To another episode of the Meet Kevin report it's actually lucky number. Uh, what are we on six today? Which is it? Six? No, yesterday was six. I'm pretty sure today is actually seven. Let me fix that really quick and double check.

Uh, but either way, uh, it is my birthday today which is kind of exciting. That means uh, the first 30th year ever for me. uh, is over. Oh, it is number six today.

That's great. So we're on number six today and tomorrow will be lucky. number seven. and uh, yeah, I'm 31 today.

It's kind of weird because I I told myself that 30 was going to be a really good year because it was a new decade and obviously, uh, when your birthday year brings you into a new decade, things have to go right? Well, they didn't. I think 2022 was a little bit of a of a challenging year. although I'm a big fan of challenging years. uh, lead or sort of paved the way for good years coming after that.

Uh, maybe maybe I'm blindly optimistic, but I I really believe that. So uh, we'll see. fingers crossed I guess I guess for 31. But uh, yeah, there's there's surprisingly a lot that we have to cover today from what's going on with a Pfizer what's going on with uh Paul Pelosi uh, multiple, uh, crazy body cam releases? uh that I want to address I obviously as well as the market.

uh, we'll probably also talk a little bit about real estate and house hack. and uh, we're certainly going to talk about inflation or company research. There's a lot about that we'll talk about. Tesla So a lot to cover.

I Think the easiest way to get started is quite frankly just to get started in this one because it's quite wild. Uh, how much there is? Uh first I I Want to cover this this chart on flows and this is probably the most exciting part for the stock market and it's has to do with the flows and how January can set up for the standard in the year. So the rule of thumb is actually pretty simple here. and I guess I shouldn't say rule of thumb because it's more of a uh, statistical uh, happening rather than a rule of thumb.

But apparently if you have a positive January which so far we have in the stock market, if you have a positive January in the S P 500 there is a 48 chance that you're going to have a positive year. Uh, when you when you have these combined now that's a little less than half. but when it does end up going positive, you tend to have an average return of 20 percent. which uh, I Found that pretty remarkable.

Uh, so this was a piece that Bloomberg put together and it really to me it suggests that a positive January kind of suggests. Okay, you have a 50 50 chance basically of having a green or red year, but if it goes green, it tends to have an average return of 20. So I Found that relatively remarkable because that, uh, you know, the average return in the stock market not considering dividends over the last 40 50 years, somewhere around 7.9 percent throw dividends in. you're closer to about 9.1 But that's also looking back where we've gone through periods of substantially higher inflation, where you would expect higher earnings and and ultimately higher Uh earnings per share, and therefore higher stock prices.

Remember, inflation is not always associated with the Federal Reserve trying to destroy the market and causing a recession, and so oftentimes some nominal levels of inflation just lead stocks and assets to rise in prices. So I Found it very interesting that, uh, a positive January is historically associated with such substantially large returns. especially if uh, you know, the average return of the stock market going forward might only be not 7.9 anymore, but maybe five percent or or even less. Who knows.

So that'll be something obviously we'll uh, pay attention to and keep our fingers crossed on, because I think most folks are looking for some positivity this year. We'll keep an eye on that. So uh, let's see here, that is the January part now. Uh, another thing that is quite remarkable in my opinion is that finally, and this is, uh, this has been a long time coming.

We finally have Elon Musk meeting with the EV Administration official and Clean Energy official John Podesto is a senior advisor of the Biden administration at the White House Apparently Elon Musk met John Podesto for a Thursday meeting. Musk later confirmed on Twitter that this was true. In fact, he just replied with the word true. This is in contrast to him often replying to stories saying false.

For example, just the other day Bloomberg had a story of uh Elon Musk potentially wanting to raise three billion dollars by selling shares of Uh Twitter and Elon Musk promptly replied and said false. So I think it's quite fascinating to see Elon's uh, confirmation or denial. And what's great about this is it really marks one of the first times that we actually see uh Elon Musk involved in uh anything that the White House or the Biden Administration has had to or has been working on. Uh, and even though it it's not like a meeting with Biden and announcing something great or new, uh, it's it's a step in the right direction.

especially since I think Elon Musk has regularly felt uh and so has Tesla felt uh, like a little bit like the black sheep from the Biden Administration that is not not really invited to Uh EV events even though Tesla is an EV, uh, an All-American Eevee manufacturer. So I found that, uh, fascinating and uh, quite exciting. Another thing that I found so interesting about Tesla was this uh tweet that came out about uh, the kilowatts or from the kilowatts and uh, it shows. sort of the time frame differences of charging a Tesla versus charging a uh, a sort of regular electric vehicle.

and uh, now what? what? I find insightful about this is I've actually used both systems before also with a Tesla. so the left one has the Tesla Supercharger on the right side. you've got the Electrify America ones I've used uh, chargepoint Electrify America blank I've used a lot of the different machines and usually what you do if you have a Tesla is you just put a little adapter on your charger and any basic stick it in your Tesla. You go through the prompts, you set up whatever you pay, and you go.

Usually the what I follow and find is when I'm using the non-tesla superchargers, they're a lot slower, a lot of the charge Point Chargers that you get at. let's say I don't know Disneyland uh, the Disneyland Resorts in California they're super slow. You pretty much have to have your car parked there for 10 hours to get any kind of reasonable charge, and most people kind of just park there, squat there and and never leave and so they're rarely available. whereas with the Tesla supercharging Network you're generally incentivized to get your butt out of there ASAP Because they start charging you once you get usually to 80.

You can extend that to 100 full on your battery if you choose. But what I thought was great about this representation was just showing the Simplicity of the Tesla supercharging. Network Now I will say they have given the Electrify America charger a little bit of a head start here and I actually appreciated this. You can see that right here: the Tesla while the Tesla charging port is open on both of them, you can see they've all already put the adapter in for uh, the the other superchargers or regular Chargers whatever they are.

although Electrify America has been getting faster. uh, they've been installing faster Chargers But let's go ahead and play this and so you can see here, we're two seconds in grabbing the device, sticking it in, and the Tesla person is gone within about six seconds. and now on the right side you see that the individual has to go through their app prompts, make payments, make sure it's charging In Fairness I Often do also double check that my Tesla is charging by making sure the light changes color on the little charging uh device, but the Tesla person's been gone for you know? Uh, probably about what 22 maybe give them 20 second difference there. Not terrible, but it shows you some of the Simplicity and the ease of the differences here.

Uh, and the reason for that is that the Tesla charger communicates with the Tesla car that is there and the Tesla car is linked to uh, your own billing methods that are again linked to you if I owe your car. So the Tesla Supercharger knows this. or maybe it's not the Tesla Supercharger that knows this. it's actually probably more likely the Tesla and the Tesla uh, essentially LTE network that's in the car that realizes okay, we're charging.

Let's go ahead and Bill right? it's probably all done through the car which is linked to your method of payment. So it streamlines the whole process. whereas with Electrify America they don't know what car is coming. they want to make sure they get paid.

so everything has to be done through the terminal of the actual Electrify America station. So there is a fairness to that in that really this is designed for Teslas whereas this is designed for pretty much everyone uh, which I think is quite interesting. In the future, there's a suggestion that maybe the Tesla app could be a you know replacement for basically this whole terminal and you could use the Tesla app to charge any kind of car even if you don't have a Tesla and and have that sort of streamlined service via the Tesla supercharging Network I Really think the supercharging network is something that's that's really underrated for Tesla's uh I think a lot of people when they think about EVS have range anxiety and and I understand this too. I I find one of if you have a Tesla.

One of the tips that I find is I Personally found that most of the time turning off Sentry mode actually substantially helps extend your battery life. I used to have Sentry mode on all the time you go to an airport, you're gone for four or five days and you come back and your battery is basically dead and then you're You know you're wanting to get home, but you can't get home because you've got to go find a charger somewhere and then then you know you've got a line at the charging stations. It's kind of annoying I've been able to prevent that now by turning off uh, the Um Sentry mode. Apparently that uses an insane amount of battery, which is crazy.

But what I do think is quite remarkable here is if we look at the year-over-year growth of the Tesla Supercharging Network you're actually seeing some substantial changes here. Uh, I Mean, look at this if we go back to 2018, which I bought my Tesla in the uh, winter of 2017. since then, the Tesla Supercharging network has expanded by uh, 3.5 x in terms of connectors. So that is their 3.5 x more supercharging connectors now than there were.

Then you can see that here there were 12 000. then now there are 42 400. BP and I don't know how or via what brand, but BP is also getting into superchargers. Uh, British Patrol Petroleum.

They I think they realize that EVS would like the next gas station. Basically right? Uh, and so they have about 15 and I think it's remarkable that a company is I should I say cash flow positive as as big oil companies has, Uh has 15 000 superchargers at all I think that's pretty neat. or I should say charging stations. they're not necessarily superchargers at BP but uh I mean Tesla's sitting at about 3x BP uh and these are superchargers rather than just sort of regular.

Chargers I Find it quite remarkable. Just the uh. the growth that we're seeing here I mean 30 35 rather year over year in a recessionary year? Pretty remarkable. You've got 3.29 X the amount of supercharger? uh State uh, what's it called sites? uh stations? I guess they call them uh versus just the connectors.

It's remarkable. There are so many superchargers. Now, you're usually not more than about 50 minutes away from a supercharger. Uh, when you're road tripping, which I rarely do because I absolutely despise driving.

Uh, but when I do I like having a supercharger now? uh. Another thing that I'm noticing is there's there's a big discussion around uh, essentially superchar or or the full self-driving of other vehicles like Mercedes vehicles and I thought I'd play a little bit of a clip here and we could react to a little bit of what it's like driving a superchar or a supercharger. My head's in the wrong place. it's 4 am.

Okay, but um, what it's like driving in in the self-driving modes on some of the competing vehicles to Tesla So here's a Mercedes One Driver doesn't have to pay attention to the road. When the system is enabled, they could read a book or watch a movie or even play a video game. Okay, first of all, the the argument that when the system is enabled that you could just read a book or play a video game or whatever is ludicrous. Since most of these systems do require, you actually still keep your eyes on the road.

Uh, now for Mercedes Uh for Mercedes Drive I Believe that's the case, but it's something to keep in mind that most cars that do this especially like GM Cruise they will make it that you still pay attention to the road. Uh, Tesla does this as well. If Tesla realizes you're looking at your phone, it's pretty aggressive at warning you to get off your phone and make sure you're still paying attention to the road. But uh, let's go ahead actually.

uh The Verge just did a piece about uh 90 minutes ago and they which is a crazy time for releasing a story but they are indicating that yeah, with the Mercedes drive system you do have to still keep your eyes on the road which is what we would expect. Uh so anyway, let's keep going here, but it's still have to stay in the driver's seat and they still have to be able to take over control of the vehicle in case the need arises. We're currently on Interstate five. We're doing 65 miles an hour.

It's too fast for dry powder, Though, we need to be doing 40 miles an hour or lower. We have to. Actually Okay, let me stop there and just say it is ludicrous to suggest that you have autopilot that can only go under 40 miles an hour. This is no different than what like the Hyundai Elantra has today, which is really just adaptive cruise control and Lane centering, which is not that hard to do.

You keep the vehicle in the center of the lane using lidar or cameras and uh, then then you use generally some form of radar to keep distance from the car in front of you. It's not that big of a deal, it's very old technology. Uh, I will I do want to correct myself and then I want to compare this to Tesla Like five years ago, it does indicate that under certain circumstances Drive pilot does actually allow you to take your eyes off the road. However, this is also again only enabled under a 40 miles an hour.

Which uh, for most cases basically means it's only useful when you're stuck in traffic on the highway on certain approved roads for that system, so that is nice. Uh, that is a benefit. I'll give them that, but again. Tesla Back in 2017 when I first got the Tesla and I purchased the enhanced autopilot package, I Actually bought the full autopilot package, and everything.

It was like five grand back then. Yeah and now it's like fifteen thousand dollars. The Tesla bank then allowed you to enable autopilot on the highway and it wasn't watching your eyes. You could do whatever you wanted to do.

Now that's not to say that that was the safe thing to do. You still had to Wobble the wheel about every minute. Uh, back then it was less aggressive. it wasn't watching your eyes, you didn't have to Wobble the wheel as often uh, and certainly was nowhere near as good as it is now.

But the technology that I'm seeing now right here from Mercedes it was already surpassed in 2017 by Tesla You could drive the Tesla going up to 80 miles an hour back then on autopilot on the highway. highway miles are some of the most common driven miles that that Tesla actually has and that makes it extremely good On the highways, you know Teslas don't have as many hours yet in the rain or in the snow or on certain you know roads it's not familiar with. Uh, so obviously the beta system is still learning there. By the way, thank you so much for these happy birthday wishes and June bug here.

And Jerry these these super stickers you're sending Super cool. thank you for that. All right. let's keep going here.

be in traffic. In order to enable drive pilot right now, we're using Mercedes-Benz regular Adaptive Cruise Control Lane Keeping assist their driver's system which is actually really, really, really nice. Um, but once we hit some traffic we go under 40 miles an hour. We'll be able to engage it.

but there are some other caveats. I Mean to me, it's just it sounds ludicrous that your your drive pilot only functions when you're going under 40 miles an hour. but we'll keep listening. On the highway, the weather has to be nice, it can't be raining, it can't be freezing, and you can't change lanes.

You have to stay in your lane while Drive pilot is enabled. but I Don't think you'll really care if you can't change lanes if you're able to text and watch a movie or read a book or play video. Okay, so this is playing up the idea that hey, if you're going under 40 miles an hour, you're allowed to take your your eyes off the road. I I mean in in theory, you could probably just enable that for any, uh, adaptive cruise control system I I Don't know that that's necessarily the best thing to encourage, but uh, that is a sign of at least some confidence from Mercedes in their system that only goes up to 40 miles an hour and doesn't change lanes.

One of the things that I think is remarkable about Um Tesla is and and uh, you know this sometimes is a little bit annoying, but the um, it'll change lanes for you automatically if traffic is moving faster or slower depending on on what Lane you're in. so if you're in a slower Lane it'll automatically change lanes for you if you're uh in the passing Lane which is technically the far left lane. It will take you out of that lane if you want. You can disable the exit the passing Lane option in Europe It's very rude to stay in the passing Lane in America it's very common to stay in the passing Lane Uh, In fact, it's probably the safest place to be in an American highway is on in the passing Lane on the left because the pretty much the only way you can get in an accident is if you crash into someone or someone rear-ends you.

uh, it's it's you know you don't really have anyone else around you. Generally, you don't have people merging into your lane as frequently because you don't have an on-ramp from being in the right side of the lane. uh, or Lanes on the highway. So uh, ironically, the far left lane tends to be the safest in my opinion.

Anyway, let's keep listening. No games because the car is driving for you as you're using the system. Uh, White means that you you are in charge. You are the person who's driving this vehicle and then as you move up the levels, you go up to level two.

It does tell you that adaptive cruise controls is on and so that that turns green in the uh, the dash Buster But there's still this. You know other things that are white. Then once you get to a situation where you can use Drive pilot, you can tap the buttons around the steering wheel and then everything Fades to green and then once it's all green or turquoise. Once it's all turquoise, then the vehicle is uh, driving.

So as Drive pilot disengages or is about to disengage it, it warns you, gives you an audible visual warning, and then it also tells you why that it is disengaging. So as you take over, it'll say for example: uh, it'll tell you that the vehicle ahead of you is going faster than 40 miles an hour and it's pulling away. Um, and at that point you need to take over the vehicle and of course speed up because people behind you are probably very very angry. I Mean that's just ridiculous I Hate to say it, but again, the 40 mile an hour limit drives me nuts.

Apparently right now, a drive pilot is only available in Nevada and potentially California. It looks like they're going through and trying to get compliance in each individual. State Uh, I'm sorry they're working on California for later this year, but right now it's actually only available in Nevada and under 40 miles an hour. Let me just say this: if I'm going to buy an S-Class Mercedes or an Eqs, you know, for over a hundred fifteen thousand dollars.

uh, I I I Better be able to have autopilot on more than 40 miles an hour because I expect to be it like in my opinion. if you're if you're regularly commuting, you're going to get a little frustrated by that idea. I'm probably just not use it I get it if you're stuck in rush hour traffic. But boy, um, a little a little frustrating.

The Mercedes hasn't expanded that system yet. but hey, you know what? That's Uh, that's the way the competition is right to now. Uh, the uh. If somebody in front of you pulls away and then goes faster than 40 and the whole the system disables.

uh, hopefully it at least still enables the Uh Lane centering and uh, adaptive cruise control which I expect that it probably does how much distance because of course, then okay, why is that? Oh, probably because the sun is blinding. So much. okay. Drive Pilot: Okay, I'm gonna I'll give credit there it.

Uh, when the sun is hitting a Tesla at a certain angle, it does either tell you autopilot is degraded uh and to pay more attention or that it just has to disable. So weather is a challenge for the Adas systems. There's no doubt about that. And Tesla doesn't try to get permission state by state.

They just introduce it shut off system currently unavailable. Yeah, it turned a little bit. We have turned a little bit a little bit. Yep, could not be activated because he's too.

You've got so many ketchup. close up a little bit because we need that at least. Okay, that's interesting. So you actually can't turn on Drive pilot until another car is close enough in front of you.

So it needs it needs a leader car to actually function. That's odd. Much distance do we need between a lead vehicle? It's about 100 meters activating Drive pilot. And now and of course, this is a very specific situation.

you would not account. Encounter that on a real Highway Yeah, the slope curve. So you wouldn't encounter a sloped curve on a real highway. I Don't know that that's an L right there.

that Europe has sloped curves all over. Because the highways are designed to be driven on faster. you know it's it's remarkable to me. Uh, that.

uh, you have really almost nobody competing with Tesla on Vision based uh, Adas uh or or full self-driving Most of them are still stuck in the ways of radar. uh, Lidar? um and uh. You know multiple other uh methods to to ensure the vehicle is where it thinks it is. Like mapping vehicle mapping understanding Exactly Okay, we're only going to enable full self-driving on certain roads like GM Cruise does where we know where every single sign is and every single stop sign is.

And every single uh you know Road Road bump or or Lane markers. it's interesting, it's it's a different strategy, but I think that's going to slow down the competition substantially and I'd love it if we had more Vision based competition for Tesla's really because uh, that, uh, the more competition you actually have, the more you. Not that Tesla needs motivation, but the more you actually motivate the leader to keep going. right? as soon as you look over your shoulder and you're like oh man, somebody's catching up, you start pushing harder and that motivation isn't there again I don't know if it's needed, but that motivation isn't really present right now.

So I find that super interesting. Uh, the the lead uh on on Tesla's full self-driving Uh, just uh. Another brief a comment on my experience with Tesla's full self-driving is it's it's gotten quite remarkable. Uh again.

I finally got FSD about six weeks ago. uh, maybe five weeks ago. Actually, I was very excited about that and uh, now without intervention it will drive me from destination destination. So I found myself getting in this habit of getting in the car uh, putting in my destination and just pressing the button and just watching it do do everything that it does.

And what I've also found really remarkable is I used to you shouldn't do this I used to keep a little like counterweight uh on the wheel so I didn't have to nudge it every so often I actually stopped doing that for multiple reasons. Uh, number one, the FSD is so good now. Uh, but I don't 100 trust it. So I actually do literally pay attention to it the entire time.

but I'm rarely uh taking over anymore I kind of just sit there and I'm just amazed by oh, let's see what it does here and it's incredible what it does. It still makes You Wobble the wheel every about 30 to 60 seconds. Yeah, but not not a big deal at all. and it's it's pretty painless.

You get pretty well in the habit of of uh, wobbling the wheel and uh, operating with with FSD So it's really remarkable that uh, it's making incredible left turns. uh, it's pulling, merges off, merges off. well. One of the places that I find it struggles is yield signs.

It still often treats as stop signs which is a little Annoying if you have traffic behind you but it's learning, you could see it gets better with every iteration. Uh, once they upgrade the neural Nets that is uh I've I've watched that over the past uh, past while improve in certain areas which is nice. So uh, kind of wild to be part of a time where probably in in five years our children will never have to drive themselves. I Think that's pretty cool because I think human drivers are never going to be as good as a as a computer or computer will at some point far exceed the capability of human driving.

which is good. This is always paying attention. Unlike us, we don't pay attention. we do silly things.

So uh, those are some interesting thoughts. I I Wanted to share on on Tesla's Full Self-driving I Do want to say that as Tesla stock runs, it's worth just paying attention to the fact that the more the stock runs, the lower your rate of return potentially becomes for making an investment, right? So for example, if we pull up our last valuation model and we suggest okay, 4.7 million Vehicles by 2025. I'm sorry, uh, 4 million Vehicles by 2025. 47 000 average selling price per vehicle take rate of 10 on uh FSD for new vehicles sold I Purposely went with a low take rate because some of them are going to be sold as software as a service rather than just the full 15K payment.

In fact, I wouldn't be surprised if most people just end up using the monthly fee capability for full self-driving and that way they could see if they like it. and why shell off. 15K Now if you could just pay monthly for it, sure eventually you'll You'll pass a break-even point where it makes sense to just have owned it rather than pay forever. But anyway, uh, look as Tesla stock price moves up, the rate of return that you expect goes down right and the multiples move up again.

So for example, when Tesla was 120 per share and you expect it to be say 489 dollars at the end of 2025, your rate of return somewhere around 59. But now if we're at say 180 bucks, your rate of return per year drops an entire 20 percentage points brings you down to about 39. And if we go back to, let's say 300, your rate of return goes down to 17. Which don't get me wrong, it's still good.

But then then you start wondering, is it like at what point uh, does it make do do other companies potentially then exceed that rate of return? So as the price goes up, it becomes stickier. Uh, for it to keep going up. Although I do have this bet that if uh Tesla ends up running to 200 per share by the time the coupon expires uh, for the programs of building your wealth link down below with lifetime access to those course member live streams and all the new content we had that's in uh, two days, then then I have to dye my hair green I made that bet. Uh, when this was before earnings when I made the bet, the stock was somewhere around 127 bucks a share.

I Wasn't expecting it to run that quickly. So we're knocking on the door of green hair here, so it's kind of remarkable. Anyway, Uh, we've got some talking to do now about. uh, what's going on with inflation? We did a lot of talking about.

Tesla here. So I'm gonna write that down here. So Teslan Tesla Tesla I Don't know I Always think it's fascinating. look at what the competition is doing.

and a lot of folks who aren't familiar with the different self-driving systems they suggest. oh, you know, these other companies have full self-driving too. And and they're referring to these systems where cars were able to go 40 miles an hour or whatever and it's not even close. Yeah, competition isn't even close.

and I wish it was because again, I think that actually motivates competition is good. Uh, again, if if you think you have no competition, not really as motivated. Uh, anywho. so let's take a look at some inflationary issues since we're going to talk about next.

Let's see here that they have. They have a lot to talk about regarding inflation. We're going to do that in just a moment. Let's see here.

see now. what are the downsides of the weekend is you don't really have CNBC or Bloomberg to help you. In the meantime, there's no cover. That's okay.

I Actually enjoy reacting to to them though when they're playing, so that's enjoyable. But uh, let's see here. Where did I Here we go? Yes. All right.

So we got a few things to talk about with regard to inflation. It's both good news and bad news. So the first thing we're going to do is we're going to cover some potentially bad news about inflation or some potential news that makes us want to take a pause in suggesting that that state inflation is over. And uh, we're in the clear: we don't want to be in the mindset that inflation is for sure over.

Remember, the big danger that we face in the market right now is believing that inflation is done. There's no way inflation can rise again. and uh, and we're back to the moon. And there's always the risk that inflation pops back up.

and in the event that inflation starts trending back up again, we're going to be in, um, not a very happy stock market. dare I say? And what I think is remarkable is that while this risk of inflation remaining somewhat sticky uh, exists, we're actually noticing that bond yields are remaining very sticky, which is actually quite bad for real estate in order for the real estate market to really get a floor placed under it. In terms of the pain that we're about to see in the real estate market where we're going to get those year-over-year comparisons showing negative real estate appreciation which I expect will create substantial fear in the real estate market. I Believe a sticking around 3.5 percent for 10-year treasuries is bad for Real Estate I Believe we need to get to about two and a half percent on the 10-year treasury.

Unfortunately, quantitative tightening contributes to the 10 years sticking around three and a half. But also I think as inflation goes away. Uh, and and you start seeing inflation recede, you should have more people moving into taking advantage of these bond yields at three and a half percent and you should see the yields fall. But because they're not falling, it's a sign that even the bond market is still uncertain that inflation for sure is going to fall.

The This is despite the fact that the bond market is pricing and rate cuts from the Federal Reserve at the end of the year. So you definitely have a very tentative Market I would call it. And there's a reason the market is tentative when it comes to inflation. Here's a piece from Bloomberg that suggests there are no disinflation signs yet in Jerome Powell's preferred price gauge.

and uh, that this is the price gauge of basically Core Services excluding rents. And even though inflation on Pce is under shooting the FED Summary of economic projections: when we look at Core Services inflation, we're still stuck at about point four percent, which is the same as where we were last month and on an annualized one, three, and six month basis. we're still stuck at Core Services around five percent. And this is not good.

especially the Super Core level, which is where you take away uh, what you have for uh, Housing Services X Inflation, right? And so this chart right here shows us Pce Core Services X Inflation and it shows us still relatively High into flight. Nation is stuck in this sort of core Services segment and this is creating some pain uh, for or or some ammunition that is for Jerome Powell at the Federal Reserve to potentially say hey, you know what, when it's time for uh, his press conference, he might end up uh, referring to exactly this measure, this core uh, Services inflation measure and suggesting, hey, look, core services are still running hot. We're going to stay higher for longer I Actually think the Federal Reserve is going to have to do exactly that. They don't want to talk inflation or they don't want to sort of talk up markets and reiterate What Markets are seeing Which is this idea that hey, inflation's going away.

Inflation's not the problem anymore. Instead, what's the problem is an aggressive fed I Don't think the FED wants to do that because if the FED does that, we potentially create, re reiterate a market rally and we potentially lead people to spend more money on Services which leads to more services, inflation and then inflation comes back which actually would likely induce a harsher Federal Reserve reaction with uh, maybe maybe truly higher rates, Maybe the uh, concern that rates could end up running to uh, three point, uh, or sorry to six percent becomes a reality if inflation ends up popping up again or core Inflation core Services inflation continues to stay high in order to keep massaging this down, you have to make sure people stop spending money. uh, as much as they are. And the more people keep spending money, the more that level stays up.

People spend more money when they feel wealthier, when, uh, when they feel that real estate prices are going to start moving up again or stock prices are always start rallying again, start spending money more Loosely Again, usually at least according to Robert Schiller From Princeton Uh, famous economist uh, who? Uh has put together things like the case Shell or Index for Real Estate He suggests that it's actually house prices that lead to the biggest boost in Core Services inflation. So it's really when people feel like they're becoming poorer because home prices are coming down. That is generally when you're going to really start seeing that deflationary hit to spending and then core services. And so I believe the FED is going to have to pretty much have this pretty harsh face on for probably at least the next three to four months, whether or not they actually raise rates each of those months.

I Think the important thing is them, whether they pause or not being very clear that we're staying here. at least until we're certain that Core Services Inflation is going down. especially X Housing. Because we do think housing is going to plummet, a housing inflation will plummet.

Uh, that has to obviously happen. Uh, which, if it doesn't, that'd be a big problem. But we think with leading indicators such as current rents versus Old owner equivalent rents that will end up happening and housing will end up being a big anchor to inflation coming up. Uh, we have to see that come through.

But in the meantime I think probably it's too premature to be excited about this idea that the FED is is going to be really nice to us on February 1st which is uh, their their next Fomc meeting a press conference day. Now there's a lot of talk about uh, this CPI change in how the federal or uh, how the Bureau of Labor Statistics or um, uh, the uh the the Um CPI release is calculated. so there's a CPI waiting. and there's a little warning on the CPI website at the Bureau of Labor Statistics that says starting with January 2023 data uh, the the BLS plans to use will be updated with weights using annual weights based on a single calendar year rather than using expense data from two years, which is the usual way they do it.

Now, a lot of folks think that's it. Here we go: this is the Bureau of Labor Statistics rigging data again. and maybe that's true, but I Personally believe the reason that they are wanting to use 2021 weights rather than 2020 and 2021 weights as sort of an average is probably because of the Oddity of a year that 2020 was all right. 2020 was really coveted in lockdown here, and I believe.

That's probably why you're expecting uh, the BLS to use weights just from 2021 instead of 2020 and the weight changes could end up being relatively nominal. so we'll see when the next CPI report comes out. Uh, we will find out. Okay, uh, hey, what? what? What Were the weight changes right? And then we can a little bit more breakdown.

Hey, how much of an impact did these weight changes actually have? Personally, I don't think they're going to have a dramatic impact, but mark your calendar for February 14th and we'll see what impact these weight changes have had. Again, this is not saying we're we're not going to compare to 2020. We're not going to compare to 2021 in terms of pricing. It's just to say that, because actually, we're not right.

We're really only comparing to 2022.. it's just to say that what consumers spend their money on is going to be looked at from the perspective of 2021 spending rather than 2020. When we were in lockdown era, which lockdown era could could overweight. let's say Home Services rather than restaurants and air travel and going out services.

So we'll see what, uh, what kind of impact that ends up having. but I think it's too soon to to say that. Oh, here we go. the CPI is for sure going to be rigged.

Now we do have some more good news, but also bad news, when it comes to inflation. I Started with bad news. So I think for a brief moment. I'll continue with with bad news.

We've already talked about how Johnson and Johnson and Procter and Gamble Staples providers are still seeing High Inflation and the impacts of high inflation are expected to be felt in their earnings for at least the next five months. Really? Basically, through the first half of 2023, that's actually a bad thing, right? We don't want to see that Staples or companies that are producing our you know, shampoo or deodorants or whatever. uh, or still suffering from high inflation. whether that's freight costs or commodity prices.

And even though those commodity prices have come down, they're still seeing year over year pain and inflation. That's not good. We don't want more inflationary indicators. uh, and Johnson and Johnson and Procter and Gamble are really telling us they don't expect to see inflation start subsiding until the second half of 2023..

Now, it's entirely possible that by the time we get to the second half of 2023, we're going to be in an environment of deflation. Potentially rapid deflation? Certainly, we're already seeing that in the Autos market. And there was actually a post this morning that I saw showing uh, price cuts for certain BMWs Yeah, here it is. South Bay BM This was the car dealership.

Guy This is the faceless guy who actually provides pretty good information on on cars in Uh or on. Twitter I Have not verified this, but anytime I've verified any of his other information, it's been pretty right on the money. So I'm gonna go ahead and go with it here. Uh, he indicated that BMW started dropping prices at least here's a South Bay BMW report showing that uh, there's a South Bay BMW clearance sale going on Uh, and that all new and in stock I4's Series 3 Series 4, Series 5, Series 7, Series 8 X3s and X5s are all receiving price Cuts Ranging between three thousand, five hundred dollars, and ten thousand dollars, probably the average price cut here is about four to five thousand dollars.

So it's interesting to start seeing price Cuts occur at some of the competitors to Teslas and I think that's actually quite deflationary and I expect we're going to see a lot more of that, but in the meantime, we do have a little bit more bad news to cover. and then I want to get to some good news on inflation and that is what 3M just said in their earnings called. So 3M look I I am I'm the biggest fan of earnings calls and uh, we we continue uh to to read earnings calls on a daily basis to try to study what's going on in the world. We believe that earnings calls are some of the most underutilized, yet best tools for understanding what's going on.

For example, in the Tesla earnings call, We actually believe that Tesla alluded to Future price Cuts coming, but did so by dodging a question about whether or not future price Cuts would come, but reiterated that future price Cuts would actually come via their margin pressure Commons that gross vehicle margins would probably decline to about 20 percent for Teslas and then eventually Trend back to 30 over time. Uh, that means the worst of margin pressures isn't actually built in yet to Tesla This is something that I think the market is somewhat forgetting is that yes, the margins were not as bad uh for Q4 But this is what I said right I said this going into Q4 like 27 times I said look most of the price Cuts occurred in Q1 or at the end of Q4 with vehicle credits. you're not actually going to see the real margin damage to Tesla until 2023 in Q1 in that vehicle. Report right? That could end up being the worst for Tesla Uh, but I I Think markets are rallying now for Tesla because they they see that the demand for Tesla's is still there and even if they do cut the price of this vehicle because they're now recognizing FSD Revenue their earnings per share actually has the propensity of of growing quite substantially as Tesla recognizes FSD revenue and more people start taking FSD That's the big question.

This is one thing to recognize revenue for stuff you've already sold. It's another thing to actually continue to sell and push. FSD Anyway, let me get into this: 3M Earnings call. So uh, the 3M earnings called uh gave us uh, both green flags and red flags.

I'll start a little bit with with some of the red flags and unfortunately 3M much like Procter and Gamble and uh, Johnson and Johnson which these are are Staples right? these are our like industrial Sables I Like to call them when when they see when they see inflation, you know a lot of people are seeing inflation, right? Uh, they expect uh inflationary pressures to remain also for the first half of 2023.. So now you have three big companies saying that Johnson Johnson Procter Gamble In 3M they're also seeing slower than expected growth due to Rapid declines in consumer-facing markets such as Consumer Electronics and Retail And they say that Dynamic actually accelerated in December as consumers sharply cut discretionary spending and retailers adjusted inventory levels. Now that actually on one hand is actually deflationary, right? Uh, Taiwan Semiconductors actually came out in response to this and said hey, look, even though we expect fewer smartphone sales, more smartphones today are actually using more semiconductors and so Taiwan Semiconductors thinks they could be somewhat insulated to reduce smartphone sales in that each new smartphone has more semiconductors in it I Thought that was very interesting. Don't get me wrong Taiwan Semiconductors to still see reduced demand uh as as other companies are, but I find that very interesting that yeah, the more advanced products get, uh, the more chips they end up using China has covered related impacts Healthcare Continued to be challenged in its recovery, a fall-off and disposable restorator respirator demand, and our exit from operations in Russia uh respirator demand.

Not a surprise to see a big decline there. everybody was buying construction respirators for covet. Initially, inflation continues to impact raw material Logistics and energy costs. The pressure remains persistent and the pressures are broad-based I Believe that people at the Federal Reserve are either asking Jerome Powell to read this drone pile is either reading my videos or watching my videos or uh or staff at the Federal Reserve is passing this kind of stuff on to people at the Fed and I I it's not good when you have 3M Just now, they just released this right.

this is on January 24th. They just stated that inflation continues to remain persistent. For them. the pressures of this, that's a red flag, right? And so this is another reiteration that unfortunately, the Fed's probably going to have to be uh tight for longer now.

3M Says they address inflation through price actions. Well, price actions are are really a way of saying that we're going to raise prices. But the problem with price actions is price actions don't necessarily mean you can pass on all your inflationary costs. and I Found this very interesting.

I actually highlighted this right here specifically. So I'm going to read this and I want to translate it. The key question for us that we have to think through and that's what we are thinking through is as deflation starts showing up in the economy, the discussion that we're going to come up with is the elasticity of price, not just across our company, but across all companies. We found that over time, the company that drives value to the customer can end up having a good price equation.

Now I Paraphrased that slightly because this person stumbled over this miserably. So, I'm going to now translate this in in: English Deflation is likely coming in the second half to input costs and output products within the industry. Output products are stuff you buy, input costs are stuff they use to make stuff, and deflation is likely coming now. 3M Expects to still be profitable, but it sounds like they still expect to be less profitable.

In other words, they expect to be in the green which is their word, but have lower pricing, power, and lower margins. So this is really remarkable because now you have a situation where you actually have the following: You have United Airlines talking about potentially competing on price with the other airlines that was just in their last earnings report. You have Winnebago talking about potentially competing with their competitors on price You have Johnson and Johnson talking about deflation coming in the second half you have uh Proctor and Gamble talking about deflation coming in the second half. or at least you know, reducing inflationary price pressures.

So I'll call it disinflation for Johnson Johnson and Procter Gamble And now you have 3M saying what's it going to look like when we start going into a deflationary environment? While everything is not yet good, it is clearly very very clearly evident and in our face that we are probably going to go into a disinflationary environment and then soon hit deflation. Now the problem with that is it's not going to happen fast And that's what I keep trying to convey in my videos is that we are not going to get in my opinion a V-shaped recovery. The days of a Larry Kudlow v-shaped recovery are over. Instead, what we're seeing is in January of 2020 everyone is like holy hell, Inflation is terrible.

Uh, you know we're kind of over here let's say and and markets are still to fall. Everyone in their earnings call is like inflation is so bad, so bad we're all raising prices. Everyone's racing prices. There was so much unanimousness and and people wonder like Kevin what was your Catalyst They still wonder to this day for selling in in January of 2023 and it was the combination of all of the earnings calls that I was reading combined with the Federal Reserve going oh damn, we've effed up.

Uh, they didn't exactly say that but they basically said that you could still see my reaction to the FED going, oh damn, we effed up uh by looking up a video meet Kevin worst report ever Federal Reserve on YouTube you find it it was from January of 2022. it's it's actually like I think a history lesson to go back. Not because of what I said because I'm not trying to Pat myself on the back here, but because of what the FED said. Uh, and it was combined with all these crazy earnings calls? Uh, now we don't have the Catalyst for a V-shaped recovery Because what are the earning lists or earnings calls telling us? they're telling us slow, slow recovery? That's what all the earnings calls are telling us.

They're telling us. Still seeing some inflation. Slow recovery, Slow recovery, slow recovery. There's no indication though that things are hellish to where we would expect a Black Swan event.

Don't get me wrong, a Black Swan event can happen. You could have some kind of insane dislocation in the bond market where markets suddenly crash uh, and some Insanity occurs. uh, and and stocks could just suddenly break substantially lower and then the FED has to come in and bail out markets and Save the Day. But there is a high likelihood in my opinion I would say a 90 chance.

Okay, this is my opinion. I'm going on all in here. Okay, so I could be wrong, but I believe there's a 90 chance. that we actually end up having the Nike Swoosh style recovery where stocks just continue to recover and they there will be volatile days.

stocks will go down again. I Don't know from what level they will go down again, but they will go down again. There will be red weeks and there'll be hellish times. they'll be fearful there will always be red and again.

But I think on net unless we have some kind of massive capitulation in because of some kind of Black Swan event I Think the fed's going to keep this aggressive face on and markets are going to slowly very very slowly. Trend back up again. We just broke for the first time the downtrend by breaking the 200-day moving average on the QQQ and the spot if you're watching video rather than the audio podcast. you could see that here if you're just listening.

It's simple because now, obviously, uh, after I do these live streams I'm posting these two Apple podcast Google podcast uh Spotify So that way you could listen to these when it's convenient for you. But we've broken the 200-day moving average and we've really begun what could be the beginning of a slow uptrend now I Want you to keep in mind that if we go back to the old days of the uptrend after the V-shaped recovery of Larry Kudlow we basically had two years of an uptrend. We still had dips though it was a rocky way up, but it was a consistent up. It was higher lows and higher highs.

We potentially could start that Trend again now and that's very exciting to me. Now there's also some more good news and it has to do with Chipotle Chipotle Mexican Grill Actually just gave us some very interesting Insight regarding hiring and jobs, which is probably one of the most important parts when it comes to what the Federal Reserve is looking at. The Federal Reserve right now is suggesting that they need to force joblessness to present to prevent the most deadly, financially deadly aspect of inflation which is a wage price spiral and Chipotle just came out and announced that they are hiring 15 000 individuals Across America which is an increase of about 10 or I'm sorry 15 of their 100 000 current Workforce that actually sounds inflationary. That sounds bad, right? coupled with Walmart raising wages.

But we've already talked about how Walmart weighs and wages is really them catching up. Uh, and they are probably lagging far behind because they're losing money and they're very sad that they have to raise prices for their employees to keep them. But Chipotle actually gave us some good news. They said the following quote: it's been getting easier to keep hourly staff with December being one of the company's best months in years for retention rates says Chipotle's Chief Restaurant officer easier to hire entry-level workers now that retail demand is softening and tech companies such as Amazon are laying off workers, the workforce is migrating back to Leisure and Hospitality increasing applicant flow now.

Chipotle is trying to double its footprint of restaurants across uh, the country and this is potentially the best opportunity for them to do so. All right. So let's try to understand that for a moment: Chipotle is basically telling us the wage pressures are going away. More people are finally coming out applying for entry-level jobs which reduces the risk of a wage price File: This is good because this is what happens in a recession.

People look for work and the few companies that are actually expanding are the ones that can really set themselves up for massive success in the future. I'm not trying to again Pat myself on the back, but I I myself and I don't know if this will play out well. it's obviously massive risk, but I have taken on more spending and more business building for my own businesses. Whether that's uh, the Youtube business or the courses we sell and providing more value within them, or uh, the real estate startup that I have or the the financial business that I have.

We're putting more effort into these than ever before and it's because I believe that the time to invest is in a recession. Uh, and then when your competitors don't invest in a recession because they're giving up and they're throwing in the towel and they're bored or or they're just not winning the way they used to and they're sad or whatever. Or they're they're afraid to spend money in a recession. Why I believe I become I have a massive competitive Advantage by spending and so I personally relate to a company like Chipotle on obviously a substantially smaller scale In that, now's probably the best time to expand because nobody else is.

and this actually sort of reiterates what we're seeing with what the Bank of Canada told us the other day, which is that higher rates take a while to hit Services inflation and even those Services inflation is remaining relatively sticky, it is likely to come down in the second half of the year. and so far, that's what everything is pointing at. Procter Gamble Johnson Johnson Winnebago United 3M Chipotle They're all singing the same song: Yes Prices are still higher today than they used to be. Yes, there's still some persistent pressures, but it looks like by the second half of 2023, they're gonna be gone.

and then we're going to be dealing with deflation as a greater risk. And when we deal with deflation, guess what? The Federal Reserve does? They print money baby? They print money. You don't have to look far uh to understand that the Federal Reserve uh prints money. When we Face deflation, the European Central Bank and uh Deutsche Bundesbank have been regularly referring back to the times of fighting deflation With printing money There was actually a piece I can't recall if it was in the Wall Street Journal No, it was in the Financial Times.

That's where it was. There was a Financial Times piece where a member of the Deutsche Bundespunk just a couple days ago was talking about how look when when we Face deflation we print money. That's just what we do. now.

whether you think that's good or not or sustainable or not, doesn't so much matter. It matters what in practice occurs and in practice, that's what they do. So I find that uh uh, very entertaining. uh to to pay attention to because it's it's going to be so weird that when, uh, in the future, uh, we're back to money Printing and in a few years we look back and go.

Plus, how are we back to money printing? This is incredible I actually found it here. Uh, this is uh, the Deutsche Bundespan Financial Times Here it is, the article is entitled interested in China Oh, any sorry, that's an ad opinion Eurozone Inflation Eurozone Can beat inflation while keeping Market stable. It's by Zabeen Mother which kind of sounds like murderer. That doesn't sound too good.

But anyway, a few years ago, when inflation was stubbornly low, despite a series of interest rate Cuts central banks were expanding their tool kit to lift inflation, This resulted in asset purchases in trillions of Euros. This was written like a few days ago. Okay, This is not like forgotten. The FED knows that when they need to print money again, they will be back to printing money.

It's kind of remarkable to think about, but it's coming. it's coming and the signs are very, very clear. I think it's funny when and I've really stopped caring like 2022 I care too much, Way too much. It was a very difficult year psychologically for me.

I I'm in a way better way better uh place now I had had state wise. it's great. Yeah, it's important, especially as a Creator I think uh, you know you have to go through those sort of phases uh, or or the struggles and then learning to advance. Uh, but anyway, I'm in a much better place now, which I'm happy for.

but uh, you know I I look at at uh sometimes I'll post a video and go. Here's good news on inflation and then I post a video and I go. Here's bad news about inflation and if you actually watch the videos you see I'm actually painting a very consistent portrait. I'm saying I I Don't believe that on Net we're going to have a big capitulation I think there's a lower chance of that and I think we're going to have a Nike Swoosh style recovery where it's slow and steady and you want to be invested in the market because you're not going to get the big fed U-turn That's like a bad signal.

It's just not going to come this time. Uh, and and that's why I've been invested in the market now I think I invest in the market too too early and we can complain about. you know, my personal moves and decisions all day long. I Don't think anybody's perfect, but I think the message that I'm sending is very consistent.

but unfortunately, there are a lot of people who don't actually listen and look. Take a step back and look at the full portrait that we're painting and they just look at titles and they're like yesterday: you say inflation was good today you sing bad, this is like flip-flop 127. and I actually think what's quite fascinating about my channel is if you go back and look at all of these not suggesting that you do. but if you go back and you look at all the videos since January of 2022, I've been pretty dang consistent with the trajectory.

uh and and I don't maintain that consistency for the purpose of saying oh, I'm consistent I do that because the the data has been clear. you know the data has been very very. Nike swooshes that things are getting worse. worse, worse, worse, worse worse.

Okay, okay now we're starting to see changes. changes, change and they're very slow and gradual. It's these very slow and gradual changes that make sort of this portrait that we're in now which I think reiterates the Nike Swoosh quick Down a stock market crash that fell three times as fast as the.com bubble. No necessary massive capitulation Point Vic stays low.

Why? Because we're Nike swooshing I Get the question all the time: Kevin Why is why is the pixel low? Why is the pixel because we're Nike swooshing I Don't know if that'll it'll stay that way, but that's a belief that I have. uh. It's also interesting that Americans are actually working fewer hours right now Americans aged 25 to 39 are pulling back on work the top earning 10 of men in the U.S logged 77 few hours in 2022 compared to 2019. now I I don't know I don't know what to make of that.

uh I I Think that in some sense has a little bit of, uh, a disinflationary, uh, push to it because if people work Less hours, then you actually suggest that there's less demand for their labor And that is disinflationary, right? So working less hours I think is the worst thing that you could possibly do from a Uh from a personal point of view. not uh and I'm a big fan. Don't get me wrong, I'm a big fan of you having balance in your life I'm a big fan of you working less hours, but a three percent reduction in working hours in 2022 is odd. Uh.

Top 10 earning women down: 29 hours? down one percent? uh, that must be per year? Uh, or I'm not exactly sure in what measure that is, but anyway, we're seeing this decline. uh in in average working hours and I find that interesting because really I think during these times, we should all be thinking about okay, recessionary times rather than working on trying to scale back. What can we do to double down and make more money because that'll make it easier for us to take the foot off the gas. When when things are good again, it's so easy when things are good to just be like I don't have to work today, right? In a recession? you really? I Think want to be of the mindset of how can I go make more money right now.

How can I study harder? How can I understand more of what's going on? Uh, so that way you know you're not. um, what? what you're You're insulating yourself the best way possible. but you're also making the best investments potentially at the bottom of the market. uh, and uh, and you're making yourself more resilient, You're growing your business more, or whatever it is you're doing, you're providing more value at your workplace, you know.

I this is actually I think one of the best times that if you're an employee to provide value, uh, to your job or to the career that you're in. So I would make the argument that right now, 2023 is the absolute best time for you to look at whatever it is you are doing and say how can I work harder, How can I wake up an hour earlier every morning? how can I improve my skills? How can I provide more value at my job? and I don't want you to think about what your net worth is, Put your stupid net worth in a box and forget about it for 2023. don't worry about it. work harder.

the harder you work, the luckier you're going to get. and I think now is that time where you really want to be that person that says I'm going to increase my skills I'm going to get another license to help provide value my jobs. Uh, you know, if you're working in finance, I'm going to start studying for a CFA you know Certified Financial Advisor license or not licensed certification So that way I know how to do uh Financial modeling better than the next guy I'm going to learn how to type better I'm going to learn how to use chat gbt better I'm going to learn how to uh code better. Whatever it is that you can do to provide more value, now's the time to do that, even if it means spending money on some more education.

You know, even though people are tighter with their money, uh and you know I personally believe now is the best time to invest in yourself and your education. Sure, perfect opportunity for a Shameless plug about the coupon code expiring in two days for the programs and building your wealth where you basically get a condensed version of everything that I know about investing in real estate or stocks or finances or businesses or growing businesses. whatever. Uh You