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🚨LIVE CPI W/ @PeterSchiff
Recorded: May 10, 2023 Duration: 1:31:51Space Recording
Short Summary
The discussion highlights trends in meme coin speculation, shifts in economic policy expectations, and concerns about financial stability. There is a focus on the potential decline in the banking sector and the broader economy, with predictions of more bank failures and the need for bailouts. Additionally, the conversation touches on the growth of digital media platforms and the increasing value of gold as an inflation hedge.
Full Transcription
Can you hear me guys?
Saman, can you hear me?
I can hear you.
Hey, what's up man?
Yeah.
Good to hear that voice.
How you doing, man?
It's been a while.
It's been a long time.
How's things, man?
What is, what shit are you guys doing?
I'm saying you guys and I was like I'm not part of it anymore.
I don't want to be part of it. What the hell's going with Pepe, man?
Like how the hell can I keep a crypto punk with shit like Pepe happening in the space?
Yeah, it's a bit frustrating.
I mean, on the one hand, obviously, people are free to do whatever they want.
I support that.
I just think it's...
Pretty poor timing that the conversation right now is around meme coins and then of course meme coins on
Bitcoin right with regulators and legislators have a focus on this face we're literally like
People are literally printing money and pumping and dumpy it's it's banana. It's crazy man like this is the shit
I had I think Pepe that someone from Pepe reached out I don't know if it was an investor the founder
No one knows who the founder is do they reached out about coming on the show or talking about it on the show
Call me stupid, but we said no.
That was a while ago.
That's the proper response, even if it was today.
I mean, we all know it has no utility and value,
and it's simply just, you know, something that trader.
Listen, I mean, it's super fun to trade for people
as long as they understand the risk,
but like, you know, you go to the casino,
you get free drinks, but you never stay an extra day.
So I hope people are getting their money out while they can.
How's my audio before I kick these off?
Is it too loud?
Let me see.
Is it better now?
Is it loud?
Yeah.
You sound great.
All right, man, so we got, we got Sam here.
We got Caleb on stage.
We do have Joseph as well.
We've got a few more panelists.
Mr. Schiff's joining us in a bit.
Robert, Mr. Wolf.
Let me put Robert Wolf on the title.
And Robert Wolf in the title is joining us any minute as well.
And let me send an invite to Wahid.
And then we can kick things off.
But man, it's a lot of shit is going on.
Before we go down the, we stop talking about finance.
And CPI, did you hear the news about Tucker Carlson and the announcement, Scott?
Yeah, I mean, it really compels me to want to go more even all that on Twitter, to be quite honest, which is something that I tweeted.
I mean, I don't have an opinion on Tucker Carlson himself, just the fact that someone of that sheer size and magnitude is willing to.
to, you know, expend the resources on Twitter rather than another platform seems obvious that, you know, streaming video is coming, a lot more features and that this is going to be, you know, listen, you were, of everyone, you were ahead of this trend, right, more than any other person to understand that citizen journalism was the next wave and that this was the place to do it.
and so I think it's just, I mean, it's huge for Twitter.
This is bigger than anything else, I think we've seen for Twitter
since Alamos took over, to be quite honest.
Yeah, it's insane. I didn't explain, you know,
Give me whatever credit you want.
I did not expect this.
I think I did a tweet, and I shouldn't have deleted it.
I did a tweet when Tucker was let go from Fox that he should come to Twitter or is he coming to Twitter or something along those lines.
And then for some reason I deleted it.
I think some breaking news came in and we replaced it with something else.
And he is.
Waheed, you were asking me about Tucker coming on the show.
I've got people messaging me.
I've still got to go through all my messages.
Everyone's calling it a game changer, a Danish message.
is you know Scott just said now he's tripling down on Twitter
Danish sends me a message he's listening to us now on a plane
on and off on a VAS connection that he says the following
the taka thing is incredible for us
so obviously it's a selfish comment because for us for our spaces
but yeah man that takken news Wahid
before we kick off the discussion the space
that taker news is insane for Twitter
it's insane
So, yeah, but it's also your humility, man.
You're willing to share the throne.
I love you.
Well, he asked me for permission.
I said, yes, you may come to Twitter.
You may come to my platform Twitter.
I own zero Twitter shares, just for the record, which I regret.
Yeah.
I probably want to change that now
now that I'm thinking about it
but yeah I've given him permission
but guys let's kick off the discussion
we do have an incredible panel today
Danish will not be able to join
he'll be joining us later
so Scott is he to help
Caleb is here to help
and Waheed is he to help
and of course
Slayman the man himself
to kick it off
what should we expect
one thing I said in yesterday space
I was talking I was telling the audience
yesterday like
Like, what a fucking day.
Like, oh, go to sleep.
There's what's going on between Israelis and Palestinians, the clashes.
I'm like, all right, we'll cover this the next day.
I wake up, relatively peaceful day in the U.S.,
and then there's the Trump news with the not rape,
not guilty of rape, but of sexual assault, I think it was.
I don't know what it's called, Sleman.
So the Trump news, Tucker coming to Twitter.
And what was the third piece of breaking news that happened yesterday?
But I told the audience, I said, the thing that concerns me the most is the debt ceiling,
the worries about the debt ceiling, we should want to understand because there's a bit of,
the panel was a bit polarized yesterday on whether this should we should be concerned about
the debt ceiling again.
It's the same, same shit different day.
Or is just political posturing, but it's not a real concern.
And obviously, inflation, potential banking contagion.
So let's warm it up, Wahid.
What should we expect?
How are the markets?
How worried are you?
So, you know, I'm probably going to give you a little bit of a different insight to what the consensus is.
And part of the reason is consensus is very consensus this month.
What do I mean by that?
You don't have a lot of disparity between the different analysts estimates.
And I actually think it's a sleepy estimate.
I actually think today you'll get quite a big miss.
I might have egg on my face.
But look at the comps.
The comps have become really easy.
And they're predicting 5% on inflation headline and 5.5 on core.
I actually think we're going to get less than that.
Now, you look at the implied volatility as measured by, you know, the VIX and the daily VIX options.
So we're sorry to interrupt you just quickly.
So you think that the expected inflation rate is going to be below 5%?
Because a lot of market analysts are the same 5.25%.
Well, I'll get to that.
But the implied volatility today is very low.
So what the market is telling you is they don't really give a shit about today.
And I think part of the – there are two reasons.
One is there are bigger fish to fry, which Mario just –
spoke about with the debt ceiling, et cetera.
And then the second thing is, you know, Powell really did telegraph.
Look, now we're sort of data dependent.
He's stuck in another 25 basis points yesterday.
Williams talked about like we may not be done and no cuts again.
So I think the narrative is slightly shifting.
But going back to your question, Silliaman, we are now at nine months.
from when those ugly shelter prints started to print nine months ago.
And that is the extent of the lagging.
So I actually think you're going to start seeing that 40% of CPI being shelter
really start to creep in and hit a dent.
That coupled with oil gas prices really coming down,
I actually think we're going to miss that 5% number
and we're going to start getting into the fours.
That's not great.
But once we start getting into the fours,
fours relative to the 2% target is far more palatable than 7% relative to the 2% target.
And there's a lot of people out there that say, you know what, we're kind of going to settle for 3% to 4%
even though Powell really tried to deny that and scuttle that away during the call.
So I think we're now finally, this month, we're going to start entering a new narrative,
which is the threes and fours, and where I think we're going to stay for a while.
until the markets begins to think that that's the new normal.
and, you know, coupled with the bank crisis and the debt ceiling,
hopefully things coalesce to the point where the central bankers say,
you know what, fuck it, let's just accept the three to four percent.
I know they're not there yet, but that's what I think the new narrative is going to be.
So I just want to, like, break it down and break down the different sectors
or the ramifications of what you're saying on the various sectors.
I think that's an easy way and structured way of people understanding what's happening.
First of all, let's look at the financial sector.
If the inflation rate was to increase, it was to be high,
then they'd have to put more controls in.
They'd have to raise interest rates.
But then what you're suggesting is that it's going to drop.
And if it drops, how, I mean, I know it's going to impact interest rates and lending
and the monetary policy stands.
But if you can give the listeners more of a, like, a broader explanation of how it is,
how your prediction may impact the financial sector.
Okay, so there's a tug war, target war.
Markets on one side, Fed on the other side.
The Fed says we're not cutting rates.
The market says, no, no, no, no, no, no, no, no, we're going to cut rates.
Has been predicting that for months and months and months.
They cannot jawbone enough.
And that dent on the six-month yield is not shaking.
Okay, so markets are continuing to predict rate cuts starting literally late in the summer all the way to the end of the year.
That's not shaken, no matter what they say.
What happens is with the debt ceiling and a few more problems in the savings and banks,
situation, that's going to pull the tug of war to the market side.
So if we get a lighter inflation today, okay, the next piece of news is what?
The next piece of news are three things.
Economic indicators continue to decelerate.
The momentum is deceleration in almost all indicators, with the exception of employment
and a few PMIs.
The second is more problems than the savings in banks.
Okay?
And third is the debt ceiling.
Those three things.
If we have a light inflation today,
those three things will finally break the pendulum.
of that tug of war, such that the markets will be, will start to have the upper hand in the narrative.
Does that make sense?
It does. It makes a lot of sense. But now, I just want to focus on one of the points you mentioned.
You said that there'd be more problems in the savings and banks.
I mean, if you want to just expand on that a bit more for the view, that'd be brilliant.
Look at the Sluess Report. I mean, it's obvious, right? It's, it's, it's,
You know, sorry, I know for the honest, some of the audience don't know this, so I apologize for that statement.
But I just basically credit is tightening both in Europe, especially in the U.S.,
The loan officers have clearly put out their surveys saying credit is much tighter disproportionately in the mid-tier regional banks as opposed to the large banks.
But even the large banks, they're parking a lot of their deposits in money markets that's sucking out a lot of, you know, a lot of reserves.
And that means less crowding out for lending.
You continue to have quantitative tiding,
which means you got a clip of 90 billion plus every month
that has to be digested by new issuance.
You know, that's bonds that need to be purchased by someone
because the Fed's not buying them.
Okay, so that's further taking liquidity out of the system.
And you couple that with, you know, the kink in the yield curve
in the one month bills.
Because of that ceiling and you've got all hellbreaking loose, right?
So the market is screaming, credit is stight, liquidity is dwindling, and, you know, Houston, we got a problem.
So the reason why today is pivotal is in that sort of tug-of-war.
So if there's a light inflation, the markets will start screaming like, come on already.
Don't you see the sirens going off?
If I'm wrong, and it's very likely I could be wrong, and inflation stays in the five handle, we got a problem.
Because then really the Fed is stuck, really stuck.
And then what?
I just don't think that's it.
And then what? By the way, other panelists, feel free to jump in and disagree as well. I'd love people that disagree. Caleb, you have a habit of disagreeing. But I had one more question to you before we got other panelists. What is, okay, so Houston, we have a problem. Tell us more about the problem. What can the Fed do? What can we expect?
like they just running out of options like we're fucked like we said we have to accept structural
inflation higher structural inflation uh jay who'll be joining us in a bit disagreed with you some
other panelists disagreed that we don't have to accept i think mr wolfe disagreed robert wolfe
disagreed as well i can't remember um that we should not expect higher structural inflation
that we shouldn't expect it um the chairman was pushing back on this uh pretty pretty pretty heavily um
It seems inevitable, but let's say the CPR numbers are higher than expected.
Right.
What do we do then?
Let me clarify.
Hold on one second.
There is target 2% or 2s.
There is structure inflation that I talk about, which is long term that we can live with.
In the three and fours, we cannot live with the fives.
So I need to clarify that, Murray.
When I talk about structural inflation, I don't mean the fives.
The fives is a problem.
The fives will not get, you know, will not get off our back.
central bankers will continue to be forced to tighten.
I'm talking about threes and fours,
which is that what I'm hoping we're going to get today.
If we get that today, we're not off, you know,
we're not off to the races.
We just give impetus to that tug of war where the markets...
you know, the world will start to say, you know what, Powell, we love you, buddy, but the markets are right.
You know, and in the face of debt ceiling and all these crises, et cetera, the markets will ultimately be proven, right.
It's not Houston. Yeah, it's not Houston. We have a problem. It's New York. We have a problem.
If you look at what John Williams said at the New York Economic Club yesterday.
So we've got a Fed president out there from the New York Fed yesterday talking about how
Or maybe this was Monday.
But, you know, just earlier this week, he was out there because we have a variety of Fed speakers this week.
And he was out there saying, look, hey, rates are going to continue to increase if inflation doesn't come down.
So, you know, you've got Fed presidents basically supporting future hikes if this number doesn't come down.
So I totally agree that we need this number to come down.
Can we sustain?
But what happens?
Can we sustain more hikes?
Like the system, the cracks are showing everything.
there's worries in the system.
Can we sustain more heights?
I'm not the game maker.
I'm just a paid observer.
And yeah, no, I think that you're going to continue to see the cracks.
And you saw it, not just in the SluS report, which I think was a great callout,
but you saw it in the infid numbers this week as well,
the National Federation of Independent Business.
I mean, we're starting to see these small businesses, which...
you know, doesn't, there's not a ton of economic indicators around small businesses.
That's what makes the infid numbers every month kind of interesting to watch.
But they're talking, you can see it in what they're saying in their survey as well.
They're seeing that the credit is tightening.
They are increasingly concerned around their future sales growth.
That was something we called out this week.
They're seeing actually their expectations for sales to drop.
precipitously actually in the next three months.
So I think you're going to see it first in small business,
more than you'll see it in kind of big business.
But yeah, absolutely you're going to see cracks in the economy.
Yeah, it's cracks in the economy.
It depends the way because the economy is looking relatively solid.
Job and wage numbers are still hot.
When is that going to change?
I mean, employment historically is last, right?
So unemployment is, you know, the lowest right before a recession because it's the last to go,
which is why we watch not just...
the employment numbers, but also job openings, which of course has been coming down,
as well as jobless claims.
And that has been creeping up just a little bit.
There's some debate about it, but it's been creeping up just a little bit as well.
And then, of course, we look at the Treasury data, and we think the Treasury
withholding's data as a proxy for employment is starting to show some normalization as well.
We don't think that the employment market is as hot as everyone thinks it is.
What are the trends in terms of the own employment numbers?
So has it, you, you talk about this last, yeah, this last week, Friday, you know, we saw like a big print on the, the overall non-farm payrolls report, which is kind of the big headline number that the Fed uses and looks at in their summary of economic projections and their conversations and their speeches.
However, what was probably widely overlooked was the massive revision to the numbers on the seasonal adjustments in the prior two months.
So we don't, again, like we pay attention to that number because you have to be relevant, but we think that there's other indicators to the economy that are showing that employment softening.
Okay, and if we look at the Fed, if the Fed keeps depending on lagging indicators, could they overcorrect?
I'm just worried, like the Fed using data from a month ago where petrol was more expensive to make decisions today when petrol is cheaper.
Could that backfire?
The Fed always overcorrects.
Like every single person up here would tell you that.
The Fed always overcorrects because they're always using lagging data.
as their guideposts. Exactly. Exactly. They over-stimulate and then they over-tighten, right? It's a very
simple process, right? So, yeah, I mean, we could obviously dive into that a little bit more.
Neely, I actually wanted to chime in really quickly on the labor market data because I agree with
you that there seems to be some overlooking going on with respect to the
revisions for the prior month data. But I actually think one of the most overlooked components
from last week's NFP data was the fact that prime age labor force participation is now
above the pre-COVID levels. Right. So this is the labor force participation rate of people
between the ages of 25 and 54. It's now at 83.3%.
We fully recovered that massive decline from the COVID environment.
And, you know, this is, you know, fundamentally really good news for the labor market as a whole because we want to see capable people working, right?
This is exactly what we want.
So I don't know if you have any thoughts on that point specifically, Neely, but, I mean, you're my go-to labor market expert.
You're so sweet.
And you're in Budapest right now, aren't you, Caleb?
Yeah.
I know, yeah.
I studied in Budapest, actually, comparative economic and political systems there.
So I am a fan of where you are.
So go follow Caleb.
He's got cool pictures.
All right.
So I would say on the labor force participation, our primary thesis has been this year that
you would actually start seeing people come off the sidelines, off the not employed,
and into that labor force.
And then to try to get hired why one of the big drivers is we had 17 million people lose
access to low to no-cost health care through the pandemic assistance of Medicaid.
Medicaid.
That ended, that pandemic program ended at the end of March, March 31.
And so that is, in fact, what you're seeing is people coming off the sidelines and into the market seeking that component, that benefit.
Because unlike other countries, you know, the primary access for most W2 type employed people, which is what's largely captured in the employment statistics, right?
is healthcare.
We don't have universal health care in our country.
And it's extraordinarily expensive to buy privately.
I've done it, I know.
So you have to basically access it through an employer.
And that is actually, Caleb, what we're seeing is people coming off the sidelines
and into the job market.
The question is, are they doing it because they want to or because they need to?
And, you know, so I love it that we're seeing that number high as well.
I think it's the why behind it is that we're looking into.
I think one of the things, go ahead, Michael, sorry.
I'll let you finish off, man.
I wanted to ask Joseph the question, but I'll let you finish off.
Sure, just maybe one of the last things here on the labor market,
because we also got the Joltz data from last week,
which showed a pretty considerable decline.
And it's interesting because if you look at the correlation between the NASDAQ and job openings,
it's very, very tight.
So we're actually starting to see a little bit of a divergence here in the last couple of months where the NASDAQ is grinding higher, but jolts are still coming lower.
I think one of the things that's kind of overlooked, and Neely again, I'd love to hear your thoughts on this with respect to jolts is, you know, we're missing a lot of context about why these job openings are coming down.
For example, are the positions getting filled or are employers delisting open positions?
And we don't have the context there, which is actually quite interesting.
And so, you know, we got the Joltz data last week.
We saw the quits rate come down.
That's very disinflationary.
Overall, I've done the research on that as well.
And so, you know, I'd also be curious to hear what your thoughts are on that actual job openings number because, you know, to your point, right, if people are losing access to, you know, government health insurance essentially, and they need to reenter the labor force to get health insurance.
You know, could we be seeing those Joltz numbers come down simply because more people are coming in and filling those open roles?
That generally seems to kind of fit with what we were just talking about with Prime Major Labor Force participation rate, right?
It does. Just really quickly, swiftly. First and foremost, Joltz, I love Joltz, you know, Fed quotes Joltz. We have to care about Joltz.
It is one month lagged relative to the labor data.
As I know, you know, I'm just sharing that for everybody else listening.
And then secondly, the participation of the survey is like, it's gone from the 70s.
like in terms of the conversion rate of the survey down to like 30%.
Like the quality of Joltz data is among all the data sets in the BLS happens to be one of the lowest right now.
So I'll just put that out there.
So I treat it loosely because of that.
Secondly, let's just say let's hold it as a truth that what we are seeing is actually true.
It's valid and it's good data.
I...
I think that the reason why job openings are coming down, and this just comes from our own personal practice because we advise CEOs and boards on matters of the economy, it's because they're literally pulling job postings at this point because they're looking at their whole labor force and they're wondering, okay, do we actually need all these people?
Do we need all the space in commercial real estate? Do we need all these people? I mean, these are the conversations that are going on.
in boardrooms right now, one of the first steps you need to do is actually to pull off your job
openings as you go through and decide to lay off people. So I think it's somewhat of a leading
indicator on layoffs. So, sorry, Mark, did you have a question? I should like, go ahead.
Yeah, look, I wanted to go to Joseph very briefly.
It's going to a separate point, Joseph.
First, good to have you on the panel.
Thank you for giving us the time.
You know, we're looking at de-globalization increasing.
We're seeing the tensions between tensions and sanctions between the U.S. and China.
Obviously, the war in Russia costs.
are rising. They could rise further with de-globalization. Even though all prices might remain
lower for now, OPEC, OPEC plus will reduce output further towards quarter three. Considering
all this, can we really expect inflation to start slowing as Waheed mentioned? Do you agree with
Waheed's analysis earlier? Okay, first of all, thanks so much for having me. And Caleb Nelly made
some great points. So I agree with that with that
idea, Mario, I think that we are really structurally heading for a world that we will have
structurally higher inflation. And part of that will be because there is a structural
deficit in supply. You can think of it as a shrinking workforce population because in the 1980s,
people who had smaller families. And so as that begins to work through the system or workforce
population is not growing as much, we see that happening already. Totally correct that the
prime age labor force participation is above pre-pandemic levels.
But if you look at the labor force participation for those 55 and above, that's declining.
And that's, I will not decline.
That dropped off and did not come back.
So we have a structural deficit in labor and going to your point about, let's say,
the reversal of globalization, perhaps structurally less energy.
That's all something that that is continuing to happen as well.
If we read central bank speeches, so the recent speech by President Lagarde, and I think a year ago, there was also similar speech by at that time Vice Chair Brainerd of the Fed.
The authorities are also becoming aware that, you know, maybe all these tailwinds to lower inflation over the past few years, globalization increasing supply.
maybe reversing.
And that, I think, really structurally changes the inflation dynamics going forward.
So I think that's something that that's definitely...
something to keep in mind. And that also, I think, suggests to me that industry
policy is going to be more restrictive than expected going forward. Depending on the mandate of the
central banks, some central banks are purely inflation targeting. And if you have a world where you
have structurally declines in supply pushing up inflation, they're going to try to counter that by
keeping inflation higher and keeping demand in check. So I really think that we are
at a point where I think the world is changing and monetary policy is going to change too structurally.
It could be that we accept a higher inflation, as was suggested by higher panels.
But at the U.S., at least, I don't think we're there yet.
And I don't think we'll see that under Apollo Fed.
We could definitely see it under a new Fed chair in the coming years.
But at the moment, it doesn't seem like they're ready for that.
So, I mean, I had a question for Stock Talk.
Are you there, Stock Talk?
I am here.
How are you, Lord?
Good, thanks.
So I'm going to ask you a few questions on the market, but specifically, initially,
obviously, market experts are saying or expecting that the inflation rate is going to be anything between 5% to 5.25%.
Well, he said that he believed it was going to drop and it was going to be 4.75%.
Yeah, that was which makes...
I'm surprised.
Like, I didn't expect Wahit to be that optimistic.
Like, Wahid, I don't know where he got.
He dropped out.
I just sent you another invite Wahid.
I see he just dropped out.
But I don't know where he got this number from.
So I'm really curious on why he's so optimistic suddenly out of nowhere.
But sorry, go ahead with your question.
Yeah, so in terms of...
So now...
He's out, hold on.
He's up.
Before he got a stock talk, because why he just very briefly before he got a stock talk,
why are you so optimistic suddenly, man?
Like, you've never had...
shared any good expectations with me since coming on the show.
Is it making you more concerned?
Well, I don't understand.
What do you mean I don't have a good experience?
I've always told you I'm bullish.
I wasn't, I was, what I mean?
Bullish?
You're bullish because everything's going to capitulate.
Cracks are going to become holes, and then the Fed will have to pivot.
Cracks aren't holes and the Fed hasn't pivoted.
I love how you tease me.
I'm being objective.
Dude, they're debating on whether to default on the freaking government debt.
Yeah, but that's politics.
It's not a real debate.
You want me to do cartwheels?
No, man, but it's not a real debate.
That has nothing to do with a discussion.
There's nothing to do with low CPI either.
Okay.
All right.
So I have two, you know.
All right, so it's very easy, okay?
Whether I have optimistic expectations of missing the CPI is irrelevant.
First of all, it's not optimistic or pessimistic.
If we miss the CPI, it means we're slowing harder than you can imagine.
Okay, so it's actually very bearish.
So a bullish view is that we have hunky-dory CPI that's above expectations, not below.
So that's point number one.
Point number two, I'm looking at 40% of that number.
People, you know, we have, people have been waiting for that number to come down, shelter.
And they've been waiting and waiting and waiting until now, finally, they capitulated that we may never see that decline.
We have now digested nine to ten months asymmetry between shelter survey and real-life rental data.
Okay?
And you could see Kay Schiller.
You could see so many surveys that show you the dramatic deceleration in pricing on real estate plus rents.
That is what I think is seeping through as we speak.
Whether it's this month or next month, you're going to finally see a reset.
Because 40% of that CPI, which in many surveys, is negative.
Negative.
It's actually negative as opposed to the positive in the owner-cruivorrent survey.
Okay, if once that numbers finally starts the anniversary and reflect the reality, you're going to see a plummeting of that CPI number.
And that's been very well telegraphed, not just by me, but many other smart people on your show, Mario.
Okay, I'm the thickest of all, all right?
So I'm not giving you a secret sauce here.
This is quite well known.
But I think now is when you start the anniversary that nine-month lag effect.
And that's what I'm hinging my prediction on.
So it's actually quite a bearish view, not a bullish.
And by the way, per the Fed's own admission and data,
they've even acknowledged that shelter and owner's equivalent rent lags the actual housing market by roughly nine months.
And so, you know, I'm in completely agreement.
I'm not. I'm just parroting. I agree with you.
Let me give you some numbers just for the audience.
So J.P. Morgan, so Goldman Sachs, our preview of CPI, we expect a 0.4%, 0.47% increase in April core CPI above, what is it?
I can't see the rest of it.
Shit, Scott, I'll read that in a bit.
And another thing I want to read out, so that one, guys, is broken.
The team in the background, the message is broken.
J.P. Morgan, the market will react with the following, based on J.P. Morgan's estimates.
If the CPI is above 5.5%, the SMP 500 will be down at least 3%.
If the CPI is 5.3 to 5.5%, it will be down between 0.75 and 1.25%.
If the CPI is between 5 and 5.2%, we'll see the market drop by 0.5 to 0.75%.
You mean the CPU?
The market will, no, up, sorry, up will 0.5 to 0.75% if the CPI is between 5 and 5.2, thanks, man.
Now, if we get to where he'd stare at tree, 4.7 to 4.9% CPI, it's going to be up by 1 to 1.25%.
And then CPI below 4.5%.
It'll be up at least 2.5%.
We'll get an update on the crypto market,
how we think that will react in a bit.
Ryan's on stage, Simon's on stage.
But go ahead, Simon.
Yeah, I'm glad you read that
because I've got a few questions based on that stock talk.
So, um,
Sorry, I was going to go to it before.
But basically, I would talk about the market in general, but firstly, in terms of currency.
So we know, for example, high inflation results in currency depreciation, and that erodes purchasing power.
Now, if the CPI remains the same, all goes lower as Waheed has indicated, then we expect...
then does that, that means the currency is going to be strengthened.
I mean, is that the case?
And if you can expand a bit more for the, for the, for the listeners, that'd be brilliant.
Yeah, I mean, I'm not really focused on the impact of, of CPI or inflation more broadly on the dollar.
I mean, some people might be, but, you know, that's not really my perspective here.
I'm more concerned about in the context of this cycle, can it come down quickly enough?
for monetary policy to change quickly enough.
I mean, the game of the game of landing the plane.
So for you, how quickly would it need to go down?
Sorry, continue, just a quick question.
Sorry, what did you say?
For you, how quick, because your point was that for you,
the main issue is how quickly can it come down?
And my question to you is,
how quickly do you want it to come down for it to meet,
so we don't have the issues that you're referring to?
I mean, I mean, there's no, there's no scheduled timeline.
It's not like, oh, it needs to come down within two months.
It's relative to the economic pressures that are at hand, how quickly can it cool down?
So, I mean, you can pull this conversation back and it doesn't really have to be entirely
inflation focused.
I mean, some people are familiar with Mike Wilson, who is Morgan Stanley's equity strategist,
who has been...
you know, in the headlines quite a bit for the last two years,
for his bearish takes especially,
but,
you know,
they issued a,
an update yesterday and,
you know,
I read it.
It was quite a long report.
but I tweeted out a summary of just like three of the key points that at least I agree with,
in their analysis.
And he,
you know,
he was citing a couple of different things and,
and Neely touched on,
on the consumer briefly earlier,
but,
you know,
they were touching on the consumer as well.
And,
and,
What they basically said was they were alluding to the AlphaWise Consumer Survey,
which they published the day before the report.
Let me just quickly jump in stock as you go on.
Mr. Schiff, Peter Schiff's on stage.
I'll let you finish off.
And Peter, just want to welcome you on stage.
It's a pleasure to have you for the first time.
So we'll be all asking you questions shortly.
If the audience wants to ask any questions, bottom right corner in the purple circle,
and we will go to Mr. Schiff in a bit.
Stock talk, I'll let you finish off.
Sorry, don't interrupt you, man.
Okay.
Yeah, so just that point about the consumer survey,
grocery was the only category.
The only category where low and middle income consumers said they were planning to spend incrementally more over the next six months.
Not a single services category was indicated there.
And so look, this isn't a perfect, it's not a single metric you can take and make that conclusion.
But I think there's risk with consumer.
I mean, there's obviously a number of other factors that play here.
You know, Neely's discussed the student loan moratorium.
And I think that will certainly play a role with psychology perspective.
Yeah.
You can also, from the equity side, you know, if you're looking at the indices, there's been a narrative for quite a while, and I think it's accurate that, you know, this year's rally so far has been very concentrated, right?
The top 10 index weights have contributed 86% of the year-to-date return. And beyond that, I think...
that the earnings situation is still complicated.
I think looking into the second half of the year,
earnings estimates are all over the place.
I'm not sure if the rebound in earnings estimates
in the period that they're implying makes sense to me.
Coming into Q1, we came down 16%.
right and you know that was the double the 20 year average of an earnings estimate compression headed into the quarter and so it set us up for what has been you know more beats than people expected you know the guidance is another story depending on the industry you're looking at
But it set up a more manageable bar,
and that's kind of what Morgan Stanley was alluding
to doing that note as well.
So I think there's some factors at play here
as well, considering the credit compression
narrative in the second half of the year as well.
We talked about the SLU survey.
briefly earlier this week as well.
So I think there are still overhead risks.
And if I had to flip a coin right now and say if they're disinflationary and inflationary,
I think they probably end up being disinflationary.
The question is just how quickly.
And that's kind of where I am right now.
Thanks a lot, man.
I appreciate it.
Peter, pleasure to have you.
I know, Scott, you've got a question.
Good to have you as well.
Peter.
Thank you.
I haven't spoken to you.
We haven't been on the show as we went through the Silicon Valley Bank collapse and everything that unfolded afterwards.
So I want to go back, moving away from CPI numbers.
What's your take on where we are today?
Could we see a contagion?
How worried should we be?
Could those cracks become holes?
I would love to get just general thoughts on the markets.
Well, sure. Well, thanks for having me on. And I think we're pretty much early in what is a greater financial crisis than the financial crisis that we had in 2008. It's pretty much
the same cause, which was the Fed and the artificially low interest rates,
which enabled banks to get involved in loans that would ultimately go bad.
They have problems with their collateral.
You know, what happened to Silicon Valley Bank was not something that should have surprised anybody.
I have been warning about it and writing about it for years.
You know, I constantly pointed out the other side of the low interest rates.
Everybody kept saying, oh, this is so great for Americans, they can borrow money really cheap.
They can buy houses and they can get these 3% mortgages and this was really good.
And I kept saying, but what about the banks?
What about the other side?
They're entering into all these loans at resorts.
ridiculously low rates, what's going to happen to these banks when interest rates go up and they're
stuck with all this underwater paper. That's why I kept criticizing Wall Street because everybody
was saying that rising interest rates would be good for the banks because they would be able to
make more money on loans. And I kept pointing out, no, rising interest rates are going to destroy the
banks because it's going to destroy the value of their collateral.
And so this is just the tip of the iceberg.
A lot more banks are going to fail in this country
As long as the Fed continues to keep rates where they are or continues to raise them,
banks are going to fail.
They're just going to keep going like dominoes.
The entire system is insolvent thanks to the Fed,
but also the FDIC and the moral hazard implicit with government guaranteed bank accounts.
If it wasn't for the government guaranteeing all these bank accounts,
customers would have been a lot more concerned about what the banks were doing with their money,
and the banks would have been less likely to take this kind of reckless risk.
But given the fact that everybody believed that everything was guaranteed,
there was a lot more risk in the system than would have been there if we had a free market or capitalism in banking.
Yeah.
Peter, do you really expect depositors to understand the risk that Silicon Valley Bank was in?
Because you've got experts, you've got analysts that didn't see this coming.
Now, I know many people did, you did.
The Fed apparently did, but didn't warn anybody.
I think a report came out not long ago stating that.
If analysts and experts that should see these things coming,
how do we expect startups that already spend all their time managing their business,
depositors that have a 9 to 5 job,
which obviously doesn't apply as much in Silicon Valley Bank,
how can they see the duration risk that Silicon Valley Bank
was the trouble they were getting themselves into?
Well, again, I think it was pretty obvious,
and if it wasn't for the complacency,
that, well, the Fed's not going to allow a bank to fail.
And if the bank fails, it's going to get bailed out.
I think if those more sophisticated depositors who had large sums of money at Silicon Valley Bank,
I think if it was clear from the beginning that there would never be a bailout,
and if the banks failed, they would lose whatever they had.
they would have figured it out. It wasn't, you know, they turned a blind eye because they were just so
convinced that that they had nothing to worry about because of the existence of, you know, that
deposit insurance. And the Fed put, I mean, maybe they thought, look, if there was ever a problem in
the banking sector, the Fed's going to bail us out, the Fed's going to cut rates, the Fed's going to do
QE. So we don't have to have...
the normal, you know, concerns that a free market would require because we've got the government.
And, you know, it's not that you should say that it's too complicated for people to understand
about banks. You know, banking is not really that complicated. I think there are a lot more things
that are a lot more difficult to understand, like, how a television works or, you know, how an
automobile works. I mean, but people still shop around and they can rely on consumer reports and
reputations and other third party methods when consumers are shopping to buy a television or to buy a car
you know, they should do the same thing when they're shopping for a bank.
You know, they should look for other indicators from third parties that, yeah, this is a solid bank.
They've got a good loan portfolio.
They don't take a lot of risk.
But nobody does that with banks.
Nobody puts out any alerts to consumers regarding which banks have better portfolios
that are taking less risk because no one gives a dam.
No person who puts their money in a bank cares what the bank does with their money because they know the government is guaranteed their deposit.
And so capitalism doesn't work when the government interferes and does that.
And so now you're counting on regulators to do the job.
And they can't do the job.
They're incompetent.
They're incapable of doing the job.
I mean, one of the things that I was very critical of for years.
is the Fed's stress tests.
Not a single stress test stressed for rising interest rates.
Not a single stress test stress staxlation.
The very thing that we have right now and the very environment, which was obviously coming to coming, that's the one scenario that was never tested.
The only thing they tested the banks for was how they would act in an environment where interest rates went down, where inflation went down.
So they didn't do anything that they should have done.
And it was obvious that they were testing for the wrong thing.
And in fact, I think they deliberately created stress tests that they knew the banks would pass.
Because if they actually put real stress tests on years ago, it would have been obvious that every single bank would have failed.
Peter, you have a lot more faith in the average person than I do because I don't believe
that a person trusts their bank because they believe they're insured.
I believe they trust their bank because they think that their money is actually sitting
in the bank and don't understand fractional reserve banking in the first place.
But you may be correct, but it's probably a mix of both.
They believe FDIC, everybody knows you go to a bank, FDIC, the signs are every place, your
deposits are insured, you know, believe me, if there was no insurance,
People would not just randomly throw their money at any bank.
Yeah.
Sure. So I think the interesting question here when talking about the Fed, obviously they pulled out the
bazooka and effectively said they would backstop everything. What I find interesting is how utterly
dismissive Powell and the Fed in general have been about their role in this banking collapse.
They still continue to push the narrative that it was poor management at the banks,
not mentioning obviously that the banks were limited in what they could invest in and the rising
interest rate. So do you think that the
Fed will continue to push here as banking isn't really their mandate.
Do you think they'll continue to push and break things at this point?
Because they've taken zero responsibility for it in the first place.
Well, the Fed never accepts responsibility for the disasters they create.
I mean, look at what happened in 2008.
I mean, they created that crisis and then, you know, blamed everybody but themselves.
And the same thing is happening now.
I mean, yes, it's not 100% the Fed.
The government is also responsible.
And, you know, the Federal Reserve technically is not the government.
It's separate.
It's the Federal Reserve.
But...
The U.S. government is also responsible, again, with the FDIC, but also, you know, the auditors.
And I guess these are Fed auditors or anyone that audits these banks.
I know, you know, from having owned a bank at one point, but the bankers need to run their banks in a way that the auditors will like.
And so...
What are the real pressures that banks had in order to get a positive audit was to own a lot of government guaranteed investments?
Because if a bank put its cash...
into anything that was guaranteed by the U.S. government, whether it was a treasury or whether it was a
mortgage-backed security with a government guarantee. The auditors were just, yep, nothing wrong here.
Let's move on because it was all assumed that it was, you know, excellent collateral.
They didn't have to take any haircuts, meaning that the bank didn't have to reserve for the potential of loss.
They didn't have to market to market even if it went down.
All they had to do is say, oh, we're going to hold it to maturity.
And the auditors were like, great.
But if they had actually taken that money and not loaned it to the U.S. government, had they loaned it out to a private business, for example, that loan would have received tremendous scrutiny.
by the government auditors.
And most likely they would have applied a haircut to it
based on some probability of default or loss.
And so the bank would have taken a charge.
And so in order to make these audits go smoothly
and to appease the regulators,
the banks were basically operating in ways that they knew the regulators wanted.
And that was put everything in government debt, which of course is not a coincidence because
the government needs buyers for its debt.
I mean, what idiot was going to buy a 30-year government bond at 2% or whatever they were doing?
I mean, nobody in their right mind would do that with their own money.
Right.
So they had to get the banks to do it.
And so the regulators kind of guided all the banks into making these ridiculous investments that nobody in their right mind would do.
So I think Peter, hey, Peter, it's Ryan speaking.
I think that you hit the nail on the head there.
I think the biggest scam in this whole banking crisis was that you didn't have to mark the government bonds to market by merely saying that you were going to hold them until maturity.
In any audits, the auditor, if this was not a government T-Bull,
the auditor would have said, you cannot make that assumption.
If people have the right to withdraw the money from the bank,
you cannot then assume that you're just going to hold the T-Bill to maturity.
You have to build in some kind of reasonable contingency,
or you have to write down the value of the bonds to a great extent.
And so I think the biggest manipulation is,
that happened was that they don't have to write them down merely by stating an intent to hold them to maturity where the intent is completely out of their hands. That's the first thing.
I think the second part of the scam, there's three parts to scam.
I think the second part of the scam is Paul standing up at the beginning of the FMC press briefing
and saying the first thing he said was we're monitoring this banking collapse
and we don't think there's a banking collapse if I were to summarize what he said.
And the scam about that is that
He has no choice but to say that because if he didn't say that, if he said, we are aware of a banking collapse and there is a banking collapse and we're going to start fixing it, they would cause a run in the banks.
And right now, even the FDIC, even if it's only related to $250,000 deposits, the FDIC can't afford a bank run.
And so that's the second part of the scam.
And the third part of the scam is...
the Treasury underwriting bank deposits because the Treasury saying that they're going to
underwrite bank deposits effectively guarantees that there's not going to be any more bank
because investors don't need to run because the money is guaranteed by the Treasury to an
extent.
And so by doing that, the Fed has basically put a band-aid onto a massive, massive, massive wound to
to say, look, not to pay, sorry, the Treasury has put a massive band-aid on a wound by saying,
okay, well, you know, don't worry, we're going to backstop you guys, we're going to backstop
deposits. Forget about equity holders. We're going to backstop depositors. We're going to backstop
depositors.
And that way they create a bankruns.
They create no bankrun.
And so if you combine those three things, to me, this is like one big, big, big scam.
This is a scam.
This is worse than the scams that happen in crypto, Peter.
Well, of course, of course the whole thing is a scam.
You know, because of the deposit insurance, no bank can withstand a run.
If there was no deposit insurance, the banks would be well positioned to withstand runs,
and there probably wouldn't even be runs.
But what they just did, and this is even worse,
and they're going to ultimately be forced to change.
But remember, when they bailed out Silicon Valley Bank...
and they were asked, well, does this mean that if any other bank fails, that all the deposits
will be insured, even the uninsured deposits?
And the government was very clear.
Yellen was very clear.
The Fed was very clear that that is not the case, that the FDIC limit still only goes to
$250,000.
And if another bank fails, it's up to the government at that time to assess whether or not
they think it's systemically important.
to bail out the larger depositors.
So the message is,
if you're in a regional or a community bank,
It's just a crapshoot as to whether or not you're going to get bailed out if your bank fails.
And so there is zero incentive to keep your money in those banks.
Everybody now wants to pull their money out of any smaller bank to put it in a big bank because at a big bank, it's more likely that they'll rule it's systemically important.
and you'll get your money back.
So they've already done something to create a run.
But of course, there's going to be a run on every bank
because depositors are not complete idiots.
You can get 5% in a money market.
You can't get anything.
at a bank because the banks don't have the ability to pay interest to their depositors
because they were dumb enough to loan out all their depositor money to the U.S.
government for 10, 20, 30 years at 1 to 2 percent yields.
And so they can't possibly compete with current yields when they've already locked up all their money at low yields.
And so everybody has two reasons to take their money out of banks.
One, the banks can't pay them enough interest.
And two, there's a risk that the bank's going to fail.
And so why take that risk for no reward?
So this situation is going to implode.
And again, all of this was obvious.
You know, for years I talked about.
the irrationality of banks entering into 30-year fixed-rate mortgages where they were lending money
at 3.5%. I said, what are they going to do when the Fed raises interest rates? And they're
stuck having to pay 5%. Well,
while to their depositors while they're collecting three and a half percent from on their
mortgages.
I said it's an impossible situation.
The banks are destined to collapse because of this stupid thing that they've been led to do.
And it was obvious.
This again, none of this requires any exceptional intelligence to have forecast.
Yet everybody just remained completely oblivious to the obvious disaster because
Nobody wanted to acknowledge it or talk about what needed to be done to prevent it from happening.
Peter, let's assume, obviously, that more regional banks continue to fail or at least wobble and we continue to see that news.
What are the systemic risks of this consolidation into the larger banks that you have discussed and is obviously happening?
Well, that was-
Peter, just quickly before you jump in, Scott, we've got nine minutes, I think, before the numbers drop?
Is that correct?
That's correct.
It'll drop in nine minutes.
I'll have those numbers right when they drop.
Oh, beautiful.
Thanks.
Go ahead.
To answer your question, yeah, I mean, I made this point in 2008 that we should have allowed
those too big to fail banks to fail back then because now they're much bigger than they were in 2008.
And they're getting bigger and bigger and bigger.
And this is a problem to continue to consolidate.
banking into a handful of institutions that will remain that are all fundamentally insolvent.
I mean, all these big banks have the same problems as the little banks.
They're just bigger.
And so we're just ultimately setting up cells up for an even bigger disaster when the Fed has to
bail out one of the two big to fail banks because they've all made the same mistake,
especially when rates have to go ratchet it up higher than,
because we're going to talk about inflation here soon.
But, you know, inflation is not done.
I mean, we're just getting started.
The rates are headed much higher over the next several years,
and that's going to put even more upward pressure on interest rates,
which is going to put downward pressure on the value of the banks collateral
and make the insolvent banks even more insolvent.
And if there's any banks that are still solvent,
it'll push them over the edge into insolvency.
Mr. Carson, go ahead with the question before we go to Evan and Caleb.
I think it's an important, you know, that's the first time in the last 45 minutes.
Somebody's mentioned the bigger picture, right?
The reality is this isn't about the cyclical effects.
Everybody's playing this in two dimensions.
Yes, every time the business cycle does the same thing.
We get malinvestment as interest rates go lower and then interest rates go lower and the tide goes out and we liquidate all that malinvestment.
That's not new.
Yeah.
that is simple as as peter said but but what's different now is is the inflationary piece the
bigger picture why are we getting all of a sudden this inflationary kind of push it's it's it's
It's a simple reality.
The Fed took interest rates to zero over 40 years.
It was a straight line left, top left, a bottom right.
You can look at a chart.
They did that because they could, while still keeping their two mandates in line,
price stability and maximum employment.
What they weren't put in charge of is the distribution of wealth.
And if you keep sending money to capital, what I call planet Palo Alto, you send money to the top to corporations, that increases globalization, that
at the same time increases technological output and but it reduces wages it reduces the power of
labor in a system and that can go on for 40 years 40 years about two generations right we've seen
this again and again over longer longer time frames but eventually people say enough is enough
the juni coefficient went from 0.32 in the u.s to 0.47 that
eventually became a situation where the younger generation who had got,
who is essentially labor gets to a point where they say enough is enough.
And you start getting rebalancing.
That's what all the fiscal policy of COVID is about.
It was building politically for quite some time.
Trump brought the right left and the left went further left.
But all of that movement, right, is now increasing flows to the bottom of the distribution,
which is increasing inflation.
And ironically, that makes other inflationary pressure stronger
because when labor is the focus,
when populism is the focus, populism is local,
you get nationalism, you get de-globalization,
whichever other people have referred to on here.
as well as resource scarcity.
So you get global competition for resources.
And all of these things are inflationary.
We saw these in the 60s, we saw these in the 70s,
all the same things, the beginning of a Cold War,
the beginning of a hot war in Vietnam, OPEC crisis,
all at the same time, we had the Great Society program
and massive fiscal spending.
It is not a coincidence
all the same things are happening at the same time.
This is how the bigger cycle works.
We can talk about the cyclical effects.
We can tie them to 08, right?
But at the same time, those are just cyclical small effects.
The bigger picture is that rates are going higher over the next decade of 15 years.
And that puts the Fed in a box because now they have a dual mandate where they can't solve both problems at the same time.
And that's the big picture.
So, Peter, you said something in one of the interviews.
You said, well, the US government doesn't have any money.
Where does the US government get the money from the Fed?
The Fed just prints the money.
That's where the FDIC gets the money, which is why everybody's going to lose.
The only way the government can make sure your bank doesn't fail is by destroying the value of the money that you have on deposit.
It's inflation that is going to wipe out the value of everybody's bank accounts.
And you talk about this banking crisis being the cusp of a much worse financial crisis.
Is there...
All right. So this is the worst case scenario. What can go right? What can the Fed do? What can happen to the economy, geopolitically, globalization rather than de-globalization? What can change that would make you more optimistic?
I can't think of anything that would happen that would make me more optimistic. I mean, to the extent that something comes out of left field that I'm not thinking about.
that allows us to kick the can down the road a little longer which obviously has been happening
that doesn't make me more optimistic because again the longer we postponed the inevitable
the worse it's going to be you know the best thing that we could do is address the problem
even though it's now enormous because we've gone so long without addressing it and allowing it to get
worse
Anything that happens that enables us to delay it again just makes it that much worse when we ultimately can't do that anymore.
So no.
I mean, we've got to pay the piper for this.
And the longer we wait, the bigger the bill.
Are we going to pay it now?
Or do you think we'll be, again, the can will be kicked down the road even further?
Yeah.
Well, it's again, you know, I'm already surprised that we've been able to kick it, you know, for as long as we have.
And that's why the problems are now as monumental as they are. You know, the, if we would have done the right thing in 2008, it would have been bad.
But now it'll be horrific. I mean, it's off the charts how bad it's going to be to do the right thing.
But, of course, we won't.
And ultimately, it's worse because, yes, we are going to destroy the value of the dollar.
We are going to see a massive collapse in the purchasing power of the dollar.
Prices are going to skyrocket.
And the way everybody is going to lose...
is through inflation.
Everybody is going to see the value of their savings, their investments, dramatically diminished, their future standard of living, eviscerated.
That's how we're all going to pay for this, right?
We didn't get all this government for free.
There's no way out of this without suffering the cost.
But the-
Two minutes ago-
Yeah, the politicians do not have the integrity to admit the mistakes and come to a more equitable resolution of...
I think Peter just got a call just cut out, which is an interesting time.
We've got two minutes left.
Peter, one minute to go now?
I'm still here for me.
Okay, cool.
I think you got a call.
You just dropped out.
No, I've got another minute.
Any final quick words before we announce the numbers, Peter?
What do you expect them to be?
What's your prediction?
Well, I mean, I...
Well, it's hard to say on month to month. I would think that we're, you know, we'd get a hotter than expected number.
But the interesting thing is that the way the markets react because the markets react the opposite the way they should.
High inflation is supposedly good for the dollar and bad for gold. And lower inflation is bad for the dollar and good for gold. That's the opposite of reality.
So I'm waiting to see the markets react the way they should.
hotter inflation being bad for the dollar and good for gold.
I and that's about 20 seconds to go.
40 seconds.
ING predictions at 4.9% CPI is at 5.5%.
So the main number to look at out is the month over month,
which is 0.4.
Same for the core.
And the core, Eurover use 5.5.
But that will go with 5.1 for the area number.
That should be out in any second now.
4.9.
I repeat, headline is 4.9.
Yeah, it came in low 4.9%.
Do we have four month over month yet?
Yeah, I have all the numbers there.
The CPM month over month is 0.4, exactly in line.
Core CPR month over month is also exactly in line with 0.4.
The core year over year is at 5.5, which is exactly in line, and which is 0.1% lower than the last month's number.
Everything goes, other than the headline number is in line.
Stock Doc, how's the market reacting?
It's ripping.
I mean, rip, bro, it's up.
0.3%, but big candle, obviously.
That's a big move, Doc, talk, doc.
Yeah, I mean, it's, but the use move.
I want to jump in here and give a little context to the market dynamics.
We're going into, we're in generally the strongest part of the OPEX cycle,
which is heading into like a month, a week and change into OPEX.
There is, Vol is very well supplied.
As somebody else mentioned, the VIX, you know, and implied volatility broadly is very,
well supplied generally mean you know if you don't get bad news um in this part of the cycle
it's good news you get the decay of puts dealers generally have to buy back their stock skew has
been higher since this banking crisis so a lot of put buyers out there recently because of all the
fear that creates this proverbial wall of worry in the short term and drives prices higher in the
context of you know no news is good news
And Peter will obviously point out gold here making a massive move up on from
2029 now at about 2045 Bitcoin also heading up
Sorry, Peter, maybe to your dismay, I don't know.
But basically, you just got blocked, man.
He just got blocked.
Oh, no, not at all.
It wasn't really.
I love gold as well.
And I think, to be quite honest,
I think all of us, I think we all agree on the premise,
and it's just at the finish line we maybe disagree on the accent,
which I have no problem with.
Yeah, let me make a comment on.
So the reason that you're seeing,
gold up,
Bitcoin up, the stock market up,
is that the perception is,
aha, this is proof that
inflation is coming down.
It's not worse than expected
and slightly better,
right? So the numbers are lower
than they were, disinflation.
And so gold is going up
because of a perception
that inflation is coming down.
That is the wrong way to look at it because if inflation really was coming down, that would be bad for gold.
Gold is an inflation hedge, right?
I mean, you buy gold to protect you from inflation.
And so if the inflation threat was subsiding, there would be less of a reason to own gold.
But they're all focusing on the Fed.
They're just looking, oh, if there's less inflation, then the Fed can cut rates sooner.
But the sooner the Fed starts cutting rates, the sooner it's basically throwing more gasoline on the inflation fire.
Because the way it's going to do that is through quantitative easing.
It's going to print more money.
And that's inflationary.
I mean, that's inflation by definition.
And also, the markets still don't get it.
That what we're experiencing right now is kind of the trough.
in the CPI numbers that we're kind of,
this is about as low as it's going to get.
And the next thing that's going to happen
is that we're going to turn up
because the dollar is on the verge of breaking down.
I mean, it can happen any day.
And once the dollar cracks,
that's going to send commodity prices soaring.
And, of course, that will immediately start showing up
in headline CPI.
So there's no reason for anybody to get excited
by these numbers if they think it means that the Fed is winning its fight against inflation.
The Fed is not only going to lose the inflation fight, it is going to surrender.
Scott, did you have further questions before I go to the panel?
You can go ahead.
I'm looking at the markets as well.
It's looking pretty good.
Stock talk.
I haven't looked at the equities yet.
I'm just looking at gold.
I'm looking at BTC as well.
Anything new stock talk?
I mean, it's up a little bit more than it was earlier,
but yeah, equities are up pretty broadly.
IWM, Q's...
Wahid, hold on.
Wahid, have the pleasure, Mr. Faith Tribe.
This is the I Told You So moment.
Please say I told you so, and then give us your thoughts.
And I'm not sure if you,
maybe you have some questions for Peter as well.
You know, it's not a told you so, okay?
What's fascinating about this cycle, and I kid you not, because you should never say it's different this time,
is this is the most telegraphed train wreck I've ever seen.
It's the most telegraphed recession, the most telegraphed deceleration,
the most telegraphed disparity between the different parties in the U.S. on the debt ceiling,
And so it's just, it's, it's sad.
So it's not a told you so.
People love the forehandle.
Frankly, the CPI was hotter than I expected, okay?
Hotter.
It came in in line.
I thought it was going to be a bigger miss.
But still, you got the quintessential 4.9er only by a squeak, and the markets want to cheer this.
I would fade this rally because now, you know, okay, 4.9 is you get into the forehandle,
but basically I thought we would decelerate more.
on ownership equivalent rent.
I'm still flabbergasted why this bloody thing is hanging in there,
but I think we are going to crater any month now.
But I agree with Peter because...
You know, now I'm going to be in the camp that we're going to be in the three to four range.
They're going to be stuck if they lower rates, which they're going to because we're going to have the debacle with the debt ceiling or savings and loans banks or whatever.
Then basically we're going to be, we're going to have to start understanding the 3 to 4% is with us for a very long time.
And frankly, you look at the leverage, the $700 trillion I keep talking about.
The 330 trillion sovereign debt, the 220 corporate and consumer debt, and I'm talking about global here, and 180 trillion unfunded pension liabilities, that 700 trillion will never be able to be taken care of unless you have a four-handle, structural, long-term inflation rate.
So yes, bullets for hard assets, gold, silver, and whatnot.
I think it's also important to note just quickly, and that doesn't mean it'll happen this time,
but obviously the first reaction that we see to these endless PPI, CPI,
choose your three letters or four letters, are often wrong in the market.
Yeah, I think it's going to do it.
So it's just important to note that sometimes we see a huge move to one side,
which can be obviously algos or just humans reacting incorrectly and then see it go the other way.
Yeah.
I don't think it just because the first five minutes of trading or 10 minutes here goes one way means that that's what's going to end up happening.
Go ahead.
So I thought we were going to get into the fours.
We did, but not in a way that I, that happened that I predicted.
I thought we'd get softer inflation.
I'm actually not happy with the inflation numbers, but.
Sure.
Go ahead, Dan.
I'd like to chime in here really quick.
I think, you know, we came in below estimates.
We continue to see disinflation.
A win is a win.
We can't overly criticize that fact, right?
I was expecting 4.8.
Seeing 4.9, I think, again, we have to take that as a win.
The thing I'd really like to highlight here,
is for the first time since February 2021,
we had a deceleration in the year-over-year rate of change
in the shelter component.
This is exactly what I've been waiting to see.
The shelter slash OER lags housing by 8 to 12 months,
We're in that window right now. This is one of my big predictions for the year. The fact that we've already seen disinflation from 9.1% down to 4.9, while the largest component of CPI is still accelerating has been a massive win. The big question I've been asking is, what happens once shelter starts to officially decelerate?
We now are in that window. And I expect to see a further continuing of a cool down in shelter and OER, which likely means that broader disinflation is only going to continue to become more powerful in the months ahead.
We're still obviously way too hot. 4.9% is not an acceptable figure for headline CPI.
Nonetheless, I believe we are trending in the right direction. We continue to see evidence of that.
And I think, you know, we can look at this and say, look, we're still too hot, but we're moving in the right direction. We can be encouraged by this. And I think we should certainly be encouraged about the outlook going forward, particularly given the fact that shelter now is officially cooling down. And it's the, excuse me, it's the largest component of CPI at 33%.
The main question, Peter, is what will the Fed do with the new CPI data?
And has the decision already been made?
Also, why is the bond market pricing in rate cuts when the consensus is that rates will be higher for longer?
All right.
So, first of all, I don't think there's any evidence that in.
inflation is receding or that it will get anywhere near 2%. In fact, looking at the consumer credit numbers, consumer credit is still off the charts. Consumers are borrowing and spending like crazy. There's been no reaction to the higher rates as far as changing
behavior. So all the demand is there being created by the Fed. The budget deficits are larger
than ever, the trade deficits. So all of the fiscal impudis, all the spending is there. And so
prices are just going to keep on rising. And the amount of growth and money supply over the last
decade, there's so much inflation that's in the pipeline.
that you're going to continue to see the results for years and years and years as consumer prices catch up to the money supply.
Owners of equivalent rent is just BS.
I mean, it doesn't even exist in reality.
It's something that, you know,
nobody pays, you know, free, you know, while owner's equivalent rent was flat and real rents were soaring, I was pointing out the absurdity of the government pretending that there was no inflation because they pretended that rates didn't, that rents weren't actually measuring rent. So I didn't care about owners of equivalent rent on the way up. I don't care about it now.
The actual shelter cost is soaring right now, not only because rents are still going up, but utilities, maintenance, insurance.
I know homeowners are seeing their insurance rates double because of how expensive it is now to rebuild if your house is damaged.
The materials, the labor costs are so much higher
than they were a year or two ago.
So the cost of owning a home is just skyrocketing.
And a lot of these landlords are gonna be under a lot of pressure
because they have loans that are gonna be maturing
and they're gonna have to refinance them
at much higher interest rates.
And they have no choice but to increase rents to try to cover their own increasing debt service costs.
So, again, I see no reason to think inflation is coming down, which is one of the reasons that gold needs to move much higher because it needs to be repriced for the reality of very high inflation as far as the eye can see.
It's not 2% inflation.
It's a much bigger number.
As far as what the Fed's going to do, you know.
they're waiting to figure out what the market wants them to do.
I mean, the Fed is beholden to the markets.
They're never going to be honest.
I think they know they're screwed.
I think they know they screwed up the economy.
You know, they're hoping they don't have to raise rates again.
But they might if they feel that that's what they need to do
to maintain the pretense that they're actually fighting inflation
and that the U.S. economy can actually withstand the higher rates.
But the reason I think the bond market
is reacting is the bond market at least is smart enough the investors in the bond market know
that we are in recession and that the recession is going to get worse the banking crisis is going
to get worse and so they expect the fed to do what it's always done which is cut rates
What the bond market is getting wrong is that they don't understand that this recession is going to differ from prior recessions in that it's going to be inflationary.
And as the economy weakens and that puts more upward pressure on prices due to the downward impact on the dollar, that's going to be a different outcome than the bond market expects.
When you have rising inflation and then the Fed cuts rates and goes back to QE in the face of accelerating inflation, that will destroy the long end of the bond market.
And so I think that investors are going to get clobbered who are buying bonds because they correctly...
think that we're going into recession and the Fed is going to cut because they've got the
inflation picture wrong. They think a weaker economy will automatically weaken inflation.
It won't. It is going to fan the fires. It's going to strengthen inflation. And that is what's
different about what's about to happen from, you know, the previous cycles. Mario, just to go back
on this point on the Fed, you're asking what's the Fed's interpretation?
Just keep in mind the timing of when we get our next CPI release.
It's going to be the morning of the first day of the Fed meeting, the FOMC meeting, the 13th of June.
That's when they go back into session, June 13, 14.
It's also a time when we're going to get an update on what they call their summary of economic projections.
While they don't directly include CPI as one of their four key variables in the SEC,
you know, the cousin friend of it, as it were, is the PCE inflation.
and that's something that kind of,
that they will actually put in there.
But they do consider it.
Powell himself has said that they,
of course, they watch it,
but it will be released the first morning
of the next two-day meeting.
Just want to make sure that you know that.
Thanks, Lee. I appreciate it.
Gordon.
Hey guys, thanks for bringing me in. I just wanted to comment on someone who was talking about rent of shelter and OER. I think it's important to remember that Jerome Powell has been very vocal in kind of predicting, you know, this magical fall and, you know, the shelter component of CPI, which is about a third of CPI. And
You know, I think he's done that on the expectation that, you know,
advertised rents that landlords are seeking for vacant apartments,
the increase has dropped significantly.
But I think that's a mistake.
And let me explain why.
It's the actual rents that tenants pay that make up the basis for rent inflation and CPI.
And whether it's, you know, invitation homes who recently reported earnings,
who highlighted April lease rent growth, you know, plus 7.5% month over month,
You know, rent renewal growth plus 7.2% month over month.
American hopes for rent.
Similar numbers, they said April new lease growth plus 9.4% month over month.
You can look at the John Burns research and consulting report that came out recently
where they said that property owners and managers can command a premium for such properties
or the National Multi-Family Housing Council report that came out where they highlighted
new rent is up 8.9% you over years.
The point is...
Tau has been saying that this rent component is going to magically drop to 2%.
Yet, if you look at what actual landlords are saying, they're still highlighting a number of 7 to 8%, which isn't where it's at right now, but nonetheless is nowhere near the 5% to 6% level that would suggest it's dropping.
So if you look at the rent of shelter...
8.3 to 8.2, rent of primary residence, 8.8 to 8.8. Those numbers aren't dropping. I think that has to be very concerning to the Fed, who I think was projecting that this was the area of CPI that was going to drive significant downtrifts. Thank you for the comments.
I appreciate it and I'll give the mic to Jonathan.
I know we've got a few more comments.
We'll give it to Joseph as well.
We'll have Peter wrap it up.
We do have a major space based on breaking news.
We had yesterday breaking news related to Trump.
Today we do have breaking news related to Biden.
We've got a few special guests.
We're going political. Slyman will tell us what that stream that's kicking off in 14 minutes is, but it's allegations based on Joe Biden and Hunter Biden.
Sleman, you've been covering it very briefly. What's the space that we're doing in 14 minutes?
Yeah, yeah, tune in. There's going to be a press conference from the House Oversight Committee Chairman James Comer.
And it's about basically Joe Biden and the Biden family's finances.
We had released from the House Oversight Committee, which showed went through the bank details.
I think that was about a month ago, but it feels like a month ago.
And it looked at how the Biden family were receiving finances from certain companies in China, which may be linked to the CCP.
or through holding companies.
So yeah, just tune in because there's going to be more revelations,
some bombings of revelations.
That'll be kicking off in 13 minutes.
We do have a few special guests, including a senator coming in in that space.
I think I was giving the mic to Jonathan.
I know you've got a couple of comments and a question of Peter.
Then we'll go to Joseph, a final comments,
and then we'll have our special guest, Peter, wrap up the space.
Go ahead, Jonathan.
No, it's just a couple of points to reinforce Peter's thesis.
The inflation is going to remain high for longer.
Yeah.
I mean, OPEC plus, as you said Mario earlier, I think they're going to call for another
output reduction.
I mean, the price of oil is not where they want it to be.
And also the reshoring activity for the US is going to add about 20% costs.
And for Europe, even more, 30% because of the cost of energy.
And in the long term, energy, you know, energy costs are not going to return to where they
were, whether you're talking about fossil fuels or climate.
or clean technologies, renewables, because the commodity prices, we transition and the demand goes up.
The commodity price for all of the raw materials is going to increase.
And with the geopolitical tensions at the moment, that's a factor which could greatly tighten markets and obviously increase inflationary pressures.
Now, I appreciate it. Jonathan Joseph, final quick comments before I have Peter wrap up.
Yeah, so I just want to follow up on Peter's comment about the bond market.
So just for context, guys, the bond market did not predict the inflation that we have today.
The bond market was totally, totally wrong, thinking that the Fed could not height rates the 5% and keep it there.
So the bond market has been very off right now.
So I think it'd be incorrect to look at the bond prices and assume some kind of supernatural wisdom.
Now, yeah.
Just one more addition to Peter's point is that I like to look at asset prices from a supply and demand perspective.
And one of the huge, huge changes in how the federal government is run is now that we have net issuance from the government about $1.5 to $2 trillion basically forever for the foreseeable future.
That's from both official and private sector projections.
And we've never seen this before.
for just a few years ago, this would have been unthinkable.
And if you have basically infinite issuance going forward, obviously you're going to have
prices of that decline.
And that means higher yields for the foreseeable future.
I agree with Peter that I don't think the market is fully understanding what's happening.
In addition to the fundamental factors that Jonathan and Mario touched upon, what we have
structurally changing.
global inflation dynamics.
Peter, to wrap up the space on a beautiful positive note,
can you please tell us why you think,
and you've kind of hinted at it already,
but I want to kind of reinforce that question.
It was one of the main questions I wanted to ask you.
Comparing this to 08, we did have a lot of guests
from Cuban to Ackman.
to Robert Wolf who comes in on a regular basis that always point out that this is different to 2008.
What we're going through now is very different to what we went through during the global financial crisis.
Yet you say this is going to be significantly worse.
You're just going back to the whole printing and inflation, destroying purchasing power.
Is that your main concern?
And is there other concerns that allow you to make such a statement?
Yeah.
Well, first of all, the people that you just mentioned were among the people that were completely blindsided by 2008.
They had no idea that crisis was coming.
They were not critical of Fed policy leading up to that crisis.
They were not warning about anything in the housing market.
So they were completely taken by surprise because they didn't understand.
the crisis. They didn't understand the mistakes that the Fed was making and how those mistakes would
ultimately manifest in that crisis. Well, they're making the same mistake again. They didn't learn
from that crisis. They didn't, you know, all of a sudden figure out why they weren't able to forecast
it. You know, and so...
They don't understand why what's happening now is similar but worse to what happened then because they still don't understand what happened back then and why it happened.
But I think if you look at some of the other people who were also warning in advance about the 2008 financial crisis, because I was not the only one, we're pretty much all in agreement that.
This is going to be worse because we understood the dynamics.
That's how we were able to warn about it before it happened.
And of course, a lot of these people, too, have a vested interest in putting a positive spin on it, given, you know, where they're situated.
And so I would take those opinions with a grain of salt.
and look towards the people who demonstrated a better understanding of these problems.
And, of course, you know, the reason that we had a crisis in 2008 was because we had too much debt.
Why did we have too much debt?
Because interest rates were too low.
And when interest rates were too low, people borrowed money to buy houses.
They overpaid for houses because the low interest rates pushed up home prices.
And also the adjustable rate mortgages allowed people to assume payments that they really couldn't afford once the mortgages reset.
And so these problems were a consequence.
We only kept interest rates.
The Fed kept interest rates at 1% for about two years.
And then it, you know, it took a couple of years to normalize them.
So we had about four years of low interest rates.
Now we had about a dozen years of near 0% interest rates in addition to four rounds of quantitative easing.
So Fed kept interest rates much lower for much longer.
And therefore, the economic mistakes that were made as a result dwarf the mistakes that were made prior to 08.
And so when this bubble pops, and I think it already has, just the air is barely starting to come out.
It stands to reason that the ensuing crisis will be that much bigger as we unwind all of the bad loans and all of the consequences for the malinvestments and the poor decisions that never should have been made but were made based on the cheap money.
So this is the worst crisis.
I mean, any way you look at it, I mean, the amount of debt that we have, government debt.
individual debt, corporate debt, it dwarfs where we were in 2008.
So it makes no sense that this financial crisis would be shallower than the 1 in 08.
It'll be much deeper.
And in fact, I think that's the reason that nobody even wants to call it a financial crisis.
The only one that talks about what's happening now as a financial crisis is me.
I mean...
Because nobody wants to invoke the comparisons to 2008.
But 2008 was a bank crisis, just like this one.
Banks are financials.
This is a financial crisis, but nobody wants to call it what it is for fear of the reaction.
And last question, Peter, and I know we went overtime.
Do we expect, or do you expect more bank failures and a possible contagion in the short to medium term?
I expect more failures, but again, I expect more bailouts.
That is the problem.
And yes, if the government wasn't making the mistake of bailing banks out, a lot more banks would have already failed.
It's the government backstops that are preventing the failures, but they're backstopping with inflation.
And so again...
It doesn't matter if the government bails out your bank.
You're still going to lose as a bank customer because the value of your deposits are going to go down because the price of everything you want to buy is going to go way up.
And that's why it's not just that you have to take your money out of the bank.
You can't stuff it under your mattress either because no matter where you have your dollars, they are going to lose value.
That's why you have to pull your money out of the bank and convert it into something else.
You can save it in real money.
You can buy gold or silver or you can invest it in real assets.
You could do something with it.
But the one thing you can't do is leave it in cash, either in the bank or in your mattress.
Because wherever you have your cash...
it is going to be destroyed in value because of what the Fed and government are doing to prevent the banks from failing and to artificially keep this bubble from fully deflating.
Peter, really appreciate you coming on stage.
I would love to have you back at a different discussion,
maybe get a crypto debate.
I know you're probably sick of them.
We'd love to do one with you.
It's always fun.
Otherwise, real pleasure to have you for everyone.
We'll be doing a space every day, as you know,
tomorrow morning at 8 a.m.
It's the biggest finance space on Twitter.
We'd love to see you there.
We do have the Biden space kicking off in,
literally as soon as I end this one, we'll be kicking that off.
It's called the Biden Bombshell Life Coverage,
the coma release of new evidence.
That will be starting in a few minutes.
Otherwise again, Peter, thank you so much for the panel.
Thank you for joining.
We'll see you again all tomorrow for the final space.
Bye, Peter.
Thank you.
Bye, everyone.
See you in two minutes for the Biden space.
Bye, everyone.
