Powell Resigning, per Trump Director of Housing

The statement from the chairman of the

board of Fanny and Freddy and the

director of the Federal Housing and

Finance Agency, Mr. PE suggests, quote,

I'm encouraged by reports that Jerome

Powell is considering resigning. I think

it will be the right direction for

America and the economy will boom. Now,

these are unsubstantiated reports that

are out from Mr. PTE who is the grandson

of uh the PTE group the homebuilder real

estate company future house hacks going

to take their throne this person has

been essentially shilling Donald Trump

since about 2019 uh although he's also

been involved in uh well not only having

a lot of wealth because of his

grandfather and his ownership in the PTE

homes group but also giving that away to

get attention on social media. One of

the ways he first got the attention of

Donald Trump by was by promising to give

away two cars apparently that uh you

know he would do if Donald Trump

retweeted the message back in 2019 which

Donald Trump did respond to and applaud

him for which sort of got him more

political attention and clout kind of

like buying it with you know

philanthropic donations basically. Uh

anyway, so he gets appointed as as uh

not only director of the FHFA, but also

uh essentially appoints himself chairman

of the board of Fanny Freddy, goes in

and fires a bunch of people at the

entities. There's been a lot of hope

that Fanny and Freddy would privatize uh

leading not only the stocks to rally for

Fanny and Freddy, but also uh to more

dividend cash flow coming from these uh

agencies, which are quasi government

agencies that basically enable the

30-year fixed rate mortgage. All the

extra money they're making now just goes

straight to the Treasury Department. But

if these privatized, they could start

returning their cash flows to investors

rather than to the treasury, which is

why their stocks have done very well.

And so you've got an individual who's

who's very focused on

uh,

how should I put it, fulfilling kind of

the goals of the Trump administration,

more Republican ideals, right?

privatization of Fanny Freddy, rewarding

shareholders,

uh potentially removing things like down

payment assistance for uh individuals

who might otherwise be using some of

these down payment assistance programs.

Uh see here on Tuesday, here's a New

York Times piece which indicates he

signed an order to end Fanny and Freddy

programs designed to provide assistance

with down payments and closing costs for

some first-time home buyers. A lot of

these are uh down payment either grants

or loans that are provided by community

organizations like churches or uh local

community um banks or otherwise. And

they essentially allow people to either

get granted money to buy their first

home or get a second mortgage that

allows them to actually borrow more than

the value of the property about 105%. I

know a lot of people would look at this

and we're like, "Oh my gosh, you know,

people shouldn't be buying homes at

these levels." And you could sort of

have a debate around that because you

could do 3% down and then borrow the

down payment and the closing cost.

Usually these are restricted for people

with, you know, moderate to median

incomes or even below median incomes.

And there sort of a way to give people

home ownership or access to home home

ownership in an unaffordable time. It's

probably some inefficiency because

anytime you get the government involved

doing stuff like this, there's some

inefficiency in what's involved in this.

Uh, and other people argue like just get

the government out of uh, the

involvement in real estate. There are

some downsides obviously to that uh,

such as losing potentially the 30-year

fixed rate mortgage or losing 30 to 60

or even 90-day rate lock periods when

you're applying for a mortgage. Uh,

potentially losing no prepayment

penalties on newer loans that are

created. Uh, right. We we don't have

prepayment penalties on a 30-year fixed

rate mortgage today, which essentially

enables you to fix your rate in for 30

years and refinance whenever you want.

So, you've got an individual that's

really trying to push the housing

community into a more private direction.

And the person that heavily stands in

the way of that in my opinion and

probably in P's opinion as well is

Jerome Powell. Drone Powell is

basically, hey, we're worried that the

effects of inflation could be a lot more

persistent because of Donald Trump's

tariffs than other people are

forecasting. In fact, if you look at the

Fed's minutes, you'll see many observe

that it may take, this is these are the

last minutes from June. Many observe

that it may take some time for the

effect of high higher tariffs to be

reflected in the prices of final goods

because some firms might not choose to

raise prices until they had run down

their inventories. However, it's also

possible that there could be a low pass

through of those tariffs as businesses

essentially get rejected by households

at higher prices leading essentially

then businesses to take it in the margin

and then of course leading to the

potential that while the labor market is

stable today, we could end up in a place

where heightened policy uncertainty and

the impacts of these higher tariffs

would end up weighing on labor,

especially uh since we're already seeing

a softening of labor conditions.

It's worth also looking at what's going

on with warn notices in this. Here's a

chart from Apollo that we annotated this

morning where we indicated a few

different things. I'll explain this

quickly here, but basically warn notices

are a heads up that in the next 60 days,

a bunch of people are going to get

fired. Uh, as you can see, we hit this

election low uh right over here. Uh,

right when the election occurred, we had

negative year-over-year layoffs. We were

under that 0% line. I threw this green

line in just to show kind of a usual low

strong labor market, low layoffs coming,

right? The green line are warn notices.

The blue line are unemployment claims,

which have been pretty, you know,

decently stable. However, warn notices

are starting to tick up. And while

they're not yet at recessionary levels,

which would be more like your red bar up

here, absent uh what happened in 2012

where you had this odd spike over here,

you can see this being the more

concerning line here. You see, you

really want to pay attention to the

trend of war notices going up. uh

because the the trend suggests that we

may end up if we continue this trend in

a recessionary level of layoffs

especially at a time where the beverage

curve is highly abnormal which I wrote

down here suggesting that even a small

increase in layoffs could end up leading

the unemployment rate to skyrocket would

make the Fed a little nervous to lower

rates. So there are legitimate concerns

that the Federal Reserve has regarding

interest rates. That said, Pte, more of

a sort of free market capitalist, you

know, Republican point of view, argues,

hey, maybe we don't need the government

in our housing. Maybe we don't need the

Federal Reserve to set rates. We should

lower rates, get the government out of

housing, lower rates, and enable

affordable housing again. Other people

argue that if we lower rates now during

these potential times, we might end up

just increasing how home prices even

more. Home prices so far have been

holding up pretty well, though ING is

reporting that in some areas home prices

are starting to falter a little bit. In

fact, you can see here the Powell Trump

clash is set to escalate. In the last

few days, we've seen people criticize

Powell's renovation of the Washington DC

branch of the Federal Reserve. Uh there

people are suggesting it's a palace, but

ING is reporting that GDP growth is

expected to fall to just 1.5% in 25 and

26. Consumer spending may be plateauing

a little bit, though not necessarily

online sales because you kind of have to

balance this with the news that as we

expected, the Amazon news was not as bad

as expected. Previously, we heard that

Amazon saw sales dropping 41%. And we

made this argument that, oh, okay, but

that's one person representing about 41

different sellers. There are thousands

of sellers on Amazon, so we need to wait

for like broad data to get more

realistic data on on consumer spending.

What we ended up getting this morning

was that Amazon Prime Day actually

fueled a 30.3% rise in online spending.

This is according to Adobe's analytics,

topping estimates for 28.4%

growth over this particular week. Now,

it's possible that because Prime Day was

four days this year instead of two that

people just basically had more time to

spend

uh and so you sort of buttered that out

and maybe that's why you had that sort

of misleading negative 40% stat. But we

basically had exactly the opposite of

consumers still spending online at

Walmart, Target, Amazon. So, so far

consumer spending still really holding

up. Uh which is good. But going back to

that ING report, you can see here

households quickly recognized that they

would be the ones to pay for the bulk of

the tariffs, therefore leading to some

uncertainty in uh in spending, although

again apparently not online. Median

sales prices nationwide for real estate

are still positive. They're the highest

level in the last four years, though

some parts like Texas and Florida, some

sunb belt areas are seeing negative

prices. ING reports this pickup in war

notices as well and that employment

outside of private education and

healthcare has virtually stalled and

even fallen nine of the last 30 months.

So these potential issues here. On top

of that, you've got a buildup of

inventory which could end up hitting

housing prices more in certain areas.

And our GDP is likely volatile for Q1,

Q2 because of tariffs. But as we get CPI

reads for July, August, and September,

we could end up seeing substantially

higher prints in inflation. Uh, and this

concern that this inflation could end up

being persistent. So that's what leads

IG to report that they don't think rates

are going to fall until December where

they're calling for a 50 basis point

rate cut uh in December. So basically a

double rate cut in December. This though

isn't stopping people from trying to

pressure Powell. It's like like this PTE

individual who says America wants Fed

Chairman Jerome Powell to resign. Mr.

Powell, do the patriotic thing and step

down now. You've done enough damage to

the middle class. You know, a lot of

people here would argue that it's not

Powell who, you know, created the

damage. It's rather politicians who

spent the money. The Fed just sort of

enabled it and then, you know, was slow

to raise rates.

So, you know, there's probably blame to

go around on both sides, but so far

there doesn't appear to be any actual

evidence uh that Powell is willing to

step down. I also think that Powell is

going to be quite stubborn on this

because I think he has a legacy to to

continue fulfilling.

Obviously, this is all coming at the

same time as we're still talking about

BRICS currencies and ddollarization.

Although Bloomberg calls this quote

still a pipe dream that BRICS countries

once again failed to make significant

strides in their crossber payment

system, they had a great opportunity to

do it during the tariff disaster of

April uh and really March uh or

potentially even coming up here as we're

threatening even more tariffs on the U

EU and Mexico. But so far the economy is

holding up. We haven't seen unemployment

skyrocket yet. And so you're getting

this push towards free market capitalism

by Trump and and the Trump fanboys or

chillers or whatever you want to call

them. But I don't think that there's any

actual evidence that this person who

seems very

convinced with I need to like make

statements that are going to be populist

actually has any evidence that Powell is

going to step down. It's to me the same

thing that you saw with the

cryptocurrency reserve calculation for

people wanting to buy homes that you

could use crypto as reserves for buying

a home. This is great, but it probably

makes very little practical difference

uh because we're just talking about your

ability to show two to six months of

extra payments in reserves somewhere.

And if you have significant uh you know

crypto assets and reserves, it's also

likely that you have enough to show that

you have two to six months worth of

payments without having to liquidate

your crypto, especially since crypto is

volatile. So yeah, I mean it might help

on a margin, but I think a lot of this

is really designed to be sort of

populist like this is the crypto

president, we're the free market uh

agency now. uh we're gonna, you know,

strip the affordable housing programs

and get the government out of housing

risk again losing the 30-year mortgage

in the longer term. So, we'll see what

kind of damage PTE causes if he does at

all. But in the meantime, economy's

holding up. Yeah, people are talking

about an underpriced risk that Powell

gets kicked out, but if Powell gets

kicked out, people are just going to

think that rates will plummet and uh

you'll end up getting a selloff in the

dollar and treasuries, which is entirely

possible, but you know, that doesn't

really affect the stock market. Uh and

on top of that, uh you know, you still

have debates about how the global

economy is doing. The International

Energy Agency says that global demand

for oil is growing at the slowest pace

since 2009. But OPEC is acting like

we're seeing twice as much growth as the

IEA is suggesting,

suggesting that demand is so strong that

we'll be able to absorb the additional

supply. So we're going to release more

barrels of oil. So in other words, we

don't really know where the economy sits

with so many different signals right

now. I think there's no doubt we're in a

transition point. But I think this idea

that O Powell is definitely going to

resign is probably overblown and more

likely just sort of a populist message

uh from uh you know a big Trump fanboy

and not necessarily something that's

based in fact reality or at all based in

Powell's personality. Powell's got

plenty of money uh to not have to worry

about you know what happens after this

and he I think he's going to see through

his legacy of Fed independence and I

think he'd rather die than

enable

a Trump choice a day sooner uh than his

job is over. That's my guess. Uh in

terms of his personality is what we've

seen over the last, you know, seven

years of Powell. Uh and and if any of

that makes you nervous, always remember

you can get life insurance in as little

as 5 minutes by going to bec.com/life.

It's mekevin.com/life

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sponsor of the channel.

>> 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 Praath there, financial analyst

and YouTuber. Meet Kevin. Always great

to get your take.