Speaker 1: So the numbers come in on the consumer price index,
Speaker 1: an inflation conversation, and they're up point one point one.
Speaker 2: Huh, that ain't that ain't bad at all.
Speaker 1: The annual rates three point four, well, that's not great,
Speaker 1: but it's not going up.
Speaker 2: If inflation is not going up.
Speaker 1: It's gonna tell the Federal Reserve don't do any rate
Speaker 1: hikes because they want to because inflation is still too high.
Speaker 1: But the measure doesn't make any sense when you get
Speaker 1: rid of food and energy, volatile energy and it goes
Speaker 1: up to point two. I don't understand what's happening here,
Speaker 1: Tony Katz, Tony Katz today, good to be with you.
Speaker 1: Doctor batt Will, economist at the University of Indianapolis, is
Speaker 1: here to make it all make sense. This is peculiar, right,
Speaker 1: because there's a lot of conversation about that. The Fed
Speaker 1: was going to raise rates in September. You have two
Speaker 1: Federal Reserve governors who want to do that because the
Speaker 1: inflation is still too high. Tariffs are caused. Towers did
Speaker 1: not create an explosion of inflation. It's just keeping it
Speaker 1: higher than we want it to be. But you also
Speaker 1: have this madness of oil prices because of what's going
Speaker 1: on in Iran that's having an effect. Yet somehow if
Speaker 1: I take energy out, the measure of inflation goes up,
Speaker 1: and that doesn't make any sense at all. So let's
Speaker 1: start where we start, doctor Matt, Well, what does this
Speaker 1: report say to you?
Speaker 3: Well, first of all, you got to remember that this
Speaker 3: is not the report that the FED is going to
Speaker 3: use to make decisions. But it does give Kevin Walsh cover,
Speaker 3: and we spoke of that just about that just a
Speaker 3: few days ago. Kevin now has more time. This is
Speaker 3: a good enough report that it's going to give him
Speaker 3: some breathing room again to not have to make a
Speaker 3: decision to increase rates to control inflation, because this isn't
Speaker 3: the measure that they use to make their decisions. But
Speaker 3: here's the good news. So the report point one for
Speaker 3: the months, it's now a trend. Last month it was
Speaker 3: down point four down. So we now have a two
Speaker 3: month decent trend in the CPI, which is what you
Speaker 3: and ipay when we go to the grocery store. Core.
Speaker 3: You mentioned at point two point two, that's two point
Speaker 3: four annualized. That's still too high, but the rest of
Speaker 3: the report gives him cover. In fact, When you dig
Speaker 3: down into the details, almost every category is in good shape.
Speaker 3: The only two that are not are airline tickets, which
Speaker 3: are two point two percent for the month, and healthcare,
Speaker 3: which is point six. The healthcare is persistent. We continue
Speaker 3: to see an increase in health care inflation. That is
Speaker 3: the big red flag in this report. If there is one,
Speaker 3: the airlines, I'm not worried about. That's a blip because
Speaker 3: they have contracted inventory during the whole situation with Iran.
Speaker 3: They're going to expand their inventory once things stabilize. It's
Speaker 3: a good report. It's not a decision report. But the
Speaker 3: bottom line for me is it gives Kevin Walsh more
Speaker 3: time to make the right decisions. So he should be happy,
Speaker 3: and quite honestly, we should be happy because he'll probably
Speaker 3: end up doing the right thing on inflation.
Speaker 1: Now, but me, you said trend. Now, let me go
Speaker 1: through a couple numbers with you. If I take a
Speaker 1: look at all items from May, June and July, all
Speaker 1: items was point five negative point four and last month
Speaker 1: point one that we're discussing. If I take out food
Speaker 1: and energy, it goes point two zero point zero and
Speaker 1: then point two.
Speaker 2: What we just saw in the month of July. What
Speaker 2: the hell kind of trend is that?
Speaker 3: Well, okay, it's not a uniform trend, but they're all low.
Speaker 3: When you take with you, when you look at the core,
Speaker 3: which you did, and those numbers you just listed, those
Speaker 3: are consistently low. Now, I know I'm saying low. You
Speaker 3: and I don't agree. Two point four percent inflation is
Speaker 3: not low, but it's lower than it was, and it's
Speaker 3: low enough that it's going to allow him to not
Speaker 3: have to take inflation reactions quickly. And again, I've told
Speaker 3: you before and I'll say it again. I don't think
Speaker 3: the way you fight inflation right now is by increasing
Speaker 3: the said funds rate. I think the red funds rate
Speaker 3: is stable. It should stay stable. I like where it's at,
Speaker 3: the way that he wants to fight it, and the
Speaker 3: way I also want to fight it is to begin
Speaker 3: to sell assets off the balance sheet.
Speaker 1: Talking to doctor Matt Will, economist at the University of Indianapolis,
Speaker 1: we'll save that conversation for another day. Annual inflation rate
Speaker 1: at three point four percent. We look at this, the
Speaker 1: market looks at this and says we don't care.
Speaker 3: Well, okay, again, market's looking at it like I do.
Speaker 3: That three point four percent is a government number that's
Speaker 3: twelve months old. They're not looking twelve months old. The
Speaker 3: market is looking at this month and last month, and
Speaker 3: both of these months. If you look at the headline
Speaker 3: number negative point four and point one. The market likes it.
Speaker 3: So immediately when this support was released, four things happened.
Speaker 3: We saw that the Nasdaq went up, We saw that
Speaker 3: the Dow went up. We saw that interest rates went
Speaker 3: down in both the ten year and the two year,
Speaker 3: so we saw a decrease in rates. We saw an
Speaker 3: increase in the stock market. The market likes this report
Speaker 3: because they see the same thing I see. Kevin Walsh
Speaker 3: gets breathing room, and that's what they want him to have.
Speaker 1: All Right, you're gonna drag me into this conversation because
Speaker 1: your argument, sir, is that the removing of things from
Speaker 1: the balance sheet is the golden goose. Once that starts happening,
Speaker 1: everybody does better. The tariffs won't matter, oil prices won't matter.
Speaker 1: Your pain in the ass, brother in law won't matter.
Speaker 1: Nothing matters if we take things off the balance sheet.
Speaker 2: First, describe what it means to take things off the
Speaker 2: balance sheet.
Speaker 1: What it is, Kevin wash the new chair of the
Speaker 1: Federal Reserve believes in and then is it indeed the
Speaker 1: panacea we've all been hoping for.
Speaker 3: Well, I'm gonna answer your first your second question. First,
Speaker 3: it's not the panacea, but it's one of the pieces.
Speaker 3: Tariffs are the other piece, and that is a big,
Speaker 3: big problem. And I will refer people to an article
Speaker 3: that you send me about you know, mister wonderful Kevin N.
Speaker 3: Leary talking about how bad the tariffs are and how
Speaker 3: the AI is covering up the damage done by those.
Speaker 3: So no, it's not the panacea. But the way it
Speaker 3: works is very simple. The FED and anybody should look
Speaker 3: this up. Just go to Google and look up FED
Speaker 3: balance sheet and look at the image. Look up images.
Speaker 3: You'll see this massive balance sheet that they have. They
Speaker 3: own all these assets, mortgages, treasury bills. They need to
Speaker 3: sell those. They've been buying them to juice the economy
Speaker 3: that was wrong. They need to sell them because here's
Speaker 3: what happens. They sell a bond because the government owns it.
Speaker 3: They sell a mortgage because the government owns it. As
Speaker 3: soon as they sell those, they receive cash, and that
Speaker 3: cash is removed from the economy. That is the key.
Speaker 3: When they remove the cash from the economy, inflation goes down.
Speaker 3: They need to sell these assets. They need to take
Speaker 3: cash out of the economy. Kevin Walsh knows that's the
Speaker 3: way to do it, not by increasing interest rates. That
Speaker 3: is not the right solution. Interest rates are now in
Speaker 3: a very good equilibrium location. Now they need to sell
Speaker 3: assets and pull that cash out of the economy. But
Speaker 3: there are other parts, like we mentioned, like tariffs, like
Speaker 3: federal government deficits.
Speaker 1: Talking to doctor Matt Wyll, economists at the University of Indianapolis,
Speaker 1: let me throw a curve your way. I wanted to
Speaker 1: talk to you about the report, but in the world
Speaker 1: of ai as, what I had sent you regarding Kevin
Speaker 1: O'Leary is that Kevin O'Leary's point is that we're spending
Speaker 1: so much money investing in AI it is booing the economy.
Speaker 1: And if it wasn't for that, the tariffs would knock
Speaker 1: this not out of this economy and break it into
Speaker 1: And I sent that to you, and your response to
Speaker 1: me was where I was at. He clearly listens to
Speaker 1: our conversations. He's listening to the show every single day.
Speaker 1: We've been having this conversation for over a year now
Speaker 1: in different ways. But on the AI tip, Brad Lightcamp,
Speaker 1: who was the chief operating officer for open Ai, has
Speaker 1: left the company. He's going to start something new. The
Speaker 1: question before us is is this a sign of something
Speaker 1: bad that at one of the bigger AI groups that
Speaker 1: you're starting to say it's not just him.
Speaker 2: You're seeing people head for the exits.
Speaker 3: Wait, wait, are they heading for the exits or are
Speaker 3: they heading for new opportunities? I mean, think about it.
Speaker 3: If you were a big shot in one of these companies,
Speaker 3: You've got your stock options, you've got your pay that
Speaker 3: you've made over the years. You cashed in. But wait,
Speaker 3: we're at the beginning of this boom, and I believe
Speaker 3: we're at the beginning of this boom. Wouldn't you go
Speaker 3: off and be, you know, the next Steve Jobs, the
Speaker 3: next Bill Gates? Wouldn't you want to start your own
Speaker 3: I really believe that these people know there's a golden
Speaker 3: goose out there and they're going to go get their own.
Speaker 2: When you say get their own, that is to believe
Speaker 2: that is to believe that there's more investment to come.
Speaker 1: We're already into the we're over a trillion dollars in
Speaker 1: the investments, and you're.
Speaker 2: Telling me that there's more to come. Now.
Speaker 1: I'm not a believer that the pie is finite, right,
Speaker 1: I'm not a player in that, but even I have
Speaker 1: to ask the question, exactly how much more investment can
Speaker 1: there possibly be?
Speaker 3: Okay, I don't have the number in front of me
Speaker 3: at my fingertips, but just go look at what Meta
Speaker 3: did last two weeks. They announced massive bond issues for
Speaker 3: the purposes of getting so much cash that could dump
Speaker 3: into data centers and AI development. Apple, which is way
Speaker 3: behind the curve on this. They aren't even in the
Speaker 3: game yet. Wait till they get into the AI game.
Speaker 3: Apple has a history. I'm I'm not a fan of
Speaker 3: Apple's r indeed since Steve Jobs passed, but I got
Speaker 3: to tell you they's nothing to be sneezed at. This
Speaker 3: company knows what they're doing. This people are going to
Speaker 3: look back and think, oh, you're kidding me. I should
Speaker 3: have gotten into the E the AI early. Yeah. Yeah,
Speaker 3: it's not too late to get in on AI. This
Speaker 3: thing is just beginning to take off. I mean, I
Speaker 3: could give you this week of people entrepreneurs I've had
Speaker 3: conversations with who are saying it's revolutionize their business across the.
Speaker 1: World's great, it's revolutionizing their business across the world. And
Speaker 1: there are going to be plenty of places that there's
Speaker 1: pushback on, like you know what, we tried to say,
Speaker 1: I crap and it doesn't work.
Speaker 2: We tried to say I stuff.
Speaker 1: You know what, we actually need people again these things
Speaker 1: EBB and flow.
Speaker 2: My question was to.
Speaker 1: The idea of is there a moment where markets say
Speaker 1: that's too much investment, that you guys are spending in
Speaker 1: the wrong places. We need to self correct on all
Speaker 1: of this because you're all being ridiculous.
Speaker 3: You know what. The answer is, yes, but this is
Speaker 3: not that situation. This is not a bubble like two
Speaker 3: thousand and one, because these companies have earnings. These companies
Speaker 3: have profits. Another reason that we see CPI being moderated
Speaker 3: and not let's go back to the original topic and
Speaker 3: not the producer prices those things are still inflated, is
Speaker 3: because the profits are so huge. These profits are justified.
Speaker 3: These prices are justified. When you see the price of
Speaker 3: a stock going up. This is not you know, a
Speaker 3: one hundred times earnings with no earnings. Sometimes these are earnings,
Speaker 3: These are profits and the prices are reasonable given the
Speaker 3: growth in these companies. There is no bubble here. There
Speaker 3: is well, the market go down at some point, of course,
Speaker 3: but there is no bubble that we're looking at in
Speaker 3: the near future.
Speaker 1: Doctor Matt Well, economist at the University of Indianapolis. I
Speaker 1: appreciate you taking the time to be with us. Keep
Speaker 1: it right here. This is Tony Katz today.