The Fed's U-turn is a COMPLETE Disaster | Worsening Reset.

on one hand we have kathy wood and elon

musk banging pots and pans screaming

about how the fed is going to force us

into deflation which will require the

eventual return to a similar amount of

money printing to stimulate the economy

again that led to the disaster we're in

now and on the other hand the fed

finally put out the truth they put on

their big boy pants strapped up their

boots and said inflation is out of

control

we've lost and we're finally going to be

real with you about the trajectory and

terminal endpoint of where we think

interest rates will go

even though that could end up being

worse

hey everyone meet kevin here we are

facing lots of pain we are facing a

disaster because quite frankly inflation

while it came down in july

didn't really do great in august and

unfortunately when we take out some of

the largest contributors to inflation

pretty much like everything like food

and shelter energy used cars and trucks

the chart that we end up with is pretty

miserable it's this right here shout out

to bloomberg for this look at this folks

it is

inflation that is still uncontrollably

rising and this is why the federal

reserve is suggesting it's time to

change our definition of what we're

actually trying to accomplish because

clearly what we have been doing hasn't

been working or at least it's not

working yet which is clearly the

argument that folks like elon musk and

kathy wood are taking that hey we've got

to be careful here because if we over

tighten we are going to usher in

deflation the world the likes of which

the world has not seen

since the great depression remember a

recession tends to be two quarters of

negative gdp but a depression can often

times even though there's no clear

definition be more than four quarters of

a negative gdp growth and quite frankly

with what we're seeing in markets now it

wouldn't be a surprise that we go from

the two quarters of negative gdp that we

already have to another two quarters of

negative gdp potentially not only

resetting markets but leading to quite a

depressing environment either actually

or just mentally but one of the most

important things that we have to realize

from what the fed told us yesterday is

where are flip-floppers

that's what they told us because see the

federal reserve first told us we want to

see core inflation go down the chart i

just showed you we want to see that go

down

then it turned into well we want to see

both headline and core go down

now the fed is changing their minds

again the fed is making the argument

that we're not even worried about

inflation going down even though that's

the number one priority but what we're

actually going to use to measure our

success

is instead of being inflation we're

actually going to measure our success by

the impact we are creating

on the labor market

yes that is the other half of the fed's

dual mandate one half being get prices

stable and the second half being ensure

or try to get to maximum employment well

we are so far to the other end of

maximum employment right now that is to

the extreme beyond end of maximum

employment that we have about two job

openings per employee uh willing to work

and this creates a lot of demand for

labor and in january

when i first warned warned about what

the absolute worst thing is that could

happen with the federal reserve it was

what's known as a wage price spiral this

is when prices go up so workers demand

more pay when workers demand more pay

companies seek to uh maintain any kind

of semblance of margin or profit so what

do they do they raise prices again but

then things get more expensive and the

workers raise their demands for wages

again and this is how you get a

stair-stepping or spiraling of prices

just going up and they don't just go up

once to where you have a year-over-year

high comparison and then it drops off

and you don't really have inflation

anymore they keep going up and so

yesterday the fed pulled off another

great flip-flop on us they made it clear

that we are going to focus on reducing

job openings unfortunately the only way

to reduce job openings is to make

companies feel like they're running low

on money or access to capital and the

stock market is the biggest source of

capital for companies so stocks go down

companies feel like they may have less

access to capital consumers may spend

less money creating less demand for

products hopefully leading companies to

finally shut down some job openings and

when those job openings shut down then

maybe we'll see the jolts indicator come

down we'll also potentially see the

quits ratio come down which currently

sits at about 2.7 to 2.8 percent and the

reality is if people are still quitting

at a rate of 2.72.8 percent it means

that they're not worried about finding

another job it means they could easily

find another job right which again means

too many companies are hiring so the

feds pulled off another beautiful

flip-flop on us and this is leading to

substantial uncertainty and lots of red

in the market again and it's not just

the united states all of this is

compounded by an extremely challenging

macro environment where the entire world

is conducting synchronous interest rate

hikes even the bank of england today

coming with a 50 bp hike although not as

large as the 75 is expected still a

relatively large hike

and the world is slowly moving away from

the days of zerp zero interest rate

policies z-i-r-p

except for of course china but then

again china is probably in a depression

a severely devastating economic

environment where

even though china has started 52 000

infrastructure projects this year

they are still seeing a decline in

construction property investment and

land sales that's pretty scary so in

other words if you're not we're like

raising interest rates right now you're

just getting screwed and if you are

raising interest rates right now you're

also getting screwed because you're

trying to crimp down on your economy get

people to spend less money and reduce

people's wealth and one of the greatest

drivers of wealth is of course the

housing market and this is why yesterday

drum powell told us that he expects a

quote difficult correction to come to

the housing market to bring housing

prices back in line with affordability

in english price is going to go down

so what do we have well we've got a fed

that once again flip-flopped and markets

need to price in this new flip-flop so

if you're wondering why things are red

it's because markets have to price in

the new flip-flop

take a look at this chart

this chart shows you a blue line the

blue line tells you

what the market's expectations were for

the federal reserve's peak rates

and the market believed oh

okay so we'll have peak rates over here

in march of 2023 and then they'll come

down

after the meeting

the market also believed that rates

would peak in march and then come down

that's signified by the orange line but

as i said yesterday when i covered the

federal reserve yo market apparently

you're missing the beat here because the

federal reserve is making it clear they

really don't intend to u-turn until

likely the end of 2024. see this period

right here that's called higher for

longer and that's because we're probably

also seeing inflation that is higher for

longer and a decline that is coming

later than expected and unfortunately

this section right here the difference

between where the fed is likely going

with fed rate policy

and the orange line

is signified by one thing folks

pain

pain in the stock market so what do you

do about this well i think there are

three things that you can do about this

the first thing that you can do is you

could consider getting into

uh treasuries

treasuries are something that we're

talking ab a lot about and we're uh

likely investing in uh

via or with i should say with house hack

because house hack is my real estate

startup that we are

porting cash for so that way when the

real estate market corrects

we can go buy real estate at the bottom

of the market accredited investors can

join me now and if you join by september

30th as an accredited investor at

househack.com you just upload w2s or

income statements or whatever accredited

investor letter from investready.com you

do that all at househack.com

you will get founding shares in this

company that is going to go by not now

we're not catching a falling knife with

house sack but when the market is lower

and with house act we are going to

deploy likely a good chunk of the cash

that we have in things like six-month

treasuries so that way

since we don't plan to buy for six

months we sit in treasuries for six

months

yielding somewhere around three point

nine to four percent on an annual basis

doing nothing

if you invest 25 million dollars into

treasuries at four percent you make one

million dollars per year literally doing

nothing could you imagine that one

million dollars per year doing nothing

and you could have founding shares in

this company if you're not an accredited

investor stay tuned i'm hoping to get

accredited investors involved

as soon as uh maybe even december or

january we'll see

so treasuries are a very interesting uh

product to look at right now especially

if you buy shorter term treasuries like

the 6 or 12 month treasuries so that way

you don't actually

end up being subject to market risks

right because if you hold your treasury

to duration it doesn't matter if your

treasury on the open market becomes

worth less or more if it's worth more

you could sell it for more of a profit

if it's worth less you just hold it to

maturity and you get your payment

right so one of the safest places in my

opinion to go right now is treasuries

however treasuries come with an

opportunity cost and for personal

investors that opportunity cost might

not be the best decision it's the best

decision for house act because house

hack isn't designed to invest in stocks

it's designed to prepare to invest in

real estate so it makes more sense for

house hack to sit on cash or treasuries

however for personal investors

there's a good chance that it makes

sense to either sit on cash or recession

proof stocks which i'm going to talk

about three or four different stocks

here in just a moment

cash is beautiful because it increases

your access to opportunity now something

we talk a lot about in the stocks and

psychology of money course on real

estate on stock investing link down

below there's also of course a

zero-to-millionaire real estate course a

coupon code for these expires also on

september 30th so check those out down

below

in those programs we talk a lot about

opportunity cost and the cost of you

sitting on cash right now is actually

the lowest it's been

in decades that's because if you're

sitting on cash most people have this

impression that oh well cash is going to

get ruined by inflation that's only true

if you're buying coffee eggs and food

and and gas or whatever right that's

only true for the first maybe twenty

thousand dollars of your household

expenditures on an annual basis for for

food and miscellaneous items or maybe

maybe thirty forty thousand dollars

depending on what your rent is right

that is affected by inflation but the

extra cash you have above and beyond

that is actually investable cash so the

excess cash you have

becomes more powerful as stocks and real

estate go down this is why you can

combine number one and two you invest in

treasuries and you sit in cash and you

wait for opportunities either in the

stock market like the pain we're

experiencing now

or you wait for that real estate crash

that has already begun and is likely to

hit peak fear

in 2023 again the startup i'm creating

is not designed to start buying homes

now while where people would be catching

a falling knife

it's designed to go shopping when we hit

bottom and you can get founding shares

in this company just go to househack.com

read the solicitation

number three

your next option is recession-proof

stocks

recession-proof stocks this is

interesting let me give you an example

of what i believe is not a

recession-proof stock poll star see

every morning when the market is open i

try to do a fundamental analysis with

course members on either or both real

estate and stocks today we took a little

bit of a look at pulstar and boy we did

not actually have to go that deep while

polstar's production is low it's kind of

like tesla in 2015 levels its gross

margin has declined over the last year

from six percent to five percent now

sure some of this may be due to

inflation or employee costs going up or

commodity prices going up but the

reality is they lost over half of a

billion dollars in just the last six

months and that's not even including

their listing expense and conversion

fees between some of their other shares

i've already taken that out

they also have roughly as many current

liabilities as they have cash suggesting

they're potentially getting close to

running out of money which explains why

they just opened two new credit lines

with chinese banks for another 200

million dollars the chinese are very

smart they're not lending a blank check

here

the reality is companies with low profit

margins and operating losses are going

to face massive hurdles in a

recessionary environment and that's

because as stock prices fall these

companies ability to go to the stock

market to raise money will fall and

unfortunately if you're a company like

pulstar going to the market to raise

money is kind of exactly what you're

trying to do i hate to say it but they

literally tell it to you on page seven

you don't even have to get in pretty

deep of their latest foreign report or

report on foreign issues pollstar

continues to finance its operations

primarily through the issuance of equity

instruments and of course debt and other

things

well that becomes substantially more

difficult to do in a recession again if

you want to be part of these live

streams which i think are phenomenal

content every single day the market is

open in addition to all the lectures we

have use the coupon down below before

september 30th and join me like my goal

is during these painful times provide

even more value and we've got a whole

bunch of new lectures coming out totally

for free for course members as well over

the next uh few a couple months here so

stay tuned really excited about that

now

other companies that potentially face

severe risks in this sort of recession

or companies like open door which i

believe may go bankrupt if they have to

end up taking a 10 to 15 to 20 write

down on their housing inventory while

their current and and long-term

liabilities are equal to about the same

valuation of properties they had at the

beginning of the year but you take a 20

right down on your assets and your

liabilities stay the same you could be

upside down to the tune of one and a

half to one one to one and a half

billion dollars

and then you try to go access the market

with shares worth three dollars a share

you're gonna look worse than ape

or amc today but boy oh boy did i get

hate for selling ape ape ticker symbol

at eight dollars and nine cents

and now it's in the three dollar range

uh sorry

the writing was on the wall for it i

tried to give my warnings but all i got

was a bunch of people with uh ape in

their bio telling me how much of an

idiot i am for suggesting that an eight

dollar nine cent stock probably wasn't

worth eight dollars and nine cents and

there's probably going to trend towards

a dollar and boy oh boy doesn't that

suck for the apes i mean hey you know

what

whatever

uh

sorry my heart goes out to you but it

seems like every hate comment i get on

the internet these days is from somebody

with ape and amc in their bio or people

sending gorilla poop to citadel which

that honestly is actually kind of funny

uh anyway

then you have companies on the other

side of the spectrum that are actually

potentially making things worse for the

federal reserve

there are companies like american

express and tesla and enfase who

presently even though end phase is i

think going to have a hard time when the

housing market falls so a little bit of

an asterisk there but you're going to

have companies like enfase tesla and

american express who are still hiring

because they want to be growing in this

environment and they are still growing

in this environment that is remarkable

see even though these companies will get

smoked

during this stock market downturn

fundamentals should set them up for a

greater squeeze than any kind of squeeze

you could hope for by a short squeeze

these are real fundamental squeezes that

are being set up and in my opinion there

is an opportunity to deploy cash into

companies that in my opinion will

survive an earnings recession quite well

at the same time retail has not

capitulated yet and unfortunately the

fact that we're approaching levels uh of

being within four and a half percent of

the bottom of the market

could send signals to retail that uh oh

we might have to prepare to capitulate

because this pain is just going to keep

going

however so far retail has given us no

sign of capitulation instead retail

keeps buying in fact retail spent two

billion dollars flowing into the market

yesterday that's above the usual 1.2

billion dollar inflow pace and investors

who are generally more conservative over

at schwab and td really began ramping up

their purchases during the august dip

now we're in the september dip

anyway there's also quite a low

allocation to cash by retail investors

right now which kind of implies we could

be

a little bit more subject to

capitulation when and if prices keep

going down

the current top buy the dip stocks

according to retail investors averaged

out over the last five days and thanks

to vanda track are as follows

fedex netflix adobe twilio who just laid

off a ton of people moderna starbucks

who uh their sales are sucking right now

roku who for some reason during an

inflationary environment wants to get

into manufacturing tvs tesla alcoa

oracle next era block apple paypal

we have review levels going down which i

personally am actually kind of satisfied

by i like to see margin levels go down

because

you know i don't i don't always like to

pat myself on the back but i will say

i've been saying get out of margin since

november

of 2021 that's right that's the peak of

the market and the reason i said get out

of margin then because is because when

you are in euphoric times it's much

easier to fall hard

so you get out of margin during euphoric

times now that does not mean i am

advocating to get into margin yet

in fact i don't know if i will ever

advocate getting into margin i don't

like margin

but margin balances are falling which is

very very nice we're now under uh

steadily under there that 700 uh billion

dollar level in margin and hopefully we

see this decline back to six to maybe

550 those were levels that we saw before

the pandemic so

a lot of pain in this market the federal

reserve has flip-flopped again you

really have three choices cash

treasuries or buying the dip in stocks

if you're an accredited investor you

have the opportunity to get founding

shares of a company that i will make no

money in until your shares double

after an ipo how great is that in other

words when your shares double

and we ipo which means you can dump

that's when i get paid subject to severe

lock-up agreements which mean i'm stuck

on the ship for at least another four

years

which i want to be because i actually

think the ship is going to be like

the biggest ocean liner cruise line or

ever of a real estate company in america

maybe i have grandiose streams but well

i do uh but uh

real estate is uh real estate is is uh

is me so i'm very very excited and i'd

love for you to join with me uh join me

in househack.com if you are not

accredited yet fear not

i promise i am doing my absolute best to

get you in

uh in this cycle if you want to learn

more go to househack.com this video is

not a solicitation but househack.com is

and since the market is so disheveled i

too have made sure my hair looks nice

and disheveled

thank you so much and good luck out

there