Oh, it's been a while since we've heard from Chris Waller over at the Federal Reserve but we just got a heads up from Chris Waller about what their intentions are. And let me tell you, I think the FED is absolutely losing it. This is. this is not.

This is not realistic at all. Chris Waller Just said the US should take a cautious and systematic approach when it begins cutting interest rates. a process that can start this year ABS in a rebound in inflation. Okay, that's fine.

Like that's what we expect. We kind of expect that, mostly because we've kind of been ticking up. It sort of feels like we're ticking up this roller coaster. Uh, and we're ratcheting up like da da da da da da right? Like those are sort of the interest rates.

Uh, it kind of like here. see this. This is the edge of the chart over here on Ec.com You can see this right. Like the slow increase of rates the problem is Chris Waller is suggesting.

Yeah, we could just slowly and methodically lower rates. The issue with that is that is not happened at all. Ever. In recent history the FED has always had to rapidly and massively cut because they were too freaking late.

Always Now they've tried. Don't get me wrong, they have tried. They've made it about n months in a row of slowly tick tick tick tick. Which what's really interesting about that is roughly 8 months after March where we could get our first cut happens to be the election and so I wouldn't be surprised if all of a sudden you start getting a slashing right before the election.

Now, why do I say that it has nothing to do with political Jade despite the fact that I ran for Governor in California and trust me, I think I got a right to be politically jaded? Okay, I worked hard on that one. But anyway, look at this. look at the Fed's history of the effective Fed funds rate. You ratchet it up in the 50s d d Crash right? And like generally you kind of trend up as the economy expands.

you could get rapid Cuts again, but it's always rapid. Like the cuts are rapid, even if there's no recession signified by a gray bar even absent a recession. when rate Cuts come down, they're usually Rapid Or you get this where you have like 6 months down and then JK We're going to go way up, right? and then when it comes to down, it's pretty much always a very rapid decrease. Here's a period of time.

Maybe you could argue we had sustained cuts for a while, but this was Arthur Burns This was like we're going up. JK We're going down, We're going up. JK We're going down JK We're going up a lot Like what is this right? So no consistency of the FED at all. You could argue.

Maybe like okay, well there's some lowering over here, but that's only off the backs of Big Cut Big Cut and then that's already up. So the fed's really historically never done these big like like gradual Cuts You could argue 89 This is probably the best period of time where you actually had the FED go down down down down but then it just turned into oh God we were too slow again. Boom I Kind of think that Boom is going to like. that's us right here.

Okay boom. Now the good news about that if we could say there's good news in getting like these massive massive crazy rate Cuts is I think the worst of the stock market is probably behind us now. I'm not trying to be like some Perma or whatever about this, it's simply to say if we scroll back to that 89 uh period of time and we do like uh like we'll do a quick Google like Dow Jones 100 100y Year history right? So you just look at the 100y year history charts macro Trends Trends excuse me has a good chart of this and what we find is that yeah the 80s like that era of 82 is to about uh quite frankly the bubble was pretty volatile but it wasn't Mega painful like. Consider this if you could have invested here in February of 82 which was right around the time the FED hit Peak rates which would be kind of like this summer for us when we hit Peak rates.

the market was volatile but it was basically a Nike Swoosh right? here's the tip of your Nike Swoosh and there's your swoosh. Hm, Have you ever wondered where I came up with the Nike Swoosh from? Was it maybe history? Maybe Kevin's reading the history books oh my God I Thought it was just a YouTuber Anyway, so what's what's fascinating though is look at 89. Look at the drop in the 8990 recession in the Dow Folks, nothing that like that was not even you didn't even feel that. Let's zoom in.

not into the 70s. let's go into 89. There we go. This was your 89 drop.

You went from 6,800 on the Dow to 5600. That's like what at 8% % drop 400 points it's more like a 5% drop. It's like 5, 6, 7, 8, 9% Somewhere around there it's super super nominal. So when you zoom out and you look at like the do drop uh which was over here which was three years of pain that was painful.

Then you look over here and you go 08 recession. That was quite painful and that 08 recession was very very rapid which honestly I kind of would rather rapid and really painful than how long uh this kind of like cycle has been and it depends I Guess what you're investing in because if you look at this cycle like most of the pain happened between December of 2021 and then over here probably around the beginning of 2023 right? So we're really talking about a 13mon downtrend cycle, but it really depends what you were invested in. Because some stocks I mean you look at a company like Tesla it's been a lot more volatile and you've had a lot more of a percentage based draw down and less of a recovery. That's okay though, that comes with these volatile stocks.

Zoom into Apple 20 years ago and you've got even more volatility than this I Know it's seem crazy to think about how stable Apple is now, but the point with Waller's comments that I think are delusional is that Waller is suggesting. oh, we're going to be able to methodically cut because we're starting to see inflation and the labor market come into more balance. In fact, he literally said the Focus right now is not on pushing inflation down, but rather maintaining a balance between inflation and jobs. That's actually a pretty big shift now.

He's concerned that we're going to get some big revisions in February for CPI data and we might. Those revisions last year washed away some of the inflation benefits that we had, which isn't great. It's going to lead to more volatility and obviously now we have supply chain concerns around the Red Sea Everybody's talking about how Germany is basically bogged because of. well, the Red Sea like a lot of material comes up to Germany through the Red Sea just like we saw in uh for Giga Berlin you know they're having to shut down for almost 2 weeks.

Actually might be a little bit more than two weeks because they don't. They don't have the materials they need so so they can't make Teslas because of material that should be coming from China through the Red Sea So it has to go all the way around. Uh, the Cape of Africa it's adding basically 30% of your commute time. But anyway, uh Waller here suggesting that the risks are more balanced and that they do not want to harm the economy as as long as inflation doesn't Reverb is in my opinion, actually a bullish sign that they're starting to realize.

Okay, we've done a lot of damage. We don't want to go too far. The IMF just reported that 75% of the rate impacts have already hit us like the lag has already hit us. and uh, Waller's like yeah, we had a strong jobs report in December but that's mostly noise.

Like they're literally downplaying the good data. and they're like inflation's good so it's like the good. The hot data is like oh no no no, that's just noise. Then inflation data.

Okay, we're good over here. Uh, now, let's make sure we don't go into a joblessness recession. That's what I'm wor worried about and they're seeing it as well. But this this idea that we're going to get slow and methodical rate Cuts It's delusional.

I Do not think this time will be different. So I actually do think that'll be bullish for stocks I Know that's weird, but I think we're going to get a slashing of rates really really quickly this year. I I Don't know when it it could literally be December of this year. Okay, I don't know what, but I think we're going to get a slashing of rates and what'll be really weird about it is the interest rate sensitive sectors in my opinion, will explode so quickly people are going to Blink and go oh damn I thought I had exposure to the interest rate sensitive stocks I guess I didn't and then all of a sudden they were like wait I can't guarantee that I Don't know that with certainty.

That's just my opinion. I Think the FED is delusional I'm glad that there are no nowhere near talking about more rate hikes. They're talking about being restrictive. but this slow and methodical rate Cuts I Just want to be I Just want to say one thing.

Crystal Clear It's never ever happened before. They always end up in fat rate cuts and we know the FED knows how to cut rates and I promise you. As soon as it starts becoming painfully obvious that we're losing jobs and the economy is losing jobs, they're not only going to cut, but they're going to go into their drawer. Why 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.

Go Congratulations man, you have done so much. People love you. People look up to you Kevin PA Financial analyst and YouTuber meet Kevin Always great to get your TAP Even though I'm a licensed financial adviser, real estate broker, and becoming a stock broker, this video is neither person personalized Financial advice nor real estate advice for you. It is not tax, legal, or otherwise personalized advice tailored to you.

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