The Fed *Hell* is Worsening.

yes the jolt stata came in hot old news

it's January joltz data that literally

just came out let's actually talk about

the FED hell let's start with the

Federal Reserve the Federal Reserve is

widely now believed to potentially

reintroduce a 50 basis point hike in

fact one of the best people to kind of

give us a little bit of a heads up on

this is my favorite mouthpiece of the

Wall Street Journal nikti nickt is so

wonderful because he actually gave us a

video this morning talking about exactly

some of his thoughts let's look at his

video Let's comment on exactly that

video remember Nick T is the guy who

works for the Wall Street Journal and

he's widely believed to be the guy who

kind of gets a heads up of what the FED

is going to do before they do it now

right before the FED meeting yesterday

in Congress Nick T warned that the Fed

was likely to come out and talk about a

higher terminal rate and that's exactly

what the Fed did so when Nick T says

something we generally pay attention to

a much like we pay attention the FED

after we listen to what Nick T says

we're going to jump on into what Kenny G

has to say Kenny G's got some nice

things to say about the FED as well

actually maybe not that nice but we'll

listen to both so let's see if I can

make this technology function and let's

listen in to Nick t

Powell now sees what everybody else sees

which is that the market is priced in 50

and so this will be his opportunity to

reset expectations if he wants to but

what he said yesterday was that the data

is going to play an important role here

and he doesn't know what the payroll

report is going to be Friday we will get

the joltz some job openings survey today

and then of course the inflation report

next week retail sales so there's still

data that could make up their mind here

but what I thought was important

yesterday was that Powell also pointed

to the revisions so it wasn't just the

January the hot January data we got but

it was the revisions that changed the

profile of what the economy looked like

late last year and it seems unlikely

that that's going to change in the next

batch of data so the revisions seem

important here

yeah this is could not be more true so I

want to actually talk specifically about

that before we talk Kenny G because

there's something important in this

first of all the jolts data the job

opening and labor turnover survey that

we're going to be getting today in my

opinion don't get too excited about it

the reason you'll want to get too

excited about it is because it's from

January the jolts data that's coming out

now in March March 8th is actually

relevant to January not February so

there's a lag of an additional month in

the joltz report so I would expect that

joltz report to be hot today mostly

because all the January data has been

pretty dang hot so I wouldn't put too

much weight on that instead one thing

that I found that was very interesting

about Nick T's comment here was that

Jerome Powell was paying attention to

the revisions now not only is he paying

attention to the revisions of the end of

last year which the revisions of end of

last year were bad right they ended up

telling us that oh no inflation was

worse than expected that's not great

right we thought inflation was a certain

level of low and that actually worsened

in the fourth quarter more so than we

thought that it would right that's not

ideal we generally don't want to hear

that inflation is revising into a worse

direction right we don't want that now

what's interesting though is if Jerome

Powell is paying attention to the

revisions what it actually means is the

January revisions from the February data

could be especially important now that's

something that we've started talking

about over the last few days I've

started warning when these reports start

coming out the Friday jobs report which

I'll be covering it two days and the CPI

report next week we really want to pay

attention to how much was January

revised that'll be critical so we'll pay

attention to that but those those are

two important things to keep in mind so

the jolts don't I personally kind of

casting that aside pay attention to

revisions like Nick T says the FED is

paying attention to now let's take a

listen to Kenny G here what does Kenny G

tell us about the Federal Reserve let's

listen in but then what's your take on

what Jerome Powell said today that the

Fed was prepared to increase the pace of

rate hikes and that the terminal rate is

likely going to be higher than

previously anticipated a lot of people

are reading that as a sign that they're

going to go faster so he created space

today to move by 50 basis points on the

next hike you know they'd come to this

year pretty clearly telegraphing that 25

basis points was going to be the per

meeting rate hike for the early part of

the year and then in some sense

taking the foot off the brake and seeing

where the economy lands and and In

fairness the fed the interest rate

tool

as a means of controlling inflation is a

it's like a it's like having surgery

with a Dull Knife it is a really

difficult tool to get the job done with

now that's actually really interesting

because remember yesterday when Jerome

Powell was testifying before the Senate

today he'll testify before the house

keep in mind that usually the purpose of

these events is to get politicians who

can then clip their hardcore questions

for Powell and Powell's just deflecting

them so generally I don't pay much

attention personally to the second day

of Powell testifying because there's

going to be the same answers as we got

the day before generally obviously I'll

pay attention to potential differences

but but that's my expectation but anyway

this this idea about rates being a blunt

policy instrument is something that

Jerome Powell has himself said before he

says look the only tool we really have

is changing interest rates to affect

demand but that's pretty blunt it's

pretty broad affects everything it's not

like a surgical tool like Kenny G here

is reiterating that creates some

problems because we don't really know

what the lag is of the Federal Reserve

raising rates as much as they are not

only do we not know what the lag is but

it makes you wonder hey wait a minute

what about quantitative tightening don't

even go there the FED is almost arcanely

lost when it comes to the impact of

quantitative tightening so we'll see but

let's keep going uh with uh Kenny G's

comments here because you hit the

housing sector you hit the manufacturing

sector you hit Parts the economy that

have a very high sensitivity to interest

rates

and you tend to leave the rest of the

economy relatively untouched

so the FED doesn't have as much impact

with their tools you might hope and

although they've raised rates

considerably it's not clear how long the

leg effects are for the impact Bingo and

once the impact starts to play out

how it how damaging that impact is so

they are they're in Uncharted Territory

it's a difficult place to be

might you know if I could if I could

tell one thing to the chairman I would I

would tell them to say less

I would just be write a message we're

going to put the inflations you need

back in the Box no I actually I don't

know if I agree with that I actually

really have enjoyed the federal

reserve's mandate of more communication

the reason for that is it creates

substantially less uncertainty now Kenny

G basically got even more Mega rich last

year shorting the market so last year

was a fantastic opportunity for short

sellers to to short the market that

doesn't mean Kenny G is always a short

seller right just means he played the

market very well I mean hats off to a

fantastic job trading but the problem is

Jerome Powell saying less could

potentially activate substantially more

fears that this Market is going to end

up getting what I call Paul volckert and

getting Paul volckert I think is

actually the worst case scenario fear

for the markets in fact if you follow me

on Twitter you'll see the thesis that I

posted yesterday which I actually

thought was a very well thought out see

I'm complimenting myself here but anyway

you could see my thesis on Twitter and

take a look at it here so what I posted

was the following I wrote my 2023 Market

thesis the feds fight against inflation

will take much longer than anyone

expected this puts upward pressure on

Treasury yields and downward pressure on

housing however the stock market most

fears Paul volcker the punishment

following an uncontrolled second

explosion of inflation now what's really

important here is Jerome Powell

regularly communicates to us the

conditions of Paul volcker the

conditions of Paul volcker specifically

are a wage price spiral and unanchored

and inflation Expectations by Jerome

Powell continuously communicating those

those requirements of Paul volcker to us

us as Market participants can determine

how close are we to trending towards

Paul volcker and regularly we hear

inflation expectations are anchored

there is no side of a wage price spiral

in fact there's less of a sign of a wage

price spiral right and you know what's

really also phenomenal is more and more

now I'm actually seeing people talk

about job loss rather than uh than like

all the benefits and perks of their job

like the job loss era is really

happening now I want to go back to that

tweet but I figure I'm going out and

building on tangent on tangent over here

but that's okay because these are

actually quite interesting I have to

give a shout out to this Tech talk

because it was absolutely hilarious now

generally I don't like watching tick

tocks but this one was great hold on

I'll play it for you

Riff to you okay this is not my first

recession so I'm going to explain the

Circuit City Griff to you okay if you're

under 35 you don't know about this one

okay there was a store a national chain

back in the day called Circuit City it

was just like Best Buy it was basically

the same store but instead of their

color being blue their color was red all

right I will say one thing that was

substantially different about Circuit

City and Best Buy was Circuit City

really paid extremely well for

commissions uh they they did a

phenomenal job for their employees but

it's probably one of the reasons they

went bankrupt because their their

employee expense was so high I

personally have found memories of

actually going to Circuit City

and then going to Best Buy like we would

go to both my dad and I that was right

after eating at Quarterdeck in South

Florida anyway let's keep listening to

this because this is actually really

interesting on we're talking about the

wage price spiral so I know you might be

thinking what does Circuit City have to

do with the wage price spiral watch it's

hilarious this is a great great argument

and I'll summarize part of it at the end

here but let's keep going

it's called Circuit City

it went out of business one day it went

out of business and it was right around

the time of the Great Recession so all

of my friends had gaps in employment

they had all these other issues and they

were stuck in entry-level positions they

couldn't move up in anything so what did

they do they all got together and they

started covering each other's resumes

that each of them had worked at

different positions at Circuit City

now covering means you you put somebody

else's like your other colleague or your

friend's phone number in as your HR

reference or whatever right that's what

he means by covering because the

company's bankrupt

I wasn't did they ever actually work

there no

were they been have they been a busboy

for the last five years yes

but now on paper

they were a floor manager at Circuit

City boom they got more money oh

actually I was the director of

procurement for Circuit City boom nobody

could prove otherwise there was no HR

department to call there was nothing you

could verify this information against

nothing

and the reason why I bring this up is

because I okay then he talks about the

how inefficient HR obviously is at

Twitter and you could basically now say

that you've worked at Twitter and you're

just part of the 6 000 people who got

laid off at Twitter and maybe you could

land yourself a better job I think it's

very interesting but as Brandon Howard

here says this is basically fraud uh it

is uh it's funny but in some way it's

kind of showing the pain that employees

are going through right now like this is

the second day in a row now that I'm

sharing imagine this take Talks on

YouTube of people complaining about how

how difficult it is to find a new job

and now basically it's so hard to find a

new job people are resorting to fraud to

get a new job what what to me what that

actually says is this signal that yes we

do not have the conditions for the Paul

volcker wage price spiral that's

probably the most important condition of

this market and that's why I say I

personally believe the stock market most

fears Paul volcker it does not fear

higher for longer in fact that's what I

say here the next line although as long

as we don't face a Fed rugging I believe

the stock market will basically look

through higher for longer is what I

argue here therefore absent of rapid and

intense re-intensification of inflation

or reanimation of inflation I believe in

volatile's Nike Swoosh recovery is ahead

of us in stocks with 2022 representing

the down the down part of the switch

right in English slow gradual uptrend

for pricing power stocks slow gradual

downtrend for real estate pricing power

stocks are those that favor higher

income individuals higher income

businesses those with high free cash

flow some SAS businesses included like

for example look at bill.com they have

negative net income but in insanely High

free cash flow only once in a recession

with inflation averaging note averaging

very important not achieving that's very

different C flexible average inflation

targeting I expect the Federal Reserve

will fulfill basically a mission

accomplished U-turn this is only likely

to happen once excess savings evaporate

yes the savings rate is lower today but

excess savings may give businesses and

consumers spending power for another

three to 12 months unfortunately by the

time a recession is confirmed Staples

Industrials Commodities and the Dixie

are likely to suffer that's my opinion

obviously especially Upon A fed pivot as

yields fall Staples which were stocks uh

some fled to uh due to you know for to

say it for safety whatever Coca-Cola

McDonald's Costco Walmart Johnson

Johnson Procter Gamble IMO are likely to

suffer suffer

do not make the mistake of course of

confusing a Fed pivot with a market

correction while it's possible that

something breaks and the FED will only

pivot if they're if something does break

in my opinion the FED will only pivot

once they're convinced inflation is

under control and that is after all the

pain point of this recession this

recession is being caused because

inflation is out of control so if

inflation is under control then the only

reason for really forcing the recession

goes away that's that's the point now I

do still believe that Staples in certain

companies will suffer whereas higher

income individuals and businesses will

will succeed because they'll be able to

spend through this recession longer

Apple Nvidia trade desk Tesla Taiwan

semiconductors to some extent some of

the housing stocks and face solar Edge

and of course layoffs are now hitting

those white collar jobs potentially more

than blue collar jobs however personally

I'm I'm I I don't know that that's

actually going to have a dramatic impact

because you're really just you're

shaving off almost off the top of the

tech sector if you will it's not like

the entire Tech sector is getting paid

off there's still massive amount of

investment going in of course then I get

some general rules like stay out of

margin and we'll likely look back in

seven years and wish we bought more now

uh invest in the down cycle of the real

estate cycle good idea consider using

ETFs blah blah blah blah anyway so I

tweeted this on on Twitter of course uh

so I recommend you follow me on Twitter

but but the point of this is really to

say I am a big believer that the Federal

Reserve or or the concern of the stock

market today is a fear of Paul volcker

and if the fear is Paul volcker then as

long as we get more communication we

actually avoid Paul volcker and that's

what's what Kenny G I think here is

missing is that uh telling Jerome Powell

to communicate less is a problem because

what you're doing is you're actually

enhancing the likelihood for something

to break in markets because you're not

properly communicating the markets that

we're not going into a Paul volcker

style scenario if we are going into a

Paul volcker style scenario I would like

to know that as well because then I will

flip-flop and sell faster than a

flip-flopper on YouTube

anyway let's keep going with what Kenny

G says

bottle we're going to do what it takes

to make that happen and we're going to

raise rates consistently until we see

very clear evidence that we put this

behind us because every time they take

the foot off the break or the market

perceives they're taking the foot off

the brake

and the job's not done

they make their work even harder

and at the same time remember they're

impacting in a very very harsh way a

very small part of the economy

and that's really tough for those

businesses that live in that part of the

economy yeah so he's making this

argument that hey if the FED like

basically pumps the market they're

making their job harder with the FED

affecting the stock market at least

according to economic literature has

little to do with what actually happens

what matters more is what happens in the

bond market with financial conditions

not so much the stock market housing

market and bond market those two have

much more of an impact now there's some

good comments here that are worth

talking about so Daniel uh here a member

writes one to nine or sorry 1.9 to one

jobs available so they may be proud to

temporarily work at a lower paying job

okay so really when we make this

argument about the jobs and labor

turnover survey which we will be getting

today by the way of course but again for

January data 1.9 to one jobs available

implies that the labor market has so

many available jobs the problem is we

have a substantial mismatch of jobs

right so and I think that's what Daniel

is alluding to here is that look you

know you you may be skilled in Tech but

now you have to go work in a restaurant

just to be able to pay your bills

because you signed up for a lease that's

more expensive than what you can now

afford right that's unfortunate but I do

think that the covet pandemic has

created such weird dislocations in the

job market that it is true you just

don't have enough people to fill the

jobs and the roles where we actually

need them I don't know that this is

necessarily trying to say this is the

tightest labor market ever even though

that is what Jerome Powell says I think

we we just literally don't have people

either willing or able to work in

certain Fields especially in Hospitality

or health care you know Health Care is

is nine hundred thousand jobs short of

where they should be according to Trend

so it's very very interesting in my

opinion someone else here writes but

hire for longer will affect EPs and

slower multiples lower Market yeah

potentially uh I mean I think the

multiples have already been priced in

but you're right if you multiply a lower

multiple by lower EPS you you end up

getting a lower stock price however I am

personally under the impression and this

is just my opinion that the bottom like

38 percent of the Fibonacci retracement

that we've seen for the NASDAQ and the

Spy or whatever is actually

representative of Paul volcker fear and

it's really the top 60 percent that is

representative of eps fear and multiple

compression fear uh like at in October

of last year markets were actually

legitimately worried that inflation was

never going to go back down remember

we've had the luxury over the last six

months of actually seeing inflation

Trend down right we did not have that

luxury in October that's really

important uh somebody's asking if I have

a comment on someone else's video but I

actually don't watch other people's

videos to the extent that I'm capable of

resisting so I have no idea when

somebody else makes a video about me

most of the time it takes somebody else

asking me about it and then I'm also

generally not very interested in looking

that's a psychological thing and I also

don't know why we're talking about that

on sort of the FED talk pick but you

know what let me put it this way it's a

lesson to everyone I actually the very

first video that I made on YouTube that

brought me from 12 subscribers to a

thousand subscribers where I was talking

about real estate in 2017. I talked

about this concept of the toxicity of

Relativity of comparing yourself to the

opinions of others and I warned myself

like the most dangerous thing is doing

that in real estate and Business and

Entrepreneurship and it's even worse and

more toxic on YouTube because YouTube is

so easy to measure views subscribers

growth rates it's so toxic but

unfortunately as the I believe the Bible

says a comparison is the the thief of

Joy don't don't don't do it and what I

like to do is I like to purposely not

watch other people's commentary in my

space because I don't want to start

rhyming like other people I like to

provide a very unique perspective uh you

know that's not to say I don't study all

day long of course I do uh but uh but

not not other content creators oh God no

anyway so when it comes to the Federal

Reserve uh I actually I am very very uh

look I hate to say I like I don't want

to sound you know dare I say like a

clown who is always bullish because I'm

not always bullish I think everybody who

watches me knows I when I turn bearish

was the right time to turn bearish I

became bullish too early I admit my

fault uh but uh but the point is like no

if if I see the conditions of going

bearish I'm gonna flip very fast but I

don't see that in fact I think most of

the feds speak yesterday and today is

really just clickbait I mean no

Jerome pal sorry I shouldn't say that

because some people watch this with

children but like really if the data

comes in hot you're gonna go 50 duh

right like but that's what we I mean

we've been talking about that since

before the FED meeting what I've been

saying on the channel look I I think the

FED would shoot themselves in the foot

in terms of credibility uh if they go 50

the data would have to be so

ridiculously intensely high for them to

go 50 that I don't think they're going

to do it in fact it's hilarious and I'm

not trying to say like oh you know JP

Morgan's watching my videos and like Pat

myself on the back as much as I would

like to be able to say that I'm not

going to say that JP Morgan released a

piece on exactly that just yesterday and

what they wrote was uh they're basically

that they're like look

the FED will confuse markets if they go

50. if they go 50 they will send such a

confusing signal to markets that they

have no control that you could actually

cause more damage to markets here it is

it was jpmorgan's Chief investment

officer Bob Michelle two first names if

employment data is very strong you've

got 50 BP pack on the table but that's a

pretty high hurdle once downshifted if

you go back to 50 it would be pretty

confusing to the market I hope they

don't do it they were really willing to

run a strong or sorry a string of 25 BP

increases exactly it's like just add

another 25 BP but don't confuse the

market with a 50. I think I think that

would be silly uh somebody here writes

uh somebody who's watching on Twitch

says data says 50 now no data says

between now and may 50 is in the bag but

that's two rate hikes right we we are

sitting at about 50 50 for a 50 in March

boy that sounds very confusing

uh now you're saying Futures leading

slightly 50. okay all right that's a

better clarification yes they're

teetering on the 50 50 level last night

they were teetering towards uh 25 by

about uh a 52 margin maybe they flipped

a tiny little bit with Futures this

morning either way I don't think it

terribly matters let's wait for the data

we'll see that but again what we're

hearing from the FED here is very

important it's no public or but yes it

is it is a volatile path forward and

that's very very important a 50 50 when

it was just 15. you are correct yes yes

you are correct don't get me wrong I I'm

not saying Mike trades here is wrong

you're correct we have substantially

moved towards 50. but in a weird way I

actually think that could be bullish

because think about it I think the

hurdle to go 50 much like what JPM says

is very very high so the Market's

pricing at 50 give me a rally baby give

me a rally on the 25.

uh so so yes the market is trying to

price that in my two week old won't stop

saying sh9t they thanks Kevin

two week old congratulations that's

that's awesome man I want to have a baby

dude I don't have a baby anymore like I

look you have a two week old I know

you're going through hell right now

uh probably lack of sleep and all the

crap that goes along with that

enjoy it man like everybody always told

me that when I had a two-year-old I

didn't believe him I'm like ah come on

man this is like I got plenty of time

looking at these like tiny hands and

tiny feet and stuff I have a

seven-year-old and five-year-old now and

I'm like dude I literally don't have a

baby anymore I'm like I want babies I

want I want like 10 more babies

so we got to get we got to get to work

but but I'm just house hacking so much

that you know I'm not fulfilling my

duties here uh anyway okay we're gonna

get off that now