Category Archives: podcast

Is Deflation a Real Threat?

[00:00:00] yeah, we’re live or at least I’m live. Are you doing friend’s attorney with the zero DTE podcast it is Wednesday, July 21st, and it is another 0DTE day. Now we had a trade on today. I didn’t have a whole lot of high hopes for it. So I, so what I did was I lowered the expectations. I made it a nice narrow spread, the risk reward. Wasn’t as great as some of our others, like for instance, Monday’s trade and there’s still a chance for two to come home.

[00:00:39] But quite frankly, I’d already told the members of our service to just, let’s forget about it, most of them would say, ah, you’re kidding, Ernie the risk on these things is so low. It’s like a no brainer. Just let it go there. You never know. It might drop down, at the end of the session and make us a ton of money.

[00:00:58] And I, it’s hard to argue with [00:01:00] that. So that’s one of the benefits of having an inversion of risk strategy, where the risk is so small on every single trade that we look at them as really no need to manage the risk. Especially when we’re looking to return on average, 150 200%, or like Monday where we, where some members got 1100 or more percent maybe even as high as 1500, 1600, maybe higher. I don’t know.

[00:01:35] But yeah that’s what we do. Here we go in with asymmetric opportunities, low. High profit potential. But today that, that difference, usually it’s like this today. It was like this, does that make sense? Risk the word risk reward? Which one would you rather do? [00:02:00] And some people would say that this kind of risk reward is very highly improbable or any it’s not, I, I don’t want to pat myself on the back.

[00:02:09] Okay. Let me pat myself on the back. But I think that just about every single one of those highly improbable trades that we’ve put on have actually made profit. All right. So today, our risk to reward was deflated. And that is actually in a, a roundabout way of talking about what today’s topic is.

[00:02:33] And I’m not going to spend a huge amount of time on this topic because I don’t think it’s really necessary. It’s an unnecessary fear as matter of fact, what did I put is. The title is deflation a real threat. I put the word threat in there as if deflation is the big boogeyman. Deflation is something that we need to look out for inflation.

[00:02:54] Eh, that’s so bad. We live with that but gave leisure and the [00:03:00] fear of deflation really stems back to the great depression back in the twenties. The 1920s, 1929. And that’s because they experienced an incredible deflation of the economy, where there was virtually no demand for services because everybody was out of work and there was no money and there was no credit.

[00:03:24] There was nothing. And so, they experienced a harshness that we have never experienced here, even in our greatest. Depression or recession or whatever the hell you want to call it. It was nothing compared to what they experienced back in the twenties. Now since then deflation has gotten a really bad rap deflation.

[00:03:48] Really, all it means is the increased power of the money supply the current. And it can also be associated with the decrease of demand of [00:04:00] products and services. All of those things would result in things that are. Now, there are some other things in that caused natural deflation, which are definitely good things like all advances in technology where, today we can buy a TV of, a 55-inch 4k ultra led quid, blah, blah, blah, whatever it is for, five, 600 bucks, that same TV just a couple of years ago would have cost $5,000. 10 years ago, it hadn’t been invented yet. There were other led TVs out there that were nothing compared to this one that costs even more than that, this fine new specimen, same thing with computers and cell phones and all these things, any kind of consumer electronic has gone through an incredible deflation in terms of price for what you get.

[00:04:57] And all of that is really good. [00:05:00] Now on the opposite side of the coin is inflation and inflation happens when you have an overabundance of monetary supply and overabundance of credit. And it’s really a Keynesian construct, right? The Keynesians they live for debt. Debt is everything. We must constantly keep people in debt, keep their savings very low.

[00:05:28] Keep them in servitude to us in servitude to the fed master, where we keep on doling out the money and rolling it out and provide the sustenance all hell the federal reserve. And that’s essentially what a Keynesian is. And unfortunately, that’s the way most economies are run these days. However, the stark reality is that the Austrian way of of economics, which is the exact opposite of Keynesian, is what normally will take over.

[00:05:59] And then the [00:06:00] Keynesian’s having to face reality every time they inflate our economy to the point where it turns into a bubble and then bursts, and then subsequently turns into a short term. Fall into a deflationary environment. And so, then they say, oh, you got to fear the deflation. The thing that we created now, we must fix it by in creating an inflating, another bubble.

[00:06:24] So that’s the story of inflation and deflation. Deflation or the kind of deflation that the fed is talking about. The one that the politicians want you to be afraid of because it upsets their natural order of things. There, there a tinkering with the economy they’re flooding of it with stimulus in order to try to fix something that doesn’t need.

[00:06:48] Keep on pushing it until we have a bubble create incredible amounts of debt and put us in back us into a corner. So that in that they can’t keep on increasing the [00:07:00] the money supply because as they’re creating inflation, and if we do have a, any kind of runaway. Good fortune in the economy, it forces interest rates to go higher so that we can stem it because we don’t want interest rates to go too high because interest rates that are too high would put an undue burden on the debt that they created in the first place.

[00:07:21] So what we’re asking the fed to do every time that there is a bubble that burst that they created is to fix it.

[00:07:27] Okay. Every time I say that I just have to laugh, and we keep on going back to the fed Lord fed, please fix the problem that you created. Why do we do that? Why do we do that? It is so damn frigging stupid, but we keep on. Electing these people that are promising us free money because we’re too sighted to be able to understand the long-term consequences of that.

[00:07:58] And we allow the [00:08:00] fed to have ultimate control over our lives and our security totally subverting what this country was really meant to be. Pure form of capitalism that would work because it would be self-healing and self-correcting instead, we’ve got to get our dirty little fingers in there and try to fix everything, take all those crooked blinds and make them straight

[00:08:25] it’s evil.

[00:08:27] So anyways, There is your little lesson in economics. And I was going to prepare for this show by listening to some supposed real economists, guys like those over at real vision. And I know that a lot of you hold them in high regard and they do put out a lot of great content, but when they bring on a economist and they start talking about their theories of van and bam and.

[00:08:51] Blah, blah blah. And telling us, if oil reaches this level, then it could be a slippery slope. And then we can just fall into some kind of [00:09:00] deflationary how, and of course, you look at oil today and it has rebounded dramatically from where it was. So I guess that that nix is the, are deflationary trigger points.

[00:09:15] Anyways, most of these economists there. What is the best thing that you can say about a weatherman? And the best thing you can say yeah. About a weatherman is that they are more accurate than in the economist. That was a joke. I know my delivery is off, but they’re the worst economists live in a, I w what would you call it?

[00:09:42] They live in their own kind of private, Idaho, their own. They have really no idea. They are steeped in their theory. They’re always wrong. Always the fed is always wrong and that’s what they’re made up of is just, reams and reams of [00:10:00] Ivy league economists. I, I paused there because I was going to say something else.

[00:10:05] So I held back, oh man. Anyways today’s trade I think is going to be a bust. There’s still plenty of time for it to come back. I, oh, by the way, I was going to start reading about inflation and deflation and all that stuff. And then I got down to this one bullet point in Investopedia and I go that’s it or any.

[00:10:30] There’s no real need to go into all the particulars here. We all know that deflation in general is a very good thing. We always put this stigma on it as if it’s something that we should all fear, but who wouldn’t want a stronger currency, cheaper products and services. Ultimately that’s where we want to be.

[00:10:52] We want to get to some sort of equilibrium, right? We don’t want to be constantly trying to push the envelope. Sure.

[00:11:00] We want temporary inflation as we surge and then retract surge regress, regress back to that mean, sometimes we overshoot the mean a little bit and go into a slightly more deflation and come back.

[00:11:12] But that’s what happens in an economy where you don’t have tinkering hand. And just let things that need to fail and things that need to thrive that fro thrive based on a meritocracy like duh. So anyways, I was going to read the why is deflation bad for an economy article in Investopedia? So why don’t we just take a look at that just briefly.

[00:11:40] Here we go. Why is deflationary bad? Why is deflation bad for the economy? And this was written by, oh, the Investopedia team and reviewed by summer innocent, whoever that is.

[00:11:53] And I like to go right down to the first paragraph, the intro, and then the key [00:12:00] takeaways. And then after that, it’s really up to you. Whether or not you want to go further into the into the document, but deflation is a fall in the overall level of prices in an economy and an increase in the purchasing power of the currency who doesn’t want an increase in purchasing power.

[00:12:15] It can be driven by an increase in productivity and an abundance of goods and services. Oh my God. This is sounding like Nirvana. Deflation is frigging awesome by a decrease in a total or aggregate demand or by a decrease in the supply of money and credit. Oh, less debt, more money, or, in other words, less debt and more savings, more independence to.

[00:12:45] Wow. What a concept key takeaway of this article deflation is when the general price levels in a country are falling, as opposed to inflation. When they rise, deflation will be caused by an increase in productivity. And that’s what we were talking about in terms of [00:13:00] phones and TVs and other electronics, even cars and everything, their tech, the technological advances are.

[00:13:08] Through the roof. And so, the value that we get for the money that we pay, even if prices seem to be going up for some things, prices are definitely going down. But overall, the value is just totally outpacing the price of the product and what it will do for us, a decrease in overall demand or a decrease in the volume of credit in the economy.

[00:13:30] He just said that right? Most of the time deflation is unambiguously a positive trend for the economy. Of course, but it can also under certain conditions occur along a contraction in the economy. Now that part right there, I’m thinking to myself. Okay. So when are exactly are these times when we experience a contraction in the economy, I have to get this back up here so that you can see that.

[00:13:58] Does that just happen by [00:14:00] itself? Or is there some kind of thing that happens or something that pushes us down that road? All right. Let’s look at the last bullet and an economy dominated by debt fueled asset price bubbles. Oh, that sounds familiar. Deflation can lead to a temporary financial crisis in a period of liquidation of speculative investment known as debt deflation.

[00:14:23] So here we have this first. Most of the time, deflation is unambiguously a positive trend for the economy, but it can also under certain conditions occur along with a contraction in the economy dominated by debt, fueled, asset price, bubbles, right there. That is exactly the job of the fed. They’ll never would never admit that, but they’re always trying to push us towards more.

[00:14:52] More money in the economy. They think that they have to stimulate us. And they are the ones that cause a debt fueled [00:15:00] asset bubble until it gets to a point where they can’t maintain it. We get some kind of black Swan event that just pops that bubble. And then we fall into a rapid deflationary spiral.

[00:15:17] And that is the deflation that everyone is afraid of. The thing that the fed causes, if it just happened, natural. Through the normal course of business that sort of sinusoidal wave of up and down in the economy. We would never experience or very rarely experience these drastic, deflationary blasts and all would be good.

[00:15:47] But that’s the world we live in. I guess you can take it or leave it. I choose to take it because there’s no way to leave. All right. Let’s say, do we have any questions here? [00:16:00] [00:16:00] Ed says, are you trading options on ES futures still? That’s the only thing that we do, ed, we trade well in the 0DTE service that is we trade options on the E-mini S&P futures con. We do not trade it on the SPX. We do not trade it on the SPY ETF because they are shit when it comes to, oh, I’m sorry.

[00:16:26] This was a family friendly program. I’m going to have to bleep that because yeah. SPX and the spy are totally inferior trading asset classes to trade the 0DTE strategy. So yeah, we only trade the E-mini futures.  Daniel’s asking. I’m sure they will fix it at our expense. Of course. Oh yes. A man with rose colored glasses.

[00:16:54] Frank says, do you remember the seventies? How was it? Yeah, I remember the seventies. I [00:17:00] was I was like a preteen and in the seventies and then turned into a. And the seventies were great as far as I knew. I didn’t know that there was deflation. My dad was gainfully employed. My mum was a stay-at-home mom, I had a Leave It To Beaver type of life.

[00:17:17] And we had abundance. We had everything that we wanted. We had a pool in the back yard. We had a boat at the dock, blah, blah, blah, blah. Yeah, I didn’t see anything. Gas prices. No. Yeah, they had gas prices were runaway. They get up to like almost a dollar for there for a bit, from 25 cents.

[00:17:37] So that was something, but then they retracted, of course, all of that was a completely manmade. A manmade crisis. Most crises are manmade. Very few are just the result of the natural order of things.

[00:17:54] Do you think deflation will eventually kick in? Yeah, eventually we will, the fed will [00:18:00] burst the bubble. They will go too far. They always go too far. Cause they always overshoot or undershoot. And so, they don’t see the consequences of what they do for six, 18 months down the road. But yeah we.

[00:18:13] Experienced deflation, and it will be one of these death spirals again, and everybody will go, oh, deflation sucks. And then we will land at the bottom and then deflation will be totally awesome because every, and when we’ll have money or, your debt will be wiped out. Things will start growing again and we’ll just be, and of course the fed will come in to fix things and start pumping the economy with money.

[00:18:39] And then that will lead us into our next. So never-ending cycle. All right. So there you go. There’s my take on deflation in my view, deflation is good if you let it happen. Naturally of course, the only deflation that we ever [00:19:00] experience is this sort of spiral out of control chaos that is caused by over-inflating in economy.

[00:19:07] Now, one thing I do agree with. We can go from inflation to deflation, like in a flip like that, but that’s a consequence of the financial bubble bursting and that is going to happen sooner or later. There’s nothing going to stop. What, where we’re at right now. Now of course, with the pandemic and then the.

[00:19:33] The new variant, what do they call it? The Delta variant out there causing more scare and possible, more shut down. We’re going to have another retraction of of services and people out of work. Less demand on products at the same time. You’re going to, that’s going to spur on more fiscal stimulus pump, more money than the $6 trillion that they’ve already put up.

[00:19:57] They want to put another $10 trillion [00:20:00] into this economy, further diluting our currency and further pushing us into that inflation bubble so that when everything starts getting back in and the, and people shed off the Delta variant and we come back again. Of course, all of this has made up all of this fearmongering is all just contrived.

[00:20:23] It’s all built around political power and crap. It’s just unbelievable. Just let people to their own devices, let them make their own sane choices. We are adults. We know how to take care of ourselves. We do not need the nanny state to rule our frigging lives.

[00:20:39] Your help is killing us.

[00:20:42] Anyways. I hope you all have a nice day. Thank you very much for showing up. I really had a good time. Where is that off button? Ah, there is that off button. Ah, there it is. [00:21:00] Peace to all right.