FED TO CUT 6 TIMES ASAP

The Federal Reserve just told us that

the time for rate cuts has come and that

we might expect a larger rate cut in

September should the jobs data coming

out next week come in bad. And they

think it's going to be bad. Federal

Reserve just gave us a big warning and

this is from the uh meeting at the

Economic Club of Miami. You've got Chris

Waller who just gave a presentation.

They're just now at the end of it and so

I'm going to give you a heads up of

everything that was said. So far, this

has been going on for nearly an hour,

and I'm just going to try to keep this

short and simple for you. There's a lot

of really good information in this, and

he gives you some insight into how

they're coming up or thinking about the

labor market, which we all know is the

most critical part of this economy right

now. So, let's get into it. The time has

come to adjust economic policy. This is

like he plays World of Warcraft. The

time has come. The moment is at hand.

Inflation risks are limited, he says,

and we don't want to wait for the labor

market to deteriorate any further. Based

on the data at hand, the data is

stronger today for a rate cut that the

risks to the downside of the labor

market have increased and they could

happen much more rapidly than we are

prepared to handle at this point. We

already saw in July that job creation

was weak. Now, we've seen with revisions

over the last 3 months that it's even

worse. But here's something he said

that's very interesting is not only are

we worried about the revisions of the

last 3 months, but consider that when we

get the QCEW revisions, which will get a

preliminary estimate on September 9th,

he specifically pointed those out, and

then we'll get the final revisions in

the spring of next year, which is just

really late data. He thinks that after

accounting for revisions that are

coming, employment has likely been

negative for the last 3 months. and he

responds to other Fed members and who

say hey like you know what if what's

happening right now is just you know a

normalization because we have less

immigration and because we have less

immigration labor supply is going down.

He comes back at this and says who says

it is okay to have negative

break even rates. He says, "Everybody's

so worried about break even rates, but

when is it okay for us to just look at

the unemployment numbers and go, we're

probably negative. This is bad." And

when is it okay to look at that and go,

"Ah, but it's okay. It's not." And

that's where he says we should get on

with it. Not only should we go for the

25 basis point cut, but we should be

prepared to cut another, this is very

interesting, four to five times because

we need to get to neutral. He kind of

calls it the destination being neutral

and he suggests that uh it determines

well the weather sort of determines how

fast we're going to get there which is

basically the weather of economic data

and basically we're going to get to

somewhere around 3% on as a Fed neutral

rate and now it's just a matter of the

data which he thinks is likely to

continue weakening over the next few

months and therefore we should get on

with it. He also says growth for the

first half of the year is averaging

about one and a half percent. Yeah, we

got GDP numbers today, but they just

average out with the zero or negative.2%

GDP we had in the first quarter. So you

have that sort of pull forward and then

the you know the the import export uh

disasters of the numbers. Uh and they

that's why we have an average first half

growth of just one and a half%. He sees

in the third and fourth quarter, while

there's hope that businesses are going

to take their uncertainty and start

buying and going, "Look, we're not going

to wait forever. Let's just start

buying." He wants to be prepared that

there is a possibility that uncertainty

about the economy, uncertainty about

hiring, and uncertainty about artificial

intelligence is all going to end up

manifesting in a rapid decline in the

labor market way faster than what the

Fed is pres prepared for. and he

actually warns. I actually think

rightfully so, mind you. I completely

agree with every like everything he's

throwing down. I'm picking up. I'm like,

I mean, he's right. This has always been

my concern that JPAL would be caught up

being worried about inflation and then

all of a sudden the labor market poops

the bed and and then guess what? Then

all of a sudden you look and go, "Oh

crap, it's too late." Because Fed policy

operates with quote long and variable

lags. We know this. This is all old

news. It's kind of like the old news

that when we look at the lines on the

Q's today, can you believe how like

perfectly these freaking lines operated

today? In the alpha report this morning,

we called the Q's going to about 577

to 578.

And look at what happened. We ran

through my 576 line, ran up to 577, ran

up to within a penny of 578 before

pulling slightly back down at the close.

Really impressive, just like that alpha

report call that we're probably going to

lose 347 on Tesla, which we did. And

that Snowflake was likely to do well,

which Snowflake ended up 20% on the day.

You could look at just the chart from

here to here. Really good call in the

morning. We went through the earnings

call in our alpha report for course

members. Remember to use coupon code

>> bullish catalyst.

>> Bullish catalyst over at meetke

kevin.com and get lifetime access. But

let's keep going with the Federal

Reserve. So, continuing on here, he says

that when we start looking at estimates

or try to get an idea of what's going on

in the third and fourth quarter, we

could see that new orders are already

starting to show indications of

declines. While they're modest, we're

seeing modest declines over the last few

months and flat production. This at the

same time as postponments and hiring and

investments not good. He's also hearing

businesses suggesting, hey, you know,

layoffs may be coming. Now, we haven't

actually really seen those layoffs come

yet, but remember, once those beverage

curve normalizes, we'll be at 10%

unemployment basically overnight. It's

it's insane how fast it's going to

happen. Uh, and he is laying out this

warning correctly so because again, we

think Powell is going to be too late if

he's so focused on inflation. And Waller

is saying, look, tariffs are a tax. They

don't raise inflation. They're just a

tax. Yeah, consumers are going to pay

them. Yeah, businesses are going to pay

them. Yeah, exporters and manufacturers

are going to pay them. He thinks you

kind of get like a one-/ird one-ird

one-ird third division. One-/ird

consumers, one-third importers and

wholesalers, and one-third

manufacturers. That's how you're going

to get tariffs paid. It's a tax.

Everybody has to pay them. Uh the

government earns more money, people earn

less money, and in the middle there's

some lost money because you always have

a dead weight loss with government

taxation is what it is. But he makes it

very clear that the public sector labor

market numbers right now are really bad.

But ignore the public sector numbers.

Just look at the private sector. How's

the private sector doing? Well, it's

averaging about 50,000 jobs over the

last 3 months. He thinks that's

basically indistinguishable from

negative. That we might be at negative

right now. Which kind of begs the

question of like we should if he really

thinks that we should be cutting like

yesterday and that's probably why he

went for a July cut or he was just

applying for the Fed chair position. Who

knows? But anyway, he says the quits

rate right now is similar to the mid2010

levels and that people are not switching

jobs to go make more money. They like if

they're switching jobs, it's because

they have to. They lost their job for

some reason and they have to like people

don't want to leave their jobs right

now. He says that teenager unemployment

which is really cycllically sensitive is

also back to mid-2010 levels which is

not great because it was a slower

economic time. Now, something else to

consider is he talks about the quality

of payroll data. He says that there's

constantly been this concern over the

quality of data due to declining

response rates. And he says that be not

because businesses aren't responding,

but rather that they're responding

later. That when the BLS sends out

surveys, businesses have three months to

return data. About 5% of firms just

don't respond. But in the past, like 10

years ago, 75% of businesses got back

within 1 month. Now only about 60% get

back within 1 month. And that's why we

have revision one and a revision number

two as those surveys start coming back

and completing out the picture of what's

actually going on in the labor market.

And that's why he thinks the latest

revisions are so noisy, which they tend

to be around turning points, that we're

probably at a turning point in the labor

market and we're either, you know, knock

on wood, hopefully going to pick up, or

we need to look through inflation and we

should cut now. In fact, he goes as far

as saying, "I feel even more strongly

that we need to cut now than I did in

July and that conditions could

deteriorate further and quite rapidly.

And we do not want to fall behind the

curve. We know we are restrictive now.

We should cut in September. The next

data set will tell us how much to cut in

September. And we should anticipate more

cuts coming because we should anticipate

the economy is going to keep slowing and

there's going to be more of a slowdown

in labor. Don't wait and end up behind

the curve. Wow, that sounds like it's

going to be really bullish for real

estate. Uh but hopefully also uh any

kind of uh investments you're making. I

always hope the best for everybody

making their investments, but this gives

you an update on what Waller's saying.

It is possible he's just applying for a

job at the Fed. Uh, speaking of the Fed,

by the way, you have Lisa Cook arguing

that it was a clerical error in terms of

why she is in a place of Oh, um, yeah, I

I did get two personal residence loans,

but that was a clerical error and I

didn't hurt anyone. Oh, okay. Well, that

might not be the best defense, but I

guess uh we'll see how it goes. So,

anyway, this gives you a complete

update. Remember to go to me.com, check

out the alpha report, get access to that

every single day. the market is open and

our course member live streams so that

way you could get these delicious setups

as well like what happened today on

Snowflake Tesla and the Q's.

Thanks for watching.

>> 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.