THE INFLATION HEADLINE LIED TO YOU THIS MORNING — HERE'S THE NUMBER THEY BURIED — jamie dimon

[00:00:00] Speaker 1: Ladies and gentlemen at 8:30 this morning a number was released that sent a wave of relief across the financial world. Within minutes the headlines wrote themselves inflation is cooling the worst is behind us you may have already seen those words today and I am here to tell you as carefully and as plainly as I can that those headlines are describing the wrong number because this morning's report did not contain one inflation figure it contained two and they told two completely opposite stories the one that made the headlines fell the one that actually matters did not and the gap between those two numbers is the most important thing I am going to show you tonight. I have spent 40 years reading these reports and I have learned that the most dangerous moment in all the finance is not when the news is bad it is when the news looks good for a reason that isn't real because that is the moment people relax that is the moment they stop preparing that is the moment they make the decision they will regret for years and I believe this morning was exactly that kind of moment so here is what I am going to do I'm going to show you the number that fell and I'm going to show you precisely why it fell because the reason is going to surprise you and it has almost nothing to do with inflation actually easing then I'm going to show you the second number the one buried beneath the headline the one the Federal Reserve actually watches and I'm going to show you why it refused to cooperate then I am going to connect both of those numbers to the one institution whose next move decides the fate of every dollar every bond and every ounce of gold and silver you own and at the very end I am going to tell you the single thing to watch in the hours and weeks ahead because this story did not end at 8:30 this morning it accelerated stay with me because if you take away only the headline from today you will have been told the exact opposite of the truth let us begin with the number that fell the headline figure the one that measured the change in the prices of everything American consumers buy came in soft this morning on a monthly basis it actually declined the first monthly drop of its kind in years on an annual basis it eased back to just under four percent down from four point two percent a month before and on the surface that looks like a genuine turning point after a year of relentless upward pressure after the inflation scare that split the Federal Reserve down the middle here at last was a number moving in the right direction relief finally but now I need you to ask the question that almost nobody in the financial media asked this morning why did it fall because a number falling is meaningless until you understand the force that pushed it down and when you look underneath this one you discover something that should stop the celebration cold the headline number fell for essentially one reason gasoline energy prices and here is the chain of events that produced it because it is a chain and every link matters earlier this year the war with Iran drove oil prices violently higher and that surge was the single biggest force pushing inflation up through the spring then in mid-June a ceasefire was reached the Strait of Hormuz the waterway that carries roughly a fifth of the world's energy reopened and oil prices which had spiked toward crisis levels collapse back down falling roughly twenty percent settling back near the upper 70s per barrel gasoline at the pump followed dropping about ten percent in a single month one of the largest monthly declines in a decade so there is your headline inflation look like a cool this morning but it did not cool because the underlying economy healed it cooled because the war paused and the price of gasoline fell for one month and I want you to sit with the fragility of that because it is the entire point a number that falls because of a one month drop in energy prices is a number balanced balanced on the single most volatile most unpredictable input in the entire economy it is a foundation of sand and the tide that pulled that gasoline price down can turn around and push it right back up in a matter of days on a single headline out of the Middle East which as I will show you shortly may already be happening but first we have to talk about the second number the one headline skipped because this is where the real story lives underneath the headline figure sits another measurement and among the professionals who actually set monetary policy it is considered far more important it is called core inflation and all it does is strip out the two most volatile categories food and energy to reveal the true underlying trend of prices across the rest of the economy think about why that matters if the only reason your headline number looks good is a temporary drop in gasoline then stripping out gasoline shows you what is really happening underneath core inflation is the number with the mask removed it is the truth after the makeup comes off in this morning core inflation did not fall it held stubborn sticking near three percent right around where it has been camped for months refusing to come down while the headline was busy generating cheerful news coverage the number the federal reserve actually stakes its decisions on quietly told the opposite story it said the underlying pressure has not eased at all it said that once you look past the one-time gift of cheaper gasoline prices across the American economy are still rising well above the pace the federal reserve considers acceptable and have shown no real sign of slowing so now you understand why open by telling you the headlines were describing the wrong number two figures came out this morning the volatile one fell for a temporary reason and made all the news the stable one held firm was largely ignored and is the one that will actually drive what happens next the report was not good news dresses good news it was mixed news dresses good news and a market that relaxes on the headline while ignoring the core is a market setting itself up to be blindsided that is the trap i promised you at the start now let me show you why it matters so enormously because this is where these two numbers stop being statistics and start reaching directly into your savings everything now depends on how one institution reads this report the federal reserve because the federal reserve has exactly one blunt tool to fight inflation interest rates when inflation runs hot it raises rates to cool the economy down and here is the problem this morning's report just created for them the problem that makes this the most important report of the season if the federal reserve looked only at the headline number the soft one they could relax they could hold rates steady maybe even signal cuts and everyone could go home happy but the federal reserve does not look at the headline number they look at core and core just told them the job is not done core just told them that the inflation they have been fighting is still embedded in the economy still running near three percent still above their target and still refusing to break which means uh the pressure on the federal reserve to keep rates high or even to raise them further did not ease this morning if anything it intensified because the one number they care about most confirmed their deepest fear that this inflation is sticky and i am not speculating about how divided they are the evidence is in their own record at their meeting in june this committee revealed a split so close it stunned observers nine members leaning one way ate the other over the question of whether to raise rates further this year one vote that was before today and in the days leading into this report the market's expectation of a rate hike at the very next meeting had already jumped dramatically climbing to nearly 40 percent from less than 10 percent just a month earlier a sticky core reading this morning does not calm that debate it pours fuel on it it hands the hawks the members who want higher rates exactly the ammunition they were looking for now why does all of this matter to you whether or not you follow the federal reserve whether or not you own a single share of anything because interest rates are the invisible force that sets the value of everything you own and here i have to connect this morning's number to the deeper machine i've described before because this report is not an isolated event it is one more turn of a much larger wheel consider the position the federal reserve is actually in behind them sits a national debt of roughly 39 trillion dollars a debt that becomes more expensive to carry every time they raise rates so they are trapped between two fires and this morning's report tightened both on one side a core inflation number that refuses to fall demanding higher rates on the other a mountain of debt that screams for lower rates they cannot fully satisfy either without inflaming the other and when a government is trapped exactly like that unable to raise rates enough to truly crush inflation because the debt will not allow it history shows us what happens next inflation is permitted to run just a little hotter than the interest you can safely earn year after year and the quiet erosion of your savings becomes the price of keeping the whole system standing that is not a conspiracy it is arithmetic and this morning sticky core number is a live reading of that arithmetic in motion this is precisely why the most sophisticated institutions on earth have not been waiting for permission through all of this the central banks of the world have been buying gold at the fastest pace in modern history converting the paper they themselves print into the one asset it cannot be inflated away the central bank of china has now bought gold for 20 consecutive months and for the first time in the modern era gold has surpassed the bonds of the united states government as a share of the world's official reserves they are reading the same trap federal reserve you and i are watching and they are drawing the obvious conclusion quietly while the headlines talk about cooling gasoline prices which brings us to gold and silver and to the honest two-sided picture you deserve rather than a cheerleader's version in the short term federal reserve leaning toward higher rates is a genuine headwind for the metals and there is no use pretending otherwise higher rates lift the appeal of holding cash and bonds that pay a yield and press down on gold and silver which pay none that mechanical pressure is exactly why both metals have been deeply discounted this year gold pulled well back from its record silver cut down harder still if you own them you have felt it but look at what today's report actually did to that picture it did not remove the inflation it removed only the appearance of inflation and only for one month and only because of gasoline the underlying pressure the sticky core the trap central bank the enormous debt every structural force that makes hard assets matter is still fully intact tonight the headline eased the machine did not and now the piece i promised you the reason this story did not end at 8 30 this morning watch the energy market and watch the middle east because the entire soft headline you saw today rests on a ceasefire and ceasefires are fragile things if tensions reignite if the straight comes back into question the gasoline relief that produced this morning's cheerful number can reverse in days and next month's headline could snap right back upward erasing the very relief that made news today the thing that pushed inflation down this month is the least reliable thing in the entire economy building your confidence on it is like building your house at the low tide line there is one more event you should watch and it is happening almost immediately on the same day as this report the chairman of the federal reserve is scheduled to testify before congress he will be asked directly how he reads this morning's numbers and his answer every word of it will be scrutinized by markets for a signal of what comes next listen for one thing above all listen for whether he emphasizes the soft headline or the sticky core because that single choice which number he chooses to lean on will tell you which way this trapped institution intends to move if he leans on the headline he is looking for an excuse to hold if he leans on the core he is preparing the ground for another hike that is the tell and you now know how to read it so let me bring this all the way back to where we began and give you the one sentence to carry out of tonight this morning you were handed a number that looked like relief and beneath it hidden in plain sight sat a second number that told the truth the headline fell because a war pause and gasoline got cheaper for 30 days the core held firm because the real inflation the kind embedded deep in the economy has not gone anywhere the federal reserve knows this the central banks of the world know this and now you know it too which means you are no longer one of the people who will be caught off guard when next month's headline tells a very different story do not let a one month drop in the price of gasoline convince you that a decade long story has ended it has not the machine i've described to you across these briefings is still running tonight exactly as it was yesterday the only thing that changed this morning is that it put on a friendlier mask for a single news cycle before i go i want to hear from those of you who have lived through inflation before the real thing the kind that grinds away year after year while the official voices insist it is under control you know this pattern in your bones you have seen a reassuring headline before and you remember what came after it tell me in the comments what you saw and what you wish you had understood while it was happening because there are younger people watching tonight who need to hear it from someone who was actually there your memory is worth more than any forecast and if this briefing helped you see past the headline to the number that actually matters then subscribe before you leave because i will be here the moment the next report drops to cut through the next headline the same way we cut through this one in the next briefing i take the trap federal reserve i described tonight and i follow it all the way to its only possible exit and i show you exactly what that exit has done to savers every single time it has been used you saw the mask slip today next i show you the face behind it the headlines that inflation is cooling the truth hidden one line below it said something else entirely you read the right number tonight almost no one else did