What was JUST Revealed about the Fed's Master Plan | Disaster.

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연준 의사록과 금융여건 분석 기반으로, 인플레이션 하락이 오히려 금융여건 완화→연준 매파 재확인으로 이어져 단기 증시·채권 반등이 억눌릴 수 있다는 'good news bad news' 시나리오를 제시. 유럽·영국 인플레 하락, 미국 실업수당청구 204k(예상 225k 하회), 2023년 CPI 전망(전월비 0%, 전년비 6.7%) 등을 근거로 듦. 낙관 시나리오 확률은 약 40%로 언급하며 당장은 약세 경계, 장기 강세 베팅엔 신중 권고.

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01. good news bad news from the Federal Reserve first we're going to break down a new piece from Nikki leaks we're going to corroborate that with what banks like Morgan Stanley and JPMorgan Chase are seeing regarding the FED then we're going to talk about what to expect going forward and is there potentially some hope hey everyone meet Kevin here we are changing the pricing for the programs on building your wealth tonight so check those out linked down below or consider locking in a flight with me and a shadow day if you're interested in shadowing me and learning more from me so go ahead and take a look at those link down below and in the meantime let's hop on over to this what do we have here we have fed minutes show officials feared Market rallies could hinder inflation fight so initially this is actually bad news take a look at this the federal reserve's minutes had essentially uncharacteristically blunt warnings that cautioned investors against underestimating the central bank's determination in fighting inflation and the FED is anxious hat seem to be loosening and see that's what's very interesting when we jump on over to Morgan Stanley we can see that the FED is right to be anxious Financial conditions are created by the sum of the following strong dollar treasury yields that are high stocks that are low oil that's expensive basically all of these things combined together when they're going in the direction that makes things worse for us again like strong dollar or higher interest rates make it so that we spend less money on goods and services ideally because we have less money me or because it's more expensive to make decisions those things lead to an increase in financial conditions unfortunately for the FED since the end of November we've actually seen those financial conditions plummet and this might explain why Jerome Powell U-turn in November he was actually acutely aware about potentially over tightening and this is why it seemed like Papa Powell was like Hey all right look we're gonna go through a tough time but but we don't want to kill you and after that Financial conditions across the board actually loosened think about it the 10-year treasure yield even though it's high right now at 3.76 it's not as high as it was back then I mean we were sitting around four and a quarter percent for a while on the tenure that's crazy a lot of these conditions have substantially loosened now well that's nice be because it means that hey markets are starting to price in that okay maybe inflation is falling more than expected I mean just take a look at for example what's happening in Europe and you could see exactly that in Europe you have inflation falling from 11.3 to 9.6 well at least in Germany this is still double digits but it's a nice drop in Germany inflation in France and Spain fell more than expected this week turkey had a substantial decline in inflation although uh they're still at like 64 inflation it just came down from 85 percent don't mind turkey though uh and uh you are seeing pain in the United Kingdom as well that's suggesting that hey inflation should be trending down manufacturing is shrinking at the fastest rate since 2009 shop closures are hitting the highest total in five years mortgage approvals falling to the lowest level in more than two years Italy's inflation at 12.3 from 12.6 uh year over year so we're seeing declines we're still at really high numbers right don't be really excited in that sense 12 inflation in Italy is still pretty dang incredible but the idea is that markets seem to be pricing in okay inflation is trending down let's start pricing in maybe a Fed cut but the problem with that is as soon as the markets start pricing in this idea of a Fed cut we actually remove the very pressure that's been pushing inflation Down AKA tighter Financial conditions as depicted by this chart so the more inflation goes down ironically the more likely inflation stays High longer because of the way markets are pricing in inflation dropping now this can set up in my opinion a good news bad news scenario a good news inflation's coming down bad news inflation going down leads to financial conditions loosening and the FED then has to get more aggressive they have to talk dirty to us like they did in the minutes they did not give us any hope in those minutes yesterday and if anything the minutes yesterday were concerning because the only source of optimism were actually ruined by data that came out yesterday morning the joltz report we already talked about that but the point is that's bad the only hope that we have so if good news lower inflation leading to bad news from the FED I mean just look at Neil kashgari coming out suggesting that interest rates should jump to 5.4 and if inflation doesn't go down fast enough to two percent we might have to go much above that this morning Esther George comes out and says we need to continue to raise rates the FED is realizing that markets are pricing in the pause I mean if you if we look at the Fed rate monitor we'll see that right now markets are only expecting a 25 basis point hike Feb one and to a large degree look at this chart right here it shows us that 98.1 certainty based on market pricing that we're only getting a 25 basis point hike Feb one the vet has not indicated they're going 25 or 50.

02. they haven't indicated anything the Market's just like yeah we're pretty confident and this confidence has actually been rising towards 25 basis points rather than 50. which is really interesting because the FED at the same time is trying to fight exactly this impression that the FED is going to slow down things are going to relax and that's what they're doing they're sending Esther George out they're sending Neil kashgaria hey go make a post they're telling uh uh what's his name Nikki leaks over at the Wall Street Journal to to make sure markets don't rally they're scrambling to try to make sure that inflation does end up moving down because even though it is the more we see it go down the more excited people are that oh yay let's go back to Rally mode in the market and that'll kill inflation again because inflation will Skyrocket and so here you have a Fed that the only hope we could have and then we'll write this one down okay here's the only hope we have the only hope if if you're bullish on this Market which I don't know how you could be bullish on this Market you'd have to be pretty insane but let's say you're bullish uh and let's say you wanted some hopium okay here's the only hope you could have the only hope is that inflation does actually plummet that's it that is the only hope we have is that inflation proves somewhat transitory right it just took longer than expected but it ends up going down consider for example the CPI projections for next uh for the next CPI read coming out on the 13th we're expecting zero percent month over month and 6.7 percent uh on the year over year that's great but now the expectations and this always makes me nervous now the expectations are are really getting ahead to where look it was easy to beat point six as easy so for example two months ago we came in at point four that was easy right in my opinion it's hard to beat zero percent month over month because basically you have to go negative now if we go negative on the month over month oh good lord that would be so great that would be wonderful but again it could probably lead to a stock rally which is going to piss the FED off even more so you're actually in this weird position where any rally the stock market has and any kind of rally the bond market has gets crushed by more aggressive talk from the Fed so keep that in mind okay any rally in bonds or stocks get sold because the FED will talk them down boom unless inflation plummets best case scenario very very quickly now that kind of makes it tough to be bullish right basically if you're a bull you are making a bet that we are going to get an inflation plummet and maybe it'll even be more of a glorious plummet than ever expected in fact inflational plummets so much that we don't even have to worry about the crazy jobs data because you know what the jobs data just symbolizes imbalances in the market and they're not actually going to lead to a rise in inflation now that might sound crazy or it might be possible consider the following this chart right here shows US states that have recovered versus not recovered on payrolls compared to prior to the pandemic what you'll notice is this massive shift from sort of Central America the Midwest ish and North uh in the Northeast to either the west or the South massive shifts here right now this is kind of remarkable because it's a total change from what we've been used to and that in my opinion makes it really hard to look at comparative data and say oh yeah we've got a you know all this crazy new job creation and for example continuing claims or the unemployment claims this morning came in better than expected which means we actually had less claims than we were expecting I want to say we were expecting somewhere around 215 000 in terms of unemployment claims uh let me get the exact number here 215 000 and we ended up somewhere around 200 oh 204.

03. we were expecting 225 we came in at 204. and that is better than expected but it's not so great because it kind of shows that even though we're expecting more layoffs and we see things like Salesforce cutting and Amazon cutting we're still not getting a lot of layoffs because people are rebalancing where they want to live but not only are they rebalancing where they want to live look at some of these service sector areas comparing today's employment levels for Food Services drinking places accommodations and clothing stores all three of these are still lower than where they were at the end of 2019.

04. so it's not a surprise that we're still creating so many jobs to some degree even though we know there are differences between the household and the establishment survey it's not a surprise that there still is to some degree some job growth because we're still in that rebalancing process it's insane and look at these for example these sectors have exploded since before the pandemic professional and tech services these are like Engineers lawyers accountants admin and support finally seeing a little inflection point transportation and warehousing look at that it's over a million jobs more than what we had uh before the pandemic so you've got this massive rebalancing of the jobs Market that again if you want opium and you want to believe that we go bullish what you're betting is you're betting that the the tight labor market is really just a consequence of this rejiggering right so tightness equals regular ring and as long as inflation plummets and the tightness really is just a re-jiggering and we don't get a wage price spiral then yeah okay if that happens it's time to be freaking bullish but I hate to say it this is a pretty dang big ask it could happen you know I I personally think you know maybe there's like a 40 chance this could happen okay it's the best case scenario inflation plummets no wage price spiral best case scenario because then the FED can go from all its crazy Hawking now to not Hawking and ironically what they would actually be doing if this happens if this hope scenario plays out what happens well what they've actually done then is they've kept the market bearish for longer and more net short for longer which potentially sets up for that squeeze now again this is the Opium scenario you've got to be really careful about this because we do have concerns an unwarranted fire easing of financial conditions complicates the committee's efforts to restore price stability you've got JP Morgan talking about no participants seeing a cut in 2023 we continue to look for a 25 BP hike in the next meeting with a risk of a 50 basis point hike you've got uh further talk here by Nick T about this this argument that any sign from this is a reference to quoting Neil kashgari any sign of slow progress that keeps inflation elevated for longer will warrant in my view taking the policy rate potentially much higher this is much higher than the peak that he's forecasting of 5.4 percent that would mean what 5.75 6 would be much higher than 5.4 yikes now this is good core prices right over the three months ended in November core prices increased at three point six percent annualized the lowest such reading since February of 2021.

05. that's great and it's also still a opium aspect that remember the FED is looking for pce inflation to be at two percent not CPI PC is usually lower and it's usually a good sign that the FED is looking for this number to average two percent which means we actually could run a little hot for a little longer so what do we have to take away from all of this well we have to know that the more bearish stocks are right now is actually in a weird way good and I know that sounds crazy but the more bearish the market is right now and the less rallies we have now does two things one keeps the FED a little chill number two gives us more of a buying opportunity the more the fattest chill the more comfortable they are that inflation is going to plummet and then when inflation does that's when we can actually see Financial conditions really actually loosen again I mean really we want to get these Financial conditions back to like January 22 levels right that would be a huge rally in the stock market from where we are now and it's possible but in the meantime we gotta act like uh you're right fed you're right no rallies no rallies okay all right we'll keep everything down just we'll we'll be bearish we'll be bearish in the meantime hope inflation plummets and we go rally but remember if you're a long-term bull right now in this market and you're excited for that big u-turn you're betting on inflation plummeting and no wage price spiral and if you think that's crazy and unlikely to happen like you think the larger likelihood is nope more pain and we're getting the six percent fed funds rates probably don't want to be long in this market anyway check out the programs link down below check out the Shadow with Kevin Day Option link down below before those prices change today tonight thanks bye