Hey guys, it's Sasha US Inflation data just came in and inflation has dropped to 3.1% for some weird reason, despite all the tweo Dums on YouTube telling you that inflation is not going anywhere, the economy is going to collapse because trust me bro, inflation in the United States has in fact gone away, which was obvious from the data we were looking at over a year ago. Let me show you a few really interesting bits of data in this inflation report, and then we're going to look at how the FED is busy saying that there won't be cutting rates for the whole of next year, and why the FED along with all of the Wall Street analysts keep being so incredibly bad at analyzing data. The first interesting thing in this report is these two numbers up here: the seasonally adjusted month-to-month movement in inflation was 0.1% last month and 0.0% the month before. So at the moment, inflation is moving way slower than the Fed's 2% Target and has been on average.

And here is the same inflation data from a year ago. You can see that in November and December last year, inflation also didn't go up a lot, which is why it is not moving relative The absolute number: The 3.1% is not moving a lot because we're lapping months where the month-to-month movements were very similar. But then in January and February there was 0.5 and 0.4% month-on-month movements. You can see that food was going up at about the same rate as well.

Back then, gasoline prices went up in those two months. shelter was sitting at its inflation Peak up 0 .7 and 0.8% month a month. And now let's look back at today's data: Food inflation has dropped all the way down to 2.9% back in January it was at 10.1% so that is a huge drop. Incredibly good news, and you can see that the month of month movements are now pretty consistently low at the 0.2% Gasoline and oil are posting negative numbers and this is because oil price has been coming down again in November And look at where oil price is in December.

When we get December data, the numbers there should look pretty low as well OPEC keeps cutting production Putin Has just gone on a visit to the Middle East to do some dirty deals to try and keep the price high, but oil prices have been resiliently low and so we have a negative year-on-year contribution to inflation. Gas prices were creeping up through the year, but we've just seen a big drop off in November and December. This has not translated into consumer prices yet because those are up 2.8% month and month in November And the fact is, gas prices are only down 10% year onye. remember, they absolutely exploded.

blew up last year when gas prices went up, but this year they're only down 10% And that's obviously because energy companies are busy profiteering. You know, when you can steal a bit of money, you got to go do a bit of stealing. Here is where the gas price was last year and here is where it is today: the moment the gas prices went up all the prices to Consumers Shut up immediately the very next day. But you know, when the prices go back down, you need to have a few committees to arrange a few meetings so that you can then maybe decide whether it would be appropriate to reduce prices at that point.

So Eventually consumer prices will catch up. We should see at that point some more negative numbers in the energy part of inflation data which will help the overall number come down. But then look at shelter. Shelter is down to 6.5% slowly reducing from its peak back in March Here is the zoomed out graph for shelter.

You can see that the graph is now heading down very consistently. You can kind of see the trajectory and there are some very good reasons why. Here is the Zumper Report which shows rental price inflation and you can see that it's down to pretty much zero. This Sat at 12 to 15% year on year for about a year and a half during Co And remember, shelter is a lagging indicator, so when real price inflation drops, it takes a lot of time for that to filter through to inflation data.

Just because there is a change in rental prices does not mean that you pay anything different until it is time for your review or until you move. Same with house prices. If you have a fixed mortgage, it doesn't matter what's happening to house prices, It doesn't matter what's happening to interest rates. You pay the same amount because your mortgage is fixed until you go and move.

But we know that the shelter number is coming down. It's coming. We can see the numbers already and it will continue slowly dropping mortgage rates. However, in the US are still very high.

This is what's slowing down that drop. but in the last 2 months they have come down a bit and are now sitting at 7% The issue is that the banks are about as good at data analysis and forecasting as the FED. These are rates on 30e mortgages and based on these rates Banks Seem to be in this consensus that you know interest rates are going to stay very high for years and decades to come. and maybe you know the FED will do a few more hikes.

I Don't know, that's what everyone's saying I Guess the media has done its job at selling this Narrative of Doom and Gloom so that if people are taking mortgages at 7% the banks are very happy to sell those mortgages and make Bank in the next few decades. But here is something to think about. Next month is January. So next month and the month after in February we will be lapping those same two months from this year, which next month will be last year, last January and February Inflation was running pretty high at 0.5 and 0.4% So let's say energy stays roughly where it is I Don't know.

Maybe it'll go up, Maybe it'll go down. Let's say shelter keeps slowly decreasing as it has been. If January and February post the same sort of numbers that we were seeing at the moment 0.0 maybe 0.1 maybe even 0.2% month- on-month movements. those will be replacing the much higher numbers that currently contributes to the last 12 months worth of data from last year because inflation has looked at over a 12-month period.

So when you have a new January, the old January departs from the last 12 months worth of data. So it is probable that when we're looking at the January and February numbers, unless something drastic happens, something big changes that suddenly inflation drops to something more like 2. 5% And I know I know it will be a massive surprise and we'll read the headlines saying nobody could have seen it coming. Where did this appear from? If we are in that position in March With all key inflation indicators pointing down and shelter slowly coming down too, it will become pretty much impossible for the FED to keep up the narrative.

To keep up this pretense that there is some kind of Doom and Gloom that they're fighting some kind of inflation because the inflation is not there anymore. The FED will just needs to keep pretending that they know what the it is that they're doing because they got it so wrong. When inflation was going up, The news still says that the US is about to plunge into the worst ever recession and blah blah blah. But here is the GDP growth rate data for the Us.

Remember when the GDP growth in Q3 came in at a whopping 4.9% year on year? Well, that number just got revised up to 5.2% Average hourly wages are growing at 4.0% This number has been trending down, which is good and the US has managed to avoid a wage price inflation spiral. Unlike the UK. At the same time, labor force participation in the US keeps climbing. Since the pandemic, it is up at 62.8% which is now in line with the data that we saw from 2013 to 2019.

You know, when the economy was booming, jobs data keeps coming in with strong numbers month after month. The US tech sector is seeing a big Rebound in growth. After growth bottomed out in Q4 last year and Q1 this year, suddenly, growth in Tech is back into double digits. Where is this recession? The data is not showing it at all.

So what happens in March In late March After the February inflation data comes out, the Fomc has another meeting. I Know that Grandpa Powell and the rest of the clowns in that committee have proven Beyond Any reasonable doubt over the last three years that they actually don't know what the it is that they're doing, but eventually even they have to call a spade a spade. Core inflation is now at 4.0% but you can see that in the last 6 months it's been running lower than that on a monthly basis, so it's on the way down. And the one thing the only thing propping up core inflation is shelter, which itself is on the way down.

The only thing keeping shelter up at the moment are the Sky High interest rates on mortgages and the lag effect. The lag effect stops being the lag effect after enough time happens and I am not sure if the FED actually can think two moves ahead, but if inflation gets very close to their 2% goal as is now looking extremely probable, there won't be any good reason to keep interest rates at 5.5% as they are today. There hasn't been a good reason to keep them that high for some time already because those rates are just keeping the handbreak on while trying to accelerate the economy. And then you have to remember the most important factor in November Next year we have the US presidential election.

and what better way is there for the sitting President to claim that Bomic is working, even if all of this has pretty much nothing to do with any of the policies? imagine if rates start coming down down and the economy starts to Boom as the election comes around at the moment, everyone thinks that the rates will start coming down. Maybe sometime in the summer, sometime late in the year, but that would just be too late. The election is happening on November 5th. If you only start reducing rates in the summer, you won't have any data.

You won't have a full quarter to see the effects of that. Now, the FED is meant to be independent of the US government. It's meant to be a political. It's also meant to have brains.

But we all know how the system works. Start starting in December 2015, the FED began very slowly increasing interest rates through to Summer 2019, But then suddenly at the end of July in 2019, they started reducing rates. And they reduced them all the way through 2019. This is before Covid arrived in 2020.

There was absolutely no change to inflation. No particular reason as to why they might do it. So why did they start magically reducing rates? Um, about a year before the election? Well, here is the verbal diarrhea. In light of the implications of global developments for the economic Outlook as well as muted inflation pressures, the committee decided to lower the target range for the Federal funds rate to 2 to 2 and a qu per..

So basically, there was no reason. It's just complete word garbage. We felt like it. The committee is meeting right now as I'm recording this video, there is approximately 150% chance that the rate will stay flat when they announce it tomorrow.

But what happens when we cycle January and February and what happens when inflation Falls below 3% What happens when the White House exerts a massive amount of pressure so that Q2 and Q3 next year suddenly look awesome? Just in time for the election And remember how growth stocks and early stage companies got absolutely obliterated when interest rates started going up with all the uncertainty? Well, it will be interesting to see what happens when interest rates start going down again because mortgage interest rates are going to start coming down too. That will increase people's ability to spend. People be able to be more mobile. If you thought this year was good for the stock market, you just wait until interest rates start going back down for real.

Because in the last few decades, interest rates have only really primarily come down to try and prop up the economy in a recession. They haven't really pretty much ever. It's very rare for interest rates to come down because the economy is actually doing well because they weren't up for a different reason and that reason doesn't exist anymore. Interest rates came down in the financial crash trying to save the economy.

They also came down in the Do crash, but when rates came down in 2019 without a crash, the stock market was going absolutely nuts. And when the rates came down in the 1990s, the stock market went on the biggest bull run in history. And when the interest rates came down in the late 80s where also there wasn't a crash, the stock market went up over 100% in 5 years including the 1987 Black Monday crash. In the middle of that 5year period, the S&P 500 is up 21% so far this year my portfolio is up 53% so far this year.

Remember in December when absolutely everyone was talking about the biggest ever stock market crash that was 100% definitely coming and a recession that you have never could possibly imagine that's going to hit this year? Where is it people will? Panic Selling stocks Fried Chicken Numnuts was coming out telling you the world is about to end I Was told that I am an idiot repeatedly for not telling everyone to sell all of their stocks. Remember that that wasn't very long ago. Well, it's funny how things turn out. e next year is going to be fun.