Throughout the past few months, we've seen many famous investors warn about the dangers of the federal reserve's actions. Over and over again, for example, rey dalio, the founder of the largest hedge fund in the world, confidently stated that inflation is coming and warned in march that the fed may suddenly raise interest rates. Additionally, michael bury and bill gates actually started selling stocks. In anticipation of a market correction, even kathy wood, the ceo and ceo of arc invest predicted that inflation would be at four percent in 2021, significantly higher than the fed's estimate for inflation of 2.6 percent.

In this video, i will cover how the federal reserve has been facing a major division clash, which was highlighted by multiple talks from different fed members. Additionally, warren buffett has also spoken up about this subject by stating that inflation is already here and will simply get worse in the next few months. Welcome to caskins academy, if you're new to the channel, please consider subscribing for more content like this and let's get right into it. Most recently, the federal reserve released its semi-annual financial stability report, which warned of some major risks that we are facing.

While the economy has been rebounding faster than expected, future dangers are on the rise. As a result, the risk in the financial markets is extremely high. The report stated that high asset prices in part reflect the continued low level of treasury yields. However, valuations for some assets are elevated relative to historical norms.

Even when using measures that account for treasury yields in this setting asset prices can be vulnerable to significant decline. Should risk appetite fall, the fed clearly thinks that we are in dangerous territory. The past 12 months marks one of the greatest bull, runs in stock market history, and this means that a sudden change in the market sentiment may lead to quote unquote significant declines. The fed governor leo brainard also explained our current situation in a statement that accompanied the report.

She stated that vulnerabilities associated with elevated risk appetite are rising. Valuations across a range of asset classes, have continued to rise from levels that were already elevated late last year. The asset classes that she is referring to are somewhat obvious stocks, housing and potentially cryptocurrencies. These assets have only continued to go up and she thinks that there is danger to that.

Brainerd went on to say that the combination of stretch valuations with very high levels of corporate indebtedness bear watching because of the potential to amplify the effects of a repricing event. In other words, a correction is likely going to occur in the asset classes that have gone up substantially. Already. Personally, i am holding a small portion of gold crypto and cash along with my stock portfolio, because i believe in today's market climate we must be ready for anything.

Therefore, if a correction occurs, i have the cash to buy the dip and, if inflation spikes up to extremely high levels, i have inflation-hedged assets such as stocks, crypto and gold. This isn't financial advice and is simply what i'm doing so. Let me know how you are dealing with this down below with that being said, there is a lot of uncertainty in the events that could transpire, which leads me to something incredibly strange that has been going on over the past few weeks. Some suspicious activity has been going on at the federal reserve that hints towards a divisive clash going on within the government.

For example. One event that was unusually suspicious was when former fed chairman jeannette yellen, admitted that interest rates would need to rise in response to the massive government spending um. You know it may be that interest rates will have to rise somewhat, to make sure that our economy doesn't overheat, even though the additional spending is relatively small relative to the size of the economy. So it could cause some very modest increases in interest rates to get that reallocation, but these are investments.

Our economy needs to be competitive and to be productive shortly after the market crashed due to her warning, yellen then proceeded to take back what she said in a later interview. In that later interview, she stated that it's not something i'm predicting or recommending. If anyone appreciates the independence of the federal reserve, i think that person is me. I don't think there's going to be an inflationary problem, but if there is the fed can be counted on to address it.

This sudden change in their opinion, seems very strange, as she did a full 180 degree turn on what she thinks about inflation and the economy potentially overheating. On the contrary, as i've covered in a previous video fed chair, jerome powell is not afraid of inflation and doesn't see interest rates rising in the short term. In addition to powell boston fed president rosengren recently spoke up about inflation by stating my view is that this acceleration, in the rate of price increases, is likely to prove temporary. He explains that supply would catch up to the increased demand.

Toilet paper and clorox were in short supply at the outset of the pandemic, but manufacturers eventually increase supply and those items are no longer scarce. Many of the factors raising prices this spring are also likely to be similarly short-lived. The fed vice chairman, richard clarida, also recently mentioned that the fed was a long way from their goals in that they want to see actual progress before tapering off. On the other side, the dallas fed president stated last week that the fed should start talking about tapering off.

Clearly there seems to be some huge polarization within the federal reserve and, as a result, it's difficult to see who we should actually believe either way. One thing is for sure: inflation is bound to rise in the short term, and interest rates will eventually rise. The only questions that remain are when these events will occur and for how long they will occur. For, in my opinion, i believe that inflation is bound to increase substantially in the next few months and full recovery is coming within these months.

The most recent unemployment report on may 7th showed that unemployment numbers are still high, but if these numbers start falling, it's just a matter of time until interest rates will rise. Now, with that being said, warren buffett has warned that inflation is already here and has already reacted to this change himself. Warren buffett is, unlike the typical fund manager, because he and berkshire hathaway as a whole have fully owned businesses. Therefore, berkshire actually has to manage real businesses.

These businesses, which include geico, sees candies and duracell all produce earnings which berkshire receives and reinvests from time to time. In berkshire's 2021 annual meeting warren buffett stated how substantial inflation is already here. In fact, he has actually been raising prices on the products he manages in his fully owned businesses. The consumer response to this has been fantastic, as people are accepting these price increases by continuing to buy berkshire's products, we're seeing very substantial inflation.

It's very interesting, i mean we're raising prices, people are raising prices to us, ah, and it's being accepted. The main driver behind these price increases is the increase in the price of raw materials. Lumber steel, copper, nickel and iron are all at record highs, which ruins profit margins and forces businesses to raise prices. Buffett is seeing these raw materials literally go up and up every single day.

On the other hand, wages haven't caught up because wages are signed by contracts which doesn't change day by day. The costs are just up up: steel costs uh, you know just every day, uh they're going up and then they're there hasn't yet been because the wage the wage stuff follows. I mean if the the uaw writes a three-year contract. We got a three-year contract, but if you're buying steel at general motors uh or someplace you're paying more every day, so it's it's an economy.

Really it's red hot. The issue right now isn't just that demand is high due to stimulus checks and unemployment. Money. Not only is demand high, but supply is also bottlenecking.

Most companies weren't expecting this buying frenzy to happen, and it takes time for the supply to start ramping. Up again i mean, and we weren't expecting it - i mean all our companies when they they thought when when they were allowed to go back to work, you know what uh uh for various operations they would we closed the furniture stores i mentioned. You know if they were closed for six weeks or so on average, and they didn't know what was going to happen when they when they open up - and you know that they can't stop people from buying things and we can't deliver them, but they say. Well, that's! Okay, nobody else can deliver them either and we'll wait for three months or something to start the backlog grows, and then we thought it would end when the 600 payments ended - and i think you know around august of last year - it just kept going and it keeps Going and it keeps going and it keeps going and i get the figures every week - i call her bumpkin calls me and we go over day by day what happened at three different stores in chicago and kansas city and dallas, and and it just won't, stop people Have money in their pocket and and they pay higher prices and it's a bike.

It's almost a buying frenzy except certain areas. You can't buy it. You know your buddy can't buy international air travel and there's so the money is being diverted from a little some. A piece of the economy into the rest and everybody's got more cash in their pocket than except for meanwhile, you know it's a terrible situation for a percentage of the people.

Price levels are increasing, but not in all parts of the economy. The fact that some parts of the economy aren't fully open yet is creating an uneven environment. Restaurants without takeout or delivery were destroyed and those with the takeout option thrived the you know this suit. I haven't worn a suit, you know for a year practically, and that means that the dry, cleaner nurse just went out of business.

I mean that nobody's bringing in suits uh to get dry cleaned and nobody's nobody's, bringing in white shirts uh to go to the place where my wife goes, the small business person, if you didn't, have takeout and delivery services firm restaurants, you got killed. On the other hand, if you've got takeout facilities done, you know same source. Tales of dairy queen are up a whole lot and they adapted them, but it's it. It is not a price, sensitive economy right now in the least and uh.

I don't know exactly how, when one shows up in different price indices, but there's there's more inflation going on than quite a bit more inflation going on than people would have anticipated. Of course, not surprisingly, warren buffett's right-hand man, charlie munger, had to speak up about this monger's opinion has been quite controversial, especially regarding bitcoin and cryptocurrency in general. Unless you were living under a rock, you would know that munger hates bitcoin and literally despises any success regarding crypto munger is already 97 years old and some feel that his opinion shouldn't matter because he doesn't understand modern day technology. On the other hand, others think that his vast experience gives his opinion credibility.

Personally, i think, monger's opinion about anything related to technology should be taken with a grain of salt, because it simply isn't in a circle of competence. On the flip side, when it comes to inflation, his opinion may have more credibility, since he has plenty of experience with it. Yeah there's one very intelligent man who thinks it's dangerous and that's just the start. That's right, charlie munger thinks that the current inflation rate is dangerous, and it's just a startup.

Much more. What's ironic is that one of the common ways to protect against inflation in today's world is to purchase. Cryptocurrency stocks are also a great hedge against inflation. Although high inflation can lead to extremely expensive valuations, which is evident today, one major way i am projecting my portfolio against inflation is by purchasing mining stocks.

Actually, one mining stock, in particular mining companies in general, have benefited tremendously from inflation due to increasing prices and raw materials created by supply, shortage and inflationary factors. I will cover what this mining stock is and why i believe, it's incredibly undervalued in a future video. I am actually looking to double down on my existing position, so if that sounds interesting to you, hit the like and subscribe button for future videos, thank you for watching and i'll see you in the next one.