wtf happened - federal reserve danger

okay what the hell happened yesterday

all right I was flying across the

country looking at real estate like I

usually do and what happened well we got

jobs data which initially was great all

of a sudden 10-year treasury yields fell

stocks are going up and then all of a

sudden everything you turned the market

crashed towards the end of the day

everything went to crack and now I'm

gonna get to College Kevin thinks you

know half percenter cloud is a crack

it's not even gonna address it okay I

had fun on my little Tim pool podcast

he's a great guy so what do we have over

here all right 10 reasons why treasury

yields skyrocketed yesterday and then we

need to get into a Nick T piece here

Hollywood strikes and the yellow

corporate bankruptcy cut 54 000 from the

August jobs without that non-farm

payroll would have been closer to 240

000. we have trend of 187 000 okay and

that's pretty including pre-covet we

need to be below that to convince the

FED that we're good we've reached a high

enough level that's what Jerome Powell

told us at Jackson Hole when you add

these back in you're at 240 hotter than

expected obviously we expect a downward

Revision in the future but a little

problematic the decline in average

hourly earnings in August was probably

temporary because there were fewer days

in August and the way they calculated it

took some of the benefit of the decline

in pay in August away the slight rise in

hours worked in August gave Credence to

the Chicago PMI report which basically

suggested oh the economy is actually

doing pretty decently and might actually

start improving here which also

reiterates why the Atlanta fed real GDP

now number is I think it's now at um

said now gdpa 5.4 or something uh 5.6 as

of September 1 after the jobs data

it's like on one hand the economy is

doing so great on the other hand

everything's gotten so expensive and

consumers are pissed and feel like

they've hit a wall uh and then here you

are having the suits telling you oh nope

everything's great see look at GDP it's

killing it no recession here until

something breaks obviously the site rise

in hours worked in August gives Credence

okay yeah I talked about that already we

got ISM Manufacturing saw an increase we

got money manager saying uh uh you know

basically hey we're going to be hired

for longer so you know let's price this

in and this is why we're seeing yields

rise uh mortgage origination picked up

we've got uh oil Rising which is an

inflationary pressure and on top of that

we've got uh Loretta Master talking

about oh it's still too high all right

then we've got Nick T over here so we're

going to analyze what Nick T is saying

as well obviously but

let's understand a few things here first

it's really important to understand that

the stock market right now really wants

to see a finish to the rate hike cycle

we're probably going to be higher for

longer and as long as nothing breaks

yeah there's no reason for the FED to

cut rapidly they're going to keep the

boot on our neck for as long as possible

certainly at least to keep our

expectations low that inflation might

rise right that's important so what do

we have here from Nick T steady hiring

robust consumer spending offer latest

evidence the pandemic's effect of the

unprecedented basically all the money

printing right uh you know suggest that

the economy is still surprisingly

resilient fine I actually think the

title is very interesting resilient U.S

economy defies expectations this is put

together by Nick t uh and so what he uh

talks about in this article is how look

the economy is is not trending towards

recession at least at this point and

something could break but one of the

reasons we're seeing a lot of extra

money circulating in business still boom

is the inflation reduction act remember

that included about 383 billion dollars

for energy spend which Goldman Sachs

says because of loose treasury

interpretations is probably going to be

more like 1.2 trillion dollars you've

got the chip sacked which will probably

also be inflated to like 200 billion

dollars of spend boosted federal

spending construction's up uh you know

basically the economy is still doing

pretty decently I mean look at the end

over here if you go to the end of this

particular article they're like wait a

second here uh recent data I've been

very positive for a soft blending view

lower probability of recession again

obviously in the event something breaks

all that goes to poopy doopies but

what's happening well one of the reasons

well actually I mean all of this

combined suggests that we had a market

yesterday that said damn we thought we

finally got a good jobs report we

thought we finally got a weakening

report that implied the FED might be

done and Jerome Powell told us we needed

to see this where did he tell us this

right here Jackson Hole he said

additional evidence of persistently

above Trend growth could put further

progress on inflation at risk and could

warrant further monetary tightening but

in addition to that we expect labor

rebalancing to continue evidence that

tightness in the labor market is no

longer easing could call for a monetary

policy response well unfortunately the

jobs data we got looked like easing

then when we actually added back in the

strikes and the Yellow trucking

bankruptcy and the fact that uh the the

wage pressures in August were

potentially reduced because of fewer

days on the month

uh working days all of a sudden people

are like wait a minute

when we actually adjust these numbers

things are actually still hot at least

until they get revised down in the

future that means we might get another

rate hike and so again the initial

impression was great then people

remembered what j-pow said which what

did Jay pal again say evidence that

tightness in the labor market is no

longer easing could call for a monetary

policy response that started pissing off

the market right there Nick T actually

put it pretty eloquently look at Nick

T's other piece here job gains East and

summer months unemployment increased oh

it's a Nick T just retweeted this piece

but somebody else wrote it hiring slowed

this summer however the readings from

Friday's jobs report uh would would

won't resolve the debate about the

November to December date or uh rate

hike and the reason for that is even

though the unemployment rate went up

reflecting more Americans seeking work a

higher participation rate

uh more employees are holding on to

workers this is a pretty normal number

this is not a weakening number the

yellow bankruptcy the strike without

those you'd be closer to a 240 000 job

gain and Jerome Powell again reiterated

that if we didn't see loosening we would

hike more such rebalancing remains

incomplete he says you have mixed

signals on consumer some companies like

Macy's Best Buy Home Depot suggesting

there's some pain Dick's Sporting Goods

but people are still kind of like hey

things aren't really really soft over

here in fact you've got a company like

this one which is a sawmill equipment uh

company and they're like hey this is the

strongest it's ever been we hear people

talking about a pullback in investment

but we haven't seen it

and this is where you kind of look at

The Tale of Two Cities of what's going

on in the economy right now you have

people like this Uber driver who's

trying to get a job but he can't get a

damn call back which is a pisser to

people who want to provide more value

and want to work and want to make more

money and want to be successful

but they can't get a job why because the

people doing all the spending right now

are the corporations and those aren't

even people okay these entities they're

doing the spending that's why we see the

Nvidia boom that's why we see Enterprise

AI boom it's not because consumers are

spending more and they're doing perfect

it's all the Enterprise that's doing

well they're propping up GDP so as

they're propping up GDP the FED then

looks and says oh you know hiring still

stable it's not weakening the way we

thought it would okay well I guess we're

gonna have to stay higher for longer

that just ends up hurting the normal

person even more along with the fact

that oil went up two and a half percent

Brent's almost at ninety dollars and the

10-year treasury yield went up nine

basis points to 4.18 it's crazy

in other words

big bottom line out of all of this is

there's so much confusing data when

you're trending either out of a

recession or into a recession that

nobody freaking knows the reality

appears to be a simple bottom line we're

going to have higher rates for more time

that enables us to buy the dip more

unless there's some kind of Black Swan

that destroys everything which appears

unlikely the economy seems too strong

for that but nobody knows that's why we

call it a Black Swan we don't know what

could happen uh and on top of that it's

the individual consumer who is feeling

pressure their wages haven't gone up as

much as uh inflation has gone up even

though wheel rate real wage growth has

gone positive it's been nowhere near as

much as we have needed

and when you factor all of this together

you start saying Okay so

basic bottom line the rich are getting

richer and the poorer get poorer an

increasing wealth Gap that's literally

what you have higher for longer is

increasing wealth Gap apple is able to

borrow at four percent for a 10-year

mortgage so to speak I'm using mortgage

as an example you know they'll sell

bonds they're able to borrow a 10 or at

four percent for 10 years and then they

take that cash and can throw it into

money markets and earn five and a half

percent there getting paid to borrow

money they're getting paid to do their

capex

on the backs of workers who are

suffering more under hire someone

however supposedly the FED also realizes

this and wants to avoid increasing pain

so we're just in an era of uncertain

and frankly usually in areas of

uncertainty there's some of the best

times to invest in songs they just have

to be choosy with wearing listing thanks

so much for watching we'll see in the

next one why not advertise these things

that you told us 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 financial analyst and YouTuber meet

Kevin always great to get your take