What the Fed JUST Said [Full Summary].

hey everyone meet kevin here here's a

summary of everything jerome powell just

said and announced so first the taper

schedule is out we're going from 120

billion dollars a month of stimulus

money that's money being printed and

injected into the economy at a rate of

80 billion dollars to treasuries a 40

billion to mortgage-backed securities

which just think of those as slices of

mortgages sold off as bonds so you're

paying interest to bond holders not to

banks but anyway this 120 billion pot is

being reduced by 15 billion 10 billion

off of treasuries 5 billion off of

mortgage-backed securities expecting to

reduce this 15 billion in november 15

billion in december those two have been

decided and are likely expecting to see

the taper continue at a rate of 15

billion dollars each month thereafter

that would put us around june when we

would be completely tapered john powell

does not want to talk about liftoff or

when interest rates will actually go up

until we have completely tapered because

otherwise he sees that as it could like

it doesn't make sense that'd be

cognitive dissidence to be printing

money and stimulating the economy at the

same time is making that money more

expensive by raising rates he doesn't

see that as logical so they're going to

complete their taper first which there

was a reference and this becomes very

very important there was a reference to

jerome powell why are you tapering at

twice the rate that you tapered at when

we first had a taper in 2013.

and he said his response was actually

very bullish he said in this economy

demand is very strong job openings are

plenty and we are still years from 20 uh

i mean we that we are today years from

the 2013 levels uh that we were in uh in

a very positive way that is in 2013 the

economy still had to grow for years to

get to levels of demand where it is now

this was really bullish and we actually

saw stocks like tesla and the s p 500

right when that comment was made by

jerome powell that demand is very strong

we saw markets move up markets like this

so far markets have been pretty

optimistic about all the things that

were talked about here we did have a

shift in the verbiage that's used in the

fed statements we shifted from using the

word transitory to expecting inflation

to be transitory and spending more time

talking about the rationale as to why

the fed believes that inflation is going

to go down and so this helps make the

fed seem a lot less tone-deaf about

inflation happening you know when

they're like oh yeah inflation's

transitory and inflation data is coming

in really really high and we expect

inflation data to come in high in

quarter one and quarter two then it

makes the feds seem like they're morons

which some of you may still believe is

true

you know regardless but anyway now

they're talking about how look we expect

inflation to rotate down in the second

and third quarter of 2022 it's taking

longer than anybody forecast in in

markets that they talk to that is their

market participants or their forecasters

thought they're seeing this inflation

take longer to rotate down but they do

think that in the second and third

quarter inflation will rotate down and

that will come at the perfect point when

the taper has completed and then the fed

will say okay good the taper has

completed now we're in a position where

we can talk about raising rates how much

inflation do we actually have left now

that we're in june of 2022

how much inflation is left do we

actually have to aggressively raise

rates or can we take our time with

raising rates because maybe the fed was

right and inflation did end up

inflecting to the downside in the second

and third quarter of 2022

uh which by the way gives us in my

opinion a little bit of a time frame for

crypto that crypto's still going to

enjoy the benefit of high inflation

readings for q few uh q4 uh q1 and q2

but that that inflection might not come

around until that summer that midpoint

of 2020 uh two so we'll keep an eye on

that obviously all right then uh he

talks about let's see here a lot of

different things so let's let's just get

into the summary of some of these things

so household and business investments

flattened in october however uh

businesses and households have very

strong financials or in strong financial

conditions sees covid receding further

and that growth should actually pick up

from last month in in this quarter here

which last month is still part of this

quarter but growth should pick up and

that's because we're escaping that delta

surge that we had in august and a little

bit of september that also led the

markets to really soften uh and spending

to soften he says that the pace of

economic growth as a result of that has

slowed but again we're expecting that to

go up we're expecting to see

job gains closer to averages averages

are somewhere around 550 to 600 000 in

jobs gains last two months we've been in

the 100 thousands and in the summer we

in june july we were at a million jobs

so we've got some work to do and

hopefully this friday we get some

positive news on jobs data this friday

that's in two days we will be getting

the jobs report 4.8 percent unemployment

he believes understates the amount of

unemployment there actually is he thinks

there's more employment or unemployment

and that's because people have left the

labor force you've got more

retirements less participation

participation amongst prime aged workers

is down some of this could be due to be

due to fears of covid uh having stronger

financial positions in households

because household wealth has gone up by

a real estate in stocks or potentially

because people are still caring for

older family or children who cannot get

covert vaccinated yet now others

including barons make actually the

opposite argument that the federal

reserve is overstating how much

unemployment there is because the fed is

actually not properly able to track how

much new business creation there is and

how many people are just going off and

working for themselves and that right

now comparing right now to 2019 we're

creating 50 percent more businesses

every single month than we did in 2019

uh and that pace was pretty strong

during the pandemic as well it was even

higher

anyway uh he does mention that and so

anyway the point of that is is really

that

you could potentially have the fed

missing the boat on employment that

employment is actually much higher than

it looks according to their numbers so

they think employment is actually the

employment reports are worse

and behrens thinks no they could

actually be better than you think so

we're kind of in opposite directions

there on jobs and that could have a big

factor in inflation even though we

expect consumer price inflation to go

down next summer we actually don't

expect wages and rents to go down so

you're going to have this sort of

negative growth of prices in my opinion

on things like cars

you know

durables like washing machines or

appliances or computers or hardware or

whatever and chips you see prices of

these things come down but i think

you'll probably still see wages and

rents trickle up which will still

contribute to inflation right

john powell does say that high inflation

does propose some difficulties for those

who can can't afford or don't have the

means to afford essentials like food and

transportation he says that our tools

cannot solve supply issues however over

time we believe we can support the

economy to essentially lead that

inflation to come down so that the

supply chain issue has become more

normal

he indicates also that they have a

completely different set and more

stringent requirements outlined for when

they're going to raise rates again we

don't expect that to happen at all until

some point next year

probably the third or fourth quarter of

2022 for the first sort of rate increase

and that's going to depend on how much

inflation goes down by the summer

that'll be the big indicator

he does believe that supply bottlenecks

will last well into next year but we

expect that inflation to go down in the

second or third quarter he says we could

be patient no direct signal is being

given on rates and he doesn't believe

that we're going to see a wage price

spiral where prices are going up

therefore wages are going to spiral up

and because wages are spiraling up now

prices have to go up because he sees

productivity still is increasing which

is good he didn't want to give exact

conditions for what they mean by max

employment but i think a lot of this is

just going to have to do with waiting

out to see how supply chain issues

change over the next six months before

we get to a potential talk about raising

rates

now uh then jerome powell mentions that

if anything changes in the economy he

will use whatever tools he has available

so if they have to adjust the pace of

taper that is taper faster because

inflation is lasting even longer or

tapers slower because inflation is

starting to

subside then he will do so obviously if

they needed to raise rates immediately

because inflation just exploded they

could just taper 100 tomorrow

with emergency action

jump rates immediately if they needed to

if they just missed the boat that badly

and i would expect something like that

would probably lead to some panic in the

market though it doesn't look like that

is something the market's really

anticipating or expecting right now

otherwise we'd see bond yields higher

bond yields right now not really

reacting

uh as much as you would think because

when the fed starts talking about

tapering it means they put less pressure

on bond prices which means bond prices

go down which means yields go up and the

yields haven't really gone up i mean the

10-year 1.59 it's kind of where it's

been sitting for the last like two or

three months here it's maybe not two or

three months but at least the last two

months it's been sitting a little flat

there

but anyway uh okay then we have uh a

little bit of talk about how labor

dynamics have certainly changed but that

jerome powell actually thinks we could

end up seeing a winter

bump uh or winter yeah winter bump in in

jobs that if we don't have a covet surge

this winter we might see hiring explode

this winter and if hiring explodes this

winter then we could we could end up

having

getting to max unemployment or sorry max

employment sooner and that would be good

for not only gdp growth but potentially

dealing with our supply chain issues

remember folks if amazon can hire more

workers

or logistics companies can hire more

workers it means we can actually clear

our supply chain issues faster so in a

crazy way even though sometimes the

market's like oh my gosh we're adding so

many jobs are we overheating we want to

see jobs added because the more jobs get

added the more hands we have on the

supply chain issues people stocking

shelves people distributing people

taking stuff off container ships

whatever right

or taking containers off of ships

whatever

and uh and then

then we can work our way through these

supply chain issues faster and that

means the more we get people employed

the sooner we can actually see the

supply chain issues abate we're still

going to see those wage pressures going

up but we'll we should start seeing

those consumer prices come down

substantially and that would be really

nice

for markets of course until that happens

we expect cryptocurrencies to do very

very well uh through around the middle

of 2022. uh i i still support sort of

the position that i have for crypto

which is 20 bitcoin uh 40 aetherium and

40 cardano i have a little bit of

rebalancing to do because i'm

transitioning between wallets right now

and i just paid off all my margin but i

just wanted to give an update on that

but i still feel that way so uh okay

good that uh that gives us a breakdown

of what jerome powell just said and what

happened at the federal reserve

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