Everyone be kevin here when the heck are we going to go back to the moon, or are we gon na hit the s to the r first, which would be stagflation to recession? Let's talk a little bit about that in this video today, as well as talking about what warren buffett's up to what kathy wood is up to and, of course, what might lead us out of this mess. Let's talk and of course, first we got ta start with futures last night futures as usual were pretty much totally wrong again. They suggested that the nasdaq 100 technology index might open up down two percent. Well, fortunately, right now in the pre-market with about 33 minutes to the opening bell is only down about 0.31.

So that is good news now. Why did we have this massive decline in futures and why are some stocks going to be read today, especially probably our indices? Although hey maybe they'll, go green well, it all has to do with oil. Not only do we have a massive supply shock because of the disaster of what's happening in russia and ukraine. Not only can libya not keep up with its opec production of 1 million barrels per day and it's citing local political issues, but now you have the united states.

Finally, by the way considering banning the import of russian oil. Now russian oil has already become a little bit of a hot tamale. A lot of people don't really want it. We import about 7.9 percent of all of our oil that we use from russia now that does include petroleum products as well.

If we just look at crude itself, it's only about three percent, but anyway the point is we do import some amount of barrels of oil from russia, and so now the u.s is considering a ban on this, and this is leading to a lot of anxiousness. Given that we've already got a supply shock for oil and again, you've got countries like libya not even able to keep up with their production, and so when blinking comes out this weekend and says that the u.s is in quote very active discussions on whether or not To ban russian oil with european allies yeah, you start getting, some nervousness about the price of oil and what that could mean for inflation. Inflation is the big one here. Okay, see, we just saw oil jump up to 128.89 a per barrel, almost 130 dollars per barrel.

On brent, we've seen 1200 option contracts come through call options for oil making bets that oil will hit two hundred dollars per barrel by the end of march, and we have warnings that hey. If we just hit a hundred fifty dollars per barrel, not only will we exceed the high from the great recession uh time frame of about 138 dollars per barrel, but when we - and if we hit 150 dollars per barrel, we'll actually see inflation jump about 2 percent. On top of whatever inflation readings are now that's a little bit of a problem says we had a 7.5 percent inflation read for january now, we're expecting to get the february numbers this thursday at 5, 30 in the morning, california time 8 30 a.m. Eastern time so set your alarm clock for those inflation numbers on thursday.

It's gon na be a huge catalyst before the fed meeting. But anyway, if we end up hitting 150 per barrel and the expectations are accurate, we end up getting some sort of cpi read at seven point: nine or eight percent at two percent, you're gon na be at nine point nine or ten percent inflation. Double digit. Inflation is something we have not seen since the seventies folks in in early 80s.

That's scary, that's really really scary, and so it's no surprise that the imf is calling for a quote severe impact on the global economy. Because of this russia, ukraine, crisis and the inflation shock, but also that markets are probably going to start pricing in more of an inflation shock. In fact, the last three months before the russia, ukraine crisis, the bond market was actually pretty chill like all right. Inflation's gon na be transitory.

We saw the five and ten year break evens, which kind of are the bond markets way of predicting inflation. For us we saw them kind of peak in about november and then slowly level off, relax, okay, cool bond market. Isn't pricing in runaway inflation? Well, what's happening now? Well, that chart has totally flipped; it has skyrocketed again and the five and ten year break events are at the highest levels that we've seen in over 10 years and folks. This is a sign that markets are expecting a lot of inflation.

Unfortunately, the bond market is now pricing in a lot of inflation and uh. These these break-evens have been skyrocketing every single day last week and today was no exception, and this also helps push our 10-2 spread way down, which increases the odds, unfortunately, of a recession. Now, what is contributing to all of this? Well, not just oil. It's all of the commodities you've got natural gas up.

79 percent in europe. You've got palladium getting hit. Another 11 up gold just hit 2 000. I mean it did really well leading up to the invasion even on the day of the invasion.

It did really well well. Now, it's up 18 from the day of the invasion. It's incredible! It's over two thousand right now weed up seven percent of the last uh five days: nickel up forty percent, it's absolutely insane how expensive things are getting uh, and so it's no surprise that warren buffett has now disclosed 30 million shares of occidental petroleum, which was up 17 on friday is up about six percent in pre-market trading right now, he's sort of a beacon of of for people to follow, but uh wow, good job warren buffett. Making a bet on oil as oil prices are skyrocketing, can't blame that at all.

But all of this together does create the potential for what's called demand, destruction, and this is what we've got to pay attention to so kathy mentions this herself. She mentions that at some point this oil shock will lead to demand destruction in oil now kathy's. Looking years down, the road kathy says: hey: if oil prices go up at some point, people are just going to say, you know what i don't want, your oil anymore, i'm going to go electric i'm going to go solar, i'm going to get off the grid. Unfortunately, kathy mentions look this long term that we've been waiting for this transition away from oil might actually take longer than expected, and she admits she got the supply shock wrong, and so what does this mean? Well, we're not going to see demand destruction for oil, yet oil is probably here to stay for the next, probably 10 to 15 years.

But you know what kind of demand destruction we might actually see consumer spending, and this is the big problem. If you're invested in consumer spend stocks right now, you might want a second. You know take a second look at your portfolio and see how exposed you are to things like tvs, consu, computers, clothing, furniture and things. Much like kathy wood says: we've already bought all the things and the ipads and things that we want.

There is a very real possibility that all of this inflation in commodities and oil - all of this, this price shock that we're seeing will lead to consumer demand. Destruction right here this year in 2022, now that is going to set up for horrible comps, comparing to q4 and maybe even q1 of this year, because so far american spending - i don't think, has really changed that dramatically. Yet, however, we do know that for every one dollar that the price of gas goes up, the price of gas, the household energy consumption, total household energy consumption goes up by about 100 billion dollars. That means there's 100 billion dollars less available for people to actually spend in our economy.

That's a problem - and this is exactly why recessions are usually preceded by oil spikes, because what happens folks, oil prices go up. We start seeing global demand wane because energy prices are high and people start fearing higher energy prices longer term, so they save more money. And what do they do when they save more money kind of like what the chinese are doing? They're saving four times as much money right now than they did at the beginning of last year. Why? Because of fud fear, uncertainty and doubt that things may get worse before they get better, and what do people do in these sorts of circumstances? Again, they stop buying things now so far america has been doing pretty well most service companies, especially the travel sector, even uber.

They are killing it uber just revised up this morning and they suggested that they're going to see revenue of between 130 to 150 million dollars. In q1, compared to the 100 to 130 expected i mean that is a big midpoint move. That's a midpoint move of about 30 million dollars or somewhere around 25 percent. It's a really good! Now, pre-market uber is only up about 2.7, which is kind of sad, but it's what it is.

So what what? How do we? How do we consolidate all of this? How do we put all of the information together and try to be prepared? Well, the reality is, we might end up getting pushed into a stagflationary environment in 2022 because of the inflation that we're seeing because of the oil shock that we're seeing and the potential for demand destruction. As we start seeing people save more money because of the uncertainties that exist. This is how we set up for stagflation, where we're in an environment of high inflation, where central banks can't do anything because remember what jerome powell says, jerome powell says hey, i can affect demand, but i can't help you with supply. Well, we've got supply shortages in the chip sector, obviously in the oil and energy sector.

Obviously - and those are areas that the fed can't do anything they can affect demand, they can tell us to spend less by raising rates and they can encourage us to spend more by lowering rates. But when it comes to affecting the supply side of the curve, the fet's kind of clueless here well, maybe not clueless more like powerless or both powerless or powerless anyway, so in a stagflationary environment there's little the fed can do because now the fed is tasked with Well, how do we deal with high inflation without actually driving us into a recession if people stop spending or start spending less it's going to bring our gdp to near zero, and that's literally what the atlanta fed is now forecasting the atlanta fed is forecasting that our Real gdp for q1 right now is around zero percent. This is due to supply chains and capacity constraints, inflation, labor shortages, oil, energy and so on. Right.

This is a problem, because if now we start potentially getting those negative reads: come q2, 3 and 4. Now the market wants to start trying to price in recessionary fears. This is why oil spikes and oil shocks tend to lead to stagflation people. Stop spending money, people start saving money boom.

You end up in a recession. It's painful, but recession could end up helping us get rid of inflation. So when do we possibly go back to the moon and how do we position ourselves for this? Well, in my opinion, you want to stay away from where that demand. Destruction is most likely going to happen and again that's sort of your tvs, your computers, the sectors like clothing, where people have already spent a lot of money after the pandemic ended or sort of during the pandemic right.

We bought our computers and our things. While we were at home during the pandemic, we brought our clothing during reopening now people are spending money out and about and that's good that could change very quickly, though. If people decide to start saving more money, so does that mean potentially doordash is going to get more popular than it already is? Does that potentially mean that people spend more money actually on energy cost savings by investing in solar, so solar companies and phase sun run sun power solar edge tesla? Maybe maybe, unless people just save beyond those aspects anyway, i don't think so. I do think that these are going to have some element of a hedge factor and consider this folks, whether or not we have a recession in stagflationary times.

Investors like to be where there's growth at all, because in order to protect yourself from all of the burdens of inflation, it's nice to have some level of growth and, if you're, looking for growth, probably the best place to look. Is the energy sector to actually get growth during a time where we're in an oil price shock? It just makes sense now, according to bca research, it does tend to take overall technology stocks about six months, following the first rate hike for tax stocks. To finally start outperforming the s p 500 again, so this is a little bit of a heads up here that it could take some time and that there's really no rush in 2022 to go all in on tech. Without a doubt.

Although citigroup has raised a tech to overweight, which is another way of saying, buy and quite frankly, tech as kathy woods says, a lot of tech is kind of on sale. Right now, but be careful small caps keep falling evs energies, green energies. These seem to potentially be high quality growth that could do well in a stagflationary environment, but just remember if we do end up pushing into a recession nothing's going to save us. So maybe this is where you want to hedge, your portfolio with some of the less expensive stuff categories.

This would be your ross, your tj maxx, your dollar store your walmart, where you're getting away from those more expensive consumer products like restoration hardware, potentially wayfair nike under armour less expensive nike, complained about a 27 reduction in sales in china. Why people are saving money? They're spending less on those expensive wants and focusing more on those needs, so that could be a way to potentially balance out your energy trade and your energy growth trade with some protection. Of course, commodities are another option, but just be careful commodities. They go up fast, but you know how that works.

Things that go up fast can go down fast. So folks, what do we focus on now? Well, we got to focus on that cpi data coming out on thursday. We know it is just the beginning and obviously, we've got to pay attention to ukraine. Things don't seem like they're getting any better in ukraine, so we're probably going to be left with a lot of uncertainty for longer, so stay out of debt.

Think up a strategy where you want to be in the event. We start going into a stagflationary direction and what are you going to do to make sure your portfolio is properly hedged so that when and if prices do come down, you don't need to sell for a margin call or to cover debts or other expenses. If you need to spend money within the next two three years on a house or you need to buy something special or whatever, maybe you don't want that money in the market right now? But otherwise you know i'm bullish on the market overall, but i've got a lot of nervousness for the short-term future here anyway, thanks so much for watching this sort of update here make sure to check out ftx via the link down below and folks, we'll see in The next one thanks bye.