Hey folks, in this video we're going to talk a little bit about inflation, higher inflation that we're seeing and some of the latest inflection points in inflation and inflation expectations. I do think what you're going to see here is potentially a little bit of a lead into what we might expect to see wednesday and, as a result, it's possible that we're going to see a little bit of a bump in crypto pricing we'll see, i did Increase my position in ethereum just yesterday, uh when we were sitting around the high 24 or sorry 34 level in ethereum, and i'm not opposed to adding a little bit more with cash that i just have on the sidelines sitting in my coinbase account. As as we see some of these catalysts draw near, but of course wednesday's gon na be a big day, so anyway, let's get into some of the sort of prefaces that we're seeing to what's coming wednesday right now. Take a look at this, so we've been thinking that used car prices would inflict downwards and and they have, but they started coming up again now they didn't originally go back to their may pricing.

When we last looked at this manheim vehicle index, which is an index that tracks used car prices as of uh last week, is when we last looked at this index, and we thought okay, all right. So there's an inflection back to the upside in the manheim used vehicle index, but that's okay! You know, so it came back up a little bit. It's not going to keep going. Is it well look at the look at the chart right now? So here's your may.

Pricing, this was sort of that inflection point to the downside in the shelf we hit the used vehicle index, as of today is now actually a chunk above where we were in may in may. We had a reading of two of three coming in now. At almost 205, which is incredible because we were expecting this to rotate to the downside now right now, that is only a percent, but the chart gives us an idea of of potentially this inflection point again in the market, where we do see uh prices that that Came down temporarily as expected, but then, as not expected, uh are or skyrocketing back up and that's not good. Now, let's take a look at lumber just as another example here, ta yeah take a look at this wow uh, the lbs now uh back over 700.

Almost back to 725, this is lumber if we zoom out to the sixth month, we'll see this massive plummet in lumber prices, but it's really not until when you go out to a year, or even the five year chart that you see this incredible spike here with The pandemic yeah the pandemic uh, i would say, let's see, recession, let's see if we can find it so recession's right here where my mouse is where we went from lumber prices of about 446 down to about 300. lumber prices, then proceeded to skyrocket uh excessively. To about almost 1600 - and that has substantially fallen since in the last six months here but which was just drop, was expected, the drop is definitely expected. However, what again is not expected is the fact that look at the last month here folks, we've been straight up in lumber prices again, and this is the danger that we're facing right now is we're facing this.

This scenario, where golly we thought prices were going to go down, they started going down. Everything started suggesting that uh central bankers were right, inflation was temporary, uh everything was going to be transitory uh. The re there were going to be two big sort of bouts of inflation. There was going to be one when we compared base effects that was going to be uh april, may june, sort of data that came in and that's comparing to the whole of the prior year to see a year-over-year boost in numbers.

And then the second was going to be the reopening that we would see a surge in spending at reopening, but then we would see a subsequent slowdown and we actually did. We saw a surge in spending this summer and then, as we started, seeing delta come back. We actually saw a slowdown in consumer mobility in in spending consumer spending, consumer confidence. Everything really rotated back to the dark side around the end of august uh, how uh the end of july to the end of august.

However, as delta has vastly dissipated, we're again seeing somewhat of a resurgence and now we're seeing flight cancellations, uh supply chains stressed more than ever before things aren't getting better and some in many cases, they're getting worse shipping time frames and freight time frames are worse than Expected you look at the port, of los angeles, usually has one docked: uh freight ship now has uh somewhere around 80, docked freight chips waiting to be unloaded. All of these things are driving prices up and again we're seeing this inflection here in not just lumber, but in the used vehicle index aluminums, also at an all-time high right. Now it's somewhat unbelievable how persistent the inflationary powers have been and uh earnings are going to reflect pain because of this, and i think this is why you are starting to get some more downgrades as well before we head into the earnings cycle, as uh institutions. Try to sort of call the uh the inflection to the downside, so they can show that oh we're right, but anyway uh so uh yeah, it's it's! It's gon na be a big issue that we're gon na have to pay attention to, or the inflationary fears.

Now i will say, the the markets are surprisingly resilient in how they're pricing inflation. If we go to the 10-year treasury bond and we look for rates, we can oftentimes see this as a little bit of a forecast of what the market thinks. Inflation is going to do and what was very interesting was we spent some time kind of stuck at about 150 to 155 and there were a lot of forecasters suggesting okay, we're not going to go back to that 172 or whatever that we had previously uh we're. Just going to level out by one five to one five, five, and that always seems like it's an argument of forecasters is that, oh, if things are going wrong, don't worry it's it's uh! It's just leveling out! It's just temporary yeah! Well, now we're at 1.61.

Let's see what the 10-year break even is doing 10-year break even treasury rate, so 10-year break even nice way to to also look at what's happening in terms of inflation expectations and basically, as the sin flex up, inflation expectations are going up. So take a look at this right here. You've been pretty flat here on the bond market uh really from april through about september, you've been relatively flat, with the exception of a little pop here in may and, of course, we're going into the beginning of the year. We saw a nice rise here in the 10-year break-even rates, we're finally starting to see an inflection up again in in how this is being priced, and when you see it's a little easier to see it here.

You can kind of see this little trajectory here since about september 22nd, where the 10-year break even's moving up again and if i zoom in a little bit more recently here since the 22nd, you could really see this nice move to the upside here and again. This is the and here's may and again. This is the 10 year break, even which tends to be a little bit of a forecast for what the market believes inflation is going to do, and we are getting a very similar may ask style push which it's worth, noting that in may we had some pain, Uh in in the markets, some stocks dramatically oversold uh, for example, take uh. Take a company like end phase that in may sold down to as low as about 108 120 as opposed to to really trading mostly sideways around.

That 150 is where we've kind of been and uh, and - and this was actually such a low sell-off that you had uh the company itself buying a chairs back, as i saw it as uh relatively oversold, so, which ended up, of course, being a wise play. But uh, look, it's it's everything, and, and now folks are even suggesting that biden's vaccine mandates for companies with over 100 employees are going to lead to even more worker shortages, more labor shortages, a lower labor force, participation rate and more service based price inflation, which one Of the big fears for inflation is service based pricing, so we'll have to keep an eye on that as well. Service based pricing and rents are going to be two of major major factors that uh that lead inflation to potentially inflect up, plus, of course, uh. Some of our ogs, like car prices, which we've seen car prices, now move up.

Here's actually a comment we'll throw it up on screen here. This is an interesting comment. It's sort of uh piggybacks off of my talk about a lot of folks getting their flights cancelled. This weekend southwest having about 70 uh 20 sorry 27 of their flights, canceled on on this sick out movement, where people are calling in sick in protest to vaccine mandates.

Here's a comment both of my parents work for the airlines. I think it's funny. If people in the industry say the airlines, american delta and regional air traffic controllers are planning more sick outs before they're laid off for no vaccines. Half of pilots are ex-military, something to think about yeah.

That's incredible! So uh, let's see here, here's uh! So, for example, some other comments here in the chat. I would quit my job before i ceded to a vaccine mandate.