Yikes! What the Fed JUST Said [FOMC Minutes].

hey everyone me kevin here the federal

reserve minutes just came out and so far

the market likes them what's there to

like and were there any red flags in

this and the answer is there were some

red flags in it and we got to pay

attention to these and

there's also some good news in it let's

get right into the actual document i've

already gone through and highlighted the

most important parts okay so uh first of

all market participants appeared to view

a moderation of inflation and slower but

still positive economic growth this is

really important okay a lot of folks in

the comments i see this over and over

again i think it's important to address

mostly because i think there's a

substantial misunderstanding here watch

my video as well this morning if you

haven't yet because we touch on this a

little bit more in depth but a lot of

folks are wondering how could you have

slowing inflation and still have

declining inflation that doesn't seem to

make sense and the answer is yes you can

because for example if apple makes 100

let's make that a little smaller if

apple makes 100 iphones in let's say

2021

and there is a demand for 110 iphones

this is demand this is supply then what

ends up happening is the price of these

phones goes up now you can actually go

into 2022

and you could end up having supply catch

up

in fact over you can actually get a

little bit more ordering going on you

could have 115 phones

and then you could have 114 phones worth

of demand in this scenario where supply

actually slightly exceeds demand you

generally won't raise prices but what

are you going to see you're going to see

net growth more revenue more selling so

no inflation while still having more

product being sold and more product

being produced now some of the other

comments that are going around about

this but how can inflation go down if

people keep spending more money it's

it's because of all the money we printed

do not forget folks because this is a

very common thing i'm seeing in the

comments of people like well we didn't

have this inflation problem in in 2009

10 11 12 15 14 15 16 17 18 19 you know

like now we've printed all the money

that's why we have this inflation

problem uh wait a minute we actually

started qe

in a substantial manner after the great

financial crisis in 2009 and never

really ended it until uh

2018 because we started trying to taper

but it never really worked we really

didn't taper until 2018 the market had a

hissy fit and the fed u-turned on it so

no we've been printing money for a very

very long time it's a precedent that

started back in 1987 with the fed

bailing out markets okay so these are

important things to learn yes you can

actually have inflation going down while

at the same time the market does better

which is very very very bullish for

stocks this is why i'm all in okay i

know people are like oh but the fed's

gonna have to raise rates to five

percent or six percent or seven or eight

percent and crush this economy i don't

know i don't see it neither is the bond

market but let's go through some more of

these notes market participants perceive

falling commodity prices okay we've seen

this a lot but they do also mention um

some of these things i'm just going to

kind of give you a summary they do

mention that this is actually a

potential risk right if commodity prices

are plummeting and that's kind of what's

pushing uh down inflation readings right

now well then if some kind of shock

happens to the commodity sector again

well then you could see the opposite

happen right you could all of a sudden

see this big push right back up uh where

uh where inflation goes back up because

commodity prices start rocketing back up

but so far lumber plummeting oil

plummeting nickel plummeting wheat

plummeting we're seeing them all plummet

uh it's pretty incredible all right

let's keep going here nearly all respond

this was a great this was bullish in my

opinion nearly all respondents

anticipated and ended up voting for the

75 basis point hike in july

but

most of them expect a 50 basis point

hike in september the market is

presently pricing in a 60 percent chance

that we're going to get a 50 basis point

hike in september the federal reserve is

also projecting that they expect to get

to a peak fed funds rate of about 3.4

percent based on their sap that's also

what the market implies now what's

interesting there though is the

following the projection for the u.s

economic activity prepared for the fed

was noticeably weaker in july than it

was in june i personally found that

really interesting because we did not

get a summary of economic projections

from the fed in july they skipped that

meeting and that's okay that we were

expecting them but we got a pretty

bearish one in june and they're

basically saying the economic data that

they got for july was even worse so

they're definitely starting to see that

slowing in aggregate demand which an

overall slowing of demand while at the

same time seeing supply chains improve

is very very important you always have

risk sides to the downside supply could

end up going to crap again china could

have lockdowns again it could you know

force tesla to raise money uh because

you know if china's locked down they're

going to have to but fortunately we're

not seeing that right now

knock on wood right so anyway uh you've

also got the potential that inflation

and commodities run up again and that

leads to more problems uh in fact across

the world the fed notes that they're

still seeing a broadening of price

pressure to core goods and services this

is for foreign markets and that is a red

flag as well long-term borrowing costs

declined for households and businesses

with uh

great credit and is still readily

available for folks i'm going to make a

separate video discussing this idea that

oh consumers don't have money anymore

that they're going to stop spending that

they just maxed out their credit cards

we'll make a separate video on that

because there's a lot of rumor going on

about this that the consumer is about to

get reamed i'm actually not seeing that

in the actual data people talk a big

talk but when it comes to actually

providing data they don't everybody's

got their opinion and that's okay

anyway mortgage underwriting standards

better than in the previous cycle now

commenting about real estate having

houses in the housing market with

substantial equity cushions left over

this actually ends up turning into a red

flag let's go ahead and jump ahead to

that red flag is that even though

mortgage standards are better and home

equity cushions are higher they believe

that it's going to remain appropriate to

once they hit peak fed funds rate to

stay at that rate for a while in fact

their phrases it would likely be

appropriate to maintain that level for

some time to ensure that inflation was

firmly on the path to two percent i

wrote housing here because i think that

is going to be a continued drag on the

housing market and off peak we're

probably going to see declines in the

housing market depending on the area

between 10 to 15 maybe even up to 25

percent nothing like what we saw in 2008

that's not what i'm expecting but i do

think we'll see some 10 to 25

price reductions off of peak which

probably will end up will probably end

up having been somewhere like march or

april and we'll probably see those uh

those lows sometime in early to mid 2023

so you want to be prepared for that

obviously i do have programs on building

your wealth with real estate investing

and stock investing building your wealth

whatever it is becoming an agent great

opportunity now check that out link down

below there's a coupon code expiring

august 26th

and then once we launch the series a the

price for this course is going to

skyrocket too so you may as well get in

before that all right so participants

also judge that there was a significant

risk facing the committee that elevated

inflation could become entrenched this

is a really important line so they're

giving us this red flag a few red flags

here right they're telling us hey we're

seeing the economy soften at the same

time commodity prices are going down

which is pushing inflation down but come

on but inflation could jump back up as

commodities go back up and the economy

is softening so our tightening is taking

effect though it will probably take more

time in fact they say many participants

remarked that in the view of constantly

changing nature of the economic

environment

monetary policies affect

lags so the economy's in a reaction lags

to what the federal reserve is doing

right and they've gotten pretty tight so

that's very very important so we've

gotten these red flags right we've got

red flags that potentially inflation

could go higher fortunately it's not the

red flag that once the fed gets to peak

they're going to stay there for a while

that's a red flag for real estate so red

flag on inflation red flag on real

estate red flag on supply chains right

now supply chains and inflation are

going in the right direction but there

are reasons it could go bad uh 10-year

treasury yields which generally precede

what the mortgage market does are

sitting at 2.9 percent we've actually 10

about 2.88 now we've actually ticked up

today rather than down we're having this

weird situation where it seems like we

want to hang out somewhere between 2.7

to 2.8 that means mortgage rates

sticking around somewhere between five

to five and a half percent three percent

larger than it was in the past so again

supply chains real estate inflation real

estate the one that is actually affected

the most

by the fed keeping a restrictive policy

for longer so if inflation does and

pulls something that looks like this

where it runs up really fast but then it

kind of like momentum bleeds out like

this

this long and drawn out decline is going

to be very bad for real estate but it

actually will probably be good for the

stock market and so that's why i do

think there's sort of a macro trade in

there i don't consider myself a trader

but i would consider myself a macro

trader

so uh okay it's no let's see what else

they have so we've talked about some of

the red flags talked about real estate

ah yes remember the expectation we were

just getting ready to talk about that

the fed has this job of making sure that

inflation expectations remain anchored

and one of the concerns that they had

was that they would lose credibility and

they talked about that again in this and

they've previously talked about this

many many times that if they lose

credibility on their fight to get

inflation down then they will fail

because that could be self-fulfilling

you could entrench inflation

expectations unanchor them and then all

of a sudden inflation stays high that

would be very very bad and this is why

the federal reserve has so frequently

come out and they do these these they

have these sort of days where they just

three of them will come out and talk and

say the fat has an un dying motivation

and and uh unwavering commitment to get

inflation down we will win you know and

they really talk the market down by

doing that but they're also doing that

because they have to it's part of their

job this though tells you what the bond

market thinks about inflation i'm going

to hide myself for a moment here the

bond market is uh predicting that

inflation should be trending down it's

not going to be straight down as you

could say here it goes through these

sort of peaks and troughs here but this

chart tends to move about three months

before inflation three to four months so

we just had inflation come down for july

and what you'll notice is if you go one

two three about three and a half to four

months right here three and a half to

four months before that july read what

do you get you get the bond market

saying oh we're seeing signs that

inflation is going to come down so we

might stabilize here for a bit for the

next report because this could be what

we get in september for august but then

we're really expecting to see some

notable declines here in inflation

towards the end of the year again this

chart here is trying to predict

inflation about three to four months

ahead of time and it's the five-year

break-even chart and it's also a way of

seeing what inflation expectations are

which based on consumers and based on

this so far are anchored and good now

what's also really remarkable is uh not

only the fed again referring to the

slowing particularly in the housing

sector but take a look at this

this idea

that uh it gdp growth will eventually

that a period of below trend gdp growth

will help reduce inflationary

expectations and pressures that's really

important because they're saying hey

actually this negative gdp report that

we just had could be a really good thing

because it helps us get inflation down

in addition to that we have this weird

thing going on where technically we're

in a recession but

the labor market doesn't say we're in a

recession so there's a dispute over this

and like biden redefining a definite the

definition of recession and all this

whatever that's all politics but what's

neat here is the fed is actually

thinking that ultimately gdp will end up

getting revised upward and in like a

looking backwards way we won't actually

end up being in a recession how weird is

that we could feel like we're in a

recession we could be told we're in a

recession and in the future no just

kidding we weren't actually in a

recession kind of interesting they are

starting to notice some signs of

softening uh labor growth in the job

market we talked about the housing uh

danger and then again here that is with

the committee facing a significant risk

of letting inflation expectations run

away so what do we have here in my

opinion we have 50 basis points coming

in september unless we get a terrible

cpi report in september the stock market

is actually enjoying this the stock

market sold off earlier today tesla was

down as much as two percent we're now

seeing tesla on the green we're seeing

qqq only down half a percent trying to

go green along with end phase here

target we did a very deep dive

fundamental analysis this morning uh

into uh reading between the lines of

what target actually said uh in our

course member live stream this morning

which i thought was really incredible uh

check out those courses linked down

below be aware this housing the longer

the fed stays at these high rates and

the longer that 10-year treasury rate

remains high which is really around 2.7

2.8 or above which is where it is now uh

the the more pain there will come to

real estate for longer real estate does

not move very fast it moves very very

slowly and uh that means that uh if if

this 10-year treasury keeps going up

you're going to see pain in the real

estate market for longer and it is an

opportunity for you to buy i highly

encourage you subscribe by the way

because i am starting a real estate

startup and my intention is to bring a

lot more real estate content back to

this channel the reason for that is i'm

going heavy into real estate once this

company launches i'll actually be

selling a lot of my stocks over time

over the next year and i expect to be

substantially heavier in real estate

again which is all in line with exactly

what i plan to do uh when i said so at

the beginning of the year for those of

you who don't remember on january 21st i

sold all of my stocks

i fielded q a for about an hour when i

discussed that i sold all my stocks in a

course member live stream i tweeted that

same day

sell

and then it took me about 10 to 12 hours

to put together a really good thorough

video which i ended up posting the next

day

and what's really incredible is sadly

some people are very very upset that uh

that that i that i sold and somehow

should have given them more of a heads

up and i thought my goodness you know

within 24 hours putting together a big

detailed video you'd think that would be

like enough right and no it's not people

got mad at me they're like oh you should

have told us earlier and i'm like dude

even if i like you you ended up selling

the next day you could have you would

have still been up like the nasdaq was

up from friday to monday so it's like

come on folks and look at how much pain

you had ahead i think some people just

honestly don't want to take

accountability for their actions i try

my best on this channel and i do feel

like i'm one of the very few people who

will actually take a stance

which unfortunately is very risky

because

if if people perceive your stances as

wrong more than it's right then then

then they feel maybe they can trust you

less i i don't believe that's the case

i've certainly made mistakes but i think

i've been pretty damn right on uh over

the

the last year in terms of the market

again yeah it hasn't been perfect no of

course not nobody's perfect but

uh i'm very very confident that uh being

all in on this market is the right move

uh mostly got in between march and uh

what may june

and uh a little bit more here recently

when we hit our old you know 318 level

on the qqq

and now i'm just waiting for the stock

market to do its thing and as soon as it

does i'm transitioning over to a lot

more real estates um which is also when

i expect the real estate market to kind

of be towards a lull or a low or both

anyway can't please everyone i guess but

i'll keep trying i'm not leaving still

here it's been painful but i'm still

here thanks everyone bye