Oh boy, it's a very painful. The failure of First Republic Bank was the second largest bank failure in the United States his entire history, the 14th largest bank in the U.S gobbled up by JP Morgan the biggest bank in the United States which usually they're not supposed to be able to do that, but they got special exemptions because well, they paid the most supposedly. or they got some friends over at the right places. But anyway, now hedge funds are loading up shorts against the entire stock market and we are seeing the most bearish positioning in stocks that we have seen since November of 2011..

that's back when investors were worried about a double dip crash following the 2008 and 2009 financial crisis. That's right, hedge funds are that bearish right now. And this is scary because it's not just hedge funds, it's also retail via ETFs ETF inflows in April were half of what they wore in March a sign that investors are either out of cash or they're allocating to other Investments like maybe gold or treasuries or money market funds. Being a licensed financial advisor, operating an ETF and selling programs on building your wealth, this is shocking to me.

Add to this that the hero of many on social media: Elon Musk Also, the hated person of many says the FED is operating with too much of a lag. In other words, the vet is overdoing their work and markets and stocks need to fall to properly show the FED how much damage they're causing and may have already caused then. Maybe the low volatility we're seeing in markets right now isn't actually something to take solaceon isn't something to feel good about. It's actually potentially just the Calm before the storm and that the worst is yet to come.

After all, two-thirds of economists are expecting a recession in the next 12 months. The yield curve inversion between the three month and the 10-year is over 160 basis points deep, And while some yield curves have started to re-steepen we haven't seen potentially the Fed's favorite that three-month tenure go anywhere nearly steepening it. And usually the Real Pain happens when that curve starts rest deepening it. Guess what? We haven't seen it start yet, but we have started to see mortgage spreads out to the highest and widest level that we've seen in the last six months, which is a sign of stress beginning in financial markets.

And Charlie Munger is already warning of a commercial property storm with his buddy Warren Buffett And really all eyes are on the Federal Reserve for a change in strategy. And so that's what we're going to do in this video. We're going to analyze the Fed, the Fed's pivot and stagflation, and what they're really up to. Are they really this stupid? Well also briefly plug a massive and completely free expansion pack.

It's a huge productivity hack to teach you how to actually use artificial intelligence to create productivity. Solutions in your life as an employee or a business owner either. Doesn't matter totally for free for existing members of the elite Hustlers course which will be rebranded to a new course, but more on that later. We will have a pre-sale link down below and all existing members will get access to this which is super exciting, but again, more on that later we need to understand.

Also, what's going on in the jobs market and earnings and so we'll be touching on those as well. So let's get started with what the hell is the Fed actually doing? Are they taking us down the right path? Do they know what they're doing? Or are they making a massive mistake like Elon Musk suggests? Well, first, it's worth remembering that Jerome Powell the chairperson of the Federal Reserve has made it exceptionally clear. One, he is a student of history, and number two, he does not want to repeat the mistakes of the 1970s or 80s. So what were the mistakes of the 70s and 80s? And how do those compare to Musk's commentary? Well, in the 70s, the FED operated with what some say was more of a leading data approach.

In other words, they used politically desirable data. Some say the Fed was basically more of a pushover to politics, and when presidents like Dick Nixon wanted to have looser money policies to help them win elections, the Fed was more than willing to oblige. The problem is, you ended up destroying the Federal Reserve's credibility and now you might think to yourself, come on man, The fan has no credibility right now. Oh, but that may be true, but it's even worse if they lose what's left of their credibility.

See back when they were printing money when inflation was six percent just a year ago, people lost a lot of respect for the Federal Reserve The FED being a student of History realizes when their credibility starts going in the dumps, they have to flip and make sure they put the pants back on and show you who's really the boss. And that means moving from leading data to potentially using lagging data. And the question isn't so much of is the Fed going to over tighten? No, no, they're going to over tighten. The question is, how much are they going to over tighten to show the world they're still wearing the pants.

One way you could look at this is by a analyzing a discussion from the Federal Reserves Federal Open Market Committee Transcripts not their minutes, but the actual word for word transcripts from October and August of 1980. in response to Chairperson Volcker: Mr Roos States The following quote: I Think that credibility is important, not just because we like to use the word and like the Ring of it this is from 1980 mind you, but because without credibility in what we have announced, we are going to have higher interest rates. In other words, inflation expectations might be rekindled because of the loss of credibility. And basically we'd have High interest rates and high inflation if we lose our credibility.

Now, consider that for a moment. We know that Jerome Powell studies the 1970s and 80s and uh, you obviously have the FED lamenting today that they don't want to repeat the mistakes of the 70s and 80s because back then the FED lost credibility and the FED does not want to continue to lose credibility today Because if they lose credibility, then what do we end up with? They just told you, if credibility goes away, we get higher interest rates and high inflation. That's exactly what happened in the early 80s and it was a big problem. So how did the Federal Reserve actually put their pants on? Well, they raised interest rates by more than double from around 8 to over 18 in today's terms.

Forget about a 25 basis point hike going from Uh 4.75 to 5. Imagine going from 4.75 to 10 percent. That's what the FED did to restore credibility in 1980. We don't want to go back to that because that didn't lead to a shallow or mild recession or soft Landing.

No, it led to a nasty recession. It led to an 18-month long recession with unemployment higher than it was during the 2008 financial crisis. Let that sink in for a moment. I Just said unemployment was higher during that rug pull by the Federal Reserve Because they lost credibility because they screwed up playing politics.

They ended up giving us a nastier recession by definition of the unemployment rate than what we had during the 2008 Financial crisis. So if the FED were likely to have a conversation with Elon Musk, they'd probably say yo, the pain you're feeling right now, bro, It's nothing compared to what you're going to feel if we don't control inflation expectations and get our credibility back in line. So if you want to see Tesla go to 24.33 like some of the Bears out there are talking about. hey, you know what? Why don't we just do you a favor.

Let's cut rates tomorrow. And then after we cut rates and reignite inflation, we'll rug pull you down another 80 percent. Or we could actually look at what's happening and what history has taught us. Look at the transcript from the 1980 meeting in August.

The FED clearly discusses the concern of losing control of inflation expectations. What do we have today? Yes, five-year break-even inflation rates. That's the Bond Markets measure of inflation. Expectations are trending down, and this is good, but they're well above the level where we paused rates the last time in 2018..

they're also starting to unanchor in the near term as measures of consumer expectations of one-year inflation measured twice in the last month by the University of Michigan have shot up over one percentage point to 4.6 percent in English. The Mission isn't a complete shoulder I'll try that without an accent. The job ain't done. There's still more work to do to make sure that inflation expectations don't continue to disancher that.

Instead, they continue to anchor down low and potentially fall even lower because until then, the Fed's job is not complete and that's really scary. It should make you nervous about the Federal Reserve and you should believe them when they say we are going to be higher for longer. Now don't get me wrong, I don't want to be a a bear here. Okay, I'm overall hopeful and optimistic, but let me be clear, hope is not an investing strategy.

So higher for longer is problematic because it means we're going to lose the insulation blanket around our economy today, protecting it from the fire of the Federal Reserve's aggressive rate hikes. That insulated blanket is the Joltz Report that stands for the Job Openings and Labor Turnover Survey. And it's basically a measure of how many job openings there are on the economy. Think about it.

if you lose a job, your spending goes down right? No, you get another job and then you keep spending. But if you lose your job and you can't get another job, then your spending goes down. And that's why the Joltz report is so unique because it tells us how much of that fire blanket do we have left because the FED lit a fire. Now the fire blanket of the Joltz report is starting to shrink.

Okay, we have now shrunk three readings in a row. We are at the lowest level in two years and it's likely to worsen. now. That is what the Federal Reserve wants.

They want the labor market to be more in balanced because they think that will reduce wage inflation. But the question is, once you burn that blanket away, do you put that fire out instantly Or does the fire start to burn you? That is the fear. The FED is overdoing it. And the question then is how much damage are we going to create.

But it's not just the FED, it's also the fire of artificial intelligence. Consider the CEO of IBM. He just reported plans to pause hiring for roles it thinks AI Artificial Intelligence will completely replace or eliminate in the coming years. These are non-customer-facing roles like employment verification jobs for human resources.

About 26 000 workers could be affected at just IBM And what did the CEO say? He said quote I could easily see 30 percent of that. In other words, that part of the business sounds insensitive getting replaced by artificial intelligence and automation over a five-year period. That's an insane claim from an employer of tens of thousands of people. IBM An American staple saying: AI is going to replace a ton of our back office work.

Thousands of workers gone Morgan Stanley Just announced 3 000 layoffs and the CEO of Citibank says blockchain technology is cool and great and all, but it's been kind Of slow to catch on. Artificial Intelligence On the other hand, that will be fast and if you thought crypto was fast, it's not. But if you thought it was fast as gonna be even faster. Now we really need to understand the implications of all of this on the economy.

but I Want to give a shout out to an amazing course member who actually recommended that I do this. I'm announcing the pre-sale of a massive set of new content, actually solving problems with artificial intelligence to help you become more productive. So if you wonder how I get so much done in a day I schedule what tools I use to hack my productivity. We're going to go through all of that using the artificial intelligence tools that we Implement to make sure we can be more productive as individuals or business owners or employees and make more money or make sure that we can get a new job in case we had fired from our current job because we're going an economic recession.

In fact, to honor existing course members, we are rebranding an existing course which is called the Elite Hustlers course that's a making Money course. We're rebranding that too and let me know in the comments what you think about it: Making Money and getting sh9t done faster featuring artificial Intelligence All existing members of that course will be given totally free access. Remember that's my goal is when you join one of my courses, you get lifetime access not only to the content, but you get access to the course member live streams and I want you to have content that comes out that's new I Always want to make sure that you know every single day I Wake up and I try to what can I do to provide more value to my existing members and my channel members, my channel subscribers, You name it all of you. and so the AI segment will be released on June 1st you'll be getting free access on June 1 You could join that course now if you haven't yet already.

We're offering a pre-sale to anyone who wants to join that course and the price will be going up on Cinco de Mayo that is the 5th of May which is in just three days. So at the end of the day on May 5th the price will be going up. If you want to access the pre-sale click the link down below and between now and June 1st you'll be able to enjoy the course member live streams, the elite Hustlers course member live streams which is a second set of live streams we do on the weekend and the existing content. Then on June 1 we'll be releasing the AI segment totally for free.

So click that link down below and join before May 5th. By the end of the day, keep in mind the course will be dedicated to building your productivity as either an employee, business owner, student, or really anyone to make sure you're the most productive person you possibly can be. Now, the problem with the Jolt staff: As the Jolt status report came out this morning, the stock market dropped. That's likely because markets are realizing we need to price in the remove of our insulative blanket and the fact that we might get burned.

Once those job losses increase, the damage to our economy could be severe. The FED is already expecting the unemployment rate to rise one percent, but anytime that has occurred in the past, the unemployment rate has gone on to rise another one percent. Meaning we are getting early indicators that the data the FED is looking at which is backwards looking, is starting to get crushed. This is risky because once the damage is done, it can take a while to undo, but the fan has to be careful here not to undo their fight against inflation in the first place and risk resurgent inflation.

This is why the FED in their commentary to us is very likely going to make it clear that their job of constraining inflation expectations is not done. and even if they stop raising interest rates after a 25 BP hike, they're going to stay there for quite a while and they're going to be very data dependent to make sure that a inflation isn't reanimating, but B to make sure it is trending appropriately and quickly down Because the longer it takes to get inflation down, the longer it might end up becoming sticky and entrenched. and the greater the likelihood we get a Paul volckering. However, the only way to actually Force this is not by driving up interest rates is by causing job loss.

But the FED can't fire people. Interest rates end up crimping money that wealthier individuals and businesses have access to. They're usually the ones who employ people right businesses, and wealthier individuals employ people. So in order to get less people employed, you have to crush wealthier individuals by hurting their stocks in their real estate.

And you have to crush business owners by increasing their cost of capital. And then hopefully they fire people. which sounds terrible. But that's basically what the FED is doing because the FED thinks, hey, as long as we get inflation down sooner rather than later, less people will be hurt in the long run.

It's a very utilitarian game. It's kind of like, you know that analogy where a train is barreling down the road and there's one person tied to the tracks on the left and 20 people tied to the tracks on the right. You have to decide by turning the lever which group of individuals are going to get uh, you know, trained. And the utilitarian answer is, well, the greatest good for the greatest number of people.

So that's the choice you make. That's the choice. The Federal Reserve is making. But if you're in Congress be like yeah, I'm just gonna make no decision.

Anyway, this might explain why today's earnings so far have actually been resilient in the face of this economic slowdown. Look at Chipotle American Express Visa E-commerce you name it. earnings are coming in much better than expected, and it appears that markets were really just too pessimistic for most companies, but cracks are beginning to show. Take Sofi for example, much of their value right now.

when you actually look at their balance sheet. This is something we did on our course member live stream. by the way. we do this almost daily.

We pick a company we go through. Some of the financial statements do it all for you, so it makes it really nice and easy for you. But anyway, so far much of their value when you look at their balance sheet right now has to do with loans available for sale. However, their portfolio growth or loan mix.

in other words, where are they growing? Where is the growth happening at Sofi is Shifting to a not so great segment. Growth is 46 year over year. in personal loans and in student loans, you're down 47 and Home Loans you're down 71 percent. So in other words, you're getting less higher fee and more secure loans like home loans.

and you're getting more low or should I say no fee. Personal loans with no light fees. That's what Sofi promises. All of these loans are exploding so far in popularity, but they're much riskier and on average they're unsecured and about twenty five thousand dollars in size.

This is risky for a company like Sofi because it probably only takes about a 15 markdown in the value of their loans available for sale for them to be upside down. That's risky for a company like Sofi and it makes you wonder why the stock is going down. Oh wait, no it doesn't because when you actually look at the numbers, it's like oh yeah, that's where the risk is during a banking crisis. lending something I've actually been talking about for months, if not years at this point.

I Don't want to own financial services companies in a recession, but that may not be true for everyone. But I will tell you this: if the ability to borrow ends for consumers and we end up ruining consumers ability to spend because maybe job losses hit at the same time as people can't borrow any more, then maybe Mike Wilson and Morgan Stanley will be right. Mike Wilson says the Bulls the equity, the stock. Bulls are delusional for thinking that the margin expansion that companies have been so used to during the pandemic that recently hit a floor may see an upswing again in the second half of 2023 and 2024..

Mike Wilson from Morgan Stanley says that's delusional. Don't think companies are all of a sudden going to become a whole lot more profitable anytime soon, because really, when job losses hit, oh, the real pain is going to be felt by everyone. In fact. Bloomberg Economists put it this way: they say we expect stagflation Light.

That's their reference. Cyflation light has very few historical examples, but it does make you wonder about the phrase this time is different, which is a dangerous phrase. Sometimes the most four dangerous words in finance stagflation-like would look something like a zero to one percent growth for our GDP with inflation sitting around three percent by the end of 2023 or 2024.. Now the Atlanta Fed Now GDP report puts us at about a 1.7 percent GDP right now in May of 2023, but that might fall to between zero and one by the end of the year.

And if inflation's still three or four percent, that's the inflation. And that's not great because that means the FED is not likely to just hike in May and go away and then start cutting. But instead we could actually see a repeat of what we saw in the 1990s, which was rather than hiking, then pausing and then cutting, the FED hiked and paused and then hiked again. They did have a little cut in between there, but they were a little more volatile in what they were planning under or what they what they actually acted upon and so this would likely severely hurt markets, especially since markets are pricing and rate cuts at the end of the year, not rate hikes.

so this is dangerous. Obviously, everything is predicated on what happens with the CPI data releases. Uh, over the next six weeks between the May Fed meeting and ultimately the next Fed meeting that the Federal Open Market Committee has. Now, it's important.

First, we've got May 3rd Fomc meeting. We already know that the next one isn't until June 14th. But between May and June 14th, we're actually going to get two more CPI reports inflation reports. Those are going to be critically important.

So you want to mark your calendar for May 10th and June 13th. June 13th is just a day before the Feds meeting in June and then we'll see if the pause actually comes to fruition. Now, it's possible that a Fed pause could actually be good for stocks if you look at this particular chart, but after a pause could be more important because if the FED pivots when the economy is already so broken, we could see the stock market plummet. Now, if the FED pivots or u-turns when they're done with their hiking cycle and the economy is still resilient at that point, then maybe stocks could actually surge up.

So in other words, nobody knows what the hell is going to happen. Now we may get some signals now, but it's unlikely we're going to. So if you're making bats, that the Fed's going to be super bullish in the short term until this data comes out, I Think it's probably a mistake. Instead, we should be looking at some practical ways we can prepare ourselves.

Number one: Be prepared for what the FED is saying. Trust them in what they're saying when they say higher for longer and that means you want to do a few things to make sure you are as well equipped as possible or Nimble as Nimble as possible. In the event you lose your job or some sources of revenue dry up, this is important. Make sure you are able to get rehired and you have all the skills necessary to make sure you can make as much money as possible.

Of course, obviously I implore you to check out making money and getting sh9t done faster. That's the course linked down below. It's the rebranded Elite Hustlers It'll come with the artificial intelligence lectures for productivity on June 1st. New content will also be added over time.

Just get in before May 5th for that pre-sale deal. But after this I Want you to think about actionable plans for eliminating debt that you have Take one step. Even right now, think to yourself: how much margin do you have? If you don't know how much margin you have, that's a problem. Figure it out.

First step one: Identify the problem. How much credit card debt do you have? How much student loan debt do you have? How about car loans? What debts do you have right now? What can you do to start paying those off? Even one more payment a month? So start rolling those things off. Now you know. I'm a licensed financial advisor, but this is just non-personal Financial Advice here: Limit your debt.

The last thing you want in a stagflationary recession is to end up jobless and in debt, because then you reset to zero. This is why invest in yourself to maximize your skill set so that you can stay employed and you can keep making money, but also limit your debt. And I wholeheartedly believe that after you've done that, take your excess capital and consider investing it in businesses Wonderful businesses at fair prices. As Charlie Munger says, it is better to invest in wonderful businesses at fair prices than in Fair businesses at wonderful prices.

So maybe you're not getting the steal of a century in the price. And yeah, there might be some more downside risk. but look at high quality businesses, ones with high free cash flow, and things that you think will have pricing power. not in an inflationary environment when everybody has pricing power, but in the long term.

like consider the AI Revolution We don't know what companies are going to make money, but we do know that chips and servers are likely to do really well. I Guess I Shouldn't say we know that with certainty because who knows maybe AI will be so good in the future. It doesn't even need chips and servers anymore? Who knows, But look for great quality companies that can adapt to change and when it comes to tomorrow I Want you to think about Halo Fed's going to give us 25 BP They'll signal a lot of jibber jabber that'll try to get them to June without creating too much excitement or too much pessimism. But don't just think about tomorrow.

Think about the next 10 years and where do you want to position yourself for the next 10 years starting now? Thank you.