Oh my gosh, Absolute disaster on PPI We're going to go through this, but we're also going to talk about what the Federal Reserve thinks about January Big deal. So if you're wondering why the market is acting the way it is for PPI This video might give you some insights. Just like the insights you can get in the programs on Building Your Wealth Link down below. 69 off Flash Sale expires Friday at 11 59 Pm on all of the programs on Building Your Wealth and the shadowing experience.

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But anyway, let's get into PBI Oh We Must talk PPI You ready for this? PPI Numbers coming in right now PBI Coming in Hot Hot hot. That's not good PPI Final Demand Coming in at Point Seven. Oh, that's not good. That's bad.

That's bad you've got PPI Expected was 0.4 You got 0.7 That is no bueno. Uh, then you got uh. core. uh X Food and Energy You've got 0.5 versus the 0.3 expected.

Also not good. Oh, this is terrible Ppix. food, energy, and trade. Oh dear Lord.

0.6 versus 0.2 expected. This is a terrible report. This is not good at all. Uh, holy smokes.

PPI A Final A Demand: six percent year over year as opposed to the 5.4 survey PPI Year over year. Uh, less food and energy you're looking at 5.4 versus 4.9 That's also beat uh or in other words, a worse number higher number PPI X food energy and Trade year-over-year coming in at four and a half versus four percent. Terrible numbers. Absolutely terrible numbers on the PPI That's not good.

You do have housing starts that just came out as well. Minus 4.5 percent. on housing starts, you were looking at 1.9 The last was also revised up substantially. Negative 1.4 was revised to negative 3.4 That shows you more slowing, substantially more slowing in the housing market then markets have expected.

However, this, uh, this PPI number is absolutely terrible. Uh, Market's basically moving straight down on this news. You went from about flat on the the NASDAQ a close of yesterday of about 309. You're sitting in pre-market right now at about 306..

yeah, most stocks turning red here in the pre-market from up about half a percent on Tesla down. now about one percent. It's gonna be really interesting to see how uh markets try to explain this one away, but holy smokes these PPI numbers were terrible. These are.

these are not good PPI numbers. Let's try to see what's actually going on. PPI uh. reports.

So we could get to the bottom of what's actually in the report. but I'll tell you this from from what I'm seeing here. Just these headline numbers. every single beat.

Not great. Uh, not great at all. We're gonna go. Uh, print up the PPI report right now so we can look at it together again.

This is a beat across the board on everything. And I'm not talking about a little bit either. This: This is a terrible survey. Now there is murmuring and I Want to start by saying this.

There is a lot of talk, uh, circulating that maybe maybe you know and I'm not trying to just pull this out of the Hat. You know, conveniently because it was a bad report and you know, maybe Kevin Lean's a little bullish. Okay, but anyway. uh, there is.

There is this talk about how surveys are potentially potentially starting to become less reliable. Uh, and I Read this yesterday, so it has nothing to do with what the survey was today. I Was going to talk about it anyway. but look at this: The survey response rates are plummeting.

survey response rates plummeting on population surveys, employment statistics surveys. The employment. The response rates are going from 60 percent, uh, approaching 40. Look at the Jolts report.

I mean a plummet from about 70 response rate to like a 38 response rate. An absolute plummet here. Employment Cost Index report: plummeting. So you're getting these massive, plummeting response rates.

and it's not me, but it's individuals are expecting that these response rates are potentially going to affect and skew the data. Because really, what you're getting is the census bureaus or the Bureau of Labor Statistics. They're sort of trying to apply different weights to responses to try to fix these weird, uh, lack of responses we're starting to get. and some folks say that businesses that are having sort of worse reports are less likely to actually respond to this information because out of, uh, maybe it's embarrassment or or you know they don't want to talk about how their business is doing poorly.

They're kind of tired about that. I Don't know, but this PPI report either way, you slice it is not good. This is not. this is this.

This is, uh, starting to look very sticky. Uh, and you know sticky is nice when it's transitory, but uh, you know, otherwise, you know, or you're playing with like I don't know, like Play-Doh or something like that. but you know you don't want to be sticky all day long. And right now this is starting to look a little sticky here.

0.7 percent of January And think about it. every report for January has been hot, right? We had CPI hot, We had jobs hot and now we have PPI hot. Like January is just a hot month now. Some say it's possible that uh January is so hot because you actually have this this, uh, uh, potential warmer uh, winter than you usually do and because you have a warmer winter.

maybe people are spending money on uh, you know, spring clothing more uh, and earlier than expected at higher prices. And this is why you had an apparel jump. You had a little bit of a pop in oil prices because of the potential that China's reopening was going to drive oil prices up. so you had some initial speculating pushing up oil prices anyway.

so we already read the numbers out. Let's actually see what this was attributable to. So, uh, final Demand Good moved up 1.2 percent in January largest increase. Uh, since Rising 2.1 percent in June of 2022, the January Advance is attributable to a five percent jump in final demand for energy.

Now remember, energy is even when you strip it out for core, it still ends up increasing the cost of other Goods within PPI. That's because you know, even though you could have like a real estate agent as a core Service as an example, their costs might actually be going up because it's more expensive to drive around. So maybe, for example, real estate agent might not be the best example. But the uh, let's say a bookkeeper or whatever wants to charge more money.

Whatever right? expenses go up when oil and energy prices flow through the economy, so people have to end up raising their prices. This is not good though. I mean these These are pretty big numbers here and so far this is a Miss on everything here. We know that energy moved up.

What else here? The index for residential, natural gas, diesel fuel, jet fuel, soft drinks, and Motor Vehicles also moved higher. We actually did see that both Pepsi and Coke talked about higher prices prices for fresh and dry vegetables decreased 33 percent. Okay, well, nobody wants those anyway. Uh, then you've got organic chemicals declined.

Oh, really lower organic chemical uh expenses while at the same time they're all spilling in Ohio That's interesting. So index for Final Demand Services point four percent in January What it? What would cause this here? Let's see here: Uh, last Trade Transportation Warehousing So over 80 percent of the broad-based increase in January is attributable to prices for final demand Services Less Trade Transportation Warehousing Wow, Wow, that shows you. sticky Services right here. We saw this in the CPI report as well, which is not good, but this is sticky Services right here.

sticky Services right here when 80 of the PPI move uh for for uh Services is basically broad-based outside of just trades Transportation Warehousing: 80 percent of the increase is based on those Services Outside of trade Transportation Warehousing which is basically everything else uh in the services sector product detail. Let's see here: a hospital outpatient care uh jumped 1.4 percent Automobiles jumped. We saw this uh with with the used Vehicle reports Health Beauty Optical Retailing Portfolio management uh Airfare passenger Services moved higher margins Uh okay. let's see here.

Let's look at the actual chart here. Let's see intermediate demand. That's fine. Okay, let me I want to get I Want to get a little bit more detailed on some of the actual items? So let me get the detail chart here.

But uh, so far the this beat is not going to make for a great day for the market here. Stocks per Wall Street Here extending losses, dollar turning positive yields ticking higher. The yield part ticking higher is very interesting when it comes to uh, real estate because uh, as as much as people got excited that rates were starting to come down and people were starting to get pre-approved at lower rates again, you actually have rates moving up again. so you're going to get potentially just this very temporary pop.

uh, and then then you'll end up getting a potentially a decline again in uh in real estate so not so great. A little head fake here for Real Estate As rates continue to move up and you saw with housing starts as well, complete disaster on housing starts. Now we're going to go look at some of the actual categories here that we have uh for PPI Let's see here. Uh, getting PPI here.

Okay, looks like final Demand Foods December to January Final Demand Foods actually in aggregate down one percent, but final Demand Goods in general up 1.2 percent on the seasonally adjusted basis for uh, final Demand Goods That's actually not ideal that you're starting to see a little bit of a pickup again in Goods Inflation, right? That's what we don't want. We don't want to see any kind of pickup in Goods inflation and you're starting to see that increase on PPI Now that doesn't necessarily have to come over to CPI If companies end up taking it in the margins, right? they take it in the margin. Uh, that's possible. Uh, it's very possible.

But it's still showing you these sort of more broad-based price pressures, right? right? That's not good. Now you've And what's also not good is now you've got people in the comments saying things like Team Bury and putting up little bears here. Uh, so what do we got here? Final Demand Goods Up 1.2 percent. That's not fantastic.

Uh, Final Demand Foods here. minus one percent. Fine. Let's go ahead and get past that.

Maybe with the exception of coffee up 1.9 Wow, it's not good for Starbucks alcoholic beverages? Let's go. Minus point one percent. Thank goodness. Okay, no price increases there.

That's fantastic. although in the UK they were I Was reading some reports yesterday that you had uh uh, restaurants and travel go down. but alcohol prices were going up because demand for alcohol spending was up. so I Don't know.

maybe the people are sad in in the UK but but anyway. uh you know, maybe they're sad they didn't get Liz trust. So what else we have here? Industrial machine handling equipment up 0.7 Electronic computers and computer equipment up two percent. These are like massive moves here.

It just makes you wonder like at some point do we still trust all these surveys that are just coming in all over the place like why is it you know the last three months of 2022, everything seems like it's disinflating and yay disinflation is here now. All of a sudden it's like a rug pull again. Nope. Uh.

inflation's back. This is wild. What is this? Tires up 2.4 percent for tires in a month? Good Lord Construction machinery and equipment of 3.4 Holy smokes I mean it's this is so broad-based I Don't know how you could say there's disinflation and producer prices when it's this broad-based and I'll tell you I even set it in CPI I'm like man, still pretty broad-based where you're seeing the inflation on Services Now it was nice. the market was rallying, but it's like I remember saying that course members that day I'm like I don't know.

the CPI report doesn't seem that great. The market rallied anyway and I'm like okay I mean don't get me wrong, I appreciate the rally, but this so these this these January reports suck for the disinflation narrative. they suck All right. What else do we have here? We got 3.7 up on lawn and garden equipment.

okay, uh. truck trailers down 1.3 Okay, so a little bit down. Cigarettes are going up. Oh no.

1.7 mobile homes though. Folks mobile homes are 1.3 percent less expensive I Think that's fascinating. Don't buy a mobile home ever. It's stupid.

Uh. costume jewelry and novelties? Okay, four point six percent. Uh, then you've got apparel wholesaling down 6.7 I Mean look at the volatility in some of these numbers. This is just insane how volatile some of these numbers are.

Uh, this is remarkable Sporting Goods including boats and retailing up 10.1 It just makes you wonder if the the seasonally warmer winter pushed this up right. Health Beauty Optical Goods retailing 4.1 but then over here, fuels and lubricants down the 17.5 I Don't even know what to make of this data I Mean it just. it seems hot. but it's just like all over the place.

It's kind of exhausting how all over the place some of these numbers are. How are we doing on? Lumber What is this? I Mean look at this. What is it? How are you supposed to understand this at all? Look at this. Hardwood lumber down Nine points.

Oh sorry. Hardwood lumber up 9.2 percent. Oh, but wait for it. wait for it.

Soft wood Lumber Down 9.7 So one's up Nine percent runs down seven percent. Like what is this? Uh, this is so confusing how some things are just massively plummeting. Some things are massively increasing. The survey responses are plummeting, the weights are changing.

It's a warmer wind. a January Than usual, people are keeping more employees than usual. I Don't I Don't think anybody knows what's up or what's down anymore. Uh, This is Wild Uh.

Speaking of what's up or what's down, you've got the NASDAQ sitting down about one percent right now. Honestly, for how terrible this report was, that's not even that bad. It could be even worse. now.

we'll see what the day does. but this in it. this is supposed to be a horrible report, right? Uh, the bond Market's barely responding 3.8 percent. The 10-year treasuries flat.

It's flat. Three point eight, one percent. Uh, this. This is just wild to me.

Uh, I would say if I had to try to conclude this I would say first of all, it's bad news. I'm not trying to put bullish news or water this down. January These are terrible reports now. the Federal Reserve did tell us yesterday.

January is the biggest month of the year for seasonal adjustments, so you have to take January with a grain of salt. The Federal Reserve said that. Okay, keep that in mind. The FED said that that could be why the bond market is relatively flat right now.

You would expect after that report, 10-year treasury yields to Skyrocket. maybe the two years are moving. Let's go pull the two. here.

You know, your shorter term treasury yields not really 0.01 Yeah, I mean this is basically flat on the two year. Even so, so, you don't actually really have a bond market. That's saying. Oh my gosh, we're freaking out over this now.

We'll see, maybe it'll change throughout the day. You do obviously have uh, uh, the NASDAQ rotating down about one percent and we'll see if it gets worse as sort of the day goes on. You got the Spy down point eight percent? Uh, what's the dollar doing? Let's go to you up over here. we'll look at the um uh dollar Index potentially uh well yeah, normally up.

I Mean do we have the dxy on Weeble Let's just look at the dollar I mean you're you're the dollar should be rising, but at least per Weeble Here in pre-market you're not seeing much of a movement, but you would expect the dollar would be rising, but then again, yields aren't really Rising So maybe the Market's kind of like whatever it's January if we rally today, which which we've seen this many times over the last multiple weeks, we've seen many times red pre-market Green close of business If we rally today, what you're seeing is people taking money off the sidelines, throwing it in to the markets because they see this as potentially a short term buy the dip opportunity and they're actually just writing off January as well. January is just seasonal adjustment month and this is a weird season. It's also I mean it's very unique given that you're coming off of the pandemic. That's the only way you could be bullish about this because the actual reports are bad.

So the fact of the matter is, it's bad. In fact, you know you're going to get more and more stories about this. but here, look at this: The PPI data was decidedly unfriendly to the disinflationary narrative. Not only did it come in quite a bit higher than expected across all Aggregates last month True I mean this was terrible.

These were terrible results. The prior data was also revised up. This left year-over-year readings higher than expected by half a percent or more across all Aggregates All Aggregates up over half a percent. Ouchy.

Wow. cheese. Meanwhile, jobless claims remained well behaved with a smidge lower than expected in continuing claims pretty much right on forecasts. On the other hand, the Philadelphia Fed continued its zigzag relationship with the Empire survey printing well below expectations for manufacturing interesting and then of course housing starts got destroyed.

But the big deal is PPI which is probably going to move up terminal rate expectations. but then again, I'm still not seeing movement in the Bond market. Maybe we'll get it throughout the day. That's what I would be paying attention to.

So if you want to know is the market discarding this madness then I think it's very important to think. Okay, let's go ahead and uh and see what the Bond market does today now. Loretta Master is uh, apparently just came out and started talking about how she saw a compelling case for a 50 basis point hike at the last Fomc meeting because she says that, uh, there's still a com, uh, there's still a lot more work to be done on inflation that's not great Uh, but with this PPI report, you're probably going to get some uh Wall Street analyst starting to call for a 50 basis point hike again. Uh, for the March meeting, we'll see how expectations end up pricing out right now.

Right now, nobody's really expecting a 50 basis point hike. That would be a little bit of a rug pull. You do have markets selling off a little bit more though. after Loretta's Master's suggestion that hey, we see a compelling base a reason for potentially a 50 basis point hike or actually, she saw that in February, we'll see, uh, if if that sort of, uh, pressure ends up getting more support, uh, in March I don't think it will I think it's much more likely that they would just attach another 25 BP hike in the summer.

So instead of potentially pausing in May, you get a pause in June or July right? and you sort of push back another 25. that's been relatively consistent with what Jay Powell has been looking at, but Loretta's Master's comments coming conveniently right after the PPI report suggesting yeah, you know, I was actually pushing for 50 and Fab probably is going to lead the market to take a little bit of a breather on on the rally that we've seen Again, If we end up pushing up throughout the day, it's in my opinion, a sign that markets are taking cash off the sidelines. They're buying the dip. They don't believe the January reports If the market trends continues to Trend down.

Maybe Finally, after a strong jobs report strong CPI report and now a strong PPI report and I mean really strong PPI report. Uh, maybe it's time for the market to start waking up a little bit and realizing, okay, maybe we shouldn't be rallying straight to the Moon Although there's nothing like two week call options to take you to the moon or to zero anyway, that's PPI for you boy. that was a disaster. But the good news is you can still get for 69 off with a flash sale for the programs on building your wealth.

Link down below through: Friday at 11 59 PM Steve asks how does this impact your rubber Band Theory you spoke about yeah I I Actually think it reiterates the Rubber Band Theory right? What it does is it says that, uh, the supply chains are so available. but the problem is the input costs much to to your argument are still Rising right? Whether that's Commodities or whatever, right? Uh, and that's probably because you're still seeing a feed through of higher labor costs, not necessarily because consumers are willing to pay more, right? This is a producer report, so this actually has nothing to do with the consumer's willingness to pay more. It also, in my opinion, probably still has little to do with the future supply chain expectations of when consumers go back to respending I Think what it mostly has to do with is you still have Embers of inflation whether that's a much higher wage costs than we had a year ago. well, or commodity prices which are still a lot higher than where they were certainly a year and a half ago.

So I think you're still seeing that flow through. It is a little bit concerning that you're seeing though. the month over month numbers coming in uh, the way they are I mean look at for example: uh, the month over month numbers. Yeah, I mean the month over month numbers were terrible.

Final Demand Month over month Point: Seven point, Five Point Six I mean these are massive numbers. I mean at an annualized rate, Just looking at core food energy trade, month over month, you're sitting at 0.6 That brings you out to an annualized rate of 7.2 percent That's very, very high. Very very high. Uh, so it's not great.

Again, The Rubber Band Theory applies to when consumers and the sort of consumer boom of potentially consumers coming back to respond. if markets start improving, are they going to be able to uh, are companies going to be able to support that demand? I Think the answer to that is yes. Well, I think the big issue is when you still have the Embers of producer price inflation increasing. What you're really doing is you're relying on the cushion of companies to be able to absorb that.

And so they end up taking it in the L in the margin, right? I Think that's where you end up getting smacked is in margin unfortunately. So this PPI report is very bad. I Think for for producers of of uh, of really anything that relies on high input costs in in the craziest way possible, companies that probably have the lowest producer price inflation or SAS companies right? And think about it, you're talking about tech labor, which isn't seeing the kind of increases in wage costs that you would see otherwise. uh, anymore.

In fact, you're seeing more layoffs, right? this is. although you know that's sort of countered by a little bit of the fact that Fidelity is now apparently announcing they were going on a 4 000 person hiring spree. But that's a little bit different than a tech world. So the tech World In a weird way, you have softer inflation and Tech wages layoffs in in Tech and software doesn't as heavily obviously rely on Commodities I mean to the extent that they're in servers and server racks and stuff like that.

But beyond that, you could scale software substantially more than you could scale factories. uh, and goods that are exposed to sort of this producer price inflation that you're seeing. So in a weird way, SAS Companies get the best of both less PPI and lower potentially Tech overhead. The valuations Assassins are still a little rich, but boy, you're seeing some of them rebound substantially now because, uh, the earnings are coming in pretty damn good for some of these SAS companies, which is not what is expected at all.

So uh, we'll see what ends up happening. But yeah, that's um, it's pretty wild when it comes to this PPI report. There's there's no doubt about that.