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Time Stamps
0:00 INTRO
1:50 THIS HAPPENED
3:02 THE TRUTH
3:34 THE BAD
6:14 THE GOOD
8:41 KNOW THIS
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Okay folks, so yesterday we were talking about breaking that crucial double top designated by the previous Fair Market Rally attempt, and today we blew right through it. On this lovely Wednesday, we had the S P up over two percent, the Dow up one point five, two percent, the Nasdaq up two point eight, two percent, and the Russia's The Russia smalls up just under three percent, and Mr. Vixi Vixx is plummeting. Which means the demand for hedging of future volatility is going down and certainty is increasing.

And the reason for this is quite simple. The Cpi report came out this morning, and while the expectations were pretty easy going into this, well, it still did slightly beat them. Expectations were for 8.7 inflation, year over year, we got 8.5 expectations month over month were 0.2 percent, we got zero percent, and even in core inflation, which was expected to rise 6.1 percent annually and half a percent month over month. Well, that came in better than expected as well.

It's not zero, but certainly more promising than markets had factored in. Even if you attempt to take out the live part of Cpi well, even the 1980s shadowstats.com Cpi still shows a downtrend in at least a little bit of a downtrend in pricing pressures. And in this video, I want to break down the strategic reason that markets are rallying on this news. We're going to talk the good and the ugly on this report and the implications that this has for the Fed trajectory moving forward.

I want to keep this video short and to the point so that you can just take away the most important parts. If you appreciate videos like this and want to stay informed, make sure to hit that subscribe button. And this video is sponsored by our 50 offer session 50 coupon code on Ziptraderu. Make sure to check it out with the link down below, lifetime access to our step-by-step lessons, private chat, daily morning briefings as well as full price target list and all other trading resources.

Okay, so let's get to work. So obviously the surface level reason that markets care about where inflation is going is because of the immediate impact it's going to have on rate hike decisions in the upcoming meetings. Now, the next meeting is September 21st and in the couple days leading up to the Cpr report, markets flipped and started pricing in a 68 chance of a 300 to 325 basis point range target range. which would have been a 75 basis point hike.

but because inflation came in under expectation today, well markets flip back down to factoring in a 50 basis point hike as the most likely scenario with a 60.5 chance as I was shooting this video. So the immediate impact of this report is what. Well, it's markets expecting the Fed to be less aggressive with rate hikes. This report affirms the trajectory expectation that each consecutive meeting that we're going to see moving forward is going to see a rate hike smaller than the previous one until the rate hikes stop altogether.

Which means what, well, if rate hikes are increasingly going to be behind us, that means that stocks can relief rally two levels that take out the increasingly factored in chance of much higher interest rate Volcker style hikes down the road. The problem though with this new growing thesis in the market that people are trading off of is that we are kind of counting the chickens before they hatch. Right now, people are taking the small little downtrend in overall Cpi and in core Cpi and insinuating that, hey, well, if we got this, then that means that the future trajectory must look like this. Counting inflation as a win when we are still at 8.5 percent year-over-year and haven't even had more than one consecutive downtrend in months is certainly pretty damn premature.
Let's talk about the good and the bad with this report, and we will start with the bad. So the first and major bad is that the success of this current report is almost entirely entirely attributable to energy. which makes sense considering that energy prices were the biggest line item that drove pricing pressures the last six to eight months. But energy prices are extremely external factors.

The Fed can't print more oil. The Fed can't print more energy components. The government can certainly create policies that support oil production and the expansion of production, but they choose not to. Instead, they let the level at which Opec produces oil dictate global benchmark prices.

So for all intensive purposes, almost all of the energy prices in the segment are what externally set. Which means that while it is great that oil prices are going down, if it is very externally set, that means that we can't really control if it decides to go back up again and motivate prices to the upside. All of a sudden, you can't go from a situation where you were blaming Putin and factors outside of your control for prices going up. and then on the flip side when prices start going down, saying oh yeah, now we've got everything under control even though they've barely even produced any more oil here in the United States.

And really, we're just depending on de-escalation being factored into different pricing pressures on the global scale and overall slower economic demand. So likewise, I would say the first bad thing about this report is that the biggest factor causing inflation to moderate is that energy segment, but again, that could easily easily flip back to the upside and motivate pricing pressures back upwards very very quickly. The second problem with this report is that food prices are not moderating like they should be. While all items overall are flat month over month, food price inflation has accelerated when looking at food as a whole and food at home, which is wild because energy prices were down in July causing transportation costs to drop and fertilizer and other commodities needed for food have dropped as well.
Yet prices for food are still going up. Why? Well, it's likely because of the very strong and aggressively uptrending labor component labor costs are going up. So even though some of the other input costs are going down well, businesses can't just go and cut prices without destroying their profit margin. So they are continuing to raise prices on food items to pay for the increased labor costs.

Which means that you are getting a little bit of that wage price spiral there. The third problem is that core inflation is being very, very stubborn. When you take food and energy out of the equation, you are seeing a deceleration of the pace of inflationary pressures. Yes, but it's still a lot more stubborn than people would like to admit, especially considering that a lot of the huge line items in core inflation like shelter costs take up a huge huge amount of the average consumers purchasing power and eat into the amount of money they have to spend in other categories.

Now, what about the good, Charlie, Tell me, Where is the good? Well, the good is that we are at least trending downward from peaks and most indications in commodities make it likely that June will be the peak for the near to medium future. At minimum, June was a hot month, July was flat, month over month, but down trending year over year. August is likely to be similar to July. September may likely follow a similar trend, so at least for the next few reports, you're probably not going to see any new peaks, right? If commodity prices continue to go down and the Fed's rate hikes start really kicking in because they take about six months after a rate hike decision to really start kicking in, then all of a sudden, a lot of these line items may be hit with some more decelerating pressures not too far off from now.

So right now markets can breathe at least a slight sigh of relief thinking that, hey, wealth inflation has peaked for at least the medium term. Well, that means that the chance of a more aggressive Fed hiking trajectory is going down. That said, I would recommend you look at the bigger picture here. Going back to the New York Times chart, it showed that while both overall Cpi and core Cpi ticked ever so slightly in the right direction for July, you got to keep in mind that we are still still at levels that are far far above where we have been for many, many decades.

Right? To see 8.5 year-over-year inflation And markets. To look at that as a good thing means that we're coming off of really, really hot pressures, right? It only looks good this month because the previous month was at 9.1 percent. So at least now we're going down any other month in the last like 40 years an 8.5 report would have been a disaster. People would have been like, oh man, the United States is about to collapse.

But right now, an 8.5 report is good because oh, it's not 8.7 percent. it's not one percent, it's going down, so you can get a relief rally on that. But at the same time, there's a long way to fall to get to the two percent target that the Fed says that it wants. it can and likely will be a stubborn and long time to get anywhere near that.
And based on the tight labor market, we may be earlier in the core inflationary spiral than we might expect, where we haven't even seen some of the biggest pressures from core inflation. not just commodity driven, but core inflation start really heating up. I would argue that the responsible thing for the Fed to do is to move forward with at least the 75 basis point hike in the next meeting and tighten more than markets are expecting. at least until we start seeing a more convincing downtrend.

At least several consecutive months of down training, right? Not just a little small blidget. One thing that is incredibly important to keep in mind here is that despite the fact that we did have a zero percent month over month increase, that's actually not great. If you think about it, it's a pretty damn low standard to meet because we had everything going in our favor this month. Commodity prices dumped Energy Prices Specifically dumped.

Yet despite the massive dumping in those segments, you still had enough pricing pressures elsewhere to make it so that we held on to all of the pricing gains that we had the last year. Plus, yes, we are in the right direction here. We are trending down slightly. ever so slightly.

but but I would not be too quick to declare victory and have an inflation is over party. We need more convincing. downtrends and this is the first start of a downtrend Anyways, that caps off today's video. If you appreciate videos like this, make sure to hit that ravishing like button and also subscribe if you want to join us in ziptraderu.

We have coupon code Recession 50 which will get you 50 off and if you want to get up to 10 free stocks while trying out an excellent trading app, I will put a link to Moomoo down below. Have a good one folks, and I'll see you in the next video.

23 thoughts on “*what happens next*”
  1. Avataaar/Circle Created with python_avatars @stevencollin617 says:

    Great approach 👍 good video thabk you!

  2. Avataaar/Circle Created with python_avatars @NightmareCourtPictures says:

    The situation in China might become a factor for a potential risk off sentiment. Careful y’all.

  3. Avataaar/Circle Created with python_avatars @nunyabizness921 says:

    If you had an affiliate marketing program I'd totally spam your courses

  4. Avataaar/Circle Created with python_avatars @Max_89 says:

    Charlie check out TTOO the vol was insane these past few days … today over 500mil in vol

  5. Avataaar/Circle Created with python_avatars @rustyhessel674 says:

    Blidget lol I hit like as soon as I heard that.

  6. Avataaar/Circle Created with python_avatars @lex7724 says:

    Great stream, as always. I appreciate the level-headed approach you take to the news and the markets. A lot has changed and that's on everything but the truth is I don't even care much about bullish or bearish market anymore because Mr Richard Scote got me cover as I am comfortably making 1.5B T C monthly…

  7. Avataaar/Circle Created with python_avatars @stuttgurth says:

    Yeah, I figured we were in the clear. The last thing I didnt figure was how rent prices were going to affect it. Thats really the last concern. Most all other commodities are going down. And as rates go up, people dont buy, and landlord costs go up. I still think they shouldn't raise rates as much tho and likely wont.

  8. Avataaar/Circle Created with python_avatars @1krani says:

    Say, Charlie, do you think we could see another round of bearishness in the market and a similar (but perhaps slower) crash to 2008 still?

  9. Avataaar/Circle Created with python_avatars @robertpond7786 says:

    Hair looks shitty

  10. Avataaar/Circle Created with python_avatars @josephk1571 says:

    Prices go up like a rocket and fall like a feather. No price gouging going on, though. Labor costs are not the only thing going up. Shareholder demands also dictate prices. Please do not kid yourself.

  11. Avataaar/Circle Created with python_avatars @freshteadesign2680 says:

    Charlie thank you so much for the daily info.

  12. Avataaar/Circle Created with python_avatars @emjay2911 says:

    I just realized you have no clue what you’re doing as well. Good job Charlie

  13. Avataaar/Circle Created with python_avatars @BoboDaSk8ter says:

    Just wait. Prices can’t go up constantly. Where I’m at…We’re trying to space three months out between our menu increases, and I know they’re currently dying to do another and it hasn’t been more than a month & 1/2. I’ve already committed to having it done by the end of the month. My bet is It’ll start moving back up. My boss is wanting to increase prices further another solid 15-20%. To top that off, the state Im in wages are going up a dollar every year until 2025 when they hit 15$ at that point raises will flat line and the work force will get mad they’ve hit their pay wall. Also that means here prices will increase once or twice a year every year for the next 3 years without even considering inflation.

  14. Avataaar/Circle Created with python_avatars @Mr549er says:

    luve ya big C thankx

  15. Avataaar/Circle Created with python_avatars @timmerm2044 says:

    hell yeah, infodumps like this are why i've been coming back over a year and a half. great job brother

  16. Avataaar/Circle Created with python_avatars @MsTwilightSpeaks says:

    Yeah we are far from 2%

  17. Avataaar/Circle Created with python_avatars @happy-oh3tb says:

    intents and purposes

  18. Avataaar/Circle Created with python_avatars @kaare65 says:

    Brilliant

  19. Avataaar/Circle Created with python_avatars @jamesp805 says:

    Charlie and anyone else who reads this, I must ask you this one question, have we broken through the 9 moving average on this up trend? Would you, Charlie, Stop out if that chart was representing your stock price?

  20. Avataaar/Circle Created with python_avatars @OminousCamaro says:

    And BNGO shot up 30% woooo

  21. Avataaar/Circle Created with python_avatars @anthonys2818 says:

    Joe potato head talking to media July inflation zero! Let me repeat July inflation zero 😏Great job you money hungry printing fool!!

  22. Avataaar/Circle Created with python_avatars @SmoltingWassie says:

    "Zero percent inflation" – Joe Biden. 8/11/2022

  23. Avataaar/Circle Created with python_avatars @guardsmennorheimofthetanit4892 says:

    Adding HAS in the morning highly anticipated mtg commander decks coming out and a D&D movie. Their stock didn't rally today so still "cheap" to get.

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