Oh my gosh, there was so much fun about what was in the fed minutes today and i actually think it was just click bait headlines because the contents of the fed meeting i actually really liked in this video, i'm gon na break down exactly what i was Impressed by in the fomc minutes for may that's the beginning of may meeting all right. Let's get started with it, so first thing: uh. There are a lot of folks circulating this quote and they really just misunderstand what the federal reserve does when they do this. But there are a lot of folks circulating the following quote on twitter, and i want you to be aware of this, so that you don't fall victim to.

Like misunderstanding, this says the median desk survey respondents also projected 50 basis. Point increases in the target. Fed funds range at the following meeting and uh and the following two meetings that is, and another 125 basis point increases by the middle of next year, bringing the projected midpoint of the target range to a peak of 3.13 substantially higher than previous surveys. Okay, so this is not what the federal reserve is saying.

This is what the federal reserve is saying. The market thinks the federal reserve is going to do so. The federal reserve is kind of making this observation that oh look all of a sudden everybody's pricing in a whole lot more tightening the market's already priced in a whole lot more tightening. This is good, maybe because that then means if financial conditions tighten.

We don't actually have to do as much work, because the market's kind of already doing it for us, that is a good thing. Some people think that's really annoying like why. Why does the fed just try to change the market by talking? Because when the market talks, i'm sorry when the fed talks and the market changes and it's what the fed wants, that is financial conditions to tighten, then the fed's doing its job like then they're winning that's their version of winning. That sucks for us - because in this case it means stocks are going down, but it's actually a good thing and it's much more predictable than if they go super super hawkish with actual policy and then they're.

Then they end up breaking something like we get a panic or a run on on. You know a certain asset or whatever, and then you have a financial meltdown, that's what you don't want. So if you could just yap and change the market do that now you have to follow through, because otherwise the fed would lose credibility, but it does give them the opportunity to pause sooner or relax sooner than what the markets anticipate, and that kind of u-turn is Probably going to be a signal that, in my opinion, sets off a q3 q4 rally this year, the stock market, which i personally am really looking forward to. Okay, now i got ta scroll hold on here.

I'm gon na look at the sky for a second all right next thing, because i'm not gon na read you the whole thing just the best parts thought this was interesting. Credit card balances grew strongly in the first quarter, amid easing standards and greater credit card utilization. Interesting note, but these sections were even more interesting. The staff noted that increased uncertainty and ongoing volatility had reduced risk appetite in financial markets.

That means mean stocks going down high p e growth stocks going down cryptocurrencies going down, but then they write the following quote: although valuations of many assets remained elevated, especially commercial, real estate, uh evaluations outside of those affected by the pandemic and also residential house prices had Risen rapidly, although staff continue to see key differences from the previous debt-fueled housing boom, in other words, like housing market, still has very resilient debt, which i believe as well like people. Ask me like: oh, is this gon na be 08 again? No, not no. We could see softness in real estate prices, but not not a 2008 again, but anyway, i did think it was very interesting that at the beginning of may, they're like yeah prices, have come down a lot, but things are still very expensive. I'm like well, it's probably not good for the stock market uh.

One thing, though, regarding prices uh is we got a big increase coming for the programs on building your wealth? Don't forget about that. That is at the end of the month. At the end of the month march 31st, and what we're going to start doing, we're going to have a new new special thing that i'm going to start doing. I'm not exactly sure how often or how we're going to do it.

But i want to create a new segment as part of our course member live streams. We're going to do dedicated uh segments on going through individual companies and fundamentals, analyses on them because honestly now is the kind of time to do that when prices are so low for stocks. Now's the time to go through that. So if you want to go through those with me, it's not the kind of content that is like ridiculously well on youtube, but it's content that is extremely valuable and if you want to have access to that for no additional check out any of the programs linked Down below and of course, if you bundle up, you could always use the bundle codes that are listed or email me if you have any special bundle, questions at kevinmeetkevin.com and do so before the end of the month, but yeah we're going to start doing those fundamentals.

So i'm excited about that probably start tomorrow. So we'll see it'll be fun. Okay, then this was interesting. Staff uh, that is the federal reserve staff.

Okay, not not market participants, staff anticipated that gdp growth would rebound in the second quarter and advance at a solid pace. Over the remainder of the year, gdp growth was then expected to slow in 2023 and 2024, as monetary policy became less accommodative uh. However, the level of real gdp was expected to remain well above potential over the projection period and labor market conditions were expected to remain tight, so, in other words, they're making this argument that hey like we had a really bad q1 because of omicron, and this big Slowdown and everything, but we actually think that we're still going to be positive, real gdp over the next uh three quarters here and and they're kind of casting down on this idea of a recession. In fact, the word recession or transitory, for that matter did not show up one single time in the fed minutes.

I thought that was pretty neat. This next piece here was also really important, and i feel, like very few folks, gave this credibility and no it's not the fact that, yes, there is also the opportunity for you to sign up with ftx down below and get free crypto every time you trade, crypto, They're also adding stocks and nfts soon so make sure you go to kevin.com ftx linked down below. If you download the app just to get ideas from their app, because it's so good make sure you use meetcav when you sign up for the app and then, of course take advantage of the trading view. Uh features that they have on the web browser as well or the web app anyway, that's ftx linked below, but no.

This here quote all told total pce price inflation was expected to be 4.3 percent in 2022 pce price inflation was then expected to step down to 2.5 percent in 2023 and 2.1 percent in 2024 as supply and demand imbalances in the economy were reduced by slowing aggregate Demand and the anticipated easing of supply chain constraints now without additional context. You wouldn't actually know that that's a big deal, but the reason that's actually a big deal is because that's actually revision down of uh personnel consumption expenditures, in other words their favorite measure of inflation. They're expecting is going to fall more heavily now, what's also fascinating, with the federal reserve. Is we look at core cpi pretty heavily and core cpi? Let me grab it really.

Quick here, core cpi is gotten got another report coming up here very soon, and the beautiful thing about it is: it's actually expecting to show, thanks to our manheim used vehicle index, a pretty substantial decline in the core segment for used vehicles. Here we go yeah previously used vehicles had a weight or contribution to cpi of almost uh three quarters of a percent. It was like 0.68 and now we're expecting used. Vehicles are only going to add about 0.15 or 15 basis points to cpi.

That's really good because those were a huge stress for a very, very long period of time and it's nice to finally see that go away. Okay. The next thing they mention is they reiterate that long-run inflation expectations are very stable and i think folks really forget how important those are. Inflation expectations have been falling pretty much straight for about the last six weeks, which is really good because we are now lower uh in terms of inflation expectations than where we were with the omicron peak.

So we had an omicron spike of inflation expectations and then we had the war spike of inflation expectations and at that point it honestly looked like inflation. Was expectations were going out of control and as soon as inflations go out of control, then you're? Actually looking like the 1970s, you know a lot of people today. They still refer to the 1970s they're like, oh, but but usually the 1970s. All over again.

We need to get paul volcker to get out of this we're going to have to force a recession yeah. Well, they will have to force a recession if inflation expectations are out of control and you have a wage price spiral. None of those things are things that we have right now. So now you have the market via five year, break evens pricing and substantially declining inflation expectations.

Bloomberg economists, uh surveying economists, are projecting a substantial decline in inflation uh with with an inflection point, and this is the kind of like they didn't really they're sort of, like ah somewhere between july and october, like that's the up in our airport, uh airport, but uh. The most important part was that by mid next year, it seems like most consensus is that we're gon na be back in that four and a half percent range of inflation, and then we're going to fall uh likely to that two percent range soon. After that, maybe the year after that now we'll see if that ends up happening, who knows? I mean inflation, and this is a big big potential risk factor. The san francisco fed actually talked about this.

Today i read it. It was a very difficult letter they put together. It was probably one of the more challenging ones that i read, but i got through it. They just released this.

It's the federal reserve board of san francisco economic letter uh 13, and they talk about the potential that inflation right now is seeing a more persistent change like an actual fundamental shift. That could mean we could have more persistent and and sort of built in structural inflation. That ends up leading cpi to run hotter than two percent over the next few years. And that would be a problem, because that would then reiterate that the federal reserve would potentially have to have more restrictive monetary policy for longer and that's, unfortunately, a lot of the notes that we saw on in mainstream media.

A lot of mainstream media was reporting that oh, no fed priming the path for for more restrictive policy. They did make mention about if inflation continued to run hot, which the san francisco board is like. Oh there's some red flags that it could then obviously we'll have to go restrictive. Restrictive.

Fortunately, though, does not mean paul volckering restrictive means going above neutral. The neutral rate is expected to be two and a half 2.75. Then we go to say three percent or three and a quarter percent right, that's the neutral rate, but they also made it very clear that there's consensus for two more 50 basis, point hikes, but no consensus after that, and that's because a lot of folks at the Fed uh, especially neil kishkari, mentioned this. His quote was: look it's easy to be a hawk and he's kind of like throwing cold water on james bullard who's like oh, let's go with 100 bases.

Point increase he's like oh, it's easy to be a hawk and basically kind of saying like. Oh anybody can be a hawk. Anybody can be a bear but like let's actually look at the data and if the data shows that inflation is meaningfully coming down, then maybe hey we front end the policy a little bit by doing 50 basis points uh three x times in a row. Then we go to 25 in september and uh, maybe two or three more 25s.

Then we just chill, then we just wait and we sit at two 2.5 or 2.75 and we just chill there for a little bit if inflation keeps coming down great. If inflation goes down to 2.8 percent - or you know 2.5 percent - and we want to let it run hot a little longer - maybe the fed does that like no, we want to definitely force it down to uh two percent. Well, then, they go restrictive and then throw in another 25. Bp hike big deal.

It's really not going to make that huge of a difference to us. It's just the big shock that we've had in the last five months in the stock market has really been going from expectations that the fed was going to raise rates to like one and a half percent to like now, three percent right. So double the the tightening plus we got quantitative tightening coming as well. Qt.

That's gon na be really interesting to see how uh qt ends up working in the background uh there's there are a lot of expectations that we're going to start seeing that reverse repo market. Finally, kind of get drawn down - this is not something that i'm so heavily concerned about, because there's so much excess liquidity, so i'm not too terribly worried about qt, though there are a lot of people who aren't. Oh, i did also want to mention before i keep talking about qt. I just want to throw in this little side tangent that uh, the fed does actually have a policy called flexible average inflation targeting.

So it is possible for them to say oh yeah, we'll just let it run a little bit hotter. So that way it averages two percent as long as we ultimately end up, then getting back to two percent and just being a little bit more patient but uh. But yeah regarding the the repo market look the repo market. I think we just hit two trillion dollars of excess liquidity.

That's there and really. The way you have to think about that is. That would be like fannie mae freddie mac, big banks like jp morgan, huge institutions that have a bunch of extra cash they park it over at the repo mark or sort of in in the overnight lending space of the federal reserve. They essentially, they lend it to the fed, uh and uh, and in exchange they hold treasuries and the reason they do.

That is because they get paid uh and oftentimes a higher rate overnight than they could in the free market. And so it really creates this opportunity. For uh an essentially risk-free place to park cash and get a reward overnight and get payment overnight. They actually say that repo market is like the reverse.

Repo market is a totally like arcane thing and we have no idea exactly how it's going to play out, but they say they say that the repo market could actually help us avoid something like the same. Creating the same sorts of arcane financial instruments that existed and led to the great financial crisis. So hopefully the repo market is a more transparent way of of essentially parking cash overnight. Rather than sending uh these banks into risky assets and then all of a sudden when they need their money, the money's gone so uh.

I think the fed sees it as like a really really good safety net, but they're gon na start vacuuming money out of that. When they do quantitative, when we start quantitative tightening on june 1st and then we're going to rapidly scale up to a pretty substantial level of about 95 billion dollars of tightening per month in about three months, we'll start smaller and then we'll get there. But anyway, my opinion personally, like i, i did not see this as a bad fed minutes at all. If anything, i actually saw it as good because it just reiterated what we heard over the last few days about hey, let's um.

Let's do these two more 50s and then we'll just chill for a bit and we'll see what how things are going we'll relax a little bit to me. That's that's the start of a positive fed u-turn and uh there. There are now murmurings among the suits that uh. It could honestly start a risk-on rally in the stock market.

Again i mean fingers crossed at this point because we've had enough pain and i could wish nothing more for everyone else, but anyway, let's talk more about it course. Member live stream, look forward to seeing you folks, we'll be back to the office tomorrow and we'll see. You then check out the codes link down below ftx linked down below we'll see the next one. Thanks bye,.