Fed Panic is STARTING: What Jerome Powell JUST Said

Here's a complete summary of everything

that Jerome Powell said today. A few

quick notes first. He did not mention

the Philadelphia Fed survey or the

conference board surveys. In case you

didn't hear those, the Philadelphia Fed

non-manufacturing

uh so think services survey indicated

weaker employment, weaker revenues, but

more optimism. And really what I noticed

in the chart was if you drew sort of a

red line across the chart, there really

only been two prior times where we've

been in a situation where both of these

lines, future activity and current

activity are below the red line. COVID

uh and then briefly in 2022 as we

started raising rates and stocks were

falling off a cliff. Somewhat

interesting to see this on the Philly

Fed survey because you kind of also saw

some of these hints in the Conference

Board survey. Uh again, neither of which

Powell mentioned, but I think some of

the things he talked about are starting

to indicate he's getting a little closer

to to the realization that uh crap,

we're gonna have to cut rates pretty

soon. Cuz look at the conference board

survey. Here are the numbers on the

conference board survey. But what

matters in my opinion is is not just

that confidence came in lower than

expected, lower than prior, present

situation lower than prior, and

expectations lower than prior. What

matters is right here.

Confidence weakened in June, erasing

almost half of May's sharp gains.

Expectations on consumer short-term

outlook for income, business, and labor

market conditions fell to 69,

substantially below the threshold of 80.

That typically typically signals a

recession ahead. The cutoff date for the

data was June 18th. So the data was

collected between June 9th and 18th. So

in fairness, you've got a little bit of

a headache involved in there. Not too

much towards the end. Uh regarding the

strikes by Israel on Iran, we'd be

looking somewhere at uh yeah, kind of

dur during during that period, maybe

half of the data would have been

affected by some of the concerns over

Israel Iran. So it's unclear how much

obviously impact that would have on the

survey. But you do notice, you know,

it's it's a recessionary confidence

board survey and Philadelphia Fed survey

this morning was a little weak.

Yesterday, we also had a little bit of a

weak one. So, when we put this together,

it might make sense why we're starting

to see some of this shift in some of the

Fed commentary. Remember that on Friday,

we heard Governor Waller say, you know,

we might want to cut in July, a little

sooner than expected. Yesterday we had

heard Bowman and Goulby both echoed it

that and today Hammock came out also on

the Fed uh suggesting that the latest

inflation readings are encouraging and

and now this is the fourth Fed official

in 3 days to pitch hey inflation's low

maybe we should cut rates. This is odd.

Like this is a really odd sudden Fed

flip that's building and it's getting

worse and worse I feel like by the day.

Hammock says that the labor market seems

stable right now but immigration

restrictions could end up being a

barrier to growth in the medium term

which could lead to a rise in the

unemployment rate and again the Fed

needing to cut. Now, something that I

see in comments is people mistake the

Federal Reserve reducing rates with

money printing. These are very different

things. The Federal Reserve was cutting

rates in 2001 to try to minimize the

pain of the.com bubble and it did

nothing. What's important to remember is

the stock market continued to sell off

throughout 2001, 2002, uh, and basically

through early 2003 when you finally

bottomed out. What was the catalyst for

bottoming out? The money printer turning

on. So, there are different things. You

can cut rates. That doesn't necessarily

do anything for you immediately. There's

generally, as Powell always says, a long

and variable lag. Uh, and and even if

rates are low, you don't necessarily

know that businesses are going to borrow

and people are going to take advantage

of it if they're uncertain. So what

happens is you're in this weird

environment where you can actually cut

rates down down down down just like we

did in 01 and you don't actually sustain

the stock market or the economy. What

matters is actually turning the money

printer on and basically getting into

the ditch bailing stuff out directly.

And that is the precedent that has been

set by the Federal Reserve since the 80s

that when things get bad enough they

will come and turn the money printer on

and shower everything with cash and make

it all okay again. Just know that's

different from rate cuts. Now that that

kind of then begs the question, so are

rate cuts bullish or bearish? Well,

generally we think of rate cuts as

bullish because rates go down, people

can borrow more money on margin or real

estate debt or whatever and invest it.

But why are they cutting? And that's

where we're starting to get these hints

that they're starting to freak out about

jobs a lot. In fact, Jerome Powell went

as far as saying that artificial

intelligence will replace a lot of jobs.

There was no question his opinion there.

He said it will replace a lot of jobs

and in the short term we could see

significant reductions in employment and

that's what he's hearing from CEOs as

well which again sounds bullish cuts but

it's also bad recessionary right in in

that near term before you get to the

money printer. Now, he does say that

longer term AI will probably create jobs

and we'll see more productivity from

people, which is a good thing. But in

the meantime, we're just going to pay

attention really to any meaningful

increase in inflation on the goods

channel over the next uh you know,

essentially two months. So, this is

actually really interesting because you

should mark these two dates on your

calendar. You should mark uh July 15th

because that's when we're going to get

the June CPI report. And you should mark

August 12th because that's when we're

going to get the July CPI report. So

mark those calendars, those days on your

calendar, July 15th, August 12th. Powell

says, "We expect a meaningful increase

in inflation through the goods channel

in July and uh June in those reads."

Now, why does that matter? because it I

mean to me he basically gives us exactly

what to look for. Don't worry about

non-housing services. Don't worry about

housing services. Just see how much is

showing up in goods outside of food and

energy. So literally not food and

energy, not services, just goods, core

goods. That's all they're really going

to be looking at. And if there's no

inflation popping up in June or July

there and those inflation reads as we

get the reports July 15th to 12th, we

could be in a really great spot for

getting those cuts in September. Now, of

course, he also reiterates that

obviously if the jobs market weakens,

then we'll have to cut uh potentially

sooner than expected. And again, when

you combine this with what the other

folks at the Fed are saying and what

he's saying about artificial

intelligence, does it sound great for

the jobs market? He probably mentioned

five to 10 different times, if we see

weakness in the labor market, that would

change things rapidly. And that's

already what the other members of the

board are screaming like, hey, labor's

weakening, immigration's going to hurt,

AI is going to hurt, everything like

we're starting to see the signs. As you

saw in the conference board survey, in

the Philly Fed survey, people were

already starting to get a little bit

more nervous. and that sort of like

postliberation day, undoing liberation

day, like the pause of liberation day,

that enthusiasm may be starting to wne.

Now, that doesn't necessarily mean the

stock market's doing poorly at the

moment. I mean, frankly, you look at the

cues, we're literally at the 5401

rejection point. I you if you're part of

the course member group, the this is the

only way you're going to believe it. But

I said this is your rejection point

today. exactly 540 uh 01 on the line. I

didn't draw that line today. That line's

been there for months since February and

we perfectly rejected this. Uh and that

was on the Alpha Report. So, if you're

not part of the Alpha Report yet, you

might want to be part of that. Get it at

me.com. You could use coupon code jpal.

Uh, and then I also said this morning

that I would not play the optimism on

Tesla because it was rallying and we

were up at 359 and I'm like, I would not

play the optimism today. We don't have a

second wind of a catalyst today. We were

up 8% yesterday. This is probably going

to get magneted down to 347 before it's

even worth playing. And sure enough,

magneted right down to 347. So if you

want to be part of that strategy, we do

it together as course members roughly at

5:30 in the morning California time,

8:30 Eastern. So an hour before market

opens, we go through this in a strategy.

So if you want to be part of this,

remember you get lifetime access over at

meetc.com. So continuing with what

Powell says. Powell says we uh that he

he does believe that this time is

different. And I hate hearing that

phrase. He says this time is different

because in 2018 we hadn't been at 2%

inflation in a decade whereas now we've

been basically above 2% inflation for

well basically since co uh and so the

issue with this is he worries that goods

inflation could be larger and more

longlasting than than anybody would

really hope. Uh again the issue here is

that's why Powell is waiting. Now, I

agree with Donald Trump and saying

Jerome Pal's probably going to be too

late, but I understand I understand why

J. Pal is waiting. He doesn't want his

legacy to be in Arthur Burns 2.0. That

would be a Fed share from the 1970s.

Quick history lesson. In the 1970s,

every time the Fed got a new piece of

data, they increased rates, reduced

rates, and they basically had no

credibility for anything that they were

doing. Don't get me wrong, they don't

have a lot of credibility today, but

they definitely have a lot more today

than they did then. You didn't even have

a Fed put president back then. Paul

Vulkar put the pants on, raised rates to

about 18 to 20%. Crushed the back of

inflation through a double dip recession

198082 and then we had like a 10-year

bull market. Obviously, it took a little

bit of Fed money printing in the late

80s, you know, after a Black Monday. But

that said, you know, the the Fed

precedent has been one of, hey, we've

had 40 years of declining inflation

rates uh because of whatever

macroeconomic situations that occurred

during those 40 years and it's unclear

that those are going to repeat

themselves today. I disagree with

Powell. I think that the great

moderation will repeat itself. I believe

that by 2032, we will actually be in a

negative interest rate regime where

banks are charging you to leave money in

savings. But that's my opinion. Powell

might also have that opinion. Donald

Trump has that opinion that rates are,

you know, need to come down, right? But

Powell doesn't know. And so he's waiting

for that certainty. But he's really

starting to hint that cuts cuts are

coming. Like maybe we don't have to wait

as long as he said during the Fed

meeting. During the Fed meeting, he said

we're going to wait the next three

months. Today he's only talking about

waiting the next two months. And before

the last Fed meeting, you had nobody at

the Fed saying, "Oh yeah, we're going to

potentially cut as soon as July." Now,

just 3 days later or 4 days later,

actually, we're closer to 6 days later

from when the meeting was, but anyway,

within a week later, we have four

members saying, "Yeah, we might need to

cut sooner. Inflation's not showing up,

and the labor market is sucking." Now,

both of those are probably just a

different form of inflation showing up.

If you think about it, inflation may not

be showing up in CPI, consumer prices,

may be showing up in costs for

businesses, which then lead businesses

to lay off. And maybe that's why you've

got four people from the Fed going, "Ah,

crap."

Also, this morning you had Steve

Minutian,

and he said, remember our former

Treasury Secretary? He said, "We're

going to see 100 basis points lower," so

a whole percentage point lower in the

Fed rate soon. And it's common for the

Federal Reserve to say they're going to

wait and then suddenly cut. So minutian

is suggesting that Fed is just putting

on the hard face until, you know, that

JPL is just putting on the hard face

until we get through the next couple

months here of data. Uh and and then big

cuts are coming and that they might cut

aggressively because of the jobs market.

Remember, mark your calendar, July 15th,

August 12th.

Pretty incredible. Uh drum powell does

say that you know we are in a regime

where growth is slowing no doubt uh and

this is where he gets drilled like wait

like do you want growth to slow that's

weird. No obviously he doesn't but you

know then it sort of depends on on their

mandates. We've already heard that so we

won't replicate all of that. Uh

something else that was interesting is

he says that private credit has not been

through a real downturn. Okay, this is

actually a big phrase. He's basically

saying like companies like a firm and

the sort of like tertiary private credit

markets that exist have not been battle

tested in a recession yet. It's one of

the reasons and this is just sort of

like entrepreneur to entrepreneur here,

okay? Or or like investor to investor,

okay? I'm not this isn't designed to be

a pitch. House hack uh believes we have

it's it's sort of in our back pocket. We

think we have an extremely competitive

uh way to provide equity loans to people

who have a really low lockin rate, but

rates are high, right? So, you can't

capitalize that equity in your home. And

we think there are ways we can establish

that based on the value of homes with,

you know, potentially minimal uh I'm not

going to get into the competitive

advantages. Uh we'll talk about that

differently, different time. The problem

is you don't want to get into private

credit. And this is the investor

investor department. You don't want to

get into private credit.

If you're about to walk into a

recession, you want to get into credit

when you're coming out of a recession or

you're soft landing back into growth.

That's when you want to be exposed to

credit. So, I actually think Jerome

Powell is right on and it aligns, you

know, who knows, maybe I'm just this is

like the uh, you know, cognitive bias

associating with, you know, that's what

I've been thinking, so I'm picking up on

it. But I think it's very logical. I

mean like do I want to own a firm in a

recession? No, of course not. Uh but you

know, do I want like it could a firm be

a moonshot if you soft land? Hell yeah.

Right. So to me that seems pretty binary

because the risks of credit defaults are

massive uh in in a recession. So uh and

I think this is why he also brings up

that banks are what he says quote likely

risk averse in this environment. This is

also where they talk about debanking. Uh

the Federal Reserve actually just

removed reputation risk from uh the

requirements that banks sort of like

make sure they're in compliance. But

it's actually very common for

politicians or people on social media to

get debanked. Uh a lot of this had been

pointed at people who were Trump

supporters that ended up getting

debanked from like Bank of America or

whatever. Uh and and they basically just

send you a letter and they're like, "Ah,

you're too risky of a personality for us

to deal with. We just dump you." And it

doesn't necessarily mean the person's

done anything wrong. It's just the banks

basically picking and choosing and it's

almost like they you know just want

people who are silent in the public

space and uh Jerome Powell says the

Federal Reserve just recently U-turned

on their requirement as in within the

last 24 hours that uh you know banks

consider these sort of risks in their

you know in what kind of customers that

they have. Kind of interesting. Uh so

then we got let's see here if we don't

end up getting that goods inflation we

could end up cutting sooner and capital

requirements. Oh this is also a little

bit complicated. They talk about the SLR

uh the leverage ratios blah blah blah

capital requirements for banks blah blah

blah blah. Bottom line out of all of

this, if they end up loosening capital

requirements, it's possible that banks

might end up buying more treasuries,

which if banks buy more treasuries, you

could see treasury yields come down and

uh bonds basically rally up. So, for

example, if you wanted to play that, you

would invest into potentially something

like TLT, which is about a 25-year

Treasury bond fund ETF, which has

obviously just performed miserably ever

since the Federal Reserve cut 100 basis

points. It was skyrocketing last year

when we were worried about recessionary

levels of employment and then the

Japanese carry trade hit. Then the Fed

cuts 100 basis points to try to frontr

run some of the damage and Treasury

yields skyrocket 1% which just like

wrecked TLT. Uh that said, you can see

that over the last few days, the 10-year

Treasury yield has actually come down a

smidge here. Uh 10-year Treasury yield

has come down from about 4.51 down to

about 4 uh 29. You do also though have

the 210 spread bobbing right around that

50 level. That's usually where we're

right at the edge of shock level. So,

it's just something to pay attention to.

This morning, this was actually as high

as 51. Uh, and so this can be a

recessionary signal. Treasury yields

coming down can be a recessionary

signal. The conference board has a

recessionary signal. But something else

that can be a recessionary signal is

oil. Oil is down 6% today on the

ceasefire talk. And it's really not so

much that like this 6% decline is what's

a recessionary signal. It's actually

more so just this trend right here,

right? You can see this trend down on uh

the western blend of oil since 2022.

This collapsing over here potentially is

just a sign of a slowing economy.

Whereas the economy was still chock full

of money, cash, and liquidity in 2022

and excess savings. that's really being

drawn out of the economy or has been

drawn out of the economy almost entirely

which is why wealthier households are

mostly supporting almost all the

spending that's happening in the economy

right now. Uh and so it is an

interesting environment to see that

while oil markets are now essentially

collapsing into back to a recessionary

kind of call. Treasuries are starting to

you know indicate some some yield

reversal here. Powell and a bunch of Fed

people are starting to get a little

concerned about the labor market. it.

You know, the Q's are at the all-time

high line, which is a really remarkable

level to be at, but it also gives us a

little bit of a, you know, maybe a

warning and that, and I'm not trying to

be like a bear here or whatever, but I

am I I would say that if you're

literally knocking on the doors here, I

mean, you're at all-time highs, you

know, Robin Hood's absolutely killing it

because of the amount of people making

money just investing in stocks right

now, right? It does sort of beg the

question like, I mean, look at this.

This was the all-time high level we hit

was 85 after IPO. I was actually an

investor preipo through just about IPO

level right here. Uh and I sold uh I

missed all this crap down here. But um

what's interesting is uh you know when

you're at these really high levels you

do do sort of start asking yourself at

what point does it make sense to set

those trailing stops again just in case

the Federal Reserve does have to start

panic cutting rates and then it makes

you wonder could it be like 2001 where

the Fed is panic cutting rates and the

stock market is plummeting in the face

of rates being cut because again there's

a difference between rate cuts and the

money printer. You want the money

printer as an investor. rate cuts are

sound cool, but they're usually being

done because of underlying issues in the

economy. Uh, so I think that's that's

just an important duality. Again, that's

not saying sell everything now. It's

just saying, look, man, you know, if if

you set a a 6% trailing stop on the

cues, uh, you know, if the market goes

up another 6%, you're golden. Who cares?

It cost you nothing, right? But if the

market goes down to 506, you know, you

just auto trigger maybe enough to sell

to cover margin or some credit card debt

or whatever and you just protect

yourself a little bit. It's something to

consider. Maybe a little early right now

since we're still riding this like high

of like stable coin legislation. You

know, I actually tweeted which I thought

was uh pretty poignant. I know I'm

trying to like compliment myself here.

It's not because of an ego. It's it's

simply to say I actually think it's a

good idea, but uh I tweeted that X uh X

payments should have its own stable coin

and Tesla could then use that to process

robo taxi payments. Cut out the

middleman, right? Uh somebody asked me,

"What would you call that stable coin?"

Uh and I responded, "Taco."

Anyway, that's what the Federal Reserve

just said. And uh if you want more on

that uh on on sort of strategies on

trades every morning, the alpha report,

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productivity, you name it. Uh YouTube

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here? I feel like nobody else knows

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advertising and see how it goes.

Congratulations, man. You have done so

much. People love you. People look up to

you. Kevin Praath there, financial

analyst and YouTuber. Meet Kevin. Always

great to get your take.