I'm old enough to remember the good old days when stocks would go up sometimes when coffee was one dollar and Jerome Powell was our friend. Now, coffee is 100 at least if you have a coupon and Jerome Powell is on trial for equity murder somewhat premeditated. I hope he has a good damn lawyer. This is the one month heat map of the S P 500 and today was just another day of black.

The Dow was down one percent, the S P down 1.65 and the Nasdaq down about 3.18 on its face. Nothing insane, right? Just a bad day. But you had a bad day to an overall terrible year and it's just a bloodbath that just never stops. It's like an evil blood jacuzzi from hell, where the jets are just so strong that it's not even pleasurable anymore.

It just hurts and rips the skin off your back and Satan's over there chomping on some tech stocks saying you enjoying those jets and we're just like, yeah, Satan, it's uh, it's wonderful. Really great. thank you the hospitality And today I want to give a practical breakdown on the inflation report that we got today, what you need to know about it And then I want to give a critical take on how bad the situation we are in is getting and some reasons to be optimistic. Okay, inflation report.

Yesterday I ran a Youtube poll on whether stocks will rally or fall after the Cpi release. We got 11 000 votes and 36 percent of you guys said rally and 64 said fall. I was expecting more 50 50 in terms of responses, as we've gotten kind of used to those contrarian rallies equities dumping massively before fear dates, and then all of a sudden you get this rally rally out of nowhere. But falling equities won the poll and turns out they were right.

That is what happened. But here are the highlights of the report. I was looking at this when it first came out this morning, and my knee jerk reaction was, oh, this isn't that bad. You know this is the slowest monthly growth we've had in like eight plus months, and headline inflation slowed year over year.

You look at March's change. We went up one point two percent before that point, eight percent this month 0.3 percent. But the year-over-year is higher than expected, and folks would have liked to see this start going down more decisively to mark a clearer turn, but it still did go down. It just went down a lot slower than it should have.

Coindesk Have this nice chart of the year-over-year numbers that showed the data point, trend of inflation and the climb from March of 2021 to March of 2022. A drop from 8.5 in March to 8.1 percent in April, which was projected by a lot of analysts would have been at least a somewhat more convincing trend break, something that signifies okay, well, inflation is coming down and calming down. We ended up getting 8.3 which is a drop that's kind of like a rounding error, and it paints the picture that we may find ourselves entrenched in a much slower, persistent plateau of inflationary pressures. At least at this point, you're starting to see some calming down from a peak.

But still, these numbers aren't anything to be head over heels in love with. At the end of the day, how useful is a peak if you just hover around that peak month after month. it's like if you hike all the way up to Mount Everest and you're stuck at the peak like great. I made it to the peak, but now I'm gonna die up here.

But this is where it gets bad. In the report, core inflation minus food and energy was the main metric that the Fed had expected to have peaked and slowed down and kind of put a lot of their credibility on this. and unfortunately, it reaccelerated at least month over month, largely driven by areas like medical care services, shelter and transportation costs, which saw increases. Airfares were up as much as 18.6 percent.

So if you're trying to fly the hell out of here, you're going to be paying out your rear end for that. And outside of core, I mean, food prices are still staying stubborn. I know we're not supposed to care about food because people don't really need that to survive. Unfortunately, the bigger picture here is that the American consumer is still getting squeezed from lots of different ends.

Hopefully we'll get some more clear down trending in future reports, but right now it's a mess and it is what it is. That said, if we've learned anything this year, it's the need to be diversified. With the recent pain that we've seen and even some of the so-called safe companies like Netflix, Alphabet, and even Amazon, the pain in the crypto market and the rapid imploding of our currency, it's clear that we need to be diversified into real assets. Did somebody say real assets? Why yes, Charlie.

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Okay, back to the market now. The overall market is a mess. Right now, the Nasdaq is getting destroyed. the S P 500 is hovering around official bear market territory.

But of course, when you look at broader market indices, they're usually held up by some big mega cap names. However, if you look at individual stocks, you can really see the pain. Wall Street Journal has this market data page that shows you how many stocks have made new 52-week lows in a day's trading session Today in the New York Stock Exchange. That number is 786, And believe it or not, in the Nasdaq, that number is 1602..

For context, that's almost half of the entire Nasdaq and almost a third of the entire Nyse. And these numbers aren't stocks in general that hit 52-week lows over the last two or three weeks. It's ones that hit it today if a stock hit a new 52-week low over and over again the last six months, but didn't happen to hit it today. For whatever reason, it didn't make the cut, which adds a lot of significance to these numbers.

You go over to Bitcoin, 40 of Bitcoin. investors are now underwater according to new data, and if you're under water with an electronic coin, that's a big, stinking risk. But honestly, stocks are bad enough right now. Let's just focus on them.

Market Insider published this piece back in December of the top 10 stocks bought by retail traders in 2021, and I went ahead and I put them together in a spreadsheet to track how much they are down from the highs that they reached in either 2020 or 2021. most of them hit their highs in early 2021. you have Apple down 18.36 percent, Amd now down 43.44 Neo down 79.48 Emc down 82.50 Pltr down 80, Verizon down 22, Microsoft 24, Tesla almost 40, Nvidia down 49.58 and Baba down 73 which averages out at 51 down. And what's crazy about this list is that retail traders tend to have this reputation of oh, they deserve to lose all their money, because guess what, they're just yellowing everything into dogecoin.

But it's like if you look at the actual data, I mean, they aren't buying insanely speculative companies here. This isn't a conservative portfolio by any stretch of the imagination. Otherwise, you'd see Sees, Candy, Mcdonald's and some old real estate companies that have been around and are based in Nebraska, but it's also not aggressively speculative. The top 10 stocks have an assortment of Big Tech with Apple and Microsoft, Growth Tech with Tesla, solid hardware or microchip manufacturer with Amd and Nvidia, major blue chip communications with Verizon Data analytics with Palantir, and some foreign exposure to the second largest economy in the world with Neo and Baba.

The only one on here that I see that's not based on the business itself or based on fundamental value is Amc, because people are buying that for the external reason of trying to protest unfair short selling right now. Obviously, if you switch from an environment of 40 years of lowering and more accommodative monetary policy, to then drop into the floor, and then all of a sudden on a dime, switching to tightening monetary policy rapidly, all of a sudden, you're to get into a situation where you get unprecedented crunching of multiples. And if that creates a recession even worse, you're getting screwed from both angles. So if markets are trying to factor that in, it makes sense that you have numbers like this.

But what's freaky is that we're so early in the process, the economy hasn't really started slowing down yet, and inflation hasn't started going down yet. And also, the Fed hasn't started tightening really much yet. And of course, there's always this argument of, well, what's a fair price to pay for a company? What's the fair price for the overall tech sector? What's a fair price for the S P 500 Where prices in 2015 frothy, Were they frothy in 2018? Were they frothy in 2020 or 2021? And the answer to whether something is frothy or not frothy is based on two things: Number one: does the economy and your company's numbers within that economy support the valuation? Number two does monetary policy support the multiple that you're paying on the numbers that the company is doing. take two different environments.

for one, rates are at zero and one rates are at 20. And let's just say, magically, the economy is growing at the same pace and you look at one company and that company's numbers are the exact same in both situations. Would the company be valued the same in both situations? No, Because in a very, very accommodative monetary policy environment, it would be valued a lot more. There's more capital to bid that up.

It makes more sense to take on that risk versus just keeping it in, for example, a savings account or some sort of investment bond. But I think that a lot of people fundamentally misunderstand the relationship between the market, the economy, stocks, and the companies they're attached to and the Fed. The Fed can certainly help push things up way too far for way too long, and can also push things down way too far for way too long, But over the long run, the Fed's goal is to create a stable environment, both not to get in the way and not to accelerate the way and in those stable conditions. It's no longer about what's the Fed doing, but what the company is doing and companies then are able to grow based on whether or not they're consistently providing more value to the economy and thus they're shareholders.

For example, let's just throw one company out there. Tesla. If tomorrow rates go up to 10, Tesla will go down substantially. But if Tesla can deliver business growth and eventually earnings that outpace whatever interest rates are over the long run, then Tesla will go up again and earn higher and higher valuations.

If they can't then they'll go down in stable conditions. It's not about what the Fed is going to do next, but what your company is doing next is it earning valuation? Is it earning a growth on that valuation? At any point in the last 10 years, the Fed could have easily you turned and raised rates dramatically, and we would have seen massive, sustaining sell-offs in rug pulling that had nothing to do with the companies and could have even induced recessions that actually hurt the fundamentals of the companies. So there's certainly a balance between the Fed and the companies. Neither are completely separable, but in ideal situations, the Fed gets out of the way and it's not even a problem.

Now, if you're an absolutist, you could say charlie, what are you talking about The Fed has been helping them for 40 years. Rates have been on a long term downtrend, yes, but again, when you set a new precedent, the market just builds on it. If you set a precedent tomorrow, at 10, things would crash and then you'd build on that precedent. Whatever you're averaging at is your new president.

That's the steady supply that the market's getting from the Fed figuratively and literally, based on the different tools of monetary policy. And the current U-turn could have happened three years ago. It could have happened three years from now, and that would have had huge impacts for where equities would be trading. But the long-term value of companies is based on what it's based on, whether they can provide economic value to the people in the economy.

and better yet, because the Fed's eternity now instead of back in 2018 before we printed unprecedented amounts of more money. There's certainly a lot more misery and pain that could be had in getting the junkie financial system off. It's junk, and it's been very painful. And it's probably gonna get a lot more painful, especially if we do get pushed into a recession.

But when push comes to shove, history does show that the Fed tends to lower interest rates when recessions start and reverse course and capital flocks right back into the market. and if there ends up being no recession and this whole thing ended up just being mental, fear, gymnastics, and inflation ends up going down without the economy going down, then hey, win win, Recession or no recession, it's very important to pay attention to what's happening right now. We are whipsawing quite a bit from massive premiums to increasingly massive massive trenches. And every day as this pans out, you're going to see some of the biggest and best companies get discounted huge and you're going to have opportunities to decide whether or not it makes sense to buy them.

Right now, in the depths of a crisis, it's very hard to see the other side. It's very hard to see the light. Does it go down 50 more? Does it last two three years? Or does it reverse a quarter from now? Two quarters from now? Nobody's going to be able to tell you that, and we could speculate all we want. But a lot of the decisions that are going to be made that dictate that are made by very, very few number of people at the Fed and an even fewer number of people at the top of the Federal government.

But over the long run, capital flocks to companies that are providing value in an economy and an economy grows. When you have a system in place that allows for people to be incentivized to contribute and to innovate and to create more and more economic value for their fellow citizens and in the Us. we still for the most part have that. So anyways, that caps off today's video.

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