#822 Inflation Hits 7.5% w/ Darius Dale

Darius Dale is the Founder & CEO of 42 Macro, the leading macro risk manager adviser. In this conversation, we discuss the macro economy, what's happening in the financial markets, how Darius is looking at various metrics, and what you should be considering as you're investing your capital. Darius joins us every Thursday on "The Best Business Show." To see the video with the corresponding charts that Darius references throughout the interview, go to "The Best Business Show: LIVE" YouTube Channel ======================= Today’s episode is sponsored by Abra. Based in California and backed by top VC firms, Abra is an all-in-one simple, secure app that allows you to trade over 110 cryptocurrencies, get 0% interest loans using your crypto as collateral and earn interest with up to 14% APY on stablecoins and 8.15% APY on Bitcoin. Join nearly 2 million users by downloading Abra from the Google Play or Apple App store. If you download the app today, you will get $15 in free crypto once you fund your account. You came, you invested — now conquer. ======================= Unstoppable Domains is THE #1 provider of NFT domains. These aren’t traditional domains, these are domains with superpowers. With your unique NFT domain such as pomp dot crypto or pomp dot nft, you can replace your long complex wallet addresses, verify ownership of your NFTs and join the 10’s of thousands of people who are now using their NFT domain as their Twitter and Discord usernames. Go to unstoppabledomains.com and get YourName dot crypto, dot x, dot nft or a range of other endings for as low as $5 and never worry about gas or renewal fees because with Unstoppable Domains you pay once and own forever! ======================= DeFi Technologies represents what’s next in the digital economy -- providing simplified, trusted access to crypto, decentralized finance and Web 3.0 investment opportunities. Institutions and investors can gain diversified, secure, compliant, and easily tradable access to a diversified set of industry-leading equity products and protocols, through a single stock purchase on a regulated exchange. Currently listed on U. S. (OTC: DEFTF) and Canadian (NEO:DEFI) exchanges. For more information or to subscribe to receive company updates and financial information, visit our website at defi.tech =======================

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:02Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Darius Dale is the founder and CEO of 42 Macro, the leading macro risk management advisor. In this conversation, we talk about what's going on in the macro economy, what's happening in the financial markets, how Darius is looking at various metrics, and also what you at home should be thinking about as you invest your capital. I really enjoyed this conversation with Darius, and I hope you do as well. Before we get into this episode, though, I want to quickly talk about our sponsors. Today's episode is brought to you by Exodus, the world's leading desktop, mobile, and hardware crypto wallet. They offer beautiful, user-friendly blockchain products that sync across all of your devices, making it easier

• 0:46Anthony Pompliano?

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• 1:30Anthony Pompliano?

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• 2:15Anthony Pompliano?

  UnstoppableDomains.com. This episode is brought to you by DeFi Technologies. DeFi Technologies represents what's next in the digital economy. They're providing simplified trusted access to crypto, decentralized finance, and Web 3 investment opportunities. Institutions and investors can gain diversified, secure, compliant, and easily tradable access to a diversified set of industry-leading equity products and protocols through a single-stock purchase on a regulated exchange. DeFi Technologies is currently listed on the U.S. Exchange at DEFTF Stock Ticker and the Canadian NEO Exchange at DEFI. For more information or to subscribe to receive company updates and financial information, visit their website at DeFi.Tech. I'm really excited about what these guys are doing.

• 3:00Anthony Pompliano?

  I've become an advisor to the business and I highly suggest you go check them out. Go to their website at DeFi.Tech today. All right, let's get into this episode. I hope you guys enjoy this one. Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only. I think we got Darius right now. Darius, you there?

• 3:36Speaker 01

  I'm fired up, man. I'm listening to you guys right now. This is awesome.

• 3:40Anthony Pompliano?

  All right, look, man, you got the floor. What the hell's going on?

• 3:44Speaker 01

  Dude, dude, I don't know, man. This is, so I'll start by saying, Joe, that was a phenomenal speech, man. I appreciate it. On everything that I've been talking about in my career for the past 13 years. I've been saying this, you guys know me, you know, I grew up very poor. You know, I've been on Wall Street for a really long time, or technically off Wall Street, rather. But, you know, a lot of what we're talking about is we sort of, we sow the seeds of this discussion, going back to the Fed's response to the financial crisis and their financial, their response to every single sort of equity market pullback we've seen since the financial crisis. And then you Layer on the fiscal policy response that in our opinion was a function of the zeitgeist

• 4:25Speaker 01

  against the incessant monetary easing at every equity market sniffle that we've had really throughout my career. And this is what you get. You get food inflation. It's up at a 40-year-high, 40-plus-year-high. You get shelter inflation. It's at a 30-year-high. You get utilities inflation, how much it costs to turn the light on. And I'll tell you, I've been evicted seven times in my life. I've probably spent a cumulative year of my lifetime of my childhood doing homework in the dark because we couldn't afford to keep the lights on. And that inflation statistic is at an all-time high. And what do we get out of it? We got a stock market.

• 5:02Anthony Pompliano?

  When you think, Darius, about what's going on right now, how do you underwrite what the actual inflation number is? Right? Seven and a half percent, I think everyone here agrees, is really, really bad. But I actually don't think it is highlighting how bad of the scenario it is. And there's two components. One is, is the official number actually accurate? And then two, is everyone in an economy obviously doesn't experience the same level of inflation? Like, how do you think about, like, how bad is it for the most vulnerable people in society?

• 5:29Speaker 01

  It's terrible. So I'll tell you this, two things. One, when you look at CPI statistics, you know, the BLS is making a tremendous amount of assumptions on what goes into the basket, what comes out of the basket. For instance, they made some revisions in this month's data to sort of more accurately account for the shift to consumption patterns throughout the pandemic. So there's a little bit more weight on goods inflation relative to services inflation. But number two, obviously, you know, when you look at it in parts, and I would say the BLS actually does this on a biannual basis in terms of surveying consumers and their expenditures and how much different sort of quantiles of consumers

• 6:10Speaker 01

  with respect to their income or their wealth distribution, how much they spend on certain goods and services. And the last time I checked that, I was a few years ago, but the reality is the lower you go down the income spectrum, the greater and greater the shares of things like, you know, rent, energy, medical costs and those things take up of your consumption. Your consumption is very much not discretionary. If anything, the last time I checked, it was pretty much consumers are operating at around a negative, a net negative margin when you factor in everything that they probably have to spend money on. And so you need wage growth, obviously, to perpetuate any sort of growth in that cohort.

• 6:46Anthony Pompliano?

  When you start to think about various parts of the metrics, like things like gasoline is up 40%, how much of that is like monetary fiscal policy and the lack of discipline there in some of the past actions over the last 24 months versus supply chain? And is it possible to break out like the monetary policy impact versus whether it's supply chain, pipeline, you know, regulation, whatever else is going on there?

• 7:09Speaker 01

  You could parse it out, but there's no point to, right? Like, you know, when we talk about supply chain disruptions, we have to remember supply chain disruptions is not just supply, it's demand as well. You can't have a supply, demand imbalance without factoring in demand. And obviously, as a function of the record monetary and fiscal policy that we received throughout the pandemic, you know, biggest fiscal programs ever, I think we did about 25% of GDP in fiscal stimulus. Obviously, the Fed's balance sheet doubled. Those two dynamics really contributed to an excess amount of demand relative to a decline, a declining or significantly reduced productive capacity of the global economy. And so that's what you have is a sort of overstimulated demand and the understimulated sort of supply dynamic that created a lot of this inflation.

• 7:53Speaker 01

  So in my opinion, you can try to parse it out, and I think it's important to parse out as an investor because that allows you some more visibility on which avenues to further express these types of bets. But the reality is, as a human being, as a consumer, who gives a fuck, you know, and pardon my language, right? Like, highest all time, you know, highest food prices you're spending since 1981, you know, there's not a family in America that gives a fuck, right? You know, I'm sorry. And again, sorry, pardon my language, but I'm very frustrated about this because I felt this for many, many years of my life. And I understand what people are going through and they're struggling right now and they're probably asking folks for questions and then tune into shows like yours.

• 8:32Speaker 01

  And thank you for providing leadership here because the reality is there's not enough leadership on Wall Street for what is a goddamn disaster.

• 8:39Anthony Pompliano?

  What is your take on interest rate hikes kind of moving forward? Obviously, you know, we see people like, you know, J B Diamond, J P Morgan saying that there's going to be six, seven different rate hikes. There's various metrics in the market that are showing, you know, pricing in of people thinking 50 basis points in March, a full percentage point. Like, what's your take on how many and how severe? And at this point, can they ignore it anymore? Like, do they have to hike interest rates after a CPI print like this?

• 9:07Speaker 01

  Well, let me start by saying the funny joke in the room right now is that they're still buying bonds. The Fed is still doing QE right now. I mean, it's obviously not funny. It's a disaster. But, uh, so, yeah, you made a great point earlier, right? About, um, you know, once the rich people start losing money and then they'll phone up the Fed, they'll phone up the Treasury and say, hey, look, guys, you're, this inflation's a problem now. At first, right, like, we have record corporate operating margins here in the U.S. If you look at the S and P 500 constituents. And part of the reason we have record corporate operating margins is because all of this inflation that us consumers and businesses are eating is going straight to the bottom line of these major corporations who are obviously in bed with Wall Street, who are obviously further in bed with, with the folks down in DC.

• 9:50Speaker 01

  So, you know, there's, they're laughing to the bank. And this is why you've seen a record earnings bonanza. That's why you see, again, record operating margins. But there comes to be a point where it becomes a political problem, right? At some point, it's a political problem for the people who run the banks, the people who run these companies, when their workers are showing up saying, hey, look, I'm out of here if you don't pay me X, Y, Z. And once all that starts to happen en masse, and we're obviously seeing that in the most recent jobs report on, uh, last Friday, we got the average hourly earnings statistic jumped up to 9% on a seasonally adjusted annualized rate of change basis. That's the fastest number we've seen since, um, since the, in a year. But the employment cost index, which measures everything that, that you have to pay your employees to, to get them to sit in a seat and, and make you richer, um, that number

• 10:34Speaker 01

  ticked up to the fastest rate we've seen in 20 years, um, going back a couple of weeks ago. So, you know, the reality is it's now starting to become a problem for them, which ultimately means it's going to become a problem for markets because that's the kind of the feedback mechanism that the Fed, uh, uses to drain liquidity and, and ultimately demand out of the system.

• 10:51Anthony Pompliano?

  What, uh, what questions you got, Joe?

• 10:53Speaker 02

  Darius, what's going on, man? Appreciate that shout out at the beginning.

• 10:57Speaker 01

  That was good, man. Real good stuff.

• 10:59Speaker 02

  My question would be around that, though. Like, what do you think people should do, right? I think it's easy for us to sit here and say, hey, start buying equities, go invest in the stock market, make sure you can capture some of this upside if this was to happen again. Maybe go get a raise at work. But ultimately, some of these things are really hard to enact if you're in a position where you're not able to do this stuff. What is your general advice, your general take on kind of what people in this position should be doing?

• 11:21Speaker 01

  Yeah, so I'll start by saying I did this. I asked for a raise and then get it and left and bet on myself. And that turned out to be the best decision I've ever made in my entire life. And so you obviously need to be financially empowered to make decisions like that. And so hopefully, the folks listening to your program are watching and understand, you know, the central core message you guys have been making this entire time, as long as I've known you guys to be doing this, which is, look, create yourself, give yourself some financial freedom and flexibility by making thoughtful investment decisions, by saving money, by allocating assets appropriately, and ultimately giving yourself some financial freedom. Because again, the only solution to this as a human being is, again, to walk into your place of employment, say, what you're paying me is not keeping up with the rate of inflation.

• 12:05Speaker 01

  I know you've made a shit ton of money in the last few years. It's time to share some of that. And if you don't, if your boss says, go F yourself, then you leave and you walk out of the door and you bet on yourself. And I understand most people listening to me, listening to this program now, probably don't have the means to do so. So the second best thing is start saving money. You know, again, very much is a personal experience of mine of the last years. I would not have been able to leave and start my own firm if I didn't save money in the preceding years in anticipation of potentially having to make that pivot. And so you need to give yourself financial flexibility, which means you can't be going to the damn Gucci store every week. You know, you can't be going out to eat every weekend. You can't be partying and picking up bar tabs and stuff.

• 12:49Speaker 01

  This is not the time, you know, in a serious inflation episode, to be sort of cavalier about your spending. You know, if anything, you want to create yourselves, give yourself incremental flexibility and start saving money in case you do have to make that change. And ultimately, I think a lot of folks will and already have.

• 13:05Speaker 02

  Darius, I don't know if you can see this, but I got your slogan on the back of my shirt there.

• 13:10Speaker 01

  I love it, man. Bet on yourself, dude. Yeah, that's exactly it. This is, and this is what, this is what one, the silver lining in COVID, because obviously it's not been great for a lot of people, particularly people have been impacted by the disease. But the reality of the silver lining in COVID is that we've, we've leveled the playing field for the dissemination of information, for the connection of people in societies and communities. And ultimately, you don't need to go through these main channels anymore to sort of build a business, start a business, connect with customers. It's never been easier to bet on yourself, right, Joe? And so, you know, I'm really proud of what you guys have done and the leadership you're showing the community, because at the end of the day, this is the only way out. You know, you can't wait on Wall Street to fix the solution. You can't wait on the Fed.

• 13:53Speaker 01

  And, and, and, sorry, I didn't answer your question earlier, Pop. Yeah, the, the market is betting on six plus rate hikes at this point over the next year. So it really, at that point, the rate hikes are kind of a sideshow, at least in terms of institutional finance. Institute, we're, we're all really concerned about the speed of the change in the balance sheet. Are they going to quantitative tighten at a much quicker pace? Right now, they're kind of talking about letting paint dry in terms of letting it, the principal maturities roll off the balance sheet. I happen to think, based on today's inflation data, and really the last few jobs reports, inflation reports, that that's not going to be an effective solution. They're gonna have, if they really want to get this under control, and maybe they don't, maybe they're just giving us lip service, but to the extent that they want us to get this under, get this under control,

• 14:34Speaker 01

  they're gonna have to do a lot more QT than they've already, um, um, sort of, um, gave the guidance for.

• 14:40Speaker 02

  Darius, what can the Fed do? Like, is that all they can do?

• 14:44Speaker 01

  Uh, so there's three, they have three policy levels, right? They have, they have the, the, the policy rate. Um, they have the balance sheet, you know, the expansion or contraction, and then they have forward guidance. So they maxed out on the forward guidance, right? I mean, you know, there's not much they can do or say that would tell the market that they're going to be incrementally hawkish, outside of saying, hey, we think 50 basis points at, at a meeting or any meeting is, is new. Um, although the, the latest forward guidance, um, we saw through this, this report would suggest that's a low probability event. Um, they can give us more forward guidance in the quantitative tightening, but ultimately, you're not going to sap demand out of the system by talking. You need to sap demand out of the system by making it harder for customers, consumers

• 15:25Speaker 01

  and businesses to to obtain financing. And and obviously, the easiest way to do that is just make it more costly by raising interest rates. And then you can also make it harder for, you know, asset markets to function and and and for speculation to to to continue taking hold and ruling the day. And then you can do that by tightening, by by contracting the balance sheet. And what what effectively happens when they do QT or quantitative tightening, as it's called, it's more or less the opposite of quantitative easing, although it's not quite the opposite. Because at least with quantitative easing, we kind of know where they're buying. The reality is, when they do quantitative tightening, we don't necessarily know the sort of resulting supply of treasuries that the private sector has to take down. Now, if they sell us treasuries, then we know what they're selling. But at least in

• 16:07Speaker 01

  this, as they currently authorize it, we don't know, we won't know until the Treasury Department starts to issue debt, and the Fed is not there to buy that debt. And that's that's the that's that's what causes problems of financial markets is we're forcing more debt securities from the federal government onto the private sector balance sheet than would otherwise have if the Fed doesn't shrink its balance sheet. So that's an issue for asset markets. And we certainly think that will be a big issue as we progress throughout this year.

• 16:33Anthony Pompliano?

  Darius, you sent us a chart that we're going to pull up here that about the Fed's never waited this late in the business cycle to begin removing accommodations. Describe a little bit in terms of like, how odd or how much of an outlier it is that they're waiting this long to actually address some of these issues?

• 16:48Speaker 01

  Yeah, so I go, yeah, I think it was the third chart I sent. Yeah, yeah, this one here. So the blue line in this chart shows the unemployment rate, the headline unemployment rate. The red line shows the Fed funds rate, and the black line shows the labor force participation rate. And then the panel below just shows the the trailing three year change in the labor force participation rate. We have never seen this. All the dotted black lines are denote the start of a Fed tightening cycle, irrespective of kind of the length of the cycle or the magnitude of the cycle, just where the, you know, the cycle began. And as you can see, with each dotted line prior to this sort of episode, there's never been, we've never been in this far into the labor market cycle for the Fed to start raising rates. And the reason

• 17:30Speaker 01

  This is so critical because it probably means we're late in the business cycle or rather we are later in the business cycle than we have ever been prior to the Fed starting to raise interest rates. So um I guess the key takeaway for this is that, you know, I said this last week, I think my my my bold prediction for 2022 is that by the end of the year, we're going to be talking about recession risk. And that's very, very, you know, that's a very low probability event occurring in the near term. And this is why you're not hearing anybody talk about it. You're not really seeing markets price in the risk in any material way yet. But I suspect as we progress throughout this year, um that word recession by the end of the year will certainly be something that you and I and a lot of other analysts and investors are having conversations about.

• 18:13Anthony Pompliano?

  Yeah, it it's um it's pretty incredible to watch this all play out. And how much do you think uh appointed positions versus elected positions? Like I I've been thinking a lot as to like if the Federal Reserve uh positions were elected, do you think that would help or hurt their ability to actually manage stuff like this? Like there's no direct um accountability by the American people for these roles. It's all by appointment and we can hold their bosses accountable. But there's no direct accountability to uh to the individuals making these decisions. Do you think that'd be better or worse?

• 18:50Speaker 01

  That's a phenomenal question. Um I think probably the best solution would be to have a cohort of individuals, of policymakers that are up for election or do change seats or whatever. You can have a certain set of seats that are up for election every time and then another set of seats that are probably a little bit more stable. You know, kind of how we have with the House and Senate, right? Like the Senate, six years, the House is, I want to say four years or don't don't call me on that. Two is either two or four. Don't call me on that. I should should probably know that is what they yelled agreed, but at this point, I see it here and there. Um, yeah, so I I mean, look, at the end of the day, it's what we're dealing with the flawed system, right? The global monetary system significantly outgrew our ability to to control it with a bunch of people sitting around a table.

• 19:36Speaker 01

  It just it just it's too complex. There's too many avenues of of financial. Intermediation is all sorts of ways for companies and businesses and more importantly, non-bank financial institutions to create to gain access to leverage, you know, sort of, you know, to to create credit. It's just, it's crazy to think that these guys can ever have it under control. It's the illusion of control, the illusion of certainty that keeps markets tame. And and I think the risk, every day we allow this inflation problem to continue, without them to actually doing something major, would they actually start to lose that that that control, that that illusion? Once that, once you sort of, you know, once you open that curtain and reveal that the emperor has no clothes on, you know, that's, that's, that's a really big scary situation for asset markets.

• 20:20Speaker 01

  I'm not saying that's a high probability outcome, but the more they do nothing or the more they don't do enough, and then more inflation continues to climb irrespective of what they keep jawboning, that that risk becomes a greater and greater outcome or outcome.

• 20:37Anthony Pompliano?

  Yeah, it's a, I guess another piece of this too is, when you start to look at the inflation number and the relationship to midterm elections, we were talking earlier, like, the best way for American people to do is just go vote, right? Like, I don't even care who you vote for. Just go vote and have your voice be heard, etc.

• 20:56Speaker 01

  I agree.

• 20:56Anthony Pompliano?

  I got to imagine that these policymakers are getting a lot of pressure right now to not go into election season with five, six, seven, eight percent inflation as the official number, right?

• 21:09Speaker 01

  They lost the election a long time. No offense to the Democrats, you know, I fancy myself very apolitical. Democrats, if you listen to me, you guys lost the election. Republicans, if you listen to me, don't celebrate too much because you're probably going to lose the next one. We're going to be playing hot potato from a political perspective for a while now, as long as we're still in this fourth turning dynamic, because the reality is the fourth turning demands big change and the reality is neither party is equipped to to to sort of deliver big change. We're probably going to see something that looks like a third party emerge at some point in this decade to actually start to enact big change. More importantly, if that doesn't occur, probably going to have to have a bigger crisis that can get everybody on board and on.

• 21:50Speaker 01

  off on whatever that solution is so um you know the so expect more hot potato from a midterm election and and general election standpoint that that's that is what it is but again going back to once we got that October inflation print when we end up to um six point two I want to say I think we we jumped over six percent the midterm elections are lost Democrats lost in the term elections on that number

• 22:12Anthony Pompliano?

  I uh I I just can't wrap my head around this like I knew it was gonna be high I didn't know would it be above or below expectations you know what's gonna come down I think I saw somebody tweeting the other day they're like it's gonna be four I was like yeah you're an idiot uh the uh the thing I just can't wrap my head around though is like what is going on behind closed doors these conversations right like are they just like eh let's just keep it easy

• 22:39Speaker 01

  no I I see I I I think there I think there are people in the in close to the Fed that are going yeah right like the you know the people who were on Jekyll Island right like those people are going and but today's you know kind of bureaucratic Fed heads the guy sitting on that board yeah I genuinely believe that these are you know public service right they like Jay Powell if you look at his press conference and you know you kind of look at it through any sort of kinesic lens which is the study of people lying and and being dishonest he's telling the truth like he's a very honest person right like you know he I think he actually does want positive outcomes for society the problem with Jay Powell and really it's not him it's the problem with the seat that

• 23:22Speaker 01

  he sits in he also needs positive outcomes from the market because ultimately he understands that the market is his boss right um and so it is what it is I mean and and let's not forget like as much as we all want to believe that the Fed is this sort of you know kind of shadowy you know kind of nefarious institution pulling some strings we'll have to forget that these people are government employees like this is a government agency like it's a lot of bureaucracy and they probably don't even have they all don't even have Bloomberg terminals like you know like it's just this is a government institution doing the best they can do to sort of you know kind of control global monetary dynamics that they are very uncontrollable and so sometimes it looks like they're doing a good job sometimes they're doing a poor job but the reality is they're really

• 24:06Speaker 01

  not doing anything other than talking and sort of reacting to the asset markets

• 24:10Anthony Pompliano?

  Yeah, it's um, I don't know, John, when you think about this and you see this, how many people your age do you think even understand what's going on?

• 24:19Speaker 03

  I don't think a lot understand what's going on. I think they understand that prices are getting higher for stuff and only on like, they only really look at it, you know, when, what, what do you buy as an individual groceries, if you use Uber, anything like that, like, those are the prices that I think matter, shelter, stuff like that. But no, I don't think they're looking at just overall like, oh, you know, that when they go to the gas pump, yeah, gas is up, but they're not just like, oh, gas is up 40% year over year. I don't think they really look at it like that.

• 24:45Anthony Pompliano?

  Yeah, they don't understand the actual infla- the numbers themselves, it's more expensive.

• 24:49Speaker 01

  John, that's, that's so interesting you say that because I, that kind of rhymes with what I think too. I think everybody sort of our age and like, so I'm a millennial and maybe you're, you're a millennial at the cusp, but you know, I think everyone's sort of in this, you know, younger than Gen X, we, we sort of, our, our relationship to inflation has largely been by choice, right? You know, we've lived in, we've grown up, we've been born and, you know, again, these numbers are all over the, you know, in terms of the last time we saw numbers like this, they're all older than all of us, right? And so we've been living in this environment where if we want to spend more money on stuff, we can't like spend $15 on a damn vegan smoothie or $8 on a cappuccino mocha latte, you know, like, we've chosen the inflation, we've chosen to go on trips and, you know, the

• 25:34Speaker 01

  millennial experience or whatever. And so now this is the first time really in our lifetimes that we're not choosing inflation, we're just being pushed inflation. And so you're to, to, I believe you're right, there is a little bit of vulnerability and not, not understanding. Yeah, I'm down here in Miami with you guys, like, I was talking to my buddies, like, they're getting rent increases that are not on schedule, like, like before their lease ends, the landlords are just pushing through one, $200, $300 of rental inflation. Like, I've never even heard of that. I've been living for, you know, 35 years, never heard of that. And so to me, it's like, this is the first time we've had to deal with inflation as people. And so it's going to be interesting to see, you know, what the, the, the kind of side effects of that are. I, I don't know if we know the answer yet.

• 26:16Speaker 02

  Yeah, I mean, I agree with that, right? Like some of the stuff that we've seen, not only in rents, but in other things too, are crazy. There was a restaurant, Darius, that we talked about the other day here in Miami that John went to and you scan the menu and they had like basically prices that were changing throughout the day with the QR code, right? So they were literally, it was depending on obviously market-based prices for seafood or something like that is somewhat normal, right? But when you think outside of that, that's not very common today. So seeing that in somewhat of a well-run establishment is kind of shocking, I think, to most people. And it's a sign of the times, right? People are very confused as to what's going on. You talk to any business owner, anyone that has, you know, is in charge of a balance sheet and payroll and all these different things. And they all say it's way worse than what they're being,

• 27:01Speaker 02

  than what the average person is being led to believe, not only from an inflationary standpoint, but hiring and all these other things. So I think people, the best thing they can do is just get educated around this stuff. I think that's probably the most important thing and figure out how you can take care of yourself because ultimately that's what you should be worried about. It's less about kind of how everyone else is feeling and impacted and just take care of yourself first and the rest will work out.

• 27:21Speaker 01

  You're spot on, man. I went to a dinner with my fiance on Saturday and it was the first time I can remember in a long time, like going back to when I was poor, like right out of college, where I was like, wow, that was expensive. You know, like, like, wow, like, holy cow, that was an expensive dinner. You know, like, jeez, what happened? Like, maybe I started looking at the receipt, you're like, what the hell? Like, did we order? Like, what the hell? And it was just, no, this, this is stuff is expensive, you know, and this is what inflation, this is what it feels like, it's what it looks like. You know, I wouldn't push back, pushback is too strong of a word. But, you know, the one thing everyone has to keep in mind when we, when we hear these stories about, hey, like, my inflation is XYZ, or, you know, but the government's reporting ABC, you know,

• 28:04Speaker 01

  there was that disconnect. Don't forget, like, these are percentage change statistics. And so, if you're on a smaller base, then your inflation rate will be higher based on the same aggregate sum of change. But when you talk about on an economy-wide basis, then the percentage changes get smaller because, you know, it doesn't, you know, the sum of all that change is not as big of a percentage change for the overall. Economy. So, you know, a bunch of 25% inflation rates can add up to a 7% inflation rate is what I'm saying.

• 28:32Speaker 02

  Darius, on the back of that, I have one more quick question for you, which is, we were talking earlier about shelters place in inflation, right? So we were reading a tweet earlier that said that shelter was a third of the CPI reading 33%. And it came in at 4.4% this year, which based on kind of whatever measure you want to look at, seems very underreported. Given everything that we've seen in the market, what are we missing there? Like, is there some disconnect that we're just not thinking of, or is that just completely inaccurate and kind of misleading by the Fed?

• 28:59Speaker 01

  Good question, man. So, uh, so the, yes, what we're missing is the way the BLS calculates. And maybe this is right, maybe this is wrong. I happen to think by the time we're all gray hair, no hair, that they'll have all this just digitally. You know, we have the technology for it. I don't know why we haven't implemented it yet. But the reason that is so much lower, lower than where we're seeing rental inflation in different, you know, places like Zillow and all these other alternative data services. Is because the BLS calculates it in a very funky, wonky, weird manner. The key summary is that it takes the panels, the sort of samples that they're measuring inflation by. It takes, you know, basically a full year for them to remeasure the sample. And so, you know, you're basically on a full year lag in terms of measuring various samples.

• 29:44Speaker 01

  And so obviously in terms of getting like multiple hits from any one particular unit or MSA metropolitan statistical area. It just takes a much longer period of time, which means shelter inflation, even though it'll lag what we're all observing and feeling and being pushed. It'll just continue to rise sustainably over the next 12 to 18, potentially 24 months, which is typical of these inflation cycles in housing. So we're going to have, we're going to be dealing with rising shelter inflation for an extended period of time. It may not get to where we ultimately see the inflation, but all of it'll eventually get priced in just based on that, that weird lag. Darius, where can we send people to subscribe?

• 30:22Anthony Pompliano?

  Uh, to your work, you, you, you continue to put out amazing work.

• 30:26Speaker 01

  Subscribe to my rants now.

• 30:27Anthony Pompliano?

  Yeah. Where can we, where can we send people?

• 30:30Speaker 01

  Yeah, I'm a lot more buttoned up in the, uh, in the day job. So, uh, I run a firm called 42 Macro. We help institutional investors, retail investors, anybody with capital that they don't want to get blown up. We help them with their macro risk management. Um, and what that means is not, you know, effectively not taking advantage of things in macro, not getting blown up by things in macro. We fancy ourselves among the best at, at that particular skillset. So come check us out. I'm at Twitter on 42macro.com or sorry, I'm sorry. 42macro D Dale at Twitter.

• 30:57Anthony Pompliano?

  John, go ahead. Darius, just always remember, you taught me this. I appreciate it. Doesn't matter if you're bullish or bearish, being positioned in the market is what matters.

• 31:08Speaker 01

  Yeah, totally. Being, being positioned, it doesn't matter if you're bullish or bearish. Positioning yourselves in things that are about to go up and not being positioned in things that are about to go down is how you make and save money. Doesn't matter if you're bullish or bearish.

• 31:21Anthony Pompliano?

  John, that's the.

• 31:22Speaker 01

  All right, fellas, I'll catch you back here next week, man.

• 31:24Anthony Pompliano?

  All right, later, buddy. Thank you, Darius. Thanks so much for listening to today's episode. I really hope you guys enjoyed this one. Make sure you subscribe on Apple, Spotify, or your favorite podcast player. And if you're looking to try to transition to get a new job in the Bitcoin or crypto industry, we've got you covered. Head over to pompscryptocourse.com. We've developed a curriculum with the top teams across the industry. It's a three-week intensive training program with over 50 events packed into that three-week time period. Go to pompscryptocourse.com to learn more and I'll meet you guys for the next episode.