Now we gotta talk about Supply chains. Look Supply Chains are the biggest concern that people have that we are going to face the Michael Burry Double Dip recession. Is the Michael Burry Double Dip recession going to happen? Consider what's happening in the environment from not only the perspective of earnings calls, but also the perspective of companies like Goldman Sachs and institutional. Bankers Looking into Supply chains and that's what we're going to do in this right to now.

Let's go ahead and start by looking at Goldman Sachs estimates for Supply chains and where we sit with Supply chains, then we'll look at some other information because again, if Supply chains end up getting congested again because we have a Chinese reopening or people continuing to spend more money like American Express saying that premium customers are spending through the recession, people are using and taking up more personal loans at Sofi to support their spending. People are probably using a firm more than ever. especially Gen Z because they're stupid and haven't been educated that you should not use Buy Now Pay Later. And don't get me wrong, I've been a fan in the in a bull market of buying out Pay later Services I Think it is stupid to use them but I Don't think that stupid people watch my channel.

Okay I think using Find out Pay Later is generally stupid. You should not use it and if you've used it before, hey, maybe there's a reason. Well, one off time it makes sense. Okay, I'm not trying to offend people here I'm just saying it's stupid.

You should pay off your debts every single month for consumer goods. Guaranteed. That's different. Obviously, if you buy a house, you should really never pay off your real estate unless you're going into retirement.

Uh, ideally you want to pay off equipment like, uh, like a car, right? Ideally, you want to pay that off because it'll restrict you to buying a less expensive car and it'll let you buy more real estate, right? But of course, if you're a company that buys equipment like machinery and you finance it, that's a little different, right? That's part of your cost of goods sold. But anyway, when it comes to buy, now, pay later. It's all right. You shouldn't use it, but people do, and so people are supporting.

They're spending like crazy. And there's the thesis that all it's going to take is China reopening and that that's it as soon as China reopens. Boom, we're going to turn inflation back on. But the reality is, that's not what's happening.

In fact, Starbucks thinks which has just basically doubled the amount of stores that they have in. China They see the Chinese reopening as gradual. but not only does Starbucks see the reopening as gradual, but Goldman Sachs tells us the following: Gulbasack Supply Chain Congestion Scale: This was released yesterday evening and they show us at a level of 2 out of 10. 10 being a full bottleneck one being fully open.

Two is the congestion scale that they put us at for Supply chains on a weekly bottleneck scale. Our weekly bottleneck scale were made at two this week as the absolute level of congestion index declined 14.5 percent. Exhibit One: Let's look at exhibit one for a moment. This is exhibit One, our weekly composite of Supply chains.

This is basically a chart showing you that right now Supply chains are as bottlenecked as they were August of 2020. in other words, barely bottlenecked at all. We had a massive skyrocketing in the chart in uh, early 2021, and then a serious a bottlenecking at the end of 2021. and this is what led to the insane inflation that is almost all but gone away.

So if you're looking for a disinflationary argument, my friends, it is the supply chain congestion gauges. The supply chains are not muddying up and notice how even over here the first few weeks of January which would Encompass the Chinese Lunar New Year there's no pickup. The opening has been very gradual in China at least in terms of good spending. So what are the Chinese spending on? Well, I actually read uh, the the the chat I Try to read Chinese news coverage because well, first of all, it's like really biased.

uh and they try to really talk up what's going on in China so you have to be really careful. In general, you want to be skeptical of all the mainstream media you're listening to. but when I read news in China You know what they're talking about. What the Chinese are spending money on travel, baby, travel and entertainment and Leisure they're traveling like freaking nuts And that's great because it's not murkying up Supply chains at all.

Which again, and we've talked about this: I just want to reiterate it: the Expiration: The expectation according to no more research is that Supply chains are going to lead or or the the reopening of China I should say is going to lead to a 700 billion dollar set of spending that compares to about the 2.1 trillion dollars of excess savings we had in the United States for our reopening. But keep in mind China has like four to five times the population that we have. So when you actually calculate this out on a per capita basis, the United people in the United States had an extra six thousand dollars of money to spend. thanks in the reopening, The Chinese on average have an extra 500 to spend and so far what are they spending it on travel and we're not actually seeing Supply chains back up? In fact, listen to this.

y'all remember all those complain complaints about ships being stuck off the coast of the Port of Los Angeles and having to wait months just to basically disembark their crap? Well look at this: the number of container ships waiting to Dock and unload Goods along the entire West Coast has remained at zero for the 10th consecutive week and the East Coast backlog has declined from 17 to 22.. Let's see, that's Exhibit Six I Want to see Exhibit Six? Exhibit 6 is here. Wow, look at that complete collapse of backlogs of ships even though there's still a backlog of 17 ships on the East Coast that is down from a backlog of over 100 ships last summer, and it is following a very similar path, albeit a little bit delayed from the West Coast uh uh declines is following a very similar plummet of the backlog just disappearing. This is a fantastic piece by the way.

By Goldman Sachs shout out to Y'all at Goldman Sachs Uh, encouragingly, chassis dwell times fell 23. These are like the things that hold Uh containers for semi trucks. Uh, wait times or dwell times fell 23 week on week. On average, you have a loosening of of Uh congestion at ports.

You also have ocean container shipping rates down 90. In the past year, January's bottleneck scale is down 75 percent. You've got Uh labor and Equipment availability improving. Look at this labor folks.

Labor availability is improving. What have I been saying? No Wage price spiral? Starbucks Chipotle Finding it easier to retain workers? Finding it easier to uh uh, not only retain workers, but find new workers. This stands in the face of the argument that we are running into a massive wage price spiral. It stands in the face of that.

Now, don't worry, don't get me wrong, this was a problem back in Uh, In in Uh at the beginning of 2022, the wage price spiral was a severe concern. Uh, and that is essentially that wages were rising at a level higher than the rate of inflation. and the belief was that that could continue. Uh, and that's scary.

We don't want that to happen. Uh, so. But thankfully so far it does not seem like uh, we are seeing that issue. Uh, at least not Uh here on the Goldman Sachs piece.

So that's great. Uh, and uh. it's also not what we're seeing in earnings calls. Let's keep going here on this for a moment see if there's anything else that's a really fantastic.

We've got Uh BNSF Intermodal traffic down 15 this week minus 17 year-over-year for last week. Note that initial January Intermodal traffic has decelerated versus December levels. We've got uh, rail Intermodal traffic down, down, down, down down. Relative to last year, we have what do you hear this is chassis dwell times.

They basically chart all the the stuff that they summarized at the beginning. so they give us all the various different Uh charts showing container weighted average well-time plummeting for San Pedro Bay rail container wait time plummeting. Rail container wait time down at about five days. Uh, which? Uh, which is basically in line with the lows that we've seen over the last couple years.

Big Three West Coast Port inbound loaded containers down 20 year over year, we're in the negative area: door-to-door shipping days plummeting down to 52. still not at the lows of about 40 that we saw in 2019, but uh, trending towards that direction here. Manufacturing: Supply delivery times plummeting. Basically, the supply chains are strengthening while at the same time Supply chains are strengthening.

We're not seeing companies complain about actually things getting worse and we're not actually seeing this idea that oh, there's going to be so much Goods demand again that we're going to murk up Supply chains again. If anything, most companies are telling us that we're probably not going to end up getting this big boom of spending again uh, until probably the second half of the year. In other words, you might have another complete six months to go before we end up getting uh, you know Supply chains that maybe would even face the risk of higher demand and another six months of these Supply chains repairing. Hey, you know what? that's not bad that that that is good.

Especially since we're seeing this incredible plummet already of uh of uh, supply chain tightness and this is very good. But in addition to that, you're also seeing slowing Warehouse construction as well as an inventory pickup at retailers. Now this I thought was very interesting. You have a Walmart inventory uh level levels up 12.5 year over year in the third quarter in 2022 on average inventory levels were up 25.

Uh, and so you still even going into the Fourth Quarter? See companies that have more inventory than they've previously had before. and what's this leading to? It's leading to lower orders. It's the same thing the chip manufacturers are telling us. They're telling us.

look, we're not actually seeing this inventory really get drawn down and leading to new orders just yet. Even Energizer Batteries was telling us. look, we're not getting as many orders as we used to because we think companies like Target and Walmart are basically just going through their inventory more so they're not reordering batteries from us. It's the same thing that you're seeing warned at companies like AMD or IBM or or what you're seeing at even a company like Tyson meets I mean I just went through batteries, chips, and meats look.

Well, let's look at these a few these just so you could see what I'm talking about. But we go to Tyson Meat for example. what does Tyson tell us from their earnings call yesterday? Well, Tyson tells us that meat packing Executives thought that chicken would need to fill an expected Gap in overall meat supplies. In other words, in this Reuters piece that sort of summarized what was happening in earnings for uh for for Tyson me we ended up seeing companies think, oh, we're going to have to invest a lot in our supply chains.

There's going to be so much meat. the meat's going to get so large our backups, you know, like the demand for meats can be huge, everybody's gonna want me, it's gonna be so much pee pee in me and uh here. What ended up happening was the CEO says we ended up getting hit in the mouth in q1 because all the protein on their Market q1 is is there is basically our calendar Q4 And so beef production was surprisingly High leaving Tyson to resell excess chicken at a discount and spend money moving it so it's You've got batteries complaining about less battery demand, you've got meat complaining about less demand for meat, and you've even got companies like AMD investing a billion dollars into Supply chains. Here's Lisa Sue One billion dollars going into Supply chains in 2022 and now they're talking about having done a very good job in supply chain risk mitigation.

We don't believe we have risks to supply chain issues because of future covet up outbreaks and as it relates to the Chinese recovery, I think we're going to benefit from the Chinese recovery and essentially they go on to suggest that hey, look, we don't think we're going to have new supply chain interruptions. We invested a lot of money into better and stronger Supply chains and we actually are excited about the reopening of China because we're ready to meet that demand. This goes back to my scrunchie of a rubber band example that the companies are saying hey, we're ready, We're ready to go. It's the same thing as Taiwan semiconductors who has a substantial set of new new equipment from Asml, but they're actually not running at full capacity.

They're not running at full capacity because they don't have the kind of demand they were hoping to get. In fact, you look at even uh, IBM and they tell you the same thing. IBM is telling you exactly the same thing like we're ready to meet the new demand, but we're not at that level yet where we have the demand relative to the amount of Supply that we have. And that's actually a really great thing because it says that Supply chains are built up and ready to support a boom in spending again.

And that's fantastic because there are so many people that are so worried that inflation is going to keep running and running and running. And the reason it's going to keep running and running and running is because as soon as people across the board start going to spend again, that's it. Inflation's going to go to heck and we're all screwed. Uh I Personally don't believe that I'm not of the believer that the reopening of China is going to do much at all for inflation.

and I think if anything, the reopening of China what it really does is it. It leads to what a lot of companies are calling for. Uh, and what a lot of companies are calling for is a very strong second half. Almost every earnings call and I don't know if they're just punting that.

That is a risk. Who knows. Maybe they're just punting. But it seems to me like every company that I've been reading into whether it's it's Hershey it's the chip makers.

It's uh, the gaming companies. it's Pinterest it's the advertisers. it's Google it's Apple doesn't matter. almost every single company I look at even Procter and Gamble uh, you name it.

Most companies are telling us that we expect inventory or sales to recover in the second half of the year and we're ready to meet that demand. That's fantastic. We're in a fantastic place in terms of Supply chains moderating right before the hope that in the second half of the Year things are going to get better. and that's at least how I'm investing.

I'm investing in the belief that we're not going to have this massive crazy second wave of inflation. Now you don't have to agree with me, that's just what I'm doing. But here's just another example: I mean people Just to show you how nervous people are, there was this belief that Russian aluminum was going to get banned uh and and that nobody was going to be able to buy Russian aluminum. What ended up actually happening is the United States government came out and put a 200 percent tariff on Russian aluminum.

Which basically means if you sell aluminum for 100 bucks, the United States is going to tax you 200. So now all of a sudden that aluminum costs you 300, right? instead of a hundred dollars for per whatever unit of aluminum you're buying. So initially people like oh my gosh, this is going to lead aluminum prices to Skyrocket Well guess what actually happened? Aluminum prices fell. Why did aluminum prices fall? Because Traders thought aluminum was just going to get outright banned from Russia So as usual, markets are looking at things from this worst case scenario point of view and they're not really looking at the reality.

Uh, keep in mind Russia is the second largest aluminum aluminum producer. China is number one. Uh, before the Russia Ukraine conflict, Russia represented about 10 percent of United States aluminum. Imports Now Russia is doing about three percent of U.S aluminum Imports So you're still seeing them.

the EU banned Russian oil to cut its Reliance on on Russia. Now of course they're coming back with sort of price caps, right? Uh, uh. and Russia is. Obviously there's a big Arbitrage opportunity for countries like China and India and all that sort of stuff.

But the point is across the board when we look at Supply chains and the disruptions that are fair third relative to what's actually happening. it's just not that bad. So pretty incredible in my opinion. So let's see here: Steve suggests here: the second wave of inflation will happen.

It may not happen for a year or two, but it's coming. I Mean what you're doing If you're suggesting that the second wave of inflation is definitely going to happen, is you're really suggesting that the great moderation that the pattern of the last 40 years is broken. and essentially, we, we can't rely on the deflation uh, that we saw over the last 40 years. Because that's it.

We've We've let the genie of inflation out of the bottle and it's going to come back. Uh, and and Steve You're not wrong to say that yes, the EV markets are going to create supply chain disruptions. You're not wrong about that, but Steve We should take this over to the course member live stream which is where we are heading right now.