means that the savings of Americans have been evaporated in eight months. Americans have ate through all their savings. It's gone 2.4 It's the lowest we had since I Want to say November 2007 And you know what happened in 2008, right? So we're now basically we Tapped Out The Savings are gone.

So in the past eight months, we basically ate through our savings and that's the problem that unemployment Market at 3.7 is being held by consumption. People are still buying a lot of stuff and that what keeps the real estate sorry that employment Market basically low because people are still spending. But the problem is that now people are spending money that is coming out of their savings as I just showed you and go check me on this. So at this point the savings are out.

Now the next thing that people do when they tap out a savings, you know that you know they go to debt. That's the next thing. And actually looking at the data for the US you will see some really alarming numbers if you add up the Mortgage Debt the credit card debt, the car loans, the student loans. the US is currently at 16.5 trillion dollars of debt.

That's the highest in history. That's besides the point. But get this from 2008 to 2019. In 11 years, we went from 12 and a half to about 13 and a half.

So we increased by 1 trillion in 11 years before 2019. from 2019 until right now until Q3 2022. In fact, we don't have the latest data. So from 2019 to Q3 2022, we increased from about 14 and a half percent to six and a half percent.

So we have raised the U.S debt right now by double than what we did in the entire decade before in just two and a half years. Imagine that. So we're accumulating more debt than ever, faster than ever, while the FED is increasing rates right now at the fastest Pace in history. except Paul Walker first of the 88, First 94, first 99 faster than 2004, faster than 2015.

Obviously 4.25 Actually, if you look at what Paul Walker did Paul Walker raised nine percent in two years, and that's literally four and a half percent per year. Dropal just did 4.25 year. very close to Paul Walker day, so rates are going up as fast as we've seen since Volker and very close to Volcker, people are in debt more than ever. real estate market is coming down, personal savings rates have been evaporated.

there's no savings, people are in debt, real estate markets crashing. And that's basically means that the unemployment Market which is the last stronghold is about to pop. and when it pops, all the screws come loose, everything comes out, it seems like a cheap cushion. And what that happens, it's going to be very ugly.

So even though I'm very happy for six and a half percent inflation, we still have another six months of these rates. Which means that this thing is not going to hold up that much. And I'm very optimistic with six months, probably six months to a year. So at this point, I'm very bearish As far as where this economy is going, we're heading into recession.

but I am happy to see that progress is being made in right direction. But I just want to make sure you understand this. Not all of this is dependent on the fed. The FED can raise interest until the cows come home.

It doesn't matter if. Energy Prices Spike Again, we're pretty much screwed. so it's good and the FED is contributing. but it's mainly energy.

pricing is and we have to keep those low if we want to have a shot at, you know, bringing this home somehow without evaporating our entire economy. Thank you for watching as always. if you want to sign up for my platform stock, MVP it's at Stock Dash Mvp.com there's a 25 off. I'm gonna put the coupon code in the description right now.

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