Tony Katz & Dr. Matt Will on Inflation Numbers & Oil Prices

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1:02that number is freaking anemic. That's all because of the shutdown in October, November. And if inflation is 3.1, why are both the down the NASDAQ at least at the start of the market? Today, why did they go up over 300 points of the down over 100 in the NASDAQ? What exactly is going on here? Tony Katz. Tony Katz today, good to be with you. Dr. Matt will join us economist at the University of Indianapolis, caught up while he's on the road. Appreciate you taking the time. Let's start with this inflation number. Because this inflation number says 3.1%. Well, 3.1%, 3% inflation. Well, that's more than the 1.7 that the administration wants to talk about how they want to look at the numbers. And if it's 3.1, why is the market saying, well, that's good news. Well, let me just say that the market's not saying it's good news because the markets digesting two reports, the GDP revision and the PCE report. The PCE is what you're

2:08referring to. It's the inflation report that the Fed uses. And the reason the market didn't react negatively is neither one of these are a surprise. That's the key. The key is what is expected and what actually happens. And neither one of these are a surprise. But let me correct the number. You said 3.1. Again, that's the headline they want to tell you. Core PCE was 0.4 for the month. Let me repeat that. 0.4 for the month. Is it going to multiply by 12 for the year? Yeah, 4.8. We knew it. You're going to multiply by 12 and you know, make it sound all miserable. And that's why people say you're Dr. Doom, but you're not trying to be Dr. Doom. No, I'm trying to be realistic here because that's what it is. And that's what the Fed is looking at. The most recent month is trending up. It's not in a small way. It's trending up in a pretty significant way. And that's what we're seeing in this inflation report. And it's across the board. Healthcare, housing, utilities, financial services, final expenditures for institutions,

3:11all these top four categories. You mentioned it all the time. Insurance rates, massively up, 16%. That's not a small amount. And that's in this PCE report that the Fed uses to make policy. So now we take a look at point four. You say, well, then that's higher than 3.1. But why doesn't the market react to that number as you're describing the number we should focus on? Well, the market's not reacting because this isn't news. The PCE is giving us the same data that we saw in the ISM report, which is the manufacturing index report, which it said was extremely high inflation. It's now a trend. And again, we saw that trend. So it's not news. And so the market is not reacting negatively because this is expected. Is it good? No. But it's not a surprise to the market. And I believe the market is reacting more to the war than they are to these two reports because these two reports have nothing new in them. And therefore the market's okay. Let's put it aside.

4:16And I believe what you're seeing in the market is other information, you know, such as oil isn't as bad as we thought. Okay. So there's other data. It's consuming other than just these two reports. Talking to Dr. Matt Will economist at the University of Indianapolis, you brought up oil. Let's just get into this really quick before I get into back to the inflation conversation. We see that there are tankers not willing to move through the straight-up or moves. We see that Iran has made threats on tankers going through the straight-up or moves. We have seen the administration say we aren't yet putting a naval escort to tankers. We heard the Secretary of War. Pete Heggs had to say today say don't worry about the straight-up or moves. We have seen the oil prices go up to 120. Come back down to 80. The issue here with oil as you see it. Is this something that self-regulates

5:16its way out? Is this something that needs a bit of military intervention escorts and then immediately you see oil go back to $60 a barrel? What's the move over here? Oh goodness. Well, okay. I got to get a little nerdy on this. I only hope you would. The problem we have with oil is we have a flow system. It used to be that we did batch processing, which means the crude oil would show up on a truck or a tank or a go-to or refinery. The refinery would process it, put in another tank and then the tank would send it out to the world through trucks and so forth. Now it's a flow system because the darn liberals haven't let us build new refineries in forever. Any slight disruption and now flows off of the loop out in the Gulf of Mexico typically. Go-to refinery goes on to a pipeline up the Mississippi, goes to another distribution center. Let's say Illinois. It's flowing. So any disruption in the flow whether it's that disruption of occurs in the Gulf or occurs in Saudi Arabia or occurs in, you know, when I say

6:19Gulf, I'm talking like, you know, the Middle East or the Gulf of America, it doesn't matter. That flow is being disrupted and the war is doing that. So you asked the question, how can we resolve it? I'm sorry to say this. You know, this may sound tough, but from an economic standpoint, the US has to get control of the straits. It's not escorts. It's not just mind sweepers. They have to get control of the straits. And what does that mean? Maybe you put boots on the ground on the other side in Iran in order to control the straits. If they don't control the straits, the flow will be disrupted and the flow is what's important and it's being disrupted at this very moment. I think one can control what's known as Carg Island and still be able to get that result. Talking to Dr. Matt Wille, economist at the University of Indianapolis. And I should note that we are building in the United States because I'm totally with you on refineries. We're building our first new refinery in 50 years. This is going to happen in Brownsville, Texas. It's a 300 billion dollar deal that is being funded with help from, I believe it's India. That's a part of

7:26this which, all right, I've got questions about there. But we do have a new refinery that's slowly being built that we are, we are years behind in our refinery capacity. But now let's bring it back to the inflation conversation. The markets seem to at this report seem to go, okay, great. This is in line with where we thought things would be we've already got it baked into the cake. Everything's good. Let things build and grow from here. We'll take any good news anywhere we can find the good news. And it just seems to be very disconnected from the oil price conversation. That on any given day, the markets will allow any given thing to affect them. And none of that is telling us an economic story for presenting a valuable picture, an honest picture of where we're at. Paint the picture for me. Here we are, March 2026. Where is this economy at?

8:33Well, I don't know that I can say it much better than what you just did because that's the whole point. The market is being reactive. It's seen what's happening with an oil tanker. It's seen what's happened with a bomb being shot into the Middle East, whether it's Dubai or Tel Aviv. It's reacting to all these things. The problems in Washington, gridlock on the DHS. These things are causing the market to react. And the picture that needs to be drawn is we don't want that. We want the market. We want the economy to not be looking in the Middle East to Washington, DC to Congress and to the President. We want the market to be looking at Wall Street, Main Street, Manufacturing, Profits, Productivity. We want it to be looking at the day-to-day things that happen in the economy, not politics. And that is totally causing chaos. The market doesn't like, you know, again, people may not like to hear this. They don't like

9:33Republicans. They don't like Democrats. They like stability. And there is no stability right now. There is chaos in the world. And that is what the market hates. It wants the chaos to disappear so it can focus in on the nuts and bolts of business. So now let's move this around. Talk to the Dr. Matt Well Economist, the University of Indianapolis. And let's talk about this GDP number. Fourth quarter GDP got revised down to 0.7%. I used the word ennemic. 0.7% is horrible, awful, very bad, nonexistent. What the hell is happening to you growth? Explain the number to me. Well, you know, ennemic is even a generous term because this is like, you know, in using the analogy of poker, it's like you're sitting across a table from someone and the opponent you're playing against just drew an inside straight. And you throw your cards on a table thinking, you got to be kidding me. Had a pair of bases and this person draws an inside

10:35straight. Yeah, because if you look at the GDP numbers, every single component was revised in the wrong direction. So first of all, right out of the gate, the GDP price deflator, which is the inflation part of the GDP was higher than expected. The consumer spending was lower than expected. Business investment was lower than expected. Exports, okay. And I'm going to, you know, yeah, Dr. Doom is here. Exports were less than expected because of tariffs, tariffs don't increase exports. They decrease them in the long run. We've seen it in the data shows it. Imports also caused a contraction and the only good part, but it's a drag on GDP is government reduced its size more than it was anticipated originally. So all these things moved in the exact wrong direction to cause GDP to decline. You couldn't have asked for a more perfect storm to negatively impact. And of course, we all know where this came from mostly was the massive

11:36government shutdown in the fourth quarter. So now you've mentioned that before. Walk us through it again in case anybody missed it. I don't mean before just now. We talked to Dr. Will a lot. How does the shutdown, remember, this was October, November, this was 42 days. How does the shutdown have such a radical effect on the gross domestic product? Well, the one component, which I believe and we've discussed is very flawed, is that government spending can actually expand the GDP and government contraction can actually reduce the GDP. So that part is a good reason why GDP would fall. And that's what happened because the government was shut down. But what the government also does is things we need. It runs, you know, Norfolk, Virginia, Port, Bano, New Jersey, Oakland, California, Jacksonville, Florida. The government, if they're not operating, those ports cannot operate to import and export goods. So that slows it down.

12:37You need a permit to continue to build the new refinery that you just mentioned. Well, that process to get the ball rolling is stopped because of the government shutdown in the fourth quarter. It's not, you know, I'm not a big government guy, but I'm not a no government guy. You need the government to be the referee, to be the police officer, to be the military, and also simply to make sure everybody is following the rules. Well, those people were sidelined for the fourth quarter and it impacts every one across the board. You can't put a factory without an approval from the government, even though Trump is expediting those approvals. You couldn't get the approval because the government was shut down. Talking to Dr. Matt Wille, economist at the University of Indianapolis, so we see this revised down number 0.7. The market looks at this and says, okay, there's a reason for it. Go full Taylor Swift, shake it off, onward and upward. What is an onward and that's what I think they're saying. You could disagree with me there, but what does an onward and upward

13:38look like? The, you know, the first quarter of 2026, everything's going to be just fine. We still have a partial shutdown with the Department of Homeland Security. So there's going to be some impact there. At what moment do we see low GDP numbers affect the US economy? You know, you're afraid I like your shake it off phrase because that's what the market was doing. That's what it is doing at this very moment as we speak. It's saying, okay, this is fine. We understand why it happened. By the way, I'm no genius on this Tony. The market do exactly the same thing that I just said about why GDP was not where it should be. But let me go back to your earlier comment. The chaos that's being created by the geopolitical world right now is going to make the market nervous because if that can be put aside, we've sent this two months in a row of growing domestic manufacturing. Wow, we haven't seen that in years and then you look at the

14:40other things that are having such as the AI, such as the deep investments that's occurring throughout the country domestically and also importing dollars into the US investment scene. There are a lot of positive things. You know, we could list them all. We've done it before. No need to do it again. That's what the market is looking for. That's what the market sees. And if we could just stop the chaos around the world, that's what the market is optimistic about. If big if big if last but not least, meet me before I let you go. In all of this, we noticed that there's no conversation of AI investment whatsoever. And there's been a lot of talk from a lot of people about maybe the AI investment is overblown. And you've got people like the famed Mark Burry who's betting against this that the investment is just too much. It's been too great. It's overblown. It's unserious. And it has to be clawed back.

15:43There's just too much reliance on AI investment to lead everything. Are we going to see an AI snapback or is this investment still full bore ahead? No questions. No, no, look, look, you know, Michael Burry got he got he got big, you know, he got successful in the big short. Okay, good for him. He's wrong on this one. There is no stopping. The reason you haven't heard it in the news because it's now just a foregone conclusion. We just assume it's happening and it is. So no, we should do not negate and do not bet against AI. That's that that'd be like betting against the internet when it was first invented. I remember people said, oh, that online e-commerce shopping thing. It's a sad. It's not going anywhere. Yeah, have that thought at your own risk. Well, that's definitive. That's that's very direct right there. Dr. Matt Well, economist at the University of Indianapolis. I appreciate you taking the time to be with us. Morris coming up. I'm Tony Katz. This is Tony Katz today. The Toyota Tundra and Tacoma are built

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