PREPARE for the Fed's Coming Rug Pull | Banking Crisis Response.

us now talk about the Federal Reserve

inflation what's going to happen

tomorrow and what Goldman Sachs is

projecting this is a pretty interesting

piece we're going to be going through

from Goldman Sachs but first Canadian

inflation kind of interesting uh big

drop compared to the estimates uh

Canadian CPI year over year for February

came in at 5.2 versus the 5-9 previous

and the estimate of 5'4 so a nice

softening we want to see that in the

International Community just like we

want to see that at home it looks like

we had month over month come in at 0.4

versus the 0.5 previous and 0.5 estimate

it's now some are arguing that we're

going to be Crossing base effects which

is where we compare to high levels of

inflation last year and that's why we

could potentially be getting staggered

down inflation reads going forward but

look I don't care what it is that's

pushing inflation down I'd like to see

inflation Trend down because it's going

to help us convince the Federal Reserve

to do what of course to pause so let's

talk about the Goldman Sachs projection

for tomorrow this came out yesterday and

uh this is the forecast from Goldman

Sachs I was reading this last night and

this is the forecast from Goldman Sachs

they are calling for a Federal Reserve

pause tomorrow tomorrow's also coupon

expiration day guaranteed best price

prices will be going up after that for

those great programs on building your

wealth link down below zero to Mill in

stocks and psych most popular right now

so what do we got we expect the FED to

pause at its March meeting this week

because of stress in the banking system

now that's interesting a lot of folks

are saying the stress in the banking

system is exactly why the FED would

pause and that makes logical sense

however I personally and this is my take

I'm of the mindset that the FED doesn't

actually think that rates uh would would

really affect solving issues at the

banking sector in other words is a pause

really going to change anything for the

banking sector let's put it this way

remember what affects Banks right now

what affects Banks well what affects

banks are the value of treasuries now

yes the FED action could drive the value

of treasuries mortgage-backed Securities

agency secures whatever all of these

could be affected by the fed's decision

tomorrow yes but they could probably

have a similar effect with their talking

in other words I don't think the base

fomc rate is going to be really

necessary for the FED to try to

manipulate the banking sector at all I

think they can do that with their

talking they're yapping and their

projections so I actually think the FED

is going to go for we need to maintain

the inflation fight we do that with

rates uh banking we we solve with the uh

buy the FED pivot facility Oop There we

go by the FED pivot facility that's not

actually what it's called but that's

what we nickname it buy the FED pivot

facility that's how they solve Banking

and so that's my take as to what they're

going to say tomorrow and really

treasury yields have come down so much

that the value of a lot of this agency

debt has actually gone up because

remember when uh

sorry let me rephrase this when treasury

yields fall the value of the bonds goes

up one of the big issues that you've had

at the banks is this plummeting in the

value of their bond portfolio their held

to maturities and they're available for

sale Securities well both of them have

been plummeting in value and as people

take money out of the banks they have to

sell something that's worth less money

now so in other words the banks like

crap you know we're losing asset value

while being forced to basically

liquidate this sucks but because the

banking crisis started we've actually

seen treasure yields plummet Bond values

rise which actually reduces some of the

strain on banks so in other words you

could be in a situation where the FED

looks and says look things are getting

better the banks solve the value of

their bonds rally Financial conditions

are still tight even though bonds

rallied and yields fell a little bit

we've got an inflation fight to worry

about and that's the top priority for us

because there's nothing worse than

losing control of inflation I really

expect the FED to say that now of course

I want to go through the Goldman Sachs

argument here but just to finish I

suppose my own take a look at this right

here these are the and it's straight up

from Goldman Goldman Sachs Financial

conditions index where are we as of this

morning still stable stable and high

much higher than where we were in

January and Jerome Powell was satisfied

with that bump right there that's the

crazy thing to think about for a moment

when that hot jobs report came out in

January Jerome Powell was like oh well

Financial conditions have already

tightened he basically rolled it off the

cuff to say ah well Financial conditions

are tight we're Gucci That was down here

we're up here so things are actually

tighter now uh then over here this is uh

the five-year Break Even inflation rate

this is in my opinion what right here is

going to reiterate the FED going for 25

tomorrow the five-year break-even rate

on inflation ticked up again uh into

this morning here last night into this

morning that to me is telling the FED

okay we got we got to stay strong

because if we lose control of inflation

expectations then we're really screwed

and uh we don't like getting screwed

here's that inversion of the yield curve

this is the 10-2 we're looking at

obviously the steepening is usually a

sign of something breaking which is

exactly what happened uh but uh let's uh

let's you know that's my argument right

but let's let's now that I've poisoned

the well I suppose let's go into the

Goldman argument so they say uh that the

FED should take a pause in the inflation

fight uh but that should not be a

problem because bringing inflation back

to two percent is a medium-term goal

says Goldman Sachs so in other words we

have time which the fomc expects to

solve only gradually over the next two

years I don't know where the are getting

this two-year idea from uh that seems a

little wild to me because the Federal

Reserve in the past has taken the

approach of opportunistic disinflation

which is where they've literally waited

20 years to get down to two percent but

whatever the inflation problem actually

actually looks

less urgent now than last summer again I

personally disagree with that because if

the FED loses control of expectations

then we're really screwed but anyway and

that's because near-term expectations

have fallen sharply that is true

long-term expectations for inflation

remain anchored true moreover the link

between a single 25 BP rate hike and

future inflation is very tenuous that's

also true how much is our 25 BP hike

really going to make a difference but

you could say that same thing in both

directions right you could say hey

what's the difference between 25 BP as a

hike it's not going to hurt anything

just like you could say hey why another

25 is it really going to help you could

go in both ways with this right now I

see your comments here somebody says

Banks need cuts to survive well not

necessarily in fact Banks what they need

is the value of their bond portfolios to

go up the value of their bond portfolio

is just skyrocketed through the banking

crisis now yes I understand it

skyrocketed from a hole right it's like

it plummeted and then it's up it's like

that Meme that we see where everything

plummets and then it goes up a little

and we're like really happy that did

happen uh now of course even Elon Musk

is chiming in on this which this is

generally a negative indicator in my

opinion for for Tesla when he acts like

this uh which is okay it's it's a it's

not this is not to to say that Elon

shouldn't I'll I'll take it uh it's

actually just a little bit of a leading

indicator when he starts complaining

about raids it's a sign uh that maybe

auto loans are getting a little tougher

to manage but take a look at this so uh

this right here is uh Twitter uh Bill

Ackman says the Federal Reserve should

pause on Wednesday we have had a number

of major shocks to the system three Bank

closures in a week week wiping out

equity and bondholders the demise of

Credit Suisse and the zeroing of its

Junior bondholders notably bondholders

bearing losses is a major problem

notably bondholders okay it's a major

phenomenon fine whatever uh so then he

talks a little bit more here about First

Republic and the effect about this

meaningful tightening that we've seen is

not yet visible fully visible he's

basically talking about the lags of raid

hikes here now Bill Ackman is convinced

the Federal Reserve studies his tweets

so he takes in my opinion he puts on

this sort of like God complex uh and

it's like fed you must listen to me we

don't yet know where all the losses are

what if more there are more failures of

other Banks which honestly there

probably will be there are too many lag

effects and yes inflation is still a

problem but Powell can do that by

pausing and making it very clear that

this is a temporary pause

no no it's not gonna happen it's

absolutely not gonna happen and I'll

tell you my opinion as to why and I'll

take the L I I'll die on the hill if I'm

wrong it's fine but I'm gonna make the

argument here okay anyway Elon replies

to this and says no we don't need to

pause we need to drop the rate by 50 BP

on Wednesday it's not gonna happen

either and I'll explain why

so uh here's the thing the Federal

Reserve for the last year has said we

need to prevent the mistakes of the

1970s because in the 1970s under Arthur

Burns we had a start stop mentality at

the Federal Reserve which was this idea

that uh okay things are getting better

let's pause okay uh uh oh oh oh oh

inflation's coming back okay let's hike

again oh oh okay okay it's calming down

again okay let's pause that created Paul

volcker that is literally what Jerome

Powell wants to prevent even though

people say drum Powell wants to be a

Paul volcker and that he's a wannabe

Paul volcker I actually don't think he

wants to be a Paul volcker because

here's the thing

let's put the bias hat on for a moment

if you're Jerome Powell what do you want

I will make it Crystal Clear what you

want if you're drone Powell inflation to

go to two percent with as little job

loss and damage to the economy as

possible and ideally no recession

simple right he doesn't need to pull

vocoros if inflation goes away because

Paul volcker is the equivalent of pain

and Jerome Powell himself said we don't

want to cause unnecessary human pain

even though in the past he said we could

always over tighten because then we

could always basically turn the money

printer on again

he's balanced that argument now with the

idea that he wants to limit human pain

now

Arthur Burns in the 70s took this start

stop approach and since then the Federal

Reserve has made it very clear that was

stupid now In fairness they didn't know

because they didn't have another

situation like that to compare back to

but today we do and today the Federal

Reserve has made it very clear that a

start-stop approach is a very bad idea

uh because it it potentially unanchors

inflation expectations and then you're

really screwed now you have Bill Ackman

Elon Musk and Goldman Sachs all calling

for either a pause or a cut but a start

stop is exactly what the Federal Reserve

has telegraphed they will not do they

have telegraphed a start stop approach

is not happening as clearly as I have

reminded you that there's a coupon code

expiring tomorrow that you can get life

insurance in as little as five minutes

that's exactly what I use Apple pay and

Android pay for it linked down below and

you can get 12 free stocks with Weeble

by going to metcaven.com free all of

those are linked down below like as

clearly as I've telegraphed those

pitches the Federal Reserve has said we

are not going back to start stop it it

seems crystal clear but but then again

people still have their their hopes

again this is all I'm saying this what

16 hours before the event so maybe I'll

take the L here and I'll gladly take the

L but I think we're getting 25 and no

start stopping I think j-pow goes look

you know Financial conditions are good

we'll keep rates up to keep fighting

inflation and on top of that the value

of of agency Securities that uh Banks

hold has just gone up so that should

actually take some stress out of the

system along with our buy the FED pivot

facility

anyway Goldman Sachs goes on to say that

tighter tighter lending standards

resulting from bank stress will subtract

about a quarter to a one and a half

percent from GDP growth in 2023 the

equivalent of an impact of another 25 to

50 BP of tightening on financial

conditions that's their belief I

actually think uh that that could be a

little later but that's okay

the estimated impact is relatively

moderate in part because lending

standards had already tightened sharply

in Prior quarters they're basically

throwing cold water on the idea that why

do we need another 25 BP okay however

the risks are tilted toward a larger

effect and the uncertainty will likely

linger for a while yes uncertainty will

likely linger for a while this is true

let me just be clear if if we get a

pause tomorrow I personally think

we're going to the moon in the stonk

market uh like I I've said it before

I'll say it again I think QQQ could

potentially run uh up to 330. I think

you could get uh the Spy easily run up

past 410 uh and I think BTC could

honestly start knocking on the door 32k

again uh potentially even higher

um would not surprise me at all if we

get a pause tomorrow I really don't

think the Market's actually expecting to

pause but anyway

we have left our fed forecast unchanged

Beyond March and continue to expect see

this is stupid man this is no three

additional 25 BP hikes in May June and

July which would raise the future Peak

to 5.25 to 5. like markets aren't even

projecting that right now and it's fine

I mean it's it's Goldman's opinion but

it just seems like a very bizarre

argument to pause and then go back to

this idea of multiple raid hikes

um I I don't see it but but okay let's

let's see what other arguments they have

here so expectations for the fomc

meeting have changed abruptly over the

last 10 days we now expect the FED to

pause

uh banking stress calls for a pause and

we discussed it in thinking or or we

discussed our thinking uh in our call

our rationale is simple it doesn't make

sense to tighten monetary policy amidst

stress in the banking system that could

present substantial downside risk to the

economy you know another thing that

people have argued is that the banking

crisis was really a a tool to determine

okay uh like we broke things how bad is

it going to get and the FED could

actually potentially guide are we going

to go for 25 BP or not based on what the

Market's reaction is well uh the

Market's reaction is something that we

could actually take a look at this

morning which is a benefit that Goldman

here doesn't have take a look at this if

we hop on over here look at this first

Republic up 25 in the pre-market 26 now

in the pre-market just go to the five

minute chart here so you can see First

Republic recovering UBS is running up uh

seven percent here

and Credit Suisse is sitting at 97 cents

that's almost 15 cents above the buyout

price for this uh for the stock so uh

that Arbitrage opportunity is continuing

here but it's showing you that people

think there's a chance now that mortgage

bonds and treasury bonds have actually

increased in value maybe the pain is

slowly over now that's not to say there

won't be other stresses on the regional

banking system but you just had Janet

Yellen yesterday talk about how they're

finding ways to potentially uh relieve

the FDIC coverage limits and and

increase them to temporarily and

potentially guarantee deposits of

everyone at small and medium Banks going

forward even without Congressional

Authority that's something that they're

quote studying right now but based on

what the market is doing today the

market seems to think oh banking crisis

yeah okay there might still be some

strains but this is not systemic

anyway we'll keep going back to this uh

Goldman piece here I I remember I like

looking at what other people what what

the opinions of others are because I do

think it's very valuable to to always

challenge your own beliefs and opinions

all right so as a result uh additional

stress in the banking system is the most

immediate concern but the lingering

concern is that uh wealthy individuals

and large depositors who are not fully

protected might move away from the small

Banks

uh and this is what we've also talked

about with basically this idea that

maybe medium and small banks will get

their FDIC limits uh extended of course

we've seen some substantially large

borrowing but why do they call for a

pause well they actually call for a

pause because they argue here that

inflation can wait six weeks that the

inflation now the inflation problem

looks less urgent now than it did last

summer because of year ahead

expectations however you have to

remember how the FED looks at this the

FED looks at this and says

that's fantastic that expectations are

lower a year ahead for inflation but we

act we actually have to see those come

through we actually have to see those

expectations come to fruition and

reality otherwise we could potentially

risk those things not actually happening

you know I know everybody's talking

about this idea of housing disinflation

that owners equivalent rents are going

to tank but what if they don't that's a

real possibility that what if they don't

well if they don't then you don't get

the disinflation that you're projecting

right so you actually do have to tighten

to the point where you actually start

seeing the stuff go through yes that

creates a risk of over tightening our

best guess is the economy will emerge

strong enough that future rate hikes

will be appropriate that is from this

banking crisis

before the appearance of stress in the

banking system two Trends and data

suggested the risks lay in the hawkish

Direction first inflation news had

deteriorated a little bit with upward

revisions and further problems of the

auto sector still have supply chain

issues in the auto sector leading to

increasing uh wholesale prices not

necessarily retail prices though second

strength and hiring real to swell I mean

I I'd like to see their data on strength

and hiring I question that a little bit

real disposable income which is still

negative and consumer spending all

pointing to some risk of a moderate GDP

re-acceleration maybe we'll see for

January but uh it's an interesting piece

from Goldman Sachs it's an interesting

argument there is there is a argument an

argument to be made about this idea of

potentially pausing uh I don't think

it's a very strong one the fed's path

Beyond March the March meeting will

depend on the impact of the bank stress

on the economy so this is where they

think the FED could basically pause and

then just re-tighten again three times I

really think that meter is the 70s too

much and if that were to happen you

really got to start asking yourself is

the Fed just making uh historically bad

mistake I think it would be wild and the

other thing that this would accomplish a

pause over here is the potential fear

right I mean think about this a Fed

pause could easily be seen as what do

you know that we don't and it's bad

isn't it that's that's my thesis I know

that's a little bit jaded to think but

think about it if we get a pause

tomorrow uh you know on one hand it

seems like oh that should be good right

but then that's also going to get

counterbalanced with fear sure maybe we

could rally under the idea of a pause

but wait a minute what if the fear year

of a pause actually ends up extending

too much where now all of a sudden

people are convinced that the FED sees

how bad things really have gotten and

it's way worse than we think it's not

just Credit Suisse and Silicon Valley

Bank and some of these crypto related

firms like silvergate or signature it's

potentially all banks I mean think about

the banks that have collapsed Credit

Suisse is historically had horrible risk

management procedures Silicon Valley

Bank lent to very risky startups who ran

out of capital and uh uh you know really

in a recession are the least likely to

survive uh then you've got silvergated

signature who uh were basically a crypto

on-ramp but because of crypto's fall

over the last year you've had a

substantial withdrawal of cash from

these Banks now all of these Banks

that have failed so far I have had

higher risk profiles than than most

other Banks

so if the FED pauses after those

failures it's saying oh no those risk

profiles extend to the regular banking

system as well uh that that seems like a

stretch for for me to see the FED doing

that I know a lot of people are calling

for it uh and this this idea of a pause

tomorrow but I mean we should make a bet

uh we should you know what let's let's

run a poll uh and let's see what you

think will the FED pause tomorrow all

right poll start your pull will the FED

pause tomorrow yes pause no pause we'll

see what y'all think yeah anyway all

right oh yeah so so my take actually for

what is going to be the most bullish for

the market tomorrow well let me answer

that first and then I'll talk about this

section here from Goldman so what would

be the most bullish tomorrow

in my opinion the expiration of the

coupon code but beyond that I would say

the most bullish thing would be a 25 BP

and then a very dovish SCP and a dovish

presser

uh and an optimistic view on inflation

that's that's what I think would be very

very good for the stock market tomorrow

like if we get this I'm gonna be very

happy tomorrow uh 25 BP dovish

projections on on how bad things are

going to get uh uh for you know

recessionary point of view which will

lead to a lower terminal rate and

potentially a softer view on inflation

that that's a hope we'll see that in my

in my opinion this would be the best

case scenario in my opinion best case

scenario number one

uh best case scenario number two

okay best case scenario number two

would be a pause along with a dovish sep

uh dovish

um

let's see uh uh uh presser Presser

not not pressure press pressure is the

press conference uh and then optimistic

view on inflation

this has uh has the potential of

creating some fear but if it's matched

with dovishness that would be very good

then you do have uh the bearish scenario

a bearish I'll call this the worst case

worst case one worst case one would be

25 BP

uh hawkish inflation

a hawkish sap higher term uh lower GDP

and uh Hawk pressure hawkish press that

that would be your probably more worst

case scenario over here

uh I suppose you could also suggest

there's a worst case scenario where the

FED pauses and then his hawkish

uh I think that would be unlikely if

they're going to Hawk it'll be 25 so

I'll I'll say these These are the three

scenarios uh I would I'm gonna go ahead

and say that you're probably

50 percent

30 percent no no no no

no no let's go a little lower here uh

let's go 20 here

and then maybe maybe 30 over here that's

those are Kevin's Theses here

all right March meeting whether the fomc

pauses or not this week it's likely to

include some acknowledgment about

uncertainty but no duh I mean this is

like saying the sky is blue we expect a

few changes to the SCP first GDP growth

will likely be revised up to uh reflect

the strength of the first quarter uh uh

maybe maybe okay but what about the 2024

GDP the second the 2023 unemployment

will probably be revised down

potentially by uh a 0.5 B percentage

points revise down for this year to

reflect continued strength okay

potentially uh that's going you know

staying in the three percent range okay

unemployment path for 24.25 will only

come down slightly they really think

things are good

which I mean that's also somewhat

bullish right I mean Goldman to some

extent here is saying like the economy

is doing really well like so what

uh you know maybe a quick little pause

to get through the banking crisis and

we'll take it from there so these are

their expectations

so they are picking up they're going to

increase

their a real GDP Outlook compared to the

feds right here the FED in the fed's in

green right here

and let's see where their differences

are so their differences are higher GDP

lower unemployment

and a slightly higher inflation but not

much higher

with a slightly higher terminal rate

5.32 okay

it's an idea uh I I'm really hoping that

they lower that terminal rate that's my

thesis but in the video that I did

yesterday where we covered uh my sort of

thoughts on the SCP I really think that

that term rate will come down

uh but maybe not

these were my projections let's see here

my projections were right here

so

let's see here

this would be

is this the right yeah this is December

and I'm trying to remember what we

talked about yesterday the 425

we're past that so five one uh uh I

remember what I said yesterday I said I

think I think 2023 is going to go to

more like four eight

so let me write that down so 2023

would be more like four eight it was my

take Goldman thinks they're gonna go to

about five three so they're gonna pop

this up a little bit that's Goldman's

take compared to mine we'll see we shall

see that's not very very interesting but

let's go ahead and see now what y'all

voted here in the poll

so uh after all that

um

22 percent of you voted for pause 78 of

you voted for no Pause by j-pow doesn't

this all seem manufacturer trying to

Institute a cbdc I mean like I don't

know why people are so afraid about this

idea of a central bank digital currency

DeSantis was freaking out about that

yesterday and he's like if I become you

know well I mean he didn't say if I

become president but we all know what he

means that he's basically talking about

how he wants to get rid of uh or ban the

ability of the government to have a

central bank digital currency I actually

think that's fantastic for blockchain I

think it's Central Bank digital currency

is is a choice and shows you it gives

you a lot of Merit and Credence to to

blockchain and I don't know why people

are so afraid of uh this this idea of

maybe like a Fed coin or something like

that by the way check this out I got a

house hack vest yeah yeah some nice

colors over here

If the Fed pauses the consequences could

be horrific hmm

all right

so the cure for a full banking system

failure is a partial banking system

failure

no

I think that in capitalism when you go

into a recessionary period of time the

riskiest businesses go bankrupt that's

the point that's what capitalism is

supposed to do

with the cbdc they can control where you

spend your money when you can spend your

money they can apply negative interest

rates and force you to spend your money

privacy gone

you already have very limited privacy uh

with with a lot of uh cryptocurrency

once people know what your wallet

address is you actually have even less

privacy right uh and all it takes is the

IRS to start mandating that you give

them your wallet addresses and there

goes all your privacy so the Privacy

takeover could happen regardless right

uh this idea that that they can control

your money I mean that's no different

from the fact that they can control your

money right now at JPMorgan JPMorgan can

freeze your bank accounts tomorrow and

you have no control of your money they

could close your credit lines they can

close your credit cards uh you know that

like all of these things the negative

interest rate all of those things can

already happen in the central banking

system the idea that somehow cbdc's are

are like so much horribly different than

what the banking system can already do

with you and don't get me wrong like I

think

a decentralized alternative to the

banking system has a lot of Merit I'm

just saying the idea that that the banks

can do all these things to you or ideas

that already exist uh

so uh we'll see uh I can't close my safe

with gold and silver yeah you got me

there

that's true unless you put it in a

safety deposit box definitely got you