*YIKES* What the Fed JUST Said

so what the heck did Jerome Powell just

tell us and how are markets reacting

well first and foremost I'd like you to

actually see something good because

there's a lot of bad news around what we

just heard today so why not start with

some good news there's a coupon code oh

no okay sorry that's the wrong script

it's actually this right here this is

the five-year Break Even chart and this

five-year Break Even chart shows you

that break evens are actually falling

after Jerome Powell's testimony today

yesterday they started this tiny teeny

little insignificant inflection point

down but after this statement from

Jerome Powell about even just the remote

possibility that they would consider

consider re-accelerating the pace of

rate increases has shoved inflation

expectations right back into the hole

this is like playing whack-a-mole with

inflation I guarantee you this chart

right here is something Jerome Powell

thinks about when he's sitting on the

toilet thinking about what the hell hell

am I going to say in Congress tomorrow

and you know what his goal is to make

sure this chart goes down I personally

do not think the Federal Reserve will be

in a position to Pivot until this chart

goes from 2.6 to about 1.6 now we were

almost there in January things were

going great look at that we were making

our way over there we're sitting at

about 2.1 we were trending down

gloriously everything was looking

freaking fantastic on the side of the

chart everything was going great until

of course we got that hot January data

that just ruined everything combining

that hot January data with this idea

that the Federal Reserve is only moving

at 25 basis point hikes LED markets to

think uh oh we could lose control of

inflation and if there's one big

takeaway out of everything that we heard

today it's that Jerome Powell does not

want inflation expectations to go

unanchored because that will cause more

problems problems even Elizabeth Warren

who went on a rampage against Rome

Powell for how dare he suggest that

potentially two to three and a half

million Americans might lose their jobs

thanks to the Federal Reserve hiking

rates Jerome Powell countered in my

opinion with the accurate response of

well what do you want you want us to

just walk away and let the whole ship

sink like it's the way it works you know

the utilitarian approach of some pain is

going to have to be felt by everyone to

solve the inflation and the insane money

printing that we've done fortunately

because of Jerome Powell's responses as

such and his suggestion that maybe we'll

actually have to go back to a 50 basis

point hike has sent inflation

break-evens back on the course towards

down now unfortunately that will be

aligned with fears that Jerome Powell

and the FED will actually hike rates by

50 basis points and next Federal Reserve

meeting on on March 22nd and now

increases the potential uncertainty

around March 22nd markets are presently

pricing in a 48 chance of a 50 basis

point hike that's almost double the

chance of a 50 basis point hike that

Futures markets were predicting

yesterday and even though Jerome Powell

talks about being very mindful with lags

and not potentially needing a

significant increase in unemployment we

still have a lot of data ahead of us

most notably a jobs report on the 10th

which is this a Friday it will be

covering it live 5 30 a.m Pacific time

then we have the CPI report on Tuesday

the 14th at 5 30 a.m I will be covering

it live Pacific Standard time now what's

very important as well was Jerome

Powell's statement and I personally

think it's Jerome Powell's statement

that not only led the stock market lower

bond yield incur in yield inversion to

worsen to nearly a one percentage point

gap between the two-year knocking on the

door of five percent and the 10-year

knocking on the door of four percent

that's a one percent inversion the

steepest inversion that we've seen since

the Paul volcker era but in my opinion

what actually send markets down was this

right here this was Jerome Powell's

opening statement and first he talks

about the current economic situation

specifically talking about the reversal

of softening trends that we had been

seeing in data just a month ago now he

does say look some of this reversal is

likely due to unseasonably warm weather

in January we've talked about that a lot

as well on the channel we've also talked

a lot about how there could be a lot of

seasonal adjustments that are leading to

a lot of noise in the January data and

maybe we could actually end up seeing

some of these seasonal adjustments uh

get removed over the uh over the course

of the next releases that we get for

data so in other words when we look at

these next data sets we want to see hey

is January getting revised down or is it

staying hot if you look at some of the

leading indicators for the Federal

Reserve

ah not so great it actually kind of

implies that when we look at like the

inflation fed now forecast from uh the

Cleveland fed which has been

historically pretty dang accurate on

what the projection is for inflation

well let's just say the March data is

kind of suggesting crap it's probably

still going to run above expectations

unfortunately in fact you can go see

that yourself just by Googling the

Cleveland fed inflation now casting

report and when we look at the CPI

forecast this updates every single day

from the Federal Reserve when we look at

the forecast for inflation we could see

that February's headline inflation is

expected to be

6.21

right now the Wall Street estimate is

six percent that means the fed's now

casting report which has been pretty

accurate is saying I don't know you

might be hopeful for a seasonal

adjustment you know change getting

revised away in January but for us even

in February the data is still hot in

fact we're expecting core on Wall Street

we're expecting core to come in at 5.4

percent but the nowcast is actually

showing a 5.54 read this means that the

feds Now cast is already suggesting

forget about January man February is

still going to look a little hotter than

expectations guess what that means

higher for longer baby higher for longer

and that's kind of what the Federal

Reserve predicts here they don't talk

about seasonal adjustments they just

talk about how January was a little bit

warmer then they talk about how a supply

chain bottlenecks have eased but the

problem is services and core inflation

is showing little signs of disinflation

now look part of this is because we

still haven't hired everybody back yet

airlines are still short on employees

restaurants hotels medical care services

are still not back to the employment

trends that we saw pre-pandemic look

even you have to remember this even if

you get get back to the same employment

level of where you were in 2019 you

should have more employment today and in

many places we still have less

employment today that's a big deal I

mean consider medical care services for

example we just got back to 2019 levels

but we're supposed to grow about 900 000

jobs or we should have grown about 900

000 jobs between now and then so that

means we should have been up here but

we're actually in line with 2019 so

they're still hiring to be done yes some

of the bonuses have gone away uh so it's

become a little bit easier to find

employees but we're still lacking

ultimately as many employees as we need

in some of these services this is

leading to that continued disinflation

which is or or lack of disinflation and

services which is a problem and then

here is the hammer you ready for this

look at this

as I mentioned the economic data the

latest economic data came in stronger

than expected which suggests the

ultimate level of interest rates is

likely to be higher than previously

anticipated previously forecasted was

5.1 percent via the fomc sep report that

is now currently expected to be higher

than previously anticipated and listen

to this he's given us the big warning

here he's saying if the next jobs in

data and CPI report

indicate that we need to tighten more we

would be prepared to increase the pace

of rate hikes in other words going back

to 50 BP so the FED is willing to go

back to 50 BP should we get hot reports

these next two numbers now that's really

bad in my opinion because that's a that

calls into the consideration The fed's

credibility now they could try to talk

this away as like oh well you know we

got hot data so we responded to it but

the problem is when you have a Fed that

goes okay we're going up at 75 okay now

we're going up at 50. okay now we're

only going up at 25. uh now we're going

to go up to 25 again oh no data hot

again oh no let's go back to 50. this

sort of start stoppie mentality is

exactly what got us into the poopy doopy

in the 70s which led to getting Paul

volckert in the 80s where the FED had a

stop start approach where they lost

their credibility because it showed that

when it's seemed like things were

getting soft the Fed was being too

bullish when it seemed like things were

getting you know hotter maybe they were

being a little too aggressive who knows

but the start stoppy attitude ruins the

fed's credibility so going 50 I think

would be a big mistake for the Federal

Reserve but yes look and I've said it

even though I I really think going 50 is

a big mistake I've said it before I'll

say it again if these next reports come

in like very bad oh yeah we're screwed

in fact right now markets are pricing at

A 5.6 percent terminal fed funds rate

that's literally up from 5.4 percent

yesterday and like a month and a half

ago we were sitting at 4.9 percent we

sat at 4.9 percent for like six months

and then just like this over the last

six weeks we've been skyrocketing up to

5.6 on a federal uh on on a terminal

rate now uh this is leading some Wall

Street analysts to already start pricing

in a 50 BP hike we know it's at about a

48 Chance some are saying uh we you know

we might even see another 50 basis point

hike in may I I don't know I think it's

more likely to see 25 25 25 over time

especially since they do recognize these

lags so I think we would need to get

some kind of blowout report next to

actually verify a 50 or solidify 50 I

should say I don't see it happening but

uh hey look could happen so we'll keep

paying attention to it now obviously

there was a lot of fighting about uh

employment and this is a big deal

because remember the Federal Reserve has

a dual mandate one is stable prices the

other is maximum employment and there's

this thesis that in order to bring

inflation down you have to create a

recession and then jobs are lost that's

basically what the inverted yield curve

says as well right the inverted yield

curve the reason it's inverted is

because we say okay well for the next

two years we want to get compensated at

a higher rate than what we want to be

compensated for the next 10 years

because we think we're going to go

through a recession now we want to get

compensated through and we're not so

worried about the long term that's why

the inverted yield curve is is well

inverted and it's generally a sign of a

recession it could be a sign of just

rapid disinflation that we're expecting

that is inflation is still high today

and we're expecting that to go away but

it's probably going to lead to a

recession uh and as is generally

accurate the yield curve well let's just

put it this way it hasn't been wrong in

the past and so that's leading a lot of

questions to the idea of like hey man

well if your goal is to slow and cool

the economy isn't that going to cost

jobs and is it not possible that we have

to get to seven percent unemployment to

get inflation down and to this Jerome

Powell said historically yes that's been

true which what I thought was really

interesting about this part of his

discussion is he balances this idea of

okay yeah I mean historically it's true

we have to get to seven percent

unemployment to get inflation down and

then the individual who was asking drone

power questions uh continuous and says

okay well in order for us to get to two

percent history suggests we need to get

the unemployment rate all the way up to

10 percent right and to this Jerome

Powell almost gets angry and he says no

that's nowhere near in play so why did

he not protest seven percent

unemployment but he did protest ten

percent employment so much I actually

thought it was a really good tactical

strategy to try to flush out what Jerome

Powell is nervous about dronepal doesn't

actually seem that nervous about the

potential of seven percent unemployment

especially since he reiterated what

Elizabeth Warren said when Elizabeth

Warren said look now the last 12 times

the unemployment rate has gone up a

percent

the 11 times or 11 out of those 12 times

the unemployment rate didn't just go up

one percent it went up another percent

thereafter well if we're at three five

now we go up a percent we're at four or

five we go up another percent now we're

at five uh uh uh we're at five five uh

we're starting to knock on the door or

start trending towards six and seven

percent unemployment so maybe it's not

horribly unrealistic to think that in a

few years you know maybe by by the end

of 2024 we could actually be knocking on

the door of five to seven percent

unemployment kind of scary because you

know there are a lot of people

complaining about not having a job right

now and guess where we sit right now

right now we sit at three and a half

percent unemployment so I don't know how

they're counting employees or what but

I'll tell you there are a lot of people

complaining about not being able to get

jobs right now I'll actually show you

one now this one's a little embarrassing

okay I'm gonna do this because look I I

I I will fall on the sword to just

provide Insight even if I look look like

a loser and sometimes you know what I

make myself look like a loser not

necessarily intentionally but if we can

learn from it I am okay with that as

well but this is a really important one

to look at and what's crazy is this is

almost becoming a trend let me first say

remember the days where there was a

trend of people showing off how much

money and or like how much free crap

they were getting at their job like

Google or whatever or whatever well look

at this hop onto this particular Tick

Tock here this guy basically has a

little thing me thinking getting a job

after being laid off won't be too hard

right and then this is only 10 seconds

long but you hit play and then what

happens is deny a letter grammarly and

then Podium I'm just kind of pausing

here influx data lumos uh Apollo Sprout

social uh and then it's kind of Loops

through some of these things it looks

like he kind of looped it a couple times

but anyway he puts up a bunch of denial

letters uh and so what's interesting is

in the comments there actually were a

ton of people I think you might have to

be logged in to see the comments but

there were ton of people who were

talking about oh my gosh there's so much

unemployment right now like this is so

relatable I can't find the job and

actually when I look at the comments

here I I I'm just gonna say it okay I

was a little bit of an [ __ ] uh I'm

like this is fantastic news for

inflation

okay yeah that's that's pretty dickish

uh but I did say sorry for you uh I I

Then I then felt really bad when he

responded and says OMG I follow you

sorry uh but but anyway back to the

point of the FED yeah it's it's crazy

because you've got a lot of people

complaining about job loss on Twitter

but we're just at three and a half

percent unemployment imagine if that

potentially doubles like Elizabeth

Warren is right to be like dude what's

gonna happen to the people who lose all

of their jobs but Jerome Powell still

has to look at this and go he's steering

the ship he's got to make sure that

everybody in mass is not at risk of

massive pain and yeah if that means some

people are going to end up getting hurt

unfortunately that's the Keynesian based

economic system that we're in in bad

times people lose their jobs I mean Elon

Musk basically is publicly conducting

exit interviews on Twitter when he's

talking about firing people for not

working hard and lying about their

disabilities okay topic for a different

video just saying things are starting to

get really heated around Unemployment uh

unfortunately though for like us

investors especially those of us who are

so wonderfully part of the stocks and

psychology and money group the real

estate investing course or the other

programs I'm building your wealth like

the elite testers group unfortunately

for us investors it means more pain for

longer if we have unemployment that

doubles over the next year you have to

ask yourself what stocks do you not want

to be in some people are saying well

maybe I don't want to be in tech stocks

because that's where the layoffs are but

then you have to ask yourself is just

the excess getting laid off right now

how much in excess savings are those

individuals going to have I don't know

is that going to trickle down to lower

wage workers or the people who were

working in Tech going to have to move in

into some service sector jobs just to be

able to pay the rent they signed up for

I don't know it's scary and it is crazy

but yes and raising interest rates is

going to make things harder in the short

term yesterday we were having a debate

in in the office about how raising

interest rates actually increases the

cost of credit card debt car debt

housing and this is a very commonly

least studied but very rarely talked

about concept known as inertial

inflation is basically to say that when

the FED tries to cool the economy to

slow the economy down when they raise

interest rates they actually induce more

inflation initially before they actually

slow the economy so unfortunately all of

the slowing effects of unemployment a

GDP recession which is a technical

recession an earnings recession that

sort of data is super super lagging and

the warnings here that you're getting

from folks in Congress are dude once you

start as Elizabeth Warren says once you

start seeing the unemployment how do we

know this is not a runaway train how are

you going to turn around and stop all of

the unemployment

kind of interesting so she actually does

make a very good point anyway so then

there's some talk about the labor force

participation rate and obviously how

it'd be nice if more people would go to

work even though they'd spend more money

it should be net positive there's uh

there's talk about the war in Ukraine

contributing to inflation uh there is uh

talk about uh well more talk from uh uh

Elizabeth Warren on how do we prevent

falling into a recession because we

don't want to create job loss now

remember that uh Elizabeth Warren

doesn't like Jerome Powell whether it's

for politics or what reasons but in 2021

she called Jerome Powell a very

dangerous man for warning about

inflation now we have all of this insane

inflation and Elizabeth Warren is saying

that Jerome Powell is quote gambling

with people's lives you claim there is

only one solution people losing their

jobs but if you're not going to fight

for people we need somebody at the FED

who will and then she kind of mutes her

mic and storms off and you know a lot of

of this I feel like is unfortunately

just politics and sort of the political

nonsense and and you know show-stopping

that you try to get to go viral on

Twitter or whatever so people keep

voting for you uh you know I I don't

know but anywho so uh so anyway then uh

we have uh Jerome Powell talking about

hell look it's not just the strong jobs

report or the strong uh CPI report from

January it's also the fact that we had

revisions for November and December data

that are somewhat concerning that a

reversing Trend uh of of uh rapidly

decreasing inflation and if inflation

takes longer to bring down then

certainly that's problematic now that

has reiterated sort of my thesis that

we're in a Nike Swoosh style recovery

where I expect look we had a very fast

down in 22 it's going to be a very very

bumpy ride back up I personally do think

the ride back up is still going to Trend

up I actually think there's a buying

opportunity going into the fear that we

have over the next few weeks to deploy

some more cash if we've been sitting on

the sidelines for a while all obviously

that's not personalized Financial advice

even though I run an actively managed

ETF I am a financial advisor I sell

courses on building your wealth I'm a

real estate broker and I have a real

estate startup despite all that stuff

this is not personal it's Financial

advice for you this is my thesis like I

I know a lot of this sounds like bad

news and higher for longer sounds like

bad news and it is bad for the housing

market but quite frankly the bottom line

reality is that higher for longer it

means no Paul volcker if they came out

and said a lot higher ASAP now we're

getting more worried about a Paul

volcker style recession right hire for

longer is kind of like okay things are

controlled it's just taking a little

longer than expected it's actually not

Paul Valkyrie uh then we've got some

talk about commercial real estate

commercial real estate potentially uh

expecting to get hit a lot more on a

valuation from Jerome Powell was sort of

questioning like how do we have so much

office vacancy and basically these

valuations that are still propped up the

way they are huge opportunities I think

coming up in real estate over the next

few years again one of the reasons I

have a real estate startup but anyway uh

stable coins and crypto he says there's

a lot of fraud there are Bank Run risks

and eventually there will be a place in

the world for stable coins if and only

if we can have a similar regulatory

regime as we do for the current banking

system uh especially since there's so

much susceptibility towards fraud and

money laundering regarding the debt

ceiling big fan of making sure obviously

Congress extend the debt ceiling I

didn't even really want to go into

quantifying how bad things could

actually get if we did not extend the

debt ceiling uh tester went on Senate

this was the Senate meeting tomorrow by

the way I just want to be clear

tomorrow's like the house version of

this it's just going to be like more

yeah wrapping it's pretty much going to

be the same show I probably won't cover

The Tomorrow Show because I think we're

getting enough Insight from j-pow today

that tomorrow's not gonna make much of a

difference but anyway I'll I might do

like a summary after the fact but I

think today is much more important

tester goes into this story about like

how he remembers having what he thought

was a good deal on a 10 interest rate

deal uh and basically they start arguing

about the neutral level of Interest

nobody knows what that is so that really

does us no good right now we talk about

uh the current debt and interest

payments on the debt we currently have

being yes sustainable but the path of

growth we're on being unsustainable this

is true we've talked about this before

on the channel as well the treasury

Department is very clear that we are an

unsustainable path of uh

debt accumulation uh Jerome Powell talks

quite a bit about housing being a big

part of uh CPI and US expecting that to

plummet in the near term here uh we we

do know as well that uh just a small

note yes I see your comment here that uh

Joe Biden is now suing JetBlue to block

the JetBlue Spirit deal uh citing that

maybe prices will go will go up for

consumers let's see here somebody here

says do you believe massive raid cuts

are coming this year no I don't believe

that massive rate cuts are coming this

year it was previously priced in that

massive rate Cuts were coming that we

were looking at about 1.7 in rate cuts

by between September and December that

has now essentially been completely

removed by by you know Market movements

over just the last six weeks uh price

cuts are actually being priced in until

2024 now so it sort of just reiterates

this idea of it's all going to require a

lot more patience patience patience

patience personally I really think in

2030 we're all going gonna look back at

2022 and 2023 and go damn we had a gift

of two years to invest in stocks at

cheaper prices like who cares if you

exactly hit the bottom or not but if you

if you're looking at your long portfolio

and you're trying to perfectly time this

freaking Market I think you're out of

your freaking mind because he ain't

gonna perfectly pull it off I tried I

think I got out you know I got out with

my tail nipped and then I got back in

too early and then I got punched in the

face you know so so like now I saved a

lot of money getting out because I got

away from a lot of profit list companies

and I reallocated to only pricing power

style stocks which I think are really

going to lead us out of the recession

but I am very confident that come 2030

I'm going to look back and go damn we

got some good deals during 2022 and 2023

and I'm gonna look back and go damn and

I rang the bell of the stock exchange

during that time and launched course uh

uh the elite Hustlers course and became

a licensed financial advisor and

launched a startup I'm very optimistic

or in two years I I'll be bankrupt and

then I'll just start a guild on World of

Warcraft and you're all invited so

either way I'm good either I'm bankrupt

and happy playing World of Warcraft or

I'm working my ass off on my startup and

here on the YouTube channel so I hope

you you know we'll just stream World of

Warcraft if the bad scenario happens so

either way

I'm with you on this journey and I'm I I

just want to be like as crystal clear as

possible I highly implore looking at

your long-term portfolio and if you're

sitting there in all cash be like who

cares like as long as there's no sign of

a Paul volcker maybe some of the pain

that we're getting here in the near term

is just really that opportunity if you

really think we're getting Paul volckert

leave me a comment tell me why I every

time somebody leaves me a comment

suggesting anything about Paul volcker I

research it I study it and I try to see

if I'm blind to something because I'm

not saying I know everything but for me

I'm all in on uh on on writing two

letters that's it I love writing these

particular two letters and I have to do

pricing power that's it thanks so much

for watching we'll see in the next one

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