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Well, I think I found one of the most clueless people in finance. It's uh this guy who says inflation is a scam. Now, don't get me wrong. I believe we've got an inflation problem. Prices are way too high, and wages haven't caught up to the level of price gains yet. But, the reasons and rationale that this person gives about why inflation is a scam shows you how little he actually knows about finance.
Now, you might be wondering, why put this poor sap on blast? Well, it's misinformation like this that gives people a misunderstanding of how finance actually works, and it misleads them to think that things are a problem when they aren't actually a problem, and then they miss what the real problem is.
The real problem we will talk about at the end of this video. First, I want to give a shout-out though to James Cat on X. His ticker ticker is too many stocks here. His username is TSLA fan MTL. He's got a great account, shares great perspective, so shout-out to Mr. Cat. So, here's what he says is scam number one in the inflation data, and there are three of these, all of them wrong.
This is the first huge fuck-off scam within this inflation data. It's not the data itself. The data is accurate. Okay, first of all, he thinks the data is accurate. That we know is false, but we'll give that one a pass. But, here is the chart of energy inflation data within the CPI report. So, the index is at 100 in January 2020, and you can see that today electricity is 30% more expensive.
can agree on that. Energy prices are up 31%. Great, that's a good baseline. But, what you're about to see is a spewing of BS, of tying things together to make it seem like there should be a logical conclusion. I'll play it together, and then I'll break it all down to show you how you get manipulated.
But, be careful as you watch this because it's very convincing. Well, here is the price of gas futures. Gas prices went up like a rocket when Russia invaded Ukraine, which the energy companies used to jack up their prices. But then the prices of the commodities have come right back down. Gas is now 10 to 20% cheaper right now than at the start of 2020.
Well, here is the price of coal over the last 5 years. And yes, coal today is almost 80% more expensive than it was back of 2020. But the price of coal has fallen really sharply in the last few months. Same time, the biggest electricity provider in the United States, Duke Energy, made record profits in 2023.
Interestingly, their operating income in the most recent quarter increased by 54% year-on-year. Do you know why? Well, the cost of natural gas for them is down 62% year-on-year. Other fuel is down 11% year-on-year. So, they're not paying as much for their commodities, but your electricity bill is up.
So, they're raking in After rate hikes this year, Pacific Gas and Electric Company, the second biggest electricity supplier, saw a 25% increase in their profits in 2023. I think you get the point. The energy companies are raking in the cash. He almost had me for a moment. But wait a second. What do we have here?
Let's go piece by piece. PG&E announces nearly 25% increase in profits for $2.2 billion. That sounds like this corporation must be really, really greedy and the executives are probably rolling in dough. They're probably laughing their way all the way to the bank. And I'm not here to shill for these corporations.
I don't care. I'm not exposed to their stock and I'm really glad I'm not because PG&E, oh, no. What's this? It had a high of about 70 bucks and it's down 76%. Why could that be? Oh, no. The CEO resigned. Oh, no, massive net income losses to the tune of billions of dollars well exceeding the gross profits they're earning now.
Oh, man. That's not exactly what Sasha told me. I didn't get the full picture. Instead, he's pulling chapter 11 bankruptcy data to show you that revenues finally are starting to grow again and the company can finally start paying back its debtors in its chapter 11 reorganization, so they don't have to fire all their customers leaving more of a monopoly and less choice around for all the other electricity consumers.
The company's actually trying to come out of a hole and this guy is saying they're greedy profiteers. Now, I'm not saying they run their business great. Obviously, they went bankrupt for a reason. They made some oopsy-doopsies and they probably deserve to be going through the hell, but I'm just saying this is a very different picture than what Sasha is telling you.
But, it's not just that, my friends. Sasha tells us that things should be getting cheaper because solar panels and wind farms are cheaper to build. Well, let's break this apart. Duke Energy, the company he talks about, only produces 1.8% from hydroelectric and solar. Now, maybe they could do more. Yes, we can install more solar panels.
Great. Solar panel prices are coming down. Does that mean solar panel inverter prices are coming down? Not if you look at Enphase. They're holding prices up even though volumes are going down. So, no, you don't only get strict price decreases and just because panels are down doesn't mean the cost of installation is down.
Doesn't mean the cost of the whole package is down. Doesn't mean the cost of financing is down. Then, he tells us that, "But, Kevin, what about windmills? Those are getting cheaper." He doesn't show us a chart of that because he's full of crap. Wind turbine prices have jumped in recent years. It's a simple Google.
It's not that hard. Now, yes, natural gas prices have come down, but natural gas consumption has been rising and the problem with rising natural gas consumption is the actual price of natural gas is only one part of what goes into the cost of what you pay for electricity. The natural gas doesn't doesn't just teleport to your cooktop.
It doesn't just teleport to your water heater or your furnace or your boiler. It has to be distributed to you or transmitted to you and that makes up roughly 40% of the cost. So no, it's not just the cost of natural gas. Besides, it's also not just natural gas that actually goes into fuel production.
It says natural gas and fuel oil makes up about 33% of Duke's consolidated energy generation. Okay, so what have other prices done? Well, he rightly pointed out that coal prices are up substantially. Of course, he tries to water that down by saying, "But they've come down a lot recently." Are you kidding me?
Look at the chart. I don't even want to do the math on this, but I'll do it anyway. We're at 284 versus 190. 284 / 190. Not Pokémon, that's funny. Uh you're up 50% on the price of coal still from the bottom. And remember, folks, natural gas is just part we've got right here. Coal making up 12.8% and the cost is up 50% for coal, but it's not just coal.
It's also natural liquid natural gas that's liquefied LNG. Liquefied natural gas. Liquefied natural gas prices are actually up a good chunk from 2019 and 2020. Anywhere between 30 to 50% depending on from what point you measure it. And not all natural gas is transmitted to people through pipelines as compressed natural gas.
Now again, yes, the prices of natural gas in aggregate have come down, but again, it misleads you because not only do you have distribution costs, fuel oils, and coal, and very little renewables that actually go into electricity generation, but most natural gas is negotiated on a contract. That means even though if you say if we just bought all of our electricity right there at the bottom, we'd have cheaper natural gas, we might actually still be paying natural gas prices from the levels of the last 6 months thanks to negotiated contracts to make sure utilities don't run dry and run out of electricity, so they don't have blackouts like the freaking losers loser government in California that makes that so heavily regulates the natural gas industry that you can't actually provide enough natural gas, and then guess what?
You end up getting power outages. So, there are a lot of factors at play here, from politics to regulation to clean environment policies to high financing costs to distribution costs to wages that are going up to labor that's going This There is so much more than just saying, "Hey, um I know coal is up, but uh natural gas is down, so the corporations are being greedy and they're robbing you." This is the problem with finance.
Finance is so much more nuanced and complicated. How about fuel oils? Remember 33% as they mentioned right here? 33% comes from natural gas and fuel oils. We don't have the exact breakdown on how much of it is natural gas, but at least some of it is fuel oil. Okay, are fuel oil prices down? No, of course they're not.
We're going from 184 to also 281, also up about 50% on fuel oil. So, wrong, wrong, wrong, wrong, wrong. Wrong on turbines, wrong on all the costs associated with solar, let alone the percentage that they actually make up energy costs, wrong on not mentioning distribution or labor or politics or regulation, wrong on not mentioning the cost of fuel oils, wrong on talking about PG&E's finally profit so they could pay back the people that they screwed in bankruptcy because they had bad business practices.
Again, I'm not here to not bag on the corporations. I'm just telling you the fact that electricity is up 31% doesn't mean the cost of energy production is down. Now, what's remarkable next is then he tries to blame oh, car insurance is a scam because car insurance is propping up US inflation. It's nothing else.
It's car insurance and that's a scam. In fact, we're going to look at Berkshire Hathaway to see how much of a scam Berkshire Hathaway's GEICO is. Okay, but before I get to car insurance, let me look at what Berkshire Hathaway said about their energy business because obviously he's not going to talk about the Berkshire Hathaway energy business because it would go against his argument.
He's cherry-picking data. What did Warren Buffett get from his energy businesses? Well, let's see. After tax earnings of our utilities and energy business declined 40.3% in 2023 compared to 2022. Oh. Yeah, that that wouldn't help his argument at all. But, let's see where Berkshire Hathaway is finally making money and let's look at car insurance.
Car insurance is up 22.2% year-on-year. But, here is the most recent quarterly report by Berkshire Hathaway who just happened to own GEICO, you know, one of the biggest car insurance companies in the United States and their profit from insurance absolutely exploded in 2023. No other year comes even remotely close and the reason was earnings in 2023 reflected the impacts of premium rate increases and lower claims frequencies.
I think that's pretty black and white or maybe black on yellow. The insurance industry is just taking the piss because they can posting these insane profits that they've never ever posted before. Now, notice what he does right here. He literally skips right over what goes against his narrative which is that insurance expenses are lumpy.
This is a lesson you have to know about insurance. Insurance, some years are really good, some years are really bad. It's kind of like you'll get crop insurance when you have fields of strawberries. Some seasons are fantastic, some seasons you have a total loss, and it costs insurance companies a lot of money.
So, they save up for that. Again, I'm not saying insurance companies can't make a lot of money, they do and they can, but they also lose money. I mean, consider for a moment and then we'll point out exactly where we're getting screwed here and misled. Consider, for example, Allstate. They don't always make money.
See when this line here goes negative by billions of dollars? Those are losses. Trailing 12-month losses exceeding 2 and 1/2 billion dollars. But, where's the manipulation in this person's video? Well, it's right here. I mean, he literally refuses to underline or even speak out loud because it goes against his narrative.
He says, "Earnings in 2023 benefited from relatively low losses reflecting the impact of premium rate increases and lower frequency claims." Earnings in 2023 reflected the impacts of premium rate increases and lower claims frequencies. I might we have lower claims frequencies? Oh, look, because it says right here, "Earnings," the part he didn't read, "reflected benefited from relatively low losses from significant catastrophic events during the year and improved underwriting." So, in part the business is getting more efficient, but also if you have mild weather at a certain period of time, you're going to have less car accidents.
When you have less snow and less rain and less hurricanes, you have less damage to vehicles. So, of course, you're going to have lumpy seasons. And yeah, you could always go, "Oh, see? They had a good weather season that one. Greedy bastards, how dare they? They're a scam." Allstate mentions that as well.
They mention that catastrophe losses for the fourth quarter were low by historic standards. Now, they were slightly higher for Allstate for the year, but the point of this is just to show you that insurance is very lumpy. So, of course, we could just cherry-pick a piece of Berkshire Hathaway's data, ignore the fact that Berkshire Hathaway's telling you Geico actually had a great year in terms of way lower catastrophes, and then let's just ignore the fact that costs for vehicle parts are going up, labor wages are going up.
Let's completely ignore that, and let's just say Warren Buffett is a greedy scumbag, because that's the popular thing to say right now. Let's just completely ignore some of the components that go to into insurance outside of the lumpy aspect, like the over 20% increase in motor vehicle and part prices for replacement parts for cars that get damaged.
And keep in mind, insurance costs are really lagging with inflation. That's because you have what's called contract rollover. That is, let's say it's year one, and everything's great in your business. Year two, things get really expensive. Well, you don't actually have to start paying those really expensive claims probably until later in that year, when you realize, "Crap, our repairs are getting a lot more expensive.
We're going to have to raise premiums in year three." Well, not everybody renews January 1st for their insurance premiums. So, all of a sudden, you look back and go, "Dang, year two expenses were way higher than year one. We need to raise our premiums." So, in year three, you raise your premiums, but it takes an entire year for people's premiums to actually go up.
And then it takes many more years thereafter as competition starts innovating and driving prices down again for those benefits to actually get passed on to individuals, because again, now they're locked in at higher rates. Yes, of course, eventually insurance prices will get pushed back down. How do they get pushed down?
By competition. That's how capitalism works. But taking a lagging industry and trying to point out really weird bumps in the road while ignoring lines in earnings reports that are actually critical to what's actually going on is just a perfect way to manipulate your audience again to make it seem like that you're the one with the only data and there can't be more of an explanation to what's actually going on.
Now, part three. So then we get to shelter in the inflation data. The only other number that is high. Dude, no it's not the only other number that's high. What are you smoking? Funeral expenses 1.5% on a month, that's over 10% annualized. Multiply all these numbers I'm going to read you by 12 to get an annualized figure of inflation.
2.2% for apparel services. What do we got here? Miscellaneous personal services 1.3%. Other personal services eight uh or 0.8%. That works out to uh over seven per well, actually, sorry, times 12, that works out to 9.6% annual inflation. Postage and deliveries up 4.8% on an annual basis. That's the only number that you Only other number that's high?
Wrong. Pet services including vet, that's up I mean look at that, 1.9% in a month and it's been going up and up every single month. Multiply it by 12, that's 22.8%. Purchases of subscription products up 3.8%. Yes, recreation is only up 0.1% and public transportation is down, but again, motor vehicle repair up 3.1%.
Yes, there's vehicle insurance that's up 2.6% on the month. Car and truck rentals are down, fantastic. But health insurance up 1.2%. Transportation services in total up 1.5, hospital services up 1.2. That's on a month, again, multiply by 12. Medical care services 0.6, household operations 0.8. Moving and storage 0.7.
Oh, so makes it even harder for those freaking tenants to recognize lower rents, which they have to move in order to get lower rents most of the time. And so that increases their cost. What are you smoking, Sasha? It's just shelter It's just It's just shelter, motor vehicle insurance, and electricity and it's all a scam.
You didn't even go into the detailed tables, bro. Shelter is at 5.7% and you can see the detailed chart here from the St. Louis Fed and shelter inflation is coming down, but it's coming down very slowly. Shelter is more than 36% of overall inflation. It's by far the biggest factor in the overall inflation data.
The Federal Reserve says that inflation is much too high. They can't possibly do anything about the rates. They've got to keep the rates high, higher for longer. High rates mean that shelter inflation is coming down way more slowly because the interest rates on mortgages are being kept artificially high.
And Okay, no, no, we're wrong. First of all, Sasha implies that mortgage rates are part of the shelter component. So, higher rates are actually driving up inflation. No, mortgage rates are not part of the shelter component. Yes, about 36% of shelter is made up by owners' equivalent rents and shelter, the cost of housing, but those are based on rent costs, not mortgage costs.
And yes, rent costs are flat year over year, and in some cases they're down. Actually, in many parts of the country from peak, rents are coming down. There's a big problem. Rents are really, really sticky when it comes to rent going down. It's very rare, almost never happens that a landlord's going to call you up and go, "Hey, you know, market rents are going down, so we're going to lower your rent." In order for you to get a lower rent, you're going to have to pack up your bags and move.
So, actually, the realization of a lower rental inflation coming through CPI is a lag for an exact reason. There's a reason there's a lag. The reason the lag exists is because people have to pack up their crap and actually move to get a lower market rent. So, that's why I know everybody bags on the Fed for having lagging shelter inflation reads.
I've bagged about it, too. I look at the market rents. I go, "Market rents are going sky high." But, the problem is market rents do go up really fast, and then everybody gets their rate hike pretty dang quickly, even if they stay in the property. But, they don't actually get their rent reduction until they move.
That's a problem. So, you have a structural problem that keeps inflation high. And yeah, you can blame greedy landlords as well. It's obvious that landlords are going to benefit from basically saying, "Move or pay." That's inconvenient to the tenant, so it keeps rents stickier, which is a problem. But, the fact that Sasha is implying that mortgage mortgage costs are included in CPI is wrong.
Now, you could make the stretched argument that because mortgage rates are high, more people are wanting to rent, and that's what's causing rent inflation. But, again, rents are going down year-over-year because there's plenty of new construction that has helped lower rents. Rents are falling, especially in areas like Texas or Florida, where you're having to do 2 to 3-month rent concessions just to get people into a unit.
That's a problem. So, yes, there is going to be a rent reset down. But, again, the problem for the consumer is you're going to have to move to realize it. So, what is the true problem with inflation continuing? Is it corporate greed? Not for the examples that he gave. Probably to some extent, yeah, sure.
I know that's a popular thing to say. But, Sasha's arguments are almost all completely wrong. There's no mention of the big elephant in the room, which is record fiscal spending. The money printer is running beautifully for the government, and that needs to get limited so we can finally slow the spread of inflation.
And this is a broad-based spread of inflation. This is not just inflation coming to you from vehicle insurance. It's pets. It's medical care insurance and medical care expenses and hospital bills. And guess what increases motor vehicle insurance costs? Hospital bills. Wow, what a surprise. There's so much more that goes into this.
And yes, the government is absolutely to blame for inflation. The government is always to blame for inflation. But Sasha doesn't blame the government. Sasha blames all the corporations for all the wrong reasons. Pick a better reason to blame them and stop misleading your audience. Why don't you .
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