Trump to Arrest Powell | Emergency Rate Cuts

few sets of Fed news. Number one, Jerome

Powell getting criminally referred to

the Department of Justice. And number

two, some big Chris Waller news, leading

the odds for potential rate cuts to

rise. Uh this is great. uh even though

we're still sitting at that

uncomfortable 102 spread of 56 which is

in shock level possibly as markets price

in more risk to the downside said so far

stock markets at all-time highs and the

question is what is Waller seeing that

makes him nervous and what do we think

about JPA's criminal referral to the

department of justice here you could see

the following representative Anna

Paulina Luna Um, this is a a Florida

36-year-old representative. She got

reelected in 2024. Remember, in the

House, you have to run every 2 years.

And she got first elected in 2022

through an endorsement of Donald Trump.

uh as a result or I should say

subsequent to her winning thanks to uh

in part her endorsement from Donald

Trump, she has become one of the largest

uh mouthpieces for the MAGA movement and

Donald Trump. So I say as neutrally as

possible, she's a Trump shill and Trump

disciple. Okay. The reason I say that's

a neutral point of view because it is

absolutely insane and ridiculous to

criminally refer Jerome Powell to the

Department of Defense to investigate

perjury regarding his crazy $2.5 billion

building. Okay, first of all, Jerome

Powell is probably going to retire from

the Fed before this project is ever

done. This project was approved not only

by the Fed Board of Governors, but also

Congress in multiple sets of testimony

around what's going on. This is a 1935

building that began construction 1935,

finished construction 1937. And the

Eckles building is considered a historic

building in Washington DC. So yes, could

you just as a real estate developer look

at, you know, look at this building and

say, "Hey, I'm going to tear down this

building for, you know, 20 million bucks

thanks to the asbestous containment

you're going to have to do, and we are

going to rebuild it uh for, you know,

$500 million and have a beautiful

government office." Absolutely possible.

I mean, even if you spent 500 bucks a

foot on this building, you'd probably be

at substantially less, you know, a

fraction of the cost for this building.

Why then are these cost overruns so

high? And what risks are there of Jerome

Powell being actually criminally

indicted or charges being brought

against him? Well, first of all, one of

the reasons, and I'm not here to shill

the expense of this, but one of the

reasons this building has such high

expenses are because a you have to use

prevailing workers because it's a

government job, which means the wages

that you're paying are often 2x what's

normal. In addition to that, this is not

like the home renovation where, you

know, somebody goes in and says, "Hey,

you got asbestous. What are we going to

do about it?" Eh, it's fine. just leave

it. Which is not highly uncommon because

asbestous isn't actually a problem

unless it becomes fryable as in people

like rub it or it gets disturbed and

then it goes airborne. That's when

asbestous is really bad. In fact, back

in history, we used to use asbestous to

cover Christmas trees. You could

literally look it up. It was a great

like snowy kind of product uh for

covering uh your Christmas tree with the

look of snow. Give your tree natural or

artificial, you know, uh the give your

tree natural or artificial. I don't know

what this branding is here, but the soft

snowy beauty of the outdoors with easy

to use snow flock. And look, snow flock

is also fire retardant. Asbestous is

actually such a great fire retardant.

They partially unbanded in the 1990s

because as long as it's not in a fryable

condition and floating around the air,

it's actually an incredible product.

It's fireproof. The Greeks discovered it

uh because they basically doused it in

oil, lit it on fire, and they realized

the asbestous never went away. And you

could actually Google asbestous mining,

and you could see back in the day people

without masks just drill mining

asbestous. These are the people who got

you know the messyloma and all the

issues related to actual actually

working with brake pads asbestous brake

pads and the dust associated with them.

Not people living in their homes who

have asbestous ducks but less on

asbestous more in the fed building

because asbestous has such a negative

reputation uh and related to the uh

Eckles building the cost to actually

appropriately contain asbestous is

enormous. Not only do people have to be

trained, but the procedures that you

have to use in terms of like bagging

asbestous or creating containment

facilities, shower facilities for the

workers, the P100 respirators, uh the

the taped up joints around your wrists

and legs and your your your uh Tyveck

clothing that you have to basically

replace every single day because it rips

every time you take it off. It's a

disaster. And so, again, I'm not here to

defend. I'm just saying when the

government's doing a renovation on a

historic building that has a high water

table which is leading to flood issues

and foundation issues and you have

asbestous issues and you're trying to do

it at prevailing wages, it gets really

expensive really fast to do a renovation

for the government. So yes, would it be

cheaper to demo this place and rebuild?

Yes. Are they doing things likely

blatantly illegal that somehow Jerome

Powell is in charge of? No. The the

reason people like Anna Pelina are

saying this is criminal what your own

pal is doing is because Donald Trump

wants lower rates. He's trying to pull a

turkey or greece where or or you know uh

you know worse like uh well there are

plenty of other examples like a Hungary

is another good example. He's basically

trying to pull a turkey where the

government takes over the Federal

Reserve, forces interest rates lower. In

the short term, they go down, but you

actually end up just inducing inflation,

and you break the reputation of the

United States being that pure place to

invest where you have an independent

Fed. That's actually what this building

is a symbol of. This building is not

just a building. This is a symbol of

American freedom right here. This is a

sing a signal that there is a difference

between monetary policy and the

government. Now you and I might look at

this and go come on man they print money

for the treasury so they can issue

helicopter money. This is true. Their

whole premise could be flawed. This idea

that you know a monetary institution can

lower shocks or recessions. I mean we've

had some pretty big recessions. Look at

08 right? We might have another big one.

Uh who knows? Fed might be too late. But

the point is to argue that the Federal

Reserve authorized by the 1914 banking

acts uh is all of a sudden uh you know

the leader or the chair of the Federal

Reserve Board of Governors is now all of

a sudden a criminal. It's really

ludicrous. And what it is is just

political posturing by people who

benefit from shilling Trump. like she

benefits by having a strong MAGA base

going Trump doesn't like Don Powell okay

tweet let's let's arrest him and you

know this is basically the Trump meeting

around oh well you know I won't fire him

you know unless of course there's some

kind of fraud or whatever that's basic

like Trump is having other people do his

dirty work for him because he knows the

Supreme Court is really really anti the

removal of Fed independence Now that out

of the way, this idea of firing JPOW, it

is leading to a little bit more of a

divergence in that yield curve, which

isn't great because it it does have some

unpriced uncertainty. I do think it's

worth looking into what Waller said and

how that could be affecting the market

today. I do just want to remind you that

I got a text from my team that we do

have the coupon code Mr. Too late, which

is ironic, expiring later today, which

means we'll have another price increase

for the Meet Kevin membership. We do

have the lifetime option available right

now. So you can get access to all the

courses, the alpha reports in the

mornings, everything. There's like no

choice for you to make. It's just buy or

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Uh AI, social media, Trumponomics, the

new lectures coming out on how to take

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business, do-it-yourself property

management, real estate zero to

millionaire, all of it. So if you want

to lock that in, go lock that in over at

meet.com and use coupon code Mr. Tool.

So that said, let's go take a look at

this Bloomberg interview with Mr.

Waller. Now Mr. Waller made the news

yesterday because yesterday Mr. Waller

was nervous about the potential that we

are starting to see private payrolls

slow down. uh that basically there's no

growth in p private payrolls outside of

really late cycle sectors like health

care or of course then non-p private

which would be uh you know public jobs

like state and local government jobs.

This is problematic because it's a

suggestion that somebody at the Fed is

starting to wake up to the realization

that we are starting to see a quote

sharp slowdown in private sector wage

growth. This is leading Mr. Waller to

say we should have a rate cut in July

because we need to get ahead of the

potential damage we're causing to the

economy. Now, currently markets are only

pricing in about a 50

59% chance of a rate cut in July.

However, after these Waller comments,

they are now pricing in a 4.7% chance of

a rate cut in July. Uh, sorry, 59.4% in

September, 4.7 in July. So, that's gone

up from basically zero following these

Waller comments. Some people think that

Waller is really just applying to be

part of the Federal Reserve, which makes

sense. He is in the third place in the

betting markets with about a 10% chance

of being replaced as the Fed governor.

Though Walsh and Hasset have greater

chances, I personally hang my hat on

Hasset because Hasset is a little bit

more of a kneebender than WSH who has

been very stubborn in the past when it

comes to uh the Federal Reserve printing

money to support recessions. And if

you're the president, you want somebody

who's the Fed chair who's basically

going to print as much money as you need

when you need it. With that said, let's

give a listen to uh this interview

between Waller uh and Bloomberg.

>> The luxury of waiting. Have we lost that

already?

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>> No, I think we haven't. Like I said last

night, the headline numbers for the

labor market, what we're seeing are

okay, but it's like when you get

underneath and start looking at the

data, the private sector is not doing as

well as everybody thinks it is. Like

most of the half of the employment

growth we saw last month was in the

public sector

>> and that means the private sector is not

doing particularly well. So,

>> right, which is important because once

that starts going negative, it's a poopa

dupa. Um, I was just joking that uh, you

know, if you're walking on a lake and

the ice is frozen and it sounds safe,

but when you start hearing cracks, and

that's what I feel like, it's too late

once you go through the ice. So, you've

got to start.

>> Interesting.

Too late once you go through the ice.

Uh, invoking Mr. Too late. It's like a

reminder of the coupon code again. No,

it really is. It's kind of true. Like if

the Fed misses preventing this

recession,

it doesn't matter how much they're going

to cut rates,

you're not going to save the market

until you turn the money printer back on

and you're going to increase the debt a

lot

>> in advance before you have that happen.

>> How do you square that with what we've

heard from corporate America so far?

What corporate America has told Lisa

sitting down with Scott Kirby of United

Airlines talking about a rebound in the

second half? pumping their stock, bro.

Like the straight answer is they're all

trying to pump their stock. They don't

want investors to be nervous that their

economy is sucking or their market, you

know, their their corporate outlook is

sucking.

>> Heard from the big banks so far this

week. How do you square what you're

seeing in the data with what we're

hearing from CEOs?

>> Yeah. I mean, when I talk to CEOs, I get

the same thing. We're we're in just hold

pattern in terms of certainly the labor

market. They're not hiring. They're not

firing. They're just watching. And

that's kind of what you see in this

underlying private sector data. There's

not not much happening. So, it wouldn't

take much to sort of tip it. Now, could

I be wrong? Absolutely. I mean, last

year we got a couple of weak labor

market reports that led us to cut in

September and then everything kind of

reversed and back uh went back up.

>> So, I'm not saying that couldn't happen

again, but it's just we've constantly

seen little bits of data continually

coming down. The beige book yesterday

came out. uh some other stuff we get out

of the jolts quits rates hiring rates

these things are not indicating a super

healthy private sector labor market

>> as you know you're facing potentially

and I stress potentially negative supply

shocks on both side of the mandate I

want to sit on the labor market just for

one further note immigration how are you

thinking about that when you look at a

labor market at the moment when we have

people coming on the program on

Bloomberg surveillance on Bloomberg TV

every single morning 6:00 till 9 coming

on here and saying look at the data

unemployment could stay at these levels

even with job gains of 50 to 100,000

because of tighter immigration. How does

that factor into your thinking as you

look at the US labor market?

>> Well, yeah, the labor market doesn't

necessarily have to be affected by it

because if workers flow in and they get

jobs at roughly the same rate as the

existing workers, the unemployment rate

doesn't change even though the labor

force is higher and when they go back

out the same thing happens. If they

leave the employment and leave the labor

force, you don't see a big change the uh

inflation rate. now can potentially

affect the break even rate that you

would need to have uh the market going

well and that's what we're still trying

to kind of get a sense of because you

basically brought five years of

immigration forward and you know of that

8 or 9 million most of them haven't

disappeared so they're still here

somewhere whether they're going to work

they're not going to work but they're

but they're still here I don't where I

think the immigration stuff if

immigration was a big factor you'd be

seeing shortages and you might see some

in you know some industry ries, but like

I've pointed out that if you look at the

new college graduate unemployment rate,

it's 7%. It's much higher than it has.

These are not jobs that are being uh

opened up because immigrants are are not

not coming in. That's it should be just

the opposite. If immigrants are leaving

and these jobs are open, then the

unemployment rate should

>> Yeah. The the issue here is the

difference, right? Like immigrants

taking jobs are taking different jobs

than college grads are. A college

graduate doesn't want to go work at a

restaurant or clean hotel rooms. And I'm

not saying that all, you know,

immigrants are doing that. There's just

a higher likelihood.

And so, of course, labor market is

pretty crap right now. If you don't have

a job, if you have a job, it's fine for

now.

>> Go the other way. So that unemployment

rate to me is telling me immigration is

not the source of the problem. Firms are

just holding off on hiring decisions

even if their earnings are doing well.

That's that's just what I'm saying

they're doing on the labor side.

>> I wanted to say there's a mutual friend

of ours that feels like he's missing out

this morning. So he wanted to catch up

with you as well.

>> He's out in Victor Idaho.

>> He's having a good time, isn't he? Mike

McKe joins us now. Good morning, Mike.

>> All right. So he talked to Daly

yesterday and Marie Dailyaly. I actually

think she had a great uh discussion

yesterday. I think she was in Idaho or

somewhere. But anyway, she suggested

that we don't want to tighten the reinss

on this horse so much that we collapse.

In other words, kind of like his ice

analogy. You don't want to be so tight.

And it's okay to start loosening a

little bit.

>> Good morning, John. And good morning,

Governor Waller. I would say I'm sorry

I'm not there with you, but I bet you're

sorry you're not here with me. Yeah, I

know you got it. I've been there before.

It's a nice

>> for a July rate cut. But uh how

committed are you? Are you willing to

dissent at this meeting if the majority

votes the other way?

>> Well, I never want to commit to an

action before the meeting. Otherwise, if

everybody committed before, you don't

even need to have the meeting to have a

discussion. So, the goal is to always go

to the meeting, sit down, listen to all

sides. People will try to convince me of

their view, I'll try to convince them of

my views. And in the end of the day, you

make the decision on what you think is

the right the right outcome and the

right data uh how the data is coming in.

And right now, I laid out my case last I

don't think I could be any more clear I

hope as to what my position is and why I

think we need to do this. It's just how

I read the data and how I think about

going forward how you respond to

anything that involves tariffs.

There's a lot of politics in this

decision coming up uh more than usual

and I'm wondering Governor Bowman has

also suggested she would prefer a rate

cut in July if two of you vote for a

rate cut. If two of you were to descend,

would you worry about the market

reaction to that?

>> You know, one of the things that has

always bothered me since I took this job

is the criticism that we are nothing but

group think. All the meanings are the

same. Nobody desends. Nobody does

anything. And

>> he's he's setting up his descent.

>> I think this is healthy. I think this is

a turning point in the way we want to

think about policy. Some people don't

want to cut, some do want to cut. But

coming out and making the case either

side, that's good, healthy debate.

Otherwise, if we're always going to do

the same, the joke is why don't you just

have one person set policy and send the

other 18 FC members home.

>> So this is healthy. I think this is what

you want to see in a democracy. You want

to see policy makers have serious open

discussion about where policy should go.

It doesn't mean anything about politics

or anything else. It's make the economic

argument and then see if you can

convince others to go along with you.

And that's all I'm trying to do.

>> We totally agree with you for the

record. We were sick of the group

thinking it's good to

>> All right. Whatever. So far, I mean, we

got the idea. They're nervous about the

payroll market. Let's just see jobs

market. That's important information.

That's why we're starting to see more

pricing or for cuts priced in. Let's see

if there's anything else here.

>> Disscent, if you make it very clear, you

think at this moment in time, this is

earlier this year because I felt like

that was not needed.

>> Um, and that's kind of the situation

we're in now. Only would think about

doing this. I desented on the balance

sheet slow down earlier this year

because I felt like that was not needed.

Um, and that's kind of the situation

we're in now.

>> Okay. So, in a place where hey, you

know, we don't need to be this high.

Fine.

>> Timber. Is that going to be too late?

>> Well, that's that's kind of the debate.

What but what does it mean to wait six

>> that's also this is going to be an

interesting one because it's true once

we go into recession it's it's a pooper

dupers but until then I don't know like

can the Fed bail us out before it

happens

>> weeks is it that critical and I the

answer is probably not it could be but

it's also the reverse why wait till

September if it's just six weeks right

>> that's exactly the thing it doesn't kind

of matter

just start thinking about do I want to

wait and risk something happening. This

is what we saw last summer by

>> Yeah. And there's no there's no other

jobs report between now and then. Like

you actually get data right after this

next Fed meeting, which kind of sucks.

So they've got to base it all off this

month's data, which was still good. But

again, when you go under the hood,

you've got the tariff inflation showing

up under the hood. 6.6% annualized gain

in core goods excluding cars. That's a

huge gain in inflation. uh in core

goods. You saw it in PPI. And when you

look at that jobs market and you peel

back the layer, you're like, dang, a lot

of those jobs are just government and

state and local, you know, private

hiring outside of healthcare was like

non-existent. It was like 15,000 jobs we

created, which is terrible.

>> By the way, we left July, we left rates,

and then boom, we got a very weak um

>> Somebody says it's not the Fed's job to

avoid a recession. Sure it is. What are

their two mandates? Stable prices,

maximum employment. What do you think a

recession does? Absolutely destroys

the unemployment rate. It skyrockets. Uh

and inflation turns to deflation. So

recessions create the opposite of nearly

both of their mandates.

>> Bad labor market report. The

unemployment rate jumped 210. Payrolls

went way down from where they were. And

people were screaming at us last August.

You guys should have cut in July.

>> Yeah.

>> So one month, Ken, it it always is one

month. Just remember that. It's just one

month.

>> That's interesting. He's actually making

the argument here that things do change

very fast.

They should have cut earlier and then

the labor market immediately rebounded

after their 50 basis point cut. But we

live in a world in which we have to

respond to real-time data to kind of

sense of where the economy is going. And

I've always said if you worry about long

and variable lags, which everybody

always talks about, the whole point of

that is to get ahead of it, not wait for

it to happen and then take a policy

action that takes quarters or months

down the road to actually have any

impact.

>> The new worry is tariffs. We've just had

a six-minute conversation with you about

monetary policy. You've built a case for

lower interest rates and no one's talked

about trade or inflation. Two

assumptions in your speech yesterday,

and I think they're important

assumptions. a large share of tariff

increases won't be passed through to

consumers. Any increase would fade over

the next year or so. What data underpins

that conclusion? Good question.

>> Well, one, it's just first, it's just

economic theory. So, you put on a tar

tariff as long as it's a one-time tariff

and that's it. That's a onetime price

effect. I mean, this is economic theory.

You could not get in any serious

economic model persistent inflation from

that. You would have to cook up some

other amplification mechanis. really

shilling for a rate cut here because

he's basically saying like, "Yes, we'll

have tariff effects, but don't let those

prevent you from preventing us from

going into a recession. Don't let the

fear of these one-time bumps in prices,

which will show up in inflation reports

and corporate earnings, but don't let

that stop you from cutting because it

could lead us to walk right into a

recession." And that's what people talk

about. Wages will start going up and

everything will get out of control.

You're not seeing that at all. This is

just not those kind of amplification

mechanisms are wage price spirals aren't

happening.

>> No, he's right.

>> Tariffs are attacks. And in public

finance, you learn that you may levy

attacks on a firm, but who bears the

incidence or the burden of that tax? Can

be a group of people or one person, not

necessarily the firm. So, this is what

I've heard from a lot of firms. If

there's a 10% tax, they'll force their

suppliers to eat some of that cost.

workers meet some of that cost in terms

of the less hiring and things like that.

The firm will take it out of their

profit margins.

>> And then lastly, some of it will get

passed on. And as I mentioned last

night, I've heard this for months now.

Like the rule is 10% it's roughly rule

of thumb is a third a third. A third,

suppliers will eat a third, firms eat a

third, consumer is going to eat a third

of that tariff. So if you eat a third of

it and it's 10% like I've been arguing

this is like 3/10en of a three basic

three three ten on the inflation rate

for a few months and that's it.

>> Well it creates a lump and then the next

year when you compare to it your

inflation's probably flat. Not entirely

untrue. And um Uzimo

in the chat says it's the perfect time

for this clip. Kevin is much more

interested than most people by the way

in the balance sheet

>> and it'll persist if you do 12 month

over 12 month that base effect will not

go away for a while and then it'll just

drop off a cliff.

>> So that's why I've been arguing you want

to look at like 3 month and 6 months to

see if these tariff effects pop up and

then go away and so that's more critical

than looking at 12 month.

>> Okay.

>> Yes. The way the president is putting

these tariffs on might not match up with

theory, Chris, the uh smooth holly tax

was passed and came into effect on a

certain date. Uh the president has not

yet put on most of these tariffs.

They're in theory still coming and we

still haven't seen the section 232

tariffs for the most part. The the

national defense tariffs that he wants

to put on semiconductors and

pharmaceuticals, etc. So if the process

is stretched out, consumers could be hit

by a series an ongoing series of tariff

increases and given what they've just

been through.

>> Yeah. But a lot of this is going to end

up getting absorbed in margins. Uh let's

go a little bit further ahead.

>> This rolling potential impact on prices

that

>> basically the rolling tariffs that are

coming delay the impacts of tariffs and

that you you know you're kind of just

spreading them out. August and early

September. This was not any

contradiction in what we were doing.

It's just after the September meeting,

the data just came back in the opposite

way. Growth was up, productivity was up,

employment suddenly took back.

>> This he's talking about last year,

August. I think that was really because

of enthusiasm around the Trump election.

I do give credit to that.

>> The employ, you know, after the tariffs

come on, everybody was worried about

deanchoring expectations, particularly

after some of these Michigan surveys

came out. When I I always look at the

market based expectation because money

people have money in the game.

>> Firms are making decisions on what

they're

>> in other words he's saying just ignore

the Michigan expectations. Focus on what

the bond market is telling you. He's

right.

>> Chief economists are saying and if those

things are wrong, they're going to lose

a lot of money. So I've always paid more

attention. I haven't seen much in the

way of market expectations being

unanchored in any ways you want to

measure them any forward. Now in the

near term of course they might go up

because you would see inflation in the

short term but in the longer term ones

I'm not I'm not seeing it. So either the

market is just dismissing all of this as

chatter and noise or at some point if

something happens such that it becomes

much more serious then you might see a

discreet jump and then you know that's

that's going to be a problem for

everybody.

>> Yeah. Uh what he's referring to are

inflation expectations right here. This

is the 5-year inflation expectation

chart. And basically, if you just kind

of draw a box around this, you can kind

of make the argument that eh, it's

pretty stable like these. And in

fairness, they've always had this

mindset. You get these little

variations. They don't care about this.

You know, here's where liberation was.

Here's the 50 BP cut. Uh, which you

could see increased inflation

expectations over 5 years. Now you're

getting some of this Powell drama over

here on the right side. That's the chart

he's looking at. You're not seeing some

kind of crazy deankering like frankly

you saw at the beginning of 2022.

You're not seeing that sort of

environment. And that's what he's paying

attention to saying we don't have to

worry about inflation. Let's just go cut

rates because what are we worried about

here? It's kind of a fair point. See how

they end this.

>> Honest. We just do our job every day. I

go in I just

>> Oh, this is the politics question. Big

deal. So, this gives you a few things to

think about. This idea about criminal

charges against Powell,

nothing but Trump magne,

whether he's applying for the job or

not, is becoming one of your most vocal

advocates for a rate cut. Because he's

basically saying, "What's the harm in

doing it now versus waiting? And if we

wait and cause a recession, we break

through the ice, we're screwed."

So if inflation is going to rear its

head a little bit because of tariffs,

that'll go away. Don't let that be the

reason we don't cut. So thank Waller for

the odds going up for July cut. Mark

your calendar for July 30th. Well, and

today for coupon code Mr. Too late, but

July 30th for the next Fed meeting.

Obviously, we'll be covering it in