Hey everyone me kevin here. This video is brought to you by masterworks, but more on them in a moment holy smokes. This is by far the worst report from the federal reserve. I have seen in a very long time everything converged into this report for what i call peak doo doo.

You had the beginning of fears around the omicron variant: inflation fears, job fears, rate fears, balance sheet reduction, fears, literally all the doo-doo you could have went into this report now. There's good news in this some some very, very little good news. There's like a tiny little good silver lining in this. The rest is literally all bad news, uh, and so after going through it, it's no surprise that the stock market, uh indices, have all u-turned to the downside and uh individual stocks, specifically profitless tech, uh or uh.

Recently, ipo'd recently spaced uh software companies, all these selling off substantially along with many other assets. Okay, folks, what's in the report what's going on here? Well, let's just go ahead and pull it up. So the very most important thing to remember is that this is from december 14th to 15th. That is going to have to do with our silver lining in a moment, but for right now we got to talk about what's going on, so i'm just going to read the highlighted sections here, because i read the entire 14 15 pages.

I'm going to give you the synopsis. There's a lot in here, that's somewhat painful, okay, so first they talked about the news of the omicron variant, leading to this safe haven flow into bonds. So, basically, moving into bonds and away from stocks that are affected by social distancing. This has obviously reversed.

This has reversed because we've uh the market has essentially deemed that omicron is substantially less mild, which uh, in all intents and purposes, is obviously you don't want to get it. There's still concerns for some individuals and it's bad for some individuals. But overall it's been relatively mild and the market has priced that in so, we've started to see a little bit of a bond selling and moving back into uh into sort of these, these social distance stocks, whether it's carnival cruise lines, recoveries or whatever. So that one thing has changed from this report and honestly i'll just give you the silver lining up front.

That's the only thing, that's positive in report in this report. Everything else is bad in this report. The only thing that's positive in the report is basically that what was a negative is kind of like a pseudo-positive right now, because it's like, ah it's okay, we've kind of already dealt with omicron like we're good, so i'm making this clear front. The only positive is that the omicron is not as bad that's it.

Everything else was crap in the report. Let's get to the crap okay, so first they talked about quickening the pace of the reduction of net asset purchases. We already know that doubling the pace of the taper, but they also started talking about this right here. The timing of the beginning of removal of a policy com, accommodation coming closer and market participants began to discuss how balance sheet reduction might come into the the future plans uh.

This right here is essentially the federal reserve taking a vacuum cleaner to the market, to get excess liquidity out of the market. Right. We've talked about that over the last couple days. We didn't expect them to talk so severely about it in these minutes, though.

So this almost sometimes it almost kind of feels like a little bit of a rug pull because it kind of just came out of nowhere like on monday. Somebody made some comments on this from the federal reserve and it was almost kind of like they purposely planned to just soften the blow of this minute. Uh release like they knew it was gon na be bad, so anyway, uh the committee's previous experience with policy normalization. This is important, considering the committee's previous experience with policy, normal normalization, alternative approach for removing policy accommodation, the timing and sequence of policy, normalization actions and the appropriate size of composition.

Okay, so now we're talking about the past and then they're going to compare to the past to the current take a look at this. The participants discussion was preceded by staff presentation. The staff reviewed the previous normalization episode, including how the committee in the past commenced normalization. So right out of the gate at the beginning of this meeting, they're like all right folks we're doubling the pace of the taper, we got to talk about how we're going to vacuum clean up all the money, that's in the economy, basically right now that leftover, money And we're going to talk about how we reduced asset holdings in the past and when they had this discussion, they found a few things one.

They found that the current economy was much stronger, but that we had much higher inflation and a significantly tighter labor market than at the beginning of previous normalization periods. So in other words, what that means is if the economy is doing better better in their mind. Now than in previous periods, it means that the federal reserve could run off their balance sheet faster, even faster than expected. Because look at what they're saying here, they're saying the following: they're saying: inflation is higher than previous periods.

They're saying the amount of money on their balance sheet is higher much larger than previous periods and they're saying the economy is stronger than previous periods. Every single one of these points to faster uh runoff so in other words, a larger vacuum cleaner than a potentially expected. Like this is not going to go slow, uh, what we'll see here they do make a quick little note. This is just sort of a minor note here saying that they prefer to raise interest rates over a faster runoff, but that little note is actually really important, because what they're saying is hey.

We want to vacuum clean up a lot of money inflation's way higher than we thought it would be. There's way more money floating around in the economy and the economy is doing quite well. So we should probably like run off our balance sheet faster, but in addition to that, it's worth noting that we think it's much more effective to just raise interest rates so in other words uh, and they say that, because that's easier to communicate to the public. So, in other words, faster, runoff, plus, faster rate hike.

This is what they're communicating here, they're saying: look we're going to have to do more of this, but we're probably also going to have to hike rates faster and again. The only positive silver lining is that omicron ain't that bad so hopefully, hopefully that can help us put a damper in inflation uh but uh. You know right now. It looks like the fed's quite nervous and uh kind of i i don't want to say freaking out, but throughout this entire document it feels like they're freaking out now.

I want to keep going through some of the scary things that are in here. I just really quickly have to get out of this way. Thank you. Today, sponsor masterworks masterworks allows retail investors to buy fractional shares in high-end art.

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Okay, let's get back to the piece over here again, that link is masterworks.io in the description down below. They also have a secondary liquidity pool by the way where you can share, sell shares and of artwork after you buy it and before they potentially resell themselves. Okay, so here's where they compare to late 2014. They say that participants noted the current average of maturities for treasuries was actually shorter than the previous normalization effort.

Okay, i told you this stuff just keeps getting worse and worse. Okay. So now what we have to write over here is shorter bond duration that they bought, which also reiterates faster runoff and reiterates a faster takeoff for interest rates. So more bad news, the balance sheet look at this they bluntly tell us here.

The balance sheet could potentially shrink faster than the last time. However, several participants noted concerns about the vulnerabilities in the treasury market. A couple of participants noted that the repo market could help mitigate such concerns uh, and that participants judged the federal reserve to be in a better position for normalization than in the past so again with the better positioning uh in the past. This right here is a problem for equity markets.

Why? Because if we are in a quote better better i'm running out of room over here better because there's so much bad news, so uh we're in a better position to run off the balance sheet or vacuum up money in the market. We've got a stronger economy. We've got a bigger balance sheet than previously. We get more inflation and shorter bond durations, which all imply that's it.

We need to have a faster movement in the taper which possibly also sets up a faster rate. Hike move pain keeps coming, so some participants judge that it could be a significant amount of balance that a significant amount of balance sheet shrinkage could be appropriate over the normalization process, especially in light of abundant liquidity in money markets and elevated use of the repo facility. So the repo facility is basically a place where uh banks and institutions can deposit a lot of extra cash that they have and to the federal reserve. This is a sign that hey, there's so much money out there uh, let's, let's just go: uh grab uh the the money that's out there, we've got so much of it, in which case, let's take advantage of uh of the cash that is there and go for A significant amount of balance sheet shrinkage, they're saying it could be appropriate so again reiterating we have all this pain here.

Let's go for a significant amount, so i'm just going to write down the word uh significant, so we have somewhat of a little bit of a summary uh here on what the heck, the fed's doing: okay, uh the balance sheet runoff commenced almost two years after policy Rate liftoff the last time so they're saying look last time we raised rates and it took us two years to lift off on or or i should say start reducing their balance sheet right, but listen to this folks, more bad news participate. Telling me this is the worst. This is like a rug pull. That's almost.

What we're seeing here anyway, participants judged that the appropriate timing of the balance sheet runoff would be closer to policy rate liftoff than in the past, and because the balance sheet is larger, it could potentially also uh indicate a faster pace of rate normalization. So, in other words, they're now saying they're, they're literally painting the portrait for us they're painting the masterworks painting for us, they are telling us faster rate, liftoff uh and on top of that they're also saying uh sooner, which is really important. Let me did they actually use the word sooner uh. They said probably closer to that uh, not not sooner.

It's basically the same thing but closer uh, redux i'll. Just there we go ish uh to lift off sorry. This is just my little summary down here of all this highlighting okay, a few participants raised concerns that a relatively flat yield curve could adversely affect the interest rate, uh market uh or margins interest margins for some financial intermediaries, which may raise financial stability risks. So now the fed like this - this is so bad.

Now the fed is literally saying hey, but if we do this, if we might have financial uh stability risks aka the r word recession right. Oh man, this is a mess. Okay, but it's difficult to judge how how the market is essentially going to respond is what they're saying participants noted that the current size of the balance sheet is elevated and would likely remain so for some time after the process of normalization normalization was underway. The committee's previous uh or here the committee has an express preference to allow for a substantial buffer in the level of reserves to support interest rate control uh.

In other words, they do want to keep some money uh. You know. Basically, they want to prioritize raising rates and they are going to prioritize raising rates over balance sheet. Runoff, okay, uh, then just a note here.

This is just sort of an accommodative factor that hey there's so much money. It shouldn't be a problem to to run off the balance sheet, but markets are obviously very fearful about this uh. Then we talk about how uh measures of compensation in the labor market had risen sharply in october and november, and then inflation was a lot higher. This is sort of a little recap of inflation here, but and we we know it's really high, but it's worth noting some of the changes in language.

So let's look at some of those inflation. Readings remained high in various indicators suggested here you go. This is a bad one. Inflationary pressures had broadened in recent months, okay, so another another bad thing to add to the list inflation broadened broadened.

This is not what you want to see. It's one thing: if you see inflation in a few narrow sector sections like used car prices, for example - that's really high, but if everything's going up, then you just you just kind of screwed uh. All right, then we've got inflation. Readings remained high and oh yeah.

Well, i just read that one sorry, okay, here we go in november, the 12-month change of cpi was 6.8 percent. Well, core was 4.9 uh, however, and this is maybe a tiny little bit of good news. Uh fears that inflation would continue to go up via surveys have somewhat leveled off. Over the past year, real pce growth appeared to be picking up in the fourth quarter, despite an upturn in covet cases.

Okay, remember now covid is is less of a concern, but folks, why are they saying that uh, despite a concer, a tick in uptick in in covet cases, and what does this mean okay, this is this is important when we had the delta variant, come inflation, uh And the alpha variant inflation went down, and now i know this is kind of weird to grasp for a moment, but but think about this for a moment. Okay, when the variance of alpha and delta struck inflation fell. However, because of this, if the previous trajectory for inflation was this dotted line here, because of these, these disruptions inflation actually rotated up after and this represents the supply chain constraints right well, here the federal reserve is saying: oh my gosh. We got to take advantage of that birthday, coupon code link down below for kevin's programs on building wealth; okay, sorry now uh, the the federal reserve this.

This is pretty actually salient uh, sorry for the plug right there in a selling saline point uh. The federal reserve is saying: usually we see inflation inflect down, but that's not what we're seeing with omicron. What we're seeing with omicron is cases are going up and inflation growth appears to be picking up, despite the fact that stimulus is wearing off so now, they're literally saying, hey uh. This is this is abnormal abnormal is essentially what they're saying that inflation is going up.

While cases are going up, abnormal makes sense for inflation to go up after cases go up, but abnormal that inflation was going up during and that affects supply chain issues right. But we have inflation going up while stimulus, uh stem you less is waning. So it's weird that inflation is going up more while stimulus is waning and covid is underway, like these things. Right here should be pushing inflation down, but they're, not they're, pushing inflation up weird and the fed is acknowledging this here saying like okay yeah this.

This is a problem like we got to get off our butts and deal with something or do something here: okay, after reaching a record level in september, the u.s international trade deficit narrowed reflecting a large rebound in exports. Shipping congestion and other bottlenecks continued to restrain overall trade in goods. Persistent bottlenecks, persistent bottlenecks in supply and transportation were reflected in record high input and output price components of the purchasing managers indices. Okay, now here's a tiny little good bit of good news again.

The last pmi report that we just got actually showed a substantial decline in inflationary pressures on this. So this is where there's another small silver lining here: okay and i'm going to give a conclusion for how you want to invest in just a moment, but there's another silver lining here. This fed report there we go. This fed report represents uh.

In my opinion, uh peak fear of the following covid and inflation and jobs. This is what this current fed report represents because remember, this came from the 14th through the 15th of december, but covid has actually gotten better uh. Better inflation according to the pmi, has actually gotten better and jobs. We don't know we will see friday but well.

The adp report suggests that we kind of blew up in terms of the amount of jobs that we have, but we don't know what that inflationary read. Is going to look like so we'll know that on friday, so in a crazy, weird flip of a way, it is possible that this terrible report from the federal reserve could actually be, and i know this sounds crazy. While it's happening could actually be the perfect thing to buy off of if, if, if, if you think these things are going to continue to get better so far, the only thing we have that suggests things are going to get better. Is that pmi report, and obviously you know kovid getting better uh, but that pmi report is the only inflection that we have so far.

So it could be way too soon to tell on that. So that is a risk, but we'll talk more in a moment. So uh, then we have the next pay over here. Rising inflation at fomc communications appeared to have put substantial upward pressure on shorter date.

Treasury yields that's the two years they're talking about here, and this is true. When the federal reserve talks about raising rates the market moves, and they do that on purpose, so they can see how the market is reacting. Okay, so now market participants view the expected path for the fed funds rate as a as implied by a straight read. Over uh of overnight index swaps suggested they had pulled forward rate increase expectations into 2022..

Okay. This is just basically saying the market foresees three interest rate increases in 2022, uh and uh, and then potentially more thereafter like three and 23 uh and so on. But it used to be two now we're at three in 2023 in 2022, rather and they're, acknowledging that the potential for less accommodative policy over the next years years folks contributed it to a notable rise in treasury yields. So in other words, the fed is like hey.

This process of us being less accommodative, is going to take years. So if we go back on over to our poop list over here, this is the poop list of all the bad stuff. I'm going to write down the word years here years, so that way we can get a little summary of just how nasty this report really. Is it ain't good? Okay, there are some silver linings, but it's kind of minor okay inflation compensation had declined moderately in november uh or since the november fomc meeting.

As highlighted concerns about inflation, outlook appeared to be outweighed by increases in previous prospects for tighter monetary plus blah blah blah. Okay, that doesn't matter so much okay, just sort of some basic review here. Credit quality of large financial corporations remains solid. This is good defaults on corporate bonds and leverage low loans, which these are basically that's a fancy way of saying subprime loans.

I don't know why they say leverage loans now, but it's they're. Basically, subprime loans, they're high interest rate, junk bond kind of loans and they have declined default rates have declined to historic lows in october november. That's good news: the uh, the only place we actually saw issues was in bonds for hotels and retail properties, which makes sense because well covet mortgage borrowers. Missing payments continued to decline through october, good news use of forbearance, programs for credit and auto loans, remained low levels in september and auto and october also good news near term.

Okay, more staff economic outlook, the near-term outlook was revised up, reflecting a faster than expected increase for uh, both both for a broad array, array of consumer prices and wages. Here goes the fed again going. Okay, we're changing our expectation. We think uh inflation pressures are going to go up not only due to how long supply chain constraints are lasting, but also because of the labor market uh over the following two years.

The boost to consumer prices caused by supply issues was expected to partly reverse and energy prices were expected to decline. This is another new word folks. We have not heard, in my opinion, at least for my memory. The federal reserve say this yet remember how inflation was always supposed to be transitory.

Well, now, oops, rather than being transitory they're only saying that inflation is going to partly reverse they're, not saying that it's going to go away, they're just saying ah, over the next couple years. Oh yeah - and i should two years a partly reverse, not great, also bad. Very bad report projected inflation over this period was a little higher than in the previous projection. We saw that in the summary of economic projections, the staff forecast of economic activity remained strong, but was weaker than that of november, but again this most mostly because of covid.

So that might end up getting revised up since omicron is, is again less of an issue than previously feared. The staff continued to judge the risk to baseline projections for the economy that were skewed to the downside and that risk to inflation were skewed to the upside. All right so digest that for a moment, baseline projection for economic activity, skewed to the downside and expectations for inflation upside. So i'm going to write down inflation upside risk and that econ activity worst case scenario.

Econ activity have a downside risk. It's literally the perfect recipe for uh the worst federal reserve report. I've seen: okay, now, oh boy! If, in the mean we get, we got a few more pages to go and it's painful. If, if you need, if you need to tab out and take a break because it's so painful, there are a few things you could do, masterworks.io in the description down below my course is on building your wealth.

There's a birthday coupon code price did go up again since the last time, but this is the month that we're releasing the path course, so that'll be really cool and of course you can always get life insurance in as little as five minutes. By going back kevin.com life all right, so what do we have here? Few participants cited healthy household balance sheets and the need for businesses to rebuild inventory and accommodate financial conditions as factors supporting continued robust growth. Okay, this is good factors supporting continued robust growth. Some good news, but that was only a few participants, not everyone.

A couple of participants commented that business conditions appeared to be improving. Broadly many participants noted the emergence of the omicron variant, making economic outlook uncertain again. This right here is actually the good catalyst that we have one of the good things since that is better uh. Then participants noted that supply oh gosh, yeah you're, just buckle up for more rent.

Okay, participants noted that supply chain bottlenecks and labor shortages continued to limit businesses ability to meet strong demand. They judged that these challenges would last longer and be more widespread than previously thought. Participants generally expected global supply chain bottlenecks to particip or to persist well into next year, at least come on folks, like i, i'm literally running out of room for how much crap to put on here that the federal reserve just gave us so well uh. So we got ta call this supply just put supply and well into uh 2022.

At least you could not write a crappier sentence. You literally could not write a crappier sentence. Many business contacts continue to experience difficulty in hiring workers across all skill levels. Notating, noting the lack of qualified candidates as well higher wages, larger bonuses and more flexible work arrangement arrangements were being offered to compete for workers.

Higher wages is a risk factor for the economy, even though that's good for workers, participants noted pointed to a number of signs that the u.s labor market was very tight, including near record rates for quips quits and job vacancies. Okay, tiny little bit of positive news here. As well, job vacancies actually declined uh, so another little silver sort of catalyst here of, in my opinion, some form of positivity, and then this was uh. The jolts decline, job openings decline, decline, uh joel well, i guess i should write that part in green just so.

We have it decline that happened since their last report. Okay, good! Where are we uh? Oh yeah, oh gosh, there's there's more folks, just just when you thought i was over just one just when you thought we were done. It's not done. Some participants noted that trimmed mean measures of inflation.

It's just a fancy stupid way to look at inflation. Okay, it doesn't matter had reached had reached decade, high levels and the percentage of product categories with substantial price increases continued to climb. Oh man, uh. So remember.

We talked about this, this broadening broadening aspect of for inflation. Let's throw that over here somewhere, okay, uh broadening broadening of categories, and then the quote was substantial: uh-huh, not good. That's bad! Oh geez! Okay, almost done so not really. Participants generally continue to anticipate that inflation.

Would decline significantly over the course of 2022 as supply chain constraints, while okay, while they thought we're going to see a decline of inflation, almost all stated that they had revised up their forecasts of inflation for 2022, and many did so for 2023 as well. This is so bad. Oh okay, you know what we're we're so out of room. I'm just gon na have to climb up the side of the paper here: uh inflation expectations, okay, revise up for 2022 and 23 as well.

Oh man, i should have made a new page, there's so much poop, i'm having trouble writing it all down this there's so much in discussing their revisions to inflation outlook, participants pointed to rising housing costs, rents, widespread wage growth and more prolonged global supply-side frictions, which could Be exacerbated by the rise of omicron again, the omicron thing, not that big of a deal right now, all this other stuff, bad bad news market. No, like bad news. Okay, market participants widely cited business contracts, feeling confident that they would be able to pass on higher costs of labor and material to customers. You, you literally, you literally, could not write a report more scary about inflation.

You just you literally, could not make a report better. Uh for for creating, like a scary movie on inflation, i mean listen to this continued confidence, biz confidence, his confidence to do what folks pass on inflation of supply and wages. You can't make this stuff up folks, the worst report and we're still not done. Okay in their comments on inflation expectations, some participants discussed the risk that recent elevated levels of inflation could increase the public's longer-term expectations for inflation to a level above that consistent with the committee's a long-run inflation objective: oh man, okay, so let's digest that here, inflation could Increase the long-term expectations for inflation.

Okay, if people think inflation is going to be worse, then inflation tends to be worse. Inflation tends to be one of these psychological, self-fulfilling prophecies. If you expect prices to go up, you might buy more today and then less in the future. Quick example.

If my programs on building your wealth, go up on average of 250 to 300 in a year, then you're better off buying now than waiting for a year when more content comes out and the price is higher. That's why you want to use the birthday coupon code, but the same. This is exactly, in my opinion, a perfect analogy as to why what the fed is saying here is bad. It's the psychological impact that wait a minute.

If prices go up, i should buy now and if you buy now, what does that do? It creates more shortages which more shortages on top of shortages already make things even worse. Okay, so let's write that down more uh uh psychological impact equals more inflation. I i really i am devastated by this report. This is this is so bad uh.

There is there's some good news in it again, but it's it's far and few between it's it's horrible. It's literally it's it's to me. It's like a rug, pull in crypto. It is so bad participants agreed that the committee's criteria of rising of inflation, rising to two percent and moderating exceedingly uh, two percent for some time, had been more than met, in other words, okay, oh my gosh.

They just killed fate. I didn't even realize this. Oh, my gosh, i would have cried they killed fate. This, in my opinion, is, is killing fate, uh, which is funny because the word initially just basically told you that the fate of the fed's action was bad.

Okay, fate is flexible, average inflation targeting okay, flexible average inflation targeting means hey we're just gon na. Let inflation be a little hotter than usual, and it's okay, because it'll average out to two percent in the long term. They didn't say it, but i think they sprayed it. Okay, who's watching emily in paris.

There's your shoutout fate is oh, i spelled it wrong, hold on say, or did i fate is dead? Oh my gosh. I didn't even realize that when i first read this until i just read it back, this is pretty much saying fate is dead. All participants remarked that inflation had continued to run notably past two percent reflecting supply and demand and balances uh. With respect to maximum employment criterion, participants noted that the labor market had been making rapid progress.

Okay, listen the the labor market and its adp report today. Bad. That's just going to continue to reiterate that the fed does not need to accommodate uh the labor market, so this this is bad. Oh, my gosh, because now we have max employment check, price stability, not check.

This is nasty. This is so mad, it's so dirty! Oh, my gosh, okay, all right we end with and then i'm gon na do a summary committee judged that its employment and price stability goals were not complementary. In other words, uh, it's so bad. I can only laugh it they're they're tears of laughter with tears.

Uh. Okay, let me write this down. Let me just translate this and then i'm going to read it. Okay, i'm going to translate it first.

We did the big f up, aka two. We f'd up. It's so bad! Listen to this again! You you just you can't you can't make this up. Okay hold up.

Where was i um? I i don't even know uh oh yeah, yeah uh so, and it is an if okay in fairness, but it's basically like it's kind of you know. This is like the o.j simpson book. If i did it, okay, if we lift up the committee, if the committee judges that its employment and price stability goals were not complementary in the light of economic developments because of higher inflation and moving materially higher and more persistently than expected, then that could that could Basically, make us have to u-turn a lot faster than than expected, and this is why their asset purchases are no longer necessary. That they're going to end uh, that they're going to taper faster and that it would be appropriate to double the pace of the reduction.

The taper, but then also then we're expecting that in the coming months that oh look at that, resulting in an end to net asset purchases in mid-march a few months sooner than participants. That expected, basically not only talking about doubling the pace of the taper, but also getting it done by mid-march uh and participants continue to stress maintaining faster okay, whatever basically, basically bottom line here. Is they they're saying here we screwed up and we are unfortunately having to make some big changes pretty radically and sooner than expected and we're sorry, but we screwed up okay, so that is that's the actual document. Let's quickly go through a summary and then let's talk about what this potentially means all right, so all of the bad news, okay, we're gon na write right summary of the bad news of all this report.

Inflation is way higher than expected. There is way more money in the system than expected. The economy is overall, doing somewhat better than expected uh, but the problem with this is all of these things point to t or not just tapering, faster but running off the balance sheet faster, especially since the bonds that we have are in shorter duration. This will also, though, lead to faster rate hikes, because the fed said that faster rate hikes are their preference.

They would prefer to leave more money in in the fed's pockets, so to speak in the markets. Pockets they'd rather leave more money on both sides of the equation than just vacuum. Everything up very quickly, they'd prefer to leave more money out there and they prefer to just use interest rates because they think that is more clear. They believe that we're seeing a significant uh, you know increase in inflation and rather than inflation being transitory.

They only expect inflation to partly reverse over the next two years, partly reverse energy. They do think they that will uh decline, but they also see a broadening of this substantial inflation. They see uh that they will reduce their bond purchases closer to interest rate liftoff, or rather i'm sorry. When they raise interest rates, they see themselves no longer waiting.

Two years to respond and run off the balance sheet like they had in the past, they think they're going to run off the balance sheet much much closer to when they raise their interest rates uh. So if they think they're going to raise interest rates in march. In the past they might have waited two years to let interest rates kind of take their effect on the economy and then, after a couple years, they'll start taking money out of the economy. Again they do that essentially uh by by selling bonds.

They sell bonds which drives treasury yields up which algorithms then use to sell the stock market right very, very crystal clear, and this faster rate. Liftoff, combined with a faster offloading of the balance sheet, is all because they potentially see supply chain shortages lasting years. Okay, then, the if, if this is all true, we, the federal reserve, literally said it today. They they said we have financial.

We will have financial stability risks if we have to go through this with a flat yield curve and raising rates which are preferences to raise rates. And if we have a flat yield curve and we have to raise rates and short-term treasury yields go up and we potentially invert, then we have financial stability concerns which could lead to the r word. They did not say the r word. They did say.

Financial stability risk so i'll put the quote over here. They did not say recession, but they basically implied it when they were talking about financial stability risk. Here's a good summary of the report. Inflation has upside risks.

Economic activity has downside risks. Oh my gosh. Well, at least this video is sponsored because we're basically going bankrupt here, and this video is brought to you by masterworks link in the description down below where you can buy fractional shares and fine art all right. Let's keep going and life insurance, although i didn't even put a link in the description for that one, but you already know the link for that one metkevin.com life anyway, business businesses, okay, let's listen to this businesses are confident that they can pass inflation of supply and Wages onto consumers and that the psychological impact of more inflation begets more inflation and that participants are revising up their inflation expectations, not just for 2022, because they done f'ed up, but also for 2023 and they're, basically killing flight of fate fate, killing flexible average inflation targeting By saying that, hey yeah we're good we're good, we inflation went high enough for us to hit the average okay.

We hit the average, we screwed all right now. What are the takeaways from this like? How do we? How do we respond to this? And what does this mean for the market going forward because i'll tell you, the market right now appears to be a freaking dumpster fire uh volatility. Just a brief look here: okay, volatility up ten and a half percent. I don't know it's up twelve percent now: okay, it keeps getting worse.

Volatility is up twelve percent. There are some things that are actually green about a page and a half of green on our watch list, but holy moly. You look at some of these numbers next door monday, matterport marathon, microvision, gamestop, amc, hottie mining, roku, end phase, mind medicine, rivia, open door, bed, bath, carvana, literally all down more than 10 percent double digit declines in some of these stocks. Cloudflare nine percent.

Look at this. Eight percent nine percent everything is a complete cluster f uh. Let's take a look at tesla tesla down five percent btc usd uh btc usd is down uh. We are down to 44 uh 200.

We literally look at this folks. The fed the fed report came out right here, uh hold on a sec, wait. Why can't? I? I can't seem to get my my claw. Oh there, it is okay.

There wait. I don't understand. What's up with the timing here, i might think my weeble's a little bugged right here anyway. There we go so the fed report actually came out here and it looks like it looks like bitcoin actually held on for about 45 minutes after the fed report came out.

But once people started digesting it goodbye, bitcoin kind of showing how it keeps trading in a similar pattern with the nasdaq okay got it. So we understand complete freaking disaster in the market. If you have options you're getting wrecked, if you've got uh bot call options. If you have bought put options, you're a king, okay, now, how do we digest this like? What do? What do we do, because this is this? Is a disaster? Not only is a disaster, but it's just like it's crisis mode.

It's it's so bad! It's so disgusting! Uh, what what do we do? Okay? Well, first, you have to ask yourself: this is a big question, for you is the items that the federal reserve is reacting to. Do you believe that those things are the correct things they're reacting to or not? So let me give you two potential scenarios: okay, so scenario: number one: let's go with uh orange here, okay scenario number one! So we're going to call it s1 scenario. Number one is, you think the fed is over reacting and you think the fed is overreacting because you believe that don't worry, pmi numbers are already better. Don't worry, the army is going to be better, don't worry, yeah we're getting more jobs, but you know what we're we have hope.

Okay, this this is scenario number one uh so uh and then and then you also have hope, because the jobs opening measure is starting to decline, uh, which is a sign that you, you potentially have less price pressures right jobs. So sorry, the jolts decline equals less price pressure. The army, being better, is less price pressure in the long term due to supply chain disruptions, and then we have less price pressure from pmi, so scenario. One is that the fed is overreacting and that you believe, because of the latest aspects here, that we've already seen less price pressures in and your hope that that wages maybe won't go to the freaking moon uh in the friday report.

Then, in this case, in an s-1 scenario, you should buy the dip again. Okay scenario: number two uh fed too late. Okay, this is this is the bad one all right. If you believe that the fed is too late, then you believe that the yield curve, oops uh, is likely to invert which equals recession.

You also probably, then believe that inflation will keep running and in the event that inflation keeps running that equals uh, faster or higher rates, because they told us that was their preference, higher rates uh with we'll say, with runoff, faster, okay uh. This also equals recession. Okay, uh, then the other aspect is uh. You probably believe that uh, let's see here what else do we have here for scenario? Number two uh.

You believe that uh yeah, okay jobs, jobs, wage pressure up which equals uh more again higher rates, wage pressure up and high jobs. High jobs report see because a high jobs report means that the federal reserve has one thing checked off max employment is checked off, but price stability is not so. Price stability is not checked off, and this potentially also leads to recession all right now, jobs, yield curve and inflation uh keep in mind that rents are potentially also likely to keep going rents. Uh.

That's that's almost almost a certainty here, because rents and cpi lag substantially right. Okay. So if you believe that s2 is appropriate, then you should uh, probably sell stocks and wait on real estate and potentially even uh, by puts so the the question for you is: what do you believe again scenario number one purchaser managers, uh purchasing managers index, showed less Price pressure army is much more positive than at when they did this report at the beginning of mid-december. We have hope that jobs are going to get better but but hope is, is a figment of our imagination.

So i'm just going to review that one. We have no idea what jobs are going to do, but the jolts is reporting less job openings which reduces price pressures. If you believe in this scenario by the dip, if you think the fed is too late and we're screwed, then you think the yield curve is likely to invert yielding leading to a recession. Inflation is likely to keep going, which the fed said many freaking times in this report, which leads to higher rates faster and a runoff recession, and that wage pressure pressures from jobs and along with high employment numbers, will lead to also recession.

Now, how bad can this get? Okay, let's now analyze that how bad can this get so the easiest thing to do is to look at the s p, 500, and i want you to go yeah. Look at look at that plummet that we had, since the fed report see right there at 11., lots of elevated volume, lots of selling volume. Okay, what i want you to do is go all the way back to the end of 2018 right here. This is how bad it can get folks, okay, right here so and who knows it could even get worse anyway.

This bumpiness - let's just let's, just be generous and say that this bumpiness is, is what we've been experiencing uh, although that might be too generous. Anyway, they saw the s p 500, or the spy rather go from the tracking index go from about 280 to 233, so that is a s p decline of about 17, which, if the spy goes down 17 good luck. You are pretty much getting screwed uh you're, like you like, if you're in in other tech stocks, you're, probably gon na double that decline. Okay, just look at arc, but look folks look at the big picture here.

The big picture is well. We had look at all this flatness by the way. It's just it's just worth noting this look at this. We had uh two over here in january of 2018.

We were sitting at 280. Okay, we did nothing all year, nothing like we ended negative in 2018. It took about 15 months to get to about 280 again more. Actually, it took more like 16 17 months to get to 280 again and only in 2019 did we finally start seeing some growth in the s p.

500. So this is bad. This right here could happen again, so if you're buying the dip you're either insane or you legitimately think the economy is very strong and that thou shalt pass, that is, the pain shall pass. That is.

That is what you believe: uh. If you are not buying the dip uh, i i i can't imagine i just can't imagine look s2. Let me put it this way if you believe in s2. I can't imagine that you believe the s p falling like two percent from its highs is the end of the pain, uh, there's, probably more pain.

Coming in scenario number two: there could be a lot more pain. Coming again, we saw s p declines of 18 to 20 percent. What are we off of all-time highs right now, cnbc, we are at, let's do the math together. Okay, what do we hit? We hit like intraday highs of like 47 10, or something like that or sorry, 48 10.

Something like that. Uh right now we're at 47 15 divided by 48 10. Something like that. Look at that we're two percent off two percent off like this could literally just be the beginning of the juicy taper crash and recession.

So if you're holding on to your stocks, there's a good chance, you could say goodbye to your portfolio and, if you're, not holding on to your stocks, uh and you're shorting the market you're doing well or again it's by the dip opportunity which, if you want to Learn more about what i'm doing, use that coupon code link down below there's a birthday coupon code price will go up after my birthday, uh and yeah wow. This is crazy. Now, what we're going to do, because this video took the place of the course member live stream, and we have 12 minutes or 11 minutes left to either sell stuff or buy stuff, depending on how i feel what i'm gon na do. Is i'm gon na jump on over to the course member live stream? Because that's what i promised i would do so i need to go to course, member live stream.

I love you all. Thank you so much for being here. Hopefully, this fomc meeting wrap-up was thorough and you fully understand why the markets are in disaster mode. Wish you the best check out the links down.