Okay, so let's go ahead and cut to the chase. So today was a murky day. Mr. Murky, Murky, the Dow and the S P 500 down Some the Rusty's down fairly dramatically and Arc down and I want to talk about the big report that dropped today.

That actually says a lot about where the market is going to go. We've covered the last few inflation reports and each of them have had a dramatic impact on the market. so we want to talk about this one while it's out. and while it's hot off the press and the only thing that I ask in return for all of this is that you hit that ravishing like button and also don't forget to subscribe either.

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So for context, in February, the tax sector, the Ark Growth Stocks, and pretty much every heavy growth oriented retail stock took a massive massive sell-off in Bludgeon, as well as of course, certain parts of the broader market. And this was all because of inflation scares that were supposed to get out of control by summer. Scared people into selling pretty much anything that was higher multiple, like tech, Because when you have things that are forward-looking well, they're more risky by extension. And when interest rates go up, it costs more money to borrow things.

Well, basically it costs more money to take on that risk. Of course, you also had a ton of margin and still have a ton of margin in the market. In fact, if you look at the broader market, margin has only gotten higher since February, and the Fed's projections back in February and March was that Yes, we're going to see rising inflation. Yes, it's going to pick up quite a bit, but it's going to be transitory in the sense that you're not going to keep seeing these exponentially increasing numbers, you're going to see it rise in the summer, and then you're going to start seeing it steady out.

And of course, the zip trader. We aligned ourselves with the Fed's view that inflation is going to be transitory, although it's a little bit less conservative in terms of the estimate. I was thinking, hey, you know what, Maybe inflation's gonna be a little bit worse than they thought, but it is going to end up being transitory. And of course, the market did not agree with the opinion of the Fed throughout February and March and even back in May, But slowly it started agreeing with it over the last couple of months.

And now we have a new report of actual data. not just predictions and market speculation, but actual data. And that's of course, the Consumer Price report that came out today. Actual numbers in terms of where consumer prices are heading, and we can get a trend in terms of where inflation is going to be Three four, five, six months down the line.

Using this data and we can extrapolate to try to figure out. Okay, well, how is growth going to trade? How is the S P going to trade? How risky is the situation we're in right now? Because if you read the headlines, it seems like inflation is out of control. So what is it that we need to know about this? Well, let's start: All items are up 0.9 percent, which accounts for 5.4 year-over-year comparing it to the base case of June 2020.. you have food up 0.8 percent, food at home, 0.8 food away from home up 0.7 energy.

Now here's a big jump up: 1.5 So back in my projection on the reports that we had a couple months ago, as well as last month. Actually, we talked about how the sector was going to account for some of the ripple effect of supply chain issues, such as that pipeline hack two or three months ago. Some of The other supply chain issues, as well as a dramatic rise in demand for energy this summer, and of course, some of the ramifications for how Opec handled the coveted energy crisis and those predictions have come true. You have indeed seen prices climb up.

Pretty obvious though. that was going to happen. so I'm not trying to pat myself on the back. although I will physically pat myself on the back because you know that's Charlie for you, always trying to pat himself on the back.

Going down to gasoline, all types. You have a rise coming off of two months of drops Negative 1.4 in April 2021, 0.7 Negative 0.7 in May, and then a 2.5 rise in June 2021. When you're looking at this report, when you start thinking about numbers in terms of 1.5 percent up or more, that's when you're starting to see a little bit more of that hot inflation. When it's over 2 and you're gearing into 2.3 2.4 2.5 you're in very hot inflation territory.

here. Those are the big parts that are pushing up that average. So down to commodities: 2.2 percent growth. New vehicles, Two percent growth.

As you know, the new vehicle market has been experiencing a ton of turbulence this year because of the chip shortage, some labor shortages, and just overall supply chain issues. And while new car prices are fairly sticky, which means that manufacturers when they introduce a car to market, they tend to keep the price of the car. for that model, you're the same, and when it does get adjusted, it adjusts and increments right. You don't have the Honda Civic fluctuating 20 to 30 percent in price, a new Honda Civic off the lot fluctuating 20 to 30 in price because of supply and demand, but you do have that on the used car market because those are based completely in market value.

Where when it comes to the new car market, it's not so much. that case, you just buy what's available for the manufacturer price. and when you run out of cars that are available, then you go to the used car market. And the fact that there hasn't been that many new cars available has driven a lot of people to that used car market.

and you consider that there's a limited supply of used cars and not that many new cars coming in. Well, that continues to account for a massive inflation in prices. You have a whopping 10 increase in April, which we covered back then, then a 7.3 increase which seemed as though it had cooled off, but now it's picking up again, which is a dramatic problem for the used car market and people who are trying to buy a used car. Right now, you have apparel climbing up 0.7 Although taking a breath from its prior 1.2 percent rate, it's still pretty high compared to where it was in the beginning of the year.

though medical care has seen a drop and a 2.2 percent drop year over year as Coven has become less of a burden on hospitals and care providers. Medical commodities account for medical supplies like ppe both over the counter and under the counter, pills and such and so forth. so we've seen some cooling off. There services in general on a steady rise.

Shelter: 0.5 percent. Transportation services up 1.5 Keep in mind that this includes airfare and as airliners bounce back and the tourism industry starts to get back on its feet or in the sky. I should say when it comes to airports, well, you're starting to see airfares climb as well. And of course, June encompasses that Memorial Day Weekend where there is a ton of people going out and flying.

So there you see transportation prices increase. Medical care services unchanged. Okay, so let's talk about the trend of this and the takeaways here. So first of all, a big reason that the average price here is at 0.9 overall and has increased from the last month is thanks mostly to the used car and truck market, the new car market, and the transportation costs.

Cnbc did the math and found that if you got rid of used cars, new cars, lodging, and transportation services, the core Cpi would have only risen 0.18 month over month, which would have been like nothing but Charlie? Couldn't you just remove everything from the report and there's no inflation at all. What's the logic behind removing data? Well, think about this for a second. Let's just take the biggest sector right now in terms of price increases. used car and trucks.

This is a sector that is having the biggest impact in terms of skewing the data and the average for the entire data set. Yet, it is a sector that has some of the least day-to-day implications for the average consumer. Think about what the average consumer buys every day: food, shelter, gasoline, commodities, services. Maybe you buy apparel once every couple weeks, or once every couple months.

If you're Charlie, you buy five shirts that all look the same and then you just have them for life. But how often are you going out and buying a new car or truck Or a used car or truck? Not very often. Maybe once every few years. Probably even more than that.

Maybe once every five years. So the day-to-day implications of price inflation on this chart isn't exactly equal. If food was going up 10 month after month after month, that would be a disaster. Everyone would be panicking, but because it's used car and trucks, it doesn't have as much of a direct impact on the day-to-day So it's not cause for just massive panic.

Although, it has the same impact on that average by bringing it up dramatically at the same time, it's also transitory when manufacturing starts really taking off and we're starting to see some signs of that already when manufacturers can start delivering more and more cars. Well, that's when you're going to start seeing this go down again. So this is definitely transitory. So I would say that this whole category is almost certainly transitory, and I'd argue not nearly as impactful to the average consumer as the other categories.

The next big sector is obviously energy. I live in California and I just paid about five bucks a gallon the other day. Gas prices are through the roof, regardless of where you are. It was a lot cheaper when I was in Florida than it is now when I'm back in California, but gas prices are much higher than they were last year.

Much of the increases that you see in food prices, commodities, services. everything else on this data set comes from the increase in energy prices that follows. If these are largely impacted by energy prices, well, if you can track the trend of where energy prices are headed, then you can get an idea of where those prices are headed to. At least a large portion of those prices.

It's not all just energy based, but a large portion of it is, and certainly the exponentially moving factor of it. So let's go ahead and look at some predictions for energy prices based on the data that we have right now. So the West Texas Intermediate Crude Oil Price Chart is showing a prediction that crude oil Prices are going to be experiencing increases into the summer of 2021 and then trend down into the fall and into 2022 before hitting a plateau. Later on, you look at the monthly retail regular gasoline the gasoline we buy at the station for personal use.

You see indications of a dramatic rise in 2021, a peak sometime in the summer july, August, and then you see it fall back into 2022 before hitting a lower plateau at an average of around 275 a gallon from a 2021 height at like 325. And you look at most energy sector trends and you see the same predictions Now There's a million different factors here, and this is just based on the data that oil manufacturers have right now and energy manufacturers are dealing with right now. But I think that you look at all the data sets we have right now and it says hey, energy price increases are transitory and you consider that the inflation report is largely fueled no pun intended by rising energy prices as well as the used car market explosion. and it's like hell yeah.

This inflation report looks pretty damn hot, but the two major factors are looking to be very, very transitory come September, October, and November. If you still continue to see energy prices go up, and as relation to that, you still continue to see food prices, services, commodities, and what not also trend upward and accelerate. Well, that's when I would start worrying. but right now based on the data that we have, it seems like the Fed's projections have been right.

So hey, this isn't a bad report anyways. folks that caps off the video. If you have any questions, feel free to reach out to us below or join us on Zip Trader Circle and of course Quick Plug if you'd like to learn how to trade. Would like access to our private chat and daily morning briefings where we brief on all the biggest catalysts each and every morning.

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