WTF: What the Fed **JUST** Said

me kevin here the federal reserve

minutes just came out and the stock

market isn't quite sure what to do with

it but i've got some insights for you in

terms of what was said and importantly

folks what was not said and some of it

quite frankly is a frustrating first of

all no mention not a single mention of

the word recession don't worry the stock

market might be pricing in a 70 to 90

chance of recession more than 70 percent

of adults in the united states might be

expecting a recession in 2022 but don't

worry it has not risen to the level of

the fed actually getting out of their

white castle and going oh damn we

actually might be in a recession yeah

nope no mention of the word recession

fortunately though there was also no

mention of the word transitory and

unfortunately there was no mention of

the word pause in other words pausing

rate hikes there were six mentions of

tighter financial conditions and 90

mentions of inflation which is pretty

wild but there was something that kind

of pissed me off right at the beginning

of the notes we're going to talk about

those because i'm gonna pull them up and

i'm gonna show you the notes right now

right after i mention that folks

we gotta get into the notes that's it

what were you expecting i just wanted to

get right into the notes okay i don't

know what you were expecting after the

release of higher than expected

inflation data okay this is the section

i'm gonna tell you but remember remember

what jay powell told us during the last

meeting he told us that we are expecting

75 basis point moves to be rare to our

face he told america 75 basis point

moves like this they're going to be rare

they're going to be rare but at the same

time even though j-pal is saying they're

going to be rare in the minutes of the

meeting so in other words in the meeting

they said that there was a considerable

probability of 75 basis point moves at

both the june and july meeting

considerable probability of 75 basis

point hikes which is what the bond

market's pricing anyway so it's not that

big of a deal but still

there's a difference between

considerable probability of 75 basis

points in june and july and hey guys

we're raising rates 75 basis points but

don't worry this is gonna be rare dude

this is literally like transitory all

over again except now we're using rare

like what is it with the english

language and wanting to try to confuse

us i don't know it really bothers me but

you know what doesn't bother me is that

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programs the prices do go up over the

time you can use the wayback machine and

see oh damn kevin's not just saying that

the price actually does go up hundreds

of dollars over time and we're releasing

a huge batch of lectures at the end of

this week let's keep going through the

notes here continued expectations that

inflation would decline notably that is

market-based expectations of inflation

are that inflation was going to continue

to decline notably now they're not

terribly wrong about this the break-even

rates right now for treasuries are

pretty low uh in fact take a look at

this i'm going to drag them up right

here this is today the five-year and the

10-year break-even rate for inflation

going back you can see at the bottom

here we've got may here we've got june

over here and here we sit right here we

have taken these inflation break evens

and basically gone straight down on both

the 10-year and the five-year i hate to

say it but for the people thinking that

inflation is the big deal here it

doesn't appear to be at least not

according to the bond market what

appears to be more so the big deal folks

is the potential that we're going to

walk right into a recession and uh but

you know the fed doesn't even want to

mention the uh the r word

all right let's go ahead and take a look

at some of the other notes that we have

here so we've got a section i'm just

going to really show you the important

ones inflation was expected to remain

high in the short term but fall back to

two percent consistent with their two

percent target in the long run i really

doubt this anytime soon especially since

we've we're going to have a lot of uh

residual winds coming in from owner's

equivalent rents as mortgage rates go up

more people tend to go to rent and that

could squeeze rents up in some areas

though rents have started coming down in

some super hot areas as less people are

potentially moving uh in general now uh

okay we've got a little bit of weakness

and retail sales in may home sales

starting to move down a little bit these

are all expected gdp growth appeared to

be rebounding after a decline in the

first quarter now i find this really

interesting because if you look at the

federal

reserve bank of atlanta and their gdp

now forecast you actually get a very

very different story in their gdp now

forecast they're suggesting that we are

basically in a recession right now which

is i think what a lot of us feel a lot

of us as americans a lot of us is just

investors or people we are feeling the

following folks this right here this is

the federal reserve bank of atlantis

estimate and the zero percent gdp line

is right there and the fed thinks gdp is

actually doing this down to somewhere

around that 2.1 negative percent

territory so a little in contrast there

with the fed credit car credit remained

widely available especially for those

with higher credit scores this was

interesting credit balances credit card

balances at commercial banks rose in

april at the fastest pace seen in recent

decades this by the way i wanted to show

this chart this is a chart of inflation

mentions we are now at the highest level

of inflation mentions at any of the fed

minutes

the level of real gdp would still expect

it to remain well above potential i

don't know if they're just smoking

something funny or if they're lying to

us i i you know i still haven't quite

figured it out but i take it with a

grain of salt because we're definitely

seeing spending growth decline and

that's why we're expecting earnings

growth to decline at companies now this

was interesting they saw an appropriate

firming of monetary policy and

associated tightening and financial

conditions as playing a central role in

helping address this imbalance in

supporting the federal reserve's goals

well the problem with tighter financial

conditions is really we the market over

the last like month here has actually

been pricing in looser financial

conditions not tighter take a look at

this this is the 10-year treasury yield

and what do we see it's gone from three

and a half percent which is a tight

financial condition the 2.9 percent i

mean that's a massive plummet in the

10-year treasury yield so kind of weird

that you know i mean we have this in

june this was this meeting happened here

and so in other words let's align this

okay this meeting happened in june and

there they're like yes yes the market is

doing our work for us this is wonderful

the market is on the same page with us

and they're helping us see they said in

helping address this imbalance they use

the word helping well apparently the

market's like yeah no fu fed

we ain't helping you do your job anymore

because you're pushing us into recession

we're done helping you the problem with

this is is this declining chart right

here the 10-year treasury yield and

looser monetary or looser financial

conditions is that potentially going to

motivate the fed to take out the ladle

and bend us over onto the table and

start smirking us it's quite possible

now especially since take a look at this

we had expectations that the jolts

numbers this morning would come in at 11

million but instead we beat expectations

we had 11.254

million job openings that is more than

expected it is a beat and so clearly the

labor market is continuing to remain

tight which kind of starts creating

problems because the fed wants to see

those job openings come down

and they didn't at least in the last

measure so again more room for some

spankage anyway this is what the federal

reserve said check out the coupon code

down below take advantage of it before

the price goes up yet again and i know

people are like kevin why do you always

raise the price you're contributing to

inflation because there's so much demand

baby let's go