The Fed is Flipping Again.

it's me Kevin CEO of house Haack and

data 7 the Federal Reserve specifically

Mr Hawker at the Federal Reserve just

dismissed the warmer January higher

inflation readings and in this video I

want to explain what this potentially

means as a bit of a shift uh first

yesterday just to catch you up yesterday

in my me Kevin report I briefly talked

about how the Federal Reserve has sort

of removed forward guidance this was odd

because typically the Federal Reserve

appre appreciates and enjoys and

reiterates that their job is to provide

everybody expectations of what's going

to come in the future they did this as

rates were going up in 2018 then when

they paused rate increases they did this

as we were going through covid uh

through uh these stimulative programs uh

that obviously they helped fund for the

government they were the money printers

after all uh they provided forward

guidance when they said that they

thought inflation would be transitory

they provided forward guidance in uh how

high they would likely end up going with

rates uh rate increases and how we would

end up staying higher for longer before

cutting rates and when we began the rate

cut cycle we actually saw a 50 basis

point cut uh just in September of 2024

here just a few months ago under the

basis that the labor market was

weakening and that the Federal Reserve

was guiding that if the labor market

continued to deteriorate we could

continue to see larger Cuts now what's

fascinating is and this is just the

catchup part what's fascinating is the

Federal Reserve has suggested Hey Okay

so we've we've done what we're willing

to do uh we used to give you forward

guidance right now we're just going to

hang out now this may be because of the

turbulence of trump policy see for the

first two months after Trump was elected

we heard Federal Reserve officials say

we're not going to provide any opinion

on tariffs once we see what the tariffs

are at that point we will react okay so

the forward guide at that point was

we're just not going to do anything then

on December 18th they told us and this

by the way hit the stock market at least

temporarily you know a lot of funds

started selling uh after this and you

could see a noticeable drw uh at least

again temporarily

here December 18th the Federal Reserve

suggests you know uh we see this tariff

policy as potentially inflationary and

uh we're we're you know going to act in

anticipation of that and this was seen

as a big flip-flop from the Federal

Reserve because they had gone from we're

going to give you forward guidance

forward guidance forward over forward

guidance for years to uh we're not going

to respond to tariff policy until it

takes effect which is fine that's a form

of forward guidance then flip-flopping

to we are now going to give you guidance

on tariffs to then walking that back in

January and

going to stay higher for longer but

something else has changed the Federal

Reserve has basically given us no clues

in terms of when they're going to cut

again they essentially just say we're

just going to be data dependent at this

point so it feels like the Federal

Reserve is sort of just leaning back in

their chair saying hey you know what

we're just going to wait and see what

happens at this point because we have no

idea we have no idea what the impact of

uh hundreds of thousands of bureaucrats

losing their jobs in Washington DC or

around the country it you know working

for the federal government including uh

uh you know States like California which

employ a lot of federal government

workers we have no idea what that is

going to do uh so we'll wait and see we

have no idea what reciprocal tariffs are

going to look like uh you know Donald

Trump did just announce these and

suggested that lutnick was basically

going to go country by country uh but

the the idea that uh value added taxes

in Europe are going to be considered a

form of a tariff that we now have to

reciprocally mat

is

somewhat uh unclear because how are we

going to pull that off so okay so you

have a sales tax on Apple

laptops uh our sales taxes in the United

States say average 7% yours is 177% so I

guess we have to now

reciprocally tax your computers by

10% wait what computers am I buying from

France again anyway so then then there's

this idea that these tariffs are going

to come from the angle of okay well well

maybe they won't just be monetary

tariffs like that Kevin maybe they'll

also be you know requirements of like

car testing this is like Automotive

regulation this this is interesting okay

so in other words nobody has any flying

f as to what is going to happen with you

know lutnick suggestions Comer secretary

uh to Donald Trump uh and to the

treasury secretary on how to actually

Implement these tariffs so the Federal

Reserve has really flipped into this

this back seat of yeah we we just don't

know so we're just not going to give you

guidance now the one guidance that they

gave us just now just with the hawker's

announcement here is that the January

CPI numbers they threw cold water on

them yes they were a little bit warmer

and and markets were unhappy about that

uh P you know PCI numbers were a little

better sorry the PPI numbers were a

little bit better the next day uh PCI

numbers is what am I talking about

installing another graphic card into a

computer that's a pain in the butt okay

I shattered the darn glass on the front

of the computer accidentally

I I I've taken that glass off and on

like 17 times but the problem is I I zip

tied all of the

cables to really clean it up and make it

look nice but but that meant I had to

crawl under a table to reinstall the

glass so I'm putting the glass and

crooked and uh let's just say um my

family had a little U uh education in

what what tempered glass

means it explodes anyway so um got to

keep that that away from the babies

anyway uh this interesting piece here

from from the doomberg uh is that Hawker

uh greeted with skepticism the data

showing that Consumer Price Index uh the

Consumer Price Index Rose in January by

the most since August of

2023 uh you know with a broad range of

increases I mean let's not even get

started talking about groceries or gas

uh prices and then of course what we're

seeing with insurance rates insurance

rates are mind-blowing but then you know

their costs have gone up a lot as well

and I'm not here to sh the insurance

companies have nothing I benefit from

lower Insurance prices that's all I know

but in the last decade CPI inflation in

January has surprised on the upside nine

out of 10 times Hawker said my

conjecture is that seasonal adjustments

are struggling to keep up with a fast

changing economy and we need to parse

the underlying Trends from the

month-to-month

noise uh the Philadelphia fed Chief said

he fully supported the decision to leave

rates stable last month and he said that

rates are at a good level to bring back

inflation to the fed's 2% goal in the

next 2 years if the economy evolves as

he anticipates so now this is

interesting because the Federal Reserve

is basically taking this POV of like hey

we're taking vaccine we don't know when

when how long higher for longer is going

to be and we're not going to provide

forward

guidance that's basically what we've

gotten in the last meetings but today we

get some detail from Hawker where he

actually

says that high inflation in January AR

is uh transitory oh oh and by the way um

it might take us 2 years to get back to

2% so uh see you in two years

peace oh okay wow yeah that that would

take quite a while that would not be as

ideal as what a lot of folks are hoping

for mostly because it then just takes

that much longer for housing to become

affordable for people to start buying

again uh now personally I believe you

know from a house hack point of view

that uh as a real estate investor if you

can buy in high quality areas now there

is a benefit to that because you do have

lower competition and you are starting

to see Supply ramp up now this is

typical generally you see Supply ramp up

in March then in April you know

sometimes in February you start seeing

it people try to get ahead of the curve

but most of the inventory like we tend

to hit Peak inventory somewhere around

July right before school starts uh and

then whatever's left kind of dictates

pricing for the rest of the year because

you know if people really need to sell

they start cutting their prices because

they're like crap school's about to

start we're about to go into the

holidays cut cut cut uh and and that's

often where deals can be had that's why

I like Q3 Q4 for buying you know when we

launched house hack we

said uh we're starting the company in 22

we're going to buy in Q3 Q4 of 23 and

that's exactly what we

did now since we've deployed and we've

renovated and now we're doing some Adu

developments and and uh and buying um

you know where we can develop which is

great but uh there is an uncertainty

here for a lot of folks who are just

trying to get into their first home

given that uh you know rates if this is

if what Hawker is saying here is true

and and there isn't any kind of you know

recessionary impetus then it's going to

be a while before rates come down uh and

so the forward guidance is basically hey

uh you're all screwed for longer and

that kind of sucks now that could be

good for the stock market because really

for rates to come down more rapidly you

would probably need to see some form of

recessionary impetus and that would be

bad for the stock market but it would be

good for the rates Market it would be

good for bonds it would be good for uh

you know to some extent uh being able to

finance that lower rates you know what

that does in certain markets where there

could potentially be more job losses is

uncertain but

at this point I find that the Federal

Reserves guidance uh so to bottom line

the video is inflation's going to 2%

we're not worried about it but we're

just going to sit here and twiddle our

thumbs uh until it happens so good luck

that's sort of the bottom line that I'm

I'm getting out of everything that the

FED is doing which again isn't great

because it means that the Federal

Reserve is backing away from giving us

any guidance on you know their take on

the potential like they're telling us

what's going on now oh yeah yeah the

economy's good now job market seems good

and stable now great but what are your

internal projections saying for the

potential for that to evolve they used

to give us that and they're not anymore

so I think it's an interesting shift

keep in mind when it comes to the debt I

know there's a lot of uh social

discussion around uh how unsustainable

the debt is keep in mind that debt can

actually be extremely sustainable if and

I'm not I'm not a shill for more

government spending but debt can be

extremely sustainable if the economy is

growing very well see as long as we are

increasing or we are increasingly seeing

productivity gains uh and we are seeing

an expansive economy you could actually

expand away from the value of that debt

now it'd be nice if the debt stopped

growing so we can actually finally

outpace the value where it currently

sits you know if you're $30 trillion in

debt it would be nice to have the

economy grow to say $50 trillion and you

basically leave that debt in the dust

over time as the economy then grows to1

trillion and hopefully that debt stays

stable so keeping that debt from from

growing exponentially is very important

and so far the debt is still growing and

still expanding which is problematic uh

even under the Trump Administration

we're still sort of growing at that pace

that we had been growing at in Prior

years and that's not a dis on on Trump I

mean he just took office you know what

three weeks ago it's just to say you

know the debt still growing so uh we got

some work to do anyway we'll see how it

goes thanks so much for watching we'll

see you all in the next one folks

goodbye good luck out there and keep

this in mind when you're reading or

hearing anything about the Federal

Reserve it's going to be a whole lot of

sitting back in their chairs twiddling

their thumbs bye good luck from the CEO

of house Haack and the daddy of seven

kids goodbye Daddy