Hey guys, it's Sasha U.S Inflation accelerated in August as gasoline prices jumped August Core inflation excluding food and energy Rose 0.3 percent hotter than expected according to the media. U.S Inflation is going up now and we have a very big problem. But is it actually going up? And is there a problem? or is it just a load of donkey poop? Well, I'll give you a clue, it is in fact a pile of ass excrements. Here is the latest data from the Bureau of Labor Statistics and I've taken the 12-month number from July and stuck it here next to August so that you can go and compare the two and just so that we can look at these numbers in context.

I've added the numbers from 12 months ago from August 2022 as well. And to make it even easier, I've colored in the latest data so that you can see which numbers improved and which numbers got worse. The overall rate of inflation is up at 3.7 compared to 3.2 percent last month, and you can see that the reason is up is the oil price. Gasoline went up 10.6 percent in the last month, fuel oil is up 9.1 percent, and transportation services ticked up two percent as well.

We'll cover that in a bit more detail later. If you combine the weight of energy Commodities and transportation services, they add up to 9.6 of total inflation. And if you do, the mass transportation services by themselves added over 0.1 percent to the inflation total this month, and energy Commodities added almost 0.4 percent. so more than 0.5 percent of the month-to-month inflation number came just from the energy companies.

Being Greedy When the oil price went up, the rest of inflation put together went up 0.1 percent. Basically nothing. So why was I so mean about the energy companies just then? Well, here is the chart of the oil price since Russia invaded Ukraine and you can probably remember how fast the price at the pump went on top when the invasions first happened. as soon as the oil price began increasing, as soon as things began happening, you had to pay more that same evening.

But then the price came back down in the fall of last year and was sitting in the 70s for a lot of this year. and did the price of filling up your car go right back down to where it was. Immediately, did it. And now Saudi Arabia and Russia are working like a well-oiled cartel to pump the oil price by reducing production and the price has gone back up very sharply to 90 in August and is now at almost 95 again.

And of course we immediately see the impact once again. Gasoline prices up 10.6 month a month and it will get worse when we get the September data. But when you're looking in inflation, it is critical to separate short-term noise from long-term inflationary pressures, The oil price going up, and the price of the pump increasing is frustrating. It is annoying and it is hard not for people because being able to drive to go around and do your stuff is a pretty crucial part of most people's life.

And it will mean that some inflation goes up because the cost of Transportation goes into the cost of pretty much everything else. But at the same time this is a noise element. It is a specific commodity driven indicator being pushed by a very specific time sensitive particular Trend that we're seeing with the price of oil right now. It is not an indicator that there is a sustained long-term inflationary problem.

It is not an indicator that a wage, price, buy, or any other spiral is happening, that prices are blowing up because of sticky inflation taking hold of something else. And this is a very good thing because when you understand this, when you look at everything else and the inflation data, you can see that everything else is doing great Food inflation is down to just 4.3 percent and food at home is just 3.0 These numbers are amazing compared to earlier this year or this time time last year. and then look at the monthly numbers over the last six months, food inflation is running at below the Fed's two percent annual. Target Over the last six months, Commodities Less food and energy are also doing great across the board, and very importantly, shelter has now dropped to 7.3 percent.

Now you won't see any mainstream media reporting on this because it's the opposite of panic, but the Shelter inflation read has reduced more than expected. You can see the detailed shell to inflation data by Googling Shelter CPI and clicking on St Louis Fed link and then you can click on this edit graph and at the bottom in the units bit select percentage change from a year ago. and if we zoom in, you can see that shelter inflation peaked at 8.2 percent in March and is now beginning to decline and the declines are becoming more pronounced. Actually, is declining faster than I expected than most people expected.

And it's a bit surprising because although house prices have fallen in the first two quarters, the interest rates are a heck of a lot higher. So the cost of new mortgages is also higher. And you might think that a big reason for the drop sets in the Zumper Report data. You can see the rent prices have started collapsing in August These sat consistently for a long time and 12 to 15 through last year, and now in August They dropped into the two to four percent range and you can clearly see where the trajectory is heading.

Now, remember that the data for Shelter in the Inflation report is delayed. It's delayed for good reason, but it is delayed nonetheless. In the inflation data, rent inflation is at 7.8 percent and it has gone up 0.5 month a month in August an annual equivalent of six percent. So the reason Shelter Data: looks good is not so much that we have seen some kind of sudden decline in August.

In fact, that is not at all what we're seeing. It is in fact because last summer shelter numbers were even more insane. they were completely Bonkers And now that we are more than 12 months down the line, those and say numbers at the end keep dropping off when you're looking 12 months back. every single month.

The stuff be that is older than 12 months does not go into the calculation anymore. And the good news is that in the rent data and in the various house price indicators that we are seeing, this shelter number will fall further. In the coming months we already see the data. We just need to wait for the lag effect to happen and for it to begin showing up on the CPI number.

So while the FED is telling you that inflation is sticky, it is a big problem. The only reason it is sticky is because their way of measuring it involves using an abacus and tallying it up on stone tablets. The only point of concern in this data is this transportation number because oil explains the energy bit. But the transportation number, well, is not quite what you think it is.

Transportation in the CPI data is not what most people assume it means because it kind of sounds like maybe it's things like buses and trains and going around and airplanes and stuff, but all of that is only 0 0.7 out of the 5.9 percent that the total weight of transportation is. In fact, the majority of Transportation when it comes to inflation is insurance and motor vehicle maintenance and repair, and you can kind of see how these two are related, right? If cars cost a lot more to repair, insurance is going to cost more too, and you can also see that these are the two items that have gone up a lot in inflation. In fact, these are the only two items that are driving. Pretty much all of the inflation and transportation insurance is up 19.1 percent in August which is a lot and I went and checked and this is the highest annual rate of growth for insurance since 1976.

and there are two things driving this primarily a smaller part of the increases because fixing low cost damage has become stupidly expensive on a newer cars and I can completely see where this is coming from. Car manufacturers have made it intentionally only impossible for local repair shops to fix relatively basic things without the manufacturer sticking their greedy hands in there and taking some of the money for themselves. If someone just drives into the back of you and you need a new bumper, if you have parking sensors in there that are damaged, new cars will not let you, just unplug the old parking sensor, throw it away, and sticking a new one. This obviously sensible solution: no instead your approved dealer, not the garage that you choose or the one that your insurance choose.

No, the approved, very expensive dealer has to marry up the new sensor with a car computer or it will not work and only the approved dealer who has access to your computer to the systems can do it because only they can access your car computer because even though you paid forty thousand dollars for your car, you don't actually own your car and you can't access your own computer. This practice has exploded in last five years because the car manufacturers are dumb and they're just after stealing more money through any way that they can figure out how it is becoming pointlessly expensive on my own car. I Own A Jeep My rear parking camera has stopped working I Did not have an accident, Nothing happened, it just stopped working one morning when I got into the car, the camera apparently has to be replaced. The take it or leave it.

Price is one thousand, Four hundred and fifty dollars to replace it to replace a shitty twenty dollar camera in the boot of my car in a process that takes about 20 minutes to complete. Is the government doing absolutely anything to stop this racket in the UK in the US Anyway, to force you know car manufacturers to provide Parts at reasonable cost to third parties and to force car manufacturers and manufacturers of other Tech to allow third parties to do the repair so that there is competition. Well, I Guess if you get elected by those car manufacturers, quite literally you know which side your bread is buttered on. But there is an even bigger problem with the cost of insurance.

The United States has seen a big increase in recent years in natural disasters hitting the mainland. the Hurricanes that have been hitting Florida the east coast and the Gulf Coast are becoming more frequent and becoming more severe and the cost to insurance company is huge And this has now come to a point where this is beginning to severely impact the cost of insurance on cars because when one of these hurricanes arrives, it destroys all the cars that happen to be parked in this path. and insurers are meant to price this into the insurance in the affected States. But in reality it is a commercially difficult decision because that would mean insurance in Florida would become astronomically expensive and it is kind of the situation where it means that the rest of the country in a way has to subsidize extreme weather events that tend to happen more in only specific parts of the country.

Now going back to inflation, Transportation has been going up recently, but now we know why. We can see the information, We can see the data and again, it is important to understand the key question. Is there some kind of a price spiral going on? That's when inflation can get out of hand. That's when you can get into the thousands of percent territory.

That's when you can have a really big problem and the answer is no. Is there a long-term accelerating inflationary pressure here? The answer is also no and that is super useful because you can see that inflation overall has gone up from 3.2 percent to 3.7 and you can see all the media freaking out about it. All the headlines are oh my God. The truth is that all the important numbers are trending down.

Inflation is going down very rapidly. and it did again in August, But in August it was massed on its way down by a couple of one-off upward factors. And by the way, these factors are still going to be there when we see the September data next month because oil prices still sitting high. But these are not pressures that can be fixed by increasing interest rates.

Because they are not demand-driven issues, they are not anything to do with what the rates can possibly influence. They are short-term noise driven by commodity prices and a very specific insurance industry adjustment that is currently happening. If you exclude this one-off noise impact. U.S Inflation has been running below the two percent Target The FED have said since March This year.

The last six months while everybody is busy panicking, the FED is busy talking about sticky inflation and people are debating how high interest rates have to go. Inflation is already there, but for some reason everyone is refusing to look at the numbers and throwing their toys out of the problem. Saying that inflation is now going to shoot all the way back up. The economy is going to crash hard in 2024.

You must prepare. You must sell all your stocks. It's going to be the worst recession ever because the overall inflation number went up from 3.2 to 3.7 And you know it is that time of year when all the YouTubers will start doing their best constipated faces again to tell you how bad the 2024 crash is going to be. And yes, inflation is not everything.

I Am not an idiot I Do understand it. Even though inflation has gone right back down, people are still suffering because nobody canceled the inflation that has already happened earlier this year and happened the year before. and you can see that the consumer confidence is at an extremely low. Point Consumer spending is low.

Companies have slashed their advertising budgets. Online advertising is 30 to 60 percent cheaper than it was back in 2021 depending on the channel. That is an incredibly big drop. People are not buying, so companies are not advertising to those people that aren't buying because they don't get a return on their advertising spend.

But low inflation means that every month, the situation, economically, the situation, financially for the people get a little bit better. Wage growth in the United States is low. Hourly wages only grew by 4.3 percent in August. This, by the way, is a good thing because this is what's prevented the inflation situation from getting a lot worse.

But the growth in wages is now higher than the rate at which inflation is growing overall and inflation on key items like food. So every month people's financial position improves a little bit on average, which is a very good thing. The problem is that the FED doesn't seem to understand this and has tightened monetary policy way too far already and might do more rate hikes starting this week. So the big question now is this: the storm has passed and the house is still standing there.

It seems to be just fine. now. Will the FED turn up and blow the house up? Anyway, out of spite, have they already done enough damage that the house is going to collapse because the interest rates have just gone way too far? Will we now see a commercial real estate crisis or more Banks struggling? Will the FED keep rates High Just because they said that they would. Even if the data categorically does not support the rates staying where they are, it's going to be a very interesting few months to close out the year.

Thank you.