WHAT the Fed **JUST** Did.

folks this is the most realistic and

optimistic and comfortable jerome powell

i have heard so far in the last eight

months

this was not a hawkish jerome powell

this was a confident jerome powell he

gave us clear guidance he told us this

is not going to be easy it's going to be

a challenge and we are going to try to

aim for a soft-ish landing but if our

plan doesn't work we're going to have to

screw you and raise rates more and the

market's going to suck

but here's our plan

we think there's a chance that inflation

peaked in march

what we're going to do though is while

we wait for confirmation that inflation

peaked in march we're going to raise

rates 50 basis points now 50 basis

points in the next meeting and 50 basis

points again that puts us around 1.75 to

2

soon

and that is still in the accommodative

direction remember if we had a paul

volcker and the fed believed we need to

paul volcker the economy you would get

rates above where inflation are or where

inflation is if inflation's at eight

eight and a half percent we'd have to

see rates at nine percent that would be

a rug poll federal reserve chair powell

says no we don't need or we're not even

considering larger rate increases he

killed the idea of 75 basis points for

now it's entirely possible that they'll

flip-flop in fact jerome powell and this

is something that i've been talking

about on the channel gave a very clear

and in my opinion very credible

explanation as to why they flip-flopped

last time

remember in the summer of 2011 exceeded

in the summer of 2021 while i was

campaigning for governor i remember the

cpi reports coming in low

and it wasn't until the delta variant

that cpi started coming in substantially

higher

and so that's what jerome powell was

outlining when he said look we were in

sync with the data in the middle to end

of last year we had weak job reports

inflation was trending down and it

really wasn't until post delta late

october that we got strong job reports

the stock market was going euphoric we

had strong eci readings employment cost

index readings we had high cpi and then

they had to pivot and so they've given

us a very clear path for this pivot

which i really appreciate because

remember what jerome powell's his number

one goal is his number one goal is to

make sure that inflation expectations

remain

anchored there are two ways you can

measure this you should know this by now

if you watch this channel regularly

number one consumers university of

michigan consumer sentiment survey what

has that been showing it's been showing

stable but elevated inflation

expectations what are the five-year

break-evens telling us what that is what

is the bond market telling us about

market inflation expectations

stable to declining compared to the

peaks that we saw in march obviously

still elevated from you know pre-war era

this would make sense so i believe that

you had a jerome powell in january that

was very much

we've lost control we're like we've lost

the plot we're way behind uh this is a

big problem and we have to shift that

pivot has now caused about five months

of hell in the stock markets and jerome

powell has regularly been asked this and

he dodges this every time he dodged it

with sarah eisen he dodged it today he

regularly dodges the question of like

hey well do you need stocks to be lower

to reduce demand because his tools

affect demand and the question here has

to do with the wealth effect if people

feel poor they'll spend less money well

he says you know his response is

generally well we look at everything

credit spreads debt the equity markets

which is stocks and that's just part of

it okay fine so if the stock market goes

too euphoric who knows maybe jay powell

can come out again in a few weeks and go

oh wait a minute because that's

literally what happened after march and

i want you to remember that after march

the market rallied after the uh the

federal reserve meeting and

it rallied for two weeks to levels where

we had almost retraced between 60 to 80

percent of of market losses from

all-time highs and we're like

what should we really be back to 60-70

percent of all-time highs to 80 of

all-time highs

probably not sure enough jay powell and

the whole fed team come out and they

start talking about how uh we're gonna

get a little more aggressive and bring

the market right back down so you know

they're watching the markets you know

they're watching valuations

all right let's talk a little bit more

about where his confidence is coming

from though his confidence seems to be

coming from this idea that the economy

is extremely strong and it's positioned

to handle this tighter monetary policy

and again their goal is to set these

expectations by talking directly to

people and markets that we are going to

get inflation back down now hopefully it

goes according to plan and we start

seeing more data come in that inflation

continues to trend down jerome powell

wasn't hawkish about this he was

actually really realistic he observed

hey we've already had two months in a

row of core cpi coming down we're

already starting to see some signs that

inflation is coming down as long as this

is consistent we're on a good path for a

soft landing if we get a big miss on

inflation it comes in hot well then

obviously we would expect another fed

pivot he's been pretty dang clear here i

don't think we could ask for more than

this however drum powell right now does

see and this is actually positive

household spending and business fixed

investment still strong still excessive

savings on consumer and business balance

sheets this is very unusual in a

recession right this is a very good

thing now of course in inflation he does

say inflation is much too high and we

understand the hardship that this causes

to folks again he's signaling to the

world we are going to get inflation down

and this signal is a way of setting in

expectations as soon as you get

expectations unentrenched you end up

getting a paul volcker jerome powell

actually expressed his admiration for

paul volcker and in the minutes he was

talking about uh like literally the one

or two minutes uh he spent talking about

paul volcker the market like quickly

turned red

uh at least in sort of the minute

candles and it's funny because it's like

people he'll paul volcker probably algos

here paul volcker that's not what we

want to hear coming out of jay pal okay

because paul volcker he did force a

recession but he forced a recession when

inflation expectations went unanchored

we have anchored inflation expectations

right now which is really good and this

is why jay powell thinks we are going to

see inflation expectations flatten out

and that we've already seen evidence of

flattening and peaking but one to two

months is not enough we need more

evidence now i love this he makes it

clear

no wage price spiral we thought we had a

wage price spiral in january but that

data actually ended up getting revised

in february

uh with with more accurate data no wage

price spiral wage price spiral is really

usually evidenced by wages going up

faster than the rate of inflation uh we

had that in january that was a panic

mode right there because if we went to

wage price spiral the fed would rug pull

us and he says that he literally says we

cannot allow a wage price spiral because

that that's worse that's and like

you could have regime collapse if you

have a wage price spiral and obviously

nobody wants that so j-pal is right like

we got to get expectations and

everything under control so that we

don't ultimately have regime collapse

when he's asked about a recession uh he

thinks that look the economy's doing

very well good time to be a worker and

he says we have a good chance to restore

price stability without a recession or

severe economic downturn i thought this

was interesting that he kind of

mentioned the severe economic downturn

part because he's kind of saying like

but if we do have a recession it's gonna

be minor

you know it's gonna be like a paper

recession which we've sort of been

talking about the fear is that a paper

recession could freak consumers and

actually drive us into a deeper

recession right labor market obviously

participation uh up slightly but still a

large lack of uh workers we're at 3.6

percent unemployment we have 11.5

million job openings as we saw from the

jolts report yesterday that with six

million unemployed people means we have

about 1.9 spots per person now i

personally think of this as like the

excess demand problem that you have uh

in in real estate where you have excess

demand for jobs just like you have

excess demand for real estate so what do

you do you raise interest rates think

about real estate and then look at how

exactly it relates to jobs with real

estate you increase rates what do you do

well you you take demand that's in the

way excess you drive excess demand down

that doesn't necessarily mean prices

have to go down right that would mean

demand has fallen below supply levels or

supply levels have risen but you drive

that excess demand down to a to a

balanced level the same exact thing is

what j-power was trying to do for wages

in fact it took him a little bit to say

it but somebody asked like what's the

ideal level that 1.9 ratio and i'm like

one that's obvious it's one and uh it

took jay powell you know a minute or so

to get to it but he's like yeah i mean

like a few years ago we were at a

one-to-one ratio

and we deemed that to be pretty

appropriate at the time of course

there's a matching effect like if you

have the wrong people in the job market

who don't have the skills for the

certain jobs you might see a different

ratio there but obviously the the point

of markets is to have a balance between

supply supply and demand uh that's

obvious so so no surprise there that

when we're so hot on that ratio 1.9

times the openings per workers available

we have room to bring that down with

higher rates we have room to bring that

excess demand in this real estate market

down and we've already

like flushed out so much cash out of the

stock market it's no surprise to me that

we're basically bouncing perfectly off

the zero percent fib here because that's

the bottom like how many more

indications do we need this is the

bottom now who know i can't guarantee it

you know you know

a sack of rice could fall over in

biden's office tomorrow and he could go

crazy and uh and and the market could

crash more you just have no freaking

idea but this is now the fourth time we

are bouncing off the 318 uh 5 level on

the qqq and if you don't see that as a

signal i don't know what more you need

okay that's all i gotta say

but anyway

it is possible obviously that uh this

here from the federal reserve could lead

to some uh risk on attitude here because

the fed is giving us a very clear sense

of comfort and stability and that could

lead smaller stocks like we're seeing

now sofi robin hood and small caps to

actually run as you get a risk on

uh momentum move just be careful i think

now is the time to kind of get into

stocks but if they if we start retracing

back fifty percent again seventy percent

again don't get surprised when the fed

comes out and starts talking hawkish

again if it happens before inflation

actually comes down jerome powell

obviously makes it clear that we're

still going to have uncertainties coming

from china from russia

and talks about how his tools work on

demand not on supply there's nothing

they can do to bring oil prices down

there's nothing they can do to bring

wheat prices down but what they can do

is affect demand now what i thought was

really interesting here is he made it

clear to us that they're not paying

attention to the top line level of

inflation they're paying attention to as

expected

core cpi

used car prices going down core cpi's

going down these are the things we want

to pay attention to that doesn't mean

it's not painful that food and energy

prices are high but the fed is judging

their efficacy on core prices going down

okay balance sheet runoff they kind of

randomly it sounded like pick june 1st

doesn't really matter uh very uncertain

the effect of the balance sheet but

again it's going to take 19 months for

the balance sheet to even start

affecting the markets in terms of

tightening because the reverse repo

market has over 1.8 trillion dollars of

cash uh and they're only going to

moderate or taper this down at about 95

billion dollars after three months you

know we gotta we gotta ramp up to 95

billion dollar taper and so uh that

that's at least 19 to potentially 20

months that we have before you actually

start seeing the tightening effect of uh

the balance sheet runoff now it's an

oversimplification to do this kind of

math like this but it's

a rough like roughly if you're going to

approximate it's is actually a pretty

good approximation so don't worry so

much about the taper focus more on the

trajectory of rates and specifically

core inflation and core inflation

expectations those are going to drive

the fed this in my opinion was a

phenomenal phenomenal fed meeting uh

this was the most coherent and

controlled that i've seen jay powell and

the most

certain he has seemed i'm happy about

this and i wouldn't be surprised if it

continues to push a risk on rally

in which case if you want to learn more

about my perspectives whether it's in

the stock market or

the real estate market make sure to

check out those programs on building

your wealth a link down below now uh

there is a coupon code that is expiring

on may 16th that'll be our largest price

increase ever because of all this

inflation that's going on the prices are

never lower so uh and they haven't been

for the last four years that i've had uh

various programs and have been adding uh

adding content to these so uh check them

out you get lifetime access to whatever

content gets added we got a couple of

sweet real estate videos coming out as

well for the real estate course and the

wealth course is getting a bunch of new

access so super excited anyway that's

the update for you on jpap