Is Amazing! We just finished the Jerome Powell Fomc press conference and we got a lot more bullishness than we were actually bargaining for. We expected that Jerome Powell would be neutral to slightly bearish. Maybe try to talk markets down a little bit, but you won't believe what he just pulled off and it was mind-blowing I'm gonna break it all down here right after, of course mentioning that you should get lifetime access to those programs on building your wealth. Lifetime access to me.

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well email McKay Keep him busy. He's he. You know he's getting a lot of emails and and I really want him to drown in emails today. So Kevin.com and the coupon now expires February 3rd uh through the week? Uh, and that'll be the final expiration.

So what happened? Well, first of all we got. we've been getting really good data, right? We've been getting this great data. We've been getting indicators that hey, look, we're starting to see a wage gain soften. We're starting to see the Employment Cost index which is softening.

Yesterday we got the ECI report and it's softened. but guess what a big banger was in this one? We've previously heard Jerome Powell regularly tell us that the Joltz report The job openings in Labor turnover survey should be in line with the market availability of jobs. In other words, there should be about one available worker for every about one available job. Unfortunately, the Jolts report went bad this morning last month was revised up slightly and on four or the month before last month, that report was revised up.

So bad news and today's job openings number was revised up again and Jerome Powell was asked about it twice and guess what he says in response to the Joltz indicator, one of his previous favorites which actually gave us bad news. Guess what he said in response to being asked about it, he goes, eh, yeah, it went up, but it's an indicator. In other words, Jerome Powell was not as enthused about this number going up as a reason for continuing to hike. Instead, he decided to give us plenty of hints that a slower pace of not only rate hikes is coming, but a pause is already being discussed multiple times was he asked about the potential for a pause being discussed and Jerome Powell wanted to at least tentatively punt the question by saying hey, you know what, we'll let the minutes decide that But we did spend a lot of time about talking about on talking about the directionality of where we'll end up going, in terms of how much longer are we going to go on with these 25 basis point hikes and of course, we want substantially more data is what he started with.

But even though he started with this idea of having substantially more data, starting with saying I want substantially more data ended up turning into an idea of a um, you know, uh, the disinflation process has started and we're actually very excited that the disinflationary process has started. Remember, there are three big portions of inflation. There's Goods Inflation, which we are starting to see Goods Deflation Number one: check done, Housing deflation. We expect to see a show up in CPI data over the next few months.

Jerome Powell tells us that we are at the beginning of disinflation and it's happening. and the next step, which quote we see coming is a decline in Core Goods Inflation x Uh, sorry, Core Services He actually stumbled on that so I wrote it down wrong Core Services Inflation X housing and he believes that process is going to get started soon. Now they're not entirely sure when, so he wants to be very clear that he's not trying to be an optimist or a pessimist. but he says the disinflation process has started.

we still need to make sure we can complete the job. and it's possible that there could be more persistent inflation in Core Services which would be like Medical Services or getting your hair cut or car insurance right? these are your core services. And he gave us a warning that while the disinflation process has started, there is still work to be done and we don't want to kind of start stop or stop start. So to speak with rate hikes.

There's a stupid suggestion from The New York Times but that's almost redundant suggesting that hey, you know, why don't you take a meeting off and and you know, start stopping Literally He's been saying for years: we do not want to repeat the mistakes of the 70s. Whenever we have to hike rates, we don't want to stop hiking and I have to re-hike We just want to make sure we get it right. This is why they've reduced their Pace down to a 25 basis point hike. And by the word, Pace, they actually revise substantially their opening statement by making sure that they remove actually a lot of items that have been contributing to inflation.

Consider some of the things they removed: They removed the fact that war is adding inflationary pressures. Uh, to their statement. They also removed that supply and demand balances are adding inflationary pressures. They removed a lot of the things that are causing inflation.

War was removed, covid was removed, Supply demand and balances removed, and we even had food and higher energy prices removed. All of the things that were really contributing to inflation have been magically removed from the Federal Reserve statement. And yes, while prices remain elevated and uncertainty is elevated, the Federal Reserve expects to now be in a process of debating the future extent of increases rather than the pace. Now, initially, this was seen as bearish because they wrote s increase says which implies more increases potentially 25 in March 25 in May before a predicted pause which the market is predicting a pause.

The market in fact is predicting a peak Federal Funds rate after today's meeting of 4.91 in July and then the market is predicting we're going to get down to about 4.25 by December. Now that's interesting because that means the markets are already once again trying to predict a flip to uh, a lower Uh rate level for the Federal Reserve that is the Ois swaps showing the FED cutting rates by the end of the year now Jerome Powell Was asked about cutting rates and he says, look, look at what I wrote in December We expected he would say look what I wrote in December but what was really shocking is the fact that he actually came out and said hey, look, you know if things end up worse, we might have to go a lot higher. But yeah, um, you know, if if inflation ends up falling faster than we expect, then we would consider that as well. He totally stopped short about using the word cut like he was clearly clearly prepped.

Do not say the word cut in the context of potentially cutting rates. So that's why at least two times when he was asked about cutting, he said, look, we think we don't have any plans to cut this year, but if inflation comes down faster, we'll consider that. In other words, yeah, we would cut now. one of the most empowering moments, mostly because I just need another reason to Pat myself in the back.

I'm just kidding. Okay, I don't know. Um, that sounds bad, but no one of the most empowering moments to me because you all know I've been talking about this thesis that I have that we're not going to get this like huge capitulation in the market unless there's some kind of Black Swan event that crashes everything and then you have as massive Panic selling. and that's when the FED comes in after they broke something and they bail out the markets right? I Don't think we're actually going to have that kind of U-turn of a moment.

I've actually really been theorizing that we're more going more likely to experience what I call the Nike Swoosh style recovery. which is, we've gone down really fast in 2022. Okay, we our stock market fell three times as fast as it did in the.com bubble. yet everybody wants to keep comparing this time to the.com bubble.

and we fell three times as fast in 2022 as we did in the.com bubble. This was a pretty damning fall, but Jerome Powell On the rebound said the following quote: We're not going to have a light switch moment. No light switch moment where it's like it's off and then it's on. That to me is basically saying the same thing as we're not looking at a v-shaped recovery kind of moment.

We're looking at a Nike Swoosh where as long as the data keeps coming in positively, we slowly Trend up. And this is why I'm a big advocate for hey, look, it feels like the bottom is probably behind us, knock on wood you don't want to go. Being too confident? Go YOLO margin but it feels like the worst is behind us. It feels like the worst of earnings is either probably here now or slightly behind us and the stock market tends to bottom uh, you know, relatively close to when we get, uh, an earnings bottom.

So if we get the worst forecasts now and I want to clarify that if we get the worst forecasting Q4 Q1 over here and we think EPS earnings per share actually ends up bottoming in Q2 Q3 then the stock market might actually be in the bottoming process between December and now where we basically have been. And potentially it makes sense why we're starting to break the 200-day moving average of a downtrend in the stock market and things are starting to move up and close higher? Because maybe the bottoming process is already in effect, that we're getting a lot of good data and Drum Powell makes it clear we are not only not seeing a wage price spiral, but one of the largest conditions for a wage price spiral is actually going away. And that is people's belief that inflation is persistent. Jerome Powell Says that sentiment could end up picking up pretty soon here, boosting the economy again and based on information, sentiment, data, and and sort of salient information that they're collecting and talks with people from their Federal Reserve banks.

They actually find that consumer expectations, which they say are at the very heart of building out inflation are actually softening to the tune of inflation. That is, people are happy and they're seeing that inflation is starting to go away and that's actually having a very positive effect on potentially pulling all overall inflation down. That expectations are the Bedrock of inflation and this makes a lot of sense. I Mean just think about it logically for a moment.

If you think that next month the prices on the programs on building your wealth link down below are going to be you know five or ten percent higher than they are today net net then you're better off buying today. We also have a coupon code expiring on February 3rd, which is in two days and we promise with a three-month guarantee that you're going to get the best price anyway. link down below. but the point is, inflation and the expectation for high inflation leads generally leaves you wanting or spending money earlier.

That's actually bad from an inflation point of view because it could potentially crimp up Supply chains more and Lead inflation to rise. But what's actually happening is inflation. expectations are falling So people have the belief that no, don't worry that Apple iPad is going to be cheaper in three months, I'll just wait for three months. Look at Maryborough for example, from GM what did she tell us She said we think our cars are priced appropriately that's what she says.

But what was actually talked about in the Earnings called more incentives and more discounting coming to GM vehicles over 2023. it's just like Procter and Gamble saying inflation is expected to subside by the second half of the Year Johnson and Johnson talking about inflation subsiding by the second half of the Year McDonald's talking about high paper inflation. But when you actually look at the paper manufacturers, what are they saying? Because I read the earnings calls is the kind of stuff that I do on a daily basis. It's really fun.

Well I Sit there. I Go! Oh, pulp price is coming down, freight costs for Shipping paper coming down. All of the leading indicators are like inflation is coming down now. I'll be the first to tell you when I start seeing it prop up again.

Okay, yeah, we had a Miss on the Joltz numbers this morning, but so far everything is trending down pretty dang nicely. And the fact that Jerome Powell came out here to say that, look, we think core Services X housing are going to start the disinflation process very soon. I'll tell you that is pretty dang bullish. Very, very bullish.

Very happy about that. Uh, Jerome Powell When he was asked about the summary of economic projections, as expected, he punted back to the December. Meaning the December meeting is hawkish enough. That's all he had to do.

I said that up front up front I told you all he has to do is if he's asked about the projections, punt to December and be neutral and it's literally exactly what we got. we got punt to December neutral if anything. I Was actually surprised we got a little bit more bullishness because he started talking about how the fact that deflation and the disinflationary process has started. That's really exciting and the fact that the only piece of data that's coming in bad Jerome Powell basically brushes that one piece of data off and goes, eh.

it's an indicator. You know that's kind of like when people come up with an idea and I don't want to. You know, like shoot it down immediately I'm kind of just like that's an idea. Uh, at this point, everybody around me already knows that that means I'm not the biggest fan of it, so it's just kind of become a joke at this point.

But in reference to Jerome Powell Jerome Powell going, that's an indicator. Oh, that was pretty damn bullish. Uh, I'm actually really surprised that Uh that he came out this this positive. uh I I think as a as a group of Watchers here at one point.

Thank you so much for being here. We had around 35 000 individual people watching and we ran a survey that over five thousand, six thousand of you voted on. And the survey that we ran beforehand was the following: it's on screen right Here it was that we thought, uh, everybody was leaning slightly negative slightly. To we we calculated roughly about the negative point one eight, uh percent level in terms of of how negative individuals are feeling.

so more bearish than positive and uh, and that is is kind of the opposite of what we got. If anything, we got slightly more neutral. Then we got negative. So I was very, very impressed with that.

uh and uh, it's It's actually quite exciting, so so we'll see, but at least at the time of this recording, you've got the NASDAQ up a couple of percent. pretty much everything uh is moving up. uh and you've got a risk rally that started which is, uh, partially quite ridiculous. Uh, Carvana is up 39, it's up four dollars Peloton which reported horrible or Tarvana by the way, should be going bankrupt.

The only reason they would survive is because they're uh, uh, you know, basically getting bailed out by J-pow Here, this is the danger is that bank companies that should be going bankrupt don't go bankrupt because their stock prices rise and then they end up dumping a bunch of shares on the market. They're able to dilute everyone and raise money. But anyway, Huge huge risk on rally Here it was asked before, uh what do I think would happen if if uh Jerome Powell was bullish and I thought we'd see some kind of risk-on rally including crypto rallying up. That's exactly what we're seeing we're seeing Bitcoin sitting at 35 a six about right now still Rising this is the 30 minute chart.

If I zoom into the Uh one minute chart, it should be even more apparent. Yeah, this is basically a straight rise here after the Uh Jerome Powell press conference, a lot of small caps really rallying here. Big risk on movement Open Door uh which should be called closed door uh, near bankruptcy here. jumping up about 10.

you've got a company like a Tesla up five a point two percent at 182. this is actually a risk factor for me because I said if Tesla hits 200 by the time the coupon expires which I didn't realize but we just by pushing it to to Friday means if we hit 200 a share on Tesla by Friday a company I think has a huge PP huge amount of purchasing power pricing power uh I I have a huge allocation obviously to Tesla because of the pricing power that I think it has then I have to dye my hair green. So I kind of uh extended that potential reality. We're even getting a move on end face here which I've been buying the dip on on end phase getting some more exposure to that which is quite exciting, but uh, really, it just seems like a broad-based move here with the exception of Embraer Embrae are lagging a little bit.

uh at just up about half a percent, not too much movement over here at the airplane manufacturer embryo. what are you doing hanging out over there in the face of the small caps rallying in America trade desk though up about three percent. uh right there with uh with end phase. So pretty incredible I would say widely bullish actually.

and really when it comes to other catalysts, look next. catalysts are this: Friday 5 30 A.m I'll be covering the jobs report at 5 30 a.m you're welcome to join me then and then. Of course we have the next CPI report which comes out on Valentine's Day On V-day we will be getting the next CPI report which I'll also be covering that live at 5 30 in the morning I Hope you can be there and make it. uh this is uh, this is actually pretty incredible.

so uh so pretty pretty impressive. Uh this is definitely the uh the the threading of the soft Landing needle. Anyway if you have questions about checking out by the way Nurse Colby thank you so much for the 49.99 donation. It's really awesome if you have questions on those programs on building your wealth or you just want to complain to McKay in terms of why have you not joined uh, the team yet? Uh, the the our morning crew on fundamental analysis q A Now whatever.

Whatever you want to ask me, why have you not joined yet Email McKay Tell him complain to him, Convince him to convince you to join, make him do some work I don't know I don't know what he's doing right now. he's probably eating a burrito anyway. Thank you so much and uh, we'll see you in the next one. Thanks so much! Goodbye.