Why the Fed JUST made things WORSE....

hey everyone kevin here the federal

reserve just pissed off markets

again look the federal reserve released

their minutes from their last meeting

this is

old news the minutes aren't supposed to

move

markets but now we had the 10-year

treasury spike up a bit

from like a low of 1.62 today during the

madness this morning to now one point

almost six nine of course 69.

uh and folks now the s p

is dipping a little bit i wasn't gonna

cover this because i'm like they're not

gonna say anything new

it's gonna be the same old crap well

why then is the market going down kevin

yeah well the federal reserve

tried and failed to provide some comfort

to the market

by acknowledging what's happening

and at the same time suggesting that

don't worry we're here to

help but the market don't want the fed

here to help why because when fed chair

jerome powell was talking to sarah eisen

two months ago

sarah eisen goes whoa what's on your

tool belt what are you gonna use we all

know sarah isaac she's

she gets in there she asks the right

questions she's like she's on it with

those questions

love those questions anyway jerome

powell's oh she even pre-answered she's

like it's interest rates right you're

gonna raise interest rates right

such an awesome question anyway jerome's

like well

yeah that that is the principle tool we

would use

market fault

[Laughter]

anyway so let me explain it by showing

you

here we go all right so here we go fat

press release

i actually i talked about this live with

course members

and at first the market was shrugging it

off but then they started freaking out a

little bit so yellow is stuff that's

pretty much the same okay i'm trying to

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i'm adding content all right so what do

we got over here covet 19 pandemic is

causing tremendous and economic hardship

that's the same thing they've said many

times before indicators of economic

activity and employment have

strengthened

okay that's good so all right this pink

a little bit of an issue

the sector's most adversely affected by

the pandemic remain weak but i've shown

it proven

inflation has risen this is the first

time

the fed has literally said that like

okay

it's happening inflation's going up yep

inflation is happening right now

this acknowledgement is kind of like in

my opinion

how like mature people are supposed to

talk about their problems the first step

is to acknowledge the problem

yeah if'd up but here's what we're gonna

do now

we're gonna comfort you by saying that

this is largely reflecting transitory

factors

look the market does not believe this

the market doesn't care about this so

pretty much all we really got

in this sentence right here since the

market does not believe this transitory

thing

all we really got is this right here

look at that look look read it now

inflation has risen it's like

he is risen right okay so let's let's

put that back

overall financial conditions remain

accommodative in part reflecting wow

okay this is all the same depends on the

course of the virus

the committee expects to maintain an

accommodative stance this was no change

no change no change

oh but what's over here in assessing the

appropriate stance for monetary policy

the

committee will contin the federal open

market committee the fed will continue

to

monitor the implications of incoming

information for economic outlook

the committee would be prepared would be

prepared to adjust the stance of

monetary policy

as appropriate if risks emerge

that could impede the attainment of the

fed's goals so in other words

we're ready to raise those rates and

we'll make that change sooner if we need

to which is

literally what fed president ballard

said this morning suggesting that look

we'll act if we have to we we

we're not gonna sit around and pull a

1967 stunt

and sit here twiddling our thumbs for

six years if inflation gets out of hand

we'll deal with it

we have the tools to deal with it yeah

it's gonna crash your stock and real

estate market but

that's your problem seriously okay

the fed as much as you might think the

fed is here to bail you out

wrong the fed only wants markets to

function

they don't care if that means function

and plummet

it's different and i know that sounds

ironic but asset prices

is not or are not a priority for the fed

the kidneys assessment will take into

account a wide range of information

including readings on public health

labor market conditions

inflation pressures and expectations and

financial and international developments

yeah well international developments is

another way of saying

inflation in the international community

sure yes okay

what about tariffs and all that fine but

international inflation also matters

but they're also saying inflationary

pressures which would be like commodity

prices going up and

uh worker prices going up labor prices

going up all this right

and inflation expectations have

skyrocketed but inflation expectations

usually amongst

institutions are are more moderate

that's what you see show up in like the

10-year break even the 10-year treasury

and that

inflation expectations amongst consumers

has risen to like oh my gosh we think

inflation's gonna be like four and a

half percent

but consumers are really bad like we i

just it is what it is

consumers are usually really bad at

having proper inflation expectations for

the long run

because they base their expectations

usually on what's happening right now

so it's like oh my gosh oh my gosh

everything's going up everything's going

up uh that that leads to

this is never going to end and obviously

we're waiting for that inflection point

hopefully in september and october where

inflation starts trending down

i guess i sound like a broken record i

get it but anyway after this happened

uh we have seen uh the cryptocurrencies

pull back a little bit

i want you and the indices i want you to

know why again to be clear

the fed is acknowledging that inflation

is here presently this is really still

no difference in messaging from what's

consistent

but because they're still saying it's

just gonna be transitory the market's

like okay so basically you're saying

inflation is here and we don't believe

you on transitory so

you're basically preparing to taper

and the fact that they're saying hey

we're monitoring the implications of

other things going on if risks emerge

we'll deal with our we'll use our tool

bay belt which as sarah eisen

taught us by directly asking jerome

powell is

increasing interest rates so increasing

interest rates would obviously be

something that

quite frankly like if it if and when it

happens it's like

maybe that'd be the best case scenario

just raise the fricking rates already

let people freak out and then let's go

back to normal market in a party

because the market's almost pricing in

so much

fear oh my gosh what's gonna happen when

rates go up well look at 2014 and 15 and

16 17 and 18 when rates were going up

you know look at when that tapered

tantrum started in 13.

there you go you know it wasn't that bad

then

the market was fine overall so i think

there's just

there's so much uncertainty that people

like

short anyway

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hopefully this helps you get a little

bit clarity on what happened here and

folks we'll see in the next one

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