Watch Soon - The Fed is Panicked | Worse than the 1980s.

okay this Friday could be a complete

disaster for the market I mean maybe we

could have some hopium but it could be a

complete disaster this morning we got

some updates from Marie Daly she's one

of the folks over at the Federal Reserve

that always comes to make sure to talk

our Market down as soon as it goes green

and there are a few things that we got

to talk about we're going to talk about

not only this concept of dis or

opportunistic disinflation crazy phrase

and then we're going to talk about what

happens on Friday so first

Marie Daly reiterated how important it

is for the Federal Reserve to get

inflation to two percent that this is

their job and that quote more rate

increases are necessary and they're

going to stay the course of getting to

two percent until quote the job is done

and their job is two percent now they

say look if there's dislocation in the

market like what we saw with the bank of

England oh well we'll respond too but

don't forget we're still going to be

hiking rates like hey we could solve

little problems that pop up like

whacking a mole but we're still going to

be trending towards making sure that

interest rates go to the freaking Moon

and that kind of sucks because see back

in the 80s and 90s we obviously had

extremely high inflation in the 80s we

briefly talked about this yesterday I

just want to reiterate this and what

happened was Paul volcker ended up

raising interest rates so high higher

than the nominal rate of inflation that

we forced inflation down to about four

percent but getting from four percent

like going from high levels of inflation

like 15 plus percent to four percent

took like five years it it went down

relatively quickly from how high it was

but getting from four percent to two

percent took 15 years

and right now you have a Fed

that is doing something they didn't do

back then back then they didn't tell us

oh we're gonna get to two percent back

then they said we're just gonna get

inflation down and by saying that by

having this different narrative which is

The Narrative of oh well we're just

going to work to get inflation down oh

okay yeah four percent yeah sounds good

okay cool we're here we could chill we

can chill for the next 15 years and they

what really they did when you actually

study the FED is you'll see that members

of the FED back then they would say

things like hey you know look we're at

four or five percent inflation let's

just wait for the next economic downturn

to further Drive inflation down right

they wouldn't necessarily try to explore

sit down it would kind of just once they

got to four or five percent it's kind of

just weighed and as opportunities came

to reiterate that inflation should Trend

down they took advantage of those by

riding the market cycle and so oh here's

a recession okay great well let's use

this as an opportunity to continue to

drive inflation down so on and so forth

right that's not what we're getting

today what we're getting today is is

yeah we should be okay but uh in the

meantime we're just gonna keep cranking

inflation down until we get to two

percent and we ain't stopping until we

get to two percent now this is having a

positive byproduct uh which is inflation

expectations are plummeting like the

market and maybe we're just being

manipulated right like maybe it's

entirely possible we get to four percent

inflation the fed's like all right you

know what we've caused enough damage

let's see U-turn maybe that could be

entirely possible but right now they

don't make us feel like that's going to

happen and it is having a positive

byproduct the downside obviously is the

stock market selling off like crazy I

mean you look at your Weeble where you

could get you know up to 12 free stocks

when you sign up for Weeble by going to

metcaven.com Weevil you go over here and

it's just like oh man two percent down

on the NASDAQ again and Tesla's down

five and a half percent and ape is down

10 I mean this is just terrible the Spy

really is falling 1.64 today anyway it

so you've got this pain but it is having

this benefit look at this right here

this is the chart of five year break

evens and when you actually look at this

side over here look how low those break

evens have gotten we are well below

where we were a year ago this is when we

had the Delta Fierce can you think that

a year ago we were just freaking out

about Delta I mean think about how much

has happened between now and last year

like just take a moment think to

yourself oh damn it's been a year since

Delta

it's been a year since Kevin ran for

governor

it's been a year uh you know well well

and then within this last year I should

say uh that uh that we had Omicron first

pop up in January remember that it's so

wild how much has happened but it's

actually very interesting to see

inflation expectations get driven down

this much and the reason in inflation

like actual inflation usually follows

this chart down which is great uh but it

it happens with a substantial lag and

the reason we're seeing this is because

the FED is so aggressive right now now

don't get me wrong this isn't to say

that inflation expectations even though

they're at the lowest point that they've

been in the last year which could create

some disinflationary shocks it's not to

say that we're at the lowest levels that

we have ever been at by any means uh in

fact we have been at lower levels let's

go ahead and take a look at exactly the

chart when we go back out five years

rather than just one year here it is so

obviously during the covet pandemic we

the expected massive disinflation if not

deflation and and so expectations

reflected that that's obviously because

you know we we thought the economies

were just going to completely shut down

but if we go ahead and draw

a line from roughly where we are now you

can see that we sit here roughly around

that December of 2020 election era in

terms of inflation and if we go back we

actually sit right around here in the

2017-18 cycle in terms of inflation

expectations which to some degree was

even though the Fed was still trying to

tighten and raise rates in 2017 and 2018

markets freaked out inflation

expectations plummeted right here in the

December of 2018 and just because of

that plummet right there what did the

FED end up doing okay never mind U-turn

let's just go ahead and turn the money

printer back on

that's literally what happened they you

turned off of that look at this insane

plummet we're getting in expectations

over here off of uh the backs of uh this

Omicron race that we got uh the Delta

race the Delta so that's in the wrong

spot uh Delta would be January this

would be Omicron right here this would

be war and then obviously we've seen

this sort of decline in expectations

here uh so this is good

it like inflation expectations are being

driven down and maybe they're being

driven down by a Fed who's just talking

really dirty to us but the problem is

they are being so clear about this we

won't stop until we get to two percent

that they are going to eliminate or

potentially already have eliminated the

opportunity for you turning before they

get to two percent and that's scary

because the FED didn't do that in the

80s and 90s like they're like no problem

inflation's down this is good enough

four and a half percent this is good

enough we can pause

this could be a massive mistake of the

FED because think about the scenarios

let's say they start breaking stuff and

then they have to U-turn now the FED

becomes less credible than they already

are

and now people trust them even less

because like you said you're not going

to stop until two percent now you're

stopping at five percent you must hate

poor people right like that that's bad

that the Optics of what they're setting

up are going to be terrible if they you

turn early if they don't you turn early

they could just crush us into a freaking

depression

and so then that brings up this topic of

okay well what happens on Friday well

what happens on Friday is we get the

unemployment jobs report uh and I'm

gonna give you the expectations here for

this jobs report and Marie Daly says hey

look if this comes in weak that would be

a welcomed piece of news because right

now we think that the Futures Market is

actually wrong in pricing in a Fed pivot

so I'll talk about those jobs

expectations but this is kind of what

the FED pivot looks like uh this is the

interest rate monitor here by the way I

got Shopify financials up there as a tab

boy we did that in the course member

live stream this morning

which remember until I make this

transition to actually a Shopify store

which which we're we're getting we're

slightly delayed in but we're making out

until that we still have lifetime access

uh to to the courses linked below and

what's really remarkable is the uh the

Shopify financials they weren't very

good okay they were not very very good

uh but anyway uh I was I was very

disappointed with what I read in the

earnings call and uh and what I saw in

uh in the financials and growth

trajectories I'm a very what I wasn't

very happy it was a quite a

disappointment but anyway so yes that

does mean for a few days we've we've

extended the coupon for the programs

down below and that's totally my fault

like I thought it would be much easier

to get the Shopify store up but maybe

because their financials are that bad it

uh it's no surprise that it's so hard to

get it up

with Shopify so anyway what's really

cool about this fed monitor tool I'm

just going to kind of bottom line you

here a little bit is what we're actually

seeing is the market is pricing in

significantly more aggressive writing

rate increases and they're not wrong to

do that because so far every forecast by

the Federal Reserve uh in terms of rate

increases has just been straight up

wrong and so what you're seeing is take

a look at this this is the probability

of basically by next summer of us being

at four and a half to four point seven

five percent and you can see right after

the FED meeting this explosion here of

that likelihood happening the more this

chart goes up the more the stock market

goes down and the closer we get

obviously to that date the more likely

these these ranges become but uh if I go

to let's say 4.75 to 5 you can see this

sort of volatility here where the

likelihood spikes and then comes down a

lot of the movements we're seeing in the

stock market right now are because of

spikes and movements in these particular

charts here so for example if I go to

this is the June meeting of next year

and we look at what are the odds that we

could potentially be at 4.75 to 5 we

could see the market priced in a zero

percent probability for basically all

all of the prior months here but as much

as on uh September 23rd priced in a 44

probability and now well yesterday was

pricing at a 21 probability after

comments and reports that we got this

morning when we actually get to data

that starts populating for today will

probably also see that uh pop up again

and it's unfortunate but oftentimes

those sorts of spikes lead to uh nasty

candlesticks to the downside you know I

mean we had a on on the 22nd which was

this last little Peak over here 22nd and

23rd we had uh we had a couple strong

red days in the NASDAQ down a couple uh

probably around three percent in just a

matter of two days so you do see how

these future rates correlate and

expectations correlate with what's

happening in the stock market and

unfortunately jobs numbers like what we

saw this morning and the fear of what's

going to happen this Friday aren't

helping like we keep hoping that that is

going to go down and uh you know limit

some of the uh problems we're facing

with the FED but we're not in fact the

expectations for this Friday's

unemployment report unemployment rate to

stay stable at 3.7 percent expectation

is that month over month earnings are

going to stay stable at 0.3 percent and

we're expecting 263 000 jobs that's down

from the prior of 315 000 but the

problem with that folks is changing

non-farm payrolls 263. it's actually not

that high of a number which means it's

going to be in my opinion pretty easy to

miss it to the upside I mean if that

report comes in and says we have 300 000

jobs

Mark is probably gonna tank more because

the fed's gonna go all right our work

isn't even started let's just keep

hiking and then you'll see these rate

curves change and then you'll see the

stock market get affected and with the

FED that is eliminating or closing this

door to just opportunistic disinflation

which is waiting for opportunities to

let deflation go down and instead

they're forcing inflation down

it's gonna be more pain for longer folks

there's there's there's no light yet

it's just more pain for longer sucks

anyway thanks for watching we'll see you

soon bye