Some folks are wondering, why does it seem like companies are talking about how greatly they've been able to raise prices? And one of the problems where that's coming from is a lot of companies are reporting their fourth quarter their their calendar fourth quarter. Uh, or they're reporting their first quarter compared to the first quarter of 2022.. And so really, what they're doing is they're comparing this year over year picture and saying hey, look, this is the end of our year or this is the start of our new year And we're able to say, look how much we've raised prices since then But that's still understandable. It's still understandable that prices, of course, increase between January to really June July of 2022 So a lot of companies today and earnings calls are bragging about how year over year they've been able to raise prices, but they're not raising prices anymore going forward.

and they haven't even raised prices quarter over quarter, quarter over quarter, which is known as sequentially. They've actually either held prices flat or just been focusing on margin improvements now. I Find that really interesting because a lot some folks are seeing inflation expectations increase at the same time. And that creates some problems because wait a minute if year over year companies are bragging about how they've raised prices.

Is there a potential? at the same time as we're seeing inflation expectations at least in the one-year term based on the University of Michigan rise and we just had Bullard yesterday come out and suggest, hey, we're gonna have to go higher for longer and I mean it this time. the banking crisis was a whole lot of nothing. so you know what that means. We're gonna raise rates again.

Oh, and we're gonna raise them to five and a half to five and five eighths somewhere around there because we gotta get inflation down. No, it's wild, because at the same time as you have this weird short-term de-anchoring of inflation expectations, long-term expectations for inflation are still stable. Not only are long-term expectations for inflation stable, but when you read any of the Yearnings calls, there's no indication that we're still seeing price increases. uh, at any kind of abnormal or concerning level.

A price increase around one two percent that's normal, right? Even three percent to some extent brings inflation down. But this nonsense about some kind of runaway Paul Volcker style inflation is potentially giving the market some heart palpitations, and there are a few things pointing to that reason. And I think that's why you're seeing some of the indices quite red, at least as we go into market open today and we'll see how they evolve. You know, Netflix of course is usually a little bit of a harbinger of uh, well, what's to come And Netflix Uh, you know they didn't know the customers we were expecting.

We were looking at somewhere around 2.41 million ads of customers and Netflix is like yo yo yo, stop judging us based on our customers. Judge us instead based on our free cash flows. You know it's kind of like the uh The Wolf of Wall Street line. You know I asked my customers to judge me on my losers, not my winners because there are so few of them.

It felt like that. It's like kind of like I Don't know Netflix You know, adding customers is a big deal and apparently y'all aren't able to actually add customers with your new advertising supported price structure because guess what, when people watch a show, people don't want to watch ads. It's simple. Uh, so.

anyway, uh, of course. Yes, they had free cash flow. They had a nice net income boost, but you're seeing companies actually struggle to raise prices. Look for example, at Tesla I mean Tesla's turning into the epitome of price Cuts Now that's on one hand, potentially bad for margin.

Tesla Model wise are now 29 cheaper than they were a year ago. Tesla Model 3s are 15 cheaper than they were a year ago. These price Cuts come just a day after we hear that the inflation Reduction Act has been extended for most models of Teslas except up. In addition to that extension, they're also dropping prices by as much as six percent.

Take a look at this, the base Model 3, which actually only gets the 37 five tax credit basically immediately got dropped by two thousand dollars as it did lose the 37.50 credit. The Model Y Long range performance and standard. All three of these have the 30s or the full 7 500 tax credit that actually got extended. but on top of that extension, what happened? Tesla Reduced prices anyway.

So I I'm like mind blown that there's this potential thesis that somehow inflation is still going to be resurgent. Not just because we're solely looking at a company like Tesla, but it's because we're looking at the broader Market Disinflation is here. Yes, year over year, at many companies, prices may still be higher, but really, now out the competition is which company can actually cut prices to compete for fewer consumer dollars and maximize their profits. And that's actually where pricing power comes from.

In a recessionary environment, you have to ask yourself what product is still going to attract customers as prices come down and margins stay high. And that's going to be a big question for Tesla and their earnings today have they maintained the pricing power? That and people believe that they have had. Remember, pricing power is not simply an explanation of oh, pricing power means price goes up. That's actually highly incorrect, because if you think about it that way, then what you're really saying is in a recessionary environment as demand Falls A company should still be raising their price.

But that would be ludicrous because if a company, we're still raising prices in a recessionary environment, their demand would probably double or triple. To the downside, and what you would end up having is less operational leverage and you'd end up having lower earnings per share profits, which is terrible. That's not where you want to be. You want to be in a situation where you're able to competitively maintain margins, grow earnings per share.

Ultimately, that's the goal of a company, and that's what defines pricing. Powers The company's ability to grow earnings per share with positive leverage in their operating in Gross margins. So we'll see what happens. But I'll tell you to me, there don't seem to be indicators of inflation, but the market is still concerned about those indicators of inflation right now.

And that's exactly why we're seeing treasury yields rise and mortgage rates rise once again. Redfin Just reported for the first time year over year that home prices are down three percent. I Thought by now they'd be down a little bit more on the year over year base basis because Peak to trough real estate was down somewhere between 10 to 15 percent. But real estate has actually started to recover in January and February as Wraith started coming down a little bit and inventory still hasn't moved up at all.

This is despite withdrawal requests from REITs uh, institutional investors suggesting they're going to sell defaults and Commercial we're not actually seeing any kind of inventory search right now. And so even though here's the chart of mortgage rates, even though mortgage rates are high, they're certainly off their September October Even though those mortgage rates continue to take up there on the right, or just taked up a little bit on the right. bond yields are up. Uh, the 10-year treasury.

right now sitting at 3.63 it's up almost 30 basis points. Again, Somehow the market is trying to say oh well, now we're not worried about banking crisis anymore. Now we're back to being worried about inflation and I can't help but look around and see nothing other than deflation and disinflation. I mean maybe I'm losing it.

but the one place I'm seeing prices go up is maybe gold and Bitcoin which obviously some people call digital gold. But even after the OPEC production cuts for oil, look at this. This is the chart of a Brent Crude. So we got oil production cuts that instantly skyrocketed oil somewhere around 10 percent.

and look, it's been bleeding out on the right side. Over here, we ran as high as 87.50 and we're already back to 83.16. This idea that China is going to export a massive amount of inflation when they reopen and and after all that inflation is exported, we're gonna see a massive Resurgence of inflation in America is also dare I say ludicrous because as China is rebounding as you can see here, a piece from TS Lombard just yesterday, China's Mobility is rebounding, services are leading the recovery. What's happening in China China's Ppis, which is the producer price index.

Epic Lows: They're negative year over year on Ppis, so are we like? the leading indicators are negative. In fact, we did a course member analysis uh on PPI versus CPI and it was phenomenal because one of the things we were looking at uh in the chart over here was uh was you could see the Um Ppi is the is the white line over here and then you've got this sort of blue line of inflation of CPI inflation where really housing is just propping up the blue line. And so as soon as housing rules over in terms of rents for year over year, all we have to do is go flat or slightly down from the 7.2 percent rent increases that we're seeing annualized which is nutty. Even if you just go flat, this should roll over very soon in terms of CPI and actually follow PPI down.

Uh, anyway, this is something we were talking about more in the course member livestream, but let's go back to TS Lombard here. Oh, that does still remind me today. Uh, is the day before 4 20. Today and tomorrow we're doing a flash sale uh for the programs on building your wealth.

We are getting rid of the single courses and potentially the lifetime access as well. We're going to be doing uh, something different in the future, so if you wanted to get in the most inexpensive way, now is going to be the time to do that because it's probably going to be a lot more expensive and a higher barrier to entry going forward. So good opportunity to check out those courses and that uh 420 flash sale link down below. But anyway, let's keep going here on inflation.

Look at this: TS Lombard A notable Bear. Folks, A notable bear. What are they talking about? Disinflationary drivers Prevail Inflation Outlook Improving in a growing number of emerging economies. In fact, expectations for emerging economy inflation is falling.

You could see that right there. This is the downtrend of higher expectation inflations being replaced by lower inflation expectations. This inflation prevails in Brazil India China We're expecting it to come in America but we just continue to overweight how much rent affects inflation in America China Services Lead recovery appears unlikely to boost in exports. What does that mean? No.

Chinese Exported inflation. That's a big deal everybody's so worried about. Oh my gosh, China's reopening is going to create this inflationary impulsive I Hate to say it, but I've been pounding the table for five to six months going. It ain't gonna happen.

And the reality is, it ain't happening Like okay. the Chinese are going to spend more money on Starbucks and local traveling. But are they going to spend money and create inflation and more export? Uh, you know. Or or they get export inflation to us.

No, it's just not happening. So now, investors are highly bearish right now. in fact, fact, so bearish that it almost makes you wonder. like for example, looking at Tesla how much could Tesla really fall after earnings when people are already so bearish it seems on the market.

Uh, in fact, take a look at this: Bank of America had a piece as reported by Bloomberg that investor allocation to equities relative to bonds has dropped to its lowest level since the global financial crisis, investors indicated that fears of a credit crunch had driven up Bond allocations nearly 10 percent overweight. In other words, you're you've got people that are still so fearful about are my autocratic garage making crisis that they're flocking to bonds now. Those people are already starting to get hosed because bond yields are rising. Which means people who bought Bonds in the last well, three, four weeks are already taking an L on their bond positions.

and that's 63 percent of participants now. expect a weaker economy, the most pessimistic eating since December of 2022. And uh, yeah, here look at. this sentiment turns more bearish in April Most pessimistic thus far in 2023.

Yikes, Look how bearish this is. Uh, these these little um' lows here I'll highlight these. these lows here show the last time we've had this sort of bearish positioning My goodness, 2011 and 2012. that was like the best time to buy right here.

So was 2004.. I mean you would have wanted to get out by about 2007, but 2004 was a great time to buy 2010. Still had another low ahead of it at least in housing, but for stocks, it was a great time to buy 11 and 12.. everybody's worried about the double dip recession which was total bull crap June of 2019.

Things were still recovering the rest of the year after the 2018 disaster at the end of 2018. Uh, and then Kovid was a fantastic time to buy. personally. I would say a lot of these times, right? here were great times to buy.

Uh, I mean I'd say May I mean 2016 was a phenomenal time to buy as well. Uh, October of 2022 we're off those bottoms and uh, the stock market technically bottomed in February of 2009, so you add a little bit more to go over here in 08 and August of 06 is questionable I think it's my iPad This is incredible. This is a little HDMI thing. I I Can look at this for a second.

Okay, the little tangent little tangent: look at this. look at this. I thought it was the dongles I thought it was the dongles. So I'm like I'm just gonna keep trying dongles until it stops and this is insane I think it's the iPad this is kooky.

That's wild. Uh, anyway, like Dongle Man over here I think I've got like 10 of these stupid Apple dongles and it's insane. This is driving me nuts Anyway, sorry tangent, but you know what? like I'm causing dongle inflation right now by buying so many of these dongles. I had a I had to return something.

some of them are still closed I'm gonna return them. Uh, because I'm starting to think it's not. It's not the dongles. Um, Anyway, so so people are so worried.

uh about inflation coming back. but again, I I'm just not seeing it and we're trying to read Ernest calls on a daily basis to try to understand where is this inflation coming from and we really don't see it. Uh, I mean you again, look at. look at the Tesla price Cuts But don't just look at uh, the Tesla price Cuts look at the prices.

uh for for lithium, look at the prices for some of the Commodities What we could even do is we could look at the Bcom Index, which is the Bloomberg commodities index and we could get an idea for a how are we doing in terms of input prices. We already know when it comes to produce surprises. We've seen producer prices fall because obviously we've gotten PPI reports and and reports suggesting hey, things aren't actually that terrible. But for some reason again, markets have this impression that right now it's time to be fearful again.

I think if I had to give an explanation to this and I don't know with certainty. but if I had to give an explanation to this I think there's a possible fear that over the next two to four weeks people are going to be just solely worried about earnings. And if people are so worried about earnings, then maybe in the short term it'll feel like there's some fear around. uh, inflation.

but again, not when it comes to actual companies and seeing this inflation. I I Don't see it I I Don't see it I Don't know I don't see it at all. But again, let's let's jump on over to the Bcom Index. Okay, so how's the Bloomberg Commodity Index doing? Let's let's look at some things here.

So here's the Bloomberg Commodity Index I Mean it. I Think a seven year year old could draw a trend light on exactly what's happening on the Bloomberg Commodity index. When you go year over year, on the Bcom index, you're at 107 right now compared to 131. What do we got? 107 divided by 131? That's a decline of 19 18.4 percent.

Essentially, that's what you've got right now. Uh, you've got, uh, Lithium prices. Let's pull Lithium prices as well. Let's get these over here so we can specifically look uh at, uh at Lithium.

China is complaining about a glut of Lithium? Oh my. Lord Look at this. This is kooky dookie. Uh, this is the one year Lithium Price index.

Look at what's happening here. I Mean you were at 46 4 per ton over here and now you're sitting at 17 3, 17.3 divided by 40. What did I say? 44.1 Let me double check that. Uh oh okay.

48.3 Well, let's do that correctly. then. 48.3 Yeah, Lithium. Are you serious That I mean Lithium prices in that case are down somewhere around um, 80.

That can't be right? Hold on a sec. 18 2 is actually. uh, where are we right now? There we go. What is that? What is this level right here? 18 4.

Let's try that. Let's try 18 4 and 46 too. 18 4 divided by 46 2.. Yeah, I mean Lithium prices are down like 60.

Uh, and that's not even off peak. that's just off. A year ago, off peak Lithium prices are down even more I mean you're talking 18 2. Uh, from what is that? 550, let's go with 55.

There we go. Yeah, you're down about 67. It's remarkable. So everywhere I'm looking I'm seeing disinflation, disinflation, disinflation.

Is it possible it's going to research? Absolutely. And I'll tell you if inflation resurges Kevin Your boy Kevin Screwed your boy Kevin's gonna lose lots of money. Uh, because so like, yeah, maybe I'm biased, but please show me where the inflation is now. every time I say that people write these comments and they're like, but when I go to the grocery store, prices are still high and it makes me want to pull my hair out because here we are trying to talk about more advanced economic data.

but we still have to step back and say bro, it's the year-over-year change in the month over month change that matters. And if prices are still high, but they're not Rising then inflation is zero. You know I Think that's where people are like, oh, inflation is rigged fine. Maybe the CPI is rigged to some extent.

But look at company data. Please show me companies other than maybe pet stores and Aerospace that are still raising prices trying to find it and I can't see it. Everyone's reducing prices and so in a price cut environment, you have to ask: what are the remaining companies that actually are going to be able to support the greatest margins in a price reduction environment? Here's an extreme example: Would you rather spend money investing in Rivian which just lost its EV tax credit of seventy five hundred dollars And would you rather invest in Rivian where they have to spend 280 dollars to get a hundred dollars in Revenue Or would you rather invest in Tesla where when they spend a hundred dollar or when they receive a hundred dollars, they actually have 20 bucks left in gross margin somewhere around there, maybe 20 25, Uh, somewhere around there, right? So those that's an extreme example of which EV maker would have pricing power Now then you have to ask yourself, well, who's going to have more pricing power Tesla or a company like and face or Nvidia Maybe there's a flip-flop. Maybe those companies end up with more pricing power, but now we're We're dictating between really the winners of their industry.

So broad schema things here: Uh I I Don't see it I've been looking at the comments here trying to find somebody who's talking about inflation. Somebody here says: Job Market opening up this summer which could create a second round of wage price file. There never was a wage price spiral. We were worried about a wage price spiral.

It never happened. and what do you mean? Job Openings Job Market Opening up this summer I I like more more job like more companies wanting to hire this summer. It seems like companies right now we've got this sort of mixed signal in the job market. which: In Fairness I'll give some Credence to this idea that you know we're not clearly in just a layoff environment.

We're still adding jobs every month, but you don't have to look far to see what's going on with the Bureau of Labor Statistics and wages. and you don't even have to just trust them. Look at the ADP report. Even the ADP reports for wage inflation are falling.

Uh, any indicator that we're looking at whether it's in CPI it's in wages. They're indicating a softening uh, in hourly earnings. Not any kind of, uh, insane wage price spiral. So uh, we haven't seen it in the past year and a half.

That was a concern, but we haven't seen it. So uh I I don't know about that? Uh yeah, I think it makes more sense to be worried about earnings, But then, if you're worried about earnings, how could you at the same time be worried about oil going up? That doesn't make sense either, right? In order for oil to go up, there has to be more demand. But if you're worried about earnings going down, why would oil go down Or why would oil go up Rather right. Because if company earnings are going down, that means the economy is Contracting Which means oil should be coming down as well now.

I I Find it very difficult to make the argument that oh, oil is going to Skyrocket at the same time as earnings are going to go down. Why? The only way that would be true is if if somehow we had additional, uh, you know, massive cuts to production. But at some point, OPEC doesn't want to cut production either, because even at a lower price, they still want to be able to produce because otherwise, they can't fill their coffers with cash, right? So there's a limit to how much they can. They can restrict, uh, um, uh.

production. So uh, it's it's gonna be really interesting. Uh, climate change is inflationary? Yeah, that's a pretty Republican argument. Uh, we've already addressed the Chinese reopening, but you know nobody's forcing you to go green.

Yeah, Is it expensive to put in solar panels and a batteries for your home? of course. But guess who's doing that? Rich people or wealthy businesses are poor people doing that? No Or mid-income earners doing it? I Hope not. Hopefully they're not buying solar leases. Now there's this argument that okay, but maybe forcing people to adopt uh, you know, or go to an EV strategy.

but I mean we're worried about that for 2032 where we're worried about people having to maybe offer new cars by EVs and you know that's just going to get kicked down the road Anyway, when we even get close to that, I mean that's like a nine year away concern. So yeah, of course, to some extent, new building isn't uh, is is going to be somewhat more expensive uh, and therefore inflationary. But wait a minute, you have an existing housing stock that you could buy. So see, real estate single family real estate isn't dictated by how much it costs to build a home.

it's dictated by what the market will bear, which is comparative to what all the other hubs are selling for. So this idea that that uh uh you know climate change is is uh and the inflation of climate change. Honestly at this point and this is this is I've been sitting here for 20 minutes asking people to give me where the inflation is and the only thing that I've heard is well the wage price spiral is going to come back or oil is going to go up. Oil is not going up the wage price spiral.

There's zero evidence that it's coming back or going up. Uh, we've talked about the China reopening not being an issue. We've talked about this inflation and now all of a sudden we're reaching 10 years in the future going. but in the future things are going to be more expensive.

Jesus Christ There's no inflation. Uh, so so I I don't know I mean whatever, whatever like and I'm not saying there definitely isn't any somewhere I'm sure there is all you could look. If you want to say there's inflation, go look at Aerospace there's inflation in Aerospace go look at pet stores. they're still raising prices.

uh and then of course you could look at the volatile Goods like uh foods which which move on a month-to-month basis or oil should be a little bit more expensive going uh for for our uh April reports because for most of this month it's been a little bit more expensive. and remember they they take the months in thirds so two-thirds of the month is already over. and yeah Energy prices have been a little higher but uh, but I I'm not seeing it. You know ESG is forcing to go green.

Where where in your life are you spending more money on ESG this is this is a Fox News talking point. Look I'm not a lot of people who watch Fox watch me too but I really want you to ask yourself in your daily life, where is ESG making your life more expensive in a recessionary environment? It's not. It's not that it's that simple. So anyway, that does it for Kevin's rant on inflation because I don't see it and it's pissing me off because I really think the more the Federal Reserve is concerned about inflation or this Specter ghost of inflation, the more risk there is the Fed over tightens and actually causes a recession would.

Right now, the odds of recession aren't like it's not. It's not a foregone conclusion at this point, so we'll see.