저자: Kevin · 외국인
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연준이 실질적으로 디플레이션 신호가 있는 집값(shelter) 지연 지표를 보고 과도하게 긴축을 유지해 경기침체 위험이 크다는 주장. 근원 인플레는 집값 제외 시 거의 0에 가깝다고 봄. 2024년 초부터 금리 인하가 시작되고 대선 무렵 큰 폭 인하 가능성 제시, 금리 인하 선반영을 감안해 1년 이상 투자 관점에선 기회일 수 있다고 함. 유가 상승 및 고소득층 실업 증가도 언급.
다듬은 글
any people would have said needed to happen in this market Apple Microsoft Nvidia all more than 10 percent from their highs and yet the overall s p so needing that good old decline that good old reset and you know what that may be true but there's also some potential fear that the Federal Reserve is going well overboard and that's what's giving the Bears the strongest potential recession narrative right now in fact there are some arguing that right now inflation is basically gone yet the FED has raised rates over 550 basis points five and a half percent take a look at Jay Parsons who puts together a really great thread on Twitter Jay Parsons says the following inflation is basically gone when you exclude the lagged shelter index in CPI remember rent is one of the biggest variables in the CPI basket category and there's about a 12 month lag between rents and CPI now this is really important so there are two things he's setting up here right and then we'll talk about how the FED is potentially screwing things up he's setting up two things number one he's telling you look inflation is essentially trending towards zero but you have to remove the shelter component and this frustrates a lot of people because people say well come on man like housing is a big portion of what people spend money on 30 to 40 percent is usually your housing ratio for those mortgage lenders out there your good old front end ratio and so removing that seems kind of rigged but the reason people remove it is because the government uses this lagged measure of trying to understand what rents are known as owner's equivalent rents which is basically what do owners think they could rent their home out for in surveys well rents could go up and then it takes homeowners a long time to actually realize what rents are as lease turnovers take time and so this gives you a really bad measure of what actual rental inflation is Redfin gave us a much better indicator they say that year over year from this July so basically last month to last August so an 11 month comparison rents are actually on average negative 16 so that actually means prices fell over the last 11 months which let's just assume they're flat August to August that may means your rental inflation is actually zero but the government says rental inflation is actually around five to six percent annualized that's when you take that point four or point five number and multiply it by twelve and that's really frustrating folks because that's leading a lot of folks to say the FED is going to drive us into a recession because they're looking at lagging data and this lagging data is going to leave the FED keeping rates higher for longer and that could end up crushing our economy which obviously isn't good let's keep looking at what Jay says here and then we'll go into some of the latest data so Mr partisans here goes on to say I'm surprised about how little buzz there is about this inflation decline to basically nothingness outside of the econ or Finance Community this like inflation right now less shelter is sitting at just one percent year over year the lowest number since November of 2020.
it's less than half of the 20-year average meanwhile CPI rent inflation continues to slowly cool as expected following its predestined down ramp based on asking rents that have been moderating since the spring of 2022 CPI rent inflation measured 0.41 month over month the lowest read since December 2021.
year over year though CPI rents up eight percent marking four months of cooling after 12 to 20 months Ascension okay some detailed numbers here on top of what I've just outlined and so as these asking rents continue to cool we actually start wondering what happens to inflation when these rents go potentially flat or negative this is what I argued in a tweet myself yesterday where I said we could be looking at deflation solely because of rents going negative and dragging the entire index down think about this the year-over-year CPI read was 3.3 percent in the CPI read we got yesterday on Lauren's birthday well what is the uh what was the main contributor to that well housing 90 of it was contributed by housing well imagine now if we first of all if we take out that 90 right if we were to go over simplifying here but if we go uh 3.3 times 0.1 we really only saw 0.33 year-over-year inflation outside of that housing contribution right but imagine now if housing via rents or even let's say down one percent and so you got a 0.9 weight to the downside with no upside contributor to inflation you could potentially be not just below two percent but below zero with housing disinflation now I'm not suspecting that we're actually going to get to that because I think other prices might end up continuing to rise and obviously we're still dealing with really high prices right rents still feel high and that's important to know is just because the inflation rate is falling doesn't mean prices are coming down people get this wrong every time they hear me talking about inflation going to zero and they're like why are price is still so high well that's because they went up and then they're flat and when you go up and you're flat you're still really expensive but the inflation rate is technically zero and there's obviously a big misunderstanding about that but anyway this idea about this lag shelter data even though the FED implies that they're aware of it has a lot of people scratching their heads and going this fed is going to drive us into a recession look for example what Marie Daley mentioned yesterday here's Bloomberg quoting her when Bloomberg suggests markets were fragile yesterday after San Francisco Reserve Bank president married daily said the FED quote still has more work to do to combat Rising prices dampening the impact of broadly positive inflation data on Thursday now that was very frustrating to markets in fact you don't even have to look too closely at the markets if you even were totally looked at markets yesterday you were probably like what the hell just happened because look at for example the NASDAQ yesterday after we got our CPI report yesterday on the NASDAQ the NASDAQ actually returned to another FIB level right around 374.
it rallied out of the gate much like many stocks did but stocks broadly sold off throughout the rest of the day and held lows throughout the rest of the day following Mary Daley's comments and this is because people were worried that this fed might legitimately overdo it and drive us straight into recession and this makes sense because think about how slow they were to react to What initially was just thought to be oh it'll just be a transitory little bump of inflation but we printed so much money so rapidly and we ended up getting a very large explosion of inflation to which obviously the FED reacted very slowly the feds the Fed was still printing money in March March of 2022 when we had over seven percent inflation which was nutty but anyway they're slow to react on that side now people think they're going to be slow to react on the other side uh to some extent break evens are relatively stable breakevens are a tool that I like to use to evaluate what the market thinks about inflation five-year Break Even rate sitting at 2.27 that assumes that inflation is going to be an average of 2.27 for the next five years that's pretty close to Target The Five-Year forward level is coming back down normalizing rapidly from this really bizarre Spike we had over the last week so I'm going to keep an eye on that but not make any conclusions there the terminal fed funds rate is currently expected to be 5.37 which is basically where we are now with less than an eight percent chance of us actually getting a hike from the FED going into uh the September meeting we are expecting that our first Cuts will come from the FED as early as January 2024 that is the first time we have any implied rate cuts and then we are looking at about one percent of rate Cuts as soon as November of 2024 so somewhere starting somewhere Jan March May getting all the way to about a percent of cuts around the election time which won't that be quite convenient but there'll be potentially massive interest rate cuts by the time we get to the election and unfortunately If the Fed continues to behave the way it does with this fed speak where it's like oh yeah okay yeah inflation's coming in good yeah that's fine we still have more work to do the more the FED pulls that off the more likely it is that we're going to get pretty substantial rate Cuts come the time of the election because the FED will really have risk overdoing it and we might actually end up seeing unemployment rise substantially more than expected and that's actually a big problem in fact with some of where you're seeing the highest unemployment right now is in a pretty surprising place I'll talk about that in just a moment I just want to remind you that we just launched a new feature where you can go to stack hack s-t-a-c-k hack like get stacked go to stackhack.com and you can actually get licensed Financial advice we're in a pre-sale right now we've already had a lot of people sign up and there's a capacity to how many can sign up we're getting started with work on these sign ups next week that's when we'll end the pre-sale and we'll actually be able to start working with everybody but we're offering actual Financial advice which is pretty cool we've got a team of financial advisors all licensed which is super exciting uh and then we can actually review your personal portfolio your personal situation and give you some real feedback on well here's maybe what you could do in your situation you know as you like incorporating all of your own information which is pretty exciting if you're looking for more principles to Building Wealth of course you still have the programs on building your wealth a link down below as well that would be at meet kevin.com okay so what segment of our economy right now is seeing the largest level of unemployment well you might be surprised by this but it's actually the income groups making more than 125 000 per year that's kind of scary to economists because they look and go wait a minute High inflation was supposed to affect poor individuals more you know that's that's how everything's rigged against poor folks is inflation's supposed to hurt the lower income folks but it's actually the higher income folks who are ending up with more credit card debt lower wage increases and more unemployment and layoffs all of this combined leads to potentially more of a rich session as some people are calling it and this reality that the FED May completely end up overdoing it so we'll see but it's one of the reasons or in other words one of the reasons I should say that we're seeing treasury yields so elevated at the moment is and actually Rising today good lord it's kind of remarkable 10-year treasury back to about 4.11 what you have is you have people with this impression that okay well if the FED is going to overdo it with this higher for longer nonsense even though inflation is basically gone to zero well then we may as well keep selling off treasuries because the FED will keep jacking up rates ignoring economic data and pain that's really the bare BET right now the bear bet isn't oh inflation is going to be here forever we're going to get Paul volckert that was last year's bare bet today's bear bet is the fed's blind to inflation being gone and the pain that they're actually creating as well as the lagged effects of their policy as they're driving this bus looking in the rearview mirror looking at inflation reports to which 90 percent of the inflation reports are propped up by CPI data that is 12 months old owner's equivalent rents and shelter inflation it's pretty nutty so anyway that's leading to a lot of fear obviously there's some geopolitical uh you know updates regarding Biden and China and some economists saying he's not doing enough others saying he's doing too much China's economy slowing down all this nonsense all this by the way doesn't seem to be affecting oil prices at all because take a look at this even with China's economy and sort of somewhat of the doldrums right now you still have international oil at 87 bucks a barrel that's relatively High WTI the Western blend sitting at about 83 much higher than the 69 we were used to there for a while zoom out on the five year and if you look at the five-year chart for Brent crude and you remove 2022 from like Jan 2022 when that invasion was really threatened in Ukraine all the way to about November if you remove that hump we are at the highest level of oil prices in the last five years in fact let's why don't we just zoom out a little bit more the last time we saw oil at these levels before this uh you know 2022 Ukraine Madness was in that 2013 to 2014 oil crisis cycle which is quite remarkable especially since a lot of economies are really slowing down right now seems kind of like the opposite of what should be happening but then again we are seeing or hearing of more threatened Supply constraints uh purposefully designed by OPEC plus to prop up the price of oil all of these things just contribute potentially to more unemployment and more pain in the economy and so I think it's potentially quite likely and this is just my prognostication so take it for what it is it's an opinion okay you know we're gonna have opinions but my prognostication on this is that the fed's rate cutting cycle will actually look a little bit extreme I'm going to pull up a notepad here and kind of draw for you what I think so what I think we're going to see is something where you end up with rates that have risen substantially that are about 5.5 percent and then what you're as sort of the upper bound and then what I think we're going to see is this flat right so we might end up seeing let's draw that a little straighter there we go so let's call that the July level so we'll call that July 23.
it would not Shock me to see a Federal Reserve that keeps rates at five and a half until July 2023 and here's the crazy part you ready for this election season is really going to heat up and I'm not like tinfoil hat here I just think it's going to be oddly convenient how this aligns okay ready for this and and mind you I'm saying this here in August of 2023 so it could be wrong here but this is how things are lining up with today's data this is what I would be expecting we sit at five and a half all the way to July 2023.
now all of a sudden we start seeing unemployment rates arise and then what do we see during this election cycle which I'm going to draw I guess I should draw that as let's draw it as sort of like this box here we'll call this little box here election cycle now let's draw it like this yeah there we go we'll call that election cycle time which would be your August of next year to November of next year maybe even December of 2024 I think during this window you're actually likely to see rates end up doing something like this a dramatic plummet to where you could see right before the election some kind of pretty wild minus two percent now markets are not pricing that in right now markets are actually only pricing in minus one percent but I think staying at this high level to just a hundred percent make sure inflation is gone and the economy is nearly crushed we'll end up leading to a Fed that prefers rapid rate Cuts rapid and aggressive rate Cuts that's what I think so uh unfortunately that means this this higher for longer pain is likely to affect interest rate sensitive sectors more and that's problematic it's problematic for Autos it's problematic for solar it's problematic for debtors it's potentially also problematic for housing that hire for longer pain as soon as we get to that rapid decline in rates though all of these sectors will have a massive Tailwinds behind them and so this is where a lot of people will say okay so are you saying we should buy Autos solar and stuff like that and you know have debt or whatever it should we should we just buy those things in the summer of 2024 then you know right for potentially those rate cuts and while that is theoretically a good idea usually the stock market aggressively starts pricing in these sorts of rate Cuts 9 to 12 months before they come which actually means you would potentially hope to see some of this rate cutting priced in starting between November and maybe May of next year who knows but it's something to consider that's just my thesis the whole like the it's entirely possible the FED ends up stair stepping rates down a little bit more where where you kind of slowly lower rates and you do end up getting that one percent they slow walk rates down but I don't think the FED is going to do that and I want to be very clear about why I think that I think the FED has worked so hard to get to this level you know sitting in their Pizza boardroom meetings and like let's raise uh anyway I think they've they've done what they can to get to this level now you're at this level and now the goal is don't signal to the economy that we're just going to run the money printer again because that would imply inflation expectations rise uh and that's what they don't want they don't want inflation expectations to de-anchor let inflation get low and then you could rapidly cut when inflation expectations are low and inflation is low when both of those are low then you could rapidly cut now that obviously introduces the other bear argument where people say oh but when the Federal Reserve is going to cut rates again they're going to induce inflation uh and this is something that I strongly disagree with that's because if we look at the FED uh balance sheet how much money they actually have outstanding I think one of the things that a lot of us forget is that we think very Austrian for a moment and we think okay inflation per the textbook is the expansion of the money supply fine maybe that is the textbook definition of inflation the expansion of the money supply then let's just say consumer prices okay consumer prices how do consumer prices move when the money supply expands well as long as the money supply expands gradually consumer prices actually stay relatively stable so from a from an Austrian point of view you can expand the money supply and you're supposed to be creating inflation but consumer prices don't actually move up that is what we saw in the decade post the last crisis look over here and sorry if I said 2023 where I met 2024 I think you know what I mean but anyway this is what we saw with the fed's balance sheet from 2009 all the way out to 2000 and really 14 we saw the expansion of the money supply we saw the leveling of the money supply and we briefly saw a decline in the money supply during this entire era right here from the 2008 financial crisis we actually didn't see very much inflation at all in fact the Fed was considering lowering their lowering their inflation Target to 1.75 percent during this era what was the rapid expansion that acceleration in the money supply that led to the rapid inflation that we see now obviously stimulus checks helicopter money all of them this is a lot more logical so I think when we look at the Nuance of of you know when the FED Cuts rates and the expansion the money supply we don't necessarily have to create inflation if we do it in sort of normalized ways and we've seen rate Cuts before not lead to substantial inflation or any inflation for that matter so I'm not a believer that when the Federal Reserve finally rapidly Cuts rates that we're going to re-induce inflation I think that'll be a story of the past that's my opinion it could be wrong and if there's data to suggest it's important to flip-flop well you know I will make sure of that uh or make sure to bring that flip to you but for now I'm pretty confident in you know to the extent that you can be in any kind of prediction prediction I'm pretty confident that this is probably more the direction the Fed is likely to lean and that could be frustrating for stocks in the nearer term but uh personally if you have an investment Horizon that's more than a year probably a good opportunity though obviously that's not personalized Financial advice for you because that depends on your situation and we can talk principles here or in my courses on building your wealth but if you want actual Financial advice you should speak to a licensed financial advisor like what's now available at stackhack.com where myself and the team now offer licensed Financial advice check that out at stackhack.com we're in pre-sale right now and we'll be helping people out very soon uh probably next week with actual Financial advice so
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