READY FOR RATE INCREASE???

Added: 2026-05-13

[00:00:02]As promised, folks, we've got to bring out the swing and a miss shirt. We certainly did get hot inflation, uh, but we did not get as hot inflation as I expected. What are we talking about? Well, we got CPI today.

[00:00:20]CPI headline was expected to be 3.7. It came in at 3.8. And probably even worse, uh, core inflation, X food, X energy was expected to come in at 2.7. It came in hot, too, at 2.8. Now, what do I mean by swinging a miss? I put out a couple of videos uh, in the last 72 hours where I thought CPI headline would actually exceed 3.8 and print a four handle. That did not happen. Hence the swing and the miss. But let's talk about inflation.

[00:00:57]It is hot. Now, is this just quote unquote transitory?

[00:01:02]I can't believe I used that word, but I did.

[00:01:06]I think there's a lot of uneasiness with this number. This number was ugly, but I think there's things under the surface that make it even uglier if you pay attention. What do I mean? Well, for two months in a row, we have had inflation exceed wage growth.

[00:01:30]I think it was 41 or 42 months we had where inflation was below wage growth.

[00:01:39]We need wage growth. I mean, we just that is the answer to affordability.

[00:01:45]Unfortunately, wage growth comes slowly.

[00:01:48]month after month after month after month. However, we have gone backwards the last two months. Last month, we reported a 0.9% inflation. This month, we reported 6.

[00:02:04]Wage growth has been roughly 0.5.

[00:02:07]So, for the last two months, the average American has gone backwards.

[00:02:12]This is not good. This is concerning.

[00:02:17]Also, we now have CPI headline at 3.8.

[00:02:22]It was just 2.4 what, six months ago? Five months ago.

[00:02:29]And seemingly this Iran conflict is not over. In fact, it appears that negotiations aren't going anywhere. So, more is coming.

[00:02:40]Where was the inflation? Well, as you might expect, it was inside the energy and food complex. Energy jumped 17.9% annually. Let's call that 18%.

[00:02:52]Foods up 3.2% and likely going higher because of fertilizer. Folks, the most obvious hit because the straight is closed is gasoline, jet fuel. However, the long tail is fertilizer and this is a large problem for food in the coming months.

[00:03:15]Where energy is up 18%, gasoline, gasoline is up 28.4.

[00:03:22]Shelter still coming in at 3.3 even though we've had negative rent growth in a lot of the country. And unfortunately, now we have the spillover effect from higher energy. What do I mean by that? I mean, airline tickets, I don't know if you've priced airline tickets recently, but wow, they are way different.

[00:03:43]Airline tickets were up 20.7%.

[00:03:46]So again, if you're hoping for a rate cut this year, if you're hoping Kevin Worsh can push through a rate cut, I think you are kidding yourselves. I did not check the odds for a rate hike, but they have to be increasing. Last week again, we got good to great jobs numbers. Today we got worse inflation.

[00:04:07]That's not an environment you can cut rates in. It's an environment that could raise rates. So again, very interesting things going on. KKR reported uh that their private credit took a $560 million write down or 10% of value as defaults jumped to 8% 8.1 specifically. Again, KKR is a large private credit uh provider and we are starting to see that that uh environment come to a head.

[00:04:37]Again, defaults now at over 8%.

[00:04:40]More pain ahead. Uh more losses ahead in the private credit arena.

[00:04:47]Active listings, active supply, again, active listings really has been flat. I think they're up 1% yearonear. That said, months of supply, given the low transaction volume did increase. We went from 4.2 months national supply to 4.4 months national supply.

[00:05:05]Gallup uh just did a poll about the best long-term investments. I tried to figure out what they meant by long-term. I'm going to assume greater than 10 years.

[00:05:15]Frankly, might have been greater than 20 years, but I just saw the chart. Uh and the last position with 2% crypto.

[00:05:24]Crypto came in at 2%, bonds came in next to last at 4%. Followed by CDs at 12, gold at 18, stocks at 20%, and finally real estate came in at first place at 38%.

[00:05:41]Pretty interesting. Uh, looks like more and more people are identifying the AI investment thesis. In fact, one person talked about the AI super rally has retail investors, that means you and me, retail investors acting the most aggressive since co.

[00:06:01]I don't know about you, but I don't think that's a good thing. The fact that we are acting as aggressive as we did during COVID when we were all at home getting STEMI checks, that's probably not good. But hey, you tell me. We got a couple of earnings uh out in the last 24 hours. We got him and hers. They missed top line and bottom line. They actually blamed aggressive accounting changes for revenue recognition. Revenue recognition is how companies identify topline versus just having it sit on their balance sheet. So very interesting. If I was an investor in him and hers, I'd try to figure out what that revenue recognition was, why it changed. Because again, if it's true, and again, I'm not saying it is. I'm just saying if it's true, that probably means their backlog is growing. But again, check it out. Look for yourself if interested. I am not, so I did not dig deeper. Uh, JD.com, be topline and bottom line. Again, I look at JD.com for what's going on with, you know, the average mom and dad. Uh, retail demonstrated remarkable resilience.

[00:07:03]We've got more and more signs that the consumer keeps spending. Fed President Goulsby is out talking smack. Fed President Goulby says the worst part of April inflation is services inflation.

[00:07:17]Now, this this should make you pucker up. It's one thing to say that gasoline and energy is inflating because you could you could legitimately look through that and say, "Hey, once the straight open that goes away, aka transitory."

[00:07:36]However, if Goulsby is right, and I haven't had chance to verify yet, if services inflation is the problem, now that's a problem. That's not the straight of our muse. That's that's wages. And uh so again, sticky services inflation not good.

[00:07:58]Uh April CPI was worse than expected. To which I say, of course it was. I told you it was. You're lucky it wasn't as bad as I expected, hence my swing and a miss.

[00:08:08]Uh, I just thought I'd give you a flavor of what's going on in our amazing school community today. We've got a 1 to2 pm real estate agent mastermind. We've also got topics like uh there's a Torrance meetup if you're down in Southern California on May 31st at Nuke, hopefully I'm saying that right, cafe and bar at 10:30. If you're down in SoCal, looks like the ORAC community is getting together for a quick meetup. Uh we obviously have people talking about AI in real estate investing. Uh we have somebody celebrating an ADU completion.

[00:08:41]And somebody's asking, "What is your favorite keypad door locks, which I thought was fun. Make sure you join the community. It is where wealth builders go to learn, grow, network, uh create new friendships."

[00:08:55]How about our friend Ed Yardini? Ed Yardini, a stock market bull, has raised, yes, raised his forecast for the S&P 500. It was at 7700.

[00:09:06]He is now going to 8250.

[00:09:09]That is even higher than our friend, Mr. Dan Bird. Mr. Dan Bird's calling 8,000.

[00:09:14]Of course, we talk to Dan every Sunday.

[00:09:16]Ed Yardini says, "Hold my beer. We're going to 8250."

[00:09:21]Scott Galloway, I thought this was an interesting conversation. Uh Scott Galloway is highlighting what China did for us in the steel market. Right.

[00:09:30]Basically, they started dumping steel which caused a lot of American manufacturers to struggle and close and really damage the US economy. Scott Galloway says China should start dumping cheap AI models into the US just like they did with steel decades ago.

[00:09:50]Scott goes on to say that if they were to do that, they could single-handedly crush the AI momentum and cause the stock market to crash 40%.

[00:10:02]Boy, that's an interesting chess move.

[00:10:04]Again, obviously, China doesn't care about profitability. They think in decades or hundreds of years if they are truly out to get the United States and they want to hurt us, dumping cheap AI models is probably one way to do it given all the debt uh that is out there.

[00:10:23]Apollo uh Torsten Sllock, their chief economist, Torson Sllock's got a lot of great opinions. I read a lot of his stuff. Companies won't automate all tasks as it is cheaper with humans. I don't know if you guys have seen some people talk about all these tokens that are being consumed with AI but some of the numbers are truly frightening where you are spending more and more than a human being. Uh again torsen slot goes on to say dot dot dot for now. So again one of the things that you could expect if AI goes the way of traditional technology is these things will get cheaper and thus more and more automation will come. Alliance Bernstein is the latest New York uh city wall street money management fund to say fu New York City. Looks like Albert Alliance Bernstein is going to Nashville. They are moving headquarters to Nashville. Shout out Mom Donnie for another uh big firm leaving. Only 25% of non-homeowners expect to buy in the next five years. I got to tell you folks, I blame the evil doomers.

[00:11:32]Doomers have uh proliferated here on YouTube and other platforms. All they do is kill hope. They say, "Wait, trust me.

[00:11:42]The world's going to blow up."

[00:11:44]And they have crushed hope. If you have no hope, you have no future.

[00:11:50]I believe these doomers are evil. They are evil with a capital E. They are evil human beings that choose to pay their rent by crushing hope. I think it is a disgusting reality, but at the end of the day, don't hate the player, hate the game, and they are playing the game well. But I still can be disappointed that people choose to uh pay their rent by crushing hope in other people, and they certainly are.

[00:12:20]Simon Properties with an interesting earnings announcement. If you don't know Simon Properties, they are one of the largest class A mall owners in the US.

[00:12:29]In fact, I think they are the largest class A mall owner. So, what is going on with Simon? Well, strong interest from Gen Z shoppers. Wow, Gen Z is not shopping on their phone. They're going to the mall, networking, getting around other human beings. Who knew? Sales and rents surge up 11.8% per square foot. Yes, at Simon Properties now they're charging you roughly $819 a square foot for retail space. They also raised their guidance and hiked their dividend 7%.

[00:13:05]Mike Simson is talking about the active real estate market says pending home sales up 6.4% yearonear. That is even with higher interest rates. Uh that is up three weeks in a row. Active inventory is at 986,000, up only 1%. Remember folks, six or seven months ago, we were up 30%. The question you should be asking yourself is when when do we go negative? I think we will go negative year, sometime in the next four to six weeks. Who would have guessed? 2026 active inventory below 2025.

[00:13:41]Uh, also Mike highlights that the spring selling season may have started late.

[00:13:47]This is obviously something I've been talking about the last three weeks or so.

[00:13:52]And uh, we've obviously got a new Fed president coming in, Kevin Worsh. Uh, one of the I don't know unfortunate facts about Fed presidents that I think we need to watch out for is 10 of the last 11. So that's a pretty high percentage. That's over 90%. 10 of the last 11 Fed presidents have been tested in the first 6 months of taking over the job. What will Kevin Worsh's test be? We shall see. Uh again, I think it's um it could be inflation, it could be a job market, it could be private credit. Who knows? But uh there is a test coming for Kevin Walsh and it will be interesting to watch. Folks, at the end of the day, don't forget to join school. It is where wealth builders go to network, grow, and learn. Uh, also, don't forget to check out Steadily. Uh, they are landlord insurance single-handedly responsible for saving Olivia and I 20 grand last year and 20 grand this year. And I greatly appreciate anybody who could help me save $20,000.

[00:14:59]Folks, have an amazing day. Take care of yourself. Peace.