Fed Emergency Rate Cut | 1.5%

Dylan says, "I got out of Open Door at

the peak and into Rocket Mortgage thanks

to you, Kevin, and the Alpha." But let's

freaking go. The Federal Reserve has

responded to the drama of what's

happening with Trump's tariff policy and

this disastrous Federal Reserve or jobs

report. On top of that, courts might end

up saving the day, but not for the

Epstein files. The Epstein files might

be the coupon code for the expiring

courses today. But when it comes to the

Epstein update, apparently Maxwell has

now been moved from a federal prison in

Tallahassee, Florida to a minimum

security prison

camp in Texas. Yes, Maxwell has been

moved to camp as Donald Trump makes sure

everybody knows that he has the right to

pardon Maxwell, but he hasn't been

explicitly asked whether or not he

should pardon or to pardon Maxwell. But

that's less important today because we

know they're not going to release the

files and that's why we have coupon code

release the files expiring later today

for the alpha report and the amazing

programs of building wealth. Not. Well,

what we need to talk about is the

Federal Reserve statements on what's

going on with this jobs data, both from

Waller and Bowman. I'm also going to

give you insight into what Boston just

said. And we need to talk about what's

going on in court because

this is kind of crazy because so far

courts have kind of been giving a lot of

latitude to Donald Trump on a lot of

different policies. It's possible courts

might finally be U-turning here and

actually strike down one of the most

critical components of Donald Trump's

economic policy, his tariff policy. The

courts are not happy with the Justice

Department uh and and quite frankly the

attorneys from the Trump

administration's arguments on why they

should be allowed to implement tariffs

without Congress.

And if courts decide the tariffs are

illegal,

maybe we could uh prop up the jobs

market without rate cuts and uh and get

back to some real enthusiasm. After all,

the cues today triple either rejecting

or losing. Actually, this is about I

would call it about three rejections on

the 55720 line here. Uh this is a line

we were talking about in the alpha

report this morning as well. But forget

about the lines for a moment and let's

think about what the Fed just said. So

this morning, Bostic came out as a real

hawk on inflation. Oh, we need higher

rates. We need higher for longer. But

this is totally the opposite of what

Waller and Bowman are saying. And some

of the arguments they're making kind of

scary. In fact, Waller is going as far

as suggesting we probably need cuts of

150 basis points. That'd be quite

remarkable to see those sort of cuts.

And if Waller were in charge, who's one

of the candidates for the Federal

Reserve, we might actually get them. ISM

payrolls, uh, for example, from

manufacturing totally missed hardcore

this morning. We'll go through Waller in

just a moment, but ISM this morning

contracted for a fifth straight month.

While overall things are still slowly

growing, they are slowing in their rate

of growth. The unemployment index came

down lower as well, which just compounds

with what we saw with the jobs report

this morning. Uh, and we're seeing that

US manufacturing activity contracted at

a faster rate. uh with uh basically

every category of manufacturing dropping

and even though demand indicators

improved like suggestions that hey

there's still back like basically

contractions in uh uh in we've got it

right here uh contracting at a slower

rate. The new orders and backlog orders

index contracted at slower rates. In

other words, we're still in contraction

for the positive. It's just like kind of

teetering a little bit.

You actually look deeper into this. None

of the six largest manufacturing

industries expanded in July. None of

them. Tariffs are beginning to wear us

out. Sales are softening more than usual

in the summer. Some businesses like the

furniture business say business is

steady for now, but they stocked up on a

lot of inventory before the tariffs.

Don't look on X for what's going on in

Vegas or take my word for what's going

on at Disneyland or Six Flags. It's

dead. Uh but take a look at this. For

every comment on hiring, this is from

the ISM report this morning, not even

the labor report, right? For every

comment on hiring, there were two

comments for reducing headcounts and

layoffs were the primary measure, an

indication that staff shrinking

continues to be urgent. This is bad.

Remember, the last thing that holds this

economy up right or that is holding this

economy up right now is the fact that

we're not yet seeing layoffs. And so a

pause to Trump's tariffs could not come

soon enough because really what tariffs

are doing is they are delaying the

Federal Reserve from cutting rates

because they're making the Fed nervous

about inflation

while at the same time we're damaging

the labor market twoofold. Once because

we're not lowering rates and second

because of the reconstruction of supply

chains in general. like all of these

ideas of investments from large

companies like Apple or you know big AI

investments or whatever they got to

translate to jobs but when at the end of

Trump's term probably not at the

beginning of Trump's term you get

through these recessionary fears first

these are problems but let's understand

for a moment Mr. Waller statement

because this is this one's pretty

dramatic. It calls for a substantial

set of rate cuts as soon as possible

which I mean makes sense because when

you look at that jobs report this

morning look at this all these purple

arrows here declining jobs and when you

include the revisions in them. So

revisions plus the last jobs reports

goods producing -41,000 construction

-14,000 manufacturing -23,000 trade and

transportation services -29,000 retail

trade 9,000 slower consumers IT8,000

remember meta negative 1% on headcount

Microsoft flat and these are the richest

companies in the world flat with hiring

AI doesn't necessarily mean you need

more jobs, you use AI

and get more done. Financials were the

only section that saw real job growth

over here at 7,000, which is nominal

outside of education and healthcare. But

a lot of this was because of the

insurance business based on the BLS

report. Business services down 41,000,

temporary help down 14,000, education

and health, mostly healthcare, 67,000.

So outside of healthcare, we do not have

jobs. There are no jobs. They're gone.

13,000 in leisure. These are horrible,

horrible numbers. We better hope and

pray that these numbers flip-flop.

And maybe courts overruling Trump's

tariffs will be the way to do it.

Waller says that tariffs are a one-off

price increase, that we should be

looking through these tariff price

increases and cutting rates. The problem

is Mr. Bostic says the textbook says

that the reason we have oneoff price

increases is because you impose the

tariffs and then you're done. But that's

not what we have right now. Right now

you have we're going to impose tariffs.

Okay, maybe we'll impose fewer tariffs.

We're going to impose more tariffs.

We're going to impose fewer tariffs.

We're going to impose more tariffs. We

have all this like vacasillating of

tariffs. And Bostic makes the case on

CNBC this morning that the Federal

Reserve needs to be really freaking

cautious about inflation because you're

screwing with people's psychology that

people are dealing with these tariffs

for a lot longer because Trump's not

just one time and in there's so much

uncertainty that people are constantly

worried about pricing increases that we

could self-fulfill price increases and

that the Fed's basically going to end up

in a 1970s situation again where they

lose control of inflation. Now, if we go

into a recession, I promise you there

won't be any inflation. We will

eviscerate inflation immediately, but

we'll be in a nasty recession. That's

how Don uh you know, Mr. Powell is

earning his reputation of too late

because the reality is you don't have to

worry about inflation. If we go into a

recession, you'll have deflation.

That's bad.

I mean, it's nice when prices come down,

but it's bad because it means a lot of

people are going to lose their jobs and

you're probably at a 15% unemployment

rate or more, which takes forever to get

rid of because of well, frankly,

artificial intelligence. I mean, don't

look. I mean, you could look on e-hack

or uh or just download the Meet Kevin

app. You know, remember, download the

Meet Kevin app and you can get uh this.

It's totally free, by the way. You can

customize your notifications for the

videos as well. So, if you don't want

the pilot videos or, you know, Maxwell

videos or whatever, that's fine. And you

can uh click out of those, but download

the Me Kevin app. Again, totally free.

And uh and you could see the chart where

we threw it today. Uh and I think it's

really useful because when you look in

that Me Kevin app, you could see that

27we unemployed chart that almost nobody

is talking about. Here it is blown up a

little bit larger. But this is the app,

you know, you can get it as well. But

here it is blown up a little larger.

This is the 27 weeks unemployed chart

and almost nobody's talking about this

and it's skyrocketing. It's not good.

You know, the every single recession

that we've ever had has been led by the

skyrocketing of the 27 weeks unemployed.

It's because people are struggling.

Like, they're getting laid off and

they're struggling to find work. In

fact, Goldman Sachs had a piece on this

this morning. I've got it right here.

Goldman Sachs says that we're in the

late innings of a systemic releveraging.

Basically, everybody is going out and

taking on debt. And that's why the

market keeps pumping up because

everybody's taking on debt. everybody's

getting fully exposed. Uh, and you know,

that's a risky environment because once

everybody's fully leveraged again, you

know, where does new money come in to

keep the sort of like bubble going,

right? I mean, we just hit over a

trillion dollars of margin debt, I

think, for the first time ever in

history. Yeah. Look at this.

Margin debt surges 9.5% in June to

record high. First time ever we've been

at a trillion dollars in in margin debt,

FINRA margin statistics. And that's June

data. We don't even have the July margin

data yet. Imagine what the July margin

data looks like. We're probably $1.2

trillion of margin debt. It's crazy. But

if you look at Goldman Sachs here,

Goldman Sachs says there's no clear

catalyst for a big collapse right now.

You know, I don't think they would have

written this if they saw the jobs

numbers this morning because this was

written right before the jobs data 632

UTC August 1st. So basically late

yesterday.

Uh but take a look at this. They even

they warn watch non-farm payroll and

ISM. Both were really bad. But take a

look at this. This is a really critical

thing to pay attention to right hand

side chart. This one right here. Okay.

Continuing claims are still near highs.

This suggests many who lost their jobs

earlier aren't getting rehired. Even if

layoffs slow, dude, I'm not worried

about layoffs slowing. They're they're

slow. I'm worried about layoffs going up

because remember the beverage curve that

looks like that right now. Okay, the

normal beverage curve looks like this,

which is basically when you have low job

openings, you have high unemployment.

But it looks like a line right now

because we have low unemployment and low

vacancies. As soon as we get layoffs, it

normalizes and the unemployment rate

skyrockets. This being the unemployment

rate going up. This being job openings

low, right?

This is a normal curve. The straight

line down is not a normal curve. We've

talked about this before, so I don't

want to rehash this. But the backlog of

still unemployed workers could keep

continuing claims elevated. Yeah, it's a

red flag. It's a problem.

So now understand when Waller calls for

150 basis points of cuts, he's doing so

because he's recognizing these

fundamental shifts that are happening in

the economy. You know, we we talked in

detail about uh the day trade, the

medium trade, and the longer trade this

morning in the course member liveream.

You can get the daily updates on this

and trade alerts or anything uh if you

join over at meetke.com. Remember, you

join once, you get lifetime access. So,

even if you come back five years from

now and you're like, I wonder what the

trade is today that Kevin thinks, you

know, it's my perspective. I can't

guarantee you. But what I can guarantee

you is you get access to all the

courses, you get my perspective uh in uh

and you know, trade alerts. You get

every live stream, every alpha report,

all one price. Use coupon code release

the files over at me.com. We've got a

coupon expiring tonight, which just

means the price is going to go up. So,

if you want to secure the lowest price,

do so now. That said, look at Waller's

commentary here. And then we got to look

at a rough day in court for tariffs.

But Waller's commentary is very

concerning.

Waller calling for 150 basis points of

cuts says that real gross domestic

product growth was just one and a half

1.2% in the first half. Now he says much

lower than the median participants

estimates for longer run GDP growth.

This is a little misleading. What he's

doing is he's referring to this longer

term column right here on the summary of

economic projections uh which is right

here this 1.8 but really the 2025

projection for GDP in June during the

June SCP summary of economic projections

was4 which you know 1.2 two is

relatively close to but whatever you

know he's trying to talk up the desire

of having rate cuts right now taking

together the data imply the policy rate

should be around 150 basis points lower

at around 3% the neutral rate in other

words we should be cutting to neutral

right now so like he if if it was up to

him and you know poly market is actually

betting that he has a shot at 13% shot

of being announced as the next Fed chair

by December

uh if you remove this no announcement by

December odds, he probably has like a

40% chance, maybe 30% chance of being

the next Fed chair. You know, he's

calling for 150 basis points of cuts

rapidly getting us to neutral. And the

reason for it is because the labor

market looks fine on the surface, but

once we account for data revisions, the

private sector payroll growth is near

stall speed and other data suggests

downside risks to the labor market have

increased. Inflation has been limited.

We should not wait for the labor market

to deteriorate. The wait and see

approach on tariffs is not what we need

right now. It's overly cautious and

doesn't balance the risks because it's

possible that the labor market falters

before we ever get clarity on inflation.

And when labor markets turn, they turn

fast. This is scary. Think about this.

They're saying we may not get clarity on

what happens with tariffs for a long

time, but as soon as the labor market

rolls, we could be screwed

and we might be delaying for uncertain

data we might never end up getting. So,

we should just cut now and then see how

the data evolves. This was posted this

morning by Mr. Waller. Bowman

also dissented and wanted a rate cut in

July and she says that economic growth

is slowing with a less dynamic labor

market and we should be getting back to

neutral which is also 150 basis points

lower. We should proactively hedge

against the weakening of the economy and

avoid risking more damage to the labor

market. Underlying economic growth has

slowed marketably. private domestic

final purchases have increased uh but

but not as anywhere close to what we saw

in 2024. It's like half the rate. We're

seeing softening consumer spending and

declining residential investment.

Remember what we talked about this

morning. This morning we talked about

like who who wins during this kind of

stuff. Who wins is corporations. The

rich and corporations win because they

can lay people off, right? They can lay

people off and they could benefit from

cost reductions because of AI and they

could use the cover of recession to lay

people off and then companies with money

get to deploy and they make even more

money. It's one of the reasons why house

hack is hoarding cash so we could deploy

in a more panicky time. You know, we got

like 13 to 14 million of cash right now.

And it's also one of the reasons I say,

you know, if if the Fed cuts frantically

150 basis points, which right now the

market is pricing in now an 88.7% chance

of a single cut in September. Uh but we

are pricing in now 2.3 cuts by the end

of the year. It keeps going up. You

know, if we get sudden rate cuts, we're

going to stop our fund raise right away

for house hack. Why why are we going to

pay, you know, our rental yield, you

know, 5% or whatever. Why are we going

to pay 5% out through conversion then

people get all the upside in stock? Like

we could probably just raise money with

our especially, you know, once we

release our AI product hopefully later

this year, you know, our SAS biz, like

people probably just want to buy the

stock and not need a 5% yield. or we

might not even have to fund raise at all

anymore depending on how much cash flow

we can generate from from you know uh

our our SAS biz which isn't really

reliant on recession or in fact our

product probably becomes better in a

recession because people are going to be

like which is the best deal of all these

deals to choose from but you really have

to ask yourself that like yes AI is

great but we gave this analogy in the

live stream earlier we're like look if

UBS gets hired to do 690 investment

deals to do research you know without AI

they've got 128,000 employees to do it

with AI. Maybe they could get the same

work done with 90,000 employees. So all

of a sudden 38,000 people lose their

jobs. But does that mean UBS gets more

contracts?

Like you know, do they do that much more

business? Not necessarily.

In the long term, yes. In the long term,

AI or technological innovations will

generally lead to more opportunities in

the long term, but that could be 10

years out. In the short term, aggregate

economic work requirements don't change

because of AI. You just have four fewer

people getting the same amount of work

requirements done. And it could take

years for us to actually see AI create

more jobs.

You know, I gave this example with

Lauren. If you get if you give Lauren a

thousand property management emails pre-

AI, you take her and two assistants and

you get to work. You grind. Now you have

AI. Lauren could probably do it all

herself. AI could handle 80% of her

emails. Did Lauren get more than a

thousand emails because of AI? No. Now

she has more time, but two people are

now out of a job because of that, right?

Uh so,

you know, it's going to be a while

before before those those jobs come. And

that's the concern that the Federal

Reserve is looking at here, which isn't

great.

Less dynamic labor market, which is

showing signs of fragility. The

employment to population ratio has

dropped significantly this year.

Businesses are reducing hiring, but they

continue to retain their existing

workers for now. But what happens when

they start realizing it's easy to hire

people because, you know, unemployment

claims are high and then you don't need

to hire you don't need to hoard workers

anymore like you've been used to for the

last, you know, five five-ish years.

Well, then you might get rid of them and

then you get rid of them. See, look at

this. If demand conditions do not

improve, firms may have little option

other than to begin laying off workers.

Recognizing it may not be that difficult

to rehire them given the sha shift in

labor market conditions. Hey, if there

are a bunch of workers available, why

not just fire a bunch of them now? We

could always rehire them in the future.

I mean, that's really insensitive, but

that's just the reality of capitalism.

You know, so far firms have resisted

reducing their workforces, but demand is

so slow right now. It's just a matter of

time for the layoffs to happen.

I mean, Bowman literally says the reason

the Fed's waiting is because of tariffs.

So, like Trump's tariffs are

accelerating the pain in the labor

market.

And that's because firms appear more

willing to reduce profit margins as they

are less able to pass full prices

through given weaknesses in demand. This

isn't good. And this is why she says we

should cut rates to neutral and stop and

avoid more erosion to the labor market.

Now, you know, this contrasts with what

Mr. Bostic says. Bostic says inflation

is a greater risk

uh and that, you know, we should be very

cautious that we're not cutting too

quickly because again, we don't want to

repeat a 1970s situations because

situation because we might not be as

like restrictive as people think.

Obviously, you know, these numbers make

it pretty clear, but he argues that it

could take three, six, or even 12 months

to for businesses to come up with

pricing strategies.

And because of these sloppy roll out of

tariffs, his words, directly blaming

Trump, we don't know what's going to

happen with pricing, so why don't we

wait? So, you have like some of the most

of the Fed that's like, ah, let's just

wait. And two people at the Fed that are

like, bro, you're killing the labor

market by doing this. Hopefully

courts saved the day. A rough day in

court for tariffs.

Literally, you have an 11 judge panel

skeptical about Donald Trump's arguments

or his administration's arguments at the

US Court of Appeals

yesterday.

And the reason the judges are skeptical

is because you have basically a

president that is implying that they

could use a 1977 international emergency

economic powers act because Nixon did

previously. However, Nixon had his

tariffs ratified by Congress and so it

wasn't just a Nixon announcement and

they were seen as a temporary measure.

So Nixon had temporary tariffs and

Congress approved them. Donald Trump is

not looking for temporary tariffs and

he's not looking for Congress to approve

them. And even if he were looking for

Congress to approve them, the odds are

Congress would not approve them.

And the judges are actually saying,

"Hey, we're not buying it.

We can't just give you the license to

impose tariffs or taxes because of the

major questions doctrine, which

basically says for these things, you

have to go to Congress.

Congress has the power uh to to demand

these things and the president isn't a

king. The constitution doesn't let him

command the tides of trades

uh you know trade policies which is very

interesting. You look at some uh some of

the top two comments on on the journal

over here. I thought they were decent.

Oh, if they actually load here. Showing

com. There we go. Uh, if tariffs are to

protect US economic interests in

emergency, why are we tariffing Brazil

for prosecuting Balsinaro or Canada for

recognizing Palestine?

Somebody else says a global economic

tariff reorder may well have been

needed. However, the US Constitution

does not need an economic or any kind of

reset. Of course, you have to be careful

because a lot of people are getting

fussy taking a lot of real big sides

here. I'm not a side taker. I try to

just provide the facts as I see them.

You know, I quote tweeted Nick T who

said Powell referred six times at his

news conference to downside risks in the

labor market, suggesting that realized

weakness could build a case for easing

policy. And I'm like, Nick T, what are

you smoking? Nick T is like, Powell

warned us. I'm like, no. Powell

literally said we should be thankful

we're not raising rates, that we need

many months of data before talking about

cutting rates. And the market clearly

saw Powell as hawkish, not dovish. Turns

out Nick T then turned off comments

to that particular quote tweet and then

he reposted it again, but he turned off

comments to the one where I quote

tweeted him, which is interesting. It's

like, wait, why Nick T, are you being

such a mouthpiece for JPAL trying to

play this, oh, Powell's always right.

I'm a shill for no one.

My goal is for everyone to hate me. And

I think I do a very good job at that cuz

I don't shill for Trump. I don't shill

for Biden or Kamla or Newsome. I hate

that Newsome guy. I'm certainly not

gonna shill for Powell. Now, I'll defend

him when I think it's right, but I'm

gonna I'm not going to get on my knees

and say he gave us the fair heads up. He

didn't give us a fair shake. If

anything, I don't think Powell knew. I

mean, maybe the unemployment rate did go

up, which that is the warning he gave

us. But why then is he being a hawkish

dumbass in that case?

You know, if Powell knew, then it's

almost like Federal Reserve malpractice

to have been as hawkish as he was. So,

no, Nick T. Powell didn't warn us.

That's a joke. If that's considered a

Powell warning, then then, you know,

Powell should go back to warning school.

It's a joke.

So, we get back to,

you know, best case scenario, frankly.

And I I said this the first time we saw

this before it went to appeals. Best

case scenario, all these tariffs get

destroyed in courts. They all go away

and they go away before the labor market

gets destroyed.

Next best case scenario, the Fed starts

supporting the labor market hopefully.

But honestly, rate cuts probably aren't

going to do it.

Rate cuts

are done in a falling economy.

Rate cuts don't bail out the stock

market. Everybody hoping that the

market's going to moon because of rate

cuts, I think is mistaken.

Rate cuts are the precursor to a

recession.

Now, I understand, you know, the market

has rebounded to the 557 line, which is

exactly the line we talked about this

morning in the course member liveream. A

very critical line this morning. Uh we

talked about in our alpha report. We

also, by the way, talked about Rocket

Mortgage being a huge beneficiary here.

It's up 14 to 16%. In the alpha report,

we talked about this before the market

opened.

This is why I think you should use

coupon code release the files and join.

But understand, best case scenario

number one, because Trump's going to be

too stubborn, is courts throw out these

stupid tariffs and and we minimize that

damage to the labor market. Hopefully

then we don't get layoffs and we stop

the layoff cycle that has just started.

Next best case scenario is maybe these

job numbers were an anomaly. Maybe the

QCEW revisions that we're going to get

won't be that bad. I mean, it's wishful

thinking, but it I'm willing to be

optimistic. I mean, look at look up the

BLS labor report. Go to the bottom. They

literally give you the date for the QCW

revisions. Last year it was in August

right here. preliminary benchmark

revisions to the establishment survey

data to be released on September 9th.

Last year, we killed like a million jobs

when we got this in August. And it

tanked the market so badly that you got

the Japanese carry trade crisis and a 50

basis point cut from the Fed. So, I

guess mark your calendar for 10 a.m.

Eastern on September 9th.

This is tough, folks. has a tough time

with markets at all-time high, margins

at all-time high, the labor market now

finally starting to actually show crap,

which we've seen coming for a very long

time. Yeah, we had a lot of Trump

enthusiasm around the election and

afterwards. Gold now rising within, you

know, 50 to 100 bucks of its all-time

high because people are panicking. And

we're back to shock level here on the

210. Oh, yeah. 51 basis points. Right

back to shock level because of this

data. You know, we escaped that for a

moment there. Skyrockets right back up.

We've been at shock levels since

liberation day, right? Like usually

being above 51 means we are prone to a

shock. Now, I want you to understand,

we don't know what the shock is going to

be. Look at Goldman Sachs. There is no

clear catalyst for an imminent collapse.

Although, watch non-farm payrolls, which

were bad. This is true, but that's the

nature of a black swan. We don't know

what shoe is going to drop. We just know

stuff's setting up and it ain't good. So

again, I'm going to write this down just

to make it like really crystal clear.

Okay, best case number one. Courts kill

tariffs

and no layoffs. Okay, best case number

one.

Best case number two is the tariffs stay

but no layoffs.

uh and tariffs stay. Uh best case number

three is

productivity boom offsets layoffs.

Wishful thinking.

Anyway, go to meet Kevin.com. Use coupon

code release the files before midnight

tonight. If you have any questions, you

can always email us at staffme.com.

>> 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 Praath there, financial analyst

and YouTuber. Meet Kevin. Always great

to get your take.