Welcome back to another. Federal Reserve Fomc press conference. Uh and uh. well.

release of an Fomc statement. We're We've got a lot of excitement for this one because I think a lot of folks are really expecting. Well, first of all, 25 BP hike. But then there are just as many folks who are like no way we're gonna get rug pulled.

The stock market's gone up too much. The Fed's gonna either talk it down or they're going to end up rug pulling us with a 50 BP hike. Some people are even suggesting that there's a chance the Federal go for zero basis point I I Think that's highly unlikely. I Personally believe we're pretty much guaranteed to get our 25 BP hike and after we get our 25 BP hike, we're going to listen to Jay Pal.

In my personal opinion, take a relatively neutral approach. Now we could be wrong. Got no idea. But I wouldn't be surprised to see a lot of references back to the last summary of Economic projections.

And the reason for that is really simple. By referring to the last summary of Economic Projections, Jerome Powell is basically able to tell the world. Hey, look I wrote on paper and so did the rest of the board that we still have work left to do. And because we still have work left to do, we have to keep raising rates.

And so what we're doing today is we're raising rates. and if you want to know where we're going, just look at the last summary of economic projections there and then let's go back and have another cup of coffee and we'll see you in six or seven weeks. That's because the next Fomc press conference isn't until about the 23rd or 24th of March that's the March Fomc meeting. So we've got a little bit of peace and quiet before then.

Uh, to be clear, actually, that is the 22nd of March. The 22nd of March will have the next uh Federal Reserve uh meeting. So we've got a little bit of quiet time between the uh, well, second half of today and uh, March 22nd when we'll get the next Fomc press report. Uh, this morning, we did get Joltz data that came in a bit hotter than expected.

It did come on the heels of a relatively soft ADP report, which is the Private Jobs report now. Uh, A few things to really keep in mind here: Uh, and I think it's sort of useful uh to analyze from the POV of Okay, well, what? What do we think the FED could ultimately say here? right? Well, First, uh, number one: we think they're going to reference the summary of economic projections. That's going to be the easy reference to them. But what's good and what's bad? Well, bad is that the job opening and labor turnover index continues to rise, right? Jolts continues to go up.

However, it does look like quits are reducing, so quits are falling. Voluntary separations fell in this morning's Jolt report. Uh, However, the actual nominal jolts level is up substantially Not Only was it up last month month in January when we were reporting the job openings data for the month prior in December, but the prior report in November was revised up. And then what did we get this time? Well, we barely got any revision on January.

Instead, we got a big beat on the actual nominal number of job openings we had, putting us in excess of about nine tenths of uh, a percent on a Jolts ratio or 1.9 ratio. Uh, let me rephrase that. So the Federal Reserve wants there to be about. let's say 6.5 million unemployed people and then about an equivalent number of job openings.

That would imply that if there are 6.5 million job openings and 6.5 million unemployed people, it would imply the labor market is in balance. And an issue that the Federal Reserve has been having is with the Jolts report. Because the Jolts report is a way of saying we're not in balance. In fact, we've got somewhere around 1.9 job openings for every single unemployed person that sends a signal to the Federal Reserve of the potential for a lot of pricing power amongst wages.

And essentially the Federal Reserve wants to ensure that wages do not have such high pricing power. Some pricing power is okay. Obviously that it obviously or or that somehow the markets induce some form of wage price spiral. The reason we don't want that at is because a wage price spiral.

would ultimately turn on the head the Federal Reserves fight against inflation. And it would send this signal that the Federal Reserve has basically lost control. and when they lose control, they might have to end up polling the good old Paul Volcker uh, cat out of the bag so to speak. So that would be a problem.

Nobody wants raid hikes like what we had under the Paul Volcker era where we substantially raised rates and held them there sufficiently long. Uh, to actually Crush Inflation? That's what we're trying to avoid. that's that goes without saying. So uh.

now this jolts report this morning did not help. and this is despite the fact that a lot of information was actually coming in relatively bullishly. We had uh, information on uh I would say solid information on inflation. Uh, for not only the month of January or sorry, rather, the month of December but also the month of November.

So you've had at least two solid inflation reports that came in, uh, below expectations. We've had indications from the Bureau of Labor Statistics that wage inflation for the last two months is also declining, which is also very good, right? We want to see that wage inflation is declining. So two months of lower wage inflation? Very good. We're seeing material: A commodity prices fall.

We're seeing earnings reports talk about lower prices even Whole Foods Talking about potentially lowering prices in their stores. These are all good things. When we're starting to see companies talk about price reductions again and be that Whole Foods be it Winnebago be it even United Airlines suggesting they're ready to compete or many of the other companies that expect to see deflation within the second half of the year like Johnson and Johnson and Procter Gamble. In the meantime, though, even though we've got this good news, it's not all yet good news.

And that's something where a lot of folks say, look, the FED is just going to keep the fire hose on the market until four. Sure for sure Inflation is gone. and until inflation has gone for sure. And the Fed's Gonna Keep the hose in the market so to speak.

And one of the things that we're paying attention to. Well, there are two big things I like to pay attention to. One is the Goldman Sachs Financial Conditions index. I'll pull that up here Goldman Sachs Financial Conditions index.

Uh, and the other is, of course, the five-year break-even rate for inflation now. Uh, the Goldman Sachs Financial Conditions index has been loosening recently, and unfortunately, as the Goldman Sachs Financial Conditions index loosens, it actually makes the Federal Reserve So water, so to speak, less effective, right? So I actually put that in the bad camp and that's that. Goldman's Financial conditions are loosening. This would this should imply that if the FED wants Financial conditions to remain tight, that they have to hawk more and they have to be a little bit more aggressive.

In fact, 10-year treasury yields have fallen all throughout January and right now, the 10 and your treasury is sitting at about 3.45 percent. So Three point. I'm sorry, let me say that again: a 3.475 percent? Uh, right below 3.5 And uh, depending on what's said today, that could move pretty substantially on the 10-year Any kind of loosening there might make people feel wealthier again and lead to more spending and therefore more inflation. So again, I'm very much of the mindset that the Federal Reserve has to keep at least some kind of hard face on.

It's going to be extremely difficult to make any kind of bet that the Fed's going to come out and say, let's go super dovish here. Uh, now don't get me wrong, is it possible that stocks are going to Rally afterwards? Of course, because maybe so many people are betting that the FED is pissed that the stock market has even come up remotely that the Fed's going to go hawkish. But then by them, not Hawking they're actually being dovish and that could be bullish for the market, right? I Mean the the stock market is just a game of psychology. If a lot of people think that drums get a hawk and then he doesn't Hawk Well, then that's bullish I Think he's going to be neutral, but a lot of people are like I don't know Kevin maybe you're wrong.

maybe it's not I think he's gonna be a hawk, right? and I don't think there are a lot of people I Really don't believe this I Do not believe there are a lot of you who actually think Jerome Powell is going to be Dovish today. Uh, but maybe what we ought to do is do a poll. Uh, the reason I don't think a lot of people think he's going to be dovish is like, why why would he if he comes out dovish? uh, all he does is risk hurting inflation. So I think the let me just personally bias this a little bit.

I'm not trying to ruin the poll here I Want I want to see what you all think what? I posted here in a moment. but I personally think why why would he go dovish which is actually a bad thing. if if he goes dovish, he risks unwinding the work he's done right now. why would he go bearish? Well, that would risk pushing us, uh, into a recession, right? That would be a problem.

Uh, and so neutral to me makes the most sense. But I want your opinion? So so you know, try to ignore for from a for a moment. What? I think and let's just see. what do you think Jerome is going to act like today? That's the question.

So we're gonna go uh Dovish? which would be bullish? Uh, neutral or bearish. so we'll run that and that poll is uh posted in the chat now I Want to see what you all think? Uh, keep in mind I've also and this is my popular request with emails we've gotten I've extended the coupon yet again to February 3rd. Uh, but uh, this weekend. uh, we'll be changing all of the uh, the pricing.

The coupon code will go away. We won't do coupons anymore, so we're getting rid of that. Uh so uh. you've got a best price guarantee, lifetime access, new content coming to the courses, fundamental analysis and real estate and stocks.

uh in the mornings and uh, we've got a new uh I haven't revealed it yet, but we've got a C secret new trading challenge that's coming up. so if you want to be part of that, it's going to be really, really epic. It's not actually just going to be me, it's going to be a a group of of Traders So it's going to be really, really exciting. I think uh.

so if you want to be a part of that, check that out. Uh, that's stocks and Psychology of Money and uh, yeah, check out those programs linked down below. We'll also be starting the Elite Hustler live stream soon. So uh.

with that said, so we've got the poll running. We've got about four minutes before we get our rate hike. I Think we're pretty much mostly convinced that we're going to end up seeing a 25 basis point hike. It would be a shock to see anything else.

so I hate to say it. I Think the initial release of the FED statement probably going to be a little bit on the boring side. Uh, but but the press conference will be substantially more. Salient So we'll do a lot of uh chatting of course.

Uh yes, the trading challenge will be for course members. Uh, when when you say Oh Oh you mean on you where you all trade and the winners get meet Kevin merch. That's awesome. Uh, so right now I'm looking at sentiment reads and it looks like Fed sentiment is currently at Peak Hawkishness.

Oh my Gosh. I Can't even say that word hawkishness. Wow, that's actually really interesting. We have not seen this level of hawkishness for the FED since 2019.

This level of hawkishness? uh, scene since 2019, Uh, 2006 and 2000. you know those are not necessarily the best years to compare to. but uh. I will show you that chart in just a moment here and we're about two minutes away from the release.

But yeah, take a look at this. uh, push uh, this button right here. Take a look at this chart on screen now. Fed sentiment at Peak Hawkishness.

So uh, here is sort of the the neutral level. This is about where I sit I sit at about that zero level. Which is crazy because we haven't been at these sort of high levels for quite a while. So so the markets are pretty hawkish here.

Uh, this uh has this is, uh, put together by Bloomberg and the Apollo Chief Economist Interesting. and this has to do with Federal Reserves. Uh oh, this has to do with actually, uh, this peak hawkishness is the behavior of the FED actually. Uh, this has to do with uh AI language processing where you take the FED minutes and you run it through.

So it's actually the FED minutes are uh at Peacockishness. Okay, that's worth. uh, clarifying. All right, let's do a quick look at the poll here.

So 42 percent of you say neutral 17 say Dovish 41 say bearish. So as many of you are bearish out of 5 400 votes, as many of you are bearish as are neutral. That's actually really interesting. Okay, all right, half bearish, half neutral.

So we definitely have a bias uh, towards towards I Mean, if you would average bearish and neutral, we're definitely more bearish than we are dovish, that's for sure. So the Market's pretty clear here. Okay again. Market Highly anticipating 25 BPS The FED generally does not stray from that.

We are expecting the rate to go to 4.5 percent if I'm going to read out the number. If it's 4.5 that's a 25 BP hike. If it's 4.25 that's zero. That means we pause.

That'd be insane. Uh, okay, here we go. Any second. now we're gonna get the release and 4.5 There it is.

25 BP hike. That was not a surprise. Uh, obviously. Uh, so uh.

A little anti-climactic so we kind of. We got. Well, we wouldn't expect it. We got our 25 BP height.

Let's listen to CNBC announce it 25 basis points to a new range of four and a half to 475. This is the eighth straight hike by the Federal Reserve since March up by a quarter to four and a half to 475.. Okay, while he says that I'm I've actually got the statement already right here. Recent indicators point to modest growth in spending and production.

Job gains have been robust in recent months and the unemployment has rate has remained low. Inflation has eased somewhat, but remains elevated. Russia's war against Ukraine is causing tremendous economic hardship, contributing to elevated Global uncertainty. The committee is highly attentive to inflation risk.

So far, this sounds pretty similar. Uh, modest growth in spending and production. They revised that last time from stable right or slightly declining so the economy is actually still modestly growing. Job gains have been robust in recent months.

Okay, committee seeks to achieve long-term inflation goal of two percent. Decided to raise 25 BP anticipates ongoing increases in the target range will be appropriate, so so no indication yet of any kind of pause from the FED right in determining the extent of future increases uh in the target range the committee will take into account the cumulative tightening of monetary policy lags in which monetary policy affects economic activity and the economic and financial developments that's normal. They included that last time as well. Not uh, not terribly different from what we expect or have seen before.

In addition, the committee will continue to reduce its Holdings of treasuries. This is consistent. This is quantitative tightening. Uh, that's pretty normal.

Looking for changes here and assessing the appropriate stance. We'll continue to monitor incoming data and then of course we have the uh, what's it called Coming Up Press Conference Now Uh, I have the exact changes already. So stand by for changes. Uh, those are coming up Uh on screen now.

Uh, exact changes are up. Inflation has eased somewhat. was actually a change, but remains elevated. and they they deleted reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures.

So they got rid of the supply and demand imbalances. And they got rid of higher food and energy prices. And they got rid of broad price pressures. They say inflation has eased someone? Okay, Interesting.

Then we have Uh, let's see here: the war Russia's war against Uh is contributing to elevated uncertainty. Notice how they actually removed. That's actually really interesting. They removed that the war is considering or contributing to inflation.

Uh, that's that's a very interesting change. So again, they removed that. the war is adding upward inflationary pressures in their statement. They also removed Supply demand imbalances and removed higher food and energy prices.

They should have just replaced that with eggs. That's really interesting. Okay, then over here we saw the 25 basis point hike in determining the instead of pace. they actually wrote the extent.

Oh oh, that's actually really interesting. So they got rid of the word pace and they changed it to extent. That means they're probably sticking with 25 from now on. So Pace to uh, getting rid of pace which would imply 75, 50, or 25 to extend.

That's a very big signal that says look 25 BP from here on out. Now it's just a matter of how long do we stay this course, right? In addition, the committee will continue to uh, conduct quantitative Tiding along with its previously announced plans. Okay, that's fine, they got rid of that. it was introduced in May That's not a big deal.

Readings on public Health have been removed, so they're no longer looking at public health and then they've replaced some of the names here. So, uh, not, uh, not not. Uh, you know, an insanely, um, bearish piece here. If, in fact, if anything, I would say that they've removed a lot of suggestions of negative inflation pressures.

I Mean, think about it. They removed the mention of upward inflationary pressures because of the war, right? So that's one. They removed supply and demand imbalances as a pressure. that's two.

and they removed higher food and energy prices. That's really three and four. So they're really removing a lot of the things that have been causing uh. inflation in their last statement now.

I Find that actually quite interesting that they would remove all of those. Obviously, the ongoing increases uh implies more than one, right? So ongoing increases. This is the opinion that Drone Powell is going to keep that hard face on, right. So ongoing increases means another at least two unless the data comes in really soft.

I somewhat. Expect Jerome Powell to say that in about 25 minutes. That look, we're just going to keep going until the data is soft. We'll we'll keep pumping until we're soft.

Uh, that's the way it works. Uh, so then we've got uh. let's see here. Okay, ongoing increases? That implies two.

Uh, so that would that actually stands counter to The Narrative of maybe a pause. Uh, counter The Narrative of pause in May Right, There's a lot of talk about potentially a pause in May So then we have let's see. So statement: I I'd slightly St I'd say the statement was pretty neutral I Mean, quite frankly, this is somewhat what I expected Jerome Powell To act like. relatively neutral.

It's like, hey, we may, we may do more than one. uh, uh, 25 BP Hike? We may not right now. Maybe we plan on doing multiple 25s we have. Maybe you know.

I Wouldn't be surprised if Jerome Powell says something like no plans of stopping right uh Nick T uh says with only the most basic changes to Fed guidance and its policy statement, all attention will be on the press conference. Uh yeah, we already know that no change in guidance on QT So no, no changes in QT but we kind of didn't expect any changes in QT anyway. uh, no changes in QT No rug pull, but also no, uh, no super dovish excitement. Uh, it's all going to come down to this uh.

press conference Now let's see s p session low. but before pairing its drop. After the statement comes out, not too much changes on the economy. Initial read comes across as slightly hawkish because of the plural mention of ongoing increases.

Let's see here, let's see how the market is actually moving. Uh, it's it. Kind of like down and then up. You know it's uh, I mean here, we can see it on screen here.

It's kind of like there was the uh, the initial lead-in of excitement. Nice little drop at first, probably on that. talk about initial increases. But but I think that this is not a surprise.

Uh, so we're going right back to Green over here. You've Really Got A Federal Reserve that they would be very, very smart for them to just reference the SCP and shut up. Just go. listen.

you want to know what our projection is. Look at the summary of economic projections. Shut up and move on. They do not want to send the signal that it is time to prematurely party.

Nobody wants a premature end. Uh, to the FED party. Okay, the parties party's going and uh and it's going to keep going the way the FED wants. no changes.

Uh, so anyway. uh, let's look at the five-year break. Even so, five year break even. I Personally believe we've got to get down to about 1.5 percent on the five-year break even now.

I'm going to explain the five-year Break Even because I know, uh, there's some of you and I appreciate you whatever you got time for I Love you all I Really do I appreciate you I wouldn't be able to do what I can do if it worked for you. Uh, but I know some of you don't uh, aren't able to come visit? you know, view all the videos. So you might not be super familiar with the five year Break Even curve. But let me show you this curve because it's probably one of the most important curves when you're thinking about the Federal Reserve.

So uh, what you want to understand is this is the five-year break even over the last five years. So it's a five-year chart of the five-year break-evens The break even is basically the bond Market's expectation of inflation and you could see that expectation has been falling. Uh, you know my seven-year-old son can draw you a trend line here. It's not too hard.

it's a trend line that's been pretty consistent almost no matter how you draw it. It has been a consistently down trend line on the five-year break evens. The problem is, you're still substantially higher at where we sit now to 0.29 then where we sat when the Fed was actually tightening in 2018, right? The FED didn't actually cut. uh, their their projections on, uh, on on actually hiking until right about here, where my mouse is.

Well, that's at about a 1.6 Breakeven inflation. So look at that. When the break-even inflation rate held steady, the FED kept talking. and it wasn't until all of a sudden the market turned down and then the FED u-turns right about here.

as it was on its way down, the FED says okay, no more hikes, uh that at the end of 2018 LED inflation break evens to stabilize and then actually eventually continue to drop lower throughout 2019. I Personally think that in order for us to get a Fed pause, we probably need to see this, quite frankly, get down to like 1.8 uh, lower than the 2018 levels. Kind of in line with the prior pause, but also in order to get any kind of you turn a rate Cuts. We'd probably have to see the break even go down over here where it was sort of in the March of 2020 era.

So again, when you look at this chart, this is a, in my opinion, a very simple chart of determining. hey, is the Fed going to U-turn Well, look on the right side, it's at 2.29 Look on the left. Oh crap, it's still higher and they were hiking over here, so the answer is no. You got to wait for that break even to fall over here again somewhere around 1.75 1.6 That's probably I think where the Fed's more likely to pause now.

I I Don't talk about that every single day. We talk about it probably a little bit more in the course member live streams which remember, you can check out using the coupon code which expires Friday at 11 59 PM Final coupon, final expiration extension. That's it. Going into the weekend, we're gonna be done.

We're changing all the pricing. It's more convenient for us to do it over the weekend anyway. I should have thought about that earlier. but anyway, Uh, so now Jerome Powell comes out in about 19 minutes and uh, most of you, based just on the poll that we ran here, believe that Jerome Powell is is going to be either neutral or bearish.

So if if we, uh, kind of just went based off really what what uh y'all are saying in the survey, or probably somewhere between bearish and neutral in terms of the expectation of what Jerome Powell is going to punish us with, now this is totally reasonable. Uh, given that again, as soon as the Federal Reserve starts cheering about inflation falling, is very likely that inflation will actually start Rising again. So I think Jerome Powell's script is very, very clear. If he had a Joe Biden style script, you know the Joe Biden one.

You will walk into the room, you will take your seat, You will shake the hands of so and so right. Like if he had a script like that. So kind of like Joe Biden does. If Jerome Powell had one of those scripts, I would expect, it would say something like this.

We expect to keep raising rates by 25 basis points. In accordance with our summary of economic projections from December, we have no idea what the oncoming data will show, We think there's still work to be done, and if you want to know how far or how high we're going to go, look at the last summary of economic projections. See the cool thing about punting by going back to last summary of economic projections is that is a hawkish statement and as long as he doesn't walk it back, it just reiterates, uh, that they're not flip-flopping And the reality is, they don't have to flip-flop until the data Actually, and highly convincingly flip-flops if Jerome Powell wants easy bait. Like if he's if he's standing there in the back room listening to meet Kevin right now and he's like, come on baby, What should I say? What should I say? to Bear Everyone all you got to do is go Hey look y'all I Thought things were going good, but uh, y'all see that Joltz report this morning? The Jobs and Jobs Openings and Labor Turnover report.

you know. I've talked about us wanting to get that to equilibrium. You know, a ratio of more like one to one and uh, you know we're going in the wrong direction. All he has to do is go right now we're going in the wrong direction and uh, you know you should look at the summary of economic projections.

If he does that, you're probably ending the day red in markets. That way you tighten Financial conditions and you actually continue doing his job for him. Look, the more you all start shorting the market, the more you help. Jerome Powell Do his job.

So on one hand, the Bulls should be happy that the Bears at least in the short term are kind of hurting the market because it just gets the job done faster. I Know that sounds wild and it's really kind of a twisted idea that the Bulls should ever be thinking the bears. But really, yeah, I mean the markets need to constrain economic activity to the point where inflation is gone. Uh, and uh, eventually I'm still of the mindset as I understand.

As ridiculous as it might sound, that eventually inflation will probably prove to be transitory. The question is just how long can you keep calling it transitory, right? That's that's the big question is, how long can we actually keep going assuming, uh, that it is transitory. Uh, now again, I'm of the mindset that, uh, the answer to that is, uh, probably at least another year and so that way, go 2030. What do we have? Well, we look back at the great moderation and uh, we we go back and say, hey, look, we printed, uh, you know, six billion dollars.

Of course, we had inflation. Uh, and then we had a war that exacerbated things and then we're back on. Trent Keep in mind what trend is for a moment I Think that's actually quite important to pay attention to. Since the early 1980s, we have been going through this cycle that's been known as the Great Moderation, right? This is basically what, uh, inflation has looked like.

you've been going from high inflation in the 70s, leaving the Gold standard and nobody trusting that the dollar would actually ever be able to support itself. Uh, Six Trillion Yeah, if I said billion sorry I meant 6 Sean But anybody, nobody believed that inflation would actually be able to ever come back down again. Uh, you know, with paper money, that'd be crazy. But sure enough, what happened over the next uh, uh, 40 years is we went through a cycle known as the Great Moderation.

The Great Moderation. The great Moderation is basically inflation coming down substantially in developed economies, especially in competitive and Innovative economies. Uh, you could blame an aging population for that. You can blame Automation and computers for that.

You could blame Fed policy for that. I Don't really care what you blame, The fact of the matter is, inflation has been coming down. Now there are two trains of thought. One train of thought is that yes, look, inflation has shot up substantially here briefly.

Uh, maybe even a little bit more than that. There we go. Something like that. Uh, and and the train of thought is that hey, look, this is going to U-turn We are going to see this rotate down as we already are and it'll probably continue to rotate down.

Where the trains of thought differ is that some people believe we are just going to go right back onto the path of the great moderation. and and basically we might actually face negative interest rates in the United States much like your Europe did very soon. Within the next decade, we could be looking at negative interest rates. In which case, if that is the path that we're going to go on, what do you want to do? If you believe that is the path? Well, if you believe inflation is transitory and we're actually likely to get into some kind of deflationary environment, then you would expect rates to plummet.

And given that everything is driven by the cost of money you want To get into as many assets as possible that would include real estate equities. Whatever that's what you want to be exposed to. if you think that rates are going to plummet. Now, if you take a Michael Burry point of view, Michael Burry will actually argue.

Yes, we might face temporary deflation where prices come down. But don't worry, as soon as the FED Cuts Again, thanks to all this money we've printed and the wealth that has been created amongst individuals, it is very likely we are going to see a second wave of inflation. and that's going to end up being what actually creates some form of Great Depression in the market where you get this massive secondary wave of inflation that ultimately ends up being worse than the first wave of inflation, and as a result ends up requiring a substantially more aggressive response from the Federal Reserve. Now what I'm going to do just because I'm curious is I'm going to run a poll.

Will inflation, uh, by 2030 prove to be transitory or worse, uh, than ever before? So I just posted that in the poll. So I'm curious to see what you all said. But anyway, those are sort of the two ideas. uh, that, uh, that that individuals are barking up, uh, uh, a patreon, right? It's either you think we're going to be, uh, totally transitory, uh, and eventually and this will just be a hiccup.

or do you think that, uh, inflation will will essentially double Skyrocket up Now obviously, if you're Jerome Powell so you're j-pow what is J powwa Well, I think J Power was pretty dang clear what he wants. He does not ever want to repeat the mistakes of the 1970s. The mistakes of the 1970s were the start stop approach to fighting inflation. In other words, do not reduce rates too soon.

So In Fairness to history. It's probably a Fool's bet to argue that rates are going to drop anytime soon because the last thing they want to do is actually even remotely suggest, uh, that they would find it at all acceptable for inflation to tick back up. Now another thing that's very important to pay attention to is everyone keeps talking about. but CAD bed Jerome Powell wants yields to go to two percent.

How are we going to get to two percent if right now we're at six percent? well. I Talked about this I ad nauseum in videos this morning and over the last few days and it's important to always remember as we go into this. and I want you to pay attention to potential indicators of this because he has not been indicating this yet. Even the Bank of Canada is already talking about this.

but but nobody else is and it's fake. It's flexible. average inflation targeting. They just have to average two percent and then we're good.

So the press conference is in about 11 min minutes from now, so stand by for that press conference and then of course, as, uh, important or critical things pop up. I'll add commentary really as necessary and then provide a summary. Afterwards we uh, presently have uh, well, that's I This is actually a very substantially different that I was expecting. Uh, we're at about 2500 votes in right now I encourage you to vote in the chat poll right now.

about 2 600 of you now have voted and I have to say I'm actually quite shocked by the result. Uh, but I'll reveal that in just a moment. So now U.S Rate Futures are pricing in about an 85 chance of a 25 basis point hike in March another 25 basis point hike in March Uh, again, being priced in at about 85 percent I Think that's very clear given the Federal Reserves uh uh, talk about uh, you know, multiple more rate increases with an s coming I found that very interesting NASDAQ is trying to move up a little bit more. Apparently somebody invested two million dollars on a bet that the Fed was going to go to a 50 basis point hike and just lost it all.

That's like the stupidest bet ever. They clearly haven't watched any of my videos. uh, like I I could be wrong about a lot of things that Jerome Powell ends up saying. But I'll tell you.

there's one thing that I I even said it yesterday: I Go I bet millions of dollars with like a 99 certainty that it's going to be 25. And of course it was 25. Uh, but again, we'll see. We'll see what ends up happening with the actual conversation.

because the conversation be worse. A lot of you were leaning bearish on this one. Neutral to bearish is the sentiment I mean it. You know we could even average this here.

Actually, that would be really interesting. So just to this is actually what you get in some of the economic surveys. You know those economic surveys where they say oh, the number came in at 50 or it came in at 49. Oh, that's recessionary.

Well, we could actually create our own little average like that too. if we say that one is is bullish and negative one is bearish. So again, I'll just write this out. Bullish is one.

neutral is zero and bearish is negative one. Uh, although they usually go with fifty one and zero I could do that. Okay, well then fine. I'll do fifty one and zero.

There we go. Bullish is one, neutral is 50 and bearish is zero. We'll do it like that. I'm gonna give it a weight based on the pulls that you all uh, gave me bullish sat at about 17 percent weight.

Then we have uh, those of you who bet on neutral was I will see neutral was forty percent weight and those of you who bet on bearish had a weight of uh. 38. It was actually 17 on bullish. it was.

Now it's actually 20. Okay, there we go. So 40 of you neutral, 38 of you bearish and uh, uh, then we've got 40 Again, neutral. Okay, 20 bullish, right? Okay, fine.

let's do this. and now let me add this up. So if I add this up, uh, and let's see here and I'll show it to you. Okay, I'm gonna change it because I can't multiply a percentage by zero.

So I'm going to go back to one zero and negative one. Sorry for the confusion there. There we go. This is where this is where our audience sits right now.

So all of y'all wondering kind of where the audience sits right now. if I Wait, bullish at one, neutral at zero and bearish at negative one. All of y'all on average are leaning at about negative 0.18 Uh, you can see that right there. So I think that's that's some fun little math that we just ran with the audience here.

But I think that's roughly how the market feels right now. So in order for the market to really go up, we're probably going to have a lot more neutral and slightly bullish talk to pick up that negative bearishness that the market is assuming right now. However, this could potentially also limit your downside. Think about that for a moment.

if you're betting the Market's going to plummet after the FED meeting, which is entirely possible. Okay, okay, I'm not giving you personal financial advice. It's entirely possible it goes down. but if we were to go down, you would have to be even more bearish than the market is already tilting.

So in other words, the market is already tilting. Bear should have to be even more bearish to continue going down. Uh, hard bat says Kevin you are the best I bought Tesla calls after watching your video before Tesla Earnings Oh, that's awesome man. Congratulations, that's that's really cool.

Yeah, you know what's been happening with a lot of earnings. It even happened with Peloton today and it's something for you all to pay attention to is markets are waiting to be bullish until they actually get the data. It's that simple. Okay, so you gotta wait for the report and then you can be bullish.

even if it's bad news, people are just waiting for the report before they actually go out and buy. Uh, that's just the way. uh, the way it's working right now. Uh, where do you go to see the market price? I Mean there are so many different places here.

One of the Resto drew it here invite. Yeah, we'll need you. send me some life Bloom from the burning Crusade But anyway. uh look, there are many different analyzes for where you can see what the market is.

pricing in you. could you could follow uh, reporters? You could look on the Bloomberg uh terminal. you could look in the refinitive terminal cap. IQ Uh, you could go to Investing.com is an easy one although I have found that theirs is not like super accurate No shade there on Investing.com but there's fluctuates like pretty dang crazily.

I've seen that uh, pretty pretty frequently here. so uh. Anyway, we got Jerome Powell coming out in about six minutes. Again, most of us leaning towards the bearish side.

Hopefully all uh, 26 000 of us uh, are already course members and the courses are linked down below. And if you're not, send me an email, let me know why you're not a course member. You just go Kevin Meet Kevin.com Uh, let me know what What's it gonna take for you to join our community? We'd love to have you. Uh, this morning we got a downgrade from Intel the S P uh, downgraded there of bonds a little bit.

Uh, although there's still going to be an A rated player at least that's the expectation. Uh Donnie pulled their uh 2.5 billion dollar share raise uh Arc invest has a billion dollar crypto Target QV Here donated ten dollars to ask about my thoughts on the crypto Market giving given the Fomc you know, look uh, crypto is a risk asset. It's very simple. Uh, as soon as as soon as we can prove that and and I I this is here's something I have not flipped on Uh, and that's actually pretty rare that I haven't flipped on something.

but something I haven't flipped on is the idea that Crypto is not an inflation hedge. I've said that. a million lines on millennial money on my channel? Uh, Well, Well, before this whole crisis we've gone to, it's a risk asset. Uh, and so if you're asking me what what is Bitcoin going to do following the Fed? well, in my opinion, it's relatively simple.

If the Federal Reserve tilts dovish, it's probably just going to rise with the stock market. If the Federal Reserve tilts bearish, it'll probably fall with the stock market. Uh, they'll pull in the same direction. I Actually personally kind of enjoy using Bitcoin Futures instead of stock market futures because in a weird way of actually found Bitcoin Futures to be a little bit more reliable in terms of the direction of which way the market might be going in the morning.

So I think that's uh, that's fascinating, so pay attention to that. But yeah, it's absolutely a risk asset. No way you slice it. So again, I Think one of the uh, the changes in the minutes here.

moving the pace of future rate hikes to extend a future rate hikes uh, is is basically a way of saying look, we're starting to debate when should we pause and it'd be nice to get any kind of insight into when that pause is being really targeted if we got any kind of indication that a pause is even remotely being considered uh for 2020, uh three, then uh, then I think the market will go very bullish and that'll be bullish for both stocks and uh, crypto. Now keep in mind I'm advocating for uh, cash balances somewhere maybe between 10 to 20 percent. not as Financial advice, but just broadly I Think it's not a bad idea to be somewhere around 10 to 20 cash I Think it makes sense to be heavily invested uh in In because I have this thesis and it could be wrong. but I have this thesis that based on what I'm seeing in earnings calls I think we're going to see a Nike Swoosh style recovery that there's not going to be a V-shaped recovery to this Uh disaster that we're facing, but rather we're going to have a slow Nike Swoosh recovery that'll come with a lot of turbulence and having some cash on the side will allow you to deploy that cash during the turbulence and sort of buy the dip of the turbulence now that it seems like potentially the worst of inflation is behind us.

Uh, not obviously advocating any kind of massive debt or margin. Uh, a big fan of being mostly in at this point, but still having a little bit of cash again just to go shopping for buying that dip. I'm a big fan of looking for companies that underperformed in 2022. However, those being companies that also have high free cash flow ideally growing margins and growing revenues or a path to Growing margins and revenues you want to be careful of value trash.

Perhaps there's a big debate going on right now: Is Intel a value trap? or is Intel potentially a company that is a value stock solely based on the fact that it's the third largest manufacturer of advanced chips worldwide, buys the same equipment that Taiwan Semiconductors buys and is working on. potentially a 20 to 100 billion dollar investment into foundries here in America Well, they're a Foundry Foundry is the company Fab are the plants so uh, Fabs uh in the Ohio area. actually could be an interesting place to end up buying real estate for House Hack, which by the way, and we've got about 30 seconds before Powell comes out here. House Hack: Holy smokes, we have a remarkable cash flow projection that we're going to be releasing.

uh, and it actually allows us to basically multiply the effect of wedge deals over and over and over again and lead to a lot of cash flow for House Hack. No guarantees, but we're the most excited we've ever been for house Hacks. so we're very, very excited to announce uh, our detailed projections and our plans. Once we announce our reg a fundraise where everybody will be able to invest and not just accredited investors.

So very excited about Houseac, you could tentatively learn more about how Psych.com but the full plan isn't there and then obviously. Also, remember we've got that coupon code that's now moved to an expiration of: February at 11 February 3rd Friday at 11 59 PM So we're on Deck now for Jerome Powell Dronepal should be coming out any moment moment now. uh to talk dirty to us and obviously I'll be taking notes I'll be quiet I'll uh provide commentary only as necessary. Uh.

and here we go. Let's listen on in. Jay Powell Thank you Mike Good afternoon and welcome my colleagues. And I understand the hardship that high inflation is causing and we are strongly committed to Bringing inflation back down to our two percent goal.

Over the past year, we've taken forceful actions to tighten the stance of monetary policy. We've covered a lot of ground and the full effects of our rapid tightening so far are yet to be felt well. Actually, even so, we have more work to do. Price stability is the responsibility of the Federal Reserve and serves as the Bedrock of our economy.

Without price stability, the economy does not work for anyone in particular. Without price stability, we will not achieve a sustained period of labor market conditions that benefit all. Today, the Fomc raised our policy interest rate by 25 basis points. We continue to anticipate that ongoing increases will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to two percent over time.

In addition: We are continuing the process of significantly reducing the size of our balance sheet. restoring price stability will likely require maintaining a restrictive stance for some time. I Will have more to say about today's monetary policy actions after briefly reviewing economic developments okay, foreign slowed significantly last year, with real GDP rising at a below Trend pace of one percent. Recent indicators point to modest growth of spending and production.

This quarter consumer spending appears to be expanding at a subdued Pace in part reflecting tighter Financial conditions over the past year, activity in the housing sector continues to weaken, largely reflecting higher mortgage rates, higher interest rates, and slower output growth also appear to be weighing on business fixed investment QQQ on screen. Despite the slowdown in growth, the labor market remains extremely tight with the unemployment rate at a 50-year low, job vacancies still very high, and wage growth elevated job gains have been robust with employment Rising by an average of 247 000 jobs per month over the last three months. Although the pace of job gains has slowed over the course of the past year and nominal wage growth has shown some signs of easing, the labor market continues to be out of balance. Labor demand substantially exceeds the supply of available workers, and the labor force participation rate has changed little from a year ago.

Inflation remains well above our longer run goal of two percent over the 12 months, ending in December Total Pce Prices rose 5.0 percent excluding the volatile food and energy categories. Core Pce prices Rose 4.4 percent The inflation data received over the past three months show a welcome reduction in the monthly pace of increases. Yep, and while recent developments are encouraging, we will need substantially more evidence to be confident that inflation is on a sustained downward path. Very.

Despite elevated inflation, longer term inflation expectations appear to remain well anchored, as reflected in a broad range of surveys of households, businesses, and forecasters, as well as measures from financial markets. But that's not grounds for complacency. Although inflation has moderated recently, it remains too high. The longer the current bout of high inflation continues, the greater the chance that expectations of higher inflation will become entrenched.

The Fed's monetary policy actions are Guided. By our mandate to promote maximum employment and stable prices for the American people, my colleagues and I are acutely aware that high inflation imposes significant hardship as it erodes purchasing power, especially for those least able to meet the higher costs of Essentials like food, housing, and transportation. We are highly attentive to the risks that inflation poses to both sides of our mandate, and we are strongly committed to a returning inflation to our two percent objective. Today's meeting, the committee raised the target range for the Federal Funds rate by 25 basis points, bringing the target range to four and a half to four and three quarters percent.

We are continuing the process of significantly reducing the size of our balance sheet. With today's action, we have raised interest rates by four and a half percentage points over the past year. We continue to anticipate that ongoing increases in the target range for the Federal Funds rate will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to two percent. Over time, we are seeing the effects of our policy actions on demand in the most interest-sensitive sectors of the economy, particularly housing.

It will take time, however, for the full effects of monetary restraint to be realized, especially on inflation. In light of the cumulative tightening of monetary policy and the lags with which monetary policy affects economic activity and inflation, the committee decided to raise interest rates by 25 basis points today. Continuing the step down from last year's rapid pace of increases shifting to a slower Pace will better allow the committee to assess the economy's progress toward our goals. as we determine the extent of future increases that will be required to attain a sufficiently restrictive stance.

We will continue to make our decisions, meeting by meeting, taking to a taking into account the totality of incoming data and their implications for the outlook for economic activity and inflation. Yeah, yeah, we have been taking forceful steps to moderate demand so that it comes into better alignment with Supply our overarching focus is using our tools to bring inflation back down to our two percent goal and to keep longer term inflation expectations well anchored. Reducing inflation is likely to require a period of below Trend growth and some softening of labor market conditions. Restoring price stability is essential to set the stage for achieving maximum employment and stable prices over the longer run.

The historical record cautions strongly against prematurely loosening policy. We will stay the course until the job is done. To conclude, we understand that our actions affect communities, families, and businesses across the country. It's not bad.

Everything we do is in service to our public mission. We at the FED will do everything we can to achieve our maximum employment and price stability goals. Thank you and I look forward to your questions. Okay, A Little aggressive, you know, needing stantially more evidence, but overall relatively good.

Not bad. That was not a bad opening statement. Pretty neutral so far as you know. Financial conditions have loosened since the fall with bond yields falling, which has also brought down mortgage rates.

Uh, and the stock market posted a solid game in January. Does that make your job of combating inflation harder? And could you see lifting rates higher than you otherwise would to offset the increase in SCP or to offset conditions? SCP So it is important that overall Financial conditions continue to reflect the policy restraint that we're putting in place in order to bring inflation down to two percent. And of course, Financial conditions have tightened very significantly over the past year. I Would say that our focus is not on short-term moves, but on sustained changes to broader Financial conditions.

and it is our judgment that we're not at a sufficiently restrictive policy stance, which is why we say that we expect ongoing hikes will be appropriate. Of course, many things affect financial conditions. Uh, not just our policy, and we will take into account overall Financial conditions along with many other factors. As we said policy Rachel Well, look at him.

Shut up. It's just going dark. I Love it. Yep, sorry.

Over the last quarter, we've seen a deceleration in prices in wages and a fall in consumer spending. All while the unemployment rate has been able to stay at a historic low. Does this at all change your view of how much the unemployment rate would need to go up if at all to see inflation come down to the levels you're looking for? So I I would say it is. It is a good thing that the disinflation that we have seen so far has not come at the expense of a weaker labor market.

but I would also say that that disinflationary process that you now see underway is really at an early stage. What you see is really, uh, in the good sector, you see inflation. Uh, now coming down. Uh, because Supply Chains have been fixed, demand is Shifting back to services and uh, shortages or have been abated.

So you see that in the um, uh, in the other, in the in the other, in in the Housing Services sector, we expect inflation to continue moving up uh for a while, but then to come down assuming that new leases continue to be lower. So in those two sectors, you've got a good story. The issue is that we have a large sector called non-housing Service Core non-hazing Services where we don't see disinflation yet. but I I would say that Um, so far what we see is is progress, but without without any weakening in labor market conditions.

Has your expectation for where the unemployment rate might go change since December You know we're going to write down uh, new forecasts at the March meeting and we'll see at that time I Will say that it is gratifying to see the disinflationary process now getting underway and we continue to get strong. Labor Market Days Wow, Uh, so, but you know we'll update those forecasts in March Okay, so going back to December but actually weakening December by saying well, it's gratifying to see it happening. That's that is way more bullish than I Expected it'll be. The job openings could come down and that would let some of the air out of the labor market without major job losses.

We saw the opposite in the December jolts this morning. Uh, job openings actually Rising uh that also was coincided with with uh slow down wage inflation? Uh, do you believe that openings are an important indicator to be studying to to understand where the labor market is and where wage inflation might be headed. So you're right about the data of course. What we, um, we did see, we've seen average hourly earnings and now the uh employment cost index abating a little bit.

still off of their highs of six months ago and more, but still at levels that are that are that are fairly elevated. Um, the job openings number has in Jolts has been quite volatile that uh recently and I did see that it moved up back up this morning. I I Do think that uh, it's probably an important indicator. The ratio I guess is back up to 1.9 job openings to Um to unemployed people people who are looking for work.

so it's an indicator. But nonetheless, we, You're right. We do see uh wages moving down. If you look across the rest of the labor market, you still see very high, uh, payroll job creation.

Um, and uh, you know, quits are still in an elevated level. So many, many by many many indicators. Uh, the job market is still very strong dude. He just walked back on Jolts like he's like oh, Joltz is very important a few months ago and now he's like, eh, it's an indicator.

What that's bullish is the trajectory for the FED funds rate in the most recent SCP Still the best guidepost? Uh, for the policy path forward is ongoing now mean more than two? Uh, Rate: Rises Now it's a good question. So you're right. At the December meeting, we all wrote down our best estimates of of what we thought the ultimate level would be, and that's was hawkish. obviously.

back in December and the median for that was between five and five and a quarter percent. Yeah, Um, at the March meeting, we're going to update those assessments. We did not update them today. We did, however, continue to say that we believe ongoing rate hikes will be appropriate to attain a sufficiently restrictive stance of policy to bring inflation back down to two percent.

Um, we think we've covered a lot of ground and financial conditions have certainly tightened. Uh I would say uh, we still think there's work to do there. We haven't made a decision on on exactly where that will be I Think you know we're going to be looking carefully at the incoming data between now and the March meeting and then the May meeting. Um, I I Uh, I Don't feel a lot of certainty about uh, where that, where that will be.

It could certainly be higher than we're writing down right now. If we come to the view that we need to write down, uh, to, you know, to to move rates up beyond what we said in December we would certainly do that at the same time. If the data come in in the other direction then we'll you know we'll make data dependent decisions at coming meetings. Of course, between those two options of um, you know, the the likelihood of maybe falling short of that or going beyond that level I Guess I would say it this way.

um I Continue to think that uh, it's very difficult to manage the risk of doing too little and finding out in six or 12 months that we actually were close but didn't get the job done. Inflation Springs back and we have to go back in. And now you really do worry about expectations getting, uh, unanchored and that kind of thing. This is a very difficult risk to manage.

whereas uh I you know of course we have no incentive and no desire to to over tighten. but we you know if we if we feel like we've gone too far, we can certainly could certain an inflation is coming down faster than we expect, then we have tools that would that would work on that. So I I Do think that in this situation where we have still the highest inflation in 40 years, you know the job is not fully done as I mentioned. I Started to mention earlier, we have a sector that represents 56 of the core inflation index where we don't see disinflation yet so we we don't see it.

it's not happening yet. Inflation in in core Services x x housing is still running at four percent on a six and twelve month basis, so there's not nothing happening there in the other two sectors representing you know, less than 50 percent you actually I think now have a story that is credible that's coming together although you don't actually see disinflation yet in Housing Services But but it's in the pipeline right? So for the for the third sector we we don't see anything here. So I think it would be premature. we very premature to declare Victory or to to think that we've really got this.

We need to see. Our goal of course is to bring inflation down and how do we? How do we get that done? There are many many factors driving inflation in that sector and they should be coming into play that have inflation. The disinflationary process begin in that sector, but so far we don't see that and I think until we do, we see ourselves as having a lot of work left to do. Uh Howard shy with Reuters and and thanks as usual.

So I just wanted to connect a couple Dots Here the statements made a number of changes. uh that seem to be saying things are getting better. You're saying inflation is ease as these: uh, that's new. Uh, you've taken out references to the war in Ukraine as causing price increases.

You've taken out references to the pandemic. You've eliminated all the reasons that you said prices were being driven higher. Yet that's not mapping to any change in how you describe policy. We still have ongoing increases to come.

So I'm wondering why is that the case? And does it have more to do with uncertainty around the Outlook or more to do with you not wanting to give a very overeager Market a reason to get ahead of itself and overreact? So I guess I would would say it this way. Uh, we can now say I think for the first time that the disinflationary process has started. We can see that and we see it really in Goods prices. So far yes, Goods Prices is a big sector.

We this is what we thought would happen since the very beginning and now here it is actually happening and for the reasons we thought we you know it's Supply chains that shortages and it's demand revolving back towards services. So this is a good thing. This is a good thing, but that's you know, around a quarter of the Pce price index core Pce price index. So the second sector is is Housing Services And that's driven by very different things.

And we as I mentioned with Housing Services we expect and other forecasters expect that measured inflation will continue moving up for several months, but will then come down assuming that that new leases continue to be soft. And we do assume That So we think that that's sort of in the pipeline and we actually see disinflation in the good sector. and we see it in the pipeline for two sectors that amount to a little less than half. So this, this is good.

and we note that when we say inflation is coming down that this is good, we expect to see that that disinflation process will be seen. We hope soon in the Core. Goods Uh, X Housing sorry the Core Services X Housing sector that I talked about. We don't see it yet.

It's You know it's a it's seven or eight different kinds of services. not all of them that are the same. And you know we have a sense of what's going on in each of those different uh subsections. Um, probably the biggest part of it probably 60 of of that will is, you know, research would show it's sensitive to slack in the economy and so the labor market will probably be important.

Some of the other ones that deliver Market's not going to be important. Many other factors will drive it. In any case, we don't see this inflation in that sector yet. and I think we need to see that it's the majority of the Core PC index, which is the thing that we think is the best predictor of headline Pce, which is our mandate.

So it's not that we're not. We're neither optimistic or pessimistic. We're just telling you that we we don't see in inflation moving down yet in that large sector. I Think we will fairly soon, but we don't see it yet until we do.

I Think we? You know we see ourselves. We've got to be honest with ourselves. We see ourselves as having perhaps more persistent. We'll see more persistent inflation in that sector, which will take longer to get down.

Um, and we're just going to have to. We have to complete the job. I Mean that's that's what we're here for today. Him saying the deflation process has started has sent the markets up.

We'll get people like hearing this: Oh, you observed several years ago that we learned we can have a low unemployment rate without above Target inflation. And we have learned lately that inflation that's Nick T It's uncomfortably high level despite a historically low unemployment rate. Given that, and given how much you did over last year, why do you think further rate increases are needed? Why not stop here and see what transpires in the coming months? Again, Go! Nick So we you know we've raised rates four and a half