Today is Black Friday the expiration of our biggest coupon code of the year. And folks, the Federal Reserve is again in Focus The stronger consumers behave today, the more the FED may have to raise interest rates to crimp our economy further, hurting stock valuations and real estate valuations AKA asset valuations as well as cryptocurrencies. Of course, if the Federal Reserve believes they might actually be acting too aggressively and they may actually be pushing us into a recession when that's not their goal because a recession could lead to unnecessary bankruptcies and job loss, then the Federal Reserve may decide. You know what? Why don't we pull back a little bit on the reins and just wait to see how the effects of what we've already done play through the economy. In just a nine short months, we've seen interest rates go from zero along with money printing to 3.75 percent about to be 4.25 next month and quantitative tightening, which rather than running the money printer means running the money vacuum like in Luigi's Mansion. So what do we know about what the Federal Reserve is thinking now? and do we have any updates? Well, we will have an update next week because Jerome Powell is scheduled to speak next week, which is right before the Federal Reserve goes into their two-week blackout period, so we'll get some insight and expect some volatility going into next week. I Also closed out some of my short-term option trades today because I want to get ready for exactly how I strategically want to play leading into Powell's speech next week and this is part of my five Million Dollar Options Trading Portfolio Challenge which Launches on Monday for those of you in the stocks and psychology of MoneyGram Now let's go ahead and take a look at this latest report here. This is a report from the St Louis Fed and I find this very interesting because first, they're going to give us a little bit of a preview about some things that are happening now. then they're going to go into what they predict going forward. and I think it's quite remarkable. And it's really important because it's going to give us an idea of what does the FED actually think. So let's look at this first. we see that right now, the economic activity We know this has been uneven. We saw negative GDP of 1.6 to negative 0.6 percent for the beginning of the year. That's technically a recession, though Joe Biden didn't want to Define it as such because, well, that's quite politically unpopular. Growth in the third quarter was unusually brisk though, with a large contribution from realnet exports the largest contribution in 40 years. However, this boost in GDP we got in the Q3. The Saint Louis Fed here actually tells us is artificial because the dollar has been so strong, making our exports look substantially stronger and more expensive and our Imports substantially less expensive. This makes sense if you have a dollar that goes up in value. It takes less of your money to buy stuff from China, but it costs the Chinese more of their money to buy our dollar denominated stuff. What is the St Louis Fed telling us? Well, here, they're telling us this is a minus for the economy. Two negative Gdps in a row, but the growth we had in Q3 was actually an anomaly and one that we don't expect to continue. That's another minus for the economy. The more minuses they tell us, the more likely the FED is to slow down on their aggressive posture because they don't want to overly hurt or crash this economy. Beyond What's necessary to bring inflation down? Speaking of which, inflation, and GDP Let's take a look at what the November Survey of Professional Forecasters predicts. Now, forecasts are often wrong, but you're going to see this reference to SPF That's the Survey of Professional Forecasters, so let's keep that in mind. The forecast now is for an annual annualized rate of one percent GDP in the fourth quarter, meaning our GDP would end up for the year of 2022, sitting at point eight percent. Not only is that substantially below the 5.7 percent growth we saw in 2021, it is a substantial negative. It is much slower than where we want to be negative. Really, anything below Trend growth would be minus two percent. And we've got three negatives here in a row: I Mean at 0.8 Even though it's not negative, it's a bad number and it's really only propped up because of the strong dollar, which actually isn't expected to stay strong that much longer. Shorting the dollar could actually be a good strategy. Now, the Saint Louis Fed and Jerome Powell via the Federal Reserve's minutes are both now indicating that a recession is not out of the question. This is a very big shift that we've heard from the FED in just the last week and that we haven't heard previously previously. The Federal Reserve has always told us ah, we don't have a recession in our forecasts. Now they're starting to say yeah, Soft Landing's looking hard. Citation the last press conference of the Fomc Open Market Committee meeting at the beginning of November And in their minutes, they talk about a recession as being as likely as not about a 50 chance. And here they are in the St Louis Fed piece talking about a recession not being out of the question. This, my friends, is a very clear minus sign, and it's one that a lot of us starting in January of 2022 thought was a real potential that the Fed was essentially going to force us into a recession. I Just don't think they were as honest up front as they could have been about it. probably because of political reasons. Notice how interesting it is that all this recession talk is now starting right after the election? How convenient. Anyway, I'm not trying to put on tinfoil hat here, just saying they tried forcing a recession from January and they Bsed us until now. and they might still be Bsing us anyway. The survey of professional forecasters suggests that headline and core inflation will slow sharply in 2023. Headline inflation is projected to come down from 7.7 percent in 2022 to 3.4 and 23.. Now, that's still above the Federal Reserve's goal of two percent inflation, and core inflation is also expected to be around that three and a half percent level, suggesting that the FED still has some interest rate hikes ahead of it, and it's probably going to take until at least 2024 for interest rate or for inflation to get anywhere even close to two percent if they're even lucky that that ends up happening. Of course, some like Kathy Wood will argue that we'll actually end up going into a disinflationary period where we could see even lower than two percent inflation. though I wouldn't say that's anybody's real base case scenario right now. Either way, this is actually a plus for the economy. and I'm saying it's a plus, not because anybody wants inflation. I'm actually saying it's a plus because the more pluses we have, the more aggressive the FED has to be. And the more minus we have, the more calm the Federal Reserve should be. So far, we've got a lot of minuses. Okay, now let's look at this this section right here. This red box stock price is going down. Real estate mortgage is getting more expensive, and this fancy phrase credit risk, spread, widening is all a fancy way of saying Financial conditions are tightening and this is something the Federal Reserve wants and demands. The Federal Reserve desires to see Financial conditions tighten and stay tight because they believe that when Financial conditions tighten, people spend less money, leading companies to raise prices less often or potentially decrease prices, therefore leading inflation to come down. So in other words, falling stock prices, home prices, and Bond values are all part of the puzzle. They're all part of the game to make you poorer so that they can win their game of getting inflation down. This is actually a good thing that these Financial conditions are very tight and so we're going to put a minus there that the FED does not have to keep going heavier because they've already done quite a good job at not only ruining home builder sentiment, but tightening expectations for financial conditions and actual Financial conditions. Now, we still have mixed readings on consumer outlays, but the Federal Reserve is starting to notice that the reason people continue to spend is because of the following: They believe that people are still spending because people are normalizing their expenditures. Check out that green line at the bottom. Normal Main Retaining normalized expenditure patterns through increased debt and by using savings they've accumulated during the pandemic. This is actually a sign that the consumers might be on their last leg of being able to spend, especially when you start seeing durables turn over. They're some of the most interest rate sensitive items and tend to be, as the FED says, more discretionary in nature. So this actually right here is another minus the turnover of interest rate sensitive environments. And we have a minus over here that spending isn't being driven necessarily by high incomes, it's being driven by potentially more debt spending. Now, we are seeing more payoff right now, which is great. More debt payoff. However, that's also aligning with more debt. The more debt we have, the more payoff we expect. Unless of course we expect defaults, then you would see more debt and lower payoffs or stable payoffs. But while we're not seeing defaults, it's clear that people are moving from having lots of money to having less money. And now take a look at this. when it comes to the jobs, Market The Federal Reserve actually thinks that the jobs Market even though it's been relatively impervious to the pain, might actually end up going negative by the fourth quarter of 2024 with job gains. They do, though, think that for the entire year of 2023, which is right here that inner circle, they think the average job gains will be around 36 000 per month, which is a Far Cry of the over 261 000 jobs per month or I'm sorry year-to-date 407 000 jobs per month. Year to date that we've seen 261 000 just recently. In other words, we've been averaging around this 400 000 level and we're finally trending down a little bit towards the end of the year and the forecast is for that to really plummet next year. And and this is very good news for the Federal Reserve. You're going to see here that compensation has not kept pace with inflation. That line, right? There is probably one of the most important things. so we actually have two minuses in here. That's because the Federal Reserve is deathly afraid of something known as a wage price spiral. and when the Federal Reserve says that compensation is not kept pace with inflation now and that the employment cost index was only up five percent from a year earlier, while inflation is up seven and a half percent or seven point seven percent, this is a sign that we do not have a wage price spiral, which is usually marked by having wages that are going up at a higher rate than what inflation is. If that were the case, the FED would potentially at this point have to force us into a Great Depression because the risk of letting inflation become unanchored and run away via a wage price spiral would be even worse to the economy than just squeezing out inflation the way we're doing now. Now, in case that's confusing, let me just be very clear. as soon as people think that prices are going to go up forever, that is expectations of inflation break because they can keep getting higher and higher pay, then inflation will continue to go up. and the only way to break it will be to essentially pull Volkerty economy like what we saw in the early 1980s where Paul Volcker raised the Federal Reserve rate to well above the level of inflation inflation around 18 percent, Fed Funds rate running up to about 20 percent. Look at where we are now: Fed Funds rates sitting around three and three quarters of a percent, and inflation over twice that. So there's a big gap today. Our Fed Funds rate is like here and inflation is like here. Then get rid of that. Inflation's here, and the Fed's like, um, nope, we're going above that to squeeze that sucker down. And that they did. They were able to lower inflation from about 18 to just about nine percent in just a matter of a year, but they crushed the economy in doing so now. Uh, there is also the belief that a falling a capital spending and business spending will end up leading to lower stock prices as we go into what's known as an earnings recession. This is actually the recession that I'm really fearful for in the World of stock picking. I Believe that in the World of Stock Picking for 2023 and I think this is critically important, you really need to focus on companies that can manage EPS growth in 2023 I think having EPS growth in 2023 is going to be very difficult. Perhaps companies like Adobe Tesla uh end phase depending on how the real estate market performs. solar Edge and some of these companies will be able to maintain High margins as well as AutoCAD Unless of course, we have a massive slowdown in the construction business leading to cancellations of architecture software though I Think that's unlikely since even if you're an architect just doing one Arc architectural drawing a year, you're probably going to keep your AutoCAD subscription. But anyway, that part is just speculating. and of course I can't give you specific Financial advice even though I'm a licensed financial advisor. This video is just broad-based financial information and if you want specific information for your situation, make sure you contact the appropriate professionals to help you out. Now in conclusion, the FED says here: the balance of risks facing the economy over the near term are decidedly weighted to the downside. Now, this year at the bottom is yet another big shift from the Federal Reserve Previously, they suggested that the risks to the economy were that the economy would perform to the upside and that inflation would perform to the upside. Both of those were bad because it meant Titan Titan Titan Titan Now what you have is the Federal Reserve saying uh oh, our economy's risks are actually weighted to the downside. And yeah, even though forecasts aren't perfect and there can still be issues in and you know, inflation actually coming down, we've done pretty damn well at slowing this economy, not necessarily crashing it even though that might be what it feels like in the economy. But we're doing pretty decently at slowing things down and now it's time for us to slow down. Which quite frankly, the Fed's slowing down is actually bullish for the economy. And in a weird Twisted way. the FED Listen to this. Okay, the FED know not only wants you to check out on that 60 off coupon code for the programs I'm Building Wealth and Black Friday coupon code that expires at midnight tonight, but the FED might actually want Financial conditions to loosen for fear of having gone too far. How do you loosen folks? You encourage a stock market rally baby? Now no guarantees, but this is a really interesting potential. I think it's all obviously conditioned on next month's CPI If next month's CPI report comes in weak oh boy oh boy, we could be in for a juicy, juicy ride to the Upside a rocket ship Dare I say anyway? Thanks so much for watching. Consider sharing the video with someone else and subscribing and we'll see in the next one. Good luck, Goodbye and happy. Black Friday.