*Holy Smokes* The Fed JUST *FLIPPED* The Stock Market | RESET

well another day another fed video j-pow

however today gave us a lot of insights

and it seems like we're actually close

to the end of a rate hikes we're going

to talk about this the summary of

economic projections and a lot more I'm

going to start with some things that

were in my opinion most interesting so

we'll go from most interesting give you

the bottom lines first first up

obviously we didn't get a raid hike

today we got another pause maybe we'll

have another we'll talk about those

numbers but listen to this Jerome Powell

is saying we had an inflection point in

June regarding inflation however now

quote unquote three readings don't make

a trend in inflation now this is really

interesting because it's like okay

Powell how many readings do make a trend

then first it's oh well one report

doesn't make a trend oh two reports

don't make a trend outside soon it's

gonna be four five six don't make a

trend it seems like

Jay pal and the FED are destined and

this is what we got out of the SCP as

well to keep rates as high as and and

for as long as possible

just to be Beyond A Reasonable Doubt

convinced inflation is gone and that

time frame could be an entire year we

could literally be waiting a year for

rate Cuts as Jerome about four reports

on Megatron five reports don't make a

trip there are easy practical

implication to that the Practical

implication of that is you're probably

going to see higher rates for a lot

longer and I know that sounds redundant

but understand j-pal said in today's

meeting there's a there's a reason why

treasury yields are as high as they are

it's because there's a lot of Supply

remember the quantitative tightening

going on as well right uh Jay Powell and

the fat are rolling off their balance

sheet which is bringing more treasuries

into the market that lowers the prices

of treasuries the government keeps

raising the amount of debt that it has

in other words funding itself more with

treasuries so what happens now you have

even more treasuries in the market and

then naturally it doesn't make sense for

business is to take on all of that risk

and put their money into treasuries when

you could just put your money into a

money market fund for example house hack

is throwing all of its money into a

money market paying like five and a half

percent right now so we can go buy the

Glorious what'll probably be pretty

painful dip this November December in

real estate by the way we're not raising

money for househacks to go to

househack.com so read more read the

prospectus and invest it's househack.com

excited to say we just got approval and

we're raising uh well it's qualification

is technically what's up but anyway so

you can think about that when you have

so much Supply growing again Treasury

Department adding to supply the fed's

adding to supply and people are like why

would I buy treasuries I'll just stick

in money markets what are you not

getting you don't get buyer demand for

treasuries so Supply gets massive and

when Supply is massive prices are low

when prices are low what does that mean

for rates rates go up and that's one of

the reasons we've seen the two-year now

at the highest level since 2006 the 10

years just been skyrocketing straight up

uh if you're playing EMF it was an easy

way apparently now to get smoked because

we are again the highest level here uh

now we may come down after today's

meeting but that could also be opium

because you're really relying on people

saying okay we're officially good with

the FED being at the top and now we're

gonna see uh yields fall and we're gonna

go buy treasuries but people aren't

buying treasuries because the money

markets are still too hot which means

you could see these high yields quite

for quite a long time because you really

need people to stop buying money markets

and start buying treasuries but that

doesn't seem like it's happening anytime

soon it might actually take another year

for that to happen which isn't great so

that explains the higher for longer like

it's not just the feds rate it's

literally what's happening in the market

keep that in mind

one thing towards the end of the meeting

that was also pretty remarkable was

j-powell telling us that

the economy is doing well but people

feel like crap because they hate

inflation they absolutely hate inflation

this was a really quick really important

reminder that it's very easy for people

to support bearish videos bearish Theses

and bearish news on the internet because

it does to some extent make us feel

better because inflation does suck it

does make everything more painful uh

more expensive going out to the grocery

store to restaurants your pay doesn't

feel as useful anymore right that hurts

everyone so it puts everybody in a

little bit more of a grumpy mood and

rightfully so now some of the Shockers

that came out in the summary of economic

projections were also quite important so

the Shockers over here were that I was

looking for the change in Real GDP to go

up to maybe 1.4 1.6 we ended up getting

one point or 2.1 so way stronger economy

projected for this year for next year I

was looking for about 0.8 uh these are

my daughter estimates here we go this

was my sheet right here you can take a

glance at that if you want but anyway

we're looking for about 0.8 we got 1.5

so basically stronger economy for longer

but j-pal finally said it very clearly

because people don't understand this

there's one thing everybody just gets

wrong about GDP and inflation almost

everybody gets this one wrong and drives

me nuts because I keep trying to correct

like the people's understanding of this

so I'm gonna be very clear here jpow

today finally said it in response to the

question will a hot GDP report hurt

inflation and his response is basically

no I mean hopefully not but we have no

idea we only care about GDP to the

extent that it actually affects

inflation so GDP can be really high as

long as there's no inflation great

because our dual mandate isn't High GDP

our dual mandate is maximum employment

and price stability

that's very important because people

confuse that well if the economy is

going to be stronger that means we're

gonna have more inflation right no the

economy was quite strong over the last

10 years before the pandemic and we had

below Trend inflation so those two do

not correlate I think we think hot

economy 2021 and then we forget to

include hot economy and supply chain

snarls and money printing at massive

levels that creates inflation but strong

economy itself does not create inflation

if anything you could actually argue

that a strong economy reduces inflation

because you encourage Innovation and

competition which lowers costs uh and

can at the same time grow an economy so

this is a very important difference uh

we did play Bingo fed Bingo and then

we'll go back to uh the summary of

economic projections here I think ish we

got Bingo this was what the bingo card

looked like today

so we did not get any talk about a shock

uh we did literally and I I penciled

this in afterwards wow nailed it I wrote

in is Jerome Powell going to say we're

going to look through or we're looking

through high oil prices because

obviously Brent's at like 93 bucks right

now it's down about a percent finally a

red day on oil uh bringing that down

because it does affect consumers it does

hurt the economy it does hurt earnings

for the companies that you might be

investing in right maybe it'll

incentivize people investing in some

green products but those are still

expensive and require you have more

money anyway but the point is I wrote

down I believe the FED is going to say

they're going to look through higher

energy prices and they literally said

we're looking through higher oil prices

now because you have to look through the

volatility we're like let's go uh so

that was a it was very exciting I get

excited about this stuff anyway mostly

anchored inflation expectations we got

that we didn't get any talk about house

so this one's like half highlighted we

didn't get talk about housing pain but

we did get talk about housing

disinflation uh we did get talk about

you know basically like nobody's talking

about one like two more hikes it's

either one more or no more hikes so we

had some consensus here no talk about

volcker or grain spam no talk about it

flexible average inflation targeting

though uh some people were comparing to

Greenspan uh and is a briefcase

indicator by Jay Powell switching from

using papers to using an iPad and people

suggesting huh is that like a subtle

hint at Greenspan that you should be

bullish because remember you want more

Greenspan that's opportunistic

disinflation we'll take our time

inflation will come down everything's

okay no Paul volcker style recession

uh Jerome Powell did dance around the

soft Landing question in one question he

answered and said look a soft Landing is

not our base case scenario uh and that

led the market to sell off everybody

started freaking out it's like oh my

gosh that's not the base case scenario

j-pell later came back and corrected

that and said well I want to be clear a

soft Landing is our primary goal it's

just not our base case scenario so he's

like yeah that's that's our Target

that's what we want to achieve a soft

Landing but it's not the base case

scenario which was a little concerning

uh that that he would say it uh yeah

that's not the base because it basically

means yeah we could still end up having

a recession and when he was asked about

this he sort of said look whether we

have a recession or not could be

dependent on things outside of our

control and this is really a reference

to the uh you know National Bureau of uh

economists or whatever uh who end up

deciding whether or not we're actually

in a recession or not and I think he's

kind of that's one of the reasons he's

saying that it's like hey it's it's out

of our control we're just going to focus

on what we can control which when it

comes to labor still indicates strong

labor market softer price pressures on

wages which is good does indicate that

the labor market would see unemployment

rise from about the 3.8 where we are now

to about 4.1 that is way lower than the

four and a half that the labor market

was expected to go up to in terms of the

unemployment rate by the FED as recently

as the last fed meeting in fact I wrote

over here that I thought we were going

to see it go from 4.5 and 24 down to 4.2

they ended up coming in with 4.1 now

that's actually really important because

remember Elizabeth Warren Elizabeth

Warren she so famously and this was

clipped so many times but she's like hey

look if the unemployment rate goes up

one percent then historically it goes up

yet another one percent so that

basically means you'd go from three and

a half percent to 5.5 percent

unemployment probably via some form of

recession that would be bad this was it

was something that was very concerning

at the time it was said now though with

the FED projecting hey maybe we'll only

go from three and a half to 4.1 which is

only about 0.6 if that maybe you start

breaking some of that historical Trend

because you're not you're not at one

percent anymore so uh maybe maybe that's

a good thing it'll be something bullish

to look forward to uh this was

interesting here the market implies

implied rates so right now we're sitting

at a market implied

67.4 percent chance as of the last

update that we will actually stay uh oh

hold on a sec uh let me let me see I may

have written these down backwards Let me

just double check uh we are at okay here

it is okay now it's changed to 70

whatever okay 70 it's now 70 percent

stay uh at uh 5.25 so 70 chance

pause okay and then for the next meeting

that's November 1 which has a 70 chance

the next meeting is December 13th and

that has a 37.9 chance of a hike sorry I

wrote that kind of funny that would be

about a 62 chance of a pause so we're

really like 70 to 62 percent chance of a

pause right now not thinking that

another rate hike is definitely coming

so this gives us some of the summary of

economic projections let's look at some

of the other things that were important

that were touched on as well uh a quick

reminder again check out housesack.com

yeah we are now open to non-accredited

investors we're very excited about that

we think this winter is going to be a

phenomenal time to buy real estate and

of course we watch the market every

single day because we're actually in the

markets and I'll just do that from the

office you actually go in the markets

talk to the Realtors see what the

competition is up to really important

for making sure you're insulating

yourselves with good deals

okay so we talked to Energy prices we

talked labor market long-term rates not

signaling okay right that was the supply

issue we talked about that we talked

soft Landing the strike yes the strike

could end up affecting the economy could

also affect inflation but it's too soon

to tell uh no comments on government

shutdown uh incoming data coming in much

stronger than everyone expected and

suggesting that uh forecasters are a

humbled bunch and have a lot to be

humbled about now basically saying like

nobody really knows but things are

definitely going better than we expected

uh I did think this phrase was

interesting I wrote down j-pal said we

will raise rates if necessary

right that that's an interesting line

because it somewhat implies that as long

as things stay on the trend now we're

good we don't actually have to raise

rates again that's what Jay Powell is

implying in my opinion with that phrase

raise if necessary right again hotter

GDP is not a guarantee uh Atlanta fed

real now GDP let's go pull this one up a

hotter GDP read is not necessarily a

sign that you're going to have inflation

real GDP now on the FED now indicator is

sitting at 4.9 percent it's come down

from the 5.9 which felt a little

ridiculous you have a five-year break

evens coming down as well five year

break even right now sitting at 2.3 it

is still high it's still at the highs of

Late July and August so you haven't seen

any kind of movement on the five-year

break even really other than recently up

five year forward Break Even same story

2.35 still a little hotter than we'd

like still uh pricing in uh right now

the market is pricing in rates at 4.7 in

this December of 2024 4.7 means rates

are going to stay high for quite a while

that's where the dot plot's worth

looking at as well and I think that was

the probably one of the big takeaways of

this meeting and why markets are Red is

because you really have this tendency to

believe that we're not going to lower

rates for a while and not while it could

be all the way through 2024 I mean look

at the uh summary of economic

projections here we're at 5.1 up from

4.6 on what rates will be at the end

of 2024 the range is four points uh 4.4

to 6.1 yeah somebody's really high

somebody's low the central range is

about four six to five four which is

basically saying 4.7 4.8 4.9 is where

we'll be at the end of next year there's

a real practical warning to that the

real practical warning to that is don't

assume you're going to be able to

refinance and bail yourself out of a

negative cash flow if you're getting

into a negative cash flow so be careful

these treasury markets probably going to

keep yields hot for a while just because

there's so little appetite to buy

treasuries I mean I personally would

rather just buy a money market or put my

money in a money market account you get

you get higher rates in some cases and

there's zero risk basically because you

don't you don't have this Market

fluctuation risk you know yields go

higher it doesn't matter like you're

you're underlying principle isn't losing

value and uh and and so that's

definitely why markets are moving red uh

on on some of this information uh for

actually spelling out higher for longer

like it's it's here uh real rates

meaningfully positive that was our Nikki

T question I think Nick could have asked

a better question seven went for no hike

12 went four one more hike uh j-pow

actually calls that a pretty tight group

obviously there are lags to consider uh

regarding the economy but thinking we're

at sufficiently restrictive levels

expecting inflation to continue to roll

off especially with housing but those on

fixed income get hurt the most because

of inflation so this gives you a full

recap here again practical practical

bottom lines here okay let's get to the

Practical bottom lines number one learn

about househack diversify away from the

volatility and the stress of stocks and

get exposed to a startup at in my

opinion the best price that could

potentially ever exist for a startup

which is a one-to-one valuation it's

basically unheard of uh but I I owe

everything in my community and in a

community or people are investing I'm

not going to VCS you know getting on my

knees begging for money it's it's just

the community and we've already raised

uh in the first like 18 hours twice the

amount of money we raised on the first

day of our fundraise uh last year when

we were

raising with only accredited investors

so we're really excited about that now

it's open to non-accredit investors okay

so that's number one housewife.com read

the perspectives number two

I'm still getting people who are asking

me Kevin

should I buy this deal assuming I'm

going to be able to refinance

and my answer almost always is no

uh we do and I have to be careful you

know I don't want to pretend like I'm

giving Financial advice to everyone on

this video here this is not personalized

Financial advice I do that by the way

stackhack.com you can get licensed

Financial advice for myself and the team

I go through all your stuff with the

team and then I make a video and a plan

for you it's really cool

it's also inexpensive which is nice but

anyway

there are a lot of people who are saying

things like oh I'm gonna you know I'm

gonna buy this market value property and

I'm gonna have a negative cash flow I'm

gonna float it until I could refinance

next year

you might not be able to refinance next

year

you should plan like if you're gonna

sync yourself up to your eyeballs in

debt you better have the capacity to

float those damn payments for five years

that's my rule now don't get me wrong I

think that in 10 years interest rates

are going to be sub two percent I made a

bet as long as we're all still alive

knock on wood put it on your calendar

2033 Kevin says interest rates will be

less than 1.8 percent for a 30-year

fixed rate mortgage it's because I think

we're going to disinflation uh and and

that'll end up and then deflation

that'll end up driving rates lower in

the long term

short term though uh-uh if we're at four

seven at the end of next year that

basically means we're flat all freaking

year long as Jay Powell and the clan is

like

uh well

nine reports doesn't make a trend

nope nothing's broken yet

and then they're gonna go

12 reports doesn't make a trend

nothing's broken yet

uh it kind of sucks so so don't plan on

that like there's some kind of massive

Rebound in uh uh you know a gunlock says

think we're getting near the end of this

10-year rate rise well yeah I mean

that's obvious why is that even a banner

why is that even a banner CNBC like you

may as well just write on there the pope

is Catholic do bears poop in the woods

yes okay yes

that's stupid

but anyway

so

so don't buy something with a big fat

negative cash flow planning to refinance

I think it's a bad idea

so uh okay we talked treasuries to talk

house talk practically okay practical

nature for the stock market so practical

nature for the stock market I I still

heavily believe uh even where prices

have moved now that Staples probably

still have at least six months of pain

ahead of them uh the reason for that is

you really need to lap all of the

potential price increases of 2022.

then you're going to get into a

territory of lower volumes and lower

volumes and lower prices are going to

result in an earnings recession in

consumer staples that's the target the

Walgreens

uh whatever right

Walmart Macy's these are companies that

I've been purposely staying away from

for over a year because I thought we

were going to start pricing in an

earnings recession in those as inflation

went away because they didn't actually

have pricing power they had full pricing

power their earnings look good because

of faux pricing power remember what full

pricing power is full pricing power is

oh well uh everything is going up

because of inflation we have pricing

power because we're a great company no

you your earnings are going up because

everything is inflating that's very

different from I gotta have you know an

n-face system on my house I gotta have

an iPhone I gotta have a Tesla I gotta

get the h100s for my you know AI startup

or whatever that's that's pricing power

very very very very different

so uh I do think that pain continues in

those Staples so keep that in mind as

well eventually there will be an

opportunity in those usually housing

stocks were covered before Staples

uh and housing stocks have actually done

quite well because there's so little

Supply but they've recently like the

housing indices have fallen about 10

recently and uh that could be because of

some more pain starting to get priced

into certain markets you start looking

at markets like Austin Texas for example

or Oregon or Boise I've been I've been

pooping on these markets for a while

here but it's even worse than I thought

it's so bad that Lennar is literally in

their earnings call we just saw this in

the course member live stream yesterday

which by the way we have some new new

verse Pro courses you should check them

out they're little crash courses they're

really really good they're on pre-sale

right now at a new price check that out

at meet kevin.com but anyway

it of course remember live stream we're

like

oh let's look at the Lennar earnings

call remember how I hate Austin and

Boise right now and then so then I go

look at the uh Lennar earnings call and

they literally choose Austin and Boise

to call out by name and I'm like yep

that's why you have to be in different

markets in the country there's a reason

why I travel as much as I do to go to

different cities because I know real

estate

for sure I know this game and I love it

but anyway

hence invest in house hack

outside.com now fundraise okay so

Staples housing stocks right so Staples

usually follow housing stocks but

housing stocks recently are are slowing

down so maybe that's not a great leading

indicator yet uh and that about does it

for really the fed's reset here I would

call this like a fed's reset of

expectations I think this is really a

slap upside the face going don't think

rates are getting cut so fast next year

quite frankly all based on this unless

we get some really fat like negative

inflation reads there's no reason for

the FED to cut and that sucks if you're

really betting on rate Cuts soon so uh

buckle up be careful that might be why

Mike Wilson says it's going to be the

indices that do the best because you're

going to get a lot of fomo of people who

are in money markets and they're like oh

I'm making five percent in money markets

and then all the stock market people at

the end of the year gonna be like I

invested into the NASDAQ and made 30 or

I invested into an actively managed gtf

and killed it you know a year to date I

mean look the S P 500 is a 15 year today

despite the volatility right if you look

at QQQ year to date you're up

38 year today it's incredible you look

at uh year to date on you know some ETFs

they're up like 45

oh but at least you made uh five percent

or no

money markets uh you know but the

volatility will continue that's the

point but I'll tell you this this is

what we're gonna leave it off on

the closer we get to

rates actually coming down which at this

point might not be until the end of 2024

the more the stock market will price

that in remember how far ahead the stock

market usually prices the stock market

usually prices ahead 18 months

so we start getting to that 18-month

level where looking ahead 18 months you

know we're knocking on the door of early

2025

and it throughout 2025 look at 2025 how

low the FED thinks rates are going to go

in 2025. that's what's got to get priced

in over the next year over the next year

we price in that by the end of 2025 we

get

that's actually not as low as I thought

3.9 they just jacked that up dang it

because I remember it being 3.4 so you

can see it's gonna be more of that

volatile Nike solution it's not gonna be

that straight it's actually not until

2026 that they project them going down

to 2.9 so that makes sense because

you've got 4.7 at the uh the Market's

implying 4.7 at the end of 2024. that's

high though because that's only about

one and a that's about what minus one

and a half percent or something over the

next year and a half the Market's right

here so you'd really only be pricing in

negative 0.8 that negative 0.8 needs to

get price stand over probably the next

six months so let's let's draw the the

map really quick okay so

next six months stocks

uh price

uh in negative point eight percent okay

and then in the next 18 months

uh next 18 months stocks have to price

in minus 1.8 unless obviously something

breaks

this is possible too and then fed knows

this that's why they'll just throw down

the bingo card of uh oh oh cut rates two

percent instantly if they need to so

there we have it thank you very much for

watching make sure to subscribe join me

every morning at 4am for a day cat or a

day cap a uh a sort of a bottom line

report we call it give me feedback as

well I'm really reading almost all the

comments on the bottom line report I'm

trying to understand what everybody

wants uh some feedback I got this

morning some people asked they said

Kevin can you go detailed into income

statements and balance sheets every day

in the bottom line report yes we can

have a segment on that absolutely

earnings calls income statements balance

sheets stock analysis uh also I got some

suggestions that were uh throw my

opinion in more I was actually surprised

by that because quite frankly I thought

people just wanted like non-bias and not

like like that the angry Kevin opinions

but I'll I could do both right I could

do the non-bias and then I could be like

and here's what I think

anyway appreciate y'all we'll see in the

next one goodbye leave me a comment let

me know

what else here I feel like nobody else

knows about this 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 path right there financial

analyst and YouTuber meet Kevin always

great to get your take