The Fed *JUST* Held **EMERGENCY** Meeting

Holy smokes. The Federal Reserve just

convened an emergency meeting with Wall

Street bankers because of liquidity

issues. I'm going to break all of this

down and what the details are in this

because there are a lot of folks that

are now saying, Kevin, this is not a

liquidity issue anymore. This is now a

solveny issue. The difference, mind you,

is liquidity is, yo, you got the cash,

so you can do some more lending. Solveny

is, hey, we got some cash, but we got

way more debt and this don't balance out

anymore. This is a big problem, folks.

We got to talk about this because this

has happened in history before. So,

we're going to talk about what's going

on now and then what history tells us in

terms of which direction we go next.

We'll talk about it. First, let's

understand what just happened. So, the

Financial Times reported this that New

York Fed President John Williams

convened a meeting uh this week with

Wall Street dealers over a short-term

lending offic uh facility underscoring

officials concerns about strains in US

money markets. This was a hastily

arranged meeting that was arranged under

the cover of another Treasury market

conference that was going on. So, they

kind of did it under the guise of

another meeting. They didn't really want

people to know that this was going on

because now the stress in the repo

markets is starting to show up. Uh and

so they did end up confirming that the

meeting took place. So the Fed has

verified that yes, we did have a rapidly

arranged meeting that took place and

yeah, it was an emergency meeting. And

what this is is this all about trying to

make sure that our repo facility at the

Federal Reserve functions. Now, that

doesn't mean much for us as individual

investors until it does. And that's

really what we're going to spend time

talking about because when you look at

this chart of usage of the repo

facility, you might think, eh, this

isn't really a problem, is it? But when

you actually zoom out for four years,

you realize that it's actually rare that

we have blue over here at all. Sure,

it's not near some of the peak levels

that we saw like at the end of last

month, which could have been end of

month rebalancing uh or or normal sort

of end of the month of funding. But then

again, you know, you don't see that in

any of these other end of months. So, it

suggests that maybe this last end of

month was worse than some of the prior.

Now, why could that be? Well, it could

potentially be because we've seen a lot

of credit stress in just the last 60

days. Let me just remind you really

quick as a summary of what's happened in

literally the last 65ish days. Now,

September 10th, goes bankrupt after JP

Morgan rugpulls them on a $700 million

line of credit. Now, obviously, the

immigration situation didn't help. Maybe

that company was just fraudulent. Maybe

it was just that company that sucked.

you know, they didn't do they did no

credit loans for autos, right? But JP

Morgan took $170 million haircut on

this. Then on September 28th, First

Brands collapsed after receivables

fraud, which is really interesting

because the company that was auditing

First Brands was fined for failing to

identify similar receivables issues. But

the auditor's lender, so the person

lending the auditor money, ended up

having a short against the very company

that defaulted. And it kind of makes you

scratch your head like how diabolical

that if you're trying to like raise

money, [laughter] you're putting your

financials out there to privately raise

money. Imagine your bank shorting you

after you showed them your tax returns,

right? Who knows? Maybe that's just an

individual issue. But then of course on

November 1st, UBS closes two private

credit funds because people are

demanding their money back. On November

3rd, Black Rockck's Renovo Homes

literally goes from, "Oh, we value these

assets at 100%." to 3 days later,

they're actually worth zero. It was

literally like straight out of South

Park. Yeah. Oh, we'll take all your

money and it's gone. [laughter]

Then on November 10th, Sonder Hotel

Group, think they ended up blaming

Marriott, but when you actually look at

the bankruptcy filings, what you find is

Saunder Hotel Group got rugpulled by

their construction lender who said,

"Yeah, no, we ain't giving you any more

money." And Saunders's like, "Yo, the

construction of our Ritz Carlton resort

isn't done yet." And the letter's like,

"Peace."

Uh oh, okay. You know, that's all that's

all just in the last 65 days. Let's not

even get to the fact that Open AI just

hinted that they might need back stops

to keep getting loans and the IMF told

us that 90% of this private credit

funding where people are like, "Oh, you

know, that's just private credit. Who

cares? Let that all fall." Well, 90% of

that private credit comes from big banks

like JP Morgan, which means the entire

financial system is built up on stuff

like this. Now, hopefully it's not an

issue, but when you combine those credit

issues, you can understand why there's

some money stress that the Federal

Reserve is starting to panic about. Now,

we've seen this in the past. We're going

to go through some of these historical

examples, but quickly on how this repo

situation works. Basically, when banks

have little excess cash, which tends to

get worse towards the end of the year,

banks start running out of reserves and

they stop lending. If you stop lending

in the American economy, it collapses.

Now, that's not what I'm calling for

here, but I want you to think about what

they did in 2020. They literally did the

opposite for banks. They went to banks,

the Fed went to banks and said, "Hey,

um, instead of you having to keep 10% in

cash, in other words, if you go lend out

$100, we want you to have $10 in the

bank to sort of back stop at least with

something." Uh, why don't we just say

you don't need to keep anything in the

bank at all? You could go lend a h 100%

out. Yeah, that's the new fractional

reserve banking situation that we have.

That probably helped us boom for the

last 5 years. Like, it's been great.

Banks have been able to lend lots of

money. The economy has been booming. But

now we're at that point where

quantitative tightening at the Fed has

brought us to oh crap, banks are now at

the point where we're starting to have

these liquidity issues, not enough cash.

At the same time as we have credit

issues and high debt and OpenAI is

making people nervous.

It's all not good. Now, when people hear

these liquidity issues, the first thing

they usually do is they think that the

Federal Reserve is now going to print

money and bail everyone out just like

they did during CO. I mean, I hate to

say it, but there are literally people

on YouTube like this guy who's like,

"Guys, remember what happened last time?

We got stim checks. We got PPP loans. We

got unemployment benefits. And we pumped

trillions into the economy. It's got to

happen again. Therefore, we're going to

go to the moon. Yet, when you listen to

this kind of content, they either glaze

or gloss over it very briefly. Uh or

they just completely ignore the fact

that the last time we got that, we had

40 years of essentially disinflation

going on. 40 years of a trend of

inflation going down. And everybody is

like, we won't have inflation if we

print money. Let's just print as much as

we can. How much should we print? Yes.

Donald Trump printed under the first

CARES Act with bipart with a bipartisan

Congress. Donald Trump printed again

with $600 stimulus checks. Joe Biden

printed again with $1,400 stimulus

checks. And we did get PPP, EIDL, every

kind of emergency facility under the sun

to backs stop uh corporate stock, to

backs stop corporate bonds. The Fed was

directly backstopping corporate bonds.

Every liquidity aspect under the sun was

brought out. And people think, "Oh,

okay. Well, if the Fed has liquidity

cris crisis today, they'll just start

immediately doing all that again. And

unfortunately, this is where they're

entirely wrong. No, unfortunately, I

don't think that charts like this posted

by uh Leo apparently follows me. What's

up, Leo? Uh Leo posts this chart mostly

because he has a price target on

Ethereum of like $30 to $80,000.

But anyway, he's like, "See, the last

time the Fed had to end QT because all

of a sudden we had liquidity stress and

we had these emergency meetings. Look

how much they printed after that." But

again, completely ignoring that we had

COVID in 40 years of disinflation to

say, "Oh, let's print. There won't be

inflation problem. Inflation will be

transitory." Now, you have a totally

different situation. First of all, a

liquidity support or temporary backs

stop by the Fed for this repo facility

like what we saw in 2018 to 2019 during

that liquidity crisis. Really what the

Fed just does is they issue very

short-term overnight lending to help

stabilize the banking system. That's

really all they do. This is not

long-term liquidity. This is not

stimulus. This is not pumping money into

the economy. So this idea that the Fed's

going to end QT is going to all of a

sudden be massively stimulative is

misplaced. Now if there's some kind of

shock, the big thing that most people

miss is that the Federal Reserve and

Congress, remember in 2020 they worked

in concert together. Congress is like,

"We'll spend it if you print it." And

the Fed's like, "Yep, we got we got the

message loud and clear." The uh the

problem is people forget of how humanity

works. If right now we have any kind of

issue where we actually have to provide

quantitative easing with the Federal

Reserve, we will have the Federal

Reserve and Congress extremely gunshy

about inflation, which is totally

reasonable. They're not going to want to

issue as much QE. they're going to be

much slower to do so because of the

deep-seated disdain for inflation that

grew over the last four to 5 years. And

therefore, the true risk is that we

don't have a COVID Larry Cuddlo V-shaped

recovery, but that if we do end up

having a problem or crisis in the

economy that the Fed has to solve. The

real risk is that they will be much

slower this time, which is really bad.

Historically, they do tend to be too

slow. In 2008, they were way too slow.

It took until February of 2009 for them

to bail out markets. During the dotcom

bubble, it took until March of 2003 for

them to bail out markets. They're

usually at the end of the cycle, not at

the beginning of the cycle. Co was so

weird and unique where they were

actually at the beginning of the cycle

and started printing basically before we

even locked down. And then of course

throughout all of that March which was

insane but it led to this inflation. So

therefore are we likely to see a Fed

that prints like they did in CO again? I

don't think immediately. I actually

think they'll be massively slow on it.

And so this is where we can look at

history a little bit and understand what

has happened historically when we've had

these little repo crises before. In

1994, we've seen a failure like this

before. Orange County,

yes, literally the entire county went

bankrupt.

Allan Greenspan then immediately

pivoted, cut rates, and boom, we got a

soft landing. So, there is a precedent

for actually some kind of, oh my gosh,

there's been some collapse. Oh my gosh,

we've tightened too much. Let's cut

rates. The pressure on the Fed to cut

rates then was massive, and they did.

The problem today is the pressure on the

Fed to cut rates is massive. I mean,

look at Donald Trump. But inflation due

to tariffs or, you know, whatever is

keeping the Fed uncertain and we don't

have data to actually show that the

economy is deteriorating underneath the

hood because it's been delayed because

of the shutdown or whatever reason or

it's ragged. Who knows? We'll see what

we get. Uh so even that next 25 basis

point cut only has like a 43% chance of

happening right now. Well that's not

great. We really if we were really

nervous about plumbing here of the

financial stability of the economy we

would be seeing consistent cutting and

that would be the correct thing to do.

The problem is already you have the Fed

going ah but inflation. So all these

people that are like oh we're going to

see QE infinity again. Have you not

forgotten what how that ended up being a

massive mistake and the pain that put

people through?

But that's not the only time we've seen

the sort of U-turn on QT. In 2019, the

day of my interview with Jordan

Belelfford about Grant Cardone, the

overnight repo facility spiked from 2 to

10% and the Federal Reserve immediately

ended QT and set up emergency

operations. Of course, while that solved

issues for about the next 6 months, we

just walked right into co So the

question in 2019 was did we have that

repo crisis because people already knew

what was coming and they were already

sort of like hoarding cash. If you look

at the bond market, the bond market

actually inverted just about 2 months

before that liquidity crisis in 2019.

And so some people argue that in the

summer of 2019, people already knew what

was going on at Wuhan. the bond market

already knew and insiders who have

billions of dollars already started

positioning into safer assets hoarding

more cash leading to the very 2019 repo

crisis

and that's why people look and say okay

so are we more like 2019 today or we

more like 1995 well 1995 Alan Greenspan

just started cutting well today the

Fed's like we don't need to cut.

So that kind of makes people think that

oh crap this is more like a 2019 where

insiders already know what's coming that

the mag 7 is way too concentrated. What

40% of the flows into into markets right

now are like mag seven stocks. It's

wild. Uh insane concentration built up

on the peg leg of artificial

intelligence. I honestly think that a

lot of the data that we're getting for

the Atlanta Fed real GDP at 4% is just

AI. And if that peg leg of the economy

falls over, there's nothing left to

support it. But that that part is my

opinion. So we're not really like 1995.

We might be like 2019 liquidity stress.

And then is there any other example

where we had this sort of repo stress?

Oh, yeah. After Lehman Brothers in 2008,

but that SH9T show was so large, any of

the Fed's bailout facilities didn't work

until, well, we had to go through a

nasty recession that took about 8 months

to really bottom out on. And of course,

the stock market recession was even

longer than that because stocks started

falling well before Leman Brothers. You

just got a much more volatile shock

afterwards. So this now creates some

really big potential problems, but

hopefully they don't, right? The best

case scenario here is that jobs start

coming back. No more credit crisis. You

know, we don't have any more

bankruptcies and the Fed stabilizes the

repo operations through their emergency

meetings and inflation just keeps

cooling. That's the best case scenario.

That's the best case scenario that says,

"Okay, buy the dip. We're going up. Like

just load up." You know, who knows?

Maybe consumer stocks are cheap or

whatever. Great. Everything will be

fine. The problem with this is we're

seeing so much foreshadowing of real

private credit risk that likely trickles

over to the banking sector that we might

just be a hair trigger away from a true

shock. You all know I've mentioned many

times before that the 210 Treasury

spread is really your indicator for when

you were shock primed. It doesn't mean

that you're at the level of a shock, but

anytime you're above 50, you're shock

primed like we were in 1995, but we were

cutting rates and we were able to

engineer the soft landing. The labor

market wasn't rolling over and we

weren't propped up by, you know, one

industry like AI right now. These issues

are very, very different from 1995 where

our labor market is collapsing.

Hopefully, that turns around magically.

We do have an economy that's propped up

by one industry, artificial

intelligence, leading to massive

concentration and massive valuations in

the stock market. Things that we didn't

see in 1995. I mean, all you have to do

is look at the Cape uh Schiller or the

uh Warren Buffett indicator and see

where our valuations sit today relative

to where they sat then. So, here you go.

In 1995,

we sat right here. one standard

deviation below the trend line of

valuations. So we were cutting rates in

1995

actually setting the standard for the

dot bubble that really then started. We

were just setting the the the stage for

this sort of runup right here. And then

of course when we peaked in the dot

bubble we were up here at 2000. You

could actually argue that 1995 is

probably much more like 2020 and we just

set up for this big run where we are

finally now at the highest level ever on

the Buffett indicator for valuations.

Therefore, the situation we're facing

right now is very much the opposite of

what we saw in 95 with a discounted

environment. Now, how does this all boil

over? Well, there are two ways you could

fall into a recession. and we pray that

this doesn't happen. Uh, you know, we

strategize on this all the time in the

alpha report like, okay, here's, like I

was just sending alerts. Here's what I'm

selling. Here's the amount that I'm

selling. Here's what I'm buying and the

amount that I'm buying. You'll see that

what I'm buying is a fraction of what

I'm selling.

And that's because of where my sort of

concern sits about this loaded shotgun.

I really feel that we have this loaded

shotgun and you've got Donald Trump

with, you know, Jimmy arms almost like

don't talk bad about my tariffs and

we're literally just that hair trigger

away from some kind of collapse or shock

or whatever at a big bank or a big

company or a big institution or

somewhere. We don't know where it'll pop

up. That's why it's called a black swan.

And then what happens? We're already

foreshadowing that shock via the repo

stress, private credit issues, the IMF

warning, the Bank of England warning.

We're already foreshadowing the loaded

shotgun. We see the 210 spread. Like all

the foreshadowing is in place. The black

swan part is we just don't know who's it

going to be. This is like the potential

Leman light or maybe even Leman big

moment. And it's a solveny issue, not a

liquidity issue. So there's too much

debt in the system, which of course

we've been talking about in the last

videos with thinner margin debt, Robin

Hood debt, leveraged ETFs, uh leveraged

Bitcoin. I mean, there's there's no

shortage of this. You could almost argue

that Bitcoin is almost the harbinger of

this sort of near-term pain, uh that we

might be approaching. Uh who knows,

maybe it's short- termism, but look at

this. Bitcoin has returned 2.67

this year. 2.67% 67% this year. And

compare that to VO, like your most basic

ETF on a year-to- date basis, up 15%.

Bro, that's crazy. Okay, who knows? Some

people say it's an indicator. But how

does this potentially play out? Well,

here's the issue. Two ways this plays

out.

Well, I guess three ways. There's the

good way. The good way this plays out is

jobs come back. Jobs come back, the

credit stresses go away, the Fed

stability works out, and we're guched.

Gucci, gu. Okay, then there are two bad

ways this plays out. Bad way number one,

slow bleed. Okay, this could happen.

This is kind of like you're walking

through the desert, right? You got the

cuts in the legs, death by a thousand

cuts, jobs deteriorate over time,

eventually you hit corporate revenues,

eventually stocks bleed, and sort of the

cycle ensues, right? Because as jobs

deteriorate, revenues at corporations

come down and then companies miss

earnings and stocks bleed more and you

kind of get this back and forth cycle

that have more layoffs or whatever and

you get a slow bleed kind of recession.

That's scenario two out of three. So one

is good, two is bad uh and and then you

have the worst case scenario which is a

credit shock. Okay. Now a credit shock

is really interesting because a credit

shock hits markets really really hard

and fast. This is why and and and you

know people think like, "Oh, I'll always

have time to get out of margin." Not

necessarily. If you wake up and the

premarket's down 10% on the cues and

your favorite stocks are all down 40%.

You're not going to have time to get out

of margin. And I think people forget

that that can happen. If you actually

look at the CNN greed and fear index,

there's something very interesting here.

We are literally within 4.2% of all-time

highs and we are at extreme fear. This

is wild, mind you. Okay, so

look at the components. Market momentum,

fear. Stock price strength, extreme

fear. Stock price breath, so the number

of stocks going up versus down is that

extreme fear. Most stocks going down

basically. Uh put call ratio, extreme

fear. The only thing that and then a

safe haven demand, junk bond demand, all

this is extreme fear. The only thing

that hasn't actually gone to extreme

fear yet is market volatility. Well,

guess what pushes market volatility up?

A shock.

So, like the gun is loaded. The the

shotgun has a massive incendiary shell

in it and it's been racked back. Uh I if

you have the AR15 style shotguns, you

you rack them like this. Okay. If you

have a shotgun, like a pump. Okay.

[laughter] Anyway, I just want to

clarify that for the gun folks. There's

some really cool AR-15 frame shotguns.

I've got them. Uh and they're pretty

cool. mostly super tangential, but you

know, you have an AR-15 in California,

you're limited to semi 10 shots. Well,

if you have an AR-15 shotgun, you're

semi duh, cuz you're not going to auto

that thing. It's so freaking powerful.

Uh, but you get 10 slugs, [laughter]

bro. 10 slugs. Uh, anyway, sorry. Okay,

so um or what some people do is they'll

mix them. Slug buck. Slug buck. This is

nasty stuff. Anyway, so getting back to

all of this insanity over here, cuz I I

don't know if it's like autism or just

like squirrel. Uh getting back to all

this insanity over here, it's bad. Now,

the good news so far is that banks ev

there's no evidence, at least broadly

yet, that banking standards are

tightening. Usually banking standards

tightening will lead credit shock. But

the problem is the charts tend to lag,

right? So reconcile what I just said

there. The charts give you the

information late, but usually credit

tightness leads. So in other words, like

wouldricolor have collapsed if JP Morgan

didn't call them and go, "Yo, we have a

$700 million line of credit with y'all

for your like warehouse line of credit

operations." Not to be confused with

like actually running a warehouse. It's

just sort of a larger business line of

credit that you could use because you

you pay for things then you wait for

your payments from your customers and

then you pay it off and then you pay for

things again, right? That's a warehouse

line of credit. Anyway, like would

Tricolor have collapsed if JP Morgan

didn't rug them? Maybe not. Would Sunder

have collapsed if their lender didn't

rug them? Maybe not.

And that's where you can kind of keep

the tides up where you don't really see

who's swimming naked because the lenders

are still like letting things pass. But

as soon as the lenders get nervous

because they're hoarding cash, that's

how the cycle begins. And we're at the

moment where where the lenders are

basically at that precipice of out of

money. That's scary. But again, not

showing up in the charts yet. domestic

banks tightening standards for credit

card loans, even though defaults are way

up. No tightening here yet. No

tightening right here yet on commercial

or industrial loans. Not seeing it here.

Not seeing the tightening yet over here

at commercial and industrial loans to

small firms. Not seeing the tightening

yet, right? These are all down. So,

we're seeing less tightening, which is

great. But again, think of how the cycle

is and how much faster the cycle can be

versus what actually ends up showing up

in the charts. And I think one way to

look at this is sort of the pattern that

you would expect. Okay? So, if you were

thinking like if you were a bank, how

would you operate? Okay, we're going

through quantitative tightening. That's

going to mean less cash. Higher rates,

that also means less cash. So, this puts

pressure on corporations, especially the

weakest of the corporations. They fail

first. Then banks start looking like

they've got egg on their face. UBS

closed their funds. Black Rockck people

like what the hell? How do you go from

100% value to zero? JP Morgan, how did

you end up losing $170 million

toricolor? Like what the hell? And then

people start going, who's next? And then

Jamie Diamond goes, "Yeah, cockroaches

check the balance sheets." Now all of a

sudden trust goes down in the economy.

credit default swaps start skyrocketing

at Coreweave and Oracle, which is

exactly what we're seeing, what we're

seeing. And it's literally people just

going, "All right,

who's next, homie? Have you found them

yet?" You know, they're getting on their

little company radios and they're like,

"Who is it? Who's it going to be?" And

this is where you see even more

tightness. And all that tightness the

Federal Reserve tries to respond to.

Now, mind you, the Federal Reserve is

kind of like putting a bandage on this.

Imagine it's sort of like there's a

giant water cooler and inside the water

cooler is like really nasty poisonous

water, but nobody sees it because the

water cooler is one of those big blue

like emergency coolers and you don't

know that the inside water is all like

moldy. But you're like, "Oh, I got that

giant tank over there in case there's

ever like a, you know, an emergency like

a, you know, I don't know, Walking Dead

situation where we need water and

there's Armageddon or whatever." You

don't know the water's moldy until you

open it up.

Anyway, now it's starting to leak. And

what's leaking out is like, ew, that's

moldy. Oh, well, maybe that's just mold

at the bottom of the tank. Maybe the

rest of the 99% is totally fine. And the

Fed's just kind of like, all right,

boys. We're going to

[sighs] hold on everyone.

Here we go. We got this. We got this.

Just go ahead and place that. [sighs]

It's just a little leak.

Ah, all better. All better. I'm sure

it's fine.

Like their liquidity facility on their

emergency meeting here, folks. It is not

solving what's in the bucket. It is

hoping that the bucket don't burst and

all the poop comes out. That's all it

is. So now this like comes at the same

time as the Fed is getting headlines

again because of Cougler. So remember

Cougler left at the Fed to abruptly go

teach at Georgetown yet all of a sudden

was nowhere to be found on scheduled

classes. You know apparently just like

you know oh Georgetown with a bunch of

Trump alumni trying to align with the

Trump administration because Trump is

forcing you know universities to make

decisions as to whose side are you on

otherwise we're going to cut your

funding better be my side. Well,

apparently uh the US Office of

Government Ethics uh reports found out

that she was potentially involved in

multiple individual stock purchases,

including Apple, Southwest Airlines, and

Cava. Now, she disclosed in 2024 that

this happened, trades between a,000 to

$250,000,

and complained that her spouse did that,

her husband did that, and in 2024, she

reversed the trades. Nothing ever came

out of that. But that wasn't under

Trump. That was under Biden. So they

kind of let that slide. And in fairness,

it could happen. But the fact that it

happened again looked really bad because

right before the July 29th Fed meeting,

which she excused herself from, she

realized that her husband did it again.

She selfreported and said, "Yo, we effed

up again." And then she's like, "Yo,

Powell, can you give me permission to

undo this?" He says, "No." My assumption

now Trump administration hears about it,

hits up Georgetown,

make a make the phone calls, she resigns

August 1st, boom, my takes her place.

Myin is shilling for rate cuts, which is

probably the right move anyway. Catches

you up a little bit on all the stuff

going on, doesn't it?

>> Why not advertise these [music] 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 Pra there, financial analyst and

YouTuber. [music] Meet Kevin. Always

great to get your