WHOA!! What the Fed *JUST* Said!

hey everyone kevin here in this video we're going to talk about what just was

said by our federal reserve chairperson jerome powell in congress we expect

similar testimony tomorrow but we got a lot of good insight out of what jerome

paul said and i'm excited to bring it to you first a couple notes we did get

eurozone inflation this morning that came in at 5.8

versus 5.4 that was expected that means slightly hotter than expected inflation

uh that's in the eurozone now we did also get the adp jobs report this

morning the adp jobs report also came in higher than expected at 475 000 jobs

versus 375 expected but not only this they also revised up their jobs from

around negative 300 and 1 000 last month to positive 509 000 so this

private jobs report really showed us that the labor market is absolutely

crushing it the real space that got hit the hardest in that private jobs report

was in the small business sector they lost jobs whereas big businesses

especially service and retail they really gained a lot of jobs my

assumption for this and it's completely an assumption is that as the stock

market falls small businesses who more often fund their businesses with their

wealth their personal wealth stop hiring or lay off people when the

stock market falls i believe that's more true of small businesses than larger

businesses which can be more resilient to these sorts of shocks now let's talk

about j-pal and remember that this video is brought to you by extra go to

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credit without a credit card using the extra debit card

all right so good news the good news is jay pal for the first time since january

just spoke and he told us that he supports a 25 basis point liftoff this

is what the market has been expecting it's what the market has been pricing in

now he did indicate that he expects there to be a series of increases

afterwards but he didn't know exactly how many yet however he gave us a really

big hint and i think most mainstream media missed this he says

this liftoff and tightening cycle will probably be much more like the

tightening cycle of the beginning of the century not the tightening cycle after

the great financial crisis okay so there are two tightening cycles that happened

this the century one before the great recession and one after the one after

happened in uh or started in 2011 and we had these slow 25 basis point hikes

after about a three-quarters initial hike and then these slow hikes the one

he's referring to now though was a was in 2004 where they did have a 50 basis

point bump and then 17 consistent 25 basis point hikes so

about every six to seven weeks they hiked rates 25 basis points and the

purpose of that is to constrain the real estate and housing market which he says

is hot and needs to cool down it's to constrain auto lending and ultimately

constrain demand and when we constrain demand then we can push inflation down

so he made it very clear that and the one part here is good news he doesn't

plan to rug pull us but don't expect the fed to be nice to

us for the next probably two years they're just gonna hike and hike and

hike and hike and hike continuously potentially if if the

reference is true to early 2004 or mid-2004 when they were hiking that

started a 17-hike process which is wild right now

the market's pricing in maybe five or six uh before we start seeing

potentially a pause so a little bit of a disparity there between the market and

powell uh he did talk about and this was quite interesting as well how when it

comes to oil the the question was will inflation

lead to or will we have sort of a spiral of inflation because of higher energy

costs and he says that oil prices going up do create a price level change but

they don't create a repeated change so in other words you don't tend to get

this cycle of up up up up of the inflation impact when energy

costs go up yes you will see one time larger hikes in inflation and uh in when

he was asked about the things like the keystone pipeline he refused to talk

about specific policy but he did say hey look the laws of supply and demand work

in other words if we have more supply of oil yeah the cost of gas gas and oil

will go down in the united states he did talk about how over the last 25 years

we've seen essentially negative inflation for most goods and that it's

only been recently here because of these shocks the supply side shocks and really

the demand side shocks that we've seen that inflation is as high as it is now

in terms of march again he does expect to lift off he does expect to proceed

very carefully and the reason he expects to proceed more carefully and the reason

he doesn't want to create any kind of shock in the market and this is very

important we don't want to see a rug pull

is because of war in fact he went as far as saying hey look at first they pivoted

because of the high inflation but they're now essentially softening their

pivot and in jerome powell's words quote the war is quote a game changer to their

trajectory now this is literally how i felt i you turned and sold a lot of

stocks in january when the federal reserve termed hawkish because i thought

they were going to rug pull us as soon as we had the invasion i bought the dip

like crazy you look at the chart of last thursday where some of those prices were

that's where i did most of my buying but i'm still only 50 50 in the market i

haven't flipped out of any positions that i've bought except for gold but

that was more of a shorter term trade or some of the other shorter term trades

that i do when sort of volatility goes up or down i'll play volatility and

swing trade that but beyond that the larger portion of my positions right now

is 50 50 and it really aligns a lot and i'm happy to hear this from powell that

we kind of both feel the same way that at first it felt like uh-oh rug pull

necessary now the war is a game changer and we just don't know what the outcomes

of this are going to be but powell makes it very clear quote we do not want to

add uncertainty and so he's actually being very clear with us right now he's

telling us he supports a 25 basis point hike and he supports a tightening cycle

like what we saw in 2004 where it was 17 hikes in a row

and ultimately that is designed to bring down inflation which he does expect

inflation to peak this year he also tells us that uh his actions are

uh they affect demand they don't affect supply so there's nothing he could do to

fix supply chains although he does expect them to get you know improve or

see improvement this year there's nothing they can do directly to effect

supply it's not like the fed can build more factories that would be up to

congress he says uh he does say though that uh before the ukraine situation

uh and the crisis in ukraine they were expecting to raise policy rates uh

probably more substantially than expected and they expect it to work on

reducing the balance sheet however now they are and i'm reiterating this they

are quote preceding more carefully because there are too many unknowns this

is exactly what we expected that the fed would turn dovish because of war this is

why i bought and this in my opinion is why it makes sense to be 50 in the

market however personally i still think we've got massive headwinds in terms of

how long are we going to be going with these rate hike cycles and how is that

actually going to affect company earnings i don't think we're going to

see the amazing earnings reports that we saw from q4 again in q1 q2 and onward

now uh jerome powell again reiterates that he expects inflation to moderate uh

he uh did respond to credibility his question the question of credibility uh

and and the federal reserve he says that look

we are responding to inflation the way we should in the 70s and 80s which is

exactly what we're trying to avoid having the volcker of the market the fed

did not respond appropriately to inflation and that was their fault

however we're not making that same mistake today the fed was slow back then

today inflation expectations are anchored back then they were unanchored

i really appreciated him making this comparison to the 70s and 80s because

that is also a big fear of mine is that the fed is going to have to sort of

pseudo-volcarus which is basically just rug pull us raise rates a bunch really

fast force a recession and crush this economy

which would be bad but it would kill inflation he says because inflation

expectations are anchored and because every time they talk about their policy

actions the market starts pricing them in that maybe we don't have to worry as

much right now about inflation becoming unanchored and that we're in a better

place today than uh than we were in the 70s or 80s and we should be less

concerned though still vigilant i really appreciate him saying that now uh he

does respond to can we control inflation without a recession and he believes that

we actually can achieve a soft landing he actually thinks it's more likely that

we are going to achieve a soft landing than not now of course this is what we

were told in 2006 as well and we also we all know what happened after that but

i'm kind of inclined to agree with him especially now because of the

uncertainties of war watch my war video yesterday where it doesn't make sense

for the fed to rug pull us in a time of war where war is likely to push

aggregate demand down because it could lead to a stagflationary crisis where

the fed loses on both ends inflation and employment right now they're winning

unemployment but they're losing on inflation and so they don't want to

overly hawk and then kill both now he was asked about biden's

suggestion that companies are just being greedy and that company should stop

raising prices this is something that biden mentioned during his state of the

union address yesterday and powell played this like a game of 4d chess he

purposely didn't watch the state of the union so that way he could just respond

and say i didn't watch it i don't know but hey back when i was uh you know in

the business world let's just say companies are constantly

managing their costs and therefore their prices and in other words he's saying

look as companies have their input costs go up they're going to raise prices so

it might be less of a matter of corporate greed and more of a matter of

dude prices are going up so they're going to try to do whatever they can to

preserve their existence as a business now about the labor market he reiterates

how tight it is and mentions that it's the bottom quartile that's seeing most

of the wage gains right now not so much the top 75 percent that it's the low

wage earners that those are the ones who've seen the big wage increases

probably in retail and services and that the higher wage earners are actually not

seeing as much now in terms of housing he does say yeah

we look we've got high housing prices why a lot of demand lack of workers lack

of legal immigration way lower legal immigration than we've had before very

low rates low availability however he does believe that housing is quote very

interest rate sensitive and that as rates go up the housing market quote

will cool and this is of course expected uh there

was a brief mention here regarding housing that there could be some risks

in areas like florida where fannie mae and freddie mac are starting to get

nervous that people might not be able to repay their 30-year mortgages as sea

levels start to rise in florida uh he didn't journal himself didn't have too

much to say on this other than yeah i mean the government's probably going to

end up footing a lot of the bill for that

unstable coins jerome powell mentioned that they're working on both the

technical and policy aspect of this and their goal is to come up with something

that is fair and honest but it is a good sign that stable coins are

pegging to the dollar and not to other currencies however

he does call for substantial regulatory oversight for example right now binance

we know has refused to block russians from being able to buy into

cryptocurrencies and we did recently think that cryptocurrencies were pushed

up essentially in pricing because of the action of uh individuals in ukraine and

russia buying uh cryptocurrencies however it now appears the data is

coming out suggesting we actually experienced a little bit more of a short

squeeze on on monday when bitcoin for example

hit 39 and a 40 saw a little bit of some short liquidations that pushed us back

to about 44. uh however on cbdc's they're still working on it they do

believe that existing digital digital currencies excuse me are mostly

speculation and not a store of value now i do want to give another quick

shout out before i finish this up here to uh extra obviously that the dollar

could get displaced but does not believe that this is a big issue right now

because inflation is being experienced throughout the world and it's not just

the dollar essentially losing its value he does believe that there will be some

unintended consequences from the swift banking system that is russia being

kicked from it certainly we're seeing issues with commodity prices like

palladium corn neon wheat all of these things skyrocketing but he doesn't

believe that money markets are going to have issues because russia is not a part

of it uh he does not see any notable cyber attacks yet though cyber attacks

are a big concern of his and ultimately powell really believes

that uh that we need to approach this market with care and

caution and that the worst thing to do right now is rug pull the market and the

big reason for that was war that war was the in jerome powell's words game

changer as to why essentially they can't rug pull the market that they have to

take it slow and easy now and folks this is exactly how we expected jerome power

would respond this is exactly what i've been saying on my channel for the last

really two months here and folks i'm investing as such

so if you want to see all my trades remember to check out the programs link

down below so that way you know where i'm investing and where i'm not and

folks as usual we'll see in the next one thanks so much for being here goodbye