Okay, folks, we got to talk about what richard clarida just said. He used to be a fed official and he just said something about what the fed should do. He used to be on the fed fomc. You know committee, the federal open market committee and uh.

It's kind of interesting to hear what he says. I mean he's gone right now, he's not at the fed so, like his opinion, doesn't really affect the fed. But who knows maybe it does through? Like sympathy i mean i'm sure he could still text hey jay pal. I think you need to do this right, i'm sure that could still happen, even though he doesn't have a voting uh voice anymore.

He still has a voice, and so what he just said could uh could potentially hurt in terms of markets going forward. So i think it's first worth noting a little bit of background. Clarita left the fed because of controversial trading uh clarita traded. They said between one and five million dollars out of a bond fund and into the uh into an equity fund.

The day before powell basically said we're gon na bail out the stock market, i mean to some extent uh. This was this was in the coveted pandemic and it's like hmm, really uh and then conveniently like right before this last, like five month long stock market crash we've been dealing with they're, like you know what we should just all, not own uh, you know stocks or, Like pick stocks or be able to trade, let's just dump them all, and so they dump them all or put them into like really broad index funds or whatever and and then all of a sudden. The stock market sells a lot. So it's kind of like hmm.

It was that another convenient trade who knows, but anyway, what did he just say? Well clarita just said that interest rates at the fed, so the fed reserve rate should be three and a half percent to slow inflation. Okay, the market right now is priced in two and a half percent, but not three and a half percent and clarita believes that we need to get to three and a half percent of slow inflation. We have not seen a three and a half percent in in, like a very very long time. In fact, we could look really quick just to see, because i'm also curious to see what mortgage rates were when we were three and a half percent.

Hey shout out to ftx take a look at this. I love this about ftx that we could use the trading view technical analysis, software built right into ftx. We could trade our crypto right here, but look at this wedge that we're creating on the day chart for btc. This to me is showing real resistance to bring btc lower and, if anything, we're seeing higher lows.

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This is a consolidation pattern and i'm hoping we get a nice breakout to the upside, especially since, when we're looking at that bottom trend line, we've got a solid four bounces now on lows, and today, right here may 6th is one of them. Let's see where we go from here, a lot of macro fears, but hopefully we're destined for that upside and hopefully you're trading it on ftx linked below, but uh. The fed's funds fed funds rate of three and a half percent would be unprecedented in in certainly near-term history here. So let's go take a look at the fomc rates and get a little bit more color on what he said as well.

So before the pandemic, we got to a high of about 2.4 percent. These are midpoint prices, so the last time fomc rates were this high was right before the recession uh the great recession. Look at that fomc rate went all the way up to about five and a quarter. So it's been what is that 16 15 years since since we've been at those sorts of or well since we've been about three and a half yeah, but anyway, three and a half or above right.

So it just gives you an idea that here in the near term, since the recession, we've never seen anything like this and what a lot of traders do. Is they kind of draw a wedge over here and they say: well, it's impossible, basically, for the fed funds rate to go back above two and a half percent markets just won't allow it. The trend is clearly down yeah, but you know what, if you end up getting this again, you know so some of these wild spikes again where the fomc rate can go up to three and a half percent. That would be pretty wild because it would certainly move the mortgage market substantially uh.

It would certainly move the stock market and that sort of balance between stocks and bond substantially. So clarita says that the central bank needs to raise its benchmark rate to three and a half percent, or even higher, to deliberately slow down the economy and slow down inflation. This is quite fascinating uh because you know, we've been getting these 50 basis point hikes, but we also haven't been thinking about this potential of really going above, like two two and a half percent, even though jay pal has been talking about maybe going slightly above neutral, We haven't really thought like: oh yeah, okay, we're gon na see like a three and a half percent fed funds rate again, which it's worth noting back when the fed's funds fed funds rate was uh three and a half percent. The last time mortgage rates were like six and a quarter percent they're, roughly five and a quarter percent right now so that'd be another percent to the real estate market, just in case you're trying to level those so clarita teaches economics at columbia, university now and uh.

It and says that really going above neutral is like his base case that we're going to have to go substantially above neutral to actually get inflation down, uh, and that would be something that would be a a shock without a doubt. And it's something that the market's, not pricing in. So if we get a fed that says oh yeah, we're going to have to go not only above neutral, but we're going to have to get even more aggressive, uh like three and a half percent four percent on the fed funds rate, this kind of red market. It's going to be like the dot-com bubble, all over again, where we just get.

You know the dot-com bubble, kind of prices and then just now bleed bleep bleep bleed for like a year until inflation actually goes down the best case scenario, if you're in equities. Right now would be that inflation starts going down, that that would be the absolute best case scenario, and i you know i mean i'm optimistic for it, but you know: we've been optimistic for inflation, going down for quite a while kind of scary anyway, there's some updates On uh, you know what the uh x, fed dude just said, and what can mean for us aka sucks.