This video is sponsored by the programs on building Your Wealth linked down below and the experience to Shadow Me. If you'd like to do that in person, check out all of that link down below. You get lifetime access to all of the content, the course member live streams, and new information that's regularly added. So what's Wall Street saying about the Federal Reserve minutes? And what says Kevin about the Federal Reserve minutes? Because in my opinion, there were two massive things that we had to pay attention to.

Well, one of which I'm actually going to play you something that Jerome Powell said in May of 2022. Nobody wanted to hear this in May of 22. nobody. But when Jerome Powell said it, it was so Salient to me that I've been pounding the table about this and it got reiterated in the minutes today.

This is absolutely remarkable, so we'll have to touch on that. But first, why don't we just go ahead and hit what some of Wall Street is saying. First we'll look at Nick T fed's mouthpiece and then of course we'll jump on over to to a Morgan Stanley piece talking about the minutes and some of their thoughts on the minutes. So first, what does Nick T tell us? Well, one of them he of course hits on one of the two most Salient pieces, but he only hits on one of the two most Salient pieces.

So I'll give you part one now and part two Standby. So part one, he reiterates much like what it was, immediately picked up on this idea that a few members wanted to raise 50 BP Now I I Want to make this very, very clear: This has nothing has changed here. Bullard's been talking about front end loading hikes. Uh, rate hikes Forever.

Like, since this rate hiking cycle started at the beginning of 2022, he's been talking about let's just go 100 basis points, 100 basis points. Let's get to four. Let's get to our terminal rate, whatever that may be as soon as possible. And there's this expectation now that oh, somehow, because now all of a sudden the minutes are reflecting that some members over at the FED are like let's go 50.

there's this idea that oh, maybe markets are going to start pricing in 50. in my opinion, it's complete nonsense. It doesn't make sense. Uh, to go 50 and I'll tell you exactly why.

First of all, let's lay out the schedule here. Okay, the difference of going 50 here in March is really to speed things up by about five weeks. That's what you're trying to do. You're trying to take the June 25 BP hike and basically move it up to March to speed it up before you get to your main meeting by about five weeks.

The problem with that is by taking a five-week Advantage. So in other words, if like, you're gonna bet on March 22nd, March 22nd, write that one down. Okay, March 22nd is the next Fed meeting. If you're gonna make a trade on the March 22nd meeting.

my opinion is you're going to have a lot of fear going in of people going. That's it. They're going to rug pull us. They're going to go with a 50.

all that buys the FED is a five-week advantage while at the same time they get that five-week Advantage they would turn around and you know what they would do. They would absolutely kill their credibility. Whatever they have left right? Because now they much like me, would become certified flip-floppers and it would show. Uh oh, we really are starting to sound like the 1970s.

Think about that for a moment. All of this is about psychology at the Federal Reserve When bad data comes out, the Federal Reserve has already trained us to tighten Financial conditions When we got a tight Jobs report, inflation report PPI report and tomorrow we have the Pce report. Guess what? Markets immediately did markets immediately tighten Financial conditions. In other words, treasure yields Rose We're at the highest level on Treasury yields right now since November we're sitting at 3.94 Yesterday I was looking at some real estate actually down at Chula Vista and the Agents that were telling me a week or two ago.

Oh, it feels like things are bottoming. Oh, things are turning around in real estate and I'm like no, I don't think so. you guys are getting head faked because interest rates just popped up again and it's just going to take another couple weeks before it shows up in the real estate market. Guess what Real estate agent starts telling me yesterday? Yeah, you know, a few weeks ago we're selling stuff again with multiple offers.

but now I Feel like we're right back in the doldrums. People aren't showing up again. It's like quiet again. I'm like, yeah, because rates just skyrocketed like it's not brain surgery.

It's actually quite simple. But anyway, here's the problem. In the 1970s. Uh, the the we We went into the 1970s with excessive price caps ceilings on things like certain food items gas oil.

These things led to massive shortages for I mean gas. Everybody knows about the 1970s Dash shortages. It's crazy. A lot of these price or shortages of goods and services were created because of price ceilings caps.

Anytime you put a price cap on something, you artificially keep the price low. But what you do is you clear create deadweight losses. It's kind of like rent control when you put a cap on rent. you temporarily make people feel better, but you actually substantially damage the future market and you make things more unaffordable.

You actually create more housing inflation. With rent Control almost I Mean 90 plus percent of economists agree with exactly what I just said. Now here's the problem and this is what happened in the 70s. We removed the price caps.

So what happens when you remove the price caps? Price is freaking Skyrocket right? But guess what happened at the same time in this Set in about 73 we left the Gold Standard. So at the same time as we removed price caps, we left the Gold Standard. And all of a sudden, oh my gosh, look at all this inflation. The inflation was being caused by having left uh or removed the price caps.

But it happened at the same time as oh no, we just left the Gold Standard. So the psychological impression was oh no. This Fiat experiment is a disaster That we're going to have So much inflation. It broke inflation expectations.

It killed the psychology of markets. This is why I have a course on the psychology of money and the zero to millionaire real estate investing course when it talks about in negotiating with real estate agents or what we talk about in the stocks course A Lot of it is based on psychology. Human psychology. Markets are graphs essentially of human emotion after all.

Anyway, So so now all of a sudden you have this impression in the 1970s that oh my gosh, we left the Gold Standard. That's obviously why we have all this inflation. And what was the FED doing? The Fed was constantly flip-flopping. They're like, okay, you know we'll We'll raise rates a little.

Oh, looks like things are getting better. Okay, we'll reduce rates a little. Oh no. okay, things are getting bad.

Again, Okay, we'll raise rates again. That like flip-floppiness led to a disaster. It led to Paul Volcker. That flip-floppiness no pants on, no seriousness, no might led to Paul Volcker.

Now a lot of conditions created that leading up to it obviously the uh, you know, gas shortages, the removal of the price caps at the same time as the breaking of inflation expectations via uh, post leaving, uh, the gold standards, right? All of that contributed to Paul Volcker. The problem is the Fed does not want to repeat the disaster of what came right before Paul Volcker, which is flip-flopping. They do not want to appear to be flip-floppers I Think that in their Ideal World they still want to tell you inflation is transitory. So anyway, to get a five-week advantage to become certified flip-floppers is it makes zero sense at all.

Like things are not like all of a sudden that bad that the FED needs to like, essentially try to rug pull markets. It makes zero logical sense at all. Uh, so I do not see that happening at all and hey, maybe I'll be wrong. but I think the odds of me being wrong on this one are like one percent I think it's very, very low.

Pretty confident in this. Uh, so you know of course you've got Mr Bullard and master saying things like hey, I don't see much Merit in delaying our approach to that level. Honestly, at this point I guarantee you the other members of the Federal Reserve board are like, oh, Bullard say something else Man, you've been saying that for 18 months I could see like Bullard at the meeting Guys, we need your friend and Bloated and everybody else like all right, got anything else to contribute because that's the same thing you said every one of the last 14 meetings. whatever.

Uh, Anyway, and then of course you have the counter argument which I think is a fair counter argument. which is this one here Tom Barkin Saying something like this. That theory to me, requires more confidence in understanding the effectiveness of a tighter rate policy than I currently have. Now that's actually really important because we do not.

Okay, two schools of thought and In In in the economies and we were talking about this actually with with the team. Uh, right after we came back from Uh from San Diego yesterday looking at real estate for Uh for house hack. Uh, we had a spa office meeting. It's great and uh, we were talking about the the two different trains of thoughts.

uh Austrian School of Economics Keynesian Anyway, uh, one of the important Uh characteristics here is that maybe inflation is not solely dictated by rates. After all, we had 40 Years of declining interest rates and no inflation. Maybe Instead, oh my gosh, imagine this inflation is caused by the Rapid or sudden acceleration in the expansion of of the money supply. Now that's not to be confused with okay, if you print money, you create inflation.

We've been printing money for 40 years, but we'd never printed money at the scale. We did, uh, during the pandemic and and that is a is not a Keynesian belief, right? that is. That is sort of just a belief like usually you look at interest rates. Anyway, the point here is Tom Barkin is basically telling us.

Look, we, we don't know of that front-ending rates is actually going to make a difference. So we're going to stick with 25. BP We also don't know what the lag is. Is the lag? three months? Is it six months? Oh, the Fed's communication is better, Or is it old school? Uh, you know.

Uh, Milton Freeman 18 months before the Federal Reserve's rates are actually truly felt by everyone, right? So in other words, that's sort of my rant about about a part one of these minutes. And then of course they make arguments here. like hiring. uh, yeah, you know, surged inflation surge.

There's some bad numbers in January. Okay, we get that some of that could be seasonal or it could be real. We just don't know the answer to that yet. That's redundant at this point.

Uh, we do know I Wrote this here here that the terminal rate as of just about 20 minutes ago when I wrote it down was about 5.37 That's obviously up from where we sat as a terminal rate projection from markets of about 4.9 Now, some say that this rate could end up going up to six percent. Uh, personally. I I don't know that the Market's going to care that terribly. I Think the market cares more, not so much about this terminal rate.

I Think the market cares more about the potential of a Paul volcker having to come out because the FED doesn't know what the effort's doing. and so I think the last thing the FED wants to signal is they don't know what the hell they're doing. So that's why Again, I'm reiterating this: 25 BP here now. I I Want to get to the second part? That's really important.

but first, before I do that. Let me just show you what Morgan Stanley said. So their Takeaway on the Fomc minutes was that they were relatively and fairly balanced. Uh, they mentioned over here that almost all participants supported the 25 BP right? They're picking up on part one as well.

Uh, and now now this is where on the left side I was sort of as I was reading the notes I wrote. look, saving one month of time basically is not worth the credibility hit that will happen basically what I just explained. but now this was really interesting because this is something that I've been talking about I picked up on immediately when Jerome Powell mentioned this I Obviously I studied drum pal very well. and when when uh, Jerome Powell responded to Dave Rubin about hey, like this jobs report just came in hot like what say you Jerome Powell immediately quit back and basically said ah, well Financial conditions have already tightened and you know one report doesn't make a trend.

and and like this is basically the FED saying look, let the market respond to the data. We've been very clear that hot data means things have to get tighter. Good data means things can maybe get looser and so the more the fed's kind of like ah Market's doing its job already and that's fantastic because even though we've had a couple red days here, you know, maybe, uh, coming up on maybe about a week of of red, we're still obviously well off the lows where we've been. And I think now that this sort of catalyst of the FED minutes is behind us, markets are kind of like, okay, like should we kind of start going back on that uptrend of the Fibonacci retracements, right? So, and that's because markets are looking going Okay, well, maybe it's just not that bad.

Like okay, so slightly higher rates for slightly longer. Okay, great. the stock market doesn't care about that. The stock market in my opinion cares about getting Paul Volckert.

The stock market doesn't care about a slightly higher for longer terminal rate. but you know who does care about a slightly higher and for longer terminal rate real estate. And this is where everybody seems blind to what Jerome Powell is actually trying to do. And I'm going to play you this for my tick tock because I played this like a long time ago.

I get so excited with the FED uh anyway. uh, let's see here. Let me make sure we got the volume over here. Let's go ahead and pick this and I don't want to blow anyone's ears up here.

Just warned us that home prices might be coming down and even though he's not certain, he just gave the biggest warning. I've ever a young person looking to buy a home you need a bit of a reset. We need to get back to a place where supply and demand are back, uh, together and where inflation is down low again and mortgages mortgage rates are low again. So this this will be a process whereby we ideally we we do our work in a way that where the housing market settles in a new place and housing availability and and credit availability are at appropriate levels.

Holy yeah. so so I mean internalize that for a moment. Think about what you just heard. If you're a home buyer, wait for a reset.

We need a housing market to settle in a new place. Why would Jerome Powell say we need the housing market to settle in a new place? Uh, because have you heard of the wealth Effect? The wealth effect is when your wealth goes down, you spend less money, right? Not so fast. It's not actually your stock wealth that matters that makes you spend less money. Because maybe we've already adopted, uh, some of the psychology of money of of you know, hey, you know what in the long term things tend to work out that's fantastic.

But it's actually real estate that reduces the spending via the wealth effect. Robert Chiller From Princeton Famous Economist came up with the case: Shiller Index for real estate. Real estate is what kills spending. When Real Estate goes down, people spend less money.

Why do you think Home Depot's like, oh yes, it appears people are going to start spending less money because real estate prices are going down. We've been talking about this on the channel for a year. that real estate related company is just going to keep suffering and suffering and suffering. And your big barometer of this is the 10-year treasure yield.

What's the 10-year treasury yield? It ain't going down. In fact, it keeps going up. So in a weird way, look at this. The 10-year treasury hits a a, You know, a high from November And what's the pre-market Oh, look.

all the stocks are red. Nasdaq's up one per. sorry. All the stock indices are green.

Uh, you've got the Dow up a third. You've got the S P 500 up half a percent. Nasdaq's up one percent. Uh, you know.

Oh, you've got oil. Grain here doesn't matter so much in the sake of this, we're just gonna focus on bonds and stocks here. But point is, you can have a rising stock market and Rising yields. and then people like get this crazy thought in their head but wait a minute Kevin I like I was told by the Basic Finance stuff that when yields rise, stocks become less desirable.

Now you go like congratulations, you've made it to Finance 101. Now let's teach you the big boy stuff and the big boy stuff says as long as we're not getting Paul Volckard, your opportunity cost of not being in stocks is substantially higher than the stupid four or five percent you're getting on on the treasuries right now. That's why you could actually see yields rise and stocks rise. Because the FED doesn't care so much about the stock market.

the FED cares more about the real estate market. Now let me prove that to you by actually showing you what they said yesterday. And this is the big part too. Look at this box right here.

This is a phenomenal box. Just just listen to to this one. All right here we go. Oh God hold on.

my stupid iPad is uh uh, being stupid, so stand by. let's refresh that really quick and then I get this for you. Okay, yeah, there we go. Now you can see it better.

Oh gosh, I Just get so excited about this stuff. I'm sorry I apologize Maybe it's the like five coffees I've already had. it's like 5 a.m The staff provided an update on its assessment of the stability of the financial system and on balance, characterized Financial vulnerabilities of the U.S financial system as moderate good. Okay, so we're not breaking yet.

fantastic. The staff judged that asset valuations evaluation pressures remained notable. Okay, that's not great, right? Because if asset values are high, the wealth effect is in essentially a great place where people can feel like they're still spending lots of money because they have it. In particular, the staff noted that measures of valuations in both residential and commercial property remained high and that the potential for large declines in property prices remained greater than usual.

Prices are already down 10 to 20 percent in various different Nationwide real estate prices are already 10 off peak. In certain markets you look at like Austin Texas Vegas Phoenix Boise you're down 20 already. In addition, the forward P E ratio for S P 500 firms remained above its median value despite the decline in equity prices over the past year above its median value. Okay, right.

The staff assessed that valuation pressure had ease for corporate bonds and leveraged loans as spreads and markets had increased from recent levels. Okay, fine, great, fantastic. So maybe maybe bonds are being priced appropriately, but I want you to focus for a moment on what they said about stocks versus Real Estate for Real Estate They said large potential for large declines, right? I'm literally going to use their words here: potential for large declines? What else did they say? They said valuations remained high, right? valuations remained High Those are their words not mine. What did they say about stocks specifically the Spy the S P 500 which has a lot more Consumer Staples in it which haven't really had as much of the stock declines as like Tech or growth right? Like they didn't mention the NASDAQ they mentioned the S P 500.

Okay, well what they said for the S P 500 was above median. so valuations for the Spy are above median Trend Okay, so which one seems more scary. Potential for large decline valuations are made high or above median. The FED is sending a huge signal here that it's not stocks that are still like in a horrible Place Although there's a risk that those companies exposed to more of that Consumer Staples sort of safety idea.

Like your McDonald's are going to get effed because they're going to have higher and even like the companies like Walmart because you're going to have higher labor costs, higher food costs, but they're not going to have PP They're not going to have the pricing power to be able to pass on those extra costs. Read the Tyson Foods Earnings call and you can see exactly that. read: Energizer Read read the earnings calls for these companies. You'll see that or I'll just give you the bottom line.

But anyway, those are companies are probably still going to get hit. so sure the Spy can still move towards median. although I think Rising tide lifts all ship the the big red flag here was for real estate. So if you really want to know what was said in those minutes yesterday, let's make it super simple for you: check out the flash sale on the programs on building your wealth down below and researching stuff the way I do.

But also join me in those course member live streams every day because it's included in any of the courses you buy. and in the Elite Hustler course you get an exclusive Saturday live stream. Uh, focused on business. So when we do financial analysis uh, during the week on the weekend on Saturdays we do, uh, business analysis and it's great.

It's really fun, so check that out! I'm always adding to these programs as well. So I I don't think they get dated at all. and if there's ever anything that's missing, people send me an email or let me know in the live streams and then I uh and then I add it. It's a beautiful thing is to get lifetime access.

so check that out link down below. But that folks is my summary on the Fomc minutes and that is very, very important. Now somebody here says Kevin way too bullish I'm sorry. Well look I've talked about the bear case many times on the channel I Go through the bear case all the time and I don't actually think I'm bullish I'm actually providing you where I embarrish I'm being very very crystal clear here: I'm highly bearish on real real estate I'm highly bearish on the Spy I'm highly bearish on Staples I'm highly bearish on oil I Like people like Kevin you're just a bull I'm like, are you like like, hello, like dude, are you missing something like how many times have I been bagging on specific certain sectors that I think you're going to perform poorly? Doesn't mean I'm going to be right, but I'm being very, very clear bearish on things I Just mentioned I Won't reiterate it, but I'm also very bullish on the things that have been sold off because I think they're freaking phenomenal.

Value opportunities High Free cash flow decade-long pricing Power plays, chips, energy EVS Autonomy Robotics but I don't want money losing companies because yeah, we might go through a recession. So I'm insulating myself with what High Free cash flow I mean like uh, I think I'm pretty clear man I think I'm pretty damn clear. Uh, so anyway I'll leave it at that. but God I don't know.

It's entertaining.