Hey guys, it's Sasha The stock market crash that was 100 definitely going to happen according to constipated. YouTubers is officially canceled because this morning the US inflation data came in and inflation has fallen from six percent in February to 5 in March. Inflation only went up 0.1 a month on month in March which is very low below the Fed's long-term goal of two percent per year and the stock market has been massively surprised. Of course, immediately after the inflation data came out, the S P 500 moved up on pre-market trading and grow stocks were up between two and three percent.

And it's funny because everyone was absolutely sure that inflation is not going away. The stock market is going to collapse the worst ever. Financial year is going to happen. Oh my goodness.

Every single Financial YouTuber was sat there holding their head in their hands, telling you that you need to sell everything right now before the biggest stock market. Russian History That was absolutely coming. except this guy because I've been explaining exactly why inflation is falling, exactly why it will continue falling right here on this channel and getting a massive boatload of abuse from everyone including many other YouTubers for not getting it. But here we are and inflation is down and stock market is jubilant.

Everyone is surprised inflation is going to continue falling for the next few months. We are now in a situation where U.S inflation rate is at five percent, which is now equivalent to the Federal Reserve funds rate. And this is exactly why four weeks ago I was saying that the Fed's increase of 25 basis points was really stupid. very poorly thought out and an entirely unnecessary measure.

If you look through the inflation data, all the key components are on the way down, many actually tracking even better than I anticipated and inflation should continue falling from here, which is really good. Food stayed flat month on month, which is extremely positive because food inflation was one of the hottest parts of the CPI index for some time and you can see that it has been gradually reducing owner month to month basis for a while now. Food inflation was 10.1 just two months ago in the January data after peaking at 11.4 in August last year, and it was very stubborn, but it has now come down by 1.6 in just two months now. Inflation coming down on food and on everything else does not mean that those things are now magically cheaper because I Know a lot of people in the comments don't understand this point.

In fact, food is still going up at 8.5 a year on average, which is a lot. it is very high. The reason that this is good news, however, is that it is now going up at a slower rate than it was last month than it was the month before and so on and the rate at which is going up is reducing sharply. Even more important is that food at home so a minus 0.3 percent movement and came in at 8.4 year on year and food at home is critical for the functioning of the economy, critical for workers that underpin the economy being able to put food on their table.

So this is really encouraging news and you can see that energy is now showing a massively negative number minus 6.4 overall and energy Commodities are minus 17 I Am looking forward to all the headlines that get way surprised about this happening because this was entirely obvious and I've been talking about it for six months already. but the media will act so surprised. After the recent production cut by OPEC and Russia oil prices climbed to 86 dollars for Brent crude and although that's a big increase in the last few weeks, the oil price today is still way under what it was at this point last year. and you can see that the oil price stayed high in April and in May and in June and in July and only really started coming down from August onwards.

So unless something major happens to oil, it will continue pushing the CPI figure down every single month for some time. Yet, natural gas is doing even better after the huge Spike following Russia's invasion of Ukraine, Natural gas is now trading at under 2.20 which is roughly three times cheaper than it was at this point last year. This is huge and you can see that the inflated gas prices stayed High all the way until the end of 2022 and there was this uncertainty around supplying Europe and what's going to happen. But now Europe miraculously made it all the way through the winter without blackout and Anarchy that everyone was forecasting and price is now staying low as a result.

and in fact, it's been heading even lower now. Energy Services are only down 2.3 percent month a month and still sit at plus 9.2 percent year on year. This sounds Bonkers Because of course, energy companies do not pass on drops in commodity prices at the same speed at which they pass on increases in commodity prices which are immediate. Oh my.

God Gas prices gone up quick. increase the bills by 500. Oh wait, gas prices are down well. You know it takes time for this to filter through.

We have to have a committee meeting to arrange another committee meeting and maybe then we will think about arranging another committee meeting so that you can pay less for your guests. Although gas costs 70 percent less than it did this time last year, the price of gas to households is wait for it 5.5 more than it was at this point last year. and I Know that the energy companies and the governments will make lots of excuses like blah blah blah. You have to buy gas in advance.

You know it's very complicated. You need to know what the price is going to be in the future. boo who. But eventually those prices will also have to start coming down following the commodity prices.

So the energy part of the inflation index is going down and it will continue going down a lot more. A lot of the analysts will point out that all items less food and energy is still at 5 5.6 and went up 0.4 and I am sure I am certain that the mass media will make this into a thing that will tell you that this proves inflation is here to stay because you see this core inflation figure is actually the really important one. But there are two massive problems with this line of thinking. First, I have never understood and will probably never understand why everyone is so obsessed about core inflation as opposed to looking at total inflation.

Because energy in food the two things that are excluded from core inflation are about the most critical part of inflation that affect how the economy performs Overall, they are two of the three primary drivers of basic economic stability and health along with shelter. so ignoring them but instead giving a about the price of Handbags and clothes is a very dumb way to look at inflation in the first place. But even more importantly, there isn't an actual problem with core inflation because if you actually look at the data, it looks great Because the only reason core inflation is at 5.6 instead of maybe three or four percent is down to three factors: new vehicles, transportation services, and shelter. Now New vehicle inflation is dropping.

There is a price War Among the highest selling car makers in the United States Tesla has dropped their prices significantly in recent weeks. Other big manufacturers like Ford are following suit because they have to, they're dropping prices, others are at least not increasing prices, and we're going to see all of this come through in the new vehicle data in the coming months. A lot of the commodity prices feeding into the price of vehicles have also come down sharply, and this is enabling those reductions in price. Transportation services is running very hot at 13.9 and it's up 1.4 month a month, but transportation services are often lagging two important things: one is inflation it's sort of a self-fulfilling prophecy thing, and two is energy commodity cost to a lower degree because transportation is a very, very heavily based on employee salaries and in part on the price of gas and oil.

And you have this combination of two things happening. When inflation is high, the transportation industry gets disproportionately affected by an upward pressure on worker salaries. It is very manual, many of the components that go into it, and the cost Transportation tends to react very slowly to changes in commodity prices directly and indirectly because transportation services themselves are mainly things like servicing and things like that. so they don't necessarily use up energy themselves.

not much anyway, but they are heavily reliant on the industries that do so. When the transportation companies see that they have been losing a boatload of money, while oil and gas prices were high, they will eventually have to scale back. They will eventually become more price sensitive, more price conscious. eventually.

this will affect the prices of this element as well, But now that the energy prices are stabilizing, overall inflation is falling. That will enhance the ability of Transportation Services to follow as well. Which they will because they're lagging and we're going to see a steep drop there in the coming months. The only other factor that is pushing core inflation up is shelter.

And shelter is at 8.2 percent year on year, up 0.6 month a month. This is actually better than I expected because Shelter was at 8.1 last month I Thought it would go up more now. shelter is a massively lagging indicator, and for a long time, house prices and rents were increasing way ahead of Shelter the number that we read in the inflation date and we knew back then that eventually shelter will have to increase to catch up with those price increases. It took longer than most people expected and now it has increased.

But now rent price inflation is falling. The Zump report has runs dipping towards a six percent Mark and the latest house price data from the St Louis Fed shows that house prices stopped increasing and were flat in Q4 last year after skyrocketing since covert arrived. So it's very early days and shelter will stay elevated for some time in all likelihood, but every month now, we will have more downward pressure adding up on shelter, which will eventually have to reduce to catch up with the lower increases that we're seeing in the real world. And here is a critical point: All three factors that are pushing core inflation up are indicating that they are either already reducing, will be imminently reducing, or be over time reducing in the coming months, maybe years.

New vehicle prices have stabilized, and transportation and shelter are both lagging indicators where we already know that they will be coming down in the future, even if they have not done already. So, core inflation is sitting there at 5.6 percent, but it doesn't really matter because it is being artificially held high Because look, the core part of the index is about 79.5 of the total, CPI shelter is 34.5 Transportation services are 5.8 So those two lagging factors by themselves are more than 50 percent of core inflation. So if we know that they are artificially high, if we know that they are on the way down, we don't know exactly when or how quickly that means core inflation will be coming down, too. It won't happen fast, but that doesn't matter because we can see where it's headed.

We can see the direction because the underlying fundamentals are going in the right direction. And now in two weeks we have the next Ofomc meeting where you're in power and the rest of his cronies will have to sit in a room for two days and discuss how incredibly dumb and unnecessary their last rate increase was just four weeks ago when they increased rates by 25 basis points 70. Scene: Out of the 18 of those, Chumps were saying that rates will have to keep increasing a lot more at least another two hikes of the next two meetings. Now we have a situation where inflation is equal to the rate and falling.

Oh my. God Who could possibly have predicted this? The economy is beginning to suffocate because of their rates increasing, not because of the underlying factors, not because of problems in the economy, because of the rates increasing without there being a need for them to keep increasing. And this is becoming a bit of a problem. So the big question is, is the Fed too proud to admit that they got it wrong.

Are they too proud to admit that giving speeches about increasing rates and how hawkish you are and blah blah blah is that more important than actually fixing the economy is drawing power? Going to give another 10 million speeches saying that you know core inflation is still hot, more increases are needed even though he knows this is complete and utter. Is the Fed really so far up there in backside that they don't realize that more rate hikes May create really bad, irreversible damage? Or is the data now so overwhelming that even those morons can't possibly keep making the same exact mistake over and over and over? Well, we'll find out in two weeks time.