Jared blickery here now with more on the market action and a very special guest jared. That's right! We do have a special guest, kevin paffrath, a financial analyst, also a youtuber whose name is meet kevin and kevin really excited to have. You here watched a few of your videos. We got to begin with the breaking news.

We saw the market kind of tank here on news of a ukrainian invasion by russia. We've seen this uh we've seen this lead up, but also markets really might have expected something like this to happen in a couple weeks when the olympics are done just kind of ratcheting up the tension markets still kind of reeling. After trying to digest yesterday's hot cpi inflation print, so i'm just wondering how are you putting all this together? Yeah, absolutely look. The ukraine issue is just fuel to the fire of what's really happening to our markets.

So right now, you've got two choices. One! You think that the federal reserve is going to guide us into a soft landing they're, not playing the violin on the titanic. Don't worry, everything's going to be fine in that case by the dip on this. Ukraine fear it's more fear and those are opportunities to buy.

However, if you think the fed is not going to lead us to a soft landing that they're not going to be able to handle the wage price spiral that has just started decoupling from supply chain inflation. Well then, maybe this is just more fuel to the fire of our economy. Heading into a recession and 2022 might be uh one of those years to just sit out well, and let me just follow up on um. You had something interesting that i was watching on.

One of your videos and argument consumer spending uh could get a significant boost from the child's tax credits which are set to be released in bulk to certain pers participants or recipients. This year outline your reasoning, because i find this absolutely fascinating, yeah, absolutely so, usually on our tax returns, we can get a two thousand dollar a per child tax credit and that was increased to between three thousand dollars and thirty six hundred dollars, depending on the age Of the child, half of that money has already been distributed via the monthly payments started between september and ended in december. The other 1500 to 1800 are still coming. They come as a refundable tax credit when folks file their taxes.

Now, since higher income, families probably are paying more in taxes when the tax time comes up, they're - probably not going to see much of a benefit from this extra 15 to 1800 per child. But here's where it matters higher income. Families are the ones spending like crazy right now, anyway, we're actually seeing income or spending rather by income, fall for those making less than sixty thousand dollars per year. Those are the folks who are most likely to get this large boost of from this fifteen hundred to eighteen hundred dollar, refundable tax credit, even individuals who pay very little in taxes will be able to get this since it's a refundable tax credit.

That means we're. We're really creating uh in a march and april, an opportunity for folks, especially lower income, folks to get a stimulus check. That's the largest stimulus check that they've ever gotten. So, while we're worried about inflation, we still have the federal reserve printing 30 to 40 billion dollars.

A month digitally, of course, and uh we have this uh 1500 to 1800 100 per child stimulus check, coming which again largest check that we've ever had that's pretty interesting there, and i just want to follow up on the fed now because uh worse, as you said, The fed is still buying bonds, but they're going to hike rates in march. We don't know exactly how much most likely 50 basis points right now, but also quantitative tightening is on the horizon. They said they might be getting that a few months after my point here is the monetary transmission uh pipeline here can take 18 months, and all of this from the from the wind down in the bond buying to the raising of rates to qt is happening in A very short period of time, so i'm just wondering how you see the potential effect of qt if it's enacted sometime this year, yeah. Well, i agree with you regarding your 18 months time frame.

I think interest rates are gon na have a little bit of a quicker uh effect on the market, but here's the thing all you have to do is look at the balance of reverse repos, all of the extra cash that we have in our system. We've got over 1.5 trillion dollars of extra cash floating around and if we tighten to the tune of 90 billion per month, like you said, it's going to take certainly over a year to actually have a meaningful impact in a reduction of all this extra cash. That's there, so i don't believe the tightening is going to be doing much for us. The bump, in interest rates, ironically in the short term, could potentially actually increase inflation.

That's because we've got a lot of extra cash on household balance, sheets and corporate balance sheets, but variable lines of credit warehouse lines of credits become more expensive, so costs of goods sold goes up and we know that businesses, at least based on his last earnings season, Have all stated they have pricing power and they're raising their prices because they want to stay ahead of the inflation. That's no longer transitory, so raising rates, while it's expected, uh is probably going to do little to call inflation. If anything could hurt margins for businesses which could potentially lead to more, but we more inflation, what we really need to see is a reduction in demand, and that, i believe, is what the federal reserve is trying to do verbally like we know that bullard came out Yesterday, he's the biggest hawk at the fed, what the fed is doing is they're weaponizing him to prepare markets that hey. Maybe everyone should spend a little less because we're going through a tightening cycle, they're hoping to reduce that aggregate demand, because it's way too high right now and it's propelling the wage price spiral and real quick here.

We just have less than a minute. What do you? What's your outlook for 2022, putting all these complex factors together, yeah? Well, i believe we have a 60 chance that we're going to go into a recession. That's because i don't believe we're going to beat the gdp comes of last year, so we'll have a technical recession. Two quarters of negative gdp, if that occurs at the same time as inflation is still high, we are going to have a freakout in financial markets, because individuals are going to look at jerome powell and say: hey, come bail, us out, please bail us out and he'll Say no sorry, i have to keep tightening.

So what should people do? In my opinion, you buy when the federal reserve u-turns what i mean by that? Is they go accommodative or they stimulate again. That's the best time to buy really quickly. If you did that in the past and you bought when the fed you turned, you would have bought march 23rd. 2020, the bottom december of 18, the powell you turn bottom february of 2009, the bottom recession, q1 of o3, the bottom of the dotcom bubble and october of 1987, which was the bottom of the 87 crash.

If you just buy when the fed u-turns, you tend to do well, wait for that time, kevin paffrath, really fine, really interesting stuff. Here financial analysts and youtuber meet kevin great to speak with you here.