Hey, by the way, quick shout out to Mr T who came out and flew with me yesterday as we explored real estate in Salt Lake City if you two want to join this by the way, a course member of ours. If you want to join either the courses or a shadowing experience, check out the link down below. We'll see you soon. All right! I Have to say I am so frustrated about the silliness that people say on the internet when it comes to inflation.

People are saying things like oh wow, since when did inflation go into 6.5 percent become bad news? Oh my God It's like Economics 101 is missing from people's brains. Nobody is saying that it is good news that inflation is 6.5 But let's understand what Nick T has said with the Federal Reserve has had to say and some of the other very important things that we need to focus on. First, you have to understand that much like the real estate market inflections are what matter in economics. You could be right here.

and if you compare year over year you might be comparing to here and that growth might be 6.5 But if you compare here to here that growth could be negative and eventually in the future when we're let's say over here at the Green Point and we compare to a year ago in the future. Now all of a sudden we might actually the year ago in the future might sort of be like that. We might be looking at negative three percent inflation. This is why structural trend and changes matter This by the way, is exactly the same thing we're seeing in the real estate market.

In the real estate market, you're seeing home prices down 10 to 15 percent off peak. Yet what's actually happening is you look year over year and you still see a lot of cities Positive, right? But it's just a matter of time before we roll over on that year over year comparison. It's basic Eco 101. of course, then you have the clowns that come out and say things like oh well, inflation can't go positive or inflation can't come down.

That is because after all, China is going to reopen. So I sent this tweet here and I said inflation can't like the other people, right? Inflation can't come down because China will reopen and I'm like, uh, China has been open for 37 of the past 40 disinflationary years that we've had. In other words, China has been quote unquote, open for the last 92.5 of disinflationary years that we've had over the last 40 years. But yet the clowns are like, no, no, this time's different.

If China reopens, that's it. That's it. China Reopens Big inflation. Let's be real: the inflationary problems we had was not caused by transitory U.S Reopening It was caused by Insane and stupid money printing.

It was caused by a war in Ukraine that was not expected and it was caused by a complete rejiggering of Supply chains around the world. Yet today, companies like Samsung and Taiwan's semiconductors are saying the supply chain snarls are almost over Taiwan Semiconductors literally today is up six percent on the news that they are almost done with the supply chain issues, regardless of what happens with a Chinese reopening. So these arguments that people have that oh no, 6.5 inflation is is uh, is somehow still bad news is ridiculous. We are on a really good path for inflation plummeting.

There's a reason we had Hawker from the FED come out this morning say, all right, we're probably looking at uh, you know, basically uh, 25 basis point hikes And there's a reason. the bond market is not only pricing in a 25 basis point hike maybe I mean probably at this point, once in February, maybe again in March or even a pause. And then the bond market prices in 1.7 in rate cuts by the end of 2023 and the bond market price is in five percent. That means going back to zero within the next few years.

Okay, there's a reason because inflation is plummeted Now Some other people have this like counter argument and somehow they think that oh, but Kevin you're only thinking inflation's going down if you take out housing. Well, I'll have you know, housing's like the most important part of people's expenses. Duh. Okay duh Yes Yes, people spend most of their money on housing.

Yes, that is true. But the Chicago or sorry the Cleveland fed themselves is well aware of the massive lag that you get in inflationary housing data. That's because they literally ask owners by picking up the phone going, hey, what do you think you could rent out your house for today and you get a 6-12 month lag in when people actually adjust what they think their rent is worth to what the market actually is. In fact, here it is.

I'll provide the facts to you. the Cleveland working paper series that they just released here in December of 2022 and this is something that Jerome Powell himself has referenced clearly clearly shows that when we look at CPI Rent CPI Rent. the purple line is going up. But all other actual leading indicators of rent whether you look at Loopnet Yardy, a basket of these put together Zillow rents doesn't matter.

All of them are trending down while the CPI report one is still trending up. It's just a matter of time before the CPI reported, flexed down and then guess what? Huge anchor to inflation. Now then of course you have people that are like it's not just how they, uh, actually, it is mostly just housing. In fact, the Bureau of Labor Statistics literally said that themselves.

They literally wrote The Shelter index was the dominant factor in the monthly increase in the index for all items less food and energy. That's core. okay, shelter. in fact, they said accounted for more than half of the total increase of core inflation and core services.

In fact, you even have the Federal Reserve's mouthpiece. Mr Nick T uh from The Wall Street Journal Look what? Mr Nikki T Had to say this morning on: Twitter December CPI Three-month annualized rates Core: Goods Negative: 4.8 percent deflation Services less shelter Just 1.2 percent annualized, well under the two percent Fed goal. What's the only area that's still exploding shelter of 9.2 percent annualized? That's insane. But the Cleveland Fed themselves says that number is getting ready to plummet now.

of course, the FED is cautious, right? because they have to be because as soon as they start saying oh, inflation is plummeting, then everybody throws in the towel and starts going out and spending money again because fear goes away. So the FED has to keep on the face of fear. But the Bond market is being crystal clear in how it's screaming to us. The more the yield curve inverts, the more the Federal Reserve is going to end up cutting rates in the face of inflation falling.

On top of that, the Bond market today is screaming to you and saying look, yields plummeting on the 10-year under 3.5 percent. Why? Because the days of rising inflation and shocks to the upside, inflation are over and behind us. So personally, you get frustrated when people are like, oh, but but then inflation minus food and minus housing isn't fair because most people spend most of their money on food and housing duh, And eggs too. We get it.

But the leading indicators for actually a basket of most food in the world and housing? or plummeting. So that means it's cheaper to rent stuff today. It's just the reports don't show it yet. Ah, Now I'll tell you exactly why the Federal Reserve is doing this.

If the Federal Reserve right now came out and told you what the Bond market was expecting the FED to do. which generally, the FED does what the Bond market suggests, the FED does anyway. It's kind of crazy, although they try to manipulate each other. If The Fed right now came out and said, hey, yeah, we're probably gonna cut rates by 1.7 percent by the end of 2023.

and uh, we'll cut rates by five percent over the next few years. That's what the Bond market is telling us. If The Fed said that right now. What do you think would happen? Every person and their mommy and their daddy and their granny would go out and spend money on debt they'd borrow.

They'd go into margin debt to buy stocks. Everybody would just YOLO on everything. They'd go buy new cars, they'd go buy a jet, They'd go buy a new house. Everyone would just go not spending money again and then guess what? Boom.

Inflation pops back up, Fed loses all credibility. That's why they're keeping the hard face on. because they have to. They don't trust us.

They're putting the hard face on. and they're treating us like little dirty brats like little step children. Not that there's anything wrong with step children. Okay, I've had a lot of Step siblings myself.

Anyway, they're trading us like children because they don't trust us not to go blow it. And they're probably right. In Fairness, They're probably right. kids.

Look it. We would all be having a freaking field day if they're like we're gonna cut.