Well folks, the conditions for deflation are here and well now we have a really fascinating new piece on supply chain gluts. We also have a piece from The Wall Street Journal on Equity Risk Premia which is very, very bearish. but I'm going to provide a counter argument to it I'm going to provide both pieces of information in this segment. remember: April 12th is CPI day.

Mark your calendar for that. tomorrow is jobs Friday that is April 7th. Mark your calendar for that and mark your calendar for prices going up on the courses on building your wealth for April 12th. With that said, let's jump into this piece right here.

It's a phenomenal piece by yes CNBC Now I Rarely have CNBC pieces on the channel, but this one was just too good not to be featured here. It says inflation's inventory. gluts are here to stay and will hit bottom lines in the weaker economy. loaded Warehouse inventories that are expensive pressure eating away at the bottom line of many companies and for many the excess Supply and Associated costs of storage will not Abate this year.

In other words, companies are going to take it in a margin in the margin. but wait a minute if the access cost of storage are still going up. Isn't that inflationary? Not necessarily. Listen it just over 36 percent of companies expect that were surveyed by Cnbc's Supply Chain Survey said they expect inventories to return to normal in the second half of this year with an equal percent expecting Supply gluts until 2024 Supply Gluts my friends Supply Gluts are deflationary.

Yeah, yeah, but that deflation occurs with a lag. and I'm going to explain that lag right after a message from our sponsor. and that lag is very important to pay attention to. So buckle up! Any of you like to know where does Kevin read his news and I personally love the Financial Times.

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And if you don't have enough time to read all the stories, just bookmark the story. So click the link in the description. Link down below: Receive a 30-day trial via the Apple app store iOS and iPad terms and condition applying it 21. Now say a return to normal can occur in the first half of the year and another 15.

Expect a normal activity by 2024, but uncertainty about Inventory management is significant, with almost a quarter of supply chain managers saying they're not sure when gluts will be worked off. Remember: excess inventory equals lower prices Supply up Price down. Simple quote: We don't expect significant decreases in inventory levels within our Network in 2023 says Paul Harris the Vice President of Operations for warehouse Quote: Several of our manufacturing clients are experiencing dead slash bloated inventory challenges due to over ordering in the container gridlock. From prior quarters, a majority have elected to keep inventory on hand as opposed to liquidating.

Now that is fair, But eventually when storage price and this is this is the 4D chess part you have to think about. Okay, so think about it. So far, over the last maybe year or so, inventories have been rising at the same time as inventories go up. Companies are like, well, we don't have to Discount just yet.

let's increase inventories. So in other words, uh, inventories go up. Warehouses warehousing goes up is the other thing that goes up, right? So we hoard more inventory as Supply chains smooth out. Now we fill up the silos.

Think about it. like having a farm. Okay, you're a farmer and you're farming corn and you just went from not having enough corn to having way too much corn. Now you have way too much corn and you're like, okay, well, I'm not going to dump it on the market I'm not going to reduce prices yet.

What am I going to do instead I am going to fill up my silos I'm going to take my corn I'm going to fill up my silos And when I fill up my silos when the price of corn is more desirable, I will slowly trickle it out into the market. That is why we have silos for corn and for nuclear weapons. But this video is about corn and prices, not nukes. Anyway, What happens when the silo fills up? Well, you have a choice Do You want to build a new, expensive silo or just start liquidating.

It is a cycle. You have to think about this as a buffer system. Kind of like, uh, okay. nobody's gonna get this reference except for the contractors.

but we have those new pressure valves on laundry machines now and new construction. Basically it's kind of like you put a little buffer in so if you get too much water pressure coming into your water system rather than getting a water hammer like when you turn on the water valve and you hear that against the wall, you have a little buffer. It fills up with water and then buffers and then as the water pressure falls again, it can flow again. right? Let's draw that in more of a supply chain English here.

But you know I gotta respect the contractors as well. So I had to use a contractor analysis I Don't know. the plumbers are probably shaking their heads right now. but I tried.

Okay anyway. So uh, here you are. You are an outstanding farmer. You know why you're outstanding Because you're outstanding in your field.

Like literally Okay. I screwed up the joke. Whatever. Uh, why is the farmer outstanding while he's out in his field I Don't know.

Never mind. So you got a lot of corn and now you have these silos. Okay, you have a lot more corn than you usually have. You fill up your Silo you're like hey, I'm not going to lower prices.

What do I do now that the silos full? well I could build more or I could just dump onto the market. So in other words, you're going to sell, you're probably going to sell because it's going to take time for you to build up these silos. So what does this mean folks? Well, in English what does it mean? It means there is a lag. It means that deflation lags.

Okay, and when we are hearing that prices for warehouses are going up, it means that the cost of storage is going up because the silo is full. When The Silo is full, you have a choice build more warehouses. but prices are still expensive. so instead you sell that.

Selling happens with a lag. Okay, that in American English means price. Gonna go down soon folks. we're gonna see some deflation.

Okay, it's a good thing when do you expect inventory levels to return to normal? Well here you have a chart. Yay! It looks like about 50 percent of people actually. Oh my gosh, Look at this. 64 of people say it's either going to happen in 2024, 2025 or they have no freaking clue.

Okay, 64 of this pie has no freaking clue or it's gonna happen in 2024 later. In other words, that deflations come in boys and girls. a total of 90 Logistics Firm managers representing the American Apparel and Footwear Association its Logistics Warehouse quote and the Council of Supply Chain Management professionals participated in a survey between March 3rd and March 21st. Oh, during the banking crisis.

How fantastic to provide information on their current inventories and the biggest inflationary pressures they are facing. Okay, so what are the biggest inflationary pressures which yes, they have been passing on to the consumers but are no longer able to That is limited. Now we cannot raise prices anymore. That's why companies take you to the margin.

Now they used to pass it on to Consumers It used to what's sitting in warehouses and what companies are doing about it. Logistics Experts tell CNBC that 20 of their excess savings sitting in warehouses are not seasonable. Seasonal, season, seasonable, whatever. Slightly more than half of survey participants said they would keep items in warehouses.

Yeah, but what happens when those warehouses are full? prices of warehousing is going to go up, but a little over a quarter said they are selling on the secondary. Market Because inventories impact the company's bottom line through elevated storage prices. Ding ding ding ding ding ding ding Thank you. Uh, somebody just donated 199 to say release the poverty chat.

Um and why are there so many blue people? Uh so blue people? are course members? Uh that? I've basically given free chat access to by turning them into Mods Uh, and if you don't have that access yet I could do that for you. Just tag me and actually you know, wait for the next wave. We do that. We'll do another round of that.

Maybe in the course member live to ask me today. but uh yeah, a lot of the blue folks are course members which you could join as well. Link down below. Harris Told CNBC Many clients with perishable goods are selling them on the secondary Market To avoid destroying products, you have to remember, you can't always just hoddle inventory.

That's very important. You can't only huddle inventory. The reason you can't only huddle inventory is because eventually inventory goes to crap. It decays, People steal it, or it decays.

Uh, see if the secondary Market is not an option, they have to destroy the product. If it's consumable, they're donating the goods and taking tax deductions or they should sell it at a at a loss and basically lower prices. Investors are worried about earnings and margin Trends and expect Wall Street to revise. lower duh.

Supply chain pressures and high inventory and high costs of carrying inventory will hurt margins. duh. Almost half said the biggest inflationary pressures they are paying or Warehouse costs Warehouse costs. Look at that.

Well guess how you can lower your Warehouse costs, lower your prices? duh. Now its Logistics Told CNBC that many clients across the industry have been using ocean containers, rail containers, and 30 or 53 foot trailers for storage. Because distribution centers are full, these charges will start materializing in Q3 Q4 Results in other words, the companies are going to take it in the margin, may as well sell your product. Okay, basically more and more of this.

Approximately what percentage of your increased costs are you passing on to customers? Well, you can see here about half of the pie says less than 30 percent and about Uh 74 says less than 50 is being passed on to customers. That means most companies are taking it in the margin. Very few companies are able to pass it all on to Consumers These are your pricing power companies. Only twenty percent of companies are saying they're able to pass on 90 to percent to 100 of the cost to their customers.

Those are PP companies. Companies with massive PP If you want to know what companies I like with massive PP you can learn about my ETF by going to meet Kevin.com You can also see my Affiliates and all the other good stuff there now. I'd Like to do a very brief look into what's going on with Wall Street and what Equity Risk Premia are saying So Equity Risk Premier according to Wall Street Uh are something we're going to be able to analyze right? Let's see here here: I Push This button I Push This button I push as this button to remind you about Metcaven.com Stream Yard. So The Wall Street Journal ran a piece this morning suggesting that stocks have not looked this unattractive since 2007..

basically what they're doing is they're looking at the earnings uh, yield for the S P 500 versus the 10-year treasury sitting at around 1.59 percentage points a load not seen since October of 2007. Now that sounds really scary when I first read this I'm like oh my gosh, this is terrible Like that is a huge uh a a red flag right? But then I got to thinking about it and then I put my thinking cap on and I put my logic together and you want to see what my logic said. My logic said the first thing. First thing my logic said is the S P 500 is trash.

Why is the S P 500 trash? Because it has a ton of top 50 companies that lack pricing power. As a result, those companies I expect are going to take it in the margin like Costco this morning. Okay, they're going to take it in the margin and they're going to suck at earnings. So of course forward EPS Looks bad for the Sap and of course the S P looks highly valued.

That's why I Like pricing power stocks number two. Of course, treasury yields are high now because inflation is expected to be high now and lower soon. And when it's lower soon, rates yields will plummet just this morning. Bloomberg Intelligence put out a piece and they suggested that uh uh uh, the sofr the secure overnight funding rate will probably the market expects it'll go below three percent in 2024.

Bloomberg Intelligence thinks it'll actually go to two percent by 2024. in other words, rapid Cuts coming once disinflation is proven. so that's my thesis. Obviously that's where I put my head.

That's how I counter. But I mean this is a bearish piece. If you want a bearish piece here, you go. Here's the chart: Bears Rejoice Enjoy! In the meantime, I am going to go talk about my PP which you again could learn more about along with all my affiliate links by going to meet Kevin.com and the courses on building your wealth.

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