What the Fed JUST Said! (Summary)

everyone meet kevin here oh my gosh

jerome powell finally

finally talked to the markets like we're

freaking five

rather than being a big d

that he kind of was two thursdays ago

when he's like look

you know what inflation going up it's

part of the game we want that to happen

we want inflation going up it's what it

is

we're not doing anything we're not gonna

do it we're good we're not gonna do

anything about it

that was his attitude two weeks ago what

happened

market okay jerome you got it

was horrible finally the next time

jerome goes to speak today

he's actually chill he's mr

chill today and he's like hey i'll

explain this to you

like your five let me make it very very

clear

about expectations regarding inflation

and other things

and finally finally

we get a clear i mean like he's tried to

be clear but he just made it baby proof

today

so what happened okay first let's talk

about what happened and we'll explain

everything you said in a nice little

summary here so

first thing that happened is two things

on the summary of economic projections

that gave the market instant confidence

we saw

yields come down and we saw

stocks go up now i was expecting

the fed to kind of do the same thing

like last time where they're like

i thought that was more of my more of a

likelihood i also thought the fed might

have

said something like no we're not

changing anything and the market

would have gone down i thought there was

a greater chance of that i was wrong and

i'm happy to be wrong on that because

i don't want to be wrong like i'd i

would rather be wrong and the market

go up right like we don't need more pain

in the market right now

uh we had enough of that for for the

first quarter here okay

but take a look at this we go over here

these are the two big

changes that we want to pay attention to

the first thing is if we're going to see

this

massive inflation then the summary of

economic projections from the fed

would not tell us that yeah gdp is going

to balloon in 2021

in other words they're projecting this

ballooning of six and a half percent gdp

uh this is a revision upwards in 2021 uh

but if we were concerned about like

hyperinflation happening or the economy

overheating

then these figures right here in 2022

and 2023

uh and then going down in the longer run

would not be

essentially just plummeting like if the

federal reserve and the board members

thought

oh the economy is going to overheat this

is really bad and we started seeing gdp

projections like

four percent or you know three percent

over here and longer run adjustments uh

oh if we stay on this path

the gdp is gonna explode because

everybody's going out and they're

spending way more money

they're saying no no we don't see that

happening we think gdp is going to be

stable and it's going to head down we're

going to see a short-term

boost and it's stable and it's going to

go down people like but kevin aren't

people going to go out and spend a bunch

more money

the fed's like yeah people are going to

go out and spend more money

but then it's going to take a little bit

of time for supply to catch up we don't

think prices are going to go up we think

people are just going to wait longer to

get their products

kind of like the chip shortage you see

with amd and stuff we don't see

the actual chip prices going up we're

seeing uh you know resale chip prices

are going through the roof it's freaking

insane you look at resale oh yeah resale

prices going up but the manufacturers

are like hey that's okay we'll get

through this backlog no problem

we're kind of jerome powell thinks we're

going to see the same thing

at uh in other cases look if everybody's

traveling no problem i guess you'll just

have to wait to get your plane ticket or

you have to go tomorrow or a different

day on a cruise you know it's all booked

up they're not worried about prices

actually going up

and they're not worried about seeing gdp

overheat

this right here this one section

highlighted on the sheet in my opinion

was one of the big things one of the two

big things that got the markets to go

oh maybe inflation isn't actually going

to be that big of a deal

because they don't think the gdp is

going to overheat despite rates being at

zero

that's a good thing in addition to that

the second big thing that we want to pay

attention to here

is the fact that the federal reserve

said right

here that uh look at this previously

they had inflation going from one point

eight percent

to two percent and that did not align

with what the federal reserve said the

federal reserve has always come out over

the past like a year basically maybe

another past year over the past like six

months and they're like

we think they'll be temporary a

temporary boost in inflation

and then inflation will go down and

people are like how are you saying that

but then in your economic projections

what you all think as a board

you think inflation is just in a linear

pattern going to go

up like where's the spike and then the

drop well

maybe now they realize and as a in a

consensus they're like well wait a

minute we should be a little more

consistent here

yeah we do think inflation's going to go

up i mean here you're going to see this

short-term bump in inflation

so they're revising their expectation

for 2021 up to 2.4

average inflation for the entire year is

the median projection now

from the board and then it's going to uh

slowly decline

these two things here we're basically

the federal reserve

finally going to the market look we're

telling you we don't think there's going

to be inflation we're telling you we

don't think we're overheating

we're not worried about having to taper

bonds yet we're not worried about having

to raise rates yet

here you go this is what we think this

was a big change number one

we did have a couple dots get plotted

uh for potential minor rate increases

here in 2022

or 23 but nothing crazy you know maybe

half percent three-quarters of a percent

maybe but jerome powell doesn't even

think we're close to this

he says it's not even time to start

thinking about thinking about

raising rates this is just okay a couple

board members are like maybe we should

raise rates a little sooner

who cares he almost cast this aside as

as irrelevant

so what else did jerome powell say well

this is the part where he's really

starting to talk to people like they're

five

which was absolutely wonderful which by

the way is something that i like doing

as well going from talking to you like

your five about finance

all the way up to advanced fundamental

analysis and of course

my programs on real estate or stocks

linked down below which you could still

use that 38

off coupon code for because we extended

it for those stimulus checks arriving on

the 17th and 19th

all right so here's the the baby talk

basically so

uh the big thing in the baby talk

discussion

has to do with supply and demand and i

love this discussion that jerome powell

had he did such a good job today

explaining the stuff like we're five

people multiple times ask him wait a

minute

if we're gonna see uh a bunch of demand

all of a sudden come back

aren't we gonna see a bunch of inflation

i mean demand goes up if supply can't

keep up they'll just raise the prices

drum made it clear here he's like no and

i've kind of already talked about this a

little bit so we're not gonna be too

redundant here but

he's making it clear look first of all

in america we're really good at

adjusting to supply

it's kind of like people like oh gas

prices are going to go up well then

we'll frack more

and we'll refine more right people like

oh well well prices of goods and

services might go up

okay well then we'll we'll wait and

we'll adjust yeah

people are going to spend more for a

short period of time but that's going to

be transient it's not going to be

persistent

in fact jerome powell goes deep here in

a simple way and he says look

for decades we have been suffering

declining inflation for decades and

these are

very strong what he calls inflation

dynamics

they're not here today gone tomorrow

these inflation dynamics i kind of

picture them like

a big ogre moves really slowly like okay

low inflation environment sounds good

you know really really slow moving it's

it's not like a little mouse that's like

here today gone tomorrow it's

really slow these dynamics for them to

change and jerome's saying look

the way the dynamics are right now

pandemic or no pandemic it's

we're in a low interest rate environment

and he multiple times throughout his

conversation said look

we've had low interest rates near

basically zero interest

rates for for the good part of the last

decade here

we haven't seen bubbles created we

haven't seen

uh valuations go to insane levels sure

they might be historically high but we

haven't seen

insane bubble economics we haven't seen

household debt go up we haven't seen

business debt go

up you know leading into the pandemic

sure we've seen

some debt go up after the pandemic but

not to unsustainable levels jerome was

really really positive about the state

of our economy jerome powell

uh further said that uh they were going

to continue to make these bond purchases

until we make substantial further

progress but the big thing that he

really said

like he was talking to five-year-olds

today was

we will make substantial communication

or we will have substantial

communication

well in advance of us tapering bonds in

fact he even gave us almost verbatim

what he's planning on saying he's

planning on saying something the effect

of

we are now in a position where we're on

a

path to begin tapering bonds

that's what he told us he's like look

we've already got the verbiage to go

like we're ready that's what we're going

to say

not when all of a sudden we we wake up

one day and go time to paper bonds

oh here's the statement what you're

tapering bonds right now no he's like

he's going to talk to us well in advance

of doing that

so then he talks about uh how any any of

these uh oh this was another big one

let me hit this really quick the

supplemental leverage ratio so he's

asked about this regarding banks

we talked about this yesterday about how

in my opinion the fed's just going to

let this expire

i'm i didn't think that the fed was

going to make an announcement today

while i was wrong about how how clear

they were on inflation here i thought we

were going to have a poopy doopy drum

today we got a really optimistic drone

pal today which was great

really good market positive on that i

was right about the fed

just uh probably running the

supplemental leverage ratio question up

to the end of the month

because that provision expires uh march

31st

and he's saying we'll get back to you in

a couple weeks on this which surprise

surprise that's good that's literally

the end of the month

and my expectation is on like march 31st

or the last business day of the month

whatever that is

uh they're just going to go yep we're

letting this expire bye

like it kind of doesn't want to draw

attention to that right now

my expectation and uh he was asked

multiple times about that at least twice

about that

and he let that go uh yeah then he was

asked which i thought was a really good

question

he was asking hey what about the

european recovery are they going to slow

us down

and jerome kind of dodged that question

but basically said look

when the u.s does well the world does

well and

u.s demand is going to help prop

everybody else up so don't worry about

it we're all doing fine

again reiterated that asset valuations

are somewhat elevated by some standards

but overall any kind of short-term risks

we're not seeing any they're not seeing

major red flags right now it's all

focused on

obviously getting out of this pandemic

and reopening he was asked a really good

question about hey you know

uh if inflation and we kind of thought

there might be a question about this

uh he was asked hey well if inflation's

at 2.4 and it's going to go down

uh you know why don't you just leave

rates at zero obviously

he had to dodge this question he totally

dodged the question i thought it was a

brilliant question

uh but he says look we gave you our

guidance and

the guidance is very clear that we want

maximum

employment and stable prices

uh and you know if we look at kind of

the summary of economic projections

we kind of see that potential coming

uh right around here i'll show you so we

kind of see

stable unemployment right around the

2022

to the longer run range right here and

then we see stable inflation

aka stable prices right around here

now keep in mind when they say stable

prices they don't mean your stocks are

stable

they mean consumer prices are stable

people's expectations for what they need

to pay for

uh you know travel and food and

computers

and clothing all of it averaged together

remains stable

and that's what we're expecting to see

between 2022 and the longer run

okay moving on very i have to

just applaud jerome today he did a

really good job uh and i'm not trying to

shield a fed here either i'm just saying

last time he pissed the market off

because he was he was just being

annoyed uh anyway uh then uh then he

reiterated

this uh ah this was really good so he he

talked about

unemployment and uh how the phillips

curve is basically broken we've heard

him talk about that before but there was

something new that we haven't heard him

talk about before

and that was something that he says

about a connection between

wage inflation and unemployment

and he says later in a cycle and and

this is what i believe he means with

late cycle behavior

i believe late cycle means when

everyone's starting to benefit from a

recovery

it doesn't mean the recovery is over or

the boom is over or in a bubble that's

about to pop

it just means when we're at later stages

in the cycle

you have minorities benefiting just like

non-minorities you have different sexes

benefiting just like

the other sex the opposite sex right um

this should be clear here women

benefiting like men right

uh or or blacks and hispanics benefiting

like whites just make it clear

it's it is what it is uh and and so in a

later

part in our cycle we have more of that

benefit like in 2019

we finally started seeing minorities

benefit from the recovery

like whites were recovering better

earlier

and so that's kind of what he's saying

here but a neat thing that he says

is there's a connection between wage

inflation and unemployment

and he says late cycle behavior says

companies

absorb higher labor costs in their

margin okay

so what does that mean jerome powell is

saying look when we get to later stages

in a recovery

wages will start going up but we don't

actually have to see

inflation because wages are going up

because companies are likely to just

absorb that cost basically having a

lower net profit the companies will just

eat that

rather than wait raise prices so the fed

believes that companies are very

reluctant to raise prices in this

environment

that they'd rather take less profit

which sounds counterintuitive

but it's also very capitalistic and the

reason you would do that is because you

want to maintain

as much competitive edge as possible and

that's essentially what he's saying here

so all right modest increase inflation

okay then he talked to us like he was

like we were little children about

inflation which honestly this was

probably the best part

i think i almost i like this part so

much i need to put this up as like a

standalone portion

uh because this was just like here look

kids you like rockets and going to the

moon

let me talk to you about inflation and

it was so beautiful

uh anyway he basically says look yes

there are going to be modest increases

in inflation

first of all that sentence right there

is way different from him two weeks ago

two weeks ago yeah we're going to see

inflation but we kind of want to see

inflation

now he's like yeah we're going to have

modest increases inflation

but those aren't permanent things sure

there are going to be

short-term bumps but they're going to go

away they're going to be one-time bulges

and then he goes on to say like look the

u.s supply

systems are very dynamic people open up

stores people produce more products

people open up more shifts in the

factories

and we're not going to see inflation or

prices going up because of it you know

temporary

supply problems uh and then he

reiterated this about inflation dynamics

which we already talked about in the

video

uh and and he even says hey look we're

going to see short-term bottlenecks

but it's not like supply won't be able

to adapt such great lines oh my gosh she

talked to us like we were a child today

and the market liked it the market

overall liked it uh

market overall bumped and stayed

relatively bumped uh which was very good

we didn't get

ugly news today we didn't get d-bag

jerome we got

really nice you know let me console you

and teach you along with show you these

economic projections that reiterate what

i'm saying

to finally make you realize that

inflation's not a problem

now the last time i talked about what

the fed said remember who remembers this

example me going

it kind of like jerome powell is annoyed

going to his

going home to his wife complaining about

how people don't understand it

and he kind of came across as like

grabbing you by the neck and going no

inflation

that was so different today today's like

yeah

we're gonna see modest bumps but they're

gonna go away don't worry about it it's

like chill today it was great

anyway that's what happened and the

stock market loved it

bond yields went down the

what do we got here right now we got

let's look at this uh we got the 10 year

right now

at 1.64 still elevated but a nice

decline

after jerome spoke so nice decline here

and a volatility fell to 19.32 i'll hide

myself for a second

nice fall in volatility and the five

year

nice fall as well so this is good very

good news

uh very good job jerome for uh being a

very good teacher today

thank you jerome thank you so much for

watching get yourself that 38

off oh wait wrong button get yourself

that 38 percent off link down below

and folks we'll see you in the next

video bye