Prepare.

Here's everything you need to know

before the Fed's decision tomorrow. This

week is all going to be about data and

the Fed setting us up to react

appropriately to the data that we're

going to get this Friday and then of

course four weeks from now. And that has

to do with the jobs report because my

expectation along with Nick theos from

the Wall Street Journal is that the

Federal Reserve is not going to cut, but

they're going to set up their signal for

a September rate cut. Now, tomorrow we

will be covering the Federal Reserve

meeting. The meeting actually starts

today and it ends tomorrow and we'll

have the rate cut decision at 11:00 a.m.

The market is only pricing in a 3.1

percentage point that we are going to

get a rate cut tomorrow. Now, I don't

think the market is going to be

disappointed that we don't get a rate

cut tomorrow. In fact, the bond market

is already falling with a 6.2 uh point

drop on the 10-year today despite the

fact that we're not really expecting a

rate cut tomorrow. Part of that is

probably because,

well, we're setting up for that

September rate cut. Now, the question is

going to be, what is JPAL going to tell

us tomorrow about rate cuts? Are we

going to get a one and done or is this

going to be the start of a series of

cuts? Well, that's what we're looking to

set up the conditions for tomorrow. And

what he's likely to tell us is that it's

all going to come down to the next jobs

reports. Hey, if we have jobs reports

that have been strong as they have been

in the last few months where our average

job gains are plus or minus 150,000,

then maybe we need an adjustment in

September, maybe one more in December

and that's it. So, in other words,

complete alignment with the market that

we get about, you know, one to two rate

cuts this year and that's it. We just

wait and see and we enjoy the soft

landing that we're so blessed to have so

far in this economy. Now, the worst case

scenario obviously is something that the

market just is not discounting for at

all right now, which we're okay with

because, you know, stocks we've been

pitching in the alpha report, for

example, like AMD, uh, keep absolutely

breaking through every single one of our

lines and riding support to all-time new

highs. Make sure you're part of the

Alpha Report. If you haven't yet signed

up, go to meet.com, use that coupon code

before it expires on Friday, and the

price goes up. It's the end of the

month, so the price is going up. That's

it. Uh JPAL is going to set us up to

say, "Hey, you know, if for whatever

reason the jobs market does start

rolling over, then we'd be prepared for

maybe even a larger cut in September,

which could be a 50 basis point cut

because remember, the Fed does not meet

in August. So you've got a whole month

of no Fed ahead of us. So, in other

words, whatever JPAL sets up tomorrow,

we've got to just hold our breath with

for the next 6 weeks without any meeting

from the Fed in August. Sure, we might

get commentary from the Fed, but no

actual Fed meetings until that September

17th meeting. So, usually what JPAL

likes to do is give everybody an

expectation. Hey, if for some reason

there's a weakening in what we get in

the underlying data, obviously we might

go with a double cut or a larger series

of rate cuts. Now, here's what to know.

The data that we got this morning was

broadly in line with expectations.

Really no stress in the Jolts report

coming in at 7.437 million versus the 75

expected. No big deal there at all. It's

actually consistent with a strong stable

economy. There's just no bad data there.

That's very good. Job openings rate 4.4%

slightly lower than the previous 46. No

big deterioration. Quits rate 2% versus

21 prior. Little smaller number there on

quits. Usually signals a little bit of

sort of nervousness about uh do I really

want to transition a job in this job

market? No is the answer. Uh but this is

not a surprise. Layoff level came in a

little bit higher than expected, but

nothing super scary on the Jolts report.

and the consumer confidence survey came

in broadly in line with expectations. Uh

you could even call it a marginal beat.

Uh when you look at some of the

components, you get some things like,

hey, it feels like the job market is the

weakest since we've seen since March of

20 21, which is odd because I always

thought of the jobs market as being

like, you know, all of a sudden really

strong in 2021. So I have a hard time

reconciling this right here. uh but uh

they said that job availability weakened

for the seventh consecutive month

reaching the lowest level since March of

2021. And that's job availability, so

potentially fewer hiring. You know,

maybe we didn't get that hiring boom

until really later in 2021. Maybe as

some of that PPP money started showing

up, which everybody knows in the

business world showed up pretty freaking

late. But anyway, uh expectations still

for the sixth month in a row below the

recessionary threshold. uh which is not

good uh because once you fall below that

it's a recessionary signal. But we've

been sitting below that for a while and

really you know we sat below the

recessionary signal for like 3 or 4

years uh when everybody was expecting a

double dip recession after the 2008

financial crisis and it didn't end up

meaning we went into another recession

until frankly co. So I don't know that

this is really meaningful. We did see

some intentions for spending on services

decline. Mixed big ticket services

expend, you know, and and like cars and

homes and other big ticket items like

appliances and intentions for that sort

of spending declining a bit. It's

possible this is just part of the normal

sort of seasonal slowdown where people

start saving as we go into the holidays.

It's also possible that people just

don't save at all and we end up using

more BNPL. But then again, there's

literally no central database that tells

us how much total BNPL data is out

there. So, you know, good luck, I guess.

Uh but uh but anyway, I mean, broadly,

economic data is strong right now. We

will get an ADP jobs report uh along

with uh Q2 GDP data, which uh is your,

you know, second read on this Q2 GDP

data. I don't see that as a catalyst at

all. I see ADP not really as a catalyst

at all either given it's so volatile.

75,000 is the expectation this time

compared to the negative 33 prior. We'll

get challenger job cuts on Thursday

morning. Not really a catalyst. PCE is

not really a catalyst. The components of

PCE are already known and people extract

them from CPI and PPI and figure what

PCE is going to be. Core PC expected to

be.3 big deal. The bigger thing is

non-farm payrolls. That's Friday

107,000. And the issue here really comes

down to what we actually think the final

jobs read will be. So this is where we

generally don't like breaking the

100,000 jobs number. If we come in under

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no-brainer. If we come in under a

100,000 jobs, people are going to start

getting a little bit more nervous about

discounting for a recession. Now, the

reason for that is because when we fall

under a 100,000 jobs in the actual jobs

report, the market starts assuming, oh

my gosh, well, we need to assume we're

going to lose 100,000 jobs for

adjustments because remember how they

always come in with like high jobs

reports and then they revise them down

later. Well, the market knows that.

Okay, we all know that the initial

number is fugazi and so we kind of like

adjust our expectations for that. We're

like, "All right, if it comes in at 99,

that really means we're negative 1. If

it comes in at 144, like it was last

time, we're really at positive 44. Hey,

the party's still going." But remember,

the problem with last uh month's jobs

report was that we only generated about

15,000 jobs outside of healthcare and

outside of government. So what happens

if we get a real slowdown in government

and healthcare? We've got no legs left

to stand on in sort of the chair of the

labor market. Now people ask me always

ask me Kevin like you know what's what's

your bull bear scale or whatever you

know like where where's your positioning

in case you're not familiar with it.

I'll give you a quick breakdown of it in

case you're not familiar with it. Uh

when I'm on one it means sell

everything. I'm like rarely at one. uh

when you're at 10 it's get as much

margin as you can go all in and then

somewhere in between is you know well

somewhere in between so right now I I

feel I we're sort of at like a 39 and

the reason I do that is because I see

valuations high

sell everything but I see it as like a

cautious place where you're like hey

ride the wave you know I've got

Palanteer stock you know like ride the

Palanteer wave stock I've had that for a

very long time I've got a bunch of old

accounts and and volunteers stock in

there. It's done very well, but it's

like ride the wave, but set that

trailing stop, right? Uh so that way if

if you know the tides change, hey, you

take your attendees and and you pay off

other debts or you preserve yourself in

the event of a job loss or whatever,

right?

uh mostly because the reason I sit sort

of below even a five because I I

understand momentum in markets has been

very enthusiastic but I think we face a

small chance of a very very big poopy

dupy. That's not to be bearish. It's

just saying that you know I think we

face maybe a 30% chance of something

that's going to be just devastating to

the economy for a decade. Uh so I kind

of wrote this out this morning in the

live stream a little bit. I I said that

uh it's it's not that we face a a you

know small risk. It's that we face a

small chance of a big risk, right? A big

risk happening. Uh and the big risk is

basically a 2 to 3xing of the uh the

unemployment rate. And so now all of a

sudden the Fed starts printing the money

printer. You know, people are like, "Oh,

the Fed's going to cut rates." Oh, wow.

That doesn't do anything because

historically it never does anything.

Historically, it's running the money

printer that bails out the markets. But

what if you start you cut rates to zero

and you start running the money printer

and it's not working and then you're in

a hole for a decade because the

unemployment rate is just permanently

higher. And and the reason I think the

unemployment rate will be permanently

higher is because of AI, right? Like

poor people are getting screwed in the

BNPL cycle. The BNPL cycle is really

interesting because it's new this cycle,

right? We didn't have BNPL in prior

cycles. So, we don't know how bad those

defaults could hurt consumers,

especially like they're literally now

wanting to add uh this to FICO scores

potentially right before poop hits the

fan. It's like worst time to add it to

FICO scores. It's like, yeah, right

before a potential, you know, recession.

If we have a recession, you know, add

add BNPL to FICO scores, then people

default and they're screwed for seven

years, right? AI is obviously new this

cycle. And then sort of the mainstream

it's supposed to say mainstream crypto

this cycle right so crypto treasuries

right so corporate crypto treasuries

that's more new this cycle compared to

like a 2008 not considering co although

even in co we didn't have that many uh

crypto treasuries so we have some real

new elements here I'd say the big one is

AI and I'll just give you a quick bottom

line but to me uh you know with AI and

we've done this a lot at house hack with

AI we find that fewer people with AI get

way more done than many people

delegated, communicating with them,

training them, all this crap. We get

much more done with fewer people in AI

than we do with many people in no AI,

you know, before the AI days. This is

different obviously from House Hacks AI

SAS that we're developing. I'm talking,

you know, hopefully we can launch that

in Q4. I'm more talking about like you

know just using chat bots to help you

draft documents or whatever right or or

you know just sort of daily office style

work. So, uh, the question that people

then have is, okay, well, if money, and

this is what's so unique about the

cycle. If money from labor

goes into AI, that's great, right?

Because like if you take someone's

salary and put it into buying chips,

cool, you're still buying something and

it creates a velocity of money. But the

question is, what happens if the money

goes from somebody's salary into an

investment? And this all comes down to

the velocity of money. You see, so we

gave this example here. We said, imagine

somebody has $150,000 salary. Well, once

you factor in workers comp, benefits,

time off, etc., they cost about $200,000

to a company. That's expensive. If they

work 240 days per year, which is a

typical work year, that means they need

to generate an ROI of $833 per workday

to justify their existence.

If a company can generate this with AI

for $200 a month, uh, you know, uh, then

then why not just use an AI bot, right?

So like you have to exceed your cost per

day to be valuable to a company. Now, an

AI is really, you know, challenging this

equation. So like if a company generates

$1,000 per day, great. You get a stable

job, you get benefits, you win, the

company wins, everybody wins. If the

company's only generating a couple

hundred and you're costing $833 per day,

then the ROI is negative, right? And so

this is when people just like they lay

off employees over time or or they get

attritioned away. So the difference

though between a person receiving a

salary is when a person receives a

salary they spend money. You know they

buy food, they buy clothing, they

consume, they buy entertainment, they

buy stuff for their house, you know,

whatever. That creates about a four to

five times velocity of money cycle.

Think about the velocity of money as

every time you spend money, you know, I

go buy this this very happy coffee mug

here. Okay, I spent 20 bucks on this

coffee mug. The person who sold it to me

gets some money. The manufacturer gets

some money. Those people pay uh their

children. Their children go spend money

on toys at Toys R Us or whatever, right?

That's your consumer, your consumption,

four to 5x velocity of money. That's why

the government incentivizes

as much as possible you to go spend

money. All right. Now when a company or

a person saves money on a on on another

human being now that other human being

isn't spending that four to 5x on the

velocity of money. Now instead the

company is maybe investing into stocks

or real estate at only a 1.8 to 2x

multiple. There's still a multiple of

their investment but it's a lot lower

than the consumption uh form of spend.

Keep in mind 70% of our economy is

consumption. Well, then you you land in

a situation where you have a very very

big risk that could take, you know, a

decade to resolve with high unemployment

because of these these structural

changes. We just don't know how they'll

play out. And I think the market thinks

basically a big fat zero about all of

that right now. That's why I sit, you

know, on that lower end. Uh it's not

because I'm not like I don't want people

to make money. I love it. I mean, I I'm

making money off Palanteer stock, too.

You know, like the some of these things

that we're calling out in the alpha

report are absolutely killing it, too. I

mean, AMD, we've been following for a

while. We called the top on Open Door.

You know, we we we call these lines on

Tesla all the freaking time. Even this

morning, like I don't feel like Tesla

had a good run yesterday. It's probably

going to circle around 318 today. Wow,

it goes straight to 318 and bounces off

the line. Like, this is just these are

just consistent patterns at this point.

Uh but point being

uh why I sit where I do on sort of this

bare bull scale uh is is simply this

larger concern of does the market care

about any of this and right now the

answer is no. Uh and so hopefully these

next jobs reports which the Fed is

setting up are fine and we don't have

anything under 100,000. There's no red

flag that the Fed needs to cut rapidly

and none of it is really a a big deal.

That's that's a goal. uh and and a hope

that way everybody can just keep making

money and no problem. Uh but you know,

watch those layoffs. Uh it doesn't have

to happen rapidly overnight, but the the

scale has been tilted in favor of fewer

employees. I mean, look at just the what

the Wall Street Journal is saying now.

You go to the Wall Street Journal,

uh where was it? Right here. Look at

this. CEOs are now talking openly about

AI's immense capabilities likely leading

to deep job cuts. Yes. Like again, we

see this at House Hack as well. Uh and

it's so great because it means House

hack makes more money. House hack can

invest in more homes, but it's just bad

for the people who don't have salaries

who previously did have salaries because

now they have to go compete for a salary

somewhere else. Well, what if they can't

get as high of a salary somewhere else?

You know, what if now they have to take

a salary cut? Well, it's bad. And this

is why it's so important to insulate

yourself. Now, look at this. Amazon and

JP Morgan said in recent weeks that they

expected their workforces to shrink

considerably. Yeah, I mean, we we

already know that. In fact, there was a

um I thought this was interesting. There

was Oh, where was it? Uh there was a

video clip of Here it is. HVAC

technician explains how AI is even

coming for his job. Let's take a listen

to this really quick and just see how we

can loop this into what we're yapping

about here. So, you know me, I love

yapping. You should see me yapping the

alpha reports in the mornings. It's some

of the best yapping there is. Make sure

to get in before the coupon expires on

Friday. We are raising the price a big

chunk uh because it's the end of the

month and it's Fed week. So, uh, yeah.

Meet Kevin.com. Get lifetime access. You

pay once, you get lifetime access.

>> AI isn't coming for my job. I'm an HVAC

technician. No, it is. It is. Nah.

You're all screwed. You better get rich

quick because I literally was working on

a unit. I had not a damn clue. It better

It was better off speaking Chinese to

me. I had no idea what was going on with

it. Zero zip. I couldn't understand it.

See these? I took a picture, took a

video, explained what was happening. Uh,

you know, I gave the symptom within 35

seconds. It told me exactly what was

wrong with the unit and how to fix it.

AI is coming for your job, buddy. Yes.

This is actually really interesting

because I remember, you know, replacing

back in the day. Uh, so I would repair

uh appliances that would break at either

rental properties or or at home. Uh, and

I actually really enjoyed it. So, I

remember taking apart a washing machine

and I'm like, "All right, why is this

happening? It's sudsing up. It's

overflowing. What's going on?" And you'd

spend hours trying to diagnose like,

"What's going on here?" And uh, I

remember I felt so satisfied because I'm

like, "Okay, I think uh, one of my I

can't remember exactly what it was. It

was like a pressure switch or something.

I think this chip is the problem." And

it's, you know, it's like a $3 chip, but

now you have to order it and you have to

wait for it to show up. And you better

be right. Otherwise, you're out without

that laundry machine for even longer.

Replace the switch. Perfect. Freaking

washing machine crank for another 10

years, baby. Bought that washing machine

in 2011, got rid of it in 2021, and that

was only a one-year-old washing machine

at the time. So, it lasted us 11 years

before it like fully pooped out. But

that little $3 chip got me another 10

years in the product. But the point is,

none of that really has to do with what

this person just said with AI. The point

is, I think of the labor and the time

that went into that machine is probably

worth about, you know, 4 hours of labor.

Okay? 4 hours of labor as an HVAC tech,

you're probably the company's probably

billing out like 400 bucks, honestly. So

if AI can cut that that labor time in

half, it means every HVAC technician can

do twice as many jobs,

which means you potentially need fewer

HVAC technicians looking and going,

well, I think this is what's wrong. You

know, so it's kind of impressive. So,

uh, like I don't think you necessarily

need to have the Meta Ray-B bands to do

that. Uh, I'll let you know what I think

of them, by the way. Uh, I I bought them

because for well, I'm going to use them

for for when I fly because I think it's

going to be really cool for landing and

takeoff and stuff. Uh, the setup

experience was absolutely horrible. Uh,

big fail for Meta. But honestly, that

always gets me excited because when a

big company like Meta has a horrible

setup process, it just makes me go like,

really? This is a trillion dollar

business and they can't even like make a

setup process for a new device simple

and and intuitive for people. This is

pathetic. Um, who knows, maybe I got a

defective unit or or case or whatever.

But, you know, that seems like a problem

as well. But anyway, um, is interesting.

Something to think about. So, uh, you

know, this this is coming. Uh, a lot of

AC techs don't know how to properly

diagnose a problem. Well, I mean, think

about just the amount of different

issues that you could have with either

appliances or, uh, you know, mini splits

or, you know, condensers or furnaces or

whatever. You know, I remember I've

replaced the um, you know, I mean, these

aren't a big deal. The little uh, 12vt

um, what are they called? just the

little 12volt transformer, the 24volt

transformers uh for the furnace units

and you got to wire it all up and

replace them because they burn out. Pain

in the butt. But you know, if AI can

help you diagnose a problem like that

quicker, you don't have to go sit there

with your voltage meter and try to

figure it all out without shorting

something and causing more problems. All

right, so it's great. uh it's it's a

it's a wonderful revolution and it will

lead to a reduction in the number of

hours of work that are available for

people and ultimately it'll lead to

longerterm unemployment. So I do think

that's a that's a potential decade to

two decade problem that we face of

longerterm unemployment because you kind

of when you go through these innovation

cycles, you go through a cycle. So I'll

show you really quickly what I mean by

that.

uh you go through a period like this,

the innovation comes out, the innovation

causes the damage. Let this be the line

of jobs and then it takes a very long

time for you to get that ups slope of

net more jobs. Like in the long term, we

will have more jobs from AI innovation,

but this could be our future for the

next, you know, 10 years.

And uh it's unclear that markets are

really pricing this in. You know,

markets right now are pricing in post

tariff euphoria and momentum. Uh and

it'll be really interesting to see how

much longer the party can continue. But

uh you know, in the short term, the

Federal Reserve does usually lead to

some softening in stock prices because

people get nervous for the data. Uh it's

like, oh, is this going to be the week

the data finally turns? Probably not

based on unemployment claims, but

obviously we'll be watching and we'll be

covering it.

>> 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.