The Fed is Preparing to PRINT | Big Flip Today.

Today was what started as a really

awkwardly quiet day and all of a sudden

throughout the day stocks kept going up

and up and up on what was relatively

little data. The Chicago National

Activities data came in negative but

durable goods sales came in stronger for

March obviously as people front ran

tariffs and earnings for Q1 are still

doing meaningfully well decently. for

example, and I don't play earnings, but

this morning course members were asking

Kevin, "What do you think about Google

earnings?" And I think, well, we know

that Google is mostly an advertising

company, and advertising typically gets

hit in a recession, not leading up to a

recession. So, it's a good chance they

can beat on ads. But again, I don't like

to play earnings. But sure enough,

Google beat on ads, which again is not a

surprise because you're getting this

sort of compression at Google before

we're actually in the advertising

recession. Now, the advertising

recession could come and the same thing

could come to Meta stock. I mean, Meta

was $740 not that long ago, and now it's

trading for $557. In fact, it was just a

couple days ago under $500, which is

this remarkable almost 35% compression.

But today, the NASDAQ just kept beating

numbers. We went 458, beat, we went 460,

right through the line, beat. We ended

up at 467. So, why did that happen

today? What gave the market enthusiasm?

Well, in my opinion, it could be

somewhat of a Federal Reserve, I don't

want to say U-turn, but U-turn in what

the market is paying attention to. So,

this is an interesting Fed U-turn

because it's not so much the Fed U-turn,

it's the market choosing to listen to

something different. So, this morning,

Fed chair or not chair, got to be

careful with that. That's Mr. Powell.

Uh, one of the Fed board members, Mr.

Waller, came out and told us that they

will absolutely cut should employment

begin to weaken. In fact, he told us

that uh firms uh are expected to see or

and conduct higher layoffs. we would

expect to see more employment. Uh he

also thinks that as a result of that

companies may not pass on as much of the

tariff costs because well frankly they

don't have the pricing power which we've

talked about before which again means

you get a cost push so companies have

more cost but you don't have a demand

pull which means people aren't willing

to pay whatever price you ask and that

just leads to margin compression and

what's the easiest relief valve for

that? Labor. So Waller gets it and I

think markets today were reacting to a

Fed that instead of doing the cross art

and going well we got to wait for uh you

know what the impact of tariff inflation

is going to be. We got Waller who

appears to be applying for a job. It

appears Waller would be the perfect kind

of at least he's playing his positioning

this way. He's playing his hand this way

to uh sort of be that Fed board member

who's like see Mr. Trump your tariffs

aren't inflationary. I'll go ahead and

cut for you as soon as labor weakens.

It's almost like he's applying for the

job of Fed chair. Now, this is really

interesting because Bessant just last

week told us that the White House would

consider starting their discussions with

potential replacements to Jerome Powell

in August. That's only four months away.

So, if discussions are going to start in

August, why not start positioning

yourself in interviews as a board member

who's willing to play the Trump ball

game? And now, partly we might think, oh

no, you know, we want that Fed

independence. Of course, we don't want

Powell fired. And but partly, we also

want a Fed that makes decisions

independent of, you know, political

power, like having a better seat at the

Fed. But Waller is actually right. We

all know this. In fact, the big concern

we have is not that the Fed is going to

act. It's that the Fed is just going to

be late in acting. Because generally

tariffs lead to a stagnation in the

economy, which yes, in the short term is

inflationary, but it tends to lead, at

least tariffs of this magnitude, should

they remain, will likely lead to a

recession. A recession is generally

deflationary. In other words, people

lose their jobs, people spend way less,

and prices actually come down, which in

a long-term mindset, and a long-term

point of view is actually part of the

healing process, right? So, prices come

down. We finally get rid of some of this

inflation disaster that we had postcoid

and we correct those prices, but at that

moment, you need a Federal Reserve

that's willing to respond not to

inflation, but to the labor market. So,

in other words, right now you've got a

Federal Reserve that's like, "Hey, hey,

Fed or uh hey, hey, Trump, you know,

what you're doing is inflationary."

That's true. See, both of these could be

true. It's a timeline. Yes, it will be

inflationary, at least for the time

being, until you create stagnation,

companies don't have pricing power,

people get laid off, and then all of a

sudden the Fed has to swoop in with a

giant bailout. And so this is

interesting because my mindset and then

I want to give you more of Waller's

interview is that the Fed doesn't cut in

May or June, but that they actually cut

more aggressively by the end of the

year. That if tariffs stay at this

level, and I know this is crazy, but I

just I I want you to see the difference

between my mindset and what Waller is

saying and what Powell is saying, right?

So Powell will wait to see what the

impacts are. Kevin is saying, "All

right, the Fed won't cut in May or June,

but once we start getting some nasty

data July, September, November,

December, by the end of the year, it's

entirely possible that the Federal

Reserve actually cuts rates, again, this

is the crazy part, but all the way to

zero. In other words, we have so much

disinflation or even deflation, we need

to do everything in our power to stop

unemployment to minimize the pain of a

lengthy recession."

and then you try your best to prop the

economy up again. Now, it's usually at

that pivot point that I like investing

in stocks mostly because the stock

market tanks when unemployment really

starts suffering. But Waller, the most

dovish at the Fed, is telling you, hey,

we're not going to cut until employment

starts tanking. So, in other words, if

employment is solid now and the stock

market is recovering on, you know, hopes

of Waller, that's fine. But you still

have the unemployment drop to go. If

that happens, maybe that won't happen,

right? Uh then the Federal Reserve comes

in uh with with their their bailout. But

again, unemployment drops, stocks drop,

then the bailout happens, and then we

slowly start growing again. To me,

that's the environment I really like

going all in on stocks and getting

excited because we have the wind at our

back. We don't yet have the wind at our

back, but what we did here today is hope

that the wind will be at our back. So,

it's it's kind of this remarkable time

frame. But let's listen to some more of

what Waller said. So, uh, Waller told us

that, uh, he stressed, uh, Bloomberg

here in the interview suggests that he

didn't believe the impact of tariffs

would have a significant impact on the

economy before July, but after that

point, unemployment could rise and rise

quickly if tariffs again come into play.

He repeated the view that in the

inflationary impact of tariffs would

likely be temporary. Now, some parts of

markets hear temporary and think

transitory, but again, you have to think

about the flow of what tariffs do to

shutting an economy down. It's shock

that isn't offset by Congress sending

stimulus checks to everyone, which means

we compress prices down, unemployment

down, true pain hits. You know, the

earnings that we're getting now, like,

come on, Hasbro earnings beating. Okay,

because we're talking about Q1 and

people are pulling forward really good

numbers and then companies, a lot of

companies with the exceptions of

airlines are kind of

like, well, things haven't gone poopy

yet, so um guidance is fine. Yeah, all

right. We could bluff our way through

and pretend that tariffs aren't going to

have an impact. We could pretend and

continue to pretend that the Chinese are

actually negotiating with the Trump

administration. Trump says we are. The

Chinese say we're not. Somebody's

bluffing. Somebody's like, "Who cares?"

What we know is so far we still don't

have tariff trade deals with anyone. We

have rumors of trade deals which is

leading to bullish call option flow and

a lot of rumor mill that oh, you know,

time to buy because the trade deals are

going to get announced. And hopefully

that's true because there is also a

possibility that the stock market looks

through a 3-month period of damage that

tariffs cause once the tariffs are

solved. Mostly because the stock market

tends to be very forward-looking. And I

think that's why today we saw such a

movement in markets. It wasn't because

we actually got progress on a trade deal

because we didn't. It wasn't because we

continue to see diversifying into house

hack. House hack. Yeah. Uh which is

still happening. People are still

investing in house hack. They're getting

their 5%. They're getting upside on the

stock. Uh and they're getting downside

protection. I mean it's it's a great way

to diversify from the insanity of

tariffs and VC valuations and stock

market valuations. But anyway, uh that's

that househack.com now open to

nonacredit investors. What's remarkable

is what the market moved on today wasn't

really any good news other than this

Waller interview and hope. Now I'm not

bagging on that. It's if anything a good

sign because it means markets are

receptive to all right cool. So the Fed

is going to work with us. Consider for a

moment the interest rate curve. May

right now 8.4% 4% chance of a cut. June,

56% chance. July, 75%. Uh, and then by

September, we're already pricing in a

76% chance of two rate cuts with by

December us pricing in 3.4 cuts with a

64% chance. So, in other words, we're

still basically fully pricing in three

rate cuts. But that Paul or Pauler, oh

my gosh, I merged their names. Pauler,

Powell, and Waller. That's bizarre.

Anyway, that support for the economy is

actually what we want to hear. Now, the

downside is you have to wait for

unemployment to start having a poopy

dupy. There are a lot of people on

social media that complain about why did

the Fed cut 50 basis points when, you

know, right before the election, they

they tried to rig the election. Well,

because unemployment was triggering the

SOM rule and we were starting to have

serious economic fracturing on the

unemployment side of the equation. In

fact, some could argue that the slight

softening of rates and this assumes a

very quick responsiveness of rates,

which I I don't think we really have.

But some say that those rate cuts gave

enough wind at the back plus Trump

enthusiasm that we actually avoided that

we're we're coming close to stalling in

September and August and we actually

avoided a recession in the latter part

of last year because of enthusiasm and

that wind at our back. And so today is a

little bit of you know somebody kind of

blowing us okay blowing at our backs. Uh

the 102 spread still not fantastic. It's

um there you go 52. Uh but we're seeing

a lowering of of the curve on both sides

today. We saw the 10-year come down to

4.31. Uh we saw the 2-year move down to

what did we get on the 2-year? The

2-year today ended at 3.79. So almost

3.8. Uh and and a lot of this driven

again by enthusiasm from from Waller. Uh

now again, as much as it's possible that

Waller is just trying to raise his hand

to say, "Hey, pick me as the next Fed

chair," it is worth considering his

line, quote, "I'm willing to look

through tariff price increases." It's

going to take courage to stare down

tariff price increases and see them as

transitory. Rate cuts could come from

rising unemployment, and the Fed will

look at data to determine policy moves.

Uh in other words, we're, you know,

we're going to focus on the Fed mission

here. All right. So you what you again

have as a bottom line today like why

were things so euphoric today? Well,

you're still getting bullish Q1 data

from a lot of companies. You're still

getting bullish March data from

durables. It's not going to be until

July is in terms of when we really get

our bad data. So then we look and go,

okay, can the Fed cut them? Well, we're

probably teing up a September cut. And I

think the market is trying to frontr run

that right now, assuming the Federal

Reserve is going to bail us out before

we get a true bite of tariff damage. And

knock on wood, I hope that's true. For

me personally, I'm going to wait for the

point of the Federal Reserve panic

because I don't know what's going to

happen between now and then. And I've

got plenty of other options, mostly my

favorite being hack. And to us, if we go

into a recession, we've got, you know,

what 112 million to go buy the dip on a,

you know, company with with the assets

we have. That's actually a lot of cash.

Uh and uh and and if uh the market

doesn't go into recession, we keep doing

wedge deals. So, we're good either way.

So, I always say, don't copy what I'm

doing, but for me, what's going to get

me really motivated is when that Fed

starts panicking and U-turning because

that's historically what has always

represented a bottom. You look at Black

Monday Fed intervention in ' 87. You

look at the 2003, March of 2003 bottom

driven by the Federal Reserve. the

February of 2009, the December of 2018,

the March of

2020. These are all Fed policy U-turns.

Those are the moments that mark bottoms

historically. That's when I want to buy

because they usually are met during

shock periods when we get really bad

data, like bad unemployment data. And

remember the pain that we had in August?

It was unemployment data that turned

into a Japanese carry trade shock.

Something like that could happen again.

Anyway, thanks for watching. We'll see

you in the next one. Appreciate y'all.

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 Praat there, financial

analyst and YouTuber. Meet Kevin. Always

great to get your take.