Wow! We just heard a lot of great news from Jerome Powell and this morning I predicted that Jerome Powell would pull back on the hawkishness and tell us that we're at a level where we can be a bit less aggressive by talking the economy down and talking the stock market down. I predicted that drum power would relax and kind of back off that incredible hawkishness that he gave us in the last press conference. After that reporter asked a really stupid question saying stocks were rallying when that wasn't even true. and folks I have good news. I think Santa Claus is coming to town this year as long as CPI comes in Okay, on the 13th. I think we got Santa Claus coming and this is exactly what we predicted This morning is exactly what Jerome Powell did and I'm so impressed with what Jerome Powell said today and I'm so excited by the discoveries that we have and the big bottom lines that I want to provide you. We have three core discoveries that we just learned from: Jerome Powell Plus, we got a Beige Book Release. This is very, very exciting. Let's start with the beige Book release because this is exactly what Jerome Powell had prepared for him before he went into this only five of 12. Federal Reserve Districts reported any growth at all and most of them reported flat activity or slight to modest declines. And here's the thing folks. the Federal Reserve Jerome Powell told us this today does not want to crash the economy because that creates human hardship. They don't want to destroy the economy they want If if growth is usually around two to three percent, they want us to be around zero to one percent. They don't actually want us to be negative. And guess what? Jerome Powell Told us today. He told us that GDP is basically just above zero. This is exactly where Jerome Powell wants the economy and he doesn't actually have to be more hawkish. In fact, he has to be careful not to be too hawkish because then we go below and we go. No negative. So he's really trying to play this: Balancing Act It's kind of like flying a plane and you're trying to keep your attitude at that right level and you're like, oh, a little too high. Oh, trim up, trim up, Trim down. You know. Back and forth, right. Run the trim wheel. Anyway, So what were the three big discoveries that Jerome Powell told us? Well, number one and this one's a little bit in depth, but it's worth understanding. Watch what Jerome Powell did. First, he says inflation is too high. Old news. Then he breaks inflation down into three things: Core Goods which he tells us is plummeting. Core good. Inflation is plummeting. Okay, so part one of three solved. Part two of three: He says it has to do with Housing Services which have risen rapidly. However, as long as new lease signings continue to plummet, we expect measures of Housing Services inflation to plummet in 2023. So in other words: Goods Inflation check Housing Services Inflation So far. Check. The third and last one has to do with wages, and this is because core services are mostly propped up by wages. And the biggest piece of data that we got this morning was actually the Joltz Report, which showed that we finally moved from about two job openings a per unemployed person down to about 1.7 openings. Jerome Powell Said this was actually right along expectations, and even though wage growth is only showing tentative signs of relaxing, we're not seeing signs of a wage price spiral. So while there's still some work to do here, we're on the right track. So think about what we're seeing. So far, the economy is at the right place. Core: Goods Inflation check Housing Services So far, check Wage Inflation working on it, but trending in the right direction. He's telling us the economy like the attitude of that plane, right. The level of the plane is kind of right where we want it. It's right where we want it. slowly descending a little bit on that inflation curve. right? That was the that was the first big core. So we got the beige book where the economy is in GDP Then we've got him talking inflation away. The three pieces of inflation that he talked away. He's basically telling you, look, we're winning. This was him going, we are winning. This was his Victory lap before actually winning and why was He doing this? because you don't want to loosen Financial Conditions do you? Well, maybe actually you do because the second core Discovery was that they feel like they've tightened Financial conditions substantially. He says we have positive yield curves. real rates across curves. We're paying attention to the inverted yield curve, which is a dangerous sign that you could go into a dark recession, right? Dirty recession, Really high unemployment potential? Uh, and right now, inflation expectations are stable. both consumer expectations of inflation and the market expectations of inflation. which if you watch my video from this morning, is exactly what we predicted Jerome Powell would reference and it's exactly what he did. So we got him talking about hey, Financial conditions are tight GDP is where we want it. Inflation measures are going down. We're actually okay with maybe Financial conditions loosening a little bit because we don't want to over tighten Now This was actually really, really interesting and this was the third big discovery. Jerome Powell Previously told us he previously said in just the last Federal Reserve meeting he said, you know we can always just print more money if we over tighten. He said that with a Cavalier attitude in response to a reporter who is saying something untrue prompting. Jerome Powell to talk hawkishly Jerome Powell Previously said if we over tighten we just print more money. we loosen Financial conditions again, right? What did he tell us today He said, well, actually, we don't want to over tighten and that's why we are slowing. We want to go slower and hold longer at a stable rate. In two separate instances, those roughly quotes paraphrases of Jerome Powell pretty much guarantee a 50 basis point hike in December He basically just told us we're getting 50 in December I mean we've had pretty much plenty of lead up for that anyway. So that's not really a surprise. But he also told us regarding the terminal rate that he only expects it to be somewhat higher than 4.6 percent. The market had been pricing in 5.2 percent. Well, 5.2 percent is quite a bit higher than 4.6 Is it somewhat higher? TBD But based on the rest of what he's saying, somewhat higher might be like 4.8 We might not actually ever get to five because he's starting to recognize the human costs of over tightening something he's never mentioned before. On top of that, he's also suggested that our recession risk in the last set of minutes from the Federal Reserve was pegged at 50 50. But he actually doesn't believe that he actually believes there's a greater chance of a soft Landing that is the non-recession path or shallow recession without a big spike in the unemployment rate. So even though the committee jointly thinks 50 50, he's on the No 50 side. the no recession or or shallow recession softish Landing side. What he wants to create is another long expansion. another 10-year expansionary cycle where we go from 2010 to 2020 and everybody's getting rich. And the people who get rich the most are the people who own assets. Whether you own assets like venture Capital in in House hack which has a deadline today for accredited investors, Whether you own real estate yourself, whether you own stocks yourself, whether you own exchange traded funds yourself, whether you own bonds yourself, the people with assets make money in Long expansions. And it's not until the seventh or eighth year in Jerome Powell says that poor individuals disproportionately Black and Hispanic individuals start reaping the benefits. And that's because disproportionately they own fewer assets than white and Asian people. So Jerome Powell's talk today was very dovish. It is entirely possible, and this is a risk factor I want you to be aware of. It is entirely possible that because this was so dovish and the market responded so well that over the next few days you end up having, uh, well, we do have the FED Blackout Window coming up soon for the Fomc meeting on the 15th, but it is possible that you get some kind of Nikki leaks or whatever that tries to talk down the market again. So I would caution against being too euphoric because even though we could have a little bit of euphoria here, we're probably going to go into CPI with a little bit softness because I promise you this if CPI comes in dirty High Drill Power is going to come right back out and go. We're wrong. We're going back up. we're going higher. He doesn't sound like that, but uh, he has. He gave us a warning up front in his speech. he said look, inflation's come down before only to go up again over this last year and over the last 12 months we've made basically no progress. When you look at core inflation, it's been at five percent all year. core Inflation Core PC inflation and he doesn't see much progress there. So there are asterisks in this, but if we get a soft read in December on CPI and you combine a soft CPI read with this drone pal we had today the next six months in the stock market I expect will be glorious I would not short this Market That's all I have for you. Thank you so much for watching this video. If You appreciate this kind of content. Make sure to subscribe, share the video. We'll see the next one. Goodbye.