Just Out! The Fed is Starting to CHANGE their Mind!

hey everyone me kevin here the president

of the dallas federal reserve

just had some not so great things to say

about the markets

he said quote we are now at a point

where i'm observing excesses

and imbalances in financial markets

suggesting specifically that we have

historically elevated stock prices

tight credit spreads and surging home

prices

this was during a virtual appearance at

a montgomery area chamber of commerce

event

now this is an issue because the more

you start having the federal reserve

going hmm

maybe it is time for us to start

tapering sooner than we expected

the more pressure grows on chairman

of the federal reserve jerome powell to

actually do just that now

jerome powell just the other day

suggested hey

don't worry this was wednesday don't

worry we're gonna hold through all this

inflation

all the inflation that's happening is

just because of the way we do our math

year over year math and anything else

don't worry it's just temporary it's

because of supply chain issues there's

no real inflation

don't mind that we just printed a whole

lot of money we don't think there's

going to be inflation now

i'm you know partially inclined to

believe that inflation will go down

in the longer run starting hopefully in

september through october so i still

am consistent with my beliefs but

the way this sort of incongruence

between folks at the fed is starting to

sound is starting to sound like

maybe discussions at the fed aren't as

unanimous as we might think they are

in fact president kaplan goes on to say

quote i do

think at the earliest opportunity it

would be appropriate for us to start

talking about adjusting

those 120 billion dollars in monthly

bond purchases

as well as obviously low interest rates

so kaplan is uh something to know he's

not a voting member of the fomc the

federal

open market committee that's the

committee that actually

votes on whether or not we are going to

raise rates

however he is a president of the dallas

fed

and this right here is topo chico it's

pretty delicious

not sponsored i wish i was but anyway

uh yeah i mean that's that's a problem

because just wednesday you had jerome

powell say

it's way too soon to even talk about

talking about

well good thing kaplan isn't part of

your fomc meetings

kind of makes you wonder why is kaplan

not part of your fomc meetings but maybe

that's too jaded

anyway kind of makes you wonder if he's

not part of the meetings

then if he were we'd probably already be

talking about

tapering because he would be there

talking about it it's kind of

interesting

and it's very opposite of what jerome

powell

said on a wednesday and uh kaplan went

on and

according to reuters here he went on to

reiterate his expectation that the fed

will need to start raising rates

next year that's 2020 more than a year

earlier

than most of his fed colleagues

anticipate

yeah and if we look at the dot plot of

what fed colleagues are saying in terms

of when

we might see interest rates go up most

of them see interest rates ticking up in

2023

with a longer run interest rate level

somewhere between two and two and a half

percent

at 20 20 20 or sorry 2024 and beyond

now kaplan was asked well wait a minute

i mean jerome powell says we have to hit

substantial

further progress and he says look the

thing is

that substantial further progress might

come way earlier than we even thought a

few months ago

and he believes there is risk that

unemployment will fall to four percent

by the year end

now that sounds odd because i just said

risk that unemployment will basically be

really low

that's obviously a very good thing so

what he means is

there's upside risk in other words it's

good if unemployment goes really really

low

because it means the economy is doing so

dang well

but it does mean there is a risk of us

raising rates sooner than expected

which quite frankly is something that

many people on wall street have been

believing and preparing for

this is why we're seeing so many shorts

in the market right now so many hedgies

taking profits and spending less money

on some of our favorite names

it's unfortunate but basically anything

you've bought since january

that has a high earnings multiple or is

a growth or spat company has kind of

been getting spanked

now on next wednesday we will be getting

unemployment

data so all eyes will be on that

unemployment data release of course i'll

be live streaming the release as soon as

it happens at 5 30 in the morning

but when asked about inflation kaplan

did say that he expects inflation to be

very high in the next few months

specifically because of base effects

but he also said that a lot of the pop

of this inflation could go away in the

fourth quarter which would be october

november december

but he doesn't go as far as saying that

all of the inflation we're seeing right

now is

transitory and he believes that there

are longer lasting

strains of inflation and it's not just

supply shortages but it's also because

you already have material prices that

are higher

and potential labor shortages on top of

all the consumer spending and government

spending that's going on

so let's say for a moment you get rid of

the base effects which those will be

gone in about three months

we don't have to worry about even

hearing base effects anymore that'll be

gone comparing to the bat of 2020 will

be gone

then supply chain issues those will

resolve themselves

but it's entirely possible and this is

an argument that's being made on wall

street now

that what if what if we get to on it

like we get to unemployment levels at

four percent

so freaking fast that all of a sudden

companies are like oh

crap we all of a sudden thought there

weren't enough workers

all the unemployment benefits expired

everybody got back to work but wait a

minute we still need a whole lot more

people

we still can't keep up well that could

be a cause or a reason for potentially

even longer lasting and larger inflation

so this is a little bit of a

very um i would say well a little bit in

very i would say this is let's just call

it what it is it's a contrarian argument

at the fed

it echoes what a lot of us see and

believe in the markets

and yeah it is nice to hear him say that

look we're going to see inflation taper

down towards the end of the year

september october has been my opinion

his is the fourth quarter

that's great i'm excited for that i'm

curious to see what will happen with

cryptocurrencies at the time i'm also

interested to see what will happen with

growth stocks at the time

but at what level will they fall to and

that's still the big mystery

now kaplan given that he's talking about

wanting to raise rates sooner than

everybody else and paper sooner than

everybody else

seems like he's starting to get a little

bit more nervous that we might end up

with a little bit more lasting inflation

than everyone is expecting

let me know what you think in the

comments down below but this is a

bombshell

from just today treasury yields on the

10-year up cryptocurrencies are up

and folks buckle up like i said the next

six months are gonna be

one heck of a ride thanks so much for

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next video

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