Yesterday we had the cpi numbers, come out, seven and a half percent increase the highest since 1982 and it started with food. It started with furnitures cars, rentals shelter. Everything went up like crazy. In fact, car rentals up 29 furniture, 17 regular new cars 12.

I mean that's just the beginning in this video i'm going to cover everything you need to know about inflation, interest rate hikes and the stock market, where we are where we headed pretty much everything you wanted to ask about inflation, supply chains and, what's going to happen With the stock market, but we're just too afraid to ask: let's go the real question i want to answer in this video is: what are we doing with this? What's the solution, where are we headed what's going to happen with the stock market? So if you ask kathy wood she's going to tell you there's going to be deflation in this market and the deflation is basically going to push down inflationary pressures all the way back to normal, whatever. That is well the problem with this theory that is 100 correct, but i don't think people understand the timing on this. I completely agree with her that new and disruptive technologies are going to cannibalize all outdated technologies and going to replace them, creating deflationary impact, for example. Instead of a factory that employs 100 people, we're going to have a robot, that's going to do the same job with two people operating the robot.

So that's going to be deflationary. Now, there's a lot of different examples of how to explain deflation and the example. I just used is probably not the best one, but that was just exaggeration just to show you what she means. The problem with this is that isn't going to happen tomorrow, not even this year, probably not even next year, when you have deflationary pressures by disruptive technology, that kind of thing takes years and years to materialize and by the time that happens, we're going to be in Some deep doodoo, because the numbers simply does not allow us to wait that long.

So i think that, even though she's right 100 percent, i think people misinterpret the problem of what she's suggesting she's, basically saying. Well, we're going to be okay in three to four years, because my technology companies are gon na change the world and i'm sure, to an extent they are honestly. I don't think we have three to four years to wait because we're in some dire straits right now. On the one hand, we had the government, basically bailing out everybody by pouring a lot of money into the system when the pandemic started, which seemed like a good idea.

On the other hand, we have major supply chain shortages because of covert and because now people don't really want to do low wage jobs, there's better alternatives, so no truck drivers, no hospitality workers, no production workers in factories. Everything is just congested. It's a big big problem. So, on the one hand, we have this massive amount of money, five and a half trillion dollars pumped into the system just in the last 18 months, so that money, if you combine it with zero percent interest, which is what we have for the past two years - Creates a lack of incentive for people to save.

Why would you put your money in a savings account when you're getting zero rate or basically something close to it, you're going to spend it so there's a lot of spending a lot of competition for goods and services. However, at the same time, there's less and less of goods and services because of supply, chain logistics and basically lack of workforce. So you have this crazy demand and supply chain logistics shortages. So what happens when you have a lot of demand, but not enough supply prices? Skyrocket, this is exactly what we're seeing in the market right now.

So, basically, if you assume that the kathy wood solution is not applicable right now, you really have three solutions you can rely on. The first solution would be basically doing nothing waiting for the god fairy. Come sprinkle her dust and magically poof make inflation go away. That was pretty much the approach of the fed up until november.

Actually, they basically told us hey, don't look up, there's no inflation, it's transitory! Well, that faded away quite quickly - and i feel bad for jim cramer, who predicted it team transitory, win literally days before team transit, or he called it quits, the weight of the evidence is finally going pal's way. Team transitory is going to win several days later. How long does inflation have to run above your target before the fed decides? Maybe it's not so transitory? Well, i think it's, it's probably a good time to retire that that word and try to explain more clearly what we mean so in november. The fed actually had to face reality and the reality is that if we keep saying hey, nothing is happening.

Everything is fine. Do not look up basically we're going to end up with americans watching their money becoming toilet paper and essentially crushing the economy. They can't afford that to happen. So in november they basically said well, we can't do it anymore.

So in november the fed basically said well option. One is not that applicable, surprise surprise, so that leaves us with two other options, and none of them are really good option number two would be to increase rates to where they have to be to completely annihilate inflation. That means aggressive interest rate hikes, much like we had in the 80s, with paul, volcker and ronald reagan. Now that kind of thing is not going to be easy to pull off in this debt structure that we have in the u.s.

You see. The u.s now owes more money than ever before. In fact, our current u.s national debt is a hundred percent of our gdp. If you increase interest rates, basically, you increase the payments that we, the united states, pay for our own debt to service the debt.

In fact, the numbers are quite staggering: it's 270 billion dollars per every one percent of rate increase. So if the fed increases rates too high, we simply can't afford to pay back these loans, and basically that would mean we'll have to print much more money to service. These loans pumping more money into the system, creating even more inflationary pressures, essentially flooding the market with more money. That's not good! Now.

The third solution is kind of interesting. The third solution is where i think the fed is headed right now is basically increase rates ever so slightly just enough just enough to slow down inflation a little bit, but not to crash the us under the weight of its own debt according to option three. Basically, what we're going to have is the slow, very mild increase in interest rates just enough to keep inflation moving slower just to slow it down a little bit, we're not trying to beat it just trying to slow it down a little bit now that kind of Small interest rate hikes are not going to crush us under the weight of our own debt. We can handle that.

The problem is that, in this approach, what's happening here is we're lying to ourselves, we're creating a slower collapse, but the end result will still be a collapse. The only difference is that, while this is going on, we can enjoy and just pretend it doesn't happen. We can completely do not look up and unfortunately, this kind of scenario we're going to have a lot of money into the system pumped we're going to have zero intervention by the fed, basically just raising interest rates ever so slightly just to keep it going. But the end result is going to be a complete collapse because at some point the amount of inflation is going to catch up to us and we'll have to admit that instead of doing a root canal, we're now going to have to go into surgery and pull Out five teeth, so now we have the trying to decide which options they need to take option: two aggressive interest rate hikes or option; three basically slide interest rate hikes, hoping for the best and trying to buy us some more time.

Well, if they choose option two, that can only happen if you have cooperation from the government, because in that option the price of debt is going to be insane. Unless you do either of two things, you either create massive gdp growth to create more tax revenue to pay for this, or the second option would be if you completely restructure your national debt. However, i'm not sure we have time for that, nor am i sure they can actually get it done. Increasing gdp growth so fast is not that easy.

It would require a lot of aggressive bets like lowering tax rates, deregulation, a lot of things that are politically complex, not sure they can get it done. Fortunately, they do have another option which they can actually do here, which is restructuring the us debt, instead of going for the cheap variable interest that we have right now with the short-term debt, let's put everything on the 30-year: let's restructure the bulk of the debt and Send it to the 30-year fixed rates, those are more expensive but they're completely fixed, thereby disconnecting the dependency or the connection or the correlation or the fear of interest rate hikes, impacting the cost of the us debt. Now this move is probably going to cost the government anywhere from 300 to 400 billion dollars, but that's going to be the end of it and it's going to basically unshackle the fed to do what they want. Unfortunately, and here's the problem, the government has shown no signs of either of these options actually happening.

In fact, so far they've been sitting on their ass doing the squat. So that makes me understand that they're not going to do that anytime soon. That leaves us with option three and option: three. Isn't that great, because under option three, what we basically gon na have is slow to mild interest rate hikes just to slow down inflation, not to win the battle just to slow them down a little bit hoping for the best.

Essentially, this is just a slower, complete collapse of everything. However, this is going to be much worse because, instead of going for a root canal, which we mean right now by the time, this body comes to a screeching, halt, we're going to need surgery and like five teeth removed. So the crash is going to be slower, but the end result is going to be much much worse and unfortunately, because politicians are so short-sighted, they can take this choice without blinking, twice, basically buying themselves six, seven, eight months of peace and quiet money in the system Stock market completely relaxed economy is stable, low interest everybody's happy. Then we figured out the plan eight months.

You know who knows what will be in eight months. Aliens can take over. I mean we don't know, that's how politicians think, unfortunately, that's going to be a horrible resort for the us economy and the stock market, but in the meanwhile it's going to be a party like none other you see, the fed is actually encouraged by the fact that The 10-year bond is now at 2. In the year it went from 1.1 to 2, it's basically pushing higher, and when you have that that actually serves as a coolant to the market, no doubt it actually does the fed's job for them and they're kind of hoping secretly like this is gon na solve The problem - it isn't it's too little too late - it's like an aspirin for a gunshot, it's not gon na help, but it makes it seem as if we're headed in the right direction.

The problem is - and i'm not gon na get into this in this video at this point - we're actually headed to an inverse curve gut forbid, but let's see what happens with that, that's a whole different discussion, the problem with the solution that seems to be happening right Now is that the fall from grace with option, basically hey, let's wait and see it's going to be much much worse than people understand and the brunt of it is going to be felt by the poorest people. The lowest income households are going to be. The ones hurt the most by this option, because when food prices go up, when shelter prices go up, people with low income will feel the pain much harder than people with mentions airlines. It's pretty much the way it is so you have this massive tax about to be levied on the poor.

Just in the name of prolonging this party, we have right now and not facing the real problem. That's a shame, and unfortunately, what happened yesterday just reconfirms what i'm thinking about the next steps it seems like this latest development from yesterday is just another nail in that coffin, basically creating a bull run based on the fed's inability or lack of desire to act. Only then to be stopped by screeching halt of interest rates, pushing the market down. So what happened yesterday? So we had the cpi go up seven and a half percent the highest since 1982, and unfortunately that little development is going to expose the fit it's going to expose the bluff.

Because the fed in a sense is like a bouncer at a nightclub that bouncer needs to look big and menacing, so he doesn't get into fights as a bouncer. You never want to fight right. You just want people to be so afraid of you, so just the right look or the the growl basically calms people down. If people lose fear from the bouncer, then basically the bouncer has to fight every freaking night and that's job no buncher ever wants to do you get injured.

I mean it's painful, you get sued, i mean if you lose your deterrent force. If you lose the image, if you lose people's credibility, then you're not really a good bouncer, most good bouncers, never even fight even once, and that's exactly what's happening with the fed here. People will see that the 7.5 is not going to cause any meaningful reaction from the fed. They're, probably called an emergency meeting, they'll, probably announce a hike of you know: half a percent 0.75 percent, maybe even one percent - it probably will happen around march, maybe even sooner, but that's just nothing compared to a seven and a half percent cpi.

And when that happens, i believe this is going to be the beginning of that bull run. I was talking about because it's going to expose the fact that the fed, even with seven and a half inflation, can't really do nothing beyond give you one percent of interest and when people understand that that's going to be the trigger. For that run that i was actually talking about now yesterday we saw the beginning of that and we saw how the fed actually shut it down. We had the seven and a half percent inflation come out.

The market was all green like crazy, because people are basically saying well the fed ain't going to do nothing about it and then the fed actually sent james bullard from saint louis. To basically do an interview and say: hey we're, raising interest, we're raising interest. You better be careful that actually did crash the market a little bit and basically cooled it down, but they had to pull out the heavy guns they had to send out james bullard and throw him under the bus basically to cool things down. So that just showed you, how eroded the fear from the fed interest rate hikes is so, in my opinion, and again, this is just my opinion.

Do your own research. This is just my crazy theory. Not a financial advisor definitely do not copy what i plan to do. It's just my crazy theory and it's definitely not conventional or conservative.

So what i see for the next six to seven to eight months depends on how long it takes for the fed to actually understand they have no choice but to raise more aggressively is a crazy bull run now? What do i do about this? Well, seventy percent of my portfolio stays put, i'm not touching it because that's a five to ten year portfolio in the five to ten year span, this inflationary year isn't going to mean anything, i'm in fact with kathy wood on this five to ten years. This is going to go away. I don't care. These are my long-term investors.

70 of my money stays put, not even touching it. I do have 30 percent of my entire portfolio in cash that was set aside, waiting for the fed to say, hey interest rate hikes. The market goes down, then we buy for cheap. Now.

I believe that this thing has been postponed now with the fat, lack of ability and lack of desire to do anything about it and then basically admitting they're going to kick the can down the road for another. Six to seven eight months, i believe that this money can serve me better in the market, so i'm going to put in the market. Probably majority of it will go to the s p 500, not even individual stocks. So what i'm gon na do is i'm gon na put it in the market for the next few months, just to let it enjoy this bull run, which i think will happen, and then it's gon na go back to cash waiting for that crash.

I believe that crash, i was talking about, will happen, but it will happen much later after the fed is forced to announce aggressive rate hikes now. This is just my crazy theory. The thing is, and i got ta be honest with you. Nobody really knows what's next for the stock market, i don't know either it's just a bet.

You want to call it a gamble, call the gamble. You want to call it. The bet call the bid, but nobody. Nobody really knows nobody can predict the future.

Definitely not! The stock market, the stock market, is like a drunken man and if you want to predict where the next step of that drunken man will be by an algorithm, it's going to be mission impossible. So what i'm doing here is i'm doing an educated guess about where i think the market is headed on 30 of my money, but at the end of the day i don't really know, and this might be just a complete. You know set of nonsense. Google and might be completely wrong, so i don't suggest you do what i do.

I'm just sharing my crazy ideas because i think it's thought provoking and i want you guys to do your own research and you know, let me know below if you agree with me, if you disagree with me, if you hate me, if you like me, you know, Do what you do? Let me know below a huge shout out for the channel members, the patrons. If you want to become part of our private patreon group, you know the link is gon na be below in the description section. It's five dollars per month. We don't have any courses or anything like that.

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