Market Outlook: The two-year Treasury spiked with extreme volatility, briefly pricing higher odds of near-term rate hikes, but the speaker’s base case remains eventual cuts to zero rates.
Stagflation vs. Disinflation: While markets are reacting to stagflation fears, the speaker argues the cycle likely ends in disinflation/deflation as labor market weakness ultimately dominates.
Energy/Oil Shock: Rising oil prices act as a tax on the economy, risking demand destruction and echoing 2008 dynamics where high energy costs tipped a weak economy over the edge.
Gold and Miners: A sharp gold sell-off and pressure on miners reflect forced selling to raise dollars amid global stress, despite geopolitical volatility that would otherwise support gold.
Dollar Strength: A stronger U.S. dollar compounds import costs (e.g., Japan’s oil bill), intensifying liquidity needs and prompting asset sales to meet dollar-denominated liabilities.
Historical Parallels: The 2008 ECB rate hike amid commodity spikes and stagflation fears mirrors today’s setup, reinforcing the view that policy may stay tight until a sharper downturn forces cuts.
Key Risks: Geopolitical tensions, supply-chain strain, and a fickle labor data signal a fidgety market, with curve dynamics suggesting turbulence before an eventual policy pivot.
Transcript
Hello fellow Robo Capitals. HOPE YOU'RE WELL. SO, we got big news. You thought we were going to get interest rate cuts. Maybe not. Maybe not. What the market signal today, and I'm talking about the two-year Treasury, is we could see interest rate hikes. Now, let me be very, very clear. I don't think we're going to get them. I think this is very, very similar to 2008. We're going to go back in time in this video and see what the central banks were doing in 2008, what they were talking about in stagflation, and we all know how that movie ended. And then we're going to go ahead and connect some dots. But first and foremost, let's go into the two-year Treasury today. Huge move, huh? And massive volatility in the two-year Treasury. And and by the way, let's start before we even go to uh CNBC, I think is where I've got this pulled up, but let me see if I've got a chart of the 2-year Treasury and Fed funds. I do. And you'll notice the two-year Treasury usually leads Fed funds, uh almost always. Now, to be clear, and and by the way, if you guys can't see this, the blue line is the 2-year Treasury. Red line is Fed funds. So, we can see there uh this blue line usually preeds the move in the red line. Now, that's the big move, but you do see some volatility uh in the interim. Now, as an example, you know, speaking of 2008, let's just do this really quick here. 2008 and right uh in 2009. Here we go. Come on. All right. So, you see this move right here? That's what I was referring to where that blue line goes up. In fact, at one point in the middle of the summer in 2008, look at this. You had the two-year Treasury trading around, can you guys see that? The two-year Treasury trading right around 3%. And the effective F effect effective Fed funds was right around two 2.06. So about 100 basis points higher. Now, I I always say that it it precedes the cycle, not necessarily what happens in the middle, because you look at the cycle, and of course, you know, the Fed was paused up here, and the 2-year Treasury, as you would expect, predicts what the Fed is going to do, and then the Fed follows the 2-year Treasury. Now, in this case, they were paused. They didn't really go up. Um, I would have to go back in time and see if we had a rate cutting cycle where that they actually reverse. I don't know that they have. So, anyway, that's what I wanted to focus on first and foremost is that the Fed usually follows the 2-year Treasury, but they usually follow it down and they usually follow it up when you have an entire cycle. What I'm talking about right here is noise in the middle. And let's go over to the two-year Treasury. And you can see this wild volatility today. I mean, it doesn't look like much with this chart, but but actually look at the moves. I mean, you started off at 3.78. And look at this. We got almost up to 4%. What where did we get up to here? Let me see. 3.9. And I'm not even at the top. Actually, let me try to see if I can see the days range. Yeah, the day's range 3.968 was the peak. I mean, you're getting real close to 4%. And you're starting off at 3 what? 78. And the day's range is 3.76 to 3 point. That's a 20 basis point range. Holy cow. And look what the two-year Treasury has done over the last five days. Look, we were at 3.66 and you go straight to almost 4%. That's a 30 basis point increase right there from 3.66 to 3.96. Now, we're going to go over why it did this in a moment, but now let's think about this. What's Fed funds right now? Fed funds is 3.6, maybe 3.65. So, right now, the two-year Treasury is trading, let's say, 20 basis points higher than Fed funds. That you could definitely definitely def if you were one of the the stagflation guys or gals, you could definitely point to that and say that this is the market predicting that the Fed might actually increase interest rates. Now, it's of course a game of probabilities. So, we go over to the CME group and we see that the probability is still very low. Let's say 7%. But yesterday, the day prior, it was at 0%. And you combine that with the two-year Treasury and they're saying maybe, just maybe, in fact, more than maybe. The two-year Treasury is really pointing at a Fed increase. Now, again, I don't think they're going to do it. I think the market's way off sides right here, which it can be in the short run, obviously. But uh I do not think this movie ends with the Fed or this rate cutting cycle ends with a big pause or I should say I don't think the rate cutting cycle ends with the Fed at 3.6. I think the rate cutting cycle probably ends with the Fed at zero. But let's go over some other news here that led to this massive volatility in the two-year chart. I still can't get my head around this 20 basis point move in one day. Wow. So, let's go over to the market watch calendar. And we really got to start with yesterday. I mean, that's where it begins. So, we had the producer price index. We talked about that. the PPI the expectations were.3 we get a 7.7 and as you would expect the two-year rockets on that now what was really interesting is the 10-year moved quite a bit but not as much so we had a flattener in there and the 30 barely budged and then today we get initial jobless claims and this that big spike up where you got to 3.96 that was right when this number came 205,000. So, the market's looking at this and I think this is a total knee-jerk reaction because they're trying to figure out which direction the labor market's headed and they're looking at the non-farm payrolls at92 and they're looking at initial jobless claims and then they're factoring in the oil prices and they're saying, "Okay, well, we got to make a decision here. growth and inflation expectations. Where's it going to be? And is the Fed gonna have to target more so inflation or are they gonna have to target more a deteriorating labor market? Excuse me. So when we get the negative 92,000 two-year goes down. Fact, I'm sure all interest rates went down probably two year more so. And then when we get the initial jobless claims, which I don't think is as relevant as non-farm payrolls, but in an environment where everyone is freaking out about stagflation, high oil prices, and therefore the Fed maybe even raising rates, in the very near term, this is what you get. You get a 20 basis point move. You get the two-year ripping from 3.76 straight up to 3.96. uh it it's it's a direct result of the market being very very fidgety uh and very very leerary of the upside in rates the upside in inflation due to what's happening in the Middle East and then on top of that you're getting the PPI at a 0.7 when the expectations at.3 and then boom today you get the expectations for 215,000 you get 205 meaning that the labor market might not be as bad as the non-farm payroll would suggest and therefore for the increase of the probabilities or the odds of the Fed not only pausing but actually hiking rates in the near term. But then in my view, and the market obviously totally glossed over this, you get a dose of reality. New home sales 719,000 was expectation, which I think is a garbage number to begin with. You got 587. 587. And this really gets to the heart of the debate, right? Like I said yesterday, you know how the movie starts. It always starts with an inversion of the curve, then an uninversion of the curve and a deteriorating labor market. You know, it always happens that way. You know how the movie ends. It ends with disinflation, maybe even outright deflation. The problem is you don't know what happens in the middle. And as we saw in 2008, the middle can look exactly like the 1970s in terms of stagflation, uh, an oil price spike. Uh, in other words, it can look exactly like it does today. In fact, it was even more extreme in 2008. But at the end of the day, when you have a battle, let's say, or tugofwar with inflation and disinflation, inflation being higher oil prices and disinflation being the labor market, guess who always wins that battle? Even in the 1970s, that would be the labor market. That would absolutely be the labor market. It's just ironically the higher oil prices, although in the short run they do increase the CPI, that's actually the straw that breaks the camel's back. It's the catalyst that tips a wobbling economy just straight over the edge. Okay, now let's uh go over to CM let's go back to CNBC here because another thing that I wanted to look at that I think is very very relevant to what we're talking about with interest rates. Gold down 4.76% just today. Now we're down at 4,663. Now, if interest rates are skyrocketing because growth in inflation expectations, oil going to the moon, why would gold be going down by almost 5% in a day? And I think the miners really got hammered. At the end of the day, you have to sell what you can, not what you want. So, in my view, these higher oil prices are putting the the the pinch, in fact, the destruction of the global supply chains are putting the pinch on global businesses and corporations, multinational corporations. And at the end of the day, they have to have dollars. They have to because their liabilities so many of them are denominated in dollars whether it's debt or inputs for their business itself. And what has a bid? Gold. Gold has a bid. So you got to unload it. So this to me is a sign of stress especially when your inputs are denominated in dollars i.e. gold or i.e. oil. Let's look at Japan, right? They have to import all of this oil. So if the price of oil goes up in dollar terms, that hits you hard. But what if the dollar goes up in addition to that? Now you get a double right hook from Tyson. Not just one. In fact, you get a right hook then the left hook. Or in this case, you probably get the left hook and then the right uppercut. That right uppercut is the dollar going up. And it's down today looks like, but over the last month or so, it's gone pretty much straight up. There you go. So, this puts a lot of pressure on countries and multinational corporations in areas like Japan. And then you combine that with oil going to a hundred and it gets to a point where they just have to sell things because they have to have dollars because they have to have that input for their widget and it costs way more in yen terms than it did a month ago, two months ago. So you what are they going to sell? They sell gold. I think that's could be what's happening right now because in any other circumstance especially the volatility in the in the geopolitical risk you would expect gold to really be ripping. Now, another thing though, if you look at silver, that could be the other market, you know, not the bond market, but the other market pricing in a slower economy that they're putting more of the emphasis on the non-farm payrolls, not so much on initial claims. So, there there's just so many moving parts here and so much going on. It's actually it's actually really quite fascinating. But let's go back in time, guys, because we remember the GFC as something that was extremely disinflationary and even deflationary. We had a deflationary credit crisis or credit collapse if you want to look at it that way to where we actually had deflation, not the good kind, the bad kind in a quarter, I think it was Q2 of 2009. So, we always remember the GFC as the way it ended. But like I say, we always forget what happened in the middle. Let's look at that right now. Here's an article from the Guardian. It highlights this article is more than 17 years old. Good. Good. And this was written July 3rd, 2008. And what they are notifying you that the ECB raised interest rates. I repeat, the ECB raised interest rates in July of 2008. Can you believe that? So now you may say, "Oh, what a bunch of idiots. What a bunch of morons." Hindsight being 2020, absolutely. But when you were in the thick of things, you got to take yourself back in that time machine. And you don't know. You don't have a crystal ball. You don't know that we're headed to the GFC. You don't know what's going to happen to Layman Brothers. You don't know any of this stuff. The only thing you know is the data that's coming out right now. So the data that was coming out right right then would led the central bankers pretty much globally to not fear a GFC to not fear banks not fe fear a deflationary collapse actually the opposite to fear stagflation check this out this is the head of the ECB which is Trice believe that is how you pronounce his name back then or that's how you pronounce his name, I guess. Always. He insisted inflation was now the number one issue. Again, July of 2008, he insisted inflation was now the number one issue among the Euro zone 320 million citizens. Yeah, that didn't age well, did it? And the ECB would live up to its mandate to deliver price stability. Financial markets had been expecting the ECB to increase rates at least two more times or close to 5%. So the marketplace was saying, "Yeah, he increased from four to four.25, but we expect him to keep taking rates up to 5%." And why did he want to do this? Get back to the article. to avert a so-called wage price spiral in the face of surging energy and food prices. That sound familiar? So, we look at oil, we hear the people on CNBC, social media, etc., and you see the price of oil potentially going to 120, 150, 200, and you're like, "Oh my gosh, it's going to lead to massive amounts of inflation because oil is an input in everything." That's true until it's not. And what makes it not true is when the oil price goes high enough and when the economy is weak enough to where that high oil price tips it over the edge because it destroys demand. That's really the key because you have to look at that high oil price as a tax on the entire economy. So you have, let's just assume the labor market is deteriorating and the economy is close to contraction. You throw on a 20% tax on top of that for businesses and consumers, what's that going to do to demand? It's going to absolutely plummet. Plummet. And even if you do have low supply of oil because of what's happening in the Middle East, demand goes to a point or drops down even lower and then price goes down. It's the cure for high prices are high prices. So the bank's president coupled his remarks with a warning to companies and pay negotiators that excessive price and wage increases to claw back soaring commodity and energy costs would indeed trigger further rises in borrowing costs and other higher in other words higher interest rates. I mean it's absurd. that now we can look back on this 17 years into the future because we all know how that ended. And it didn't just end in the opposite that they're saying. It ended in the greatest deflationary collapse since the Great Depression. So they didn't just kind of get it wrong. That's my point. The German economy, the zone's strongest, has so far held up during the financial turmoil and amid surging commodity prices. Again, financial turmo, it's the exact same thing as you see today. We get the revisions to GDP down down remember we had the expectation for what was it 1.5 and we got a.7 was the last read. That's before revisions by the way. You have the labor market. what we've been talking about. Even the ADP numbers suck. What about private credit? Would you call that financial tur turmoil? Of course you would. It's literally like the parallels are staggering. The parallels are frightening. amid surging commodity prices. But France, Italy, above all, Spain have began to experience a downturn with Spanish unemployment rising strongly. Again, the tugof-war between high oil prices and a deteriorating labor market. Deteriorating labor market is always going to win. Some policy makers are already warning of, wait for it, stagflationary risks. History doesn't repeat, but it sure does rhyme. And in this case, it could be repeating. It sure looks like it. It sure as hell looks like it right now. In fact, I don't know if I could think of another way with, you know, using macroeconomic indicators that where we are right now could be more similar to 2008. I I honestly can't think of one. So, is the market, the two-year Treasury predicting the Fed raising rates? I would say it's getting darn close. It's getting darn close. Especially when you consider the fact that today it got up to 3.96 and Fed funds is at 3.65 and the 2-year Treasury always leads. Now, again, do I think that we get the Fed rate hike? No, absolutely not. because I think that the numbers, the data is going to continue to deteriorate going into April to the point where the Fed is going to continue to pause. And the way I see this playing out is the Fed continues to pause using inflation, high commodity prices, stagflationary pressures, blah blah blah blah blah, just like in 2008, until the stuff properly hits the fan. Properly hits the fan. And then you guys know what they're going to do. They're going to take it straight down to zero. Take it straight down to zero. No certainties, only probabilities. But that's my base case. All right, guys. Enjoy the rest of your afternoon. As always, make sure you're standing up for freedom, liberty, free market, capitalism, and we'll see you in the next video.
BREAKING: Market Signals Fed Will RAISE RATES!!
Summary
Transcript
Hello fellow Robo Capitals. HOPE YOU'RE WELL. SO, we got big news. You thought we were going to get interest rate cuts. Maybe not. Maybe not. What the market signal today, and I'm talking about the two-year Treasury, is we could see interest rate hikes. Now, let me be very, very clear. I don't think we're going to get them. I think this is very, very similar to 2008. We're going to go back in time in this video and see what the central banks were doing in 2008, what they were talking about in stagflation, and we all know how that movie ended. And then we're going to go ahead and connect some dots. But first and foremost, let's go into the two-year Treasury today. Huge move, huh? And massive volatility in the two-year Treasury. And and by the way, let's start before we even go to uh CNBC, I think is where I've got this pulled up, but let me see if I've got a chart of the 2-year Treasury and Fed funds. I do. And you'll notice the two-year Treasury usually leads Fed funds, uh almost always. Now, to be clear, and and by the way, if you guys can't see this, the blue line is the 2-year Treasury. Red line is Fed funds. So, we can see there uh this blue line usually preeds the move in the red line. Now, that's the big move, but you do see some volatility uh in the interim. Now, as an example, you know, speaking of 2008, let's just do this really quick here. 2008 and right uh in 2009. Here we go. Come on. All right. So, you see this move right here? That's what I was referring to where that blue line goes up. In fact, at one point in the middle of the summer in 2008, look at this. You had the two-year Treasury trading around, can you guys see that? The two-year Treasury trading right around 3%. And the effective F effect effective Fed funds was right around two 2.06. So about 100 basis points higher. Now, I I always say that it it precedes the cycle, not necessarily what happens in the middle, because you look at the cycle, and of course, you know, the Fed was paused up here, and the 2-year Treasury, as you would expect, predicts what the Fed is going to do, and then the Fed follows the 2-year Treasury. Now, in this case, they were paused. They didn't really go up. Um, I would have to go back in time and see if we had a rate cutting cycle where that they actually reverse. I don't know that they have. So, anyway, that's what I wanted to focus on first and foremost is that the Fed usually follows the 2-year Treasury, but they usually follow it down and they usually follow it up when you have an entire cycle. What I'm talking about right here is noise in the middle. And let's go over to the two-year Treasury. And you can see this wild volatility today. I mean, it doesn't look like much with this chart, but but actually look at the moves. I mean, you started off at 3.78. And look at this. We got almost up to 4%. What where did we get up to here? Let me see. 3.9. And I'm not even at the top. Actually, let me try to see if I can see the days range. Yeah, the day's range 3.968 was the peak. I mean, you're getting real close to 4%. And you're starting off at 3 what? 78. And the day's range is 3.76 to 3 point. That's a 20 basis point range. Holy cow. And look what the two-year Treasury has done over the last five days. Look, we were at 3.66 and you go straight to almost 4%. That's a 30 basis point increase right there from 3.66 to 3.96. Now, we're going to go over why it did this in a moment, but now let's think about this. What's Fed funds right now? Fed funds is 3.6, maybe 3.65. So, right now, the two-year Treasury is trading, let's say, 20 basis points higher than Fed funds. That you could definitely definitely def if you were one of the the stagflation guys or gals, you could definitely point to that and say that this is the market predicting that the Fed might actually increase interest rates. Now, it's of course a game of probabilities. So, we go over to the CME group and we see that the probability is still very low. Let's say 7%. But yesterday, the day prior, it was at 0%. And you combine that with the two-year Treasury and they're saying maybe, just maybe, in fact, more than maybe. The two-year Treasury is really pointing at a Fed increase. Now, again, I don't think they're going to do it. I think the market's way off sides right here, which it can be in the short run, obviously. But uh I do not think this movie ends with the Fed or this rate cutting cycle ends with a big pause or I should say I don't think the rate cutting cycle ends with the Fed at 3.6. I think the rate cutting cycle probably ends with the Fed at zero. But let's go over some other news here that led to this massive volatility in the two-year chart. I still can't get my head around this 20 basis point move in one day. Wow. So, let's go over to the market watch calendar. And we really got to start with yesterday. I mean, that's where it begins. So, we had the producer price index. We talked about that. the PPI the expectations were.3 we get a 7.7 and as you would expect the two-year rockets on that now what was really interesting is the 10-year moved quite a bit but not as much so we had a flattener in there and the 30 barely budged and then today we get initial jobless claims and this that big spike up where you got to 3.96 that was right when this number came 205,000. So, the market's looking at this and I think this is a total knee-jerk reaction because they're trying to figure out which direction the labor market's headed and they're looking at the non-farm payrolls at92 and they're looking at initial jobless claims and then they're factoring in the oil prices and they're saying, "Okay, well, we got to make a decision here. growth and inflation expectations. Where's it going to be? And is the Fed gonna have to target more so inflation or are they gonna have to target more a deteriorating labor market? Excuse me. So when we get the negative 92,000 two-year goes down. Fact, I'm sure all interest rates went down probably two year more so. And then when we get the initial jobless claims, which I don't think is as relevant as non-farm payrolls, but in an environment where everyone is freaking out about stagflation, high oil prices, and therefore the Fed maybe even raising rates, in the very near term, this is what you get. You get a 20 basis point move. You get the two-year ripping from 3.76 straight up to 3.96. uh it it's it's a direct result of the market being very very fidgety uh and very very leerary of the upside in rates the upside in inflation due to what's happening in the Middle East and then on top of that you're getting the PPI at a 0.7 when the expectations at.3 and then boom today you get the expectations for 215,000 you get 205 meaning that the labor market might not be as bad as the non-farm payroll would suggest and therefore for the increase of the probabilities or the odds of the Fed not only pausing but actually hiking rates in the near term. But then in my view, and the market obviously totally glossed over this, you get a dose of reality. New home sales 719,000 was expectation, which I think is a garbage number to begin with. You got 587. 587. And this really gets to the heart of the debate, right? Like I said yesterday, you know how the movie starts. It always starts with an inversion of the curve, then an uninversion of the curve and a deteriorating labor market. You know, it always happens that way. You know how the movie ends. It ends with disinflation, maybe even outright deflation. The problem is you don't know what happens in the middle. And as we saw in 2008, the middle can look exactly like the 1970s in terms of stagflation, uh, an oil price spike. Uh, in other words, it can look exactly like it does today. In fact, it was even more extreme in 2008. But at the end of the day, when you have a battle, let's say, or tugofwar with inflation and disinflation, inflation being higher oil prices and disinflation being the labor market, guess who always wins that battle? Even in the 1970s, that would be the labor market. That would absolutely be the labor market. It's just ironically the higher oil prices, although in the short run they do increase the CPI, that's actually the straw that breaks the camel's back. It's the catalyst that tips a wobbling economy just straight over the edge. Okay, now let's uh go over to CM let's go back to CNBC here because another thing that I wanted to look at that I think is very very relevant to what we're talking about with interest rates. Gold down 4.76% just today. Now we're down at 4,663. Now, if interest rates are skyrocketing because growth in inflation expectations, oil going to the moon, why would gold be going down by almost 5% in a day? And I think the miners really got hammered. At the end of the day, you have to sell what you can, not what you want. So, in my view, these higher oil prices are putting the the the pinch, in fact, the destruction of the global supply chains are putting the pinch on global businesses and corporations, multinational corporations. And at the end of the day, they have to have dollars. They have to because their liabilities so many of them are denominated in dollars whether it's debt or inputs for their business itself. And what has a bid? Gold. Gold has a bid. So you got to unload it. So this to me is a sign of stress especially when your inputs are denominated in dollars i.e. gold or i.e. oil. Let's look at Japan, right? They have to import all of this oil. So if the price of oil goes up in dollar terms, that hits you hard. But what if the dollar goes up in addition to that? Now you get a double right hook from Tyson. Not just one. In fact, you get a right hook then the left hook. Or in this case, you probably get the left hook and then the right uppercut. That right uppercut is the dollar going up. And it's down today looks like, but over the last month or so, it's gone pretty much straight up. There you go. So, this puts a lot of pressure on countries and multinational corporations in areas like Japan. And then you combine that with oil going to a hundred and it gets to a point where they just have to sell things because they have to have dollars because they have to have that input for their widget and it costs way more in yen terms than it did a month ago, two months ago. So you what are they going to sell? They sell gold. I think that's could be what's happening right now because in any other circumstance especially the volatility in the in the geopolitical risk you would expect gold to really be ripping. Now, another thing though, if you look at silver, that could be the other market, you know, not the bond market, but the other market pricing in a slower economy that they're putting more of the emphasis on the non-farm payrolls, not so much on initial claims. So, there there's just so many moving parts here and so much going on. It's actually it's actually really quite fascinating. But let's go back in time, guys, because we remember the GFC as something that was extremely disinflationary and even deflationary. We had a deflationary credit crisis or credit collapse if you want to look at it that way to where we actually had deflation, not the good kind, the bad kind in a quarter, I think it was Q2 of 2009. So, we always remember the GFC as the way it ended. But like I say, we always forget what happened in the middle. Let's look at that right now. Here's an article from the Guardian. It highlights this article is more than 17 years old. Good. Good. And this was written July 3rd, 2008. And what they are notifying you that the ECB raised interest rates. I repeat, the ECB raised interest rates in July of 2008. Can you believe that? So now you may say, "Oh, what a bunch of idiots. What a bunch of morons." Hindsight being 2020, absolutely. But when you were in the thick of things, you got to take yourself back in that time machine. And you don't know. You don't have a crystal ball. You don't know that we're headed to the GFC. You don't know what's going to happen to Layman Brothers. You don't know any of this stuff. The only thing you know is the data that's coming out right now. So the data that was coming out right right then would led the central bankers pretty much globally to not fear a GFC to not fear banks not fe fear a deflationary collapse actually the opposite to fear stagflation check this out this is the head of the ECB which is Trice believe that is how you pronounce his name back then or that's how you pronounce his name, I guess. Always. He insisted inflation was now the number one issue. Again, July of 2008, he insisted inflation was now the number one issue among the Euro zone 320 million citizens. Yeah, that didn't age well, did it? And the ECB would live up to its mandate to deliver price stability. Financial markets had been expecting the ECB to increase rates at least two more times or close to 5%. So the marketplace was saying, "Yeah, he increased from four to four.25, but we expect him to keep taking rates up to 5%." And why did he want to do this? Get back to the article. to avert a so-called wage price spiral in the face of surging energy and food prices. That sound familiar? So, we look at oil, we hear the people on CNBC, social media, etc., and you see the price of oil potentially going to 120, 150, 200, and you're like, "Oh my gosh, it's going to lead to massive amounts of inflation because oil is an input in everything." That's true until it's not. And what makes it not true is when the oil price goes high enough and when the economy is weak enough to where that high oil price tips it over the edge because it destroys demand. That's really the key because you have to look at that high oil price as a tax on the entire economy. So you have, let's just assume the labor market is deteriorating and the economy is close to contraction. You throw on a 20% tax on top of that for businesses and consumers, what's that going to do to demand? It's going to absolutely plummet. Plummet. And even if you do have low supply of oil because of what's happening in the Middle East, demand goes to a point or drops down even lower and then price goes down. It's the cure for high prices are high prices. So the bank's president coupled his remarks with a warning to companies and pay negotiators that excessive price and wage increases to claw back soaring commodity and energy costs would indeed trigger further rises in borrowing costs and other higher in other words higher interest rates. I mean it's absurd. that now we can look back on this 17 years into the future because we all know how that ended. And it didn't just end in the opposite that they're saying. It ended in the greatest deflationary collapse since the Great Depression. So they didn't just kind of get it wrong. That's my point. The German economy, the zone's strongest, has so far held up during the financial turmoil and amid surging commodity prices. Again, financial turmo, it's the exact same thing as you see today. We get the revisions to GDP down down remember we had the expectation for what was it 1.5 and we got a.7 was the last read. That's before revisions by the way. You have the labor market. what we've been talking about. Even the ADP numbers suck. What about private credit? Would you call that financial tur turmoil? Of course you would. It's literally like the parallels are staggering. The parallels are frightening. amid surging commodity prices. But France, Italy, above all, Spain have began to experience a downturn with Spanish unemployment rising strongly. Again, the tugof-war between high oil prices and a deteriorating labor market. Deteriorating labor market is always going to win. Some policy makers are already warning of, wait for it, stagflationary risks. History doesn't repeat, but it sure does rhyme. And in this case, it could be repeating. It sure looks like it. It sure as hell looks like it right now. In fact, I don't know if I could think of another way with, you know, using macroeconomic indicators that where we are right now could be more similar to 2008. I I honestly can't think of one. So, is the market, the two-year Treasury predicting the Fed raising rates? I would say it's getting darn close. It's getting darn close. Especially when you consider the fact that today it got up to 3.96 and Fed funds is at 3.65 and the 2-year Treasury always leads. Now, again, do I think that we get the Fed rate hike? No, absolutely not. because I think that the numbers, the data is going to continue to deteriorate going into April to the point where the Fed is going to continue to pause. And the way I see this playing out is the Fed continues to pause using inflation, high commodity prices, stagflationary pressures, blah blah blah blah blah, just like in 2008, until the stuff properly hits the fan. Properly hits the fan. And then you guys know what they're going to do. They're going to take it straight down to zero. Take it straight down to zero. No certainties, only probabilities. But that's my base case. All right, guys. Enjoy the rest of your afternoon. As always, make sure you're standing up for freedom, liberty, free market, capitalism, and we'll see you in the next video.