CPI

Hey everyone and thanks for jumping back Into the macroverse today we're going to Talk about the most recent CPI report if You guys like the content make sure you Subscribe to the channel give the video A thumbs up and check out the sale on Into the cryptoverse premium at intothe Cryptoverse tocom let's go Ahad and jump In so we did just get a recent CPI print And it did come in hotter than expected Now I think that you know the market is Certainly making a big deal about it and I wanted to use this video to sort of Explore what's going on underneath the Hood see if you know is the market Overreacting uh what's going on all Right so first thing we're going to look At is headline inflation and the reason Why we've seen such a notable reaction By the market if you were to go take a Look at um um by the way dominance is at 54.3 1% in case you're curious uh but if We were to go take a look at the dollar You can see the dollar has had a pretty Big move here back up to 105 I've said Before you know I I probably going to See the dollar higher in six months than It is today I've said that a couple Months ago um not only the dollar go Higher but we also have seen things like TLT go lower as the long the yield curve Continues to go back up right so if you Look at the 10-year yield it's back up To around 4 and a half% 30-year yield is

Back up to 4.56 2% so the longer the old Curve is going back up on this news the Dollar's going up and of course TLT is Going down as an artifact of the long End going up Now was it that big of a print to Merit All of that well if you look at what's Going on here has inflation re Accelerated or has it stayed the same I Would argue that at this point it has Mostly stayed the same now I could see It re accelerate but I still think we Are a little ways off from that Potentially happening I'll talk about That more later in the Video if we look at this headline Inflation hit 3% in June of 2023 it is Now you know three quarters later and We're still between 3 to 4% now we Already went up to 3.7% in August then We came back down and now we're going Back up again and we're at 3 and a half% But all in all it still is just between The 3 to 4% range right it hasn't really Taken out these high over here but it Also hasn't been able to go below these Lows and we said before that that last Percentage is going to be the hardest Percentage to get to go from 3% to 2% is A lot harder than 9% to 3% right to go That last percentage is is really the The extra mile that's what really is is Going to make things challenging and and That's why I think a lot of the market

Participants continue to question the Fed's resolve will they stay the course Until the job is done like they have Said or will they pivot sooner leading To some other type of outcome Now with it being at 3% it sort of raises the question we'll Sort look look at a monthly change here This is the monthly change so you can See that it it really hasn't been very Negative for a while here I mean a Couple of negative months but mostly Positive roughly around 3 to 4% but it raises the question where is It coming from so if we break this down By category first we'll take a look at Headline inflation so this is headline Inflation this is the same thing we just Looked at right you can see all right It's at 3 and a half% now we're going to Go through each category here's food and Beverages food and beverages went from 2.25 and it stayed flat at 2.25 so one Of the reasons why inflation didn't Really get any better this month is well This category stayed flat housing Actually went up okay so that is a bit Of an issue it could be an anomaly but This is the first month where housing Saw an increase rather than a decrease Since January of 2023 right I mean it's been a long time Since we saw this as as a positive and Is it just something like this where you

Just get one to two months and then it Goes back down I think there's a case to Be made that that could happen but this Is one of the reasons housing makes up a Large contribution we'll talk about that In a few minutes and so with housing Going up that contributed a lot to the Hotter inflation print if you look at Apparel you can see that it's back up a Little bit to about 4% Transportation Also back up to 4% so again this is one Of those ones that went deflation area Back in the summer of 2023 and now it's Been slowly trending back up Medical Care also went up uh pretty big jump Actually back up to 2.2% all the way Down from negative 1.4% back in September Recreation went down this has Been one of the stickier ones as you can See you know it has taken a while for it To come down but it is now less than 2% So another category that has finally Reached that 2% level education and Communication dropped down a little bit Other goods and services also dropped Down slightly so remember not all Categories are treated the same and if You look at it as a contribution because It's weighted if we look at it as a Contribution and we zoom in over here to This is headline inflation right here Let me reset this so this is headline Inflation now look at food and beverages Right it's not it makes up

Only3 of the of the 3.5 right so Relatively small contribution look at Housing though right housing makes up a A much larger contribution and so when You get that increase coming from the Housing market that's what leads to this So I think that you know it could still Stay sticky for a while longer but my Base case is that it still continues to Not go too much above the current range For a while now what could cause it to Go above the current range well if the FED pivots too soon right if the FED Pivots too soon the counterargument Could be made and I've said this many Many times is that the pricing out of Rate Cuts could eventually cause them to Get priced back in what do I mean by That well if you go look at the watch Tool here this is what it looked like Yesterday rate cut in June is what it Looked like yesterday right now reload The page and see what it looks Like I already reloaded it over here but Um now rate cut not till September so rate cuts are getting Priced further and further out so what Did I say a long time ago that Ultimately the pricing out of rate Cuts Could eventually lead them to being Priced back and what does that mean it Kind of feels like it's a bit handwavy Right what it means is that there are so Many companies and businesses and people

That are expecting lower rates right They're expecting lower Rates and they keep not getting them Right so maybe they're holding on for as Long as they can or saying all right Well if we just wait till rate Cuts then Demand will pick back Up rate Cuts keep getting pushed further Out and further and further out What happens right eventually those Companies throw in the towel they say Well we can't we can't do it any longer We can't operate like this any longer And they shut down so if this continues Right the pricing out of rate Cuts could Eventually cause them to get priced in And what could be the issue for the FED Is that inflation is still very very Sticky but the unemployment rate is Starting to to Trend up now this last Month it actually went back down a Little bit but you can generally see That whenever it goes above its 24mon moving average so if we pull up a 24mth moving average here you can see Generally speaking it it it doesn't take Long before it starts to move higher Much higher so I think the issue for the Fed and and where the markets may Eventually have an Issue is what happens if you have a 4% Unemployment Rate but you also Have 3 to 4%

Inflation then what does the FED do Right because again I mean they have a Dual mandate it's inflation keep Inflation down to 2% get it back down to Their 2% objective but also for maximum Employment it's been so easy for them Forever to for monetary policy because You got you got a secularly tight labor Market and you got inflation running Wild so the only thing you can do Is is really just keep raising rates and Keeping rates elevated quantitative Tightening but now we are getting really Close to the point where there's a risk Right if they continue to stay too tight For too long then it could lead to a Policy mistake if you think about it They made a policy mistake back in 2021 When they didn't raise rates and they Let they let inflation run rampant what Happens if the opposite is going to Happen now where they look at lagging Data coming from say like the housing Market to tell them not to cut when in Reality there are some categories that Are already back at 2% and have been at 2% for a long time so I think that is is Kind of what we have to be aware of There is a chance that the FED makes a Policy mistake and the reason that Policy mistake could happen is all of These rate Cuts getting keep getting Pushed further and further out If this happens you're going to it's

Probably going to lead to more Bankruptcies if you're not familiar with What I'm talking about just go look over Here at at Bankruptcies Um so look at at at United States Bankruptcies and you'll see right I mean They've been going up very very quickly Here okay and those are going to Continue to go up as long as more than Likely as long as rates continue to stay High and rate Cuts keep not arriving so At some point we're going to reach a Threshold where it affects the lab labor Market and then the FED is going to have To cut so that we try to avoid some type Of nasty economic downturn we're still Not there yet right but you can see how It could theoretically happen as these Rate Cuts just keep getting pushed Further and further off now how do you Navigate something like that right I Mean with with with crypto I've said Before right for crypto I you know my my My focus has just been Bitcoin because I Think Bitcoin dominance is going up it Gives you exposure to the upside it Minimizes your down side risk right so If there is a nasty crash Bitcoin will Likely recover a lot quicker than than a Lot of the other coins um that's how you That's how you you know you you continue To to be an investor right because you Don't I mean again it's hard to just do

Nothing for for years and years and Years and that's why I've said Relentlessly you know look at at at Bitcoin dominance it's likely going to Go up no matter what right and if it's Going to go up no matter what right if It's going to go up no matter what then Bitcoin gives you exposure to the Upside while also minimizing your Downside risk right we've said this a Thousand times probably over the last Two years and Bitcoin has gone up a lot Dominance has gone up a lot and because Rate Cuts keep getting pushed further And further out dominance is likely Going to keep going up remember last Cycle dominance did not top until after Rate Cuts arrived right Bitcoin USD Topped before the First Rate cut right But dominance did not top until rate cut Until after rate Cuts arrived rate Cuts Still haven't arrived yet and it looks Like they're getting pushed further Out because they get pushed further out Bitcoin dominance keeps going up but at Some point at some point and who knows When it is who knows but at some point We reach a level where dominance breaks Above 55% goes to 56% and makes its way Probably to 60% And then the Consumer finally Weakens right then alt Bitcoin I work it In in every video what is wrong with me

Then alt Bitcoin pairs break down just Like they did here which Le which by the Way when they broke down here the FED Pivoted one month later I don't care What this says right these probabilities Chang every day every day basically These probabilties Chang and if you Looked at this two years ago they would Have said we would have never gone to 5 A half% which by the way in 2022 I said Many many times the terminal rate is Likely going to be 5 a half% no one Believed it back then you know they were Talking about much lower rates here we Are at 5 and a half% so when we look at At at monetary policy I don't really Care what these probabilities are Because they're going to change right in The same way that they just did change Yesterday the market was projecting rate Cuts in June now they're not projecting Rate Cuts until September but what happens if in the Next month or two all Bitcoin pairs Break down what happens if in the next Month or two the unemployment rate goes To 4% and bankruptcies continue to go Up then all of a sudden all these rate Cuts they get that keep getting priced Out could get priced back in again I'm Not saying we're there yet for me to Believe that we're there I would have to See all Bitcoin pairs break down until

That happens right until that actually Happens then the next phase of the cycle Has not yet begun but that I think is The tell when they break Down when they break they haven't broken Yet I think they're going to eventually And a lot of them are already breaking Down individual alts are already Breaking down for anyone who cares to Look and I mean look at them today a lot Of all Bitcoin pairs are down and and Bitcoin dominance is up so you have Inflation that's still remaining sticky The market is reacting to it Right the market is reacting to it it's Pushing the rate Cuts further out it's Going to make businesses more and more Desperate for lower interest rates and It's going to cause probably some Companies to go bankrupt because they Can't just they can't survive this Forever you know some of these some of These more risky companies they just Can't survive it Forever um but the larger ones can right And that's why you see the same way that Bitcoin dominance goes up guess what Else has probably gone up and something Like Nvidia dominance if we track that I Bet it's gone up a lot too and look Today I mean nvidia's up on the day While a lot of other stocks are Down it's all about that flight to Relative safety right relative safety

Right look at the Russell it's down 2% While the Russell's down 2% Nvidia is up 1% you know someone said the other day How can you base this crypto Stu I mean We've only seen this happen one time for Crypto so how can we base this on what Happened over here guys this is monetary Policy going back thousands of years Right during higher rates you know this Type of environment high-risk stuff Bleeds to lowrisk stuff right altcoins Bleed to Bitcoin all companies bleed the blue Chips so you know inflation continues to Remain sticky my guess is that that Means that liquidity will continue to Leave alt and go to you guessed it Bitcoin the King Bitcoin dominance at 54% we talked A lot about and we got the having coming Up Soon um and we'll see if it can you know If it's going to repeat what it did over Here where it it it sweeps those prior Highs but lot of things to consider here Guys and you know my my thought process Right now with inflation is That it's not reaccelerating just Yet but I could Envision a scenario Where it could okay but if it does I I Still think it would probably not be Insv maybe next year okay if it does Which I don't I'm not even convinced Well I know a lot of people are

Comparing it to the 70s and again maybe That's a valid comparison and we could Follow the 70s if say later this year we Get let's say we get an unemployment Rate print at 4% and then the FED turns The money printer back on and then we Just show we haven't learned our lesson From the 70s and then we get another Wave of inflation that is a potential Outcome that I don't think anyone wants To live through because then you know Anytime you go to the grocery store You're gonna be spending $400 instead of $300 and I don't want to do that I have Four kids that's why I spend $300 but I Don't want to go through that you know I'd prefer for inflation not to have a Second wave but if the FED Cuts Prematurely then we could get a second Wave if they caught prematurely we could Get a second wave just like we got in The 70s and if you look at the 70s it Bottomed out here at 3% and then started To go back up the issue is if it starts To re accelerate the market tops right If it starts to re accelerate the market Tops in the 40s when it went Deflationary we had a deflationary Crash guess what happened the market Went Down that's why you hear people talk About hard Landings and soft Landings All the time it's because if the FED Stays too tight for too long it leads to

A deflationary crash and the market goes Down if they don't stay tight enough and Inflation re accelerates because the Mark because the fed's cutting rates and Turning the money printer back on then You could get a crash because um Inflation re Accelerates how do you get the soft Landing so how do you get the soft Landing it's not impossible there are Examples where it's happened look at 1967 although we did get hard Landing Two years later even in the mid 90s we Had soft Landing we had a soft Landing It's not Impossible but it's difficult to Manufacture because you have to keep Rates high enough for long enough to Make sure that you don't see inflation Re Accelerate but if you keep them high too High for too long you could get a Deflationary crash like we got in the 1940s and like we got over here in in The late 2000s So you know engineering a soft Landing Is not a simple feat right and I think a Lot of people are sort of declaring that That it's been done look it's possible That you could get one it's just there's No how can you know yet I mean if Inflation is still above the fed's Target and the unemployment rate is

Still going up how can we sit here and Declare anything has been a soft Landing Right because you see inflation going Up I mean it's mostly just Flat and you see the unemployment rate Slowly going up so it's too early to Declare Victory just yet Powell has said That many times and this print here is Certainly kicking the can down the road On on when rate cuts are going to arrive Now the only question is is is this Really Kick the Can out of the road or Will it lead to a will it lead to rate Cuts being priced back in because the Market can just not bear it anymore how Do we Know I think coin perers will tell you Altcoins are a lens into the consumer Into the average consumer as long as They hold here the FED has not gone too Far as long as they Hold when they break if if they break if And when that probably means the FED has Gone too Far that's my guess that's my guess I Could be wrong I've been wrong about a Lot of things I'll be wrong about a lot More things but that is my my general Guess and my stronger conviction is that Regardless of where those things go you Guessed it the Bitcoin Dominance is going Higher and not that long ago it put in Its highest weekly close this

Cycle and the only thing that has Changed since that Weekly close is that Rate Cuts have been pushed even further Out and if rate Cuts have been pushed Further out High RIS risk will continue To likely blead to low risk meaning the Bitcoin dominance is going to go even Higher and eventually we reach the point Where all the pricing out of rate Cuts Causes the market to throw in the towel And then all the rate Cuts get priced Back in how do we know when that Happens likely when all Bitcoin pairs Break down thank you guys for tuning in Make sure you subscribe to the channel Give the video a thumbs up and again Check out the sale on into the Cryptoverse premium at intothe Crypt.of next time bye