The Fed's Great Lie.

[Music]

is Jerome pow playing a scop on us good

old jpw from the Federal Reserve gave us

a rug tug yesterday not a rug pole we

were expecting a rug tug not a rug pole

but we were wrong in where that tug came

from we got a little tuggin on the long

end of the curve not on the shorter end

where we're were expecting to see some

revision up but is this potentially all

part of drum Powell's sop today the day

after the FED meeting we consider

exactly that see one of the things that

was driving me to believe that we would

get a rug tug not a pole because fed

doesn't want to have to dramatically cut

we did talk about that beforehand but

one of the reasons that led us to this

conclusion was the financial conditions

chart look at this very closely when you

see the red line you could see that the

federal funds rate skyrocketed and

initially the financial conditions via

the Bloomberg Financial conditions index

in this chart Rose in line with the FED

funds rate this makes sense but what has

happened since then well even if you

take out the banking crisis over here

you could see that since about the uh

third quarter of 2022 Financial

conditions have actually loosened

substantially we've come straight down

on financial conditions and so this led

me to think japal might want to tighten

these up a little bit how could we be

standing at levels as low as 2014 and

2018 when inflation was running at

1.7% and we were trying to prop up

inflation not prop down inflation how

could we not tilt hawkish well we were

wrong jout did not tilt hawkish and so

the question is why why did he not tilt

hawkish on the short term and only gave

us a little rug tuggin on that long term

why is that well one of the reasons he

could be doing this is psychological by

keeping the FED funds rates stable for

longer as re heard he's prepared to keep

these rates high at this level for the

foreseeable future at 5 and A4 to 5 a

half% what we're doing is we're sending

a signal to people that psychologically

says the FED is fighting inflation but

what is the Fed doing at the same time

they're propping up the economy and jobs

by allowing Financial conditions to

loosen that's the only explanation I

could think of here is that

psychologically he's doing this he's

going to face I'm fighting inflation and

over here he's got like the there's like

a fire and it's the economy and jobs and

he's pouring gas on it so he's kind of

like see see look I'm fighting inflation

I'm fighting

inflation and he he's actually

purposefully trying to stoke the fire of

the economy to stick the soft Landing

remember that's what gets jpow his

statue in people's front yards is

solving inflation while not having a

recession you kill the fire over here

yes inflation will go away but then

you've killed the economy and then you

have massive joblessness which is bad so

what do you do instead you try to stoke

this in the background and in the

foreground what do you do you fight

inflation oh fighting inflation fighting

inflation basically it's the perfect

scop the same is true with quantitive

tightening slowing okay now that's a

fancy phrase you don't have to so much

worry about that but the slowing of QT

coming is another way of actually

loosening Financial conditions even more

and so now I'm starting to think oh my

gosh I think this is the plot all along

this is the point pretend you're

fighting inflation which that hurts

interest ratees sensitive stocks we know

that at the same time purposefully Drive

Financial conditions looser what does

that do it leads to more lending more

stock buying pressure more Bond buying

pressure more business spending more

credit more Deb uh debt and bond buying

pressure is useful because the treasury

keeps issuing so they can give billion

dollar grants to Intel and other

companies and fund these exploding

deficits so as they say don't fight the

fed and the FED yesterday proved to me

that the Nike Swoosh can hold now that

doesn't help interest rate sensitive

stocks right we we wrote that here at

ec.com remember I like posting our

research and our company sort of news

updates over on eack

you could see that for uh free uh down

in the SE fed section in green but

anyway what are the next catalysts and

what is this really mean for us from a

practical point of view well if the Nike

Swoosh can continue then from a

practical point of view what it is or

what we're hearing is the Federal

Reserve will continue to prop up

probably your mag 6 your apples your

Microsoft your Google your chip makers

your chip designers your Nvidia the

economy can keep booming on that note

Maybe even your SAS businesses you can

keep booming the companies with earnings

that are growing can keep booming the

companies with negative earnings are the

ones getting whacked in fact if you look

at cumulative returns in the S&P 1500

and you compare them between uh again

those companies with negative earnings

and momentum stocks or companies with

growing return on Equity what do you

getting well you're getting a very clear

Divergence momentum or return on Equity

stocks are Absolut Ely killing it

whereas any kind of negative earnings

company is getting destroyed what kind

of companies have negative earnings well

mostly small caps that are getting

buried under the weight of high interest

rates or large caps that medium and

large caps which are interest rat

sensitive where their customers get

buried under high interest rates and so

that leads to negative earnings when we

hear about negative earnings or

potentially negative uh uh deliveries

for Teslas or or whatever people start

start pricing that in by going short

those stocks oopsy dupsies now when it

comes to something like apple for

example I've personally been really

tempted to buy the dip I'm not too

worried about the doj suit because it

really what it says is Apple is winning

now 31% of Apple's bottom line does come

from services and a good chunk of that

comes from the app store they do still

make most of their money from products

and so yes forcing some kind of

reduction in Services uh potential

Revenue here could hurt Apple but I

think a 3.6% sell-off where we sit right

now it's a potential buy the dip

opportunity I've been thinking about

buying the dip on Apple but then it ran

up to 178 and I'm like hm now it's back

to 172 pretty close to that 169 170

floor or or support level we've seen

tempting but anyway uh and keep in mind

if you want alerts for all of my trades

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email us at staff meetkevin.com for

bundle up inquiries but

anyway this financial conditions scop I

think is something that we really have

to internalize as okay the FED doesn't

need to help interest rate sensitive

stocks and at the same time they can

help all of the other

Stocks by fueling the fire of loosening

Financial condition

the buy now pay laters the financials

the paypals the affirms the targets the

Macy's the Home Depot it doesn't matter

you can literally support

everything except the interest rate

sensitive stocks and and you still send

the signal the psychological signal that

you are fighting inflation because

that's what you're doing you're sending

the message at the same time QT slowing

and the loosening of financial

conditions not even getting a mention by

JP

well other than like oh yeah Financial

conditions are helping tighten inflation

really bro have you looked at the

financial conditions chart they're not

helping maybe it is just all supply side

either way pay attention to that next

Catalyst to pay attention to uh the next

pce and CPI reports are going to be

particularly important as well as the

jobs report maybe less so pce I'd

probably put in more on jols jobs and

CPI that's April 2nd 5th and 10th the

reason for that is they are either going

to prove that drum pow was right to

dismiss January February or wrong and

that will change everything for the May

1st fed meeting so mark your calendar

for those dates obviously I'll be live

streaming all of those uh so and and I

live stream those some people aren't

aware but I live stream them on the meet

Kevin live channel so if you haven't

gone to meet Kevin live it's a different

Channel and that's where I live stream

all these generally at about 5:25 in the

morning uh every day the market is open

it's realistically more like 5:26 a.m.

but uh yeah so anyway uh thank you so

much for watching what do you think is

this just the FED sop is this all part

of the plan because I don't think we can

be kidding ourselves that jpow is

unaware of the shenanigans that are

going on here I think he knows damn well

what he's doing and I think he's doing

it on purpose to prop up GDP while

saying don't worry we can have a

stronger GDP while inflation is falling

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 P there financial analyst and

YouTuber meet Kevin always great to get

your

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