Well, Jerome Powell just gave us a beating And it all starts with these interest rate probabilities where you also have a convenient reminder of the expiring coupon code tonight and price is going up tomorrow. You get a price guarantee and lifetime access to any of the program's most popular being stocks and Psychology and Money and of course the zero to millionaire real estate investing course followed by the Elite Hustlers All right, take a look at this. these are now after the Fomc press conference, the implied overnight rates and the number of hikes slash Cuts It's simple: you're gonna look over here on the left side at the implied rate, which is creating this blue line right here. And so what do we think the rates going to do? Well, The rate is likely to go up one more time in May that is roughly sitting at a 50 percent probability right now.

That's why you have the rate slightly below that five that's being priced into the chart. But you've got about a 50 chart or chance to get another 25 BP in May. Then the expectation is that we're actually going to get a 25 BP cut followed by more Cuts more Cuts more Cuts more cuts and more cuts. This stands in the face of J-pal because this suggests that rates are going to come down as much as 1 to 1.1 percent.

So 100 to 110 basis points. This chart suggests four rate Cuts here in 2023. of course, what is J-pow telling us? Well, good old Jay is telling us Hell No In fact, that's not our base case. in fact, our base case.

right now is using monetary tools to tighten and firm up the system and squeeze out inflation. In fact, they expect to sit at a wonderful 5.1 percent by the end of the year. Not only do they expect to sit at 5.1 percent by the end of the year, which is the same as December And they softened their Outlook Uh, because they were going to raise their Outlook in the last presser Feb won. They told us hey, if we had to rewrite it from December, we'd probably include more rate hikes.

But the reason they didn't include more than 5.1 is because they believe Financial conditions have tightened so much such that we don't actually need to raise rates anymore because markets are going to do it for us. At the same time, we're getting pushed closer to a recession via these GDP projections, moving a tenth of a basis or a tenth of a point closer over here on real GDP and uh, four tenths of a percent closer for next year to a recession now. Jerome Powell Had a lot to say, but a lot of it kept referring to this document right here. This document, which also has another coupon reminder there about 11 59 PM Right there it says the committee anticipates some additional policy firming may be appropriate.

That used to say, the committee anticipates that ongoing increases may be appropriate, right? So that's been changed to some additional policy firming Jerome Powell Was asked to clarify what the hell is policy firming? You know, like what it's going to get firm and then it's going to go soft. Is that like like a reference like an edge nudge wink wig. Uh, and that's basically what markets are assuming. But Jerome Powell says well, by firming, we mean more hikes.

Okay, fine, so more hikes. But what were some of the big things that led the market to actually go red during his discussion and his presser? Well, the biggest thing is, despite the fact, and this is by far the biggest. Despite the fact that the market is pricing in Great Cuts this year, as many as four of them or more four to five rate Cuts being priced in this year. What did J-pow have to say? No Rate Cuts per the base case of the committee.

Now, obviously that could change. He made it very clear they need if inflation ends up being stubborn, then inflation will end up leading to more rate increases. Uh, Elon Musk is not very happy about this. Elon Musk Makes it very clear that this rate hike is quite frankly foolish because it'll just lead to more deposit outflows.

This is something he tweeted in just the last 20 minutes. When it comes to talking about inflation, which is the one thing that would actually keep the FED continuing to hike, he's asked about disinflation and he said he's asked hey, look you you were you mentioned the word disinflation like nine to ten times last time. Is that still happening Jerome Powell actually gave us hope here. He said yes, disinflation is still happening First we have Goods disinflation which been has been happening for six months.

home services disinflation. That takes time. But the good news is all the leading data which has been consistent for about the last six months is pointing to that in time we're going to see a massive anchor of Housing Services disinflation. My expectation is you're actually going to get a beautiful marriage of this you are going to get at the same time and you want to prepare for this, especially if you're a stock investor looking at pricing power kind of stocks.

Whatever you're looking at I Would not be shocked folks. Mark my word on this. Save this. put a sticky note on your desk and hold me accountable for it.

I would put an X right here and I would say that come July X marks the spot baby. We get massive Mega housing disinflation and we get the start to Services disinflation X housing and what happens? The FED goes mission accomplished baby, start cutting and whoever thinks the Market's going to go down when that happens is betting on stocks that they don't actually think could make it through a soft recession. Uh, but that's all right. That's all right, that's the debate, right? that's the debate, the Bears are like the recession is going to happen, it's going to kill earnings and the Bulls are like dude, once the once inflation's gone, the FED u-turns man, he's going back.

Yeah, we might have to go through a temporary like oh I hit a little bit of a wall there. But let's get out of it. That's why I personally pick pricing power stars but Jerome Powell made this very clear. Number One: Goods Disinflation happening for six months Housing Services Still trending towards this inflation just a matter of time before it shows up in the data.

Number Three non-housing services have still not shown disinflation happening. Now that's a problem. That's the sticky part, right? But I Think come. July You can actually get all three of them.

Think about what that would mean for a moment if you got one. Goods continue to come down. That would be fantastic, right? That's what you want. You want goods, disinflation to continue to come down.

As long as Goods disinflation continues to come down and housing starts showing up and maybe Services starts slightly showing less stickiness. then I Think it is possible the market could be right and you could end up seeing, uh, some form of rate cuts. The problem is because we're not seeing number three yet. Jay Powell has to keep the hard face on.

He's got to keep the attitude up that no, no, no, no, no no no, we ain't going anywhere yet until we actually see that data now. Unfortunately, because it's taking so long to happen, more problems are happening including the banking crisis. Jerome Powell's response to the banking crisis and to recession. when he's asked about the possibility of a soft Landing he says it's too early to say that wasn't fantastic.

We don't love to hear Jay pal say I don't know we're looking for the path to soft Landing that's what he said I don't want to hear that because I Like the J-pal that's like we see a clear path to a soft Landing Oh boy, there's the soft blade Again, we're going to it. That's not what we got today we got. Yeah, soft planning would be nice, wouldn't it? Um, yeah, it's certainly possible it's it's an idea, but we don't see it. Uh, but yeah, that's kind of what we got today, which uh yeah, it's not that great.

But anyway, then we got a little bit of a discussion on banking, talking about how history has shown that banking crises left unchecked or really bad that they can cause more damage. Uh, that's very bad. Uh, we learned about uh uh. you know him saying that all depositors deposits are safe now I Thought this was really interesting that he would say that all depositor savings are safe Now he's asked, hey, why are you saying all depositors are safe Are you basically saying FDIC insurance is now ramped up? Is it higher than what we expect and what do we actually get as a response he says no.

All I'm willing to say is what I said Well, he said all depositors savings are safe and then he says we have tools to protect depositors. Depositors should assume their deposits are safe. He's basically de facto verbally bailing out everyone's bank. That's basically what he's doing.

whether he has the power to do so or not. That's basically what he's saying. Now he's talking about how the banking system is safe and resilient. I haven't heard that before I Feel like we heard that about Bear Stearns But anyway, Silicon Valley Bank He says, look, management failed badly, they didn't hedge.

That's true. They removed all of their interest rate Hedges Uh, and one of the reasons you might remove interest rate Hedges is because you have to book the expense for them. Whereas if you just hold stuff in hell to maturity Securities you don't actually have to book those losses for Hedges you do have to book Hedges though. So it made more sense to make the bank look more profitable.

Which is, you know, kind of like fraudulent. but legal. Uh, so technically not fraudulent. It's just deceitful.

Uh, the bank is basically able to say, well, let's just get rid of our hedge expense and even though we're losing all this money, we just won't hedge it Because don't worry, it'll be fine. And it wasn't. Uh, Anyway, so uh, he talks about how this Bank Run occurred a lot faster than uh, historically normal. uh, talks about how they're using an emergency facility.

Essentially, that's the uh Bank uh uh term funding program for basically taking Bank toxic assets, recognizing them at full value, and taking on that duration risk. Uh, so that way Banks can pay depositors by taking out loans from the FED Do keep in mind that's actually problematic for banks because if if banks are like yay, we're operating and then all of a sudden it's like somebody's like I want my 10 million dollars, the deposits and the bank's like damn it. Okay now we have to go borrow that money from the Fed and we borrow 10 mil from the FED Let's say and go. Here's your 10 mil.

Now the bank lost that 10 million deposits and they're looking at the FED going damn it now I gotta pay interest on 10 mil that I don't even have anymore. like it's like two middle fingers in your face. Uh, and so now the bank is paying interest on a deposit they don't have and they're losing even more money. Sucks for the banks.

This is why I don't want to touch any banks right now. People like, when are you gonna buy the dip on financials I'm like when there's no recession so in five years, oh I wasn't supposed to say that. Uh, anyway. uh.

all right, so consumer spending may have picked up potentially due to weather inflation. goal is still two percent. Next, banking failure. Don't really see another banking failure, although there are risks going on.

A lot of eyes on Pac West right now, but that's me saying that along with the research I've been doing, implied year end Target rate is uh, per markets is 4.28 That's about that one percent uh rate cut is being priced in Jerome Powell Does not fear any problems in the commercial real estate banking sector. The NASDAQ is positive about 0.46 right now Dow Jones s p Uh, flat to negative: a quarter of a percent oil actually up about one and a quarter percent bonds, actually sitting down about 12 basis points on the 10-year sitting at about 3.489 somewhat implying more recessionary fears. As we wait for that disinflation to roll around, a credit conditions tightening Jerome Powell suggested that credit conditions tightening could represent the equivalent of approximately a 25 basis point hike. In the event that we have a 25 basis point hike, it is entirely possible, entirely possible that credit conditions would actually amplify the 25 BP hike that we have now.

Or for May to make it feel like a 50 or a 75 or maybe even more. Jerome Powell Made it clear that we don't know. Analysts don't know, nobody knows how tight credit conditions are going to crush the economy, But he did make it very clear that tight credit conditions will weaken the odds of a soft Landing in other words, greater chance of rug pull uh and uh. And and it's hard to tell how long these tighter lending standards are going to affect the market, but they are going to be a critical factor that we have to pay attention to in markets today.

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These are all of my thoughts on all of this. Let me see what questions we have here. Somebody says he says there's a path, we just need to find it. Yeah, no kidding.

That's uh, that's not very hopeful. Um, somebody else writes here. Uh, okay. Well, yeah, the entire banking system's about 19 trillion.

Yeah, don't worry, the FED doesn't need to print all that. Uh, well. the big Banks ain't going anywhere. Then we got bigger problems.

banking. Oh, some of these comments are funny. Uh, it's all fine. The banking system is sound.

Jpow will use his firm tools. Yeah. I I Don't know what's worse hearing that, uh, all is fine or or them acknowledging that no things are not fine. You know it's It's uh, kind of one of those uh damned if you do, damned if you don't uh situations.

We do notice that BTC is trending down a little bit here looking at uh 27.6 and uh yeah, we got Tesla down half a percent QQQ up about six tenths of a percent. So we'll see what happens. But that folks is the summary of the Fomc and well, we'll see you later. Thank you for watching and goodbye and good luck.