What's up everyone? All right? So in this episode, we're gonna speculate: what is the Federal Reserve gonna do tomorrow when we find out about the interest rates and I want to hear what you guys think is going to happen? So we have uh, three options. Number one is they say they're gonna pause no interest rate hikes. We're gonna defer it. We're gonna push back because of what happened in Silicon Valley Bank and these other Banks we're just gonna pause.

Second option is they're going to go with a quarter basis point hike, which is what they had sort of initially. uh, suggested they were going to do. and then the third is they're going to go with a half basis point hike which they had kind of given themselves. maybe the runway that they might do that.

So those are three options. What do you think they're going to do? No hike, pause. And maybe they don't call it pause, but they just no hike right now. Quarter basis point or half a basis point.

So obviously we had the inflation the CPI numbers for um, uh, the last month that just came out and they were. They were still hot. They were I mean obviously we're still in a high inflationary environment I think it was 6.4 percent. Uh, but I didn't look closely at it so I knew it was still high.

It came in around expectation, but it didn't It's not decreasing and this is you know, year over year measurement. So we're still high in inflation. Okay, but we've just had this collapse in Silicon Valley bank and then we've also had the First Republic Bank bail out so to speak, the 11 big Banks infusing uh, cash infusion of what was it 30 billion And then we've got what's going on with Credit Suisse. So the fact is, right now, it feels like we're in this environment where in 2020, the Federal Reserve you know basically used everything it could to stimulate the economy.

And man, the economy went Hot Super super hot 2020 2021 and then 2022. They're like, wow, Inflation's not transitory. Now we need to put on the brakes. but the economy is like this massive ocean liner.

It doesn't turn on a dime, it doesn't stop. And so there's that expression that monetary policy is lagging. So anything that they do today is going to take maybe six months, maybe longer to really see the true effect. So does that mean right now, when we're seeing some of these Banks collapsing? this is the effect of a decision that was made six months ago.

And so what is it going to look like six months from now? So that makes me think that if it were me I would say wait a second. Wait a second. Of course it's not me, but you know if it were me I would be saying wait, we wanted to slow down the economy. You know, we wanted to increase interest rates so maybe people wouldn't be buying houses as quickly.

That would reduce the the housing prices, right? That would bring soften the housing market a little bit, make it more affordable. Maybe we want to slow down the the car market. you know, slow this stuff down. Naturally, That could result in some layoffs in some of those Industries Real Realtors aren't selling as many houses.

some layoffs, car dealers aren't selling as many cars slow down there and that that all would be kind of a nice gradual slow landing. And then we just had a bank collapse. So I feel like that was unintended I Can't imagine that they would have been like we're gonna try to knock down some banks here. No way I Mean that was definitely I'm sure unintended.

and actually what it does is it highlights that Silicon Valley Bank You know, because of this and I mentioned this in another episode about why the banks are collapsing. Um, the HTM accounting rules have held to maturity the ability on a balance sheet to show the value of an asset they bought based on its value at maturity which could be 20 years out and to not have to write on the balance sheet show the face value which in the case of bonds. Last year, both stocks and bonds went down. So we found out that Silicon Valley on their 10K from uh, just last month was showing 91 billion dollars in assets that were held to maturity.

So their true value their face value if forced to sell them a lot lower. So it kind of seems like you know this increase in interest rates over the last year which has been historic is now, Sort of. It's like squeezing. you know, some little uh, surprises out and all of a sudden we're like, whoa, We've got this held to maturity accounting issue in the banking sector, right? So maybe maybe Regulators didn't do enough on Silicon Valley Bank or in the way to change this accounting Rule And there was.

There were some changes to it, but they didn't fully address it in the last five years or so. So my I would say. My hope is that they say, let's just let's just pause. What they might say is they might say we're going to proceed with a quarter basis point hike because these are atypical situations with these banks that are in trouble right now and the market.

The the government is more than capable of bailing them out and unwinding it. We've dealt with bigger issues than this, so this isn't going to be a problem and it's isolated. So the economy is strong. The banking system.

The banking system is strong, the economy is still hot when you cool it down, we're just going to see the course and not make any changes. Um, and maybe in fact, that would be a bigger vote of confidence. Uh, but it's hard to feel confident you know when the whole transitory thing was so wrong? So what do you guys think I don't know? Let me know. Down Below in the comments I Think it's certainly going to have an impact on the market.

Uh, no doubt about it. Uh, and and for small Cap Traders We continue to be in this Bank drama that's taking a lot of attention away from the Small Cap Market that we're typically trading in. So this has been a very difficult time for any of us to really probably find any Edge whatsoever. So this is a time where as far as I'm concerned, I'm just kind of laying low, holding tight I've taken a couple losses and I'm just like.

You know what? It's a stepping back. No reason to dig a big hole right now. Let's just see how things unfold over the next week or so, so there will I'm sure be some really great opportunities ahead, but right now it's very choppy. so I'm curious to hear what you guys think is going to happen.

Um, is the Federal Reserve going to increase interest rates this week? Let's find out.