What Powell JUST Said [Full FOMC Summary] HOLY SMOKES

Well, JPOW just gave us a giant dose of exactly what we expected. Wait, wait,

wait and see. With a little bit of a taste of a bear. Yeah, we actually got a

little bit more bare here than I think we were bargaining for because Jerome

Powell is really talking about how not only are we in a tricky situation, but

that data could break soon in either direction. And this break, in other

words, higher inflation or higher unemployment or both could happen very

rapidly. And when he was asked about, hey, well, you know, how much

unemployment are you willing to handle? You know, he kind of led this discussion

about unemployment and their capacity for handling unemployment with a

reference to 2024, which is a really good lesson. And I think if there's

anything you take away from this Fed meeting, it's actually about how the Fed

is going to respond as soon as unemployment goes poopy dupy. So look,

last year in 2024, we were not at 2% inflation yet. We were still around 2

and a half 2.8 3-ish% inflation, trending to 2%. And what they saw is the

unemployment rate go from the mid3s to like 4.3.

That was enough to freak the Federal Reserve out along with the triggering of

the SOA rule to lower rates 100 basis points. So I would venture to say if we

saw the unemployment rate go from roughly where it is now to breaking 5%,

we'd probably expect to see another 100 basis points of cuts actually relatively

rapidly. So, I don't think the Federal Reserve has much of a desire to see the

unemployment rate go up. If it actually starts looking like we're trending even

higher, the Federal Reserve will actually cut rates to zero. That's my

opinion. And and Jerome Powell giving us this example of 2024 and their capacity

or willingness to respond to employment and how quickly they responded. talks

about going to Jackson Hole, talking about the problems, and then cutting

rates 50, 25,25 shows you they don't want unemployment up. Unemployment up is

bad. They're still going to talk this hard talk about how inflation's got to

come down. But I think JPA is convinced that if they were able to get inflation

down from, you know, 9% through what in the long term will be seen as a

transitory movement up, right? I know that's a joke and they clown the Fed for

it, but let's be real. If we zoom out over a 10-15 year time frame, prices

went up and then inflation just the inflation rate tapered down. Okay,

they're going to do the same thing with tariffs. They might phrase it

differently, but it's going to be the same thing. The unemployment rate

spiking could lead to a three-year recession, which is terrible, and they

want to avoid that. The problem is JPAL makes it clear that, yeah, the soft data

is bad. Uncertainty is not good. Uh, you know, with businesses and consumers,

things look bad with shipping and businesses. we're paying attention to it

all. There are a lot of changes. Things could break in either direction, but

we're not going to be preemptive. Okay, there's the second thing to pay

attention to. So, if the first thing to pay attention to is that the Fed does

not have a lot of interest in letting the unemployment rate go up, then the

second thing to pay attention to is that they're not going to be preemptive.

Which basically means if you're begging for rate cuts, don't expect to see them

until the unemployment rate starts ticking up. Now, we are seeing that some

of that Trump enthusiasm that came with the election is starting to wayne. Where

do we see this? It's very simple. Go to house hack.com. Okay. No, I'm just

kidding. I'm I'm not going to do that to you. No, we're going to go I'll do that

to you later. This 27-week unemployed number right here is what you got to pay

attention to. Look at this. The 27-week unemployed number popped in uh from May

to June of 2024. Substantial pop in 27 weeks unemployed. That's more than 6

months. Okay, just in case you're wondering why they use 27 weeks, it's

cuz 52 divided by 2 is 26. Oh I never realized. I know. That's what I'm

here for. Like and subscribe. Okay, so uh the 27w week unemployed figure is

important because these are people who don't show up on those weekly

unemployment claims every Thursday. Uh and then you see the Fed cuts rates

right here. So you can see they did not actually have a lot of capacity for

being willing to let this keep going up. Then Donald Trump uh wins in November

and look at what happens to 27 weeks unemployed. People get really

enthusiastic. We get 2025 hiring, stock market at all-time high. Oh my gosh,

we're going to go into the biggest MAGA expansion ever. Yay. Yay. Yay. And then

all of a sudden we get liberated. And so what do we get with liberation? and

we're right back to the 27-week unemployment numbers that actually set

up the rate cuts last year. So, watch this data. Now, that said, we haven't

seen the data here yet, which is the third thing you should take away from

this Fed meeting. Okay? This is the fancy thing that Jerome Powell actually

Mitch McConnell glitched out on glitch McConnell on uh trying to figure out

what the components of this equation are. It doesn't really matter, but

basically real final sales to private domestic producers. Uh this this is

exactly what he referenced right here. He calls it the PDF P whatever. Okay.

The the sum of consumer spending and gross private fixed investment. Yo man,

that's too complicated. How much money do businesses and people spend? Okay,

it's that simple. Okay. How much money do businesses and people spend on junk?

Not the government, not China containers. How much did business and

people spend in the first quarter of 2024 or five? 3%. Okay, that's really

good. Now, how much of that is a pull forward? How many people were buying

Fords in Q1 because they thought tariffs were going to raise the prices, which I

mean they are. You know, Ford just announced the 2K price increase. Rivian

says they're going to see a 3K impact. Not sure if they're going to raise the

price because they don't really have pricing power. They have really small

PP, but I've been saying that since Rivian was over $150. Anyway, so that's

been a while. But anyway, this number is the number Jerome Pal is referencing. So

now this gives us a little bit of an equation for when J Pal is actually

going to do anything and get off his ass because he's going to be late. Okay, I'm

telling you, he's going to be late. Like, they're going to be worried about

inflation. They're going to be late. Unemployment's going to start

skyrocketing. Then you're in a recession and the Fed's going to go, "Oh

crap." But then it's too late. Okay? Then then the poopy dupy hits. That's

when you want to buy. By the way, when when the Fed freaks out, that's buy

time. So anyway, what do we have here? This is a pretty clear number that we

could look at. The problem is we're not going to get another one of these GDP

reads until July. July is a, you know, July is when we're going to get Q2

earnings and Q3 forecast. July is we're when we're going to see layoffs. July is

we're going to when we're going to see the damage that tariffs have caused in

Q2. So, we're just not going to know for another 3 to four months. And they're

not going to cut in July because the July data is going to come in throughout

July and the beginning of August, which really means the Fed ain't going to do

jack anything until at the earliest September, but by then it could be too

late and you could have a nasty ass recession Christmas. Sorry, I should I

shouldn't say bad words. Uh, hey, on the bright side, I got bingo. Uh, please uh

please admire bingo on the right side there. Labor market still solid. Layoffs

remain low. Long-term inflation expectations remain anchored. import uh

and export disruptions skewed GDP in Q1 which could lead to restatements of Q1

GDP. Basically, revisions just like Besson is talking about. The debt is

unsustainable. Should the labor market weaken more, we're prepared to respond.

In other words, we're not seeing the layoffs yet. He talked about his four

big changes from Trump. Fiscal tax, immigration, regulatory. He didn't

mention geopolitics this time, though. Um he was about to say that he's not

going to quit, but he basically just reiterated no comment on politics twice.

People are still spending money. He had a purple tie. said, "Good afternoon. We

could respond quickly if we need to." And he was on time. Uh oh, and he

definitely implied no June cut. So, if you were looking for any kind of

implication for a June cut, you didn't get it. Which shouldn't have been a damn

surprise anyway. I mean, this is what we talked about for the last, you know,

whatever weeks on the channel. It's like, stop begging JPL to do anything.

He's not. He's going to be late and slow. Now, don't get me wrong, I think

what he's doing is the right thing for the place that he's in. It's actually

kind of interesting because if they cut too early, they kind of license more

tariffs. Crazy thought if you think about it that way. Weird. You might not

agree with it. That's fine. I've decided I'm just going to speak my mind every

damn day. No more caring if people like me or not because I've just realized

nobody's going to like me except hopefully Lauren and my seven children.

I got to work on the seven children part. Anyway, um so uh Fed. Okay, what

else do we have here? So they're well positioned to respond. We talked about

GDP 150k job average transitory. Oh, this was interesting. The nature of h

whether or not these tariffs are going to be transitory in terms of price

impact depend on how long the tariff disruption will last. And we have to

determine if the price impacts are going to be persistent or not. And so we're

going to pay attention to negotiations that are going on. So basically

everything is in the hands of Donnie T and his negotiations which if these

negotiations are going to go anything like they did in 2018, they're going to

end not with a solution but with Donald Trump not making any deals and then JPL

eventually having to bail out the market. Anyway, uh quick shout out by

the way uh to um Zero Hedge. That was really cool. #notsponsored. They're

like, "Powell, one thing we hear a lot is, "We could have explained QE better."

And then they said, "Don't worry, Kevin will explain it better." Shout out to

zerohedge.com. Uh, they actually have really good perspective. I I do like

them. You have to bal You have to balance them though, just with everybody

else. You have to balance me out too, okay? Don't use just one source. Use

many sources. Okay? Well, for greater clarity. Uh, can't say which way things

shake. I And again, I say the same thing about me. That's not a slam, you know?

Just don't only listen to me. Uh can't say which things will shake out. Great

deal of uncertainty out there. Sure. If you look through the distortions, the

economy looks solid and the underlying inflation picture is good. Ah, this was

interesting. But because of the tariff problems, we could end up delaying

progress for a year. Now, that was crazy. Okay, that was another big

picture moment there where JPAL is like literally like, "Yeah, bro. Dude, 2024

we got employment unemployment in the low 4% for more than a year. We got low

2%s for inflation. We got 2 and a.5%. JPAL is basically molding his statue.

He's like, I did it. I solved the COVID inflation. Look at my statue. And then

JPL's or and then Donald Trump comes. Hold my beer. Have some tariffs. And

then Pal's like, "Oh, you asshole." And basically now now he's saying, "Hey man,

you know, we might get delayed by a year. We might not be able to finish the

job or things are going to break uh and then when things break they'll obviously

respond very quickly just like they did in 2024." The guy's like, "Oh, how much

unemployment are you going to be willing to tolerate?" He just told you. He

literally just told you. Look at 2024 as an

example. All right. Uh downside risks have increased. Uncertainty very high.

Blah. We haven't had tension for a very long time between unemployment and and

inflation. Duh. That was back in the 70s. This is not a 1970s situation. Uh

yeah, they're watching shipping information. Very likely Q3 could be

affected. We're in a tricky situation. Ends the ledge. All right. Okay. That's

it. That's all I got. Dude, I didn't do the house hack pitch until the end. You

know how many people watch until the end? Not everyone. I should have done

the house hack pitch at the beginning. Dang it. You know what? F it. No house

hack pitch today. No house hack pitch. That's it. I will not pitch

househack.com or the meet Kevin course. None of them. We're done. It's over. Let

me go make another call. Why not advertise these things that you told us

here? I feel like nobody else knows about this. We'll we'll try a little

advertising and see how it goes. Congratulations, man. You have done so

much. People love you. People look up to you. Kevin Pra there, financial analyst

and YouTuber. Meet Kevin. Always great to get your take.