Yikes | This is Concerning [The Fed's New Problem Is Here].

hey everyone me Kevin here in this video

I'd like to address the growing concern

around revisit to the 1970s this is

something that I have thought has been

very unlikely mostly because we've seen

so much progress on inflation in 2023

especially going into the last part of

2023 that how could we possibly revisit

the 1970s there was no way I thought

this would be possible well now there

are growing concerns that maybe the

market is beginning to price in ex

exactly what happened in the 1970s and

there are some reasons why the market

could end up being right first of all I

want to show you the first sign of panic

that the market is finding it necessary

to price in a potential for the return

to the

1970s no it is not the risk asset like

Bitcoin it is actually your more old

school inflation Hedge and that my

friends is gold now I'm not here to Shi

gold you know I don't do that but I want

to be very clear look at this chart

we've got gold that just broke through

$2300 per ounce and this is generally

considered a fear investment we're

seeing this pull up substantially

beginning really since the last data

that we got for February here at the

beginning of March and all throughout

the mon of month of March we've seen

this sort of fear index

increase uh this does mean that market

is concerned about something what it is

is obviously speculative it could be uh

the growing problems that we have with

Israel striking in Damascus the Iranian

Embassy so now you're pissing off the

syrians and the Iranians it could be

settlers in the West Bank expanding

their grab of territory pissing off

Palestinians more it could be the attack

uh on uh Aid work in Gaza it could be

Putin doing Putin things it could be

Ukraine doing Ukraine things it could be

China doing China things it for all we

know could be earthquake in Taiwan

although we really expect that had some

limited uh impacts fortunately now

terrible that one person died a blessing

that hundreds of people didn't die so

there are a lot of things always sort of

going on in the world that could lead

gold to fluctuate but one of the things

that is happening with certainty right

now has to do with wages and this is

something that makes me nervous from the

point of view of what the FED is

actually going to do this year first

let's understand at the beginning of the

year we were pricing in six to seven

rate cuts when I say we I mean the

market okay this is not like a group of

people com and makeing their opinion

this is like the market fed Futures were

pricing in six to seven rate cut it's

crazy now we're sitting at maybe we've

got about a 62 to 63% chance of getting

our first cut in June if we're lucky but

what did Jerome Powell tell us today

well Jerome Powell today at a speech at

Stanford which I covered live on the

meet Kevin live Channel expressed his

desire for more patience that we're

having more participation uh we're

seeing Supply chains heal we he sort of

went through a historical explanation of

why we had inflation but what he did

Express clearly was patience and I think

I may have found exactly why it has

everything to do with the potential for

a wage price spiral now I'm going to

start by talking about something you

probably haven't heard of before and

that's the impact of California on wages

across the entire country potentially

you may have not heard this yet but

California decided to increase wages for

fast food workers to

$20 per hour with the exception of of

course if you're a bread fast food

worker yeah let that sink in for a

moment and then let's also consider

Gavin nome's connections to Panera Bread

and he's the governor of California so

just going to throw that out into the

universe make with that what you want

but then again rigged in politics is not

really a surprise that's as unsurprising

as it's unsurprising for me to mention

that the price is going to go up again

on the courses on building your wealth

my trade alerts the alerts for day

trading the alerts for when I Reby Tesla

we're going to be reing Tesla buckle up

for that all of these in the stocks and

pych group make sure to bundle those

with courses like the gold course or the

Zer to millionaire real estate course

email us if you need a custom bundle at

staff atme kevin.com so California just

raised wages to $20 and you might think

okay who cares California raised wages

to $20 well Bloomberg intelligence

actually thinks that because

California's fast food workers represent

410 of a percent of the national work

Force we could actually see ECI move up

by .1% in Q2 that's the employment cost

index and that gets annualized so you

multiply it by four to see what the

potential inflation impact is on wages

the FED ideally wants that Target to be

3% the problem though is if you have a

move up in fast food workers in

California you literally start the

spiral because guess who gets pissed off

well people who have wages in the $20

range plumbers electricians and these

are like starting plumbers and

electricians right like Journeymen right

like master plumbers and electricians

they're making 50 60 70 bucks an hour

they're running their own business

they're making 100 bucks an hour 120

bucks an hour right of course but I'm

I'm talking for like your you're you're

starting workers so you've got a lot of

folks in construction starting out 20

bucks uh and that's with no experience

and you're putting in good work right uh

starting Sal or wages I should say for

teachers or police officers you're

generally in the $20 range yet now all

of a sudden some kid coming out of high

school with no skills could show up at

McDonald's and work for $20 an hour

that's literally like two and a half

times what I made when I went to school

but you know I'm 32 so I don't want to

that's 16 years ago now I don't I don't

want to sound like that oh back in my

day it's just kind of a lot and the

problem is that move up is not only

driving restaurants to raise their

prices in California even in and- out

just raise their prices but it's also

driving all of these other workers to

potentially say wait a minute I should

get paid more and so what happens is

everybody moves up and then Nationwide

you get a pushup because people don't

want to lose workers potentially to

California you know if you're working uh

as as a fast food worker in Ohio for six

bucks an hour or maybe eight bucks an

hour or whatever it is right now and you

can move to California make 20 bucks I

understand parts of California are more

expensive but there are very affordable

parts of California that's pretty damn

good okay doesn't mean you have to be

working in Newport Beach I mean you

could be in Bakersfield you still

benefit from that $20 an hour so that

sort of drives up wages across the board

now what do we have to consider here

well Bloomberg thinks bottom line out of

all of this the ECI for the second

quarter employment cost index is going

to move up by

1.1% uh just a little over that that

means 4.5% annualized wage growth that

is way higher than the FED is targeting

to actually start cuts and the second

quarter ECI report rep comes out on July

31st which is literally the morning of

the FED meeting which makes it entirely

possible that the FED says you know what

let's wait to get our last wage data for

the quarter in July before we cut in

June so they don't cut in June so you

delay to July they get the ECI in July

it's propped up by the second quarter

numbers because the wage increase just

went in April 1st propped up by the

second quarter numbers now all of a

sudden you get a hot ECI how does the

FED potentially cut why don't think it's

actually likely that the FED does

instead what instead you have is a fed

that's going to look at reports like

this Friday's unemployment report which

is of course preceded by the ADP report

we got this morning the ADP report

showed wage gains for job Changers go

from 7.2% to 7.6% uh in February so

January to February and then from

February to March we went to 10% as an

increase we're we're going the wrong way

now I want to be Crystal Clear it's good

for people to make more money but what

happens is the potential for setting off

a wage price spiral which is what we had

in the

1970s wage price spiral occurs when

prices basically lead to increasing

wages so prices go up wages go up that

leads to people uh having more money to

spend so prices go up again as prices go

up again people demand higher pay

because everything's more expensive rent

and stuff everything's more expensive

think union strikes or just changing

jobs and so you have to pay more to

retain talent you have to pay more to

attract tal a talent this could

potentially lead to that stair stepping

of uncontrolled inflation which is a

currency Destroyer we know that

inflation destroys currency this is why

you should always be investing in real

assets anyway whether it's real estate

uh hopefully you're checking out and

learning about the house hack mini funds

or you're learning about house hack you

can learn all about that at the house

hack uh YouTube channel of course you

could also uh send me uh an email at

ious hack.com and uh we'll get you taken

care of so uh those are things to think

of uh that is of course make sure you

read the PPM realize there's a risk with

every investment we got to have balance

when we talk about this stuff uh but

inflation expectations fortunately are

relatively stable right now that's a

good thing that is like our saving grace

to the potential pain of a wage price

spiral see as long as inflation

expectations are anchored we might be

able to

forall a wage price spiral and right now

we do see expectations somewhat stable

except we've started an alarming Trend

at the beginning of the year we've

really started seeing inflation

expectations start skyrocketing take a

look on screen here this is posted over

at

eac.edu .8% over here on the left that

we had before the pandemic and they're

certainly lower than that crazy high

that we had at 32% right before the FED

started their liftoff the question now

though is is this surge going to

continue the only reason we previously

had a surge here is because of a banking

crisis and thoughts that the Fed was

going to cut rapidly and that would lead

to a substantial rise in a secondary

wave of inflation now we seem to be

rising because some of the latest

inflation reports are coming in hot

now maybe those will end up being

transitory maybe they're a fluke you

know what maybe the level of new

immigration we're getting is going to

keep wages down consider that one of the

reasons potentially we have this

mismatch between the uh employment

household report and the payrolls report

when we cover jobs reports which of

course we have a new jobs report coming

this Friday is potentially because we

have a lot of illegal immigration and

they don't always get picked up in the

Census Bureau data or in the the way the

Bureau of Labor Statistics calculates

their figures and so what you

potentially have is a households report

that looks like jobs are falling and

deteriorating when they're really not so

if the FED has to sort of adjust in that

okay well employment's still kind of

running really well here we have to ask

ourselves are we really in a

deteriorating environment where we have

to cut probably not so in other words

the FED is probably leaning towards

unpriced these summer cuts at least with

the data we're getting now now of course

this Friday we'll have an unemployment

report and we're going to look for those

average hourly earnings on a

month-over-month basis from March to

come in at. 3% that's great but that

doesn't represent California's wage

increases yet which hit April we won't

get that data until May and it doesn't

affect the secondary wave that comes

from California's wage increases that's

going to take some time so we definitely

have some more wage increases in the

pipeline which could make the Federal

Reserve a bit more nervous to cut and

this is of course coming at the same

time as oil prices are now hitting 90

bucks a barrel which does affect our

headline inflation read obviously not

necess necessarily our core inflation

rate although even multivariant core is

showing some signs of slowing in its

fall which is not great we really want

to see multivariant core continue to

Trend down you can see that over here at

the New York fed and you could see if we

go to decomps and we just uncheck

everything except the multivar core you

can see how we're stabilizing at this

higher level on multivar core around 1%

which is not as low as we'd like pre

pandemic we were sitting closer to 0%

right now we're sitting at about

1.07% that's just for core add to that

headline and you have a Target that's

over 2% so we have some work to do on

inflation we have some work to do on

wages now what does that mean what it

probably means you have a few quarters

left of delays in terms of when we're

going to get interest rate uh reductions

which would be hopefully good for

interest rate sensitive stocks which

companies don't care about interest

rates well Amazon

Apple Microsoft Nvidia AMD

asml uh these these large massive

companies meta these companies don't

care what interest rates are if anything

they've got so much cash they're

benefiting off these interest rates the

companies that do get hurt by this are

obviously your interest rate sensitives

the durables the appliances the Autos uh

the uh energy Investments the solar

right these are interest rate sensitive

we already know that that's old news the

question is where is the bottom in the

interest rate sensitives well right now

expectations are that we're going to get

Cuts in June my opinion is that we

probably end up finding a bottom when

the market wakes up to the realization

that wow we might not get any cuts at

all and when the market wakes up to the

realization that we might not get any

cuts at all this year I think there's a

chance the market will move somewhat

bearish in fact we're starting to see a

Slowdown in the greed and fear index now

I find that really interesting when we

start seeing a Slowdown in the greed and

fear index where one month ago we're at

extreme greed and we're slowly rotating

down it's a sign that we might slowly be

moving into a segment or time of fear a

time of fear could come at the same time

as the FED un prices those summer rate

Cuts or potentially any rate cuts for

this year I think that could be a

glorious bottom opportunity to buy

interest rate sensitives and that's the

time to buy the dip is the time to buy

the dip now when everybody's excited

about inflation uh uh and and uh uh rate

Cuts not in my opinion I could be wrong

though I'm not your personal financial

adviser you know this but look at this

turnover over here we're seeing this

slowdown uh in uh the level of of greed

uh we were at extreme greed a month ago

a week ago we went down to Greed and

we've been down at greed for a while now

and so we are starting to see the uh

stock price strength sort of the new 52-

we highs start rotating down we're still

sitting at extreme Greed for how many

stocks are moving up still sitting at

Greed for the put call ratio and Market

volatility is still sitting in neutral

junk bond demand is the only thing

that's moved to fear so far but it is

possible that the next best buying

opportunity might be when this here

moves back into the fear or extreme fear

category I'm not sure if that's going to

come from q1 earnings which start coming

out within the next few weeks we're

probably two weeks away from earning

season really starting or if it's when

we get our jobs and inflation report

remember we got our jobs report Friday

and our next inflation report on April

10th so mark your calendar for these

dates Friday the 5th jobs report that's

also coupon expiration day mark your

calendar for April 8th we're going going

to get New York fed inflation

expectations and an expiration of the

house hack warrants very important if

you have warrants you lose them if you

don't fund them by April 8th I'm being

very clear about that in almost every

video now and at on a CPI basis we're

looking at 04 on a month over month on

April 10th uh which that's going to be

driven up obviously by gas prices as

well and a core at. three we'll see what

we get but that's April 10th so buckle

up we got some big dat coming over the

next week thank you so much for watching

if you found this helpful consider

sharing the video make sure to as usual

like And subscribe and we'll see you in

the next one goodbye and thanks so much

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 Go

congratulations man you have done so

much people love you people look up to

you Kevin PA there financial analyst and

YouTuber meet Kevin always great to get

you a

take even though I'm a licensed

financial adviser licensed real estate

broker and becoming a stock broker this

video is not personalized advice for you

it is not tax legal or otherwise

personalized advice tailored to you this

video provides generalized perspective

information and commentary any

thirdparty content I show shall not be

deemed endorsed by me this video is not

and shall never be deemed reasonably

sufficient information for the purposes

of evaluating a security or investment

decision any links or promoted products

are either paid affiliations or products

or Services we may benefit from I also

personally operate an actively managed

ETF I may personally hold or otherwise

hold long or short positions in various

Securities potentially including those

mentioned in the video however I have no

relationship to any issuer other than

house act nor am I presently acting as a

market maker make sure if you're

considering investing in house act to

always read the PPM at house hack.com