The Fed's LAST Warning | Get Ready.

hey so it looks like once again the

Federal Reserve is flipping and this

time you have to really look at what

Nick T tweets and understand some of the

history of the fed and then combine that

with Wall Street Journal article that

Nick T just wrote now Nick T often known

as the FED Whisperer is basically

guaranteeing us that we're going to get

a 25 basis point cut at this week's

Federal Reserve meeting that's on

Thursday a day later than usual because

the election is Tuesday which delays the

start of their 2-day meeting so they'll

have their meeting Wednesday and their

press conference on Thursday let's just

quickly understand some flip-flops we've

gotten from the fed and then we can put

this all into context I'll do it all for

you number one the Federal Reserve told

us that inflation would be transitory

but they neglected to tell us how long

it would take for it to be transitory

now I do agree that inflation is going

to be transitory but but it will have

taken a whole lot longer than expected

it'll have taken 2022 2023 24 and part

of 25 that's a 3 and 1 half year process

for inflation to be transitory and

nobody wants to wait basically a whole

4-year election cycle to actually get

inflation down so this is why the

Federal Reserve killed their tone deatha

inflation is transitory argument even

though it's widely anticipated that

inflation is going to continue to

disinflate now now don't get me wrong

there are a lot of people that think

Donald Trump will cause inflation

because of more fiscal spending if uh

Republicans sweep some people think

haris will cause more inflation because

of inflation reduction increases in the

shortterm longterm down right so more

infrastructure spending so inflation in

the short term under Harris not good uh

basically people think if there's a

sweep either candidate is just going to

spend more money inflation is going to

go up if you have a like stag or split

uh Congress you know house uh Senate and

presidency if these are split party then

maybe you won't end up getting as much

spending so that could be good for

keeping a lid on inflation and of course

we've got this sort of unsustainable

debt path that we're on personally

tangent on that I think we're way

premature on the debt crisis I think a

lot of people are like oh my gosh the

debt crisis it it's going to cause uh

you know uh the greatest recession ever

that might be true at some point in the

future but I don't think we're anywhere

close to that and I think we're more

likely to just kind of continue to see

government spending the debt continue to

rise and look I I don't want to sound

like I'm not saying there's a problem

here there's definitely a problem look

at our interest payments over history

here they've absolutely skyrocketed but

when you compare that to the levels of

GDP our interest outlays were a lot

higher in the 80s and 90s than they are

today now you know this could obviously

rise a lot and it probably will if we

keep spending like this but this is

probably still a 10-e out problem so if

we do end up with a fiscal issue that

could be 10 plus years out uh if we end

up with disinflation then eventually we

do get transitory inflation but the FED

did tentatively at least flip on that

idea which means there is a risk the FED

over does their constraining or

restrictiveness on the economy I think

people think oh everything's going to be

fine because the fed's going to cut 100

basis points in 2024 you know 50 already

and then

2525 uh no interest rates sitting at 4

and a qu% are still painfully high for

the economy that we've built I

understand that may still seem low

historically but for the economy that

we've built that's used to interest

rates between 0 and 2% this isn't good

you are still restricting the economy

substantially especially as we continue

to see disinflation so this isn't good

and this is a flip from the FED that

really just increases the odds of

potentially causing a recession

especially with their flip on fate they

always used to say go into 2020 before

covid that they're willing to have a 2%

inflation Target that is flexible as

long as we average 2% over the longer

term which could be 5 to 10 years and so

I've regularly believed that the Federal

Reserve would come out and say all right

inflation's at you know 2 and a half%

and about averages 2% and they'd be more

aggressive in lowering rates to prevent

a recession the problem is uh last year

they killed the idea of flexible average

inflation targeting and they basically

told us that fate was a a lie all along

F AI T pronounced fate spelled or or

written out as flexible average

inflation targeting he told us it was a

lie all along jome Powell in a press

conference I don't remember the exact

date of it but I remember the moment

very clearly because I was covering it

live and I'm like are you kiding me uh

he's he's basically ah I'm going to

paraphrase here but basically yeah you

know we created this policy because

inflation was running below Target but

because inflation is running above

Target today we don't really use that

policy anymore and I'm like oh so it was

just a lie it was a lie to try to make

us think that you wanted inflation

higher but now you're not going to use

that because you never really intended

to use this average it was a little

fugazy and it does piss me off a little

you know then we obviously we have this

idea of higher for longer which we have

been high for quite a while you know

like a year uh and so maybe you could

argue that they haven't flipped on

higher for longer but now it seems like

they're starting to flip on this data

dependency argument uh and so let me

show you this Wall Street Journal piece

and you can kind of see what I'm talking

about here uh so first of all uh Nick T

just wrote In The Wall Street Journal

that Federal Reserve officials are

expected to cut interest rates by a

quarter point at their meeting on

Thursday he's almost always right with

his leak here so I think you're going to

get your 25 BP cut you won't get a zero

you're not going to get a 50 50 would

signal

Panic zero would would would just not be

good so I don't know that markets are

going to move too much on this because

it's already priced in at this point uh

another thing is they acknowledge the

suspense of the last one which was the

largest suspense level or or wideness

that we've had in 4 years which is wild

and they don't like doing that they

don't like surprising markets I was in

50 camp and so I was really excited when

I saw 50 but Nick T was also in 50 camp

and uh while there was a moment we were

unpriced

50 50 was pretty evident as we were

going into the meeting uh but it there

was still a big gap you know you were

only like 60% likely to get 50 and had

it not been for Nick T's article on 50 I

I would have been a little bit more torn

but that really was the nail in the

coffin and sure enough we got 50 so now

they're saying 25 for this one uh and

continuing on in the Wall Street Journal

piece here they do talk about a little

bit of the puzzling situation that we're

in really what they're talking about

here is like hey the consumer's been

holding up because you've seen these

these stronger revisions of data uh like

consider the consumer spending data that

we got sorry this Adobe scroll kind of

sucks today I think a setting changed

but anyway uh they talked a little bit

about how hey you know economic data

show talking about consumption has been

really really strong in fact we've seen

spending consumption data revised up and

savings data revised up which is really

good and removes sub risks from the

economy but there are still other risks

some of the other risks that exist are

the unemployment rate Rising full-time

jobs down temporary workers down a lot

those things both usually only happen in

recessionary environments I mean

consider that non-farm payroll was

expanded ing on the establishment survey

by 200,000 jobs per month over the first

6 months of 2024 now we're down in the

last 3 months to an average of half of

that 103,000 the trajectory of jobs is

bad uh and so now what they're trying to

argue I hear the revisions so you've

seen revisions up in spending but down

in jobs but the problem now is the

Federal Reserve is potentially starting

to flip on data dependency now no

guarant te's of this we'll want to pay

very closely attention to this uh on the

presser this week but look at Nick T's

latest comment and I understand what

he's saying but I think it's a little

bit of a precursor to what's to come

watch this an eventful week for an

uneventful fed meeting 25 BP anticipated

so we'll get that officials are trying

to get away from being overly data

reactive inflation progress helps and a

puzzle looms over consumption and

slowing employment basically look

consumption always lags okay people

spend money that they have because

that's what people do they're just going

to blow all their money uh this is why

you should diversify instead of blowing

your money invest into something amazing

my opinion I'm biased like house hack

diversify into house Haack go to house

act.com to learn more about that read

the PPM but look here's the thing this

this idea about getting away from data

uh

reactiveness is basically them saying

look we don't want to like Oh yay the

jobs report in September was really

strong let's go with zero Cuts I think

what they're basically trying to say is

let's get away from some of these this

these frequent calls for data dependence

and how about we just go

25 every meeting and let's just see how

things go for the foreseeable future I

don't think they'll exactly say that but

I think that's what they're going to

imply is that they want to be like a

steady moving average and you're just

going to get 25 25 25 25 that's my

anticipation so basically they'll set up

you don't have a summary of economic

projections this week but they'll set up

25 they'll tea up the next 25 and

they'll say hey look the data is really

noisy let's see how it goes between now

and January this is at least somewhat a

departure away from the data dependence

that they've always told us about data

dependence does not mean data reac if

they're starting to redefine data

dependence this is really just another

flip-flop on the flipflops of flips and

that's because data lags you have to

remember that and this is actually a

good thing that the Federal Reserve is

actually waking up to this because you

don't want them looking in the rearview

mirror all the time you want them

looking forward and going uh yeah this

labor market does continue to weaken

this was a pretty terrible October

report and even though there could be

weather effects and Boeing effects it's

still pretty bad report and the

household survey undid a lot of the good

that we saw in the prior report

so you know especially when you consider

that the jobs that are being created

right now are government jobs which some

argue are way less productive

potentially potentially than uh

non-government jobs private

jobs and now private jobs are coming in

negative on a month over month basis

which is a very recessionary warning the

FED basically has to leave data

dependence behind and they have to start

doing what they did in 2007 remember

they cut uh 50 basis points in September

of7 the same day 17 years earlier than

when they cut 50 basis points this

September which is really scary and an

eerie warning uh but then they started

having to do Panic Cuts in like as soon

as January of 2020 or 2008 because

they're like oh okay yeah the numbers

starting to get worse and they realized

they were behind the curve they don't

want to be behind the curve so I think

this is them starting to signal that

like hey like we got to get ahead of the

curve a little bit and just be

consistent with these 25s and we're not

going to be convinced to go for a zero

that's my take that's my distillation of

this and I actually think it's the right

thing for them to do I do think they

need to be even more aggressive in this

direction though but they also don't

want to Spook markets because if you

have a stock market selloff you'll

probably self- fulfill more job cuts and

then you're in a recession but if you

don't cut enough then you could also uh

lead to earnings misses and job cuts and

a recession so they're kind of in like a

pretty damned if you do damned if you

don't position but uh anyway you know

you know me I'm a valuation kind of guy

uh if you like my analysis make sure to

check out the stocks on building your or

courses on building your wealth over at

me kevin.com animal real estate guys so

if you like real estate check out house

hack.com we've got some really cool

things going on some exciting news

coming hopefully uh go to house hack.com

we'll talk to youall soon thanks so much

goodbye check out those convertible

blonde offerings over at house.com I

think they're a great deal biased yes

read the PPM thanks bye good luck we 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 PA there financial analyst and

YouTuber meet Kevin always great to get

your take