Now we're going to go through a few things on the FED before the FED meeting, so it's important to watch this. ASAP We're going to talk about Nikki T's hints. We're going to talk about Goldman's hints. We're going to talk about TS Lombard's hints and we're gonna draw some dots because that was what we do.

Oh well, Reminding you that today is the expiration of the coupon day which means prices go up and yet lifetime access guaranteed best pricing and it's only a one-time payment and you get lifetime access to me and of course member live streams and all the perspectives on building your wealth. So if you like the perspective you get here, just imagine what you get in there. It's a lot of amazingness. Now we gotta talk about the Federal Reserve because obviously that is the big discussion that we need to have today.

That is the most important topic. There are a lot of other things to cover Ukraine oil and China with the Saudis We got so much to cover. But the most important thing to talk about right now is what's going to happen in about five, four to five hours when Jay Pal gets all less papers together. you know, makes it seem like he's frazzled I Love that.

By the way, when he comes out and acts frazzled and like the corners of his papers are damaged and stuff making it seem like he's kind of been like nervously preparing. it's all for the show. Okay, maybe it's not, but I think it's all for the show. But anyway, what's going to happen? And so I've given you my projections.

but in this video, we're going to give you some projections on what institutions are looking at. Uh, first, it's worth noting that the Bundesbank Chief says that rate Setters must be quote more stubborn in their inflation fight now I Actually thought this was an interesting piece and let's look at this together here: Germany's Central Bank Boss said Eurozone Rate Setters must be more stubborn in continuing to raise borrowing costs to tackle inflation. He discounted fears about the recent Financial turmoil that's been experienced. Now that's interesting, because really, what we're saying is hey, whoa whoa whoa hey, the banking crisis does not matter.

Instead, you must continue to hike. You must continue to raise rates as much as possible. Uh, bad accents. Uh, and that is actually what's being at least to some degree priced into markets.

Now, this chart is going to be very important today. Uh, this is the Federal Reserve's terminal Rate expectations. This terminal rate expectation right now is sitting at about 4.96 Now, this is going to be very important because if the FED comes out with a summary of economic projections suggesting they're going to go from, say uh, you know where we are now four, four, five to four, seven five with the 25 BP height. Uh, and then in their summary of economic projections, they have the goal of hitting 5.1 If they move that Target up then the Fed's basically signaling to us, hey, look, you all need to price in many more price hikes I Don't know why you all got your your panties tied up because of a silly little banking crisis? Who cares? We lost five banks we still hiking sorry now.

Unfortunately, that could lead to some pain in the uh, the stock market because I think the stock market is actually to some degree trying to think that maybe the federal pause which is just totally ludicrous. There are multiple different banks calling for a pause. No more research is calling for a 25 BP cut Elon Musk is calling for a 50 BP Cut: You've got no more. uh, uh, you've got Goldman Sachs Calling for a pause.

Most banks are calling for a 25 BP hike, but just this idea of of of pausing basically totally discounts inflation. I mean I Suppose if J-pal comes out and says inflation's over, we're gonna pause and cut. Yeah, boys and girls, we're going back to the Moon But but I don't think we're there I Actually think the central banks CBS are are really clear that, uh, look, we got to make sure inflation expectations don't run away from us. Uh, and so Mr Bundas Bank says if we are to tame this stubborn inflation, we will have to be more stubborn I didn't know that was possible for a German raid Setters at the FED are set to decide on Wednesday whether to continue raising rates despite the collapse of U.S Uh, you know Banks Silicon Valley Uh, a bank and signature anal and of course we had Credit Suisse and in Switzerland and so on.

So analysts largely expect to raise by a quarter basis point today. Uh, they talk about how the banking system is resilient in Europe and much the same as being talked about in America that this is not another 2008. Uh. and instead we just have to basically focus on getting inflation down.

That that is going to be the most important fight now. I Agree, Uh, and Nick T gives us some hints as well. Let's close out some of these others here. Let's look at what Nick T has to say.

So this is what Nick T tells us to watch for: Nick T Uh, this is uh by, by all accounts known as the FED Whisperer. He's the guy that during the FED blackout periods. Basically, lets The Fad not be in a blackout period. He's the guy that gets the text messages from the Fed that's like yo, We're leaning this way.

write the story. So a lot of people actually refer to articles from Nick T as kind of like a hint from the Fed So they can increase their messaging to the public even though they say they don't message the public I Don't know, it's wild. Anyway, the FED faces one of the thorniest policy decisions in years on Wednesday Whether the Lyft interest rates again to fight High inflation or hold them steady amidst the most intense banking crisis since 2008., we got some more research that we're going to dive in on this, including from Bank of America which we'll talk about in just a moment. Uh, but anyway.

Uh, this live I will be live streaming this at 2PM Eastern and 11 A.M Uh, California Time The video is already up so you can go click it, remind if you want on it. But anyway Nick T says the FED has tried over the past year to Telegraph Its raid moves to avoid surprises, but hasn't confronted an Abrupt and fluid crisis on the eve of a policy meeting. Now they do on Tuesday Investors thought a rate hike was likely with interest rate Futures uh indicating a roughly five and six chance of a quarter point increase. Okay, well remember the FED also likes to do what the market does uh, or what the market projects.

and if the market is projecting a 25 BP, it's get. it's probably going to be a 25 BP That's my base case. It would be very, very rare to see something other than a 25 BP Here, officials raised their Benchmark fed funds rate by a quarter point to a range between 4.75 and or 4.5 to 4.75 in Fab. Now we're going to get the next 0.25 The case for raising rates.

Here's what to watch for. So the bank: Silicon Valley Bank collapsed Two weeks ago. Officials were set to debate whether the raise rates by a quarter point or half point because signs of the economy still running hot. Since then, the economy has shown surprising strength in hiring spending and inflation, leading to concerns about that aggressive rate Rises over the previous year hadn't done enough to slow and Corral inflation.

in other words, making the argument like hey, uh, these rate hikes still haven't caught up Of course. now people say, oh, but we had banking failures. Is that not a sign of of interest rates catching up? Maybe to some degree because you had some banks with very, very poor risk management procedures, But as those failed treasury yields actually fell which increased the value of the bonds that other Banks had on their balance sheet, which actually makes a continued banking run less likely. Anyway, some economists argues argue that stopping rate increases now risks fueling unacceptable risks that inflation will stay higher for longer.

Fed officials have at times acknowledged the risk of being forced to simultaneously fight two problems: inflation and financial stability or instability. Several officials have said they'd use emergency Okay, this is boring so far. So anyway, let's go to where there's a little bit more interesting here. This is: Crisis Management Okay here.

What's this quote that they're using over here? I Always like the quotes that they use because they try to provide both sides. They're probably a little worried they'll be seen in some cases as knuckling under a financial pressures. In other words, like if they go for or zero then it's kind of a sign that their weak paper handers. Now of course they do give this argument about maybe holding steady because hey, Financial conditions have tightened since the bank failures.

This is true, we've seen the Goldman Sachs Financial conditions index much higher than where we were sitting at the beginning of February But and the cost of borrowing for these banks have gone up. Uh, but Goldman Sachs makes the argument here that increasing tightening in lending standards could end up creating more recessionary fears and therefore do the work for you of of tightening. And so maybe you don't need higher rate increases. Now yesterday TS Lombard had a good piece.

They actually said that a Fed uh or or the tightening and lending standards is probably going to be similar to somewhere around 0.75 to 1.5 percentage points in hike in rate hikes. Goldman Sachs put that number at only about 0.25 to 0.5 I actually agree with TS Lombard more. Here's that piece. Let's look at this piece together.

So the 2008 PTSD versus the ghosts of the 1970s. So they talk about uh, basically things being broken and this new era of no longer having permanent zero lower interest rates which are a great time to sort of expand risk. But what you have here is uh, they talk about how the US is acutely susceptible to monetary tightening and that's why we're seeing these banking failures and we have to realize that these banking failures are going to tighten lending and Bank fears so much that the first thing that happens is people stop uh, getting yield on their deposits or as high of a yield on their deposits as they could potentially at new Banks or Fintechs. There's a reason for that, You might be wondering: why is it that the Legacy Banks don't pay me a yield like the fintechs do? Well, Part of the reason is the Legacy banks have a lot of the debt.

that or the assets that are devaluing quickly as rates are rising and so rather than pay out more in interest, they are taking more of that income yield that they could Farm off of your deposits uh, and and buffering their losses on their bond portfolios. But in doing so, they're actually driving their depositors out of the banking system and into just buying Treasury themselves to increase their deposit yields. Which is a good point. Now they hear talk about how this is not going to be another 2008 which is another argument for the FED just maintaining their 25 BP hikes.

Uh, but they talk about here and I think this was really neat. They talk about how cred a credit squeeze that is an actual tightening in credit standards typically feels like another 75 to 150 basis points of hikes. and that I think is actually what we want to pay attention to at the Federal Reserve Today is it possible that we enter into a new phase of the Federal Reserve We'll talk about that, but basically look at this: They refer to the Bank of England as a recent example where the Bank of England patched up the UK financial sector and maintained its monetary squeeze, but never reverted to its previous extreme levels of hawkishness. Instead, gradualism ruled.

Okay, so now this is really interesting. Let's try to put all of this together. So first of all, today is March 22nd, which is the Fomc day, but it's also the expiration of the lifetime access of the coupon code linked down below for those programs on building your wealth. Okay, so we'll just leave that right there.

Okay, important to know and it's only a one-time payment. If you want to break it up into smaller payments, you could do that. Just check out with PayPal Okay, so what does this potentially mean for the Fed? Well, If The Fed hints in any way that we're going to do 25 BP now, but tighter lending standards could affect the market the way TS Lombard thinks. get.

this could affect the market 75 to 150. BP Well, what does that effectively mean? That means we can have a lower bound. Uh, in March that's with a 25 BP hike of 4.75 But now, if you add in tightening with tightening because banks are freaking out, you could actually be at a rate of 5.5 to 6.25 percent without actually being there. Think about that.

If the FED hints this today, they could be signaling hey, we don't have to do as much anymore because the banking system is going to tighten and effectively do that work for us. Which basically means the FED could be at a six percent effective rate thanks to the credit squeeze they're creating while pausing after the next 25 BP that we're expecting to get today. That is also very interesting because in my opinion, if rates were effectively 5.5 to 6.25 we would effectively I would call it an effective guarantee that we're hitting a recession. If if we have rates this high and if the banking crisis tightens lending this much, then that's where we're walking.

So what could that then mean for the way the FED talks to us? well as TS Lombard says gradualism which is basically a way of saying uh, I I would call it uh, softly acting like a hawk with hikes and seriousness on inflation, but mostly being dovish, it's kind of like a change in tone. And TS Lombard makes a really good argument here that hey, look, this credit crunch could hit us so badly that who cares what banks say about what happens today, What actually matters more is about the Fed's potential move towards gradualism In response to the credit tightening that's going to happen as basically all the banks pucker and they're like oh dear, we better tighten lending because we don't want to go bankrupt like all those other Banks And that does enough of the Fed's job for them, that's entirely possible. It's something to pay attention to now. we'll look at a Bank of America piece as well here, but I think we should quickly get the Goldman Sachs Financial Conditions index.

Uh, let's get that really quick just to see how we're doing going into the meeting. uh Jay Powell looks at this chart I'm 99 certain now Financial Conditions look like okay, look like we're rotating down slightly, but uh, let's pull this up together here. Okay, here we go. So here are Financial Conditions as of this morning.

A slight loosening over here after the drama that we've had in the last uh, you know, a couple weeks here. Uh, However, this level is still substantially higher than where we were over here when Jay Powell uh spoke with Dave Rubinstein and and cheered how it uh, Financial conditions were tightening. Remember, to some degree you do not want to see this sort of uh uh, you know Char rotate all the way down because you do need financial conditions tight enough to kind of prevent rampant and runaway inflation. I Don't know that this drop really is significant to the FED though.

I mean if we were down here I think we'd get a very hawkish fed. I think here. Given that Jerome Powell was pretty neutral over here. I Wouldn't be surprised if here you have a pretty calm fat as well.

So I'm I'm looking for a 25 BP hike in a relatively calm fed today. That's that's what I'm looking for now. Uh, we do have Bank of America that has some insights on this as well. Hop in on this piece here.

So what's next for growth and inflation and are there going to be second round effects blah blah blah. So let's just look at some of their summary answers here. So the first thing they talk about here is if Regional Bank issues are ring fenced, tightening lending standards, and a Slowdown in credit creation would be consistent with our Baseline outlook for a mild recession in the U.S Later this year they've been calling for like a Q3 Q4 uh, recession here. Our bank research team believes the FED will impose stricter liquidity and cap requirements on a larger subset of banks, leading to tighter lending standards.

More pronounced, Financial stress could lead to Fed cuts and even a return to the zero lower bound if stress spreads, but this is not our base case. It's actually what the Bond market has been pricing in for a while that we would actually end up seeing somewhere around 500 basis points and rate cuts by the time the cycle is over. That would put us basically right back at zero. Now, a lot of people don't think we're ever going to go back to zero that we're never going to see those low rates again.

That's going to take a very long time to get inflation down. Uh, I I'm a little torn on that I probably lean more like 60, 40, maybe even 70 30 towards the idea that oh no, we're going back to zero And not only are we going back to zero, but we're probably gonna start knocking on the door of negative rates uh, in the future. but we'll see mostly because of the deflationary impacts of Uh AI autonomy And otherwise, with money markets now yielding four percent, are we worried that money will flow out of equities and into higher risk free yielding assets? Well, my answer to that before I read their answer Here is my answer to that is I think that's already happened I Think people have already thought why would I invest in stocks when I can get four percent risk free on treasuries? Uh, and the answer here is simple: you might get four percent on treasuries and maybe avoid a 10 or 20 right down on on the stocks that you bought. but if then all of a sudden those stocks go up fifty percent.

Well boy, your opportunity cost was pretty rich to sit in those treasuries. But anyway, cash has become an alternative. but there have been, There's been no equity capitulation so far. Yeah, because I feel like allocation to equities is already relatively low I I saw uh, it was actually a funny uh little meme yesterday on on Twitter where was this darn thing? Uh, it was.

Let's see here somebody writes waiting for oh here it is spotted in. Look at this investors waiting for a drop below the October lows before buying and it just shows a bunch of skeletons. uh, would look to be impaled on some kind of wall that doesn't look very pleasant. but uh I don't think they they are bothered by that anymore.

Anyway, Uh, okay, fine. In the past has the how has the FED reacted to financial crises when they are in the process of raising hikes or racing raising rates following the 1987 stock market crash, the FED cut rates and then raised them again as things stabilized? Ethan Harris believes the FED can address Financial stability and inflation with their varied policy tools and concerns. Uh, that uh, that they can't are overdone I don't think I mean this is a suggestion that Goldman Sachs is making as well I think it's so wrong? I I think there's I would I I bet a good chunk of money on this I Think there's almost no chance. the Federal Reserve pauses and it keeps going.

If The Fed pauses They're done. They're done. A Fed pause means they're done because they've said a million times. We will not repeat the mistakes of the 70s.

the start stop Uh uh uh policies of the 70s, so it's very interesting. Uh, you know you could go to Goldman You know they're the ones who are saying this. Here's their piece from this morning. and uh, they refer to the Fed's response to the 1966 Credit Crunch 84, 94 and 98 collapses.

Uh, and they look at these. But basically they say here. beyond the immediate response, the FED eased monetary policy further in two episodes where it initially eased resumed hiking in an episode where it initially paused and continued to hike further in an episode where it initially hiked despite Financial Cons: stability concerns I Believe they're going to do the yellow section here, which is just keep hiking even in the face of financial stability concerns. Overall, the historical records suggest that the Fomc tends to avoid tightening monetary policy in times of financial stress and prefers to wait until the extent of the problem becomes clear unless it is confident that other policy tools will successfully contain stability risk well.

And I bet I guarantee you a 99 certainty. That's exactly exactly what the FED is looking at today. They are looking at this and saying, look, we have a Buy the FED pivot facility. It's the bank term funding program.

We have the Buy That Fed pivot facility. We did our job. Then we added to liquidity in US dollar swap markets throughout the world and we again did our job. We got tools.

I I Guarantee you he's gonna say this. We got tools on our tool belt bro wheeze using them. but rate hikes are important to contain inflation because that remains our number one fight. Uh yeah.

So in other words, they're gonna make this argument. my thesis that we have stability. They're gonna send this confidence. Today we have stability.

Now we need uh Financial stability, right? So that that's we have Financial stability. So instead we're going to focus on maximizing jobs and stable prices because that's our dual mandate. Financial Stability is kind of like their third mandate. Uh, well, actually it might be their primary mandate and then you have this dual mandate thereafter.

Either way, because the financial stability goes actually wonky. The other two issues go away. They'll do whatever they need to do to maintain Financial stability, even if that means lots of job loss. But uh yeah, I don't I don't I don't know I I Just don't jive with the arguments that, uh, you know we're gonna start.

stop here. So I I'm actually bullish on it I'm bullish on 25 and I'm bullish on a dovish fat I'm happy about that. I Think the the scariest part where we could get rug pulled today uh is a you not using the coupon code link down below because you pay once and you get lifetime access and you're guaranteed to get the best price. So I don't know why you wouldn't you get to join me in fund the analysis? uh q1a uh or real estate analysis ever.

Oh, there's so much we do, it's great. all right. So here's the Dot Plot again. Well, the sap uh, the Dot Plot is one of the other.

Pages it doesn't so terribly much matter. Uh, I suppose since I mentioned it, I'll pull up the dots for the people who care about the dots. this is what the dots look like. Oh, you know what I should do? I should make my projection over here I Like making these bets, somebody is asking me how come Kevin is not introduced to Espresso So sometimes when I land at uh airports, uh and I need something really quick or no.

Usually when we're about to take off at airports, I'll have an espresso because the plane takes off so fast that it kind of like jerks. Uh, your coffee back and then you spill I've done that like three times. so I I'll have espresso. The problem is, espresso gives me a massive stomachache.

It's just too concentrated, too acidic or whatever. So so I I know espresso I like it especially. you go to like Italy or you have some you know Cuban coffee which is really espresso I think Anyway, Okay, so so this is the Dot Plot projection from December Okay, I'm gonna I'm gonna draw my Dot Plot projection for for this year. Okay, so this is gonna be midpoint target range for the FED funds rate.

uh, in 2023. So this is the end. Let me make sure it's the end. We'll go through these really quickly.

Oh, here all my drawings from last time. Okay, so here it says yeah, Okay, it's the end. Uh, median logaron. Uh, is it the end though? See, that's actually interesting.

Is it the end or the peak that they write over here? Uh, it's the projection for the year. Usually that's what they expect the year to end in I'm pretty sure these are year end, but for let's see, Central Tendency three Highest lowest long run. Uh, one participant did not submit based on our system monetary policy. Fourth Quarter.

Oh, here we go Present changes from the fourth quarter of the previous year to the fourth quarter of the Year indicated. Okay, Q4 it's Q4. So let's go back to the dots. So where do we think rates are going to be in Q4 Okay, so now this is going to be interesting.

When the FED does this. It signals uncertainty, uncertainty. When the FED does this, that is. all the dots are clumped together.

It signals certainty. I Think what's gonna happen is how many dots we have. One two, three, four, five, six. That's uh, seven, eight, nine, ten, eleven, twelve, thirteen, fourteen, fifteen, sixteen, Seventeen eighteen nineteen.

Okay, and then one person didn't submit. Okay So 19. So 19 dots this time. How how would I revise this? Well, I would probably go as far as saying uh for Q4 I'm gonna go I'm gonna put five right here.

I'll put two right here. Uh, I'll actually put uh, let's see, that's seven I'll put four over here. Three four. actually.

I put five over here. That's 16. And then I'll put another four right here. That should be added up.

But this is. this is the kind of dispersion that that I would think of. I I Think we're we're going to lose this higher end in consistency. It's possible it's possible you end up having like one lingerer up here, but I think you're going to lose the high end by Q4 Remember this is Q4 All right.

So you're gonna lose the high end and uh, and you're gonna shift this whole box basically down. Um, as much as half of a percent or so. So we'll see. that's uh, that's my take.

Kevin Drinks Energy drinks. No I don't those are very bad for you I used to, uh, but not anymore. So anyway, those are my projections on the Fit updated just a few hours before the FED meeting with all the latest: Goody Two-Shoes.