Welcome back to meet Kevin Report number 35 It's Sunday February 26th And man, we've got some juicy things to talk about. So one of the things I want to start with is, uh, just to touch on Supply chains. There's there's so many obviously leading indicators that disinflationary pressures are occurring. The concern is how long it takes some of these pressures, the disinflationary ones to actually be felt by us.

And that's what gives the Bears a very strong argument that hey, look, the fed's going to end up overdoing it. It's almost like in a weird way, both the bulls and bears are in agreement that hey, inflation is going to come down. The problem is, the signals that are being sent to the FED might not exactly be the things the Bulls want to hear because bears are potentially and rightfully so. Saying: look, it takes a while for disinflation to actually make its way through the market.

I mean we've been seeing leading rents for example, on owner or for actual house saying come down for about 10 months now, it's CPI is owner equivalent Rent is still going up massively lagging indicator. but there's yet another one I was reading about this morning and it's almost at every level of the economy. You see this: it has to do with shipping containers. Yes, longer range and shipping containers have come down to back to their pre-pandemic lows, but more shorter duration shipping contracts haven't yet.

They're still twice as high as they were in 2019 and with 70 percent of goods going through containers and 70 of well I should say Let Me clarify that 70 of goods that travel in containers are traveling in containers that have contracts for basically the shipping rates contracted and negotiated in 2021 or 2022. In other words, longer term contracts. It might take quite a while to actually see that sort of disinflationary pressure work it straight through the economy. So I Wanted to start with that tidbit today.

just that local. If you're betting on a really big decline in Fast and inflation, we could be disappointed with the amount of patience it takes. And that was some one of my largest lessons over the last couple years. Here is: you could have the best thesis in the world for the market, but patience is usually where we can mess up and end up shooting ourselves in the foot.

So watch for patience. Patience So important when it comes to markets and it really shows. Look, if housing is going to require patients and Supply chains are going to require patients In terms of those shipping contracts and another one, look at. Labor Even though the supply, the availability of Labor has been skyrocketing, it's going to take a while to actually see that create any kind of disinflationary impetus, because even if companies are just motivated to raise prices less, that still means they're potentially raising prices.

So something to keep in mind is just that. patience. There's one big thing to to Really declare uh, today, it's it's patience. Take that away.

Take that home. uh yesterday I did fly uh to uh Sacramento I Have to say who, anybody who lives in Sacramento I think you lived in a beautiful place? uh I know yesterday was unseasonably cold. it was 38 degrees actually drove just a little bit north of Uh Sacramento and was able to check out the snow for Max Max has never been in the snow. uh and and I'll tell you when you drive north of Sac you'll have no snow for the longest time.

and then all of a sudden it's almost like you're in World of Warcraft and you just like switched into a different biome and all of a sudden everything's covered with snow. and it's It's just like crazy weather. it's so weird even on the way back when we crossed that sort of line where like we saw the loading screen basically and we were in a different Zone it's so wild. uh that's the road you take I think it's the 80 going up to Reno and Tahoe which is kind of crazy but Saks Beautiful.

So great. Great job! Sacramento Really enjoyed Sac yesterday. You could actually see a lot of that because we won't be making a larger video out of out of that trip because it was more of a family day. Uh, check out my Instagram or the YouTube YouTube stories and you'll be able to see some of the properties we looked at I Made sure to post a little bit more uh of of the actual properties we were looking at.

I'm really I've noticed one of my problems is when I get into a property I kind of forget to ig or story but I think yesterday I did a pretty good job so check those out I think you'll enjoy them. That was really fun. uh. also wanted to just give a shout out to uh Ricky Carruth he uh he made a really cool video right here you could check it out.

I Flew with Meet Kevin and he kind of gives you an idea of what it's like shadowing uh, me for a day so that was really cool so you could just type that into YouTube Ricky and then uh, you know, meet Kevin or whatever. so uh, you know. great uh, great weekend So far Sundays are usually my favorite day because I could kind of, uh, focus a little bit more on the back end stuff. Really, it's like not not surrounded by uh, as much as much activity should I say a little bit quieter, but a lot to talk about today.

I Want to start uh with talking about models and I'm not talking about girl models. sadly talking about uh or if you're a girl guy model or vice versa or anyone, what your preferences talking about financial models? We have to talk about a model that JP Morgan brings up. Uh, so we'll take a look at that. Uh, okay.

let's go ahead here. I Have no idea what you're saying in another video you said people should own if you buy stocks on a brokerage like Weibo or Fidelity do you own these I have no idea what you're asking wrong. I'm sorry, let me rephrase that question. Okay, go, let's go.

Let's start with this. models chat. Let me get this ready here. Stunned by for the models.

It's actually going to be really interesting because this is an effect that very few people talk about. uh on here and actually I don't think I've ever seen anybody talk about this before. so this will be a unique set of perspective which really really remember that's that's my always. My goal is if I could provide a unique perspective then I think everyone wins and uh, we'll get to see your commentary on it as well.

All right here we go. Now we gotta talk about the Catalon effect. It's a French word. It's a French effect and it's really impressive because it might blow your mind in terms of a traditional economics.

But what I'm going to do to start with this effect is I'm going to introduce what JB Diamond just said and it'll show you why this effect potentially is so important. So take a listen to Jamie Diamond here for a moment on Jim Cramer We're not going to listen to all of this, but let's get started thing wrong because maybe that's too short a term. Maybe what we're thinking about when we talk about the FED is not what is happening. Boots on the ground here.

Yeah. I think they're different I mean the FED look they have I have all the Bold respect for Jay Powell Uh, but you know the fact is we lost a little bit of control of inflation models. didn't pick that up. I've always been suspicious of models and more.

Use them extensively. I Always say you use a little bit of judgment too. Uh, and there's been a sea change. Governments are borrowing a lot of money and you got to incorporate that what's taking place.

That means they're spending it. That's inflationary wages we haven't we've seen come down, but not so much oil and gas will probably be going up because you know the investment has been curtailed right? Uh, and you know the the green environment, the green economy we think it's close to four trillion dollars a year of additional spending so you're talking and the IRA act which I think has a lot of good stuff in it. the infrastructure app, the chicks app. this is huge money and so you know me, you've got to see change and I think we should all get adjusted to that and you know we'll have more normalization of interest rates and we'll be fine.

Just remember America's most prosperous has the planet will be fine. Okay, but I'm gonna pause there because the rest is actually less interesting. But let me just highlight some of the things he mentioned here and then we'll get into those models. So first of all, Jamie Dunham is really taking this position that I don't know man, even though we've gone away from sort of the monetary money printing which is the Federal Reserve basically bailing everyone out uh, via essentially the unlimited money printing uh which was then distributed via stimulus checks uh, unemployment pay PPP loans.

whatever you actually have now is Jamie Dimension Look, inflation reduction Act is cool and all. but energy. Green Energy is four trillion dollars of potential new inflationary impetus. Government spending, government subsidies could actually be the next wave of Stemi checks.

That's actually really interesting. He says that because one of the things that I use to describe the chips act which is another act that was just passed which is massive 80 plus billion dollars of of uh, support and subsidies and then sanctions and restrictions on chips uh, specifically for chip companies and preventing China from being able to access some of our technology although they just steal it Anyway, those are basically massive stimulus checks for the chip makers. I mean Taiwan semiconductors Intel Nvidia Uh, it doesn't matter whether it's a chimp maker or or the actual chip designer. there's so much stimulus money going into energy G batteries EV Chargers Look at the Stemi checks.

basically Tesla's going to be getting from hanging out with Joe Biden Hey yeah, we'll open up your supercharger Network in exchange for a few billies so we can make more superchargers everywhere so our Tesla owners don't get pissed off at all the congestion that we're going to create by letting other people use the Chargers Jamie Diamond in the nicest way possible is basically saying we are going from people stemi checks to corporate welfare in chips and energy and it's going to have a massive inflationary impetus. That's actually by the way how China stimulates China during this recession. uh, or sort of this covet pandemic did not stimulate their people With stemi checks and and cash they the people had to go save their own money. It was very difficult for uh for for Chinese individuals relative to to Americans or even Europeans in regards to how much government support we were receiving on an individual basis.

and in China you focused on corporate welfare, Corporate support corporate stimulus. Well, that that's basically what Jamie Dimon is suggesting. We're moving into this potentially new inflationary regime driven by government spending and how we have to ignore models traditional economic models and we're likely to see what he says is a normalization of interest rates. That's a way of saying we probably won't be going back to zero percent.

Maybe we're going to stay at a Fed funds rate of three or four percent for quite a while longer. And we've got to get used to this idea. And that means markets really have to adjust to higher rates for longer. That sort of reiterates what I've said earlier.

Patience, patience, patience. It's a very interesting idea, but another very interesting idea that's somewhat uh, uh, compounds what Jamie Dimon suggests. Here is the following: and we're gonna. This is so remarkable.

I'm gonna read a lot of this and add commentary. Uh, it's not that long. It's really worth it because I'm my opinion. it's just mind-blowing insight into perspective on economics.

So if you're an Econ person, this is phenomenal. I I mean like I Usually think the flash sale and the programs on building your wealth that's going on right now, or the shadowing experience, you know, come learn from me directly, Ask me questions, Whatever. I Think that's incredible and that's that's a really good deal. but this effect is insane.

All right, You ready for this? So I Really like this? Let's let's go through some of this Together in effect is a change in relative prices resulting from a change in money supply. This is very. That sounds complicated, but it should be a very, very simple. Basically what is being said is, look, inflation occurs when you change the money supply.

How much money supply there is. We're gonna keep going here in just a moment because it gets more interesting than that. You might think to yourself, oh well, that's obvious, right? Like yeah, Print more money than you get inflation, right? Not necessarily. And this is the crazy thing about what Jamie Dimon says about models, because the Economist just talked about exactly this as well.

So the Economist did this really, really good piece. The piece is, uh, right here. and it's uh, lots of investors think inflation is under control, not so fast. And if we go through this piece, we'll actually find that there's a lot of talk about sort of the traditional, uh, idea of inflation.

Which is that? Okay, well, if we have, uh, higher rates, we have higher rates to fight inflation. And basically the way we calculate inflation is just as a formulaic measure of what's unemployment and what are rates doing. That's sort of the old school and traditional Keynesian way to look at inflation. But the Economist makes this really interesting argument right here that aligns with what Jamie Diamond is saying and aligns with what the country on the fact is saying.

Take a look at this. Tracking the money supply is deeply unfashionable. So again, when I read that definition of the cantal on whatever effect you might be thinking to yourself, oh yeah, well, duh, Inflation goes up when the money supply goes up, right? But look, it's actually not the traditional school of thought. Even The Economist reiterates that tracking the money supply is deeply unfashionable.

Since the 80s, central banks have generally focused on interest rates rather than trying to fix the amount of money in circulation. Money does not even feature, as in. in other words, money is not even a part of the quote state of the art models. There's that word.

Models of Inflation. In other words, the models of inflation that we use today don't even care about the money supply, which completely ignores the gun. DeLeon Effect I Have no idea how to say that word. So I'm just going to keep going with that, by the way.

And I'm not going to excuse myself anymore. So here we go: Which the traditional models are: interest rates, the real economy, which includes the labor and inflation expectations. So in other words, traditional economic models say, hey, we got to look at what are rates, what's the economy doing, and what are expectations of inflation. We've heard that a million times before, certainly from my channel as well.

Hey, as long as inflation expectations are anchored, maybe we're okay, but that's also important to make sure that we're on the path towards disinflation otherwise. Oh, God Otherwise, those expectations will break and then we have to make things worse, like throwing your pencil. Oh I Hope I didn't break the tip. Oh, it still works.

Okay, cool. Anyway, so what do we have? Yes, the money supply was one of the few indicators to provide an advanced warning of inflation across the Oecd organization of economically developed countries, a broad measure of the Uh. This sort of warning Supply or warning from the money Supply shows that we saw a 12 increase uh, in the six months after February 2020.. So in other words, by about August of 2020, which was really about a year and 13, Maybe a year and three months.

Yeah, about a year and three months before. Like getting to the end of 2021, where we really started getting nervous about inflation. We actually already saw the warnings in the money Supply, and it was a massive red flag that big inflation was coming simply by looking at the expansion of the money supply. But it's not just the expansion, the money supply.

That's interesting. We'll have to go into detail about that. So let's keep going. and I'll tell you you, if you think it's just money supply up higher inflation, that's actually wrong.

It does have to do with the money supply, but it's actually the derivative of the money supply that matters. I'll explain that in a moment. I'm not a big fan of calculus either, so don't worry about that. but I'll explain that so let's keep going.

A recent study by economists at the Bank of International or for International Settlements finds that countries with stronger money growth saw markedly higher inflation, and that incorporating money growth into inflation forecasts would have improved their accuracy. So in other words, maybe what we need to do when we're trying to predict inflation is actually look at the change in money supply growth rates. There's the derivative, and then we might know what could actually happen with inflation. We're going to go back to the cancellation or whatever effect in just a moment.

But let me explain that. So if the money supply Okay, so let's call it the M2 money supply is going up like this: Do we have inflation or not? According to the what we just read from the economist, the answer actually is no. Now that seems weird, right? but that's because this is linear. Okay, now let me change that.

If the money supply is growing like this, do we have inflation or not? The answer is yes. Because the derivative, which is the rate of growth here, is exponential. Here, the rate of growth is constant. So the growth rate is.

If if we're now measuring the first derivative, which is like the acceleration, think about it. Like when you hit your gas in your car. If you get to one level of in of acceleration where you're adding, maybe I'll just say a mile per hour per second. Let's just say your your actual rate of growth or your your acceleration is actually constant, right? The graph of your acceleration is constant.

It's flat. You're accelerating at the same speed, When you're accelerating at the same speed, your potential and your money supply is rising. You're not actually creating inflation. According to this argument, the argument is actually that when you hit the gas faster and faster and faster, and you're accelerating faster and faster and faster, and your derivative line is growing.

In other words, the rate of growth is expanding. So in other words, if you're thinking about like company earnings, think about that a little bit differently. Think if you're growing at 25 25, your rate of growth is constant, right? But if you're growing at the money supply at 25, then 35, then 45 your, or maybe even 50 to go along with the sort of the more exponential curve there, maybe it's even 60. Right now, your rate of growth has shifted from a constant to much faster.

What happens when you do that? Boom Inflation. That's where the inflation comes from. And it's really interesting because if you look at the money supply graph, you could see right here. look at the constant, almost constant increase of the money supply here, right? No inflation, No inflation right here.

During all of this, no inflation. But look at when the rate of growth changed. Whoop! Big Fat Rate of Change, right? That was a red flag That was a huge warning signal that said oh, the rate of change has exploded. We're about to deal with a whole hell of a lot of inflation.

That's fascinating. Now let's keep going with the gun. Uh, okay. I Feel like I'm saying it like an Italian but it's actually French Uh, see, it came from a 1680s book which actually came before Adam Smith In The Wealth of Nations book.

Uh, and it's the uh uh in general. whatever. Essay on the nature of trade in Gen. Okay, whatever.

who cares? So since the 2000s, the world's largest Central Bank started to run out of policy tools like lowering interest rates and many were aggressively creating new money during each major financial crisis. Yeah, so you have a financial crisis. They just turned the money printers on. The current state of the US economy is experiencing inflation expanding during the Biden administration at rapid levels, resulting in the increase in price cases that occur in energy.

Blue Collar labor and food, but not in other products and services. Keep in mind this article is a little bit older, but it teaches us a principle that is very important today. Okay, it's very important to internalize this one I would like personally. I would write this down in your notes somewhere because it's so interesting.

but anyway, with the creation of the US Fed and the U.S exiting the Gold Standard, the C effect has favored investors and owners over wage earners workers in the aggregate. Okay, I started my channel around that thesis. My channel exists around the belief that you will not build wealth. If you are not either an investor in stocks or bonds, real estate, or businesses, that's it.

You have three choices to get rich in. America Okay, stock spawns businesses. real estate. If you have none of those, you're probably poor and you're gonna stay poor.

It's just like I Wish they would teach you that in fifth grade, so you could like put that mindset to work earlier. But you know most people don't learn that until they're like 25 or 35 or 45 and then it starts getting too late. It's sad. but I don't know.

Maybe they do that by Design It's that The Sea Effect also had a theory in which the beneficiaries of the state creating the currency is based on the institutional setup of that state. This essentially means he who is close to the king and the wealthy likely benefited from the distributional choices of the currency through the system. Think about all the PPP money, right? Like the people with guess what, real estate, stocks and businesses got the gold. Anyway, since the 1950s, most of the world has adopted a Keynesian style of economic theory.

In times of financial crisis, the central banks are used to increase the money supply and the large banking institutions like Jamie dimon. and the capital markets distribute or lend out that money call markets and prevent Bank closures time and time. It is clear the uh that in the case of the U.S capital Markets, many of the U.S banks, large private Equity houses and Wall Street farewell after Central Bank QE I mean that's obvious So they turned on the money printer who wins its banks private equity and Wall Street whereas you individual Savers are usually the ones who deal with the jump in inflation and the loss of purchasing power that's during a QE regime, right? So in other words, they're saying look under the Keynesian economic school of thought when you turn on the Money Printer to sort of minimize the effects of recession, you're really benefiting rich people more. You're hurting poor people because of the inflation you're creating thanks to the derivative change or the change in the derivative of of the Uh rate of Growth of the Money supply.

Chanting the phrase by various heads of state of buildback better can essentially mean who gets the new money out of the crisis and where shall that Capital be allocated? Okay, now this is interesting because look how crazy and a crazy lead this relates to what Jamie Diamond says Jamie Dimon says energy like the green explosion. basically chips. right? That's who wins. That's who wins.

Uh, that's awesome. All right. So by analyzing the current U.S financial and economic system, tech companies like Amazon which Lobby the US government and U.S airlines benefited tremendously. That could be said of other governments across the world as well.

The pandemic was a boom for the Ultra Rich according to the World Economic Forum Interestingly, with the passive passage of the Cares act PPI Ubi Basically, uh, you know, blah blah blah, we basically supported businesses. Okay, fine, but the Federal Reserve now preaching about the risks of U.S Income inequality and climate change. which is interesting as their QE policies have clearly widened the income gap. What policies can be used to mitigate the gentleon effect.

How are institutional investors such as Sovereign wealth funds, pension funds, and and basically, uh, institution? How? How is Wall Street getting ready for the crash, so to speak. when QE goes away. Now, what's interesting is I didn't tell you this, but this was written basically at the top of the market October 2021. In other words, they used the gantalion effect to predict the disaster that was about to happen.

In other words, hey, QE really great for Wall Street Private equity and businesses and the rich. but when that QE flip-flops be careful. it's going to be hard unless you have new forms of government support. Now, what complicates things today is we do have new forms of government support and they happen to be in energy.

uh, in the green space as well as chips. There's a reason why when I keep talking about my PP uh, that is pricing power stocks. when I keep talking about PP pricing power style stocks. There's a reason why I think there's a massive wind at the backs of chips AV Makers Battery makers Etc There's a reason.

Okay, uh, that's why I'm a big fan of pricing power style stocks, especially based on on the handouts of government stimulus. Unfortunately, the cantalon whatever effect now suggests that we're having a reversal of the massive inflation uh effects. Via looking at the M2 Money Supply, we could see that the previous rate of growth that we've had in the M2 Bunny supply has actually turned negative. Now, that's obviously because we're going through a quantitative tightening cycle.

so let me explain that in relation to this effect quickly. If previously, and I'm gonna I'm just gonna overly simplify this. Okay, if previously, we were growing the money supply at two percent a year, so we're going plus two percent plus two percent plus two percent. Here we go.

How much inflation do we get? Zero Because the rate of change is actually constant. So it's almost like inflation is a factor of the rate of change in the expansion of the money supply. So when this all of a sudden became say, plus ten percent plus ten percent right during the massive money printing, we went through. what did we get.

Oh wow, we got, you know. Basically Plus 10 inflation. Holy smokes how simple. It's almost scary how simple it is.

but the warning signs were there and and just to to show you kind of maybe where we are with actual numbers today, let me go to this piece right here. Uh, it is. Uh they show us how how close we are I'm pretty sure when I get to Green over here there we go look at this. The expansion of the money supply is about 17 today and consumer prices are about 14 above Trend today.

In other words, consumer prices are almost completely caught up to to this change in rate of the expansion of the money supply. Okay, so let's go back to where we were under this page. Okay, so zero rate of change Zero Inflation Money Supply is growing constantly. Massive increase in the money supply.

my M to M2 here on the left right and what happens? Inflation skyrockets. What are we actually getting now? Well now we're actually in this environment where we're reducing at let's just say, a constant rate. Okay, so the money supply is declining at a constant rate. So gee, I wonder what's going to happen with inflation? It's obvious it's gonna go down.

Uh, this is where people are like and including the bull. The Bulls and the Bears are slamming their heads against tables, going fed like it's it's gonna go down. You're going to overdo it and the recession is going to be what the bad part is. because you're going to destroy so many companies and this is where you get a lot of the Bears saying look, there's no reason why companies should be coming more valuable right now.

especially in certain sectors which I believe are ones that don't benefit from the new sort of stemi checks that would be Staples uh, grocery stores Staples McDonald's restaurants these guys in my opinion. Costco's uh, right, the uh, the uh, whatever. These are the ones that are probably going to end up getting screwed in the next few years. and it's the ones that are getting the stemi checks while we're visiting deflation.

Then in my opinion, you're going to see the massive explosion of of value. And and that's why I personally am so heavily focused right now. Chips, EV, battery makers, etc etc etc. Tesla Whatever.

Whatever. Because we're likely to see the disinflation while at the same time, the people getting stimmy are these sectors. So while you get disinflation and the FED likely pushing the broader Market towards recession because they're so behind, they're not paying attention to the gun dealer on the fact they're not paying attention to that. Instead, they're paying attention more to the traditional Keynesian economic school of thought.

You probably have the FED pushing us over the over the edge into uh into sort of a darker territory which is bearish for a lot of markets broadly, but in my opinion actually oddly bullish for the the ones who are surviving and getting the stimi checks and those are those here. So hopefully you learned something with again. tell it on the fact, man, take a shot every time I've said that in this video, you'll be fine. just don't drive.

Cheers! All right that was fun. I like that one right? that that that whatever effect that should be the can't effect oh James O'leary Are you related to Kevin O'lear anyway James O'leary says in all caps. Okay, all caps, You ready for this. Do you care? People who followed you got hurt on shift badly.

Where have you been I've been talking about how terrible shift will be as an investment since the beginning of the U.S vehicle shortages in like February to April of 2021. You're asking me about a stock that I liked two years ago and then promptly flip-flopped on when we went to a used car shortage. When you go into a shortage, guess who loses the vendors? The ones who make money off transactions. Guess who's losing today in the real estate market real estate agents.

Now some people are like, what about sellers prices have gone down a little bit a little bit. Yeah but not I Mean maybe prices across the board in the United States are down 10. but guess what? transactions are down 37. So guess who loses when transactions are down 37 percent exp.

Realty Redfin Zillow Re Max Coldwell Banker Guess what shift is like Like all of those companies I just talked about. So I'm sorry if you did not pay attention, you need to put your big boy pants on and go. I've listened to a thesis two years ago and then I didn't come back for the follow-up Wow. I'm an idiot and I can only blame myself.

That's what you need to do. I'm sorry, but I'm also not sorry because I've been very clear on the channel if you've been following me. In fact, I tell you my thoughts every day: I'll take an L I shorted Airbnb going into earnings. That was stupid.

They did very well. I'll take the L But if I've been saying the same damn thing over and over and over again, I'm not gonna take an L because you were an idiot and you weren't listening, that's your problem. Foreign M2 Dropping at the same rate as treasury purchases. look at the treasury's meeting with regular CDs and great depositors retail pressures there, there are potential uh, Black Swan considerations in the bond market.

One of the weirdest things that's happening right now is the creation of the repo market, right? The reverse repo market and how much it's being used. Because banks have so much excess capital and they're not using it to buy Bonds in the bond market, they're parking it in the repo market and the repo Market is is barely seeing a drawdown. Now, what's really interesting about that is it kind of makes you wonder. like when the Federal Reserve rate exceeds what you know six month T bills are paying you.

banks are better off just parking their money in the repo Market than they are buying treasury bonds. That means less buyers for treasuries Less Buyers for treasuries means price of treasuries down yields up When yields go up. Guess what loses real estate? So that's why I'm still bearish real estate. Now don't get me wrong, you know I mean as soon as rates fall, you'll get some quick stability.

You saw that in December January you have a massive lack of inventory story in January that's a duh. Like most listings expire, they're written for December 31st and then sellers get discouraged and they take their properties off the market. Just wait for the the spring surge of inventory. And if the spring surge of inventory aligns with the Uh with with the sort of fear of year-over-year price declines and high rates, oh boy, that's gonna.

that's gonna be really entertaining to see. I think it's very bad news. very bad news. but uh, we'll see.

we'll see. All right, let's see here. Um, okay yeah. I mean it's it's this is a fair.

This is a fair argument. Uh so I Want to talk I Want to touch on this Now Fair Follow-up Here You says you say a constant rate of M2 increa and increase didn't lead to inflation. How does a constant rate of decrease mean deflation? Okay, let's let's clarify that because you're right. when we go back to the question mark I Drew Here the the point that really is being made is it's to say that Okay if we're switching.

so when we inflect when we inflect, there will be an impetus change. And even if that impetus change is going back to zero, right? which is not deflation, this change right here is considered disinflation, right? Going from a higher level to a lower level that's considered disinflation, going negative would be deflation, right? Generally, it's going to be technology that's going to push you into deflation, which could happen. But you're right. Let's clarify that let's not go as far as calling it deflation, but the idea would be uh, if if we're getting to this this impetus of a Contracting money supply, we should be approaching zero.

Now, obviously this is a broad effect and it's hard to sort of micro down and say this is exactly what's going to happen. But I would I would guess solely by looking at this effect and of course the leading indicators we're looking at Whether it's corporations earnings calls, whatever, it may be it, and the supply of labor which has exploded. If we do still have crazy labor mismatches though, which is a problem. But anyway, we would expect to see disinflation over the next few years.

Very, very rapidly and very quickly. But when I say very rapidly, uh, that's over the span of a few years. Uh, and so I suppose you have to zoom out to call that rapid. Uh, but I do think that in 10 years from now, we look back and we're going to go.

Uh wow Yeah. Money Supply was expanding at a constant rate. Okay, no surprise, inflation was what Stable. Oh you.

all of a sudden expanded money supply super quickly. What happened? Oh wow, You had inflation. Oh, then you went back to a stable money supply and a stable rate of now Contracting Money Supply. What happened? Oh wow.

Inflation basically went back to stable right? This and then this period of time right here, right here. I Think this is what you'll end up labeling as: uh, uh, There we go. Let's write this here. Transitory.

Uh, now again, that'll be painful because it'll actually have been 2022 to probably 2020. Four or five, right? So this period of time, well, I felt very long. uh, and hellish. But it could, according to this principle, should end up proving to be accurate.

Uh, and then who wins during that time? Well, again, the ones getting the Stimi checks in my opinion, my thesis, my thesis. Uh, so you know. All right. Stand by.

there we go. Good follow-up question. thank you for that. I Always appreciate that kind of clarity.

Uh. two acre piece of undeveloped land and desirable location. Paying 2K interest a month was working to sell to a developer in Q2 last year. Not sure what to do? All right? I Hate to say this.

but the number one thing I Say not to buy in the real estate investing course is land. Land is an alligator like. It makes you no money unless you're You're in farmland and that's different. It makes you no money and uh, it's illiquid.

Uh, and it it costs you money, right? You have to maintain the lot and then if you have a loan on it, you have to pay as you said interest on it personally. I Would get rid of that lot as quickly as possible I'm not personalized Financial advice for you. That's what I would be thinking I Think development is very difficult. If you're getting into development, you better have a lot of experience in development and speculating on Raw Land is very difficult because you're not selling it to.

uh, you know, a home buyer of which there are millions, right? You're selling it to someone's who specifically wants to develop there. That's very challenging. Uh, so yeah. anyway.

I I I Don't you know Now the worst kind of land you could buy would be land with alligators on it because I mean then it's just ironic. Uh, more. Austrian Economics Yeah, Okay, so by the way, what we just described was Austrian economic School thought right the the cantilever and effect. uh yeah.

um okay. all right, let's go on to the next topic. Oh yeah, we get to talk Tesla Next, that's gonna be cool. All right, let's do some Tesla talk.

What is what is a good old Pathy have to say about Tesla Uh, this is quite interesting so we're gonna pull this up. It's also cool because I you know I Interviewed Brett Whitten from uh, our convention and our Flagship Oops, he was great. Uh, watch that on my channel if you haven't yet, just type into YouTube meet Kevin uh Ark investor or breadwitt or whatever. Okay, one sec.

All right. Uh, right. So let's go five seconds. Now we gotta talk about a Tesla We gotta talk about not only what Kathy Wood says regarding Tesla her price Target on Tesla but we got to talk about: is she interested in Byd and why is she interested in Byd? Are they even remotely interested in automation? What kind of cost curve reductions are we looking at? Is it just batteries? or is there something else to pay attention to as well And has Elon Musk liked any of Kevin's tweets yesterday? Well, I kind of gave that away.

Yes. Follow me on Twitter to find out. Uh, which one actually? uh no. I'll just show it to you on screen right here.

It's kind of cool. Uh, like it. woke up to it this morning. So Elon Musk collect your Tweet Government should never limit the potential of anyone to equalize privilege.

Government should help those who were dealt a worse hand. Example given: don't be like California specifically Culver City removing honors classes because not everyone is represented. Instead, invest in more educate education for those following behind. Yes, yes, Great tweet.

Oh wait. I'm just complimenting myself I'm sorry. Anyway, follow me on Twitter at Realmeet Kevin and make sure to follow me on Instagram where I'm posting a lot of stories of uh, our real estate travels including yesterday. We won't be making a video out of that content because there's more family day, but you get to see some of the houses we're looking at so check that out as well as the flash sale on the programs on building your wealth link down below which is linked to Tesla Investor Day which is coming up on a March 1st my thesis By the way, on Tesla Investor Day if you haven't yet seen it, make sure to type into YouTube Meet Kevin Tesla is bankrupting the competition Tesla Investor Day Preview gives you some pretty cool insights about the potential for what the model 2 might actually be and it might be a lot more obvious than it seems.

so watch that video. But for now, let's listen to Kathy and respond. our Flagship strategy which which is Arkk Tesla is our largest holding. but if you look at ARK Q which is our autonomous, um, our autonomous technology and robotic strategy.

we also own other uh names like Byd in China and etchang and a little Neo as well. Now, uh, why uh do we think uh EVS are the place to be? Well uh, we are analyzing Battery Technology but more important, drive train technology which includes batteries. and if you look at the cost curves associated with drivetrains, what you'll see is that for every cumulative doubling in the number of electric vehicles uh, sold, produced and sold, cost declined by roughly 28 percent. Uh, and it seems as though keep that in mind for a moment if let's say a drivetrain costs a thousand bucks once you produce twice as many.

So let's say Tesla goes from a million vehicles to 2 million vehicles or any. Electric Vehicle Manufacturer She's basically saying that thousand bucks is now potentially only going to cost uh, let's say 28 Minus So 720 dollars? Great. That's fantastic. Now remember the battery day or the investor Day goal is to potentially show how the next Master Plan 3 MP3 can reduce costs all costs by 50 percent for cost of goods sold of electric vehicles at Tesla.

Of course she's broadly talking about just specifically EV Drive trains and how those cost declines are so rapid something that you're not seeing in Ice Vehicles Those have already reached essentially their their bottom in costs. Like you're not making internal combustion engines cheaper, they've already hit, they're they're low so to speak. and if anything, their their longer term cost has started to Trend up because of just the inflationary impetus that we've been going through. But anyways, Eddie The total cost of ownership of an electric vehicle is lower than that of a gas powered vehicle.

which means uh, which. Which helps us understand why last year, electric vehicle sales globally were up I believe it was 62 or 64 percent, while gas powered vehicles were down about seven percent globally. So the electric vehicle shift is underway. Consumers want electric vehicles a total cost of ownership, cheap, cheaper.

So last year there were 7.7 a million electric vehicles uh, sold around the world. We think that number is going to 60 million in the next five years. Now The consensus estimated that it is that it's going to only 20 million, so there's still a big gap between. Think about that, that's a 3X She's suggesting in where we are and where the consensus view is that 60 million We Believe will account for 75 roughly of all vehicles sold in five years.

So electric vehicle is very important. Now Many people focused on Asia say, wait a minute. Byd is winning here. And if you look at last year's sales, Byd sales if you look at hybrids and Battery electric vehicles, they were up 211 percent to roughly 1.8 million units whereas Tesla's vehicle sales were only up 40 percent.

And so the question from Asia is, well, isn't Bydia Byd ahead of the game here? Uh, you might say yes based on those statistics, but if you take out High by the way, this is a, uh, a counter to Charlie Munger right? Charlie Munger is like ah, Byd is going so great. So this is basically without saying it Kathy would directly responding to Charlie Munger Now because of where I paused here. She's basically saying if you take out hybrids here we go Hybrid vehicles and we think hybrid is is going away. Hybrid is two systems in one, much more complicated, much more costly, and you look on that basis.

Byd's a pure battery. Electric Vehicle sales last year were 900 000 whereas Teslas were 1.4 million around the world. But electric is not the whole story here. In fact, from our point of view when it comes to Tesla Uh, autonomous autonomy their autonomous strategy.

the autonomous taxi platforms is much more important than their electric vehicle strategy. In our view, our fifteen hundred dollar price target for Tesla It's roughly it's a little over two hundred dollars now, but our fifteen hundred dollar price Target in five years is two-thirds because of autonomous. And when we listen to Byd We do not hear autonomous as a strategy. That by the way, my opinion: Huge Boon For which company no, no I know you're saying Tesla I know you're saying Tesla it's okay Nvidia Seriously Huge Huge Boon for NVIDIA there now I I Don't want to come across this like hyping in video right now because the darn thing ran so much after earnings because all they did was talk about Ai and it's like like I want to buy more Nvidia I Don't want you guys to pump it on this God I Understand AI is important.

Don't get me wrong, Kathy is going to talk about it as well. Okay, like yes, but like most companies have already been using Ai and developing AI they've just not really been talking about it since chat Jpt and now everybody's like don't worry, we too are working on our yeah yes yes I too am working on AI with our company house hack. Okay, like it's not topic of a deal. Apparently everybody thinks it's a big deal, but no Nvidia Why? Because when the companies realize they're behind like Mercedes who only fixes about I think it's 17 of their recalls via over their the air updates Uh, companies like Mercedes What do they do? Well, they realize they're way behind on autonomy.

So as you can see here in the Nvidia earnings call and I'll just summarize it here. But basically what you see with oh, it's 17 uh, what you see with Mercedes is Mercedes going to companies like Nvidia for their autonomous uh and automotive technology whether it's the systems on chips or or whatever. uh, the Gpus for the the neural Nets the the AI basically for for your driving, uh and observation uh, whatever. I think Nvidia is actually a big winner of Automotive companies falling behind Tesla I Think a lot of people I mean look at it this way Toyota Mr Toyota from Toyota is like oh no, hybrids are the way hybrids are the way.

That's the future. That guy gets fired for reiterating that hybrids are the future and he's part of the silent majority. It's fired. Now you get somebody else who's coming in.

What's he saying? EVs And it's true. Like electric vehicles are the future. So so pure. EV Platforms coming soon for for Toyota Finally, finally they're getting with it.

But look at that, that's like five or six years behind when they should have made that realization. They should have made that realization back in 17 or 18. Now you've got companies that are like, yeah, we don't Toyota is another one of them, by the way. Oh, we don't need autonomy, we just need adaptive cruise control or whatever you know like.

I Drove a pretty much a brand new Sprinter van yesterday. Sprinter vans by the way. Absolutely beautiful, fantastic cars. I Cannot wait until Tesla makes a sprinter van and I know that Elon Musk has a place in his heart for the Sprinter van.

I Think they're just probably too large to Giga cast yet and they got to Kind of Perfect the model before they get to larger ones. I Don't know. that's my hope and that's the excuse I'm giving I just hope by 2030. I get a sprinter event from a Tesla and that's because I want the autonomy.

I'm driving in this thing and it sucks. It sucks I'm sitting there for like 90 minutes and I have to hold the steering wheel. Okay I know that sounds terribly first world, but my point of that argument is once you drive every day and you technically don't drive because you're on full self driving, you're just sort of supervising. how do you go back? You don't But the Legacy companies are so far behind.

they're like including Byd and not investing in Autonomy like Kathy What's this? They're going to be forced to dive into Autonomy and they're not going to have the time to develop it themselves. So what are they going to do? They're going to go to a company like Nvidia or you know, Mobileye which which you know Intel's spinning off so or whatever wherever they can find it. I'm not saying Nvidia is the only player, but I am saying if you kind of want to hedge to Tesla's autonomy, Nvidia is actually a very interesting play Anyways, keep going. We hear it more with the x-pen Uh, but again, they from a unit volume point of view, are far behind Byd and Tesla So that's how we're looking at the world right now.

I Think when you're talking about electric vehicles, you're not talking just about drivetrain. The drive train strategies: I Think the companies that are going to win as I mentioned before are not focused only on electric. They're focused on autonomous. Which means they are focused on three of our major Innovation platforms.

First robotics autonomous vehicles are robots, second energy storage. They will be electric because the total cost of ownership now for vehicles is uh, lower for electric than gas powered and three Artificial intelligence. So these are three major platforms: Artificial Intelligence will power these autonomous electric vehicles and we believe that Tesla from a thought leadership point of view, is leading the charge so to speak In this uh, in this movement towards autonomous electric vehicles and just in in terms of your fragmentation point, you know the the five thousand dollar. Vehicles If you look at the range and performance of those Vehicles there's no comparison to a Tesla Model 3..

the range is very limited. The power is very limited, so you really do have to adjust. Uh, when you're talking about price for range and performance which is what we do and well, most people do. But there are some people who are so convinced that Elon Musk is an evil man that they don't do that and it's so weird I feel so terrible about it.

but there's someone in my family who is such a person. I still love them I'll still have beer with them. Whatever. just saying.

it's crazy and uh, I do believe that Tesla has for a given price the best range and performance of any car on the market today. One of the things I could say David sorry, um, that we're not just talking about uh Battery Technology Drive Trains When we're talking about autonomous, we're talking as I mentioned before about robots, energy storage, artificial intelligence. and we're talking about software as a service. So over-the-air software updates I Got my Um I bought my first model three in 2018 I Have never taken it in for service I have never been to any station I Don't have to go a gas station.

Okay warning: Do not ride with Kathy her tires are probably bald I'm just kidding. that's obviously different than service, but it's like that. that's important. So think about that.

How much in the way of costs, uh, and convenience I have been saved over these last five years. The most important variable, uh, we believe in this new AI age is, um, proprietary data and I I think uh, if we're looking for killer apps, you know a lot of people are trying to compare this to the early days of the internet and we didn't know during the early days of the internet that it was the apps on top of the internet that were going to Garner all of the economics, the social networks of course. and um, and today, what we believe people are missing is that the big winners are going to be those companies that not only have the right AI expertise, but also have the right domain expertise. If you thought, if you talk about life sciences and multi-omics DNA RNA Proteins methylation, you've got to have domain expertise and understand that.

But even beyond that, you have to have your own data. So we think that AI is going to cause one of the most profound productivity increases in the history. This, by the way, is very similar to what Brett Whitten is obviously also at ARC uh mentioned in the interview with me. uh which I mean you Again, you should watch that interview.

Uh, it's uh, just type into YouTube meet Kevin Arc invest and you should see it Brett Whitten phenomenal examples of that productivity increase that AI could do in your life where maybe that AI isn't separate on like chat GPT but it's like built into your Excel spreadsheet or your email or or your text messages or or whatever and it makes your life so much easier. I mean I Just want to give a like a simple, simple, super easy example of something that already exists today that makes my life easier is like if I want to say like uh, if somebody's like oh, where are you on an iPhone I can just type I'm here and then it shows up. You press the little button it's like current location. Boom, it already does that for me.

Think about that just like on steroids, right with with what where technology can go in terms of understanding what we're trying to do and then simplifying Our Lives It's really incredible, which will always remember. If you also want to simplify your life, use the flash sale down below to get lifetime access to programs I'm building your wealth Whether that's zero to millionaire real estate investing course most popular right now, followed by Stocks and Psychology of Money. Both of those is a bundle. Very, very popular.

Uh, fantastic way to learn how to build your wealth in investing. And then if you are looking for making more money as an employee or entrepreneur, more tax benefits LLCs whatever. check out the Elite Hustlers Course These come with a lifetime access to their live streams and would love to have you there. Let's keep going of of the world and so you have to.

As you're looking at investing you, you must look at companies and how they're harnessing AI to lower their cost structures. That's the first killer app and then other companies that have proprietary data like Tesla We'll go back to Uh Tesla It has more it has collected over the last five to seven years, the the highest number of real world driving miles in the world. In fact, it has probably collected more miles uh, by an order of magnitude than all of the other Auto and tech companies around the world. and that's why we think it is in the pole position to develop and win at the autonomous taxi platform.

uh, strategy. The first company to get from point A to point B most safely and quickly is probably going to win. So we're looking at a lot of winner take most opportunities in this new AI world and the winner take most. As I mentioned before is based on bringing in the right AI expertise, the right domain expertise for your own businesses, and the highest quality and biggest pools of data upon which to train AI in our flat.

Yeah, that's a really good point. The training of AI as well you need. It's not just having the machine or or some data, it's having a lot of data. And that's probably the hardest part of AI And that's where she's suggesting.

Tesla's clearly a leader and it's it's a I think a fantastic response to Charlie Munger And and it makes me quite excited for seeing what's coming up on investor Day again. watch my video on investor Day, but just to give you a little preview personally: I Think it's very possible that the model 2 or whatever that people think is going to be announced and investor day I could be wrong. but I wouldn't be surprised if it's actually that 25 000 car is actually the model Three. In other words, here's how we can make the model 3 cost 50 less to produce and sell it for twenty four thousand, six hundred ninety bucks.

Whatever they choose and actually have an affordable car that's amazing. In other words, not going down to a two-door car or not going down to a limited range car to get to 25k, which is generally what people expect with a two, uh, a model two. I've also been a believer that in the future, a smaller car like that would come out I Do think a car like that makes probably sense for the Chinese markets, but I've adapted my vision and I agree with Brett Whitten from Arc when he told me in person that the likelihood of a smaller car like that being popular in the United States is very low because as Americans we buy a car for that that edge case scenario not for our everyday scenario. So I thought that was, uh, really incredible.

But anyway, we'll see, that'll be fantastic. Very cool perspective here from uh Kathy on, uh, on on Tesla and the Autonomy. I Definitely think there's a lot of lack of paying attention to what's going on in in Autonomy. so super exciting.

So uh, okay, let's uh, let's keep going here. Okay, uh-huh All right. so uh, let's look at a few Q and A's we've got here. America Loves them.

Huge cars America The bigger better. Yeah, no kidding huh? No kidding. Kind of want a Rivian truck. too pricey.

Well, they're pricey because the company's losing money like crazy on manufacturing them. but they are very nice. Very very nice. By the way, does the deal? Do yourself course Teach you how to rebuild a destroyed house.

Remember the do-it-yourself course is really trying to teach you how to renovate for rental and do-it-yourself Property Management So it's do-it-yourself property management and separately rental. Renovations It's not like all right, you know your suds need to be 16 inches on. Center that's that's that's like a contractor course, right? That's different. I'm a software Dev Came here from Twitch recommendations I Know nothing about the economy and marketing, but I Watched here in the last 15 minutes.

Very interesting. Oh thank you so much appreciate that. Thank you for watching on. Twitch Planet Fitness I think Kathy is also ahead of this curve, but it could happen faster than we imagined.

That's also potentially true. How quickly uh uh, AI will I think how quickly I think AI will personally get to 80 to 90 percent. Very very good, very quickly. But I think that last 10 20 will be very difficult.

Uh, for example, the AI that we're training for house hack is is very very very good. Uh, 80 to 90 of this time. Uh, but getting that that last 10 20 in much like Tesla full self-driving is the most difficult part. and that's the part where it still takes a lot of human intervention to make sure you're not getting screwed much like open door and Zillow who relied too heavily on their their algorithms and their broken Ai and and now they're you know? Well, Zillow Thankfully got out quickly enough.

but Open Door is basically getting screwed. Someone here is asking why were you bearish on energy the previous week Almost all energy companies are also in green energy. Yes, this is true. Look for example, at a company like Occidental Occidental Petroleum Ticker Oxy, they are in to manufacturing carbon carbon capture technology which in the future could be extremely profitable.

but unfortunately today I've come to the conclusion that it's just a little bit of essentially clickbait to suggest that the oil companies are also in Green Technology offshore wind farms, carbon capture technology or whatever like or BPS into electric vehicle Chargers Don't mistake it. these companies are oil companies natural gas companies, right? These companies use uh, carbon, uh, a carbon-based energy to make lots of money? Yes. Are they trying to transition to Green because they have so much money and they can make massive investments into green? Yes. But those are still money losing Investments at this point.

so it doesn't make me very excited about having a heavy allocation to those. even though they do it, it's just not the primary. it's like a sideshow and I feel like it's more of a a political Sideshow than like a profitable Sideshow and and I'm I'm not very interested in political I like I don't like making Investments based on politics because politics are insane like the political I mean y'all I mean most of you remember I Ran for governor I I got to see firsthand coming in second place of recall candidates in California What what the political system was like and it's nutty. Now we gotta talk about another crazy covet conspiracy confirmed as the Wall Street Journal has for us.

I Downloaded this this morning. Take a look at this. This is a mind-blowing piece. Wall Street Journal Now saying the Energy Department which is one of the big players in scientific data of the government, not some of these other Sideshow organizations that still think covet came from natural transmission because somehow bats can infect humans.

Nope. The Wall Street Journal Finally flip-flopping siding with the Energy Department and saying the energy Department says the lab League most likely origin of covet or or the lab League uh, in China Chinese Lab Lake was the most likely origin of covet. It's very interesting. let's take a look at what we've got here.

So the Wall Street Journal Breaking this down, the U.S Energy Department has concluded that the coveted pandemic most likely arose from a lab leak. remember Wuhan and how China vehemently denied that this came from a lab leak, that this was just natural transmission from like a wet Market or whatever where they were selling you know, certain animals or whatever and somebody got sick at the market. They did not at all want to indicate that they were potentially responsible for the covet pandemic. I Mean think about how many people died, how much the economy in in many regards was destroyed because of covet.

Now obviously, some things became a lot stronger thanks to government handouts and stimulus. Most specifically Rich governments uh, or a rich government. businesses related and or closely associated with the government. Whether that was the airlines or businesses receiving PPP funding or people who are Real Estate Investors much to the hurt of poorer people who didn't own businesses, assets, or real estate.

and so anyway, very unpopular. Obviously for China to take the L on covid, but that what used to be right-wing conspiracy accuracy more and more seems to be exactly what happened. The shift by the Energy Department which previously was undecided on how the virus emerged, updated this particular 2021 document with just a small five-page report update and they're highlighting how different parts of the intelligence Community are coming to different conclusions about the origin, but the FBI now joining with the Energy Department and saying the virus likely spread via a mishap in a Chinese lab. Some of the other Uh departments, including the Energy Department originally made a judgment with low confidence quote-unquote low confidence that this came from a lab leak, but now they're switching and flip-flopping to basically saying yeah, it was probably a lab league and so they go into some more detail over here: I Think it's quite interesting here that the FB the FBI excuse me the FBI previously came to the conclusion that the pandemic was likely the result of a lab leak in 2021 with quote moderate confidence and they still hold the view of moderate confidence, the FBI apparently employing microbiologists, immunologists, and other scientists and they support their conclusion that hey, it's there's moderate confidence that this was a lably the National Intelligence Council Uh, which of course refused to comment here.

They still