uhg.... What Jerome Powell JUST Said

well drone Powell just finished speaking

and wow there's a lot to unpackage let's

get right into it so drone Powell said

something delicious and juicy he says

look the whole point of higher rates is

to tighten Financial conditions he says

quote that's literally how it works and

so what's interesting is you've noticed

Jerome pow in the FED been a little bit

more fussy and maybe hawkish and look at

what's happened to financial conditions

this is the Goldman Sachs Financial

conditions index the Federal Reserve

started hiking right around this region

right here you notice that these

Financial conditions really started

relaxing and actually even relaxed

during the banking crisis a little bit

of a spike there but then a relaxation

again we are almost at the tightest

Financial conditions now though that

we've seen following bond yields now at

almost 5% for the 10-year treasury at uh

you know the geopolitical risks that

we're seeing the lack of a house speaker

that we're seeing right now the 10e

sitting at

4.96% after that presentation that's up

slightly oils up slightly again at

almost $92 these are some expensive

issues that people are very concerned

about and rightfully so what's

interesting though is drum pal says he

talks to businesses regularly and he

finds that the economy is strong the

consumer is strong where there's pain is

potentially among smaller more cash

strapped companies early stage companies

that don't have cash that they can

invest in treasury bonds for example at

house hack we have money sitting in

money markets or Treasury ones running

like 5 to 6% it's crazy it's amazing uh

deadline by the way for an investing in

house cack is November 1st that's the

other fed day coming up but drum says

look many forecasters were saying we'd

be in a recession and here we are

inflation's going away and we're not in

recession and he's not actually wrong if

I were jome Powell I'd be cheering right

now I'd be like bro we basically didn't

break anything we still have under 4%

employment jome Powell is talking about

how unemployment has not been under 4%

for this many many months in a row since

the late

1960s that's over 50 years over half a

century lows of employment that we're

facing right now yet the economy is

still moving and still chugging along

above Trend now Dron Powell thinks we

might have to get the economy under

below like under Trend to actually and

he says we're at Trend right now with

economic growth he thinks we might have

to get the economy below Trend to

actually reiterate we're not stopping

until we get to 2% but overall so far a

lot of wins what about the banking

crisis people say well of course they

created the money printer banking

facility for that which basically said

don't worry if treasury yields go up and

your bond values go down fear not we'll

still lend you money assuming those

treasury bonds are worth 100% because we

could always just take them and wait

till maturity we got time that basically

overnight solved the banking crisis

really really incredible now what I

really want you to think about that he

said which was in my opinion somewhat

there were two game changers here okay

one without I'm about to talk about and

the second one that Nick T pointed out

which I also noticed in his speech the

first one is that he actually showed us

his hand he said something that a lot of

people missed it just right over

people's head below their knees he said

it really clearly he said look if people

seriously expect that we won't stop

until we get to 2% inflation then we'll

get to 2%

inflation then he said if people didn't

believe us we would never get there and

I'm paraphrasing now but he basically

said if we came out and said we're done

and we're not trying anymore to get to

2% then bond yields would plummet bonds

would rally and financial conditions

would loosen really rapidly and then we

wouldn't get to 2% so basically even

though inflation is going away and in

his commentary in his prepared speech

his prepared remarks he basically

suggested there's a lot of volatile data

we have inflation coming down inflation

was really great this summer we had a

little bit of a pop in September but

that's probably just volatile data and

we don't really have to be that heavily

concerned about that we have to keep

putting on the face of strength until

inflation's basically meaningfully on

its way to 2% because as soon as we say

we're done bond yields plummet and that

makes it harder to get to 2% in the

first place so in other words even

though we're trending towards 2% and

everything's going great we still have

to pretend like everything is

bad because if we stop pretending then

we'll unwind the progress we're making

it's like a Topsy Turvy world but Jerome

Powell is so clear about that he is so

Crystal Clear about that there's no

secret here he's being very blunt and

blatant about that but everybody wants

to forget that there's this fear that

there's actually still an inflation

problem there's not and every inflation

report that comes out oh my gosh there's

a real inflation problem there's not

even in today's conference drum how's

very clear look what caused inflation

was a massive cap capability of demand

coming at the same time as a supply

chain shock driven by coid and even in

countries that didn't print as much

money as we did they also experienced

massive inflation because these supply

chain changes with high demand but

that's not what we have going forward so

he says we're basically on the trend to

maybe even going below 2% inflation just

like where we were in 2020 12 through

2019 we can go back to that and if

something breaks we're not up against

the effective lower bound that's a big

deal the effective lower bound the elb

is zero 0% rates it's basically a way of

saying if you're at zero and something

breaks how do you cut you can't cut but

we're at 5 and a qu% you have a lot of

room to cut if something actually breaks

the second Big Game Changer was what he

talked about about Labor this is

something that Nick T from The Wall

Street Journal pointed out as as well

and as I went through the transcript the

first time I actually wrote wow next to

it twice I'm going to read you this

because it's the most important part out

of the actual prepared remarks in the

labor market strong job creation has

been met uh with a welcomed increase of

a supply of workers due to higher

participation and a rebound of

immigration many indicators suggest

while conditions remain tight the labor

market is cooling good that means less

of a wage price spiral perfect or no

wage price spiral job openings have

moved down from their highs and are only

modestly above pre-pandemic levels

that's a wow right there in the past he

used to say we want one to one now he's

like yeah we're only modestly higher on

the jolts right now this isn't that bad

we don't need to go to one: one he's

basically undoing what he previously

said he's flip-flo he's like nah one:

one's not that important we're okay

being modestly above otherwise he

wouldn't say it's modestly above he

would say there's still progress to be

made this is good that's a flip-flop

from the FED what's another one the one

that Nick T pointed out has to do with

inflation and here it is quits are back

to prepandemic levels the same is true

of the wage premium earned by those who

change jobs surveys of workers and

employers show a return to pre pandemic

levels of tightness in other words

remember how Drome Powell is so worried

about inflation coming from that third

part there are three parts Goods housing

and then Services X housing okay housing

we know is coming down goods inflation

is coming down put those off the shelf

what do you have left Services X housing

okay what drives Services inflation X

housing first of all what is that it's

the person who cleans your teeth it's

the person who cleans your house it's

the person who does your tax returns

your lawyer your funeral parlor it's

your veterinarian it's your doctor these

are Services okay Services X housing

those prices go up when wages go up

unsustainable ably Jerome Powell

basically here is saying wages are going

back to what you would expect or would

have expected pre pandemic what

inflation did we have pre pandemic

1.75% we had below Trend inflation right

now he's flipping he's basically saying

look we're not really like between you

and me we're not really getting

inflation anymore like the inflation

problem's done now we have to be sure

it's dead and the way we're going to be

sure it's dead is by pretending we still

have to be at these high rates if

something breaks we can cut but until

then we'll just sit here at these

restrictive levels and we don't think

these rates are too high because the

economy is still doing well but we're

just going to sit here uh until we get

to the lower rates because as soon as we

signal that we're going to U-turn bond

yields will plummet off a cliff and

that'll loosen Financial conditions

which could lead to Grandma and Grandpa

going back on margin into Robin Hood and

and yoloing stocks and then you get

another bubble that's what they're

trying to prevent so this is a

manipulation and he's being he's been

very transparent about it he is like

bluntly telling the economy hey um I

don't believe you that you are going to

sustain 2% inflation so I'm just going

to ream you until inflation is 2% so

what does that practically mean well

practically means if you're investing in

stocks you can't be a little weeny baby

you're going to have to buckle up and

realize it's still going to take time

for stocks to moon and go to new highs

that's going to take time and that's

okay that gives you years potentially

here to DCA and increase your position

in stocks that you think will matter in

the long term 5 10 years out I'm not

here to Advocate trading in and out

every single day you know just because

elon's a little doesn't mean we

need to dump Tesla stock although some

people are dumping Tesla Stu CU they're

like damn he really a big problem but

anyway we talk about that in a separate

video point is longterm drum Pal's

pretty happy Jerome Powell's winning

Jerome Powell is setting up for his

statue because he is winning and he know

knows he's winning he just doesn't want

to risk giving up it's kind of the way I

think about it is imagine you're on a

Marathon run okay and you're winning

you're in first place you don't want to

be the guy who slows down right at the

end before the Finish Line puts your

hands up and goes yeah I'm winning and

then the second place person runs past

you it's happened plenty of times in

sports and it can happen with the

economy as well Jerome Powell's in first

place he knows he's winning and he

doesn't want to F it up what else did he

say

a little bit of talk about the Phillips

curve big deal it's flatter than you

would expect he talked a little bit

about how he felt in 2012 when

everybody's like we're going to have

inflation and this is actually funny

he's like oh everybody in 2012 is like

there's going to be so much inflation

and he's like bro there's no inflation

and then inflation's low for like eight

years thereafter like he's like so

clearly telling you the road map for the

long run again shortterm sucks long run

he's like very clear here this is

actually very transparent banking crisis

we have a facility for it no major risks

to Banks from a commercial real estate

shock could there be more shocks of

course uh interest rate spending sectors

are starting to show pain that's housing

that's cars that's Elon

Musk uh but we still have strong demand

strong demand strong savings higher than

we expected uh let's see here 5year

break even by the way up again 2.4%

5year forward Break Even

2.5% uh in the past 25 years we may have

had lower inflation though because of AG

in higher savings he does think there is

a risk that the neutral rate will be

higher going forward but quite frankly

he has no effing idea what the neutral

rate is going to be and nobody does we

could only speculate on it I speculate

that it's going to go back and probably

be even lower thanks to competition and

Innovation he thinks it'll be somewhere

in the middle some people think it'll be

even higher that's like we can place

bets on that that's crystal ball stuff

that stuff doesn't matter right now but

the point

is this is uh this is a pretty neutral

speech I don't think this is the dovish

uh drone Powell people were hoping for

though as soon as you get a doish drone

Powell you know yields plummet and and

all the stuff that they don't want to

happen happens so this is not

unexpected what is what also should not

be unexpected is the deadline for house

hack November 1st make sure you go check

out house hack.com read the offering

circular and get involved in house Haack

if you want to be involved in a startup

uh we'll be posting a lot of housec

videos over the next two weeks to show

you some of the progress we making how

fast we're making progress really really

exciting uh we got to hit the disclaimer

keep in mind I am a licensed financial

adviser I'm becoming a licensed stock

broker already passed my Series 7 and

another related test uh and I am a

licensed real estate broker but despite

all this this video is not personalized

Financial real estate advice for you uh

I'm not short the market long the market

long some of the stocks that I mentioned

so I got to be clear about that this is

not tax legal or otherwise personalized

Financial advice this video is

generalized perspective this video is

not and shall never be deemed reasonably

sufficient information for the purposes

of evaluating security or investment

decision in other words good luck I love

y'all I'll keep bringing updates to

y'all and you know what I'm going to

keep speaking my mind because all the

little weenies who are like oh ke

Kevin's only mad cuz of this or oh Kevin

I see you I hear you if you have a good

perspective I'll say you're right and if

I think you're wrong I'll tell you I

think you're wrong but one thing we

ain't doing anymore is caring about the

carens all right folks I appreciate you

we'll see you the next one goodbye good

luck why 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