Get READY: The Fed's Rug Tomorrow.

J Pal is going to rug us tomorrow or

not? Well, that's what we're going to

talk about in today's segment on the

Federal Reserve.

It's Schumer Siesta coupon code

expiration eve. That's right. [music]

The Schumer Siesta coupon code finally

expires tomorrow for the M Kevin Alpha

Report. But for right now, we're going

to talk scenarios and we're going to

build them out together. So, Federal

Reserve scenarios, here's the game plan.

Okay, so what what is expected? What is

expected? We always want to start with

this is this like the base case. This is

what the market expects. Okay. So the

market expectation you know we'll go

green check mark here. We are expecting

with a 96.7%

probability that uh we will get a - 255

BP cut and we are widely expecting the

vacuum cleaner to pause. Okay. Why do we

expect the vacuum cleaner to get caused

and what the heck is that? That's

basically the end of QT. This is the end

of an era. QT began in March of 2022. It

has been 3 and a half years of

quantitative tightening and the end of

QT, which is the Federal Reserve selling

bonds. Mind you, when they're selling

bonds, they're lowering the value of

bonds, right? So, this has the impact of

lowers uh uh value of bonds when they

sell bonds, right? because there's more

supply. When they stop doing that, they

could potentially lead market rates to

actually come down because they're

selling fewer bonds. We don't have to

think about the mechanics of that. Just

think bottom line,

Fed rate down and hopefully market rates

down. However,

usually the market already prices that

in uh and so we're probably around 4% on

the 10-year Treasury as just a stable

here's where we sit if we get a base

case from the Fed tomorrow. Nothing

freaky, nothing scary. What do we get?

Probably honestly still sitting around

4%. you know, if we get the end to QT

because QT isn't entirely priced. I

would argue um maybe 70% priced in uh

for QT, maybe we end up getting like a

39

maybe on the 10. Do we expect some kind

of big cratering on the 10-year?

Probably not. Uh broadly, this is the

base case. This is what's expected. And

if we get this expectation, it should be

modestly bullish. Uh, so I'd call it

modestly bullish. It's it's nothing

scary. Uh, it's not scary. It's it's

nothing that makes us really concerned.

Now, what should be concerning to you?

Concerning to you, not markets. Okay?

Because you know that markets can be

irrational. We can make a lot of money

in markets. We can, you know, markets

can skyrocket, but we can also know that

there are bottom line issues in the

markets, right? The most concerning

thing that you want to pay attention to

tomorrow uh is twofold. So number one,

you want to pay attention to any talk

about um uh private credit uh uh being

uh uh how should I call it systematic or

a systematic risk. So this would be

systemwide rather than just uh

idiosyncratic. That's going to be your

big oopsy dupsy. You don't want to hear

any of that. I don't expect you're going

to see Powell say anything negative

about this. Uh so I would say uh expect

Powell to sweep this under the rug,

right? Keep the cockroaches where they

belong, so to speak. Now, previously we

have him heard we've had him talk about

the normalization

of the beverage curve uh may be

beginning. Okay, this this is

this is complicated, but uh we talked

about this a little bit this morning in

the alpha report. Uh you know, mind you,

we do that every morning before the

market opens up. Not only to get sort of

my next 10 stocks to buy for the next 10

years, but sort of my take on, you know,

where's the market going to go in the

day? Like, is this the day you go call

options or, you know, do we sit out Fed

jitters and kind of just wait and see?

You know, those are the things that I

kind of plan for in the day. uh but in

in the morning report what we touched on

is the first time I've talked about it

is the steepness of the beverage curve.

Now the steepness of this it's a little

complicated. I'm going to keep it nice

and short. But basically if Powell talks

about the steepness that's all I want

you to think. If he talks steepness I

want you to think bullish. Okay? If

Powell talks steepness

think bullish. basically uh steep. If he

references the steepness of the curve, I

it's just a fancy way of saying new

normal for the labor market, right? Uh

if uh if he downplays

uh the steepness and says curve should

normalize, that's bad, right? Because it

means that unemployment recession might

be getting closer. Now, obviously, we've

been worried about the unemployment

market uh in the labor market for about

a year now. You know, we weren't worried

about the labor market in 2022. We had a

crapload of layoffs in 2022. But

remember what happened in 2022. The jobs

market was so freaking tight, YOU

COULDN'T HIRE ANYONE. You couldn't find

anyone in 2022. So when Amazon fired

28,000 people in 2022, guess what all

the people did who got fired? They went

AND GOT A BETTER JOB. THEY WENT AND GOT

MORE money somewhere else, [laughter]

you know? So like totally different jobs

market. Today we're firing 14,000 or up

to 30,000, which is just a way for them

to sort of like damp down head tamp like

tamp down headlines a little bit. Uh now

they're going to fire up to 30,000

people. That's more firing than what we

saw in uh 2022. And it's a horrible time

to get fired, mind you. Like I was

talking to Jack yesterday. I'm like,

"Bro, imagine you're an accountant and

and you got fired along with 30 other

thousand people and now you got to go

find an accounting job. This sucks,

especially in the days of AI." And he's

like, "Dad,

this sounds terrible, but what's an

accountant?" [laughter] And I'm like,

"Okay, son. have you ever heard of a

credit card? And then I start teaching

him about debits and credits and he's

like, "Dad, I'm 10." [laughter] Anyway,

so um we were actually doing that

yesterday though. This is what happens

at midnight at the Meet Kevin household.

You start talking about accounting. But

anyway, any hey, you know what? Put him

right to sleep. It worked out great. So

anyway, um the the the thing to think

about is like now

it's a lot tougher of a labor market if

you get fired. And so it's not just

30,000 at Amazon. It's not just the

thousand at Target or or 1500 at Target

or the thousand at Paramount. But also

UPS is bragging about how they laid off

like 35,000 workers in the last 9

months. Okay. 35 over the last 9 months.

That's like 3.8,000 workers every single

month gone. Ara

a thousands of livelihoods. Man, it's

scary. And it's just it's like if it

were a 2022 market, fine. Like just go

get another job, you'll be okay. But

it's not, man. I mean, you've literally

got Walmart bragging about how they want

to keep uh their jobs, their hiring

flat, basically uh for the next 3 years.

So Walmart wants to grow revenues and

not hire for the next three years.

That's scary. Goldman Sachs says, "Yeah,

we don't want to hire at all for the

next, you know, whatever years it is."

Uh, and then on top of that, you've got

um I think I think they said one or two

years at Goldman Sachs. You've got other

companies also reporting that, yeah, no,

we're just we're just not going to hire

right now. So that's why I say when it

comes to the Federal Reserve, if he

downplays steepness of the curve, it's

good. If he says the curve should

normalize, it's bad. Because the curve

normalizing with how low vacancies are

right now, bottom line, means the

unemployment rate's going to skyrocket.

If he's like, well, you know, the

curve's just steeper today. This is a

new normal. It's potentially a sign the

Fed's just going to be slow and too

late. They're kind of doing the usual

like, h everything's fine. The economy

is fine. Things are bullish. you know,

it's just a new normal. It probably

means they're going to be too late, but

it it's just it creates no shock now,

you know, and that's in contrast to what

they could do in another scenario, which

let's talk about the other scenarios.

So, in another scenario, the Federal

Reserve could also come out hawkish. The

most hawkish thing that I think we would

get tomorrow would be 25 bips because

that's basically priced in. I don't

think they're going to shock us. I don't

think we're going to we're not going to

get zero. We're not going to get a hike.

It's just they're not going to go for a

rug pull on the market. You've got too

much funding stress. So, too much

funding stress to see zero or a hike.

Uh, you know, that's that's unl

I I I would put this at like, you know,

1% chance. Okay. Especially with that

last CPI report we got, like 1% chance.

So, hawkish would be 25 BP and no QT

end. I don't really see this happening,

but this would uh in my opinion, you

know, yields up and uh stocks down. Uh I

put this at like a, you know, 10% chance

of happening. We're probably going to be

over here uh at uh this sort of base

case scenario is probably closer to like

70%. Uh honestly, probably closer to

like

I'll go let's see 10. Yeah, I'll go 75%.

You know what there's actually more of a

chance of and I would put this at like a

15% chance is actually the bearish. So

the bearish 50 I this is not mega likely

but it's possible. The bearish 50. So

the bearish 50. This would be a bearish

shock. Uh I think there's a you know a

15% chance of this. So, I think it's

unlikely, but this would basically be

like, oh, SH9T,

what does the Fed see that they need to

rush to get ahead of, right? That's how

the market's going to react to this. And

that would also be, you know, like a

sellown because even though it comes

across as bullish, like, oh, wow, that's

great. Like, cool, we got 50 of cuts, it

would be somewhat shocking. You know, I

had a course member ask me this morning,

I go, they're like, hey, Kevin,

congratulations. you guys, you know, you

raised almost what I think we're at half

a million dollars now raised uh for

house hack in in just the last 40 hours

which is crazy. Uh I think that's in

part because and I know people they you

know I wear the reinvest shirt so I

always like to be clear like the

reinvest is the new doing business as

for house hack. Uh so we put a little

note on the website for that as well.

But I think people are looking they're

like wow you guys are going to have this

wedge AI and you've got your your AI

time frames on your website and that you

could go see it if you want at

reinvest.co. This video is not a

solicitation. Read the offering

circular. Right. Uh but anyway, our

renovation AI, like we've got some

really cool things coming. We're really

excited. Like every day I'm just like

I'm giddy about this and I'm working

with the AI team like we should do this,

we should do this. And and you're like

they got to keep me reigned in because

there are so many things that I want to

do. Uh and we're going to look at a Nick

T article here in just a moment as well.

But they're like, "Hey Kevin, like what

is uh uh you know, what is the potential

of uh us ending the funding round sooner

and reinvested?" go. Look, I I never I'm

I'm the no pressure guy, okay? I was the

branded meet Kevin, no pressure agent,

and I never want anybody ever to feel

pressure to invest. And it's very

important to know that there's never

pressure to invest. I really don't think

the Fed's going to go like double cut

tomorrow. Obviously, if the Fed comes

out and they do something crazy like,

"Oh, we're going to cut 100 basis points

because we're panicking." Obviously, uh

it's going to make sense to talk to the

board and no longer do a 5%, you know,

yield on on our on our round, uh where

you get 100% of the upside of the stock

plus a 5% yield, obviously, right?

Because like if rates tank, like why

would we do that? You just you don't

have to compete with that. Like I think

5% already is pretty good when money

markets are yielding you like 375 and

that's like you're getting 5% plus the

upside in the stock which I think is you

know valued at a real estate valuation

uh and and has no valuation premium for

AI. You know what I saw yesterday and

we're going to look at this article here

but I saw this yesterday and I and I

like part of me like wanted to vomit but

the other part of me is like this is

great. Uh but listen to this. Look at

this. You can't make this up. Seoia

Capital leads $750

million

round for a startup that quote uses AI

to create slide decks. It's right here

in green. It uses AI to create slide

decks. Bro, Grock and GPT already do

that. How do you possibly How do you

possibly get a $750 million startup for

for basically a GPT rapper? Like this is

AI. So in my opinion, there are

two AIs. There's like first of all, you

know, you got your your generative AIs

that are actually good. Like whether

it's Grock or it's uh GPT or whatever,

right? Like you know, Claude, Anthropic,

whatever. Like they're good. They're

all, you know, have their strengths and

similarities. Uh but they're good. And

then there are all the startups that

basically just ride on the coattails of

those companies. And then I'm like, "Oh,

you guys aren't even doing anything

unique. There's what's proprietary about

this?" And then what almost a billion

dollar valuations is like this is

stupid. Whatever. Uh like we have

proprietary MLS at House Hack and we

keep training more. [laughter] We're

like, "All right, now we need an ML for

this." I don't want to get too detailed

into, you know, the MLS we have because

there's there's some of our uh, you

know, proprietary edge uh, in in how we

structure our real estate data. Uh, but

it's it's really fun and I study, you

know, AI on a daily basis. I love it. I

got my AI book right here. But, um, one

of them at least. Uh, so, uh, what's

really interesting about this whole Fed

thing is I don't think we're going to

get, that's going back to the Fed here.

I don't think we're going to get some

kind of crazy like, you know, 50 BP or

shock cut, right? So, here's Nick Te's

article and uh Nick T's take here is

that the Federal Reserve uh officials

have uh a suddenly pressing decision, a

decision when they beat meet this week

that has nothing to do with the interest

rate cut. It is whether to stop

shrinking the uh portfolio

at this meeting or wait until the end of

the year. Right? So that unfortunately

is a risk tomorrow that we end up

getting uh let's go back to this there

is a chance you know within this you

know so 30% chance no QT end within that

75% base case where we get the 25

there's a 30% chance we don't end up

ending QT right not ending QT not great

for bonds you know people are looking

forward to this maybe a little bearish

but it's this is it's mostly bullish.

It's going to come down to the wording.

I even don't even like I don't even

really think markets are going to care

about the normalization of the beverage

curve versus a steeper curve here.

Again, remember if you hear steepness,

think bullish because it just means him

saying new normal. It's bullish for now.

It could also just be blind to history,

right? Uh and if you hear normalization,

it's bad because of the layoffs. Fine.

But going back to the Nick T piece here,

what do we have here? As recently as two

weeks ago, the Fed seemed on track for a

year-end decision. Uh, however, Powell

in a rare speech devoted primarily to

technical, monetary, plumbing dynamics,

said the central bank could approach the

point in the coming months where it

needed to end QT. Uh, and that's really

because of that pressure that we're

seeing in sofur, which is the secured

overnight funding rate. And so, the

debate is going to be separate from what

we're seeing uh, regarding interest

rates. Here are the Federal Reserve

assets. You can actually see they're

basically back to COVID levels. Like

right before CO Well, actually, no,

that's not true because technically the

CO printing started over here. They're

just right after CO we just kept

printing printing printing printing

printing printing for a very long time.

This is probably where the inflation

came from. Like this was the emergency

response and this was probably just the

continuous printing that led to all the

inflation right here. That's where they

overdid it. So the overdid it portion is

gone. But the COVID response is still

built in the system. That'll probably

just stay there forever. But the Federal

Reserve doesn't want the balance sheet

so big because uh supplying trillions of

dollars of interest bearing reserves to

the bank carries political costs such as

paying larger amounts of interest. Uh

but they want to keep short-term rates

under control, blah blah blah. None of

this really matters. It's just basically

as a way of saying as we saw yesterday,

we've started to see some volatility in

the spreads on the overnight uh uh

yields. Now, I always kind of like

looking just to see what some of the

comments are over here. So, let's just

go to like most liked over here. When

the Fed purchases securities, it creates

reserves, electronic cash that the bank

holds. This is basically, yeah, printing

money to us normal folks, creating value

out of thin air. So, technically, and I

always get a comment out of this every

time I say this, this is it correct and

it's not correct. The Fed doesn't

actually print money. the Treasury

prints money, but the Federal Reserve

changes a number on a spreadsheet that

creates essentially debt for the the

government out of thin air. Uh and and

the Federal Reserve uh it and then they

print the money, right? So, I always

think that's very funny. Decentralize

first. The economic sophistry of modern

monetary theory must be revealed. You

know, how many people I feel like just

write comments now with AI? Uh it is

just like I wonder how much of the

internet is just dead these days. Like

who actually writes their own comments

anymore? I know you folks do, but you

folks are smart. Uh somebody says,

"Please bring back the soundboard. Just

close the door. Close the door."

>> So anyway, uh look, that's the preview.

Now, what do we actually think that's

going to do for Marcus? Okay, look, I'm

going to be clear about this. This

morning in the alpha report, this is a

free sample. Okay, this morning in the

alpha report, I said, "Folks,

today is not a day for puts.

Today is probably not a day for calls

either, though. I think the Q's sit 6:30

as a floor and hang out." And it's

really freaking scary because it's on

the dot at 6:30 right now. And I said

this in the pre-market. You can like you

could fact check this. If you go back

and watch all my live streams going back

to like 2018 or or there. And you go

back into the live stream this morning.

It's like, yeah,

Kevin wasn't mega bullish today, but he

also said no puts. He I literally said,

you know, there are some days if you're

trading the cues, there are some days

you just take off. And today might be

one of those days. Now, like why would I

say that? Because that is isn't that

boring? No. I actually think, you know,

obviously I can't give you personalized

advice, but I think it's really good

perspective. Why do I think it's good

perspective? Because you go into the Fed

meeting, bro. This is so normal. Like,

right before Fed meeting and then China

on Thursday, come on, man. Of course,

the market's going alltime highs, you

know, maybe I'm just going to kind of

chill out and wait just a little bit.

Come on. Uh so like

hey you know if you could you come up

with if you're happy with your own

strategies whether or your own

fundamental analysis if you're even

doing fundamental analysis great. Uh if

you want if you want to see the

fundamental analysis that we're doing uh

in and the technical analysis uh every

day uh before the market opens up almost

every day. Uh, you know, sometimes I get

sick. Uh, I actually take a sick day

calling my boss, but that happens very,

very, very rarely a handful of times a

year. Then, uh, and I still try to get

the alpha report out even if I can't go

live. But, uh, yeah, you know, come join

us over there in the alpha report. Use

that coupon code humor siesta. We are,

uh, we're going to expire that tomorrow

uh, evening and, uh, and then the price

will go up. So, we'd love to see you

there. Let me see what um, uh, what what

some of you have uh, in the chat here

uh, this morning. Somebody writes,

"Kevin, my strategy is called taco."

Yeah, that's why I sit at like an 8.9 to

nine out of 10 on the taco scale.

Totally agree, man. The taco scale is is

something else. Uh so, uh okay, let's

see here. Then we've got uh bring back

the sound. Oh, we got we got the

soundboard for you.

>> Nice to have you.

>> So, you want to talk about love making,

right?

How many of your kids did you have to

lay off due to AI? You know, I'm

actually hiring. [laughter]

All of them are hired. They're great.

That we're we call them the Magnificent

Seven. The Magnificent Seven children.

You know, sometimes we put a little more

money into the one of the Mag Sevens and

a little more into the other, but we

always try to balance out our allocation

to the Mag Seven. [laughter]

All right, there's my take on the Fed.

>> 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 Pra there, financial [music]

analyst and YouTuber. Meet Kevin. Always

great to get your take.