We need to talk about massive rate Cuts coming from the Federal Reserve Now this might sound very premature. just like people thought in January of 2022 that I was an idiot for selling because the Fed was about to rug pull us. And sure enough, they did. Now in this video: I Want to seriously entertain the possibility of massive rate Cuts coming much sooner than we expect Though we're also going to entertain the risk factors associated with both sides and I'll tell you which side that I'm leaning to.

Now this is as convenient as it may sound. This is not inspired by it's this is just a contribution to this. This is not inspired by Elon Muska tweeting yesterday that this trend of rate hikes is concerning and that the FED needs to cut interest rates immediately because they are massively amplifying the probability of a severe recession. This is just a convenient addition to the fact that Elon might be right now.

In order to break this down, we need to go through three pieces of this video. First, I'm going to talk about history. how have rape Cuts played out historically, and where do they align with what the Bond market tells us? This is very revealing. Then I'm going to talk about inflation.

The three critical pieces: We're gonna break down the consumer rents and jobs because we have a jobs report coming tomorrow. Then we're going to make a conclusion. What do we think the dangers are and what are the takeaways? Let's get into the video. note: I've been posting a little less and able to do live streams a little less like I I Really want to do open and close Market live streams but Lauren has covid and I've been watching and taking the kids to school and it, uh, let's just say my heart goes out to moms out there or full-time dads.

Boy oh boy, it's very difficult to work and take care of children. Isn't that right? Max he's on his iPad Thankfully, let's see if I can get the video done. In the meantime, we are also offering a coupon code PP that expires on December 9th when I will be at the New York Stock Exchange for the programs I'm building your wealth. Remember those come with lifetime access to all of the future content in those individual courses, a lot of which is being released in December including a trading challenge in our stocks and psychology of Money course, new real estate lectures, and more lectures for the elite Hustlers course with another large batch already in production and posting soon.

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So first, our massive interest rate Cuts coming. the inversion of the yield curve suggests Yes, in fact, the inversion of the yield curve is extremely important. When we look at the inverted yield curve, we'll see that we are so inverted that we have not seen levels of inversion this bad. I'll hide myself so you can actually see the rest of the chart.

We have not seen inversion this bad over here. At negative 77 points on the three month ten year since remotely close over here in the.com bubble, you could see around December of 2000 right here, Which we still had two and a half years of pain in the stock market when this, uh, time occurred here. And of course, we had a pretty deep inversion over here in 2006.. we did have a brief inversion before the Covid pandemic suggesting a recession was coming.

Of course, nobody could have predicted covet over here, But what's very important to know about these charts is they actually tell us that when we have inversion this deep, the pain of a recession is ahead of us and not behind us. Look at this a little bit more closely. look at when you had the inversion in December this the deepest part of the inversion. It was around December of 2000.

Again, you still had pain for all of 2001 and 2002. that pain was actually mostly felt during the steepening phase, not the inverting phase. It's the same in more recent memory. Over here.

remember that yield curve drama in 2019. People like, oh no, the yield curves reverted. Things were booming. Then it's generally not the inversion that's problematic.

it's the re-steepening which most of that came around the uncertainty of the covet pandemic more recently. Uh, as well than the 2000 crash is the Great Recession over here in 2006 and seven where we saw the depths of the yield curve. Inversion in six and seven. But most of the pain was actually felt in 2008, 9 and 10, and most of the real estate pain was not actually felt until 2011, when the curve had already steepened substantially.

But folks, it's not just the threes and tens, it's the two's intense three month, ten year, two year tenure. These are two different charts, but you could see the same pattern holds true here. Well, the only difference is we are most. we are more inverted now than at any point since the 80s where we were substantially more inverted.

Now, what's remarkable about this though, is we can actually chart something really phenomenal. Now, this is a bit complicated, but I'm going to break it down as simply as possible. The blue dots give us prior rate cut: Cycles See these here in 1980, 81, 2000, 2007, 1990, and 2020 right? These are rate Cut Cycles the zero line right? here tells us how inverted Are We Now inversion is usually considered negative, but this is where the confusing part is. This tells you you're inverted by how many points and it's a positive.

So that's why the chart's a little confusing, But once you realize that numbers above zero are just the depth of how inverted we are, you'll realize, oh, okay, got it. So the higher we are here, the more inverted we are. Okay, so we were really inverted in the early 80s, right? Exactly. That's why they were that hot.

Okay, so where are we now? Well, on the twos and tens, we're inverted by about 77 basis points, which is approximately here. And if you plot this regression line here, don't worry if you don't understand what that means. if you plot this blue line basically here, you can then predict how much the Federal Reserve will have to cut rates. Look at this folks, if we're at 77 BP of Max inversion, draw that to the Blue Line Come down and what do you get, folks.

Total Federal Reserve Easing predicted by this chart is five percent or 500 basis points. This means the market is pricing in that the Federal Reserve will have to cut rates completely back to zero based on how inverted the yield curve is right now. And even though the Federal Reserve is suggesting, we're going to have rates higher for longer, which the market was really believing. See this black line here.

This black line says okay, Got it. So rates are probably going to go up to nearly five percent and then they're going to stay higher for longer. Well, as of yesterday, the Market's like, okay, so rates are going to go up to about five percent, but uh, we're probably going to go down sooner. In other words, we're going to start seeing that rate cut cycle much sooner.

So in other words, higher, but not for so long. Which is really interesting because that's actually not what the Federal Reserve is saying, right? Jerome Powell right now is saying yeah, we're going to be higher for longer. We're going to maintain rates higher for some time, but the market is actually starting to say uh-uh talk is cheap. The FED is about to Institute Not a pivot, but a massive potential U-turn where they go from hiking to potentially reducing.

And that's because they may have pushed us so quickly into a deep and coming recession that they have to cut to prevent a real depression. But we have big risk factors, including inflation. Now let's talk about inflation and we'll continue talking about these risk factors because this is a pretty critical video here. Uh, and then I Think all my videos are important, but let's just say this particular one, this one's pretty important and I would share it with your friends and family if I were you because I think uh, it's it's it might change your mindset about where we actually are like things are starting to turn tenuous.

Let's put it this way: notice how Rosy and optimistic Jerome Powell was yesterday in case you didn't watch my videos or you didn't see how Rosy and optimistic drone Powell was yesterday. he was glowing with optimism and I'd like to translate that to glowing with hope because he realized oh my gosh, we may have effed up again and gone too far. Let's look at this. Let's understand the three things that create inflation.

We talked about these briefly yesterday, but we have some new numbers about these. There are three important things that lead to inflation: Number one: Goods Number Two Housing, rents and number three Services, services and wages related to Services may be the most important. but I Want to show you something very ugly. But before I show you something very ugly I Want you to think logically for a moment: How do you get service prices down? Think about that.

What is a service House cleaning Consulting Human Resources Recruiting Cyber Security Payroll Services right? Cooks Real Estate Agents lenders? Those are Services right? Well, what actually tends to happen first when an economy goes into a recession? Well, generally we see: Goods stock up inventory, stock up stuff stocks up because people spend less money on stuff like, you know what? I got enough stuff I'm gonna stop spending money on stuff. And when people stop spending money on stuff, what naturally happens next? Well you walk through stores and you're like hot damn. They got a lot of stuff around here, which is exactly what we saw on Black Friday TVs And computers everywhere at companies whose primary business like Best Buy selling 50 of their good or getting 50 of their revenue from computers and phones, computers and TVs everywhere everywhere shells are full and so what happening. That happens when people stop buying stuff.

Manufacturing slows. when manufacturing slows what happens, then well again, you need less Consultants Human Resources Recruiters Cyber Security Payroll Services Accountants Company uh Services related to to factory acquisition company, cleaners, real estate agents, lenders everything I Just mentioned and then you end up with Services deflation. So in other words, Goods drop first. then you get Services deflation.

See, as long as Goods that is stuff has pricing power, you don't actually have to cut. Now it's probably prudent to cut, but you don't have to as long as you stop pricing power for your stuff. But if people stop buying, then you look over here at the manufacturing side and you're like, okay, well, we gotta cut over here and the factory sector is preparing for exactly this. In fact, the ISM Manufacturing report today came in substantially below estimates under a read of 50, which is a level of contraction coming in at 49 versus consensus of 49.7 This suggests stronger contraction happening in the quote backlog backlog is future orders.

It's also the first contraction that we've seen in manufacturing ISM since May of 2020 and we're seeing citations of layoffs and hiring freezing as well as disinflation. Continuing in this good sector, this is bad Manufacturers are starting to realize oh My gosh, we are about to go into a very dirty season of less Goods Manufacturing and prices are likely to come down. Consider this: Dollar General Dollar Stores Places people thought would flock to because of high inflation are now losing market share on their stock market capitalizations like Dollar General down seven percent on higher supply chain costs and a lack of pricing power. Imagine that a dollar store with a lack of pricing power.

But it kind of makes sense because if people stop buying the little dreidels and toys at Dollar Stores which are actually high margin products and start buying their apples and expensive fruits from Dollar Stores or Foods In general, all of a sudden, their margins get squeezed. they have less pricing power. So this inflation is actually hurting companies like dollar stores. Which is weird because they've actually been performing very, very well.

But it's not just dollar stores that are suffering Walmart is having struggle trouble selling uh, to uh, discretionary items to individuals again, computers and PCs Victoria's Secret is having trouble selling lingerie Costco had its slowest comp sales increase since April of 2020 when everybody was flocking to Costco non-discretionary spending is plummeting and when Goods plummets, what happens next? Services plummet. Of course, people are still trying to extend their budgets. People are opting to pay now more with Buy Now Pay Later services like a firm Google Search transfer a firm credit implying they're curious if a firm is going to run their credit or what credit scores are required or at the highest level ever. People are looking for more credit cards today than ever before, and it's likely because even though we're seeing repayments on credit go up with higher credit, it's likely because people are suggesting, you know what? I Don't mind if I spend some of my excess savings, you only live once and I may as well just keep spending to maintain my quality of life.

At this point, however, a danger of the buy Now Pay Later platforms is their charge-offs are nearly twice as high as that of credit cards, Suggesting that the more people flock to buy now pay later, the more risky consumers are resorting to a risky form of lending. A form of lending where you might not actually see your credit score go up, but you might see your credit score go down if you miss a payment. That could backfire for consumers. But in the meantime it tells us uh oh, the good side: I Think there is no question Goods in manufacturing is getting hip, but what comes after this is sluggishness in services and that's really the last hold up.

and we have a Jobs report coming out tomorrow. A BLS Jobs Report. But we don't even necessarily need to wait until tomorrow to get some more insight. We can look at the ADP Jobs report and look at exactly where we're seeing pain.

Zoom in over here. service, producing information Financial activities and professional and business services all layoffs and Across The Good Side Manufacturing plummeting by a hundred thousand jobs. However, we're still seeing a prop up of the you only live once mentality spent Leisure hospitality and well health services. Kind of still makes sense given that we're coming out of a pandemic now and then.

of course. Another thing to consider is there were a lot of discretionary surgeries that were held off on because of the pandemic. However, when these shoes drop, the wage and service inflation sector and the unemployment sector could see substantial pain and that's the trajectory that we're heading in right now. We just haven't quite seen it yet.

And this is important because look at this chart here. This chart is the only chart that individuals who suggest inflation is here to stay have going for them. That is because we know that Goods inflation via the Personal Consumption Expenditures report that's the Fed's preferred inflation gauge compared to CPI is plummeting. What's next to plummet though I Believe is services and it's coming.

The Five-Year Break Even Rate has historically always been correct. The five-year Break Even rate says that when the rate trends down, inflation Trends down. It's very volatile though. When you look at the micro or the smaller segment here, like when you zoom all the way in, you're like oh no, after drone Powell's hope yesterday is hopium.

We actually saw break evens Trend up. But look at this downtrend we're on. It's a solid downtrend. Inflation is going to come down now.

keep in mind we are still at higher levels of Break Even than where we were during the hiking style when Jerome Powell was potentially going to get fired in 2018. But all it's going to take is a few nasty inflation reports coming in low for these break-evens in my opinion, to absolutely plummet. We're already seeing the yields on treasuries plummet by almost 15 basis points down to 3.55 on the 10-year plummeting to levels we haven't seen since. September Erasing these real fears that inflation is going to be higher for longer.

And that's because the market is smart in predicting what is potentially going to happen in aggregate. The trend is your friend. In aggregate, inflation is going to go down and it's going to go down gloriously. The question is, and this is the big problem is how quickly is that inflation actually going to Trend down? And this is where we have to talk about the problem.

And then we have to talk about the conclusion. Now, No. I did have one thing. If you were paying attention, I'm going to be very quick about this.

It's the rent side of inflation, right? On the rent side of inflation. Now, we are starting to finally get fear. Articles in Bloomberg Apartment markets have turned to ice over the past few months, says one Bloomberg article from today. They say that real sluggishness in rents is coming.

Usually rents fall between September and November of 1.3 percent. This year, they're down 2.2 percent, substantially higher and substantially weaker than on average. The Federal Reserve themselves says that they see real rents plummeting. That is new leases and not just inflation adjusted leases, but new leases, nominal and real are plummeting.

And even though there are some lagging measures like owner's equivalent rents that say they're still Rising, we know those are looking into the past by six months to a year, The reality is, as long as rents continue to Trend down which they are and vacancies continue to go up which they actually are, even though we have a housing shortage, then we expect inflation to continue to go down. Keep this in mind: Vacancies right now have surged up to 5.7 percent. Now, While that's lower than what we've seen before the pandemic, it's definitely up from last year where we were sitting at 4.1 percent vacancies. So you're seeing a trend rents down vacancies up.

How could that be with a housing shortage? Well, oftentimes less household formation, household closings, which is usually a way of saying a nice way of saying people are dying or people are moving in together like families. or they're staying together for longer, not replacing people or potentially selling their homes because they're dead now usually in these bus. Cycles You see real estate home prices come down, car prices come down, rents coming down rarely happens. A 2.2 percent decline in this season extended out for an entire year would be very abnormal.

But it is a trend that could be happening now. and fear and psychology could be the next phase of the real estate cycle, which is bad for the housing market, that is. even if mortgage rates come down, there could still be so much fear like what we had at the end of 2008, that it could take another three years for the housing market to actually bottom like it did that. Now let's before we talk about the dangers and conclusions.

let's think about what I just said I Just said that Jerome Powell is spreading hopium because I Think on the inside he's starting to panic. He realizes they went too far. He realizes the yield curves have inverted so deeply, which are historically the best indicator of how battle recession is going to be that the FED is likely to have to cut rates by five percent 500 basis points. We saw that explained in this particular chart here.

So the FED is providing hope because they're panicking. This curve suggests we are going to go back to zero percent interest rates way sooner than we expect and potentially a very stimulative economy because the FED may have over tightened and led to too much pain. Now on one hand, that's actually potentially good for businesses as they lean out in the near term become the most efficient versions of themselves and that can lead to wonders for stock market returns going forward. But that doesn't necessarily help every individual.

It's more likely to help you since you're watching a finance Channel and you're probably an investor of some sort. that's not going to help people who aren't investing. Now, before we talk about conclusions, it's important to consider some dangers. The dangers are very clear.

The biggest danger is what if inflation continues, well, this is extremely unlikely. Commodity prices are rotating down, oil and energy is rotating down. Almost every sector of inflation is rolling over, and consumption is facing massive pain. Manufacturing is feeling it.

Services is coming and housing is already seeing it. With rent stalled. The question now is not so much. Will inflation go up again? Don't really expect that.

The question is, how fast will inflation fall? That's the big problem is how fast do we start cutting? In my opinion, the best case scenario is inflation plummets and the FED Cuts rates quickly so we can avert a very dangerous recession. Remember what the FED wants, The FED wants our planes so to speak. As I said yesterday, our plane's attitude to be pointing down so that we're above Trend We're above the ground, right? We're not going negative, but we're flying above, but kind of trending down and below that growth that we've had over historical time frame. right? That's where they're trying to keep us.

Now for those of you who don't fly planes, Yes, I Correctly said attitude and not altitude, you could Google that one I Saw a lot of confidence on that yesterday and it's like all right now. next time I'll add some clarity. A lot of folks like to refer to this particular chart, which says when the FED pivots stocks crash by more and what you could see is that over an average of 13 months from the Federal Reserve's pivot to the bottom of the market, we could see another 22.2 percent decline over a 13-month period. I First broke this video or this chart down in a video I posted on October 18th entitled the FED Pivot.

However, in that video which is the same thing I'm going to do now though I encourage you to watch that video because it's more in depth. This chart misses something extremely important. This chart misses that. The Federal Reserve in 1987 following Black Monday created a policy of backstopping the market entirely.

They did so in 1987. In about March of 2003, you should be pretty used to these by now if you've been watching the channel. They did so in the spring of 2009. it was actually February of 2009, it was March of 2020 and it was also December of 2018.

these are the post Fed Ed will bail everything out Bailouts and all of those bailouts occurred at the same time as when the stock market actually hit bottom. The issue is the only items on this chart that actually show you a post Fed will bail everything out period of time we're here. and here this is when markets have come to expect that the Fed's going to bail us out. The problem is, this chart does not tell you when the FED went All in fact, stop.

The FED did not actually backstop markets is, which is when the actual bottom was in about February of 2009 for the Great Recession and the stock market traded sideways here. So this chart's a little confusing. but the market was essentially near the same bottom in March of 2003 when the FED bailed out markets in 2003.. this has actually very little to do with the Fed's pivot.

You Could argue that the Fed's pivot would be going from 0.75 basis points to 0.5 basis points. That's generally not what you're looking for when you're looking for a Federal Reserve U-turn A Federal Reserve U-turn would be. Holy crap. We have screwed up so badly that right now we are having an emergency meeting and we are going to decrease interest rates to zero.

This is somewhat similar to what they did during the Covet Pandemic. The Covet Pandemic says, hey, you know what, what are we gonna do All of a sudden, Covet Pandemic hits. rates are at two and a half percent fed comes out in an emergency meeting Cuts rates to zero instantly because they realize oh my gosh, we're about to go into a deep, deep dark recession. So we're going to turn the money printers on.

This same thing could actually happen again. and the yield curves are saying that it is a possibility. So let's talk conclusions and what actionable steps and advice we could take from this do. keep in mind while I am a licensed financial advisor, that means I can give licensed Financial advice.

This video is not personalized Financial advice for you. There's a big difference between broad Financial advice and personal financial advice because personalized Financial advice depends on your unique circumstances. So I don't want any of this video to be misconstrued as personalized Financial advice. It's not even though I'm a personal financial advisor financial advisor.

So what conclusions do we have from all of this information? Jerome Powell is panicking. That is. Conclusion: Number One Conclusion: Number two: Inflation is going to plummet. It's just a matter of how long it's going to take.

The longer it takes, the worse it is for markets. The quicker it plummets the better then the FED will reduce rates. It's just a matter of time, right? So you're not going to stay this High based on what the bond market is telling us the only way I believe and I could be blind here. But the only way this video this thesis could be wrong is if the bond market is wrong and it's possible.

So this doesn't mean when I say will I want you to be clear, it's Will based on what the bond market is telling us, there's always a potential that maybe quote this time is different, but historically this time ain't different. In fact the four most dangerous words in investing or this time is different and the bottom Market is telling us that drum Pal is panicking that inflation is going to plummet. So what do you do strategically? Well, strategically I Believe the best thing to do is a as always stay out of margin and lower your debts. Cash is King The time for opportunity and to invest is when there is panic and nobody else has cash.

Those are two things that are very very important. Panic It's nice to be able to say oh, buy when there's blood in the streets, but if you're also bleeding out and you also have no cash, what good does it do you? So increase your access to cash, make more money. Join the course to be an elite Hustler Make more money, Learn how to increase your income, lower your debts, be able to qualify for more for Real Estate But also, be careful about speculating. This is a very uncertain time in the near term when we zoom in.

The stock market feels like this. It's up and down. It's emotional roller coaster. It's very different to speculatively make short-term calls, but in the longer term.

I Would be looking for companies that have pricing power through the recession. Those could be smaller companies that are still growing or essential companies that can grow during the recession with pricing power as people might consolidate to the brands that they absolutely can't live without. Those are companies that I would really keep an eye on, though not all of them are guaranteed to do well. I'm a big fan of focusing on increasing your income, staying away from risk and margin, and focusing on pricing power because when the Federal Reserve's money printer turns on again, those pricing power stocks are going to kick the competitions of booty.

and I believe that those sorts of companies are likely to outperform the market. No guarantees obviously. So these are my expectations. I Think this is a very big and critical video and it's one that I expect will be able to look on in the future and say yikes, That is what happened.

No guarantees but inflation I Expect to be very, very clear will plummet. It's just a matter of when and the longer it takes for the Federal Reserve to backstop the economy again, the more pain we likely have ahead. Although the stock market might try to price in that eventual U-turn because they're finally smart to the fact that ah, the bottoms come around the FED U-turn time and if the bottoms come around fed U-turn time. maybe we want to pre-price that in.

Anyway, if you found this video helpful, make sure to share it with anybody you love and care for and folks we'll see in the next one and check out those programs linked down below and building your wealth. The price goes up over time and the sooner you get in, the better and the next coupon expires on December 9th and the coupon code is PP.