The Warning Of Hyper Inflation | DO THIS NOW

What's up, grandma's guys here, and welp, it just got a lot worse. As of today, the inflation rate came in at 9.1 percent, which was the highest amount ever reported since 1981 and significantly higher than every other analyst expected. Not to mention, what's even more concerning isn't the fact that home buyers are cancelling the highest rate of deals since COVID. A recession is all but confirmed, and an alligator was found swimming in a Wisconsin lake. But instead, the fact that inflation increased at a rate of 1.3 month over month suggests that it's about to go a lot higher.

So let's talk about exactly what this means, why these numbers continue getting worse, how this is about to impact your investments, and then, most importantly, what you could do about this to make money. Although before we start, as usual, it takes a lot of research to be able to post accurate information like this shortly after it comes out. So if you appreciate that, it would mean a lot to me if you inflated that like button and subscribed if you haven't done that already for the YouTube algorithm. Plus, as a thank you for doing that, here's a picture of a squirrel.

All right, so first, when it comes to inflation, before we go into the exact numbers, we need to clear up some confusion when it comes to these readings. Because even though we've seen a huge increase year over year, that does not give us the entire picture. And it's really important to understand precisely what this means. To start, the category that gets the most attention is what's known as CPI inflation, which stands for the Consumer Price Index. This covers a weighted average of the most frequent consumer purchases, and it's tracked on a year-over-year basis every single month.

As a simple way to visualize it, just imagine you have a grocery basket of 10 items, and on a regular basis, they compare the current cost of the basket with a month prior. If that basket costs more, we've seen inflation, and it's reflected in the headline that we see here. However, measuring these prices isn't just a one-size-fits-all approach, and in an effort to make a reasonable comparison between items, some extra measures are taken.

Like first, CPI is adjusted to include for the extra features that weren't available 10 or 20 years ago, like the fact that all new cars are required to have a backup sensor. These changes allow for the inflation number to be altered as needed for the fact that sure, you are paying more, but you're also getting a lot more back in return. The second, CPI numbers are also adjusted to consider the fact that when prices rise, consumers have the option to switch to a less expensive alternative, like going from name brand to generic.

Because of that, this switch is calculated into the official readings, artificially bringing down the overall number that's shown. And third, housing increases are based on a metric known as owner's equivalent rent. This is obtained by asking homeowners, "If you were to rent your home today, how much do you think it would rent for monthly, unfurnished, and without utilities?" Of course, that brings in the major concern that homeowners might not know what their home would accurately rent for, and it's entirely based on opinion and not factual data.

So when one-third of the entire inflation index is comprised of shelter, anecdotal reports may not provide a truly accurate reflection of how much rents are really going up, which I'll talk about shortly. Because that brings me to the next reading: core inflation. This purposely excludes food and energy prices because they tend to be a lot more volatile based on factors outside of our control. They're also considered to be staple items that are consumed on a regular basis, regardless of how much they cost. After all, you still need to put gas in your car to drive to and from work, even if it's seven dollars a gallon in California, while some guy ambushes you for a TikTok video.

Although in this case, as of today, gas prices are beginning to come down, with the peaks so far having occurred a month ago on June 15th. The same could also be said about food, which have all soared in price over these last 12 months. In fact, the cost of eggs have gone up by 95%, making one of the best investments so far this year being an egg-laying chicken. Anyway, jokes aside, point being inflation numbers are extremely difficult to calculate because even though there are ways to cut back and buy cheaper alternatives while paying anecdotal rent to a hypothetical landlord, the actual number for someone making no adjustments whatsoever is substantially higher than what's being reported today.

So in terms of what's going on right now and what this means for you, your money, and your investments, here's what you need to know. All right, so in terms of our latest inflation report, yes, it is a clear glaring sign that conditions are worsening despite Joan Powell's best attempts at throwing water on a flame. But in terms of the exact numbers, you're going to want to hear this. The highest inflation category throughout the last month was almost completely isolated to energy, with an overall increase of 1.5 percent month over month.

This includes a whopping 10.4% increase in the cost of energy commodities and an 11.2% increase in the cost of gasoline. On top of that, food also increased by another 1% last month, while new and used vehicles also increased by 0.7% and 1%, respectively. I know the bubble was supposed to have popped, but that didn't happen, at least in the month of June. But finally, rental costs increased by another 0.8% last month, which was the largest monthly increase since April of 1986, and medical care rose by 1.9% in dental services, which was the largest monthly change ever recorded.

Now, the good news kind of is that when you exclude food and energy prices, core inflation still came in high at 5.9%, but it's also the same as the month prior, suggesting that maybe inflation is beginning to peak after all. So far in the month of July, oil prices have fallen below a hundred dollars a barrel, car repos are beginning to add slightly more inventory under the market, and commodities are dropping on fears of a recession that in turn should cause core CPI numbers to begin falling, as long as there's not another black swan event that we can't predict.

At the end of the day, energy prices are being skewed by the Russia-Ukraine war, which the Federal Reserve honestly has very little of an effect on. The truth is, inflation numbers like these are a slightly lagging indicator, and even though we could certainly see the prices are going up, July's data is going to be a lot more telling now that people are beginning to cut back and some sectors are beginning to soften. Although the biggest concern for the market isn't so much rising costs but instead the increased likelihood of a larger rate hike when the Fed meets on July 25th, September, November, and December.

This is seen as a negative for stock values as the cost of borrowing gets more expensive. See, now that it's come to light that inflation still remains high, the market has begun to price in a strong chance of another 75 basis point rate hike in July, which would be the most aggressive increase since 1994. In fact, the market is pricing in a 93% chance that we'll see a 50 to 75 basis point rate hike in the next two weeks, along with the 66% chance that they may begin to slow down in September, assuming inflation begins to come back down.

The goal is that by the end of 2022, we should expect a base federal funds rate of around 3.25% to 3.5%, which, just for reference, is a rate that we've not seen since January of 2008. Really, at the end of the day, all of this boils down to what's being called the soft landing. This refers to a gradual slowdown in the economy following a period of rapid growth, kind of like landing a plane on a tarmac versus dropping a bowling ball from 45 meters in the air. As of now, that's the Federal Reserve's goal—the plane, not the bowling ball, in case you were confused.

Anyway, in a perfect world, the Federal Reserve could slowly raise interest rates, inflation gradually begins to decline, and the economy moves on like nothing has happened. But so far, the Federal Reserve doesn't exactly have the best track record. As you can see, out of the last 13 previous rate hike cycles, 10 of them have preceded a recession, and as Fannie Mae concludes, we're more likely to see what they call a hard landing right as the Fed signals that they're about to be much more aggressive than they have been in the past.

In fact, a New York Fed model recently put the chance of a recession at 80% while inflation lasts harder, better, faster, stronger than anticipated. Hey, that was a Daft Punk reference for anyone who didn't get the joke. Anyway, the risk at this point is that with the economy slowing down, prices increasing, and asset values falling, Americans have begun to spend more of their rainy day fund, with the personal savings rate having just recently fallen to 5.4%, the lowest it's been in almost 10 years. This general economic worry is the same reason why 15% of home deals are now being cancelled, while Americans cut back on spending and face the repercussions of higher interest rates.

With real estate, for example, many builders pre-approve their buyers based on the interest rates at the time that they start construction. However, now that mortgage rates have increased, many of those buyers can no longer afford the payments, and they have no other choice other than to back out. As a result, builders are beginning to do the unthinkable. That's right, they're starting to negotiate and offer incentives to keep buyers in the deal. A Barclays analyst even said that a read of agent responses suggests that demand may no longer be exceeding supply, giving buyers the upper hand to potentially get a property at a discount. You hear that, millennials?

In the bigger picture, though, the good news is that according to the New York Fed, most Americans believe that inflation will soon begin to come down, with the three-year expectations returning to just 3.6%. Beyond that, though, in terms of what we end up actually seeing in the short term, it's the equivalent of a coin toss. No one knows the full scale of what's to come, how soon inflation will decline, if we see a stagflationary debt crisis, or if we get better than expected news.

The truth is, these inflation ratings are constantly evolving, and the Federal Reserve is going to do anything they can to protect the employment rate while also doing their best to bring down inflation without hurting the economy. No, that doesn't mean they're going to be looking over your spy call options to make sure they print attendees, but it does mean that there is a chance of collateral damage, and that needs to be considered, especially when the unemployment rate is near historic lows.

However, let's be real, if you own stocks and you intend to hold them for at least another few decades, then who cares if they drop in price? You should see this as it's a Black Friday deal. Now is a chance to continue buying normally at cheaper prices and save some money. If prices then drop even further, then just continue buying as normal and don't change your strategy. If anything, the higher the market goes, the fewer stocks your money buys you. So by reframing the way you view market fluctuations, you'll be able to come out ahead a much more profitable investor long-term.

This is the only not financial advice I will ever say, and it's what I personally follow. Not to mention, based on every piece of factual research that we have available to us, this is the most profitable way that almost everyone can invest over the next 20 years. Everything else is a shot in the dark. Oh, and also, don't forget the most important thing through this entire video is just this: Costco's not going to be raising the price of their hot dogs, so at least that's good news.

So with that, city guys, thank you so much for watching. Also, feel free to add me on Instagram. Thank you so much for watching, and until next time.