Hey everyone me kevin here, so obviously, inflation is like all the rage to talk about right. Now, everybody is talking about inflation and in this video i want to look at something very particular when it comes to inflation. What spawned this was actually me, taking an export of all of the inflation that we've been seeing and then comparing that by sorting the year-over-year inflation with everything, that's been going up sorted by highest inflation to lowest inflation, and this is what i got right here. This is the chart and you can see, we've got gasoline, we got fuel, we got motor oil, we got cars and trucks and kerosene and energy a lot of things that we kind of expect to go back down over time.

Right like at commodities, especially energy commodities, tend to go down over time. Supply shortages and cars. New and used should subside over time, but i mean look at some of these things. They're up anywhere between 30 percent uh year over year for used cars and trucks to uh over 58 for motor oil.

It's insane, but then i looked at the rest of this chart and i'm like man, there's something else going on here. Look at this! What is this uncooked beef roast 26? Then we have uncooked beef, steaks, 24, uncooked beef and veal, 24, pork, roasts steaks and ribs 22.9. We got lodging thrown in there away from home, but that could be coming out of the midst of the pandemic, where everybody lowered prices just to fill vacancies. So i don't really expect that to be much of an issue there, but look at that bacon.

Breakfast sausages. Beef, veal, bacon, related products, pork meats, and so it got me thinking a little bit what what what is happening with meat - and i am meat kevin. So i figured let's talk about meat and i did a little bit of research into meat and together we're kind of looking at this like wait a minute, maybe there's something sus going on, there's something sus going on with meat. Is there potentially also something sus going on elsewhere, and what does that tell us about inflation? Let's talk about that in this video quick note, this video is brought to you by the programs on building your wealth link down below.

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Okay, folks, let's look at this when we started researching meat price inflation. The first thing that we learned is that there were a lot of things that potentially hit supply and demand for meat, and that was during covid production was shut down at many plants. Farmers were left with nowhere to send their beef, so they had to ultimately cull cattle and other livestock, which means killing them without actually being able to use the mead and farmers skilled back their production at the time. In fact, production for pork fell 6.9, and so it makes sense if production goes down, then prices move higher right, but i mean 6.7 percent doesn't really explain.

24 right, like production down. Six percent price is up twenty percent that that didn't didn't really jive with us. We're like okay well. Well, maybe there are other excuses.

Okay, there were storms that led to production shutdowns. There are, you know, fud uh fears, like worries about proposition 12 in california, which california is not only the largest state in the country. It is also the largest pork consumer in the entire country and california. Has this massive proposition called an animal welfare law that, starting in january 2022, pork availability and pork prices might be dramatically affected in california, because individual cattles and eggs and hen and pigs and chicken and all this stuff they have to have enough room to stand and Turn around so it doesn't just affect pork, but a lot of folks are pointing to pork prices potentially going up because of this fear around california's proposition 12..

And so then, then i got to think myself. Okay but like again fear over california's proposition and maybe temporary production shutdowns. For for me that that doesn't make much sense. There has to be something else going on, and so then we found something.

Listen to this a friday white house economics team report, looking at the financial statements of some of the biggest meat processing companies in the country that have somewhere between a 55 to 85 percent market share of all meat in the country show that gross profits across all Of these companies have grown 120 percent and their net incomes have gone up by 500 percent. That's substantial! Now! I didn't. I didn't really believe that these net incomes and profits have all gone up this high. So i wanted to do a little bit of a trend myself and understand.

Okay, because you know you could kind of play the math game a little bit and go well we're comparing that quarter backward or whatever. So i wanted to get a little bit of a longer term trend. So i looked at tyson foods financials and i looked at their net margin so how much they're actually bringing to the bottom line and when i applied a moving average to the bar chart of their net income. Take a look at this folks.

Their net margin in the last three years has never been higher and it is trending up. The line here is the moving average of a trend up of net income at tyson foods, one of the nation's biggest food uh and meat producers. That's a big deal. Take a look at this: this is the simple linear, uh trend line, so to speak, and this is where software tells us the trend line.

Is you just apply that and uh? The spreads spreadsheets are great tool master using them, but anyway this was really simple. I mean i spit this together in like three minutes these little charts here, because you just take the data plot. It apply the trend line and boom. It's like.

Oh, my gosh net profits are going up, but wait a minute. They're blaming potential issues in california, they're blaming production, shutdowns, but really what's happening. Is these meat companies are making more money hand over fist and then they're suggesting that? Well, you know uh, it's biden's fault. Uh or it's jerome's fault, yeah prices are going up it sucks.

Doesn't it wait a minute that really got me thinking to myself if prices for meat are leading uh companies to be able to raise prices 20. 25? Isn't it also possible that companies like apple nvidia and uh, basically any company - end phase etsy amazon, you name it. Anyone selling anything, someone selling courses online, isn't it possible with a coupon code link down below? Is it possible that, in theory, anybody could just raise their prices under the guise of inflation, because we're seeing inflation, which is kind of us comparing back to the whole of 2020? But then also all of these supply chain constraints? Right that, because we have inflation, we're seeing companies raise prices simply to fatten their profit margins and uh that the inflation we're seeing right now reported in cpi is really just sort of this potential. Lingering effect of companies going hey uh, we can raise prices, we can raise prices, so we are, and now that's not to say that there isn't actually inflation happening.

There is, but when you see production shortages of like six to seven percent and maybe prop 12 in california, a big deal and some of these things that might affect the pricing of meat by 10, 12 13. But all of a sudden meat is actually up twice. As much and profit margins are skyrocketing at the meat companies, you can't help but wonder if maybe some of this inflation is really just an opportunity for companies to take advantage of more profit and building up higher profit margins. Passing along more of the cost to consumers than they're, actually incurring thanks to labor or production shortages and all of a sudden.

What you end up with is a company like tyson meat, which has you know forward compounded annual growth. That in some cases, is quite frankly negative, but the growth rate is is not that phenomenal for them. I mean here take a look at this. This is barclays forward estimate.

Their revenue is expected to grow at 4.6 on average over the next four years, but their net income is actually expected to shrink 4.1 percent over the next uh four years. So you start looking at these numbers like wait. A minute. Are these companies just taking advantage of short-term inflationary talk to raise prices, increase their margins insulate themselves in this crazy market and that we can actually see margin compression over a lot of these companies that seem like they're doing really well over the next year to two Years and really the companies that we're actually going to want to invest in are probably companies that can sustain high margin.

That is what happens if all of a sudden, the tyson food margins start going back down. So this trend line these trend lines start rotating back down tyson foods valuation probably going to plummet. I mean right now: it's selling for 10 times 20 25 earnings, it's seen as a value play that has turned into a growth play, but if that growth goes away, maybe we could go back to five times 2025 earnings just feels low feels almost like a value Play but then again we're projecting out four years right, because if you compare to google, which is also selling for like a 10 to 12 times 2025 multiple, what would you rather have? Would you rather have google or tyson well, even if you have margin compression at google you're still going to be bringing a crap ton of money to the bottom line in excess of 20 to the bottom line? You have margin compression at tyson foods from 6.5 percent down to 2.7, again you're, barely making money, and so to me this is a little bit of a lesson that if companies are being opportunistic about inflation and they're raising prices, the ones whose stocks are probably going To get hurt, the most going forward are going to be companies that when this brief euphoria of inflation and the opportunity to kind of hide under the cloak of inflation, oh yeah, all the costs went up. Meanwhile, they're just raising the prices, even the costs haven't gone up, uh that that's going to go away and those companies are probably at the biggest risk of, in my opinion, failing uh - maybe i shouldn't say failing but having their valuations compress, the most in 2022, 2023 And on so, what are companies that probably can sustain margin or have that fat room? Well, in my opinion, companies that could sustain that margin would be high growth and high margin companies, like apple microsoft, google nvidia amd enfaze.

You know these are companies with a lot of room, a lot of margin. A lot of i mean look at visa, for example visa. They take over 40 cents to the bottom line of every dollar of income. They make that's really incredible.

So these are things to think about, and i think the two-folded bottom line here and i'll talk a little bit more about tyson as well in just a moment, but i think the two-folded bottom line here really is some companies that have done very, very well. In 2021 might not do so well going forward because they've kind of hidden under the cloak of inflation to prop their margins up artificially. That's one and number two. I think when we get compression again when prices start coming down again and things have to start getting competitive again, as inventory starts stacking up, whether it's in new cars or used cars or whatever or even meat, then we can see prices of some of these things Substantially collapse really hurting margins and then the companies that win are not going to be.

Companies like tyson now don't get me wrong. Tyson food has a an 84 price target for december of 2022 by j.p morgan. They believe there's going to be continued and extraordinary strength and industry beef spreads. They actually think that margins will improve in 2022 as processes become more efficient.

They believe that 90 plus percent of the tyson food staff is vaccinated and they believe that'll help keep production lines up and running, keeping that efficiency up the same time, you've got barclays, suggesting that they're expecting better revenues in chicken and other international segments, both growing at Double digits year over year, but they're worried about overall volume potentially leading to underperformance in 2022, but they also still have an 89 price target, so you've got institutions looking at this from the limelight of hey. Well, maybe the growth will keep going and that's what makes me nervous is when companies and people believe that oh well, the growth is just not going to stop it's just going to keep going, but if prices do all of a sudden start slowing down or the Growth of prices start slowing down because, all of a sudden we have much more inventory and there's much more competition between meats again again between cars or other products. I think it's companies like tyson that are going to get hit the hardest and, let's not try to try to bag on tyson. I'm just saying, if you're looking for something to invest in, especially in this dip that we're feeling right now, probably you still want to look for those high margin, companies and or high growth companies.

That doesn't mean you want to pay a crazy valuation. Hey take the discount where you can get it, but yeah margin is gon na, be critical for 2022, just my opinion and this tyson thing about them. Hiding the price increases uh. Basically, under the guise of inflation, while making a ton more money was an eye-opener to me that maybe some of this inflation is just being created as an opportunity anyway.

Thank you so much for watching this video check out the courses linked down below before that price goes up now. In fairness, i know that sounds kind of similar, but in fairness, the prices of my courses, even before we had inflation, always go up because i never want somebody who buys in to think they got a worse deal than somebody who bought two or three or four Weeks after them, especially since the content is perpetually expanding, so hopefully i can be seen as different from that, but i understand anyway, thank you so much check out those programs linked down below in that coupon code appreciate, y'all and we'll see in the next one. Thanks bye.