Better buckle up for a rug Pole from the Federal Reserve because we just had some data come out and we've got inflation data and boy oh boy we got some problems. Let's talk about that. Do keep in mind today is November 1st Which means it is not only Jpow Day I'll be covering Jpow live, but it is also the expiration of House Hacks fund raise. The 2023 fund raise comes to an end for House Hack.

We've been waiting for this so long, we're so excited to close the fund race. Go To Househ Hack.com you have until the end of the day. Email us if you have questions at Irh Househ Hack.com and funding closes tonight. So check it out for House Hack.

But folks, we got to talk data and we got to talk trajectory for the Fed's interest rate path because some are now saying higher for longer, maybe higher forever. Literally, look at this white line that I have sort of highlighted here with this box right here. Look at that white line that is the Fed funds Futures line. This shows you how high markets think interest rates could be going all the way out to December of 2025.

That rates could be higher at over 4% for the next 2 years and potentially even inflect up at that point. That's because markets are now beginning to try to at least understand. Is it possible that the neutral rate of interest could be higher? This is a fancy piece that Nick T tweeted out. It's basically a piece that says treasury yields have risen so much because markets are now suggesting there's a chance, the neutral rate of interest, which is where the Federal Reserve is neither stimulative nor restrictive, could be a lot higher than it's previously thought to be.

Previously, the neutral rate of interest was thought to be 2% So if you kept interest rates at 2% as the Federal Reserve well then the economy would grow at about 2% So economic growth being right arm. neutral rate being 2% rates 2% economy at 2% Great Easy. If you want to depress the economy, you take rates and you drive rates up, which should drive the economy to a slow down. So you bring rates to say 4% economy goes down to 1% The problem is, we've now risen rates to 55% and what's the economy doing? It's growing at like 4.9% based on the last GDP read and it should be down here.

and now people are worried. Okay, well, does the FED have to go even higher? And is that going to actually drive us into a deep dark recession? It's just a little visual for how you could try to understand the disaster that's going on. But that is the problem the Federal Reserve faces is. What do you do? Do you raise rates or not? Today markets are expecting the Federal Reserve to Hold Steady for their second pause.

That is based on the FED Futures rate Monitor and we're looking at a 99% chance of that. But look at some of the data that came out this morning this morning. We had the Joltz read: Jolts data came in at 9553 million. That once again is higher than the 9.4 that is expected.

That means once again, the economy is staying more resilient. That's exactly what we're seeing in Nickt tweeted piece here as well. Where you have an economy that is providing more jobs, the 6-month moving average sits at 234,000 jobs. The 3month moving average sits at 266,000 jobs.

Our ADP report comes in soft again ADP Coming in at 113,000 versus the 15 expected. But remember last time we got a soft ADP report of 89,000 we got this blowout: 336,000 jobs For the actual jobs, report this: Friday We're expecting another jobs report. 180,000 jobs are expected. Problem is, we're starting to see multivariant core inflation Trend up.

This is calculated based on the Fed's favorite inflation numbers, which just came out a few days ago. It's Pce inflation they don't like to go by CPI though everybody watches CPI Anyway, they calculate together this graph which this graph here is sort of your probability band of where inflation probably is. You can see it's very volatile. Even when it goes down and it's trending down, it has periods where it goes up, so that's very normal that it feels like it has many inflection points because it's a very volatile graph.

We've had a very great Janu January to like July September of 2023 where this is basically been straight down. The problem is now it's doing a little bit of a tick up here, which could be very well part of just the volatile nature of this chart. Again, you go out to the 70s. You see almost exactly the same thing thing here.

the mid 7s. Here's the Paul Vulker era, right? Even during the Paul Vulker era, you saw this band move up occasionally. you saw it here. You saw it here.

You saw it here. You saw you see it right here. And that didn't necessarily mean long-term trends were breaking back up higher, right? We don't actually highly expect that inflation is going to rip up again, though. There are some people who say Kevin you're wrong and I very well could be.

Maybe inflation will resurge. It's not what we're seeing in company earnings calls. it's not what we're seeing in company earnings either of those. Both of those are indicating declining volumes and that prices are going to have to fall for goods and services to continue driving spending.

Unfortunately, the rearview mirror data like Q3 GDP data suggests people keep spending services and goods consumption rising in Q3 Residential investment increased for the the first time since Q1 2021. That's mostly driven by home builders, so you have a very strong economy. It's one of the reasons you're seeing this drive up in Yields. Unfortunately, these strong numbers are great on one hand, because it means the economy is doing well, but on the other hand, it keeps interest rates again higher for longer and that's likely what we're going to hear from.

Jerome Powell Today I Think Jerome Powell needs to be very hawkish in his pause today. I Would not be expecting any kind of hey, we're going to cut rates soon. People are going to ask him these questions. He's going to dodge them.

He's going to look at this particular chart right here and he's going to say, look, we're going to go with a hawkish pause. We'll pause. Maybe he'll even tell us he probably won't though there's there's a tiny chance, like a 2% chance he'll say we're done hiking now. we're just going to sit here.

I Think he's going to be very clear. we're keeping the door open to more rate hikes. They have to fight this curve down to below 2% Which is that line right here? That bottom line: Look at that. We're not not there.

We're not even close yet. We have work to do. Uh, we could zoom out here and kind of see Pre-co for a moment. This is where we got to get back to.

we. we were getting close to it, but now the trend is going back up so we're going the wrong way. I Andan look at that. at the low, we were at about 2.19% to 2.96 That was the ban spread.

Uh, and now we're sitting at 2.4 to 3.28 Got to push that down. You know you want it to kind of be like where we were in the past. Where I mean look at in the past it was like5 to 2% This is why your Trend was below right. You were having inflation below Trend So anyway, drone pile today: I Do Not Expect is going to be very enthusiastic about suggesting rate hikes are over.

He's going to tell us that more rate hikes are a possibility. We're pausing, but we're attentive to inflation. Rising This is not going to be a bullish pause. It is a hawkish pause that's coming.

We'll create a bingo card and we'll go through that when it's Bingo time which will be in about uh, 3 hours. It's about 11:00 a.m. Pacific Time 2 p.m. uh Eastern that we will be covering the event live so make sure you're there.

In the meantime, go to House.com Email us at IR House.com if you have questions. uh and uh thank you so much for watching not advertise these things that you told us here. I Feel like nobody else knows about this? We'll We'll try a little advertising and see how it goes. Congratulations man, you have done so much.

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