In today’s episode, Tyler breaks down the latest CPI print and explains why a short‑term uptick doesn’t mean inflation is back. He walks through yields, the newly configured Fed, and how energy and geopolitics are driving the headlines. We’ll also discuss why the bull market shows no signs of slowing, the role of innovation and technology in keeping inflation at bay, and why record liquidity on the sidelines could fuel markets even higher.

Don’t look back because the market is closed. Good Tuesday afternoon, everyone. Tyler Herriage here with you for today’s VRA Investing podcast. Hope you all had a fantastic day out there today. Hope your week has been off to a fantastic start as well and a little belated here. But happy Mother’s Day to my mom and to all the other moms out there. Thank you so much for everything you do.

Got my Mother’s Day pink on for you today. So with that said, let’s start jumping right in because it’s got a we got an action packed podcast here today. Got a lot of high notes to cover, but of course, some of the low notes, our major indexes for the most part did finish negative on the day, but well off the lows of the day. Of course we’ll cover our major market action. But today we also found out that Kevin Warsh has officially been confirmed as part of the Federal Reserve Board. Excuse me, I’ll have a little bit more on that in a second too. But we can finally, finally, finally say goodbye to Jay Powell. We’ll wait, at least in one regard, because he will be on the Federal Reserve Board as well, just no longer Federal Reserve chairman.

[00:01:32]:
So we’ll still hear from him in front of microphones, I’m sure, as much as he possibly can to be the little inside spy, if you will. And in a couple of years, he’ll have a huge deal, probably with with a major media outlet. I would not be surprised. This guy loves being in front of a microphone even though no one else really enjoys it. Just like Janet Yellen. Think about all the speaking fees that she got. Anyway, we’ll get to that more in a minute as we do prepare for Trump now flying out for China. The upcoming meeting with Xi Jinping at a crucial point here, not only for our relationship with China, but where we’re at with the war in Iran as things continue to be on pause here in the Strait of Hormuz.

So we’ll clearly see the impact from it in today’s action as we discuss it and oil prices here as well. But it wasn’t all negative on the day. We’ve got a lot of bright spots to cover here and what a move it has been. Let’s go ahead and start there, really, because one day’s action and it seems like the top callers are in. It doesn’t seem quite that different from where we were on March 30 at the lows, at the worst of this conflict so far, where anyone any talking Head out there. Just couldn’t see a way where stocks could head higher from it where this couldn’t. There’s not a way out there that this doesn’t get worse from here. You know, immediately followed by a V shaped recovery to all time highs.

[00:03:13]:
I was on the Schwab network that exact day on March 30th saying exactly this, that we wanted to see the semis lead. We want to see, well, tech lead and semis leading tech. Big bullish call on Tesla and all around a big bullish call. And well, as we’ll see here in just a minute in the chart of the Nasdaq, there hasn’t been a whole lot of red on the screen yet. And the days of red have been immediately followed by all time highs. This has been a powerful bull market from the March 30 lows, but also from the 2022 bear market lows. And as we said here often we’re still so early, we haven’t really even seen the parabolic move higher. You know, for all the people saying it’s 1999 out there, I encourage you to go listen to Kip’s podcast from yesterday and talk about all of the factors, whether it’s a booming IPO market that we haven’t seen yet in years.

Right. We had the SPAC market and that in a hot IPO market in the late. Was it 2019 or so? We saw some good ones. We haven’t seen anything like that yet. We’ve got the huge ones on the horizon and a lot of smaller ones as well. And as, as Kibbs talked about, man, I get the fear that that would suck liquidity out of this market. But when you have record levels of cash on the sideline, record levels of money market funds, home equity, there’s so much liquidity yet to come into this market. And the money printer stays on.

[00:04:54]:
So maybe that’s a, that’s actually might be a good place to start even I wasn’t planning on starting there, but why not? We’ll try to keep this somewhat short and sweet for you here today, but we’ll go ahead and we will kick it off here with what we’re seeing in money supply, which continues to all time high after all time high. But if you think this looks scary to you, in our view, you just ain’t seen nothing yet. And that doesn’t mean that inflation has to come back roaring in any kind of a way either, because we think innovation will help take care of that. And as many of you know, the ultra Optimists out there like us have said at the end of the day the, the money printing might not even be able to catch up with the level of deflationary impacts here. Because first and foremost inflation is a money printing problem, first and foremost. And that is a direct result of the Federal Reserve. As much as Jay Powell would loathe to admit it and never really would, you could just go back to his 60 Minutes interview that he did during COVID where he said yes, we digitally create money. That is the money printer the there for you.

[00:06:09]:
So now we have. I’ll kind of segue here into my first topic of the day. Federal Reserve chairman is changing. Kevin Warsh was confirmed by the Senate today as part of the Federal Reserve Board. Just a technicality here. Still has to get confirmed tomorrow officially as Fed Chairman. But again we can say goodbye to this guy right here. I’ll go to this one first.

This is a tweet from 2019. We say goodbye to this guy right here. 2019. Jay Powell said low inflation is one of the major challenges of our time. Think about that now, seven years later, where we are today. Where I mean you’d have to go back decades to find a Federal Reserve chairman that saw an inflation rate as high as Jay Powell. You have to go back to Arthur Burns essentially to find an average inflation rate as high as Jay Powell’s has been. Right.

And so this is really what got me onto this was Lynn Alden saying here exactly that with 5 over 5 continuous years of above target inflation from spring 2021 to the present, at least he can say we fixed the low inflation problem. You know, if you remember at the time, if you’re a Fed watcher, you know they were for years during the 2000 and tens for years saying stubborn inflation just won’t go quite high enough. We can’t get it over to relieving the money printers on as you can see from M2 which does go back through the 2010s they to prove that it’s not solely a money printer problem, that you can still have non inflationary factors amidst your currency being determined based. It is a different conversation. It’s technical but it’s different. Look how much money printing they did. And it took this adding basically 30% plus to our money supply. 40% when you zoom out even more over that two year period to really kick off inflation.

[00:08:11]:
That’s how much deflation we’ve had from technology. Now I don’t have the chart prepared for me right now, but if you look at the the chart of inflationary factors versus deflationary factors. You’ll notice really one thing. All of the deflationary factors, very low government intervention, all of the inflationary factors, health care costs, right. If you look at, you know, TVs, consumer electronics, all that kind, all of them straight down. But then you look at the heavily regulated government areas and it’s all straight up. So again, we won’t have to see Jay Powell. And more good news here.

You know, even if Kevin Worsh is a fantastic Fed Chairman, we’re not fans of the Federal Reserve period here. You know the creature from Creature from Jekyll island created in 1913 under the guise of a hunting trip in the midst of holidays, right in, in December, G. Edward Griffin laid it all out in his book the Creature from Jekyll Island. Since the Federal Reserve was created, we now have, you know, universal taxes essentially which was at the time only supposed to be for the top 1%. Sound familiar? And since 1913, the US dollar has lost almost entirely the full amount of its purchasing power. Again I have that chart. I’ve shared it quite a few times. I don’t have it in front of me here today.

[00:09:38]:
Those are the facts of what we’ve seen from the Federal Reserve. So now we’ve got someone new at the helm. Hopefully our guy we’ll see a lot is still yet to be seen. Can’t forget that Jay Powell was also nominated by Trump. But we have a little while here and so Kevin Warsh has a little time to see if he can clean house, take care of some of this in house fighting. You know the, they’ve said it often in the headlines of you know, the, the least congruent something along those lines, you know, they’re not having unanimous decisions. They have all kinds of naysayers and, and of course they were talking about Stephen Myron being too low at the time. Now you’re have some people who reject to the upside, right the opposite of what Stephen Myron did to the Fed just a few months ago.

That’s why they’re already talking about rate hikes this year, which is pretty wild to think about. Going into the year we had the expectation for three rate cuts. I believe it was Cal Shell Poly market today. Now the odds are for one rate hike. Now that’s not according to the CME Fed watch tool. They’re essentially staying even for the year. So we’ll see what happens. The next FOMC meeting isn’t until June 17, so we’ve got a month and five days for Kevin Warsh, you know, to do some house cleaning over there at the Fed.

Tyler Herriage [00:10:58]:
It needs it. No doubt about it. We got it. It’s beyond trimming the fat right it this is a major, major operation that needs to take place here. So good luck to Kevin Warsh over at the Fed. And again, you know, the timing of this year, we’ll see how it all plays out. We think it’s going to be to the upside. We remain firm in that call.

[00:11:21]:
I’ll lay out all the reasons for it here today. But Trump as he flies out to meet with G, you know, we’ve got a Fed influx. This is a crucial meeting for trade in tariffs with what’s going on in China. China of course buys most of the oil from Iran. Let’s see how this goes. It’s going to be again a crucial time. Going to be very interesting to watch. You know, Kip and I have talked about this a lot because longer term in the market, of course nothing has changed.

But in the shorter term, you know, we like to speculate about what we’re going to see. And of course that matters tremendously to the positions that we own, specifically options positions and so kind of game through what the next few weeks might look like here from this meeting. We’re now just eight days away, nine days away, eight days away from Nvidia’s earnings as well, which how many times have we seen Nvidia from the chat GPT moment really, which is roughly 2023 to today where we’ve seen the market stumble or pause and even at all time highs. But the headlines are so negative and no one’s bullish on this market. Everybody’s ready to get out, take some profits right in Nvidia blows away again, comes in with huge guidance, you know, raising it again. We’ll see if they still have that card in their pocket. Like I said, going to be an action packed next few weeks for our market. That said, let’s take a look at this market action.

[00:12:57]:
Well, let me quickly here. I don’t think I got to this today yet. Let me see. I have not discussed our inflation report from this morning which was CPI up 2.8% year over year, base CPI up 3.8%. You know, the highest that we’ve seen in a little bit here. Of course oil prices back above $100 a barrel today doesn’t help. We think this is a short term blip higher. Our call has remained from the peak in 2022 when we published the big bribe that inflation was a Rearview mirror issue.

Nothing has changed in our view. If you get oil back down then inflation is immediately right there with it. So no major concerns for us here yet. Of course we’re keeping an eye on it absolutely. But it was never going to be straight down. And an exogenous factor like a war or a conflict sending oil prices higher has the ability to do this. You know we’ve talked about it a lot though we think the worst of this is far behind us. We’re just off all time highs.

[00:14:07]:
Right. One one down day and again it’s one major issue away from being solved. So what we’re seeing in our other metrics, yes we’re on the rise but truflation still below 2% here on CPI. So so good to see. We see this as a much more accurate representation of inflation. So so good looking charts there now. I mean you can dive into some, some areas whether it’s gas prices or beef prices where you’ve seen massive increases that something has to be done about one thing at a time. Bringing down energy prices would contribute a lot to helping that and it helps a lot for transportation.

So speaking of that, we did have one major index finish higher on the daytoday and it’s the one that has been lagging here. Okay, the Dow Jones we’ve seen the transports fall from their all time highs and not be able to get their footing yet. Transports did not finish higher on the day. But now it’s the Dallas turn, right. Transports really a blowoff move higher there and again back to oil prices, getting oil prices down specifically this is there’s a potential for a big move higher in diesel. That’s the scare because it is involved in such an essential way for transportation. So that’s a big part of the fear. But the Dow Jones bucking the trend of the rest of the market which is at or near overbought levels and finishing higher on the day.

[00:15:41]:
We’ll look at that as a tell that continued the worst is behind us. Next up here, let’s take a look. The S&P 500 down just over 1/10 of 1% on the day. The equal weight actually better for anyone who says it’s just seven stocks but tech, you know the Nasdaq did finish lower on the day. Quickly Here the Russell 2000 led the way lower which is led so much to the upside. Not a huge surprise. But the NASDAQ here finished well off the lows of the day. You know, nearly had nearly double the losses.

Finished down 7/10 of 1%, was down 1.4. So roughly what, 350 points or so at the lows of the day or and off the highs they 450points right in the Nasdaq. And how many times though? Well, let’s take a look. I’ll have to show you from the V shaped recovery right here. March 30 lows. Okay, let’s see if my annotations on. There we go. From the March 30 lows, look at how much green on this screen there is.

[00:17:01]:
One to two days of red. All time highs, one day of red, big move higher all time, one day of red. You know, little, little back and forth. That actually is an all time high though there though as well. If you can see that on your screens, if you’re just listening on audio, I’ll describe it for you. From the March 30 lows, we’ve only had one series of back to back down days. Every other pullback, no matter how much fear you’ve seen in the headlines, has been followed by another move higher in this market. So could we be right back off to the races tomorrow? Absolutely.

It wouldn’t surprise us at all. That is the strength in this bull market that it has the potential to go much, much higher from here. For those concerned about market caps or spending capex, all of these things, our debt to GDP ratio here in the U.S. right, all of these things, we think these are such small fries compared of concerns compared to the upside out there. Because soon, and somebody just said this earlier today, when you look at these, these mega cap tech companies, even the ones with massive valuations like Nvidia, we’ve, we’ve been saying for a while Tesla was going to hit a $10 trillion valuation. That’s the beginning of this ball game that we’re gonna see way bigger moves than that. And somebody else today was just talking about SpaceX. Zipo, right? Yeah, it’s gonna go public.

[00:18:39]:
The one and a half trillion range or so. A lot of speculation up in the air but you’re telling me that a company that can do this. Okay, I’ve got to pull up this tweet. I wasn’t planning on sharing this, but I do have it open so I am going to share it. This is incredible. A company that as essentially is only 200 satellites away from having launched as many satellites as the rest of the world combined. 200 satellites away. Now they’re much smaller and you know, the rest of the world, just like he says here, the rest of world just had a 61 year head start, totally different design in satellites, but still that gives you, if you look at the launches, right, done by SpaceX compared to the rest of the world, it will blow your mind.

And so as we head towards the space economy, how many trillions and trillions of dollars have yet to be unlocked? So we’re looking at a company that is not just a 10 trillion dollar company, it’s a 20 trillion dollars company. And over the next few decades, 30, 40, 50 trillion dollar company. Now, when you talk about one company at that level, 38 trillion dollars in debt here in the U.S. doesn’t seem like that big of a deal, especially when we’re not even the worst offenders. Okay, We’ve got China much worse than us. Japan much worse than us. And they don’t have, you know, China definitely has some fantastic companies. If they, if they.

[00:20:16]:
Well, I won’t get into the Chinese politics of it all, but whether it’s Alibaba or all of the Chinese version of the American mega cat names, right. BYD for Tesla or whatever the Google Alternatives name is just not clicking with me right now. But regardless, they got some great companies. But think about what we have here in the U.S. true innovation. Apple, Microsoft, Meta, Tesla, SpaceX. Same guy, but okay. Nvidia.

I mean, incredible companies. And combined we’re getting pretty close to that $38 trillion valuation already of matching our whole country’s debt. So again, when you put these into perspective, I don’t know if that helps too much there. I. We could go into the conversations that Kip and I have about this all the time and when you start to do the numbers, it makes that debt problem seem so small. All right, we’ll start to wrap it up here for you on the day. I do have one more main point that I do want to make here because it’s one that I haven’t touched on here in a while. But yields were higher on the day to day the 10 year right up against its recent trend line.

[00:21:27]:
Higher. Okay. And it’s again a point I haven’t touched on here in a while. We talk often about the NASDAQ rallying 585% from 1995 to 2000 and the multiple pullbacks of 10% or more along the way. Each one an incredible buying opportunity and how the the real move didn’t even begin until the end. The real move higher didn’t begin until the tail end of the move, I should say. I’m gonna go ahead and pull this chart up for you real quick. I wasn’t going to do this either today.

I’m glad slide because my screen’s a little messed up. Sorry about that. There we go. 580% move. Okay. During. Would it surprise you to know that during this time frame yields the 10 year yield average 6.1% with moves much above that. Okay.

That is why we say that yields at a four and a half percent are going to hamstring this economy. Yes. We could be moving much faster here and really get the boot off the neck of the American people because that’s who’s impacted by yields. Mostly it’s actually contributing to inflation in some ways because people can’t afford houses with yields this high. Construction on new homes is we’re hearing for a lot and maybe this is different in different areas. There are some companies getting ahead of it, offering their own terms even of financing, but they’re not going to contribute or commit to doing some of these big projects that weren’t already planned with rates at these levels. It’s just not going to happen. So the Fed contributing to inflation there.

[00:23:11]:
But it is pretty astounding to think where the 10 year was. Okay, this is the second time that I’ve done this where I wanted to share the 10 year chart in the last week now too. I’m going to start drawing this up before every podcast, I guess. Let me draw this up really quick because I want to show this really quickly here for the 10 year and what we’ve seen at these levels from Trump’s inauguration to today. Let me just draw this up here really quickly. One second. All right. And save this.

All right. Okay. So just here the last year. Okay. Every time that we’ve gotten to this level it served as a top. All right, let’s zoom out a little bit again to Trump’s inauguration. Trump was inaugurated January 20th. So there’s the 13th.

The peak in yields in the last call it, you know, year and a half, 18 months or so. January just before his inauguration. Straight move lower after. Right. And quickly. I mean before the end of February was below this trend line that I’m pointing to here. And as only had brief moves above it and now can’t get above it. Right.

We want to see this hold and continue to move lower. That’s what we expect to happen from here as well. We could even get a little bit above it and move lower. Sure. Just like we saw here. That’s fine. But again, we’ve talked about this for a long time. Our long term view does remain to be we look for lower Yields and you zoom out even more.

[00:25:02]:
It’s incredible to see the series of lower highs and lower lows that we’ve seen for decades now. And again to kind of wrap on that point there. Even if we were to go above it, again, we don’t see that being the case. We have an example, a recent example from the dot com era that tech stocks can still rally, small caps can still rally in a huge way when yields are much higher than they are today. All right, final points here for the day. I won’t go through all the internals, but it does essentially make the six out of seven days where they’ve been a bit poor. But on a day where the market was lower like this, we had no two to one negatives or anything like that out there really. I mean across the board here, maybe close to it in some areas, but again, no big beats on Advanced decline for NYC or NASDAQ.

52 week highs and lows basically flat on the day. And volume similar boat there. No massive beats. We’ll take that here. And again you saw that chart from the Nasdaq. These pullbacks have been short and sweet along the way. You know, we’ve been at extreme overbought. That is when bad things tend to happen.

[00:26:19]:
It’s when we pause, we’re bought our buying and we take some profits in our leverage positions like we did a couple weeks ago. But I mean this is, we’re looking at a market that will soon be a true runaway train here. And to the point I mentioned last week as well, the rotational aspect of this bull market. We’re not seeing any more days where it’s just red across the board. All sectors lower. Gold, silver lower, Bitcoin lower. Right. That’s what we got at the worst in March.

Now even on days where it’s negative, you get some big winners. Like today Nvidia hitting a big all time high despite the NASDAQ being down big on the day today for our sectors, we had a lot of sectors finish higher here on the day as well. So let’s take a look at that. Of course I get an ad right in the middle of it. 7 out of our 11 sectors higher on the day. You think you see some more green from our major indexes there. Right. But we did have this semis down and some of the smaller names in this group have been on huge, huge runs.

A lot of people talking about those valuations. Again, we think the semis are going to continue to lead in this bull market. But our leaders on the day, healthcare and consumer staples are laggards. To the downside, excuse me, a couple more leaders here. We did have energy as you might expect. But to the downside, consumer discretionary tech and industrials were lower on the day. All right, quickly here because these are important ones too. Gold was our final here in after hours trading.

[00:27:56]:
Now last trade, $4,723 an ounce. But just like you want to see tech leading and semis leading tech, you want to see the gold miners leading gold. So today the gold miners at one point down roughly three and a half percent. Gold was down much more earlier in the day too is rallied back but miners down roughly three and a half percent finished down just half a percent at one point. We’re almost flat on the day. And get this junior miners which you even want to see leading them. All right, actually finished positive on the day. So good to see that group leading.

Silver has been on a nice move higher here as well. Let’s see because I think, let me just get a double check here. Yes, it is higher. I’m glad I checked. Last trade here roughly 87.50 an ounce. Copper also hitting an all time high here today. Dr. Copper usually bodes well for economic health to $6 and 64 cents a pound.

[00:29:01]:
And oil still above a hundred dollars a barrel at $102 a barrel. Now lastly here for today, bitcoin still above $80,000 a bitcoin. $80,582 a bitcoin folks. That’s all we have time for here today. Please be sure to subscribe to receive our podcast every day at the market close. You can sign up@vraletter.com, click the podcast link at the top and we’d love to have you with us. Thanks again for tuning in. Until next time. We’ll see you back here tomorrow for the close.