https://external-preview.redd.it/gnZnMv6T4vlwH98wgxQPS_ZMDO5oKO82IMMARAqNunc.png?auto=webp&s=dc479c2bc821a2d8c0ed87602f4a798aeee83ab5
# Government bureaucracy, the original cause of inflation.
Throughout the last decade, governments around the world blindly supported renewable energy sources such as wind and solar while, at the same time, rapidly fading out nuclear and fossil fuels. This is a problem because politicians are not energy experts and left no transition period for the change to green energy. Scientists have been telling us that we need nuclear and fossil fuels until renewable energy become more reliable.
Did politicians listen to reason? Even after the pandemic, when demand is high, president Joe Biden proceeded to cancel oil and gas projects such as the Keystone xl pipeline. As a result, we couldn’t get enough of our crude oil to refineries and gasoline prices soared.
The same thing is happening to Europoors too; Germany retired their nuclear power plants only to burn low grade coal for power. And the British went for wind energy and when the wind isn’t blowing, they are forced to buy nuclear power from France.
All of this bureaucracy is bad enough, however, things got worse fast after the pandemic. COVID 19 destroyed our oil and gas industry and there is literally no investor confidence because governments kept cancelling new projects. The result? Super high gas prices in the west. [Even in 2022, the supply of crude oil has not yet returned to 2019 levels.](https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCRFPUS2&f=W)
High energy prices increases the cost of production and shipping, which is then passed down to consumers. This is the original cause of cause of inflation nobody is talking about.
Mainstream media kept on blaming Putin when [imports from Russia only accounted for 8% of all U.S. petroleum imports](https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=&cad=rja&uact=8&ved=2ahUKEwj0z9LQu636AhWqFlkFHbRIBt4QFnoECAMQAw&url=https%3A%2F%2Fwww.eia.gov%2Ftodayinenergy%2Fdetail.php%3Fid%3D51738&usg=AOvVaw0_JmnzTEBRmxtDd6yTFktQ) and 3% of that is crude oil. A 3% cut in supply is not enough to double crude oil prices. We have been producing our own oil for more than a century now. **THE MEDIA HAS NO CLUE WHAT IS GOING ON, DO NOT LISTEN TO THEM.**
# The so called “strong” labor market.
GDP or gross domestic product measures all of the economic output in a country. This is significant because an actively working population = good production / output numbers. So, how is the unemployment rate so low when the GDP is negative?
The answer is simple. Unemployment rates are a lagging indicator; no employer wants to fire their workers at the first sign of slowing economic activity. They all think, “maybe the worst conditions are already behind us, and maybe there are better days ahead…”. Employers would rather have everyone work less hours than layoff some. But let’s be real, are things really going to get better?
https://preview.redd.it/h2a77t1l4vp91.png?width=1806&format=png&auto=webp&s=623579e5642c4121a428f179abe30729ed5b415e
As you can see, profit margins for companies in the S&P 500 are falling off a cliff. I expect this trend to continue until high energy prices are fixed, reducing the cost of production.
# Wut the fed doin?
The fed is now switching to quantitative tightening. However, Daddy Powell cannot lower inflation by doing QT alone because high energy prices caused the inflation. It is not possible to fix this issue without drastically increasing oil production. Even still, oil and gas companies lack proper investment and are not expanding.
High energy prices *leads to* high production and transportation costs
High production and transportation costs *leads to* higher CPI readings
Inflation will remain high until supply chain issues and high energy prices are fixed. The fed does not know this. They will keep raising interests rates until something breaks.
# What to expect:
* **It is not (yet) the right time to gamble on puts;** implied volatility is incredibly high making the chance of profitability really low. According to the fed watch tool, investors already priced in (at least) a 50 basis points rate hike. If nothing changes, it is more than likely that the market will move sideways until the next FOMC meeting on November 1-2.
* **A fed pivot will not save us** because of the worsening labor market. We have seen this taken place during the 2008 financial crisis, when the fed pivoted due to rising unemployment, only to be met with further selling pressure in anticipation of a weaker economy.
* **Significant dates to keep track of:**
1. *Unemployment Data:* October 07 and November 04; A large increase in the rate of unemployment may spook investors.
2. *CPI Data release:* October 13; traders may anticipate a negative CPI number. You can play buy the rumor/sell the news.
3. *Fomc Meeting:* November 1-2; at least 50 basis points already priced in.
* **Shit is going down 2008 style.** Expect the news to cover “unexpected” increase in unemployment rates and the fed to pivot sometime in the future. These two events will tell you capitulation is close.
# The Capitulation play I promised and when to yolo on puts.
**DISCLAIMER: THIS PART IS DEFINITELY NOT FINANCIAL ADVICE. I AM NOT A FINANCIAL ADVISOR. THE FOLLOWING STATEMENTS ARE FOR ENTERTAINMENT PURPOSES ONLY. DO PROCEED WITH CAUTION.**
* *Ticker symbol $TLT is considered a safe play.* The ETF tracks 20+ year treasury bonds and goes up during recessions. Plus, it is on discount right now.
* *Buy puts on tech when the fed pivots and news cover rising unemployment rates.* This may sounds counter-intuitive but the fed only pivots when they realize they have gone too far and something bad is about to happen. If you are going to do this, follow further instructions:
1. DO NOT BUY PUTS AFTER A GAINT RED DILDO HAS EMERGED. YOU WERE TOO LATE.
2. Do purchase options contracts with at least 3 months until expiry. The market can stay irrational longer than you can stay solvent.
3. Keep at least 50% of your portfolio in cash. This should be done in case your timing is off.
# Thank you for reading this my fellow regard.
My current portfolio allocation: 15% $TLT shares, 85% cash (getting ready to buy tech puts and more $TLT)
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LEARN ABOUT: Investing During Inflation
REVEALED: Best Investment During Inflation
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Too many big words for me
Everyone wanted this. Its been cheaper to globalize + we got to sell a lot of fossil fuels.
Everyone is pretty content now that shit is fucked so it’s finally time to fund nuclear. Even big oil will lay off funding Greenpeace shit and buy back in. The excess baseload from nuclear really helps push the bull market in 2027.
The EU is hilarious. Those guys were milked sooo hard on funding renewables lol. At least France was able to push nuclear as green finally
Soo, buy TLT June 2023 Calls, got it.
I can get on board with a lot of this but if you don’t think October 13th CPI report will be bad for the market I don’t know what will be. I think that turns out worse than this past one. I’m not doing a write up though I’m just looking at my grocery bills
I mention the cpi as a reason to buy puts in two weeks and not wait for FOMC necessarily
> Germany retired their nuclear power plants only to burn low grade coal for power
Germany especially, man. The fucking regards in Greens…in the middle of war, with 80-100% markup in futures energy prices, with EU imploring them to reconsider not shutting down the remaining 3 nuclear reactors or just delay it — despite all the most obvious factors to wait and think, these ideological nutjobs went ahead and have them shut down. Now borrowing and begging for natural gas and deals with France, Finland at high prices for energy or whatever the fuck they are doing now.
I’m confused. So u saying it’s kinda early to buy put before next November fomc meeting?
>Scientists have been telling us that we need nuclear and fossil fuels until renewable energy becomes more reliable.
Actually, not at all. I am an engineer myself, and really embarrassed how engineers and scientists has proclaimed, that we have all the technology, we just need to make the political decision, then we do the transition.
If I did this point 10 years ago, which I often tried, it was like others really did not understand, what I was saying. “Do you seriously believe, we need to save energy?” “How can you say, we need a wind turbine here? They are ugly”, “how can you ever suggest nuclear? your capitalist”.
I do not believe politicians are any worse than others. But so called scientists not telling the full story of transformation, that is ugly.
However, this one I am 100% in line with you. THIS IS OUR INFLATION
>High energy prices increases the cost of production and shipping, which is then passed down to consumers. This is the original cause of cause of inflation nobody is talking about.
Do you anticipate some small flux of positive margins for companies from the recent drop in fuel prices? Since it is a lagging indicator I could see a potential bounce from slightly better inflation numbers but then a hard drop down after winter if energy goes back sky high.
I think you don’t understand how bond market works.
If you buy puts on $TLT you are betting that interest rates will rise on US 20-Year bonds.
If the Fed pivots interest rates will come down to stimulate the economy back again, so $TLT will go up and your puts will be worthless
This makes a lot of sense.
Nice read
Wait why are you banking on the TLT and bonds to recover?? ELI5
No offense, but oil companies themselves canceled waaaaaaaay more projects than Biden did with an already dead and unneeded pipeline.
First few paragraphs read boomer as fuxk and blindly political. Follow that up w no real argument and def no ‘due diligence’ F. This dude blows
VOTE in November will be what turns this economy around .
Across the board we need a change .
You’re premise is BS. The XL wouldn’t have even been finished yet. New leases take years to start producing oil. Don’t let political nonsense skew your predictions
What if you do your comparison but use the 2018 fed pivot instead of the 2008 Fed pivot? What happens then?
No regard. Biden didn’t cancel oil. Biden signed more permits than the last guy did. Biden is increasing oil usage so maybe come back when you have at least a basic understanding of this topic.
Are you trying to sell us your bags from TLT