What Jerome Powell JUST Said on 60 Minutes

hey everyone me kevin here jerome powell

just had a 60 minutes interview and

folks

60 minutes with jerome powell you know

you're getting

something from me and kevin because we

got to pay attention to what jpal says

it can mean a lot for the future of our

portfolio so

without further ado let's get right into

it i do want to mention that this video

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into the transcript

so jerome powell talks about the economy

being at an inflection point boy oh boy

we like inflection points on this

channel that is something i

regularly talk about is identifying

changes or

shifts in the way the markets are moving

for example an inflection point would

look like this

if things are going up up up up up up

and all of a sudden the trend changes

down

right there is your inflection point

those are very important things to pay

attention to

so jerome powell says that we're at an

inflection point

because right here we feel like we're at

a place where the economy

is about to start growing much more

quickly and job creation coming in

much more quickly or that will have more

jobs quickly so the big risk right now

is covet spreading again but otherwise

he kind of feels like we're at this

explosion

of a potential turning point in the

markets

where the economy could grow very very

fast and very quickly and this is

because of a combination of the vaccines

a strong

monetary support from the fed and also

strong stimulus from the government

so the outlook has really brightened and

as far as

outlook drone policies gdp growing this

year between six to seven percent

which is the highest level in around the

last 30 years and unemployment might get

down to around four and a half percent

four percent to five percent somewhere

in that range four to five percent and

so

uh scott uh asks the question here so

you're expecting a

boom rather than a recovery jerome

powell corrects this and says well

i would say that this growth that we're

expecting in the second half of this

year

is going to be very strong

all right let's keep moving on so jerome

powell said

further says that this is a very kind of

unusual

recovery especially the industries with

direct contact

to the public as suffering as much as

they they they are

and jerome powell believes it's going to

take some time for restaurants and

retail and travel to all get back up

to the levels of where they used to be

and jerome powell says we're going to

support this

economic recovery until it's really

complete and

so these are always i'm always looking

for little changes in the ways he's

he's things saying things and this is

something i haven't actually heard him

say before i've never heard him say

we're going to support the economy until

the recovery is really complete

so i always look for those little modest

changes and the things jerome paul is

saying

and that there is one of them kind of

doubling down on how supportive he wants

to be

although they did uh show a clip of

somebody who had lost their job and

maybe this was

more out of empathy than a signal to the

markets drum powell then goes on to say

look we don't have the answer to

everything but their goal

their goal overall is really trying to

help

people the problem though with the fed

and we know this is as the fed keeps

rates low

it's generally the wealthier people who

get supported

more than poorer folks and that's very

unfortunate that's sort of what

exacerbates

the the case-shaped recovery uh that we

regularly see and it's

it's unfortunate all right we spoke to

apollo 11 a month

ago and at the time the fed's worst case

predictions

were as he puts it unspeakable

now jerome powell responds and says hey

look congress

has at this point effectively replaced

people's incomes

kept people in their homes kept them

solvent

kept their lives together with what they

did in the cares act

it was heroic jerome is calling what

congress did heroic

to keep things stable or as stable as

possible

he does lament the fact that over 550

000 folks have passed away from

covet 19 but says look even the fed

tried to do what they can

or could by taking advantage of

emergency lending powers and dropping

benchmark interest rates

to zero now uh one of the things the 60

minute staff asked jerome powell is

why is it that investors have borrowed

more than 800 billion dollars to

speculate in stocks so barred more than

800 billion dollars in margin

to speculate on stocks and he says well

one the thing that jerome powell does

and the fed is

they don't necessarily look at

speculation

like how much margin are people are

taking out but they do look at the

broader system so they're looking at how

are banks doing how well

capitalized are banks uh are we having

any kind of

credit freezes or crunches where all of

a sudden people can't

access debt anymore and that would be

more of an issue

that jerome powell is paying attention

to and whether or not these

companies or banks or financial

institutions

are able to withstand significant shocks

say valuations did fall substantially

and so

here's a good line i'll read and i would

say you know some asset prices are

elevated by historic metrics of course

there are people who think that the

stock market is not overvalued

or it wouldn't be at this level we don't

think that we have the ability to

identify asset bubbles perfectly

so instead we focus on having a strong

financial system that is resilient to

significant

shocks including if values were to go

down

and this is true they do stress tests of

banks and other forms of stress tests

that try to determine okay

what would happen if the market sold off

50 how would banks survive

just as an example and so those shocks

are what they're

looking to pay attention to but one

thing that i got from this that i

thought was really interesting was this

slide right here

we don't think we have the ability to

identify asset bubbles perfectly

and i think many folks watching this

video now would say it's pretty obvious

stocks feel like they're in a bubble

bitcoin feels like it's in a bubble real

estate feels like it's in a bubble

everything feels it's the everything

bubble right so uh this actually leads

uh the crew over 60 minutes to ask the

question

what are the chances of a systemic

breakdown

like we had in 2008 another global

financial crisis right

we usually look to history and identify

basically patterns to say okay well this

is just going to repeat itself

but usually we get different causes

and so maybe that maybe looking at 2008

isn't the best thing to do

jerome powell actually has a different

answer for us though in terms of what to

look forward to so he gives us some

insight

he says and look the chances that we

would have a breakdown that looked

anything like what we had in 2008

where banks were making terrible loans

remember the ninja loans no income no

job no asset loans

investment decisions terrible investment

decisions and

needing to have low levels of liquidity

and weak capital positions

and government bailouts the chances of

all of that again

he says that is the chances of 2008 all

over again

very very low very low but the world

changes and risks evolve

and so that's where he brings up his big

new risk his big new risk

cyber risk he says that's where the risk

i would say is now

rather than in something that looked

like the global financial crisis

he says there are scenarios in which

large financial institutions

would lose the ability to track the

payments that they're making

in the event of some kind of cyber hacks

or cyber attacks

and he says that could lead a broader

part of the financial system to come to

unhaul

to come to a halt and that obviously

would be very very bad because that

would lead to frozen

queer credit lines a lack of lending and

the entire thing

could stall very very bad but it's

interesting because it's not really a

risk that we generally talk about i feel

like on youtube

the cyber security risk relative to like

the risk of overvaluations in real

estate or an eviction crisis or a stock

bubble in

electric vehicles or so on furthermore

the fed's mandate he says is to keep the

economy warm enough to produce maximum

employment

but not so hot to set off a runaway

inflation

this is a little bit of a softening for

me i've never heard this analogy before

maybe he's made it before i haven't just

paid maybe i haven't paid attention to

it

but usually he says our mandate is to

have stable prices and maximum

employment and then he talks about how

important it is to get

people of minority descent

or for women to get back to maximum

employment but here he's actually

striking a new balance he's saying ah

you know

our job is to keep the oven so to speak

warm enough so that our tendi's bake

nicely

but also not too hot to where we

overcooked our tendees and end up with a

bunch of stinky inflation

it's a little bit of a softening there

so remember i'm looking for those

changes in what he's saying and that's

one of them for sure the other softening

was right here we're going to continue

to support the

economic recovery until it's really

complete so that was

bullish but then this was a little bit

more

potentially bearish on uh we do have to

keep an eye on that inflation so you're

kind of getting a little bit of

of both sides there uh but anyway then

he does uh get asked

will the fed raise rates and tap the

brakes before inflation

happens that's usually what you've done

so aren't you going to do that again and

he says no

we're not planning on doing that instead

we can afford

to wait to see actual inflation appear

before we raise rates now we don't want

inflation to go materially above 2

and go back to you know the bad old

inflation days that we had when you and

i were in college a long time ago

in other words the 70s and 80s back when

we had really really high inflation that

was ridiculous the 10 to 15 percent

inflation

18 inflation that was those were some

crazy times

uh now we don't expect to go back to

those or rather maybe

drone says we do not want to go back to

those

so we're saying hey look we can afford

to watch

inflation go up but we expect that

inflation is going to

curve back down and if it overheats

then we'll act of course this is where a

lot of people debate that and say hey

man

once jerome once you let the genie out

of the bottle you

ain't getting it to go back down wishful

thinking

well and everybody's gonna have their

own opinion on that one of course

all right so uh but at this time he says

we do have the ability to wait to see

real inflation and that's what we're

planning on doing

uh and what we mean by real inflation is

two percent on a sustainable basis so

two percent over and over and over and

over and over again

and uh when we get above to two percent

or above two percent over and over and

over again he says

that's when we will raise interest rates

uh then

he goes over here and says uh here's the

issue

with raising prices he says global the

globalization of the economy

so the issue with inflation or in other

words things that keep prices lower he

says

globalization of the economy and

technology have

enabled manufacturing to take place all

around the world

both deflationary pushes if you can

manufacture something

something somewhere else cheaper that's

deflationary technology

makes things easier to produce also

deflationary then he says

it's very hard for people in wealthy

countries to raise

prices or raise wages which that second

part sucks a little bit like we don't

want

to hear that raises wage excuse me we

don't want to hear that wages can't go

up right

but he says it's hard for workers to

raise wages

when wages can move overseas it's just a

different economy and this is part of

his overall argument

that inflation dynamics are

trending more towards disinflation than

hyperinflation

this is jerome's argument okay it's

j-power it's a deal with the money

printer all right

anyway drone pile i think it's highly

unlikely that we would raise

rates anything like this year no

so this is when he's asked let me read

this in context so

all the way through the end of this year

you wouldn't see rates

increasing i think it's highly unlikely

would we raise rates anything like this

here

no so in other words no not planning on

increasing rates

this year and then uh we do have 60

minutes that says

other members of the federal reserve

board don't even see

a rate increase in 2022 however there

are i believe four to six that do see a

rate increase in 2022

but uh nothing for 2021 uh so really

kind of reiterating

more of what we're very used to with

jerome powell here

a couple changes though a little bit of

softening on the way he's describing his

job of kind of keeping that temperature

perfectly balanced

waiting for that actual inflation two

percent is his number

and he wants to see two percent over and

over and over again my guess is probably

for

three to six months he'd want to see it

stabilize

at over two percent and then say okay

let's raise rates

which probably would be a 2022 event

we'll see

uh and the biggest risk right now is not

a 2008 bubble pop

it's actually cyber risk uh so i don't

know if that's a little like a

like a red herring like uh hey don't

look at the market look over here and i

don't know why all of a sudden i sounded

like barney

but i i guess everybody's gonna have to

make their own conclusion on that one

anywho thank you so much for watching

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