Well, another day. another fed video j-pow However, today gave us a lot of insights and it seems like we're actually close to the end of a rate hikes. We're going to talk about this: the summary of economic projections and a lot more. I'm going to start with some things that were, in my opinion, most interesting.

so we'll go from most interesting. Give you the bottom lines first. First up, obviously we didn't get a raid hike today. We got another pause.

Maybe we'll have another. We'll talk about those numbers. But listen to this. Jerome Powell is saying we had an inflection point in June regarding inflation.

However, now quote unquote: Three readings don't make a trend in inflation. Now this is really interesting because it's like, okay, Powell how many readings do make a trend then first it's oh well. One report doesn't make a trend. Oh, two reports don't make a trend outside soon.

It's gonna be four, five, six, don't make a trend. It seems like Jay pal and the FED are destined. and this is what we got out of the SCP as well. To keep rates as high as and and for as long as possible just to be Beyond A Reasonable Doubt Convinced inflation is gone and that time frame could be an entire year, we could literally be waiting a year for rate Cuts.

As Jerome about four reports on Megatron Five reports, don't make a trip. There are easy practical implication to that. The Practical implication of that is you're probably going to see higher rates for a lot longer and I Know that sounds redundant, but understand. J-pal said in today's meeting, there's a there's a reason why treasury yields are as high as they are.

It's because there's a lot of Supply Remember the quantitative tightening going on as well, right? Uh, Jay Powell And the fat are rolling off their balance sheet, which is bringing more treasuries into the market That lowers the prices of treasuries. The government keeps raising the amount of debt that it has, in other words, funding itself more with treasuries. So what happens now you have even more treasuries in the market, and then naturally it doesn't make sense for business is to take on all of that risk and put their money into treasuries when you could just put your money into a money market fund. For example, House Hack is throwing all of its money into a money market, paying like five and a half percent right now so we can go buy the Glorious What'll probably be pretty painful.

Dip this November December in real estate. By the way, we're not raising money for househacks to go to Househack.com so read more, read the prospectus and invest. It's Househack.com Excited to say we just got approval and we're raising. Uh, well, it's qualification is technically what's up, but anyway, so you can think about that when you have so much Supply growing again Treasury Department Adding to supply the Fed's adding to supply and people are like, why would I buy treasuries I'll just stick in money markets.

What are you not getting? You don't get buyer demand for treasuries. So Supply gets massive. And when Supply is massive, prices are low. When prices are low, what does that mean for rates? Rates go up and that's one of the reasons we've seen the two-year now at the highest level.

since 2006, the 10 years just been skyrocketing straight up. uh, if you're playing EMF it was an easy way apparently now to get smoked because we are again the highest level here. Uh, now we may come down after today's meeting, but that could also be opium because you're really relying on people saying okay, we're officially good with the FED being at the top and now we're gonna see, uh, yields fall and we're gonna go buy treasuries. But people aren't buying treasuries because the money markets are still too hot.

Which means you could see these high yields quite for quite a long time. Because you really need people to stop buying money markets and start buying treasuries. But that doesn't seem like it's happening anytime soon. It might actually take another year for that to happen, which isn't great.

So that explains the higher for longer. Like, it's not just the Feds rate, it's literally what's happening in the market. Keep that in mind. One thing towards the end of the meeting that was also pretty remarkable was J-powell telling us that the economy is doing well, but people feel like crap because they hate inflation.

They absolutely hate inflation. This was a really quick, really important reminder that it's very easy for people to support bearish videos, bearish Theses and bearish news on the internet because it does to some extent make us feel better. Because inflation does suck. It does make everything more painful.

Uh, more expensive. Going out to the grocery store to restaurants your pay doesn't feel as useful anymore, right? That hurts everyone. So it puts everybody in a little bit more of a grumpy mood. and rightfully so.

Now some of the Shockers that came out in the summary of economic projections were also quite important. So the Shockers over here were that: I was looking for the change in Real GDP to go up to maybe 1.4 1.6 We ended up getting one point or 2.1 So way stronger economy projected for this year for next year I was looking for about 0.8 Uh, these are my daughter estimates. Here we go. This was my sheet right here.

You can take a glance at that if you want. But anyway, we're looking for about 0.8 We got 1.5 So basically stronger economy for longer. But J-pal finally said it very clearly because people don't understand this. There's one thing everybody just gets wrong about GDP and inflation.

Almost everybody gets this one wrong and drives me nuts because I keep trying to correct like the people's understanding of this. So I'm gonna be very clear here. Jpow today finally said it in response to the question will a Hot GDP report hurt inflation and his response is basically no I mean hopefully not. But we have no idea.

We only care about GDP to the extent that it actually affects inflation. So GDP can be really high as long as there's no inflation. Great because our dual mandate isn't High GDP Our dual mandate is maximum employment and price stability. That's very important because people confuse that.

Well, if the economy is going to be stronger, that means we're gonna have more inflation, right? No, the economy was quite strong over the last 10 years before the pandemic and we had below Trend inflation. so those two do not correlate I Think we think hot economy 2021 And then we forget to include hot economy and supply chain snarls and money printing at massive levels that creates inflation. But strong economy itself does not create inflation. If anything, you could actually argue that a strong economy reduces inflation because you encourage Innovation and competition which lowers costs uh and can at the same time grow an economy.

So this is a very important difference. Uh, we did play Bingo Fed Bingo and then we'll go back to uh, the summary of economic projections here: I Think ish we got Bingo This was what the bingo card looked like today, so we did not get any. talk about a shock. Uh, we did.

literally and I I penciled this in afterwards. Wow, Nailed it. I Wrote in is Jerome Powell going to say we're going to look through or we're looking through high oil prices because obviously Brent's at like 93 bucks right now. it's down about a percent.

Finally, a red day on oil. Uh, bringing that down because it does affect consumers. It does hurt the economy. It does hurt earnings for the companies that you might be investing in, right? Maybe it'll incentivize people investing in some green products, but those are still expensive and require you have more money anyway.

But the point is I wrote down I Believe the FED is going to say they're going to look through higher energy prices and they literally said we're looking through higher oil prices now because you have to look through the volatility. We're like let's go Uh, so that was a it was very exciting I Get excited about this stuff Anyway, mostly anchored inflation expectations. We got that. We didn't get any talk about house so this one's like half highlighted.

We didn't get talk about housing pain, but we did get talk about housing disinflation. Uh, we did get talk about. you know, basically like nobody's talking about one. like two more hikes.

It's either one more or no more hikes. So we had some consensus here. No talk about Volcker or Grain Spam? No talk about it. Flexible average inflation targeting though.

Uh, some people were comparing to Greenspan uh, and is a briefcase indicator by Jay Powell Switching from using papers to using an iPad and people suggesting huh? Is that like a subtle hint at Greenspan that you should be bullish? because remember, you want more Greenspan That's opportunistic disinflation. We'll take our time. Inflation will come down. Everything's okay.

No Paul Volcker Style Recession Uh Jerome Powell did dance around the soft Landing question. In one question, he answered and said look, a soft Landing is not our base case scenario. uh and that led the market to sell off. Everybody started freaking out, It's like oh my gosh, that's not the base case scenario.

J-pell later came back and corrected that and said well, I Want to be clear, a soft Landing is our primary goal. It's just not our base case scenario. So he's like, yeah, that's that's our Target That's what we want to achieve a soft Landing But it's not the base case scenario which was a little concerning. uh, that that he would say it.

Uh yeah, that's not the base because it basically means yeah, we could still end up having a recession And when he was asked about this, he sort of said look, whether we have a recession or not could be dependent on things outside of our control And this is really a reference to the uh, you know, National Bureau of uh, economists or whatever uh who end up deciding whether or not we're actually in a recession or not and I think he's kind of. That's one of the reasons he's saying that it's like hey, it's it's out of our control. We're just going to focus on what we can control, which when it comes to labor, still indicates strong labor market softer price pressures on wages, which is good, does indicate that the labor market would see unemployment rise from about the 3.8 where we are now to about 4.1 That is way lower than the four and a half that the labor market was expected to go up to in terms of the unemployment rate by the FED as recently as the last Fed meeting. In fact, I wrote over here that I thought we were going to see it go from 4.5 and 24 down to 4.2 They ended up coming in with 4.1 Now that's actually really important because remember Elizabeth Warren Elizabeth Warren She so famously and this was clipped so many times, but she's like, hey, look, if the unemployment rate goes up one percent, then historically it goes up yet another one percent.

So that basically means you'd go from three and a half percent to 5.5 percent unemployment, probably via some form of recession. That would be bad. This was. it was something that was very concerning at the time it was said.

Now though, with the FED projecting hey, maybe we'll only go from three and a half to 4.1 which is only about 0.6 if that. Maybe you start breaking some of that historical Trend Because you're not, you're not at one percent anymore. So uh, maybe maybe that's a good thing. It'll be something bullish to look forward to.

Uh, this was interesting here. The market implies implied rates. So right now we're sitting at a market implied 67.4 percent chance as of the last update that we will actually stay. Uh oh, hold on a sec.

Uh, let me let me see. I may have written these down backwards Let Me: Just double check. Uh, we are at okay. here it is okay.

Now it's changed to 70. Whatever. Okay, 70. It's now 70 percent stay? uh? at? uh, 5.25 So 70 chance pause.

Okay, and then for the next meeting, that's November 1 which has a 70 chance. The next meeting is December 13th and that has a 37.9 chance of a hike. sorry I wrote that. Kind of funny.

that would be about a 62 chance of a pause. So we're really like 70 to 62 percent chance of a pause right now, not thinking that another rate hike is definitely coming. So this gives us some of the summary of economic projections. Let's look at some of the other things that were important that were touched on as well.

Uh, a quick reminder. again. check out Housesack.com Yeah, we are now open to non-accredited investors. We're very excited about that.

We think this winter is going to be a phenomenal time to buy real estate. and of course, we watch the market every single day because we're actually in the markets. and I'll just do that from the office. You actually go in the markets.

talk to the Realtors see what the competition is up to. Really important for making sure you're insulating yourselves with good deals. Okay, so we talked to Energy prices. We talked labor market long-term rates, not signaling.

Okay, right. that was the supply issue we talked about that we talked soft Landing The strike. Yes, the strike could end up affecting the economy, could also affect inflation, but it's too soon to tell uh, no comments on government shutdown uh, incoming data coming in much stronger than everyone expected and suggesting that uh, forecasters are a humbled bunch and have a lot to be humbled about now. basically saying like nobody really knows, but things are definitely going better than we expected.

Uh, I did think this phrase was interesting I wrote down J-pal said we will raise rates if necessary, right? that? That's an interesting line because it somewhat implies that as long as things stay on the trend now we're good, we don't actually have to raise rates again. That's what Jay Powell is implying in my opinion with that phrase raise if necessary right? Again, Hotter GDP is not a guarantee. Uh Atlanta Fed real now GDP Let's go pull this one up a hotter GDP Read is not necessarily a sign that you're going to have inflation real. GDP Now on the FED Now indicator is sitting at 4.9 percent.

It's come down from the 5.9 which felt a little ridiculous. You have a five-year break evens coming down as well. Five year break. Even right now, sitting at 2.3 it is still high.

It's still at the highs of Late July and August so you haven't seen any kind of movement on the five-year break even really, other than recently up Five Year Forward Break Even Same story: 2.35 Still a little hotter than we'd like. Still uh. pricing in uh, right now, the market is pricing in rates at 4.7 In this December of 2024, 4.7 means rates are going to stay high for quite a while. That's where the dot plot's worth looking at as well.

And I think that was the probably one of the big takeaways of this meeting and why markets are Red is because you really have this tendency to believe that we're not going to lower rates for a while and not while it could be all the way through 2024. I Mean, look at the Uh. summary of economic projections. here.

we're at 5.1 up from 4.6 on what rates will be at the end of 2024. The range is four points. Uh, 4.4 to 6.1 Yeah, somebody's really high, Somebody's low. The central range is about four, six to five four.

which is basically saying 4.7 4.8 4.9 is where we'll be at the end of next year. There's a real practical warning to that. The real practical warning to that is, don't assume you're going to be able to refinance and bail yourself out of a negative cash flow if you're getting into a negative cash flow. So be careful.

These treasury markets probably going to keep yields hot for a while just because there's so little appetite to buy treasuries. I mean I Personally would rather just buy a money market or put my money in a money market account. You get you get higher rates in some cases, and there's zero risk. Basically, because you don't, you don't have this Market fluctuation risk.

You know, yields go higher. It doesn't matter like you're you're underlying principle isn't losing value. And uh, and and so that's definitely why markets are moving red. Uh, on on some of this information.

uh, for actually spelling out higher for longer like it's it's here. Uh, real rates. Meaningfully positive. That was our Nikki T question I think Nick could have asked a better question.

Seven went for no hike, 12 went four. One more hike. Uh, J-pow actually calls that a pretty tight group. Obviously there are lags to consider, uh, regarding the economy, but thinking we're at sufficiently restrictive levels expecting inflation to continue to roll off, especially with housing.

But those on fixed income get hurt the most because of inflation. So this gives you a full recap here. Again, Practical, practical bottom lines here. Okay, let's get to the Practical Bottom lines: Number one: Learn about Househack, diversify, away from the volatility and the stress of stocks, and get exposed to a startup at, in my opinion, the best price that could potentially ever exist for a startup, which is a one-to-one valuation.

It's basically unheard of. Uh, but I I owe everything in my community and in a community. Or people are investing? I'm not going to VCS You know, getting on my knees begging for money? It's it's just the community. And we've already raised, uh, in the first, like 18 hours twice the amount of money we raised on the first day of our fundraise.

Uh, last year when we were raising with only accredited investors. So we're really excited about that. Now it's open to non-accredit investors. Okay, so that's number One Housewife.com Read the perspectives.

Number two: I'm still getting people who are asking me Kevin should I buy this deal assuming I'm going to be able to refinance and my answer almost always is no, Uh, we do and I have to be careful, you know I don't want to pretend like I'm giving Financial advice to everyone on this video here. This is not personalized Financial Advice I do that. By the way, Stackhack.com you can get licensed Financial Advice for myself and the team I go through all your stuff with the team and then I make a video and a plan for you. It's really cool.

It's also inexpensive, which is nice, but anyway, there are a lot of people who are saying things like oh, I'm gonna, you know I'm gonna buy this market value property and I'm gonna have a negative cash flow I'm gonna float it until I could refinance next year. You might not be able to refinance next year. You should plan. like if you're gonna sync yourself up to your eyeballs in debt, you better have the capacity to float those damn payments for five years.

That's my rule. Now don't get me wrong, I Think that in 10 years interest rates are going to be sub two percent I Made a bet as long as we're all still alive. Knock on wood, put it on your calendar 2033 Kevin Says interest rates will be less than 1.8 percent for a 30-year fixed rate mortgage. It's because I think we're going to disinflation.

uh, and and that'll end up and then deflation. That'll end up driving rates lower in the long term. Short term though. uh-uh if we're at four seven at the end of next year, that basically means we're flat all freaking year long as Jay Powell And the clan is like, uh, well.

Nine Reports doesn't make a trend. Nope, nothing's broken yet. and then they're gonna go. 12 Reports doesn't make a trend.

Nothing's broken yet. Uh, it kind of sucks, so so don't plan on that like there's some kind of massive Rebound in uh, uh, you know a gunlock says think we're getting near the end of this 10-year rate rise? Well yeah, I mean that's obvious. Why is that even a banner? Why is that even a banner? CNBC Like you may as well just write on there the pope is Catholic Do bears poop in the woods? Yes, okay, yes, that's stupid. But anyway, so so don't buy something with a big fat negative cash flow planning to refinance? I think it's a bad idea.

So uh, okay. we talked treasuries to talk house talk practically. okay. Practical nature for the stock market.

So practical nature for the stock market. I I Still heavily believe uh, even where prices have moved now that Staples probably still have at least six months of pain ahead of them. Uh, the reason for that is you really need to lap all of the potential price increases of 2022. then you're going to get into a territory of lower volumes and lower volumes and lower prices are going to result in an earnings recession in consumer staples.

That's the target. the Walgreens uh, whatever, right? Walmart Macy's These are companies that I've been purposely staying away from for over a year because I thought we were going to start pricing in an earnings recession. In those as inflation went away because they didn't actually have pricing power. They had full pricing power.

Their earnings look good because of faux pricing power. Remember what full pricing power is Full pricing power is Oh well. Uh, everything is going up because of inflation. We have pricing power because we're a great company.

No you, your earnings are going up because everything is inflating. That's very different from I Gotta have you know, an N-face system on my house I Gotta have an iPhone I Gotta have a Tesla I Gotta get the H100s for my you know AI startup or whatever that's that's pricing power. Very very very very different. So uh I do think that pain continues in those Staples So keep that in mind as well.

Eventually there will be an opportunity in those usually housing stocks were covered before Staples Uh and housing stocks have actually done quite well because there's so little Supply But they've recently like the housing indices have fallen about 10 recently and uh, that could be because of some more pain starting to get priced into certain markets. You start looking at markets like Austin Texas for example or Oregon or Boise I've been I've been pooping on these markets for a while here but it's even worse than I Thought it's so bad that Lennar is literally in their earnings call. We just saw this in the course member live stream yesterday which by the way we have some new new verse Pro Courses You should check them out. They're little crash courses.

They're really really good. They're on pre-sale right now at a new price. Check that out at Meet Kevin.com But anyway, it of course remember live stream We're like oh, let's look at the Lennar earnings call. remember how I hate Austin and Boise right now and then So then I go look at the uh Lennar earnings call and they literally choose Austin and Boise to call out by name and I'm like, yep, that's why you have to be in different markets in the country.

There's a reason why I travel as much as I do to go to different cities because I know real estate for sure I know this game and I love it. But anyway, hence invest in House Hack Outside.com now fundraise. Okay, so Staples housing stocks, right? So Staples usually follow housing stocks, but housing stocks recently are are slowing down so maybe that's not a great leading indicator yet. Uh, and that about does it for really.

the Fed's reset here I Would call this like a fed's reset of expectations I Think this is really a slap upside the face going: Don't think rates are getting cut so fast next year. Quite frankly, all based on this unless we get some really fat like negative inflation reads: there's no reason for the FED to cut and that sucks if you're really betting on rate Cuts soon. So uh, buckle up. be careful.

That might be why Mike Wilson says it's going to be the indices that do the best because you're going to get a lot of fomo of people who are in money markets and they're like oh, I'm making five percent in money markets and then all the stock market people at the end of the year gonna be like I invested into the NASDAQ and made 30 or I invested into an actively managed Gtf and killed it. You know, a year to date I mean look the S P 500 is a 15 year today. Despite the volatility, right? If you look at QQQ year to date, you're up 38 year today. It's incredible.

You look at uh year to date on. you know, some ETFs they're up like 45. Oh, but at least you made uh, five percent or no money markets. Uh, you know, but the volatility will continue.

That's the point. But I'll tell you this. This is what we're gonna leave it off on. the closer we get to rates actually coming down, which at this point might not be until the end of 2024, the more the stock market will price that in.

Remember how far ahead the stock market usually prices? The stock market usually prices ahead 18 months. So we start getting to that 18-month level. Where looking ahead 18 months, you know we're knocking on the door of early 2025 and it throughout 2025. Look at 2025, how low the FED thinks rates are going to go in 2025..

that's what's got to get priced in over the next year. Over the next year, we price in that by the end of 2025, we get that's actually not as low as I thought. 3.9 They just jacked that up. Dang it, because I remember it being 3.4 so you can see it's gonna be more of that volatile Nike solution.

It's not gonna be that straight. It's actually not until 2026 that they project them going down to 2.9 So that makes sense because you've got 4.7 at the uh. the Market's implying 4.7 at the end of 2024.. that's high though, because that's only about one and a.

That's about what. minus one and a half percent or something over the next year and a half. The Market's right here. so you'd really only be pricing in negative 0.8 That negative 0.8 needs to get price stand over probably the next six months.

So let's let's draw the the map really quick. Okay, so next six months stocks. Uh, price? Uh, in negative point eight percent? Okay, and then in the next 18 months. Uh, next 18 months stocks have to price in minus 1.8 Unless obviously something breaks.

This is possible too. And then Fed knows this. That's why they'll just throw down the bingo card of uh oh oh. cut rates two percent instantly if they need to.

So there we have it. Thank you very much for watching. Make sure to subscribe. Join me every morning at 4am for a day cat or a day cap.

a uh a sort of a bottom line report we call it. Give me feedback as well. I'm really reading almost all the comments on the bottom line report I'm trying to understand what everybody wants. uh some feedback I Got this morning some people asked they said Kevin can you go detailed into income statements and balance sheets every day in the bottom line report? Yes, we can have a segment on that absolutely.

Earnings calls, income statements, balance sheets, stock analysis. uh also I got some suggestions that were uh, throw my opinion in more I Was actually surprised by that because quite frankly I thought people just wanted like non-bias and not like like that the angry Kevin opinions. but I'll I could do both right I could do the non-bias and then I could be like and here's what I think Anyway, appreciate y'all we'll see in the next one. Goodbye, leave me a comment.

let me know what else here I Feel like nobody else knows about this? We'll try a little advertising and see how it goes. Congratulations man, you have done so much People love you people. look up to you Kevin path right there financial analyst and YouTuber meet Kevin Always great to get your take.