We've definitely had some pain over the last few days, all starting with the Polish disaster, but that then turned into a retail sales disaster. What's happening in the markets? How does it change our outlook for the Federal Reserve And are the numbers we're getting right now what? We think? They are a sign that consumers are just still spending like crazy and the worst is yet to come from the Federal Reserve Maybe let's break all of this down. So first we got a very weak CPI report I still Pat myself on the back a little bit for nailing exactly the year over year and the month over month numbers, but this video is not to brag. this video is to talk about. We had a good report, we had a good report. we should celebrate that together on CPI Hopefully that's the beginning of a trend. Then yesterday we got a really good PPI report. So you've got the buyer's version: CPI of inflation coming in low, lower than expected, still high of course and the seller's version the producer price index level of inflation coming in lower than expected. Okay, great, wonderful. And we've also seen that you know, obviously if you strip out shelter, you're a negative month over month inflation. We've been on that trend for about four months. If you just look at services from the PPI, we're at our first negative read since November of 2020 on a month over month basis, it was like negative. It was negative one point one percent. So those are great things. But this morning things got screwed up a little bit with what looked like a strong retail sales report and there's a lot of talk about. Oh nope. See, the consumer is still too strong. Inflation's gonna go right back up in December It is a way too early to get excited about. That's it. Peak Inflation is in. No No no. The FED needs to crimp even harder to crush that consumer and make sure they stop spending money because I'll tell you the number of people signing up and this is what. I'm making all these videos while I'm on my cruise here. Make sure you all know it because the number of people signing up for that Elite Hustlers course is really impressive. Y'all want to make more money? It's really, really good at use that. Black Friday coupon code link down below black. Friday's around the corner, but even people bundling up or emailing us for custom bundles at Kevin Meet Kevin.com looking to build wealth in real estate or stocks? Really incredible sign up. So yeah, the consumers are still spending, but uh, not not that. I myself am a perfect example of a consumer uh, spending gauge in terms of how many people are signing up. but it's worth noting. uh I think people are investing in themselves. Maybe so maybe a little bit different. But we did get this retail sales report that was a little bit hot this morning and we should touch on that a little bit. So this report. obviously, if you look at it from a year-over-year basis and you're like oh, things are up eight point. You know, retail sales are up eight point Three percent. Uh, from October The first thing you should say is oh well, come on man, that's just inflation. Yeah, it pretty much is Just inflation. But why then are we seeing stocks red across the board? But at the same time as we're seeing stocks right across the board, we're actually seeing bonds rally and bond yields are coming down. which is kind of interesting. So at the same time as that, we're also seeing the terminal rate for the Federal Funds rate on the markets projections move up about 10 basis points from about 4.83 to 4.93 So kind of a little bit of a head scratcher. if these retail sales numbers are coming in hot, suggesting that consumers are still spending, that implies the FED should have to raise rates more. We're seeing that with the FED terminal rate expectations being moved up, even Goldman Sachs moved their terminal rate expectations up another 50 basis points. So we're seeing expectations go up there. but at the same time we're seeing the bond market rotate down. The inversion of the yield curve is the steepest it's been. Uh, I Want to say in in actually since the.com bubble it was since 2000. I looked at that this morning you look at the ten twos. It's scary how deep the inverted yield curve is on the 10 twos, but those treasury bond yields continue to collapse. So if people really thought this retail sales report which is hurting stocks right now would contribute to the FED hiking more, then bond yields should be going up. So it's a little weird. It feels like cognitive dissonance. and this is where I actually think that what the market is doing is something very, very different I think. And then we're going to look at these reports and I'm going to show you some supporting data I Think what the market is doing is it's saying we need to reprice stocks because these high retail sales numbers won't last and now is the time to take attendees where there still are some to be had if you have any left to take or do some tax loss harvesting. Now, because earnings at these retail sale companies, any company that's selling stuff probably going to start suffering. So let's get out. While we still got an opportunity here on some potentially good numbers, Sure, Does it mean the FED potentially has to be a little bit more aggressive for longer? Yeah, maybe more aggressive for longer. But does it increase the peak in terms of How High The FED is going to go no CPI and PPI put a lid on that I Think that's why we're seeing the Bond market move down. People are saying all right. look Now's the Time You know, take some profit, do some tax loss harvesting if you need to take some attendees. If you need to on stocks, let's move on over and hop on into bonds. Let's get what yields we can. We can get some great yields on corporate bonds, you know. Triple A Rated corporate Bonds In excess of a five percent, you get some treasuries that are risk-free still at that four and a quarter percent level. So some pretty incredible opportunities. So let's get out of some of these retail names. Well, maybe this is the last hot report. that's sort of my thesis. Now why do I think this potentially is the last top report? And let's look at the actual report. Well, first of all, I I Don't think this hit as much coverage as it really should have. But remember, California Just sent any household making less than five hundred thousand dollars Inflation relief stimulus checks. Yeah, I'm pausing here because you should be face palming right now like you've got to be kidding me. But it's true now. You sent stimulus relief checks in October to households in California. Remember California has about 12 of the entire country's population. That means potentially one in 10. Americans Got a stimi check in October That could actually help prop up some of the retail sales data that we saw in October Because it actually came as a surprise, we were seeing week sales in September and all of a sudden they popped up. Now keep that stimulus argument in your mind and now let's zoom in and see. Okay, more stimi money, Got it. Where's money going on a month over month basis? Where are we seeing that increase in sales? Well, the biggest increase in sales we're seeing is gas stations 4.1 percent. That's a huge part of this. Okay, not so much of a surprise though, because prices became a little bit more expensive month over month, but they fluctuate so terribly. We always like to try to exclude those, but even if you do, if you exclude gas stations, we're still at that one percent read: month over month. That's not so good. So where did it come from? Well, it didn't come from appliance stores and electronics. We already know that durables have been suffering PC Sales are down 19 year-over-year We already know that. Food, yeah, food continues to be something expensive. 1.4 percent grocery stores? that's a big deal Food Services And drinking places I know this one really well. 1.6 percent. That's that's a lot. But again, we know that people are spending more on going out. This is actually a good thing. We want people to go out and travel and spend money. It's a good underlying Force for the economy, but we weren't expecting some of these numbers. But then again, if you looked at the airline reports, kind of like, okay, yeah, that makes sense. Still not seeing weakness in the airlines non-store retail right here. 1.2 percent. That's like online personally. I Think that's probably Stemi right there. That's probably your Stemi, because look where you're seeing the minuses: Department stores down 2.1 percent Sporting Goods Down point: Three percent. And what's really interesting is, well, not only you, of course also seeing that decline in electronics and uh, but you're also seeing building material and garden stores still puffed up. Look at that one point one percent. But now, what's the other interest thing about why this retail sales report could potentially be a peak bad number? Well, one was because of stemi, but two, the lag effect if non-store could be explained potentially by retail stimming. What about that building material sector? And what are some of these companies telling us? Well, they're almost all telling us the same thing. Whether it's Best Buy Who's doing layoffs FedEx Who's doing layoffs and we're seeing cardboard prices collapse Target Who's seeing 400 million in thefts, but also relaxations in their guidance. That's why they were down double digits today in the stock market. But what else are you seeing? Both Home Depot and Lowe's suggesting that all of a sudden they're seeing an inflection point and they expect weaker sales going forward into next year. A lot of this has to do with the fact that it takes a housing market slow down to really start slowing down down retail sales. So if you put all of this together, sure we're going to have month over month gyrations partly because of this massive stimulus check in California going. You know? let California is so stupid. They don't teach Financial education in the schools. so the state is run by by people that obviously don't understand economics and they're sending inflation release stimulus checks I Mean it's just, it's just completely pathetic. but but you can't run against the governor. It's a democratic Mafia out there anyway. So oh my gosh, what happens when you have companies and a housing slowdown? Suggesting that at the beginning of Q1 and the next few months going forward, we're expecting a Slowdown I Think we're going to end up seeing a substantial decline in these retail sales reports going forward that we might be in a position where this could be a peak retail sales report. And take a look at some charts. Here you see consumers cut back as mortgage costs rise. That's not a surprise, but this is an interesting one. Consumption will be further hit from tight lending bank's willingness to make Consumer loans plummeting. and usually when you see a decline in bank's willingness to make loans, you tend to also see retail sales trough right after that. We've already seen credit card spend go through the roof as it seems like people are just trying to sustain for a little bit longer. I Really Think there's this disbelief that, oh, we can't be going through a recession, Let's just borrow and spend our way through it and hopefully by then the Federal U-turn and things will get better. So how do we put all of this information to together in a simple summary? So my simple takeaway from this is this: retail sales report. Throw it out the window. The year-over-year numbers don't matter. The month over month fluctuations are in things that are totally skewed by energy. and if not by energy, they're totally skewed by stemi effects. And they're not forward-looking they're rearward looking. But if you actually look at what's happening at companies again. Best Buy Layoffs Cardboard down FedEx Freezing corporate hiring and laying people off Amazon Laying people off, wanting to hire less people for seasonal work, laying on people at the corporate level. uh Target Terrible sales guidance at Walmart Saying more people are going to Walmarts to try to save money, You know? I Think that's a good sales pitch obviously. but it's interesting to note and lows and Home Depot both warning about the Slowdown just now starting. I Think you take this report, throw it out the window. When you take this report, you throw it out the window. What does it do? It says in the future we expect earnings per share at companies to go down. For companies who are going to be affected by retail sales, Maybe for example, a company like Tesla is saved because they might not be affected so much by this, as long as they can sell every single car they produce. that changes Tesla collapses. but it also reiterates to the bond market. Hey, get the yields while you can because that retail sales report isn't going to be what pushes the FED to higher levels. it's going to be any kind of inflationary. read: Pce PPI CPI And so far two really good reports pointing to the downside: this retail sales report not very meaningful. Some of the insights are: I Think it's a warning if you're exposed to retail stocks. Also, if you're exposed to borrowing stocks, right transaction based stocks I Was thinking a little bit about American Express Visa Well, you know even Sofi or or a firm what's going to happen when people finally say you know what I'm I'm maxed out I just have to pull the reins back I Think this is potentially a peak retail sales report and it's a peak that uh, is getting hurt earnings so buckle up. Thanks for watching. We'll see the next one. Bye.