12 40 P.m 12 40 P.m Eastern Standard Time or 9 40 A.m Pacifica Standard Time is when we expect Jerome Powell to be in conversation with a David Rubinstein. This is the Chairman of the Economic Club of Washington DC and oftentimes when the Federal Reserve comes out and speaks, they can give us some hints about policy action coming, especially after the Fomc meeting. Well, the last Fomc meeting, we had a Jerome Powell who was heavily dovish or at least it sounded that way. It sounded like we had a drawn Powers Happy that disinflation was starting to happen without massive job losses.

However, there are lingering concerns that maybe without job losses, we won't actually be able to solve inflation. This has led to a bifurcated discussion where on one hand you have people who say the only way inflation will go away is through a harsh style recession. It doesn't have to be super deep, but some some form of harshness toward the unemployment rate Rises Substantially, there's a reason American Express has a projection and a plan when or should I say if the unemployment rate actually reaches 8 That was discussed in just their last earnings call a few days ago. So these are discussions that are actually happening.

That yes, it is possible the Federal Reserve has to force a dirty recession to actually eliminate inflation and prove to markets that we will not let inflation expectations unanchor because the worst thing that can happen in our economy is on inflation. Expectations on anchor People disbelieve the ability of the Federal Reserve to actually bring inflation under control and then what we're left with is the need to end up having a Paul Volcker Style It was extremely dirty and raises rates well above the level of inflation. That's what it's taken to get inflation under control in the past, but based on the last Fomc testimony, it seems like Jerome Powell is cheering the idea that maybe we can actually get inflation to go away without high employment unemployment. And that's actually what's happening right now.

Remember, the FED has a dual mandate: stable prices and maximum employment employment. If you can essentially raise rates to say, four and a half percent, Four and a quarter percent Forum three quarters percent. Whatever. Five percent.

If we can raise rates that level and inflation goes away convincingly, then the Federal Reserve would have no reason to force a recession because that would lead to unnecessary job loss. But there is the belief that there, and that's sort of the other side of that bifurcated Fork that the Federal Reserve is not actually going to be able to get inflation out of the markets, that there are going to be sticky forms of inflation such as haircuts, pilot pay, air travel, services for accounting, services for medicine Medical Services nursing Urgent Care Ambulatory Care These sort of services that could end up leading inflation to be a lot more sticky. That's sort of the other argument, right? So we have no idea which one we're going to get, but what we do. We just had a pretty wild unemployment report and the report suggested that we created eight standard deviations more jobs than expected.

We have not seen a Miss like that in over 20 years. It is extremely rare to see misses like that on the employment reports. It's very normal to see the unemployment report or employment reports Miss Economist expectations either up or down. But by the magnitude uh, that we were surprised was absolutely remarkable.

Uh, and again, a positive surprise like this has not been seen but once in the last 25 years. In fact, here is a chart on exactly that and you can see we had one surprise like this: over 200 000? Uh, uh, you know, maybe about what is that about six months or so ago, but otherwise, we have not had positive surprises until going all the way back to 19 1997. Pretty remarkable. So now this labor report came out two days after Jerome Powell's dovish comments.

Which is really interesting because on one hand, you have a very dovish Jerome Powell Uh, on the Fomc meeting day on Wednesday what do you get on Friday He had a pretty crazy labor report that suggests maybe the economy is actually doing pretty hot and on one hand, that's great because maybe it means we could avoid a recession and sort of have that Goldilocks style soft Landing where we actually bring inflation down without leading to substantial job loss. But again, you have bifurcated bets on this a lot of hedge funds today positioning thinking there's no way like we, there's no way we're getting inflation down without job loss. Other people saying maybe just maybe this time is different and we can actually get inflation down substantially without job loss. And so of course that's where the debate ranges.

But then again, of course tomorrow we have Jerome Powell who comes out to talk at 12 40 P.m Eastern time in conversation again with David Rubinstein the Chairman of the Economic Club of Washington DC This conversation I'll be covering it live on the channel here. So again, mark your calendars that's 12 40 P.m it's 20 minutes. Um, actually, no. sorry, that's that's three hours and 20 minutes before the closing bell.

Uh I Gotta keep changing the time frames here. 12 40 p.m Jerome Powell will actually be having a discussion with David Rubinstein David Rubinstein is someone who's worth over three billion dollars. He used to work for the government as a an attorney for the State Judiciary subcommittee on Constitutional Amendments which sounds incredibly boring and it's no surprise he left that job. He ended up going on to form the Carlisle Group which what's interesting about that is the Carlisle Group ended up growing to over 293 billion dollars of assets under management in 1800 employees.

He's like a Ray Dalio type Bridgewater Capital type And the reason that's important is oftentimes when Jerome Powell comes to speak at certain events like I remember last month Distinctly, he ended up speaking at some climate change event. We got literally nothing about the economy. All we got was that drone Powell thinks it's not his place to try to regulate climate change. His mandate is simple, stable prices, maximum employment.

That's it. Don't put climate change on him. That's all he said. Basically told us in the last event it was a big nothing burger, right? and so some people are saying maybe tomorrow Jerome Powell's speech will basically be a nothing Burger as well it could be.

But I think that's somewhat unlikely given that David Rubenstein is going to be asking questions and David has a background in private Equity Bradylio style type and this is for the Washington economic Club of Washington DC I Think we're going to get some pointed questions about the economy now. What we could hear could be really interesting because we actually had Bostic talk today and by Bostic was not very enthused about this last Labor report. Now on one hand, Bostic today who obviously Mr Bostick he works for the Federal Reserve he's a president of one of the Federal Reserve Banks He's not a voting member of the Federal Open Market Committee at this point. but He suggests that look, if the stronger economy persists the way that this employment report suggests, then he says quote I would expect that would translate into US raising interest rates more than I have projected at the moment, which his projection at the moment is in line with the summary of economic projections from December or a 5.1 percent Peak Now Traders are already starting to trade in the potential for another hike in June Now that's interesting because that would put us at right now 4.5 Now that would bring us to 4.75 in March on a 25 BP hike.

That would put us at five in May and potentially five in a quarter in June. And if we do have strong uh labor reports and strong economic reports like this, the FED might end up having to hike that high. And it's possible that the bond markets Peak which right now is only pricing in a peak of about 4.9 might end up being too low. which could mean we have to price in a little bit more pain to make sure we can get inflation out.

And so this is where you really have that duality of people trying to evaluate. Okay, like so is inflation going to go away or not right now Bostic does give us a little bit of a heads up that look. It's possible that the Jobs report could have been an anomaly on Friday so he's giving us kind of both arguments here. He's saying on one hand, look, if the economy is actually that strong, yeah, we we might have to do more to get inflation down, But on the other hand, this jobs report could be an anomaly and that's not only because of seasonal Trends and massive seasonal adjustments that usually take place in January but also because we have quite a different season this year relative to last year because we're coming off an era where it's been very difficult to employ people and so maybe we didn't have as many seasonal layoffs as we ordinarily would have had because well, companies don't want to lose employees and then have to go back to hiring.

Now this is where I like to look at leading indicators and sorry for beating this horse. But I think it's very important to look at Starbucks and Chipotle, both of them massive hires of employees and what do they both say? Wow, it's getting easier to hire employees. Look at Tyson Foods Who reported today and what does Tyson Food tell us? Well, they tell us, hey, um, you know we uh, we. we were understaffed a year ago when we were making bank.

Today, we're not making bank anymore and we're properly staffed. Now we're looking into more Automation and not hiring more. Kind of a very interesting change in talk from massive labor shortages to we got enough employees. Now now we're gonna look into like, maybe layoffs types of food didn't imply that, but other companies are, uh, and automation which Tyson Foods did talk about.

So in my opinion, based on what we're seeing with actual earnings calls like actual leading data. unlike these lagging labor reports, we're not seeing the basis for a wage price spiral. So I'm not as bearish as a lot of the hedge funds are. especially the long short positioned headphones hedge funds, which which are basically trimming positions on both ends.

they're removing Equity exposure more than they're going long uh and uh. And there's still not leverage the way they used to be either. most hedge fund leverage sitting at about 69 right now, usually sitting closer to about 80 by the way. but uh.

What's very fascinating is that if we end up having a drawn Powell tomorrow, that does give us economic insights. everybody's going to be curious about Jerome Powell's opinion on this Jobs report and I think there are a lot of traders who are going to be making bets on Jerome Powell and what he's going to do personally. If I were Jerome Powell and I were in drone Powell shoes I would be very, very cautious to make any kind of conclusions about the economy one way or another. based on that Jobs report I would probably make a simple statement of look: we're going to be updating our forecasts in March If by March we think the economy is in a lot stronger of a position and inflation isn't continuing to come down, then we may have to revise and be more aggressive if the economy is in a strong position but inflation is continuing to plummet, then maybe we can maintain a stable position or even potentially a slightly looser position depending on how data is changing, but we're going to be data dependent now.

That's a little bit boring. But I think there are a lot of people who think that Jerome Powell tomorrow is basically going to rug pull the markets. And so we saw a little bit of tentativeness in the market today. where uh, oh, Jerome Powell is going to come out tomorrow and talk dirty to us because that Jobs report came in so hot.

I think Jerome Powell realizes that as we've heard many times, one report doesn't make a trend. they're the ones who tell us that all the time. But and I'm not just trying to like bullishly explain away this last Labor report. but it's just not consistent with with what I'm seeing, especially in terms of even in the Labor report itself of of wages spiraling out of control.

Even the labor report that came in hot suggested wages were actually Cooling to some degree more than expected. uh, and uh. And the same thing was reiterated by the ECI report: the Employment Cost Index Report. Now, sure, more job openings, maybe people taking on more jobs or multi-jobs but this idea about a potential wage price spiral leading to a Paul Volcker? It's just not my base case.

I I You know if I had to put odds on it right now just sort of out of thin air I'd probably say we have maybe a 10 chance of a wage price spiral developing I Just don't see it in any of the data right now. I Had a very different belief in January of 2022. I'm like holy crap we're about to go through inflation. How you might remember the videos that I made on the economies facing the Titanic of inflation and I made multiple videos talking about the Titanic sinking? It was.

It was bad. But anyway, this is the conditions in our environment today are are nowhere near what we've seen uh, last year, so we'll see. It'll be really interesting to see what ends up happening tomorrow. Uh, do we end up getting another leg down? or do we reiterate the supports that have been created so we'll see, but we will know tomorrow, so stay tuned.

I invite you to come to my live stream. uh I will be obviously streaming in the morning probably somewhere around 4 30 a.m as usual California time and then we'll do another stream around 9 30 probably maybe 10 minutes before Jerome Powell is expected to speak at 9 40. Could be a nothing burger or you know we'll end up just getting the blow off. Do I actually think Jerome Powell is going to come out and say something dirty like uh, you know, hey, uh, this is bad No.

I I could not be extremely bearish after for tomorrow's Catalyst I Don't actually really see it as much of a catalyst at all, so I probably wouldn't be making massive volatility bets. If anything, it might just be another one of those things that's checked off the list. All right, let's go on to the next. Catalyst you know and he just kind of slowly see the market try to Trend up we'll see and I will tell you I think Jerome Powell is going to be happy about uh, the uh treasure yields actually Rising right now because those Titan Financial conditions so you can actually see the stock market slowly recover while those bond yields actually stay high sitting at 3.63 right now, that's gonna put some pressure on real estate again so we'll talk a little bit more about real estate.

Uh, tomorrow morning in the opening Live! So I look forward to seeing you as usual. If you want to be part of my programs on building your wealth, check out those links down below. You get lifetime access Us and you get lifetime access to the course member live streams as well as the Elite Hustlers live streams which I expect will begin this weekend. We just introduced uh, that that is a feature for those in the Elite Hustlers groups and that's going to be a business sort of mindset.

Business Development uh live stream versus Real Estate Analysis, stock analysis and investing q A So it'll be a little different from that, but I'm very excited! Thank you so much for watching this video! I Always appreciate y'all being here right now and uh, we'll see you all soon! Thanks! Have a good night Bye.