저자: KevinPaffrath · 외국인
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파월 연준의장이 대차대조표 축소(양적긴축) 중단을 시사하며 'vacuum 끄기'로 비유. 장기국채 비중 확대 및 MBS 매각 방향을 언급해 장기금리 하락(비둘기파 전환)을 예상. 베버리지 커브 정상화(실업률 상승 전환점 가능성)와 관세 인플레만 남았다는 점을 근거로 듦. 채권 금리 하락은 단기 주식시장에 호재로 해석하나, 경기침체 위험과 AI 생산성 논쟁을 함께 언급. 금 강세, 레버리지 ETF 파산 위험 경고도 포함. 상당 부분 방송 내 프로모션 발언.
다듬은 글
Well, JPOW just flipped. This is wild. We just potentially got Powell telling us that he's turning the vacuum cleaner off. And uh let's just say he gave some hints as to why he's turning the vacuum cleaner off. So, let's get into that note. This video is going to be sponsored by Investing Pro because they've got their Pro Plus flash sale going.
If you use that coupon code, you not only get the 50% off that they have on their website now, but you also get the extra 15% off. More on them later, though. Let's focus right now on Powi Wowi. What was just said? Okay. So, first of all, as expected when we put together our bingo board, we thought that Powell was going to talk down the fact that we're not getting labor market data.
We we actually wrote here that he would downplay the BLS data, that we have other data that we can get to, and that the labor market's not falling off a cliff and that we're on a wait and see. We're not getting a rug pull. We want to get closer to neutral. A lot of this pretty basic. you know, we've seen a lot of that so far.
Uh, and this reiteration that we're in a low, higher, low fire market. We've heard of this before, but what was new here was that Powell came out and spent the first maybe 10 minutes talking about the balance sheet. Now, to understand the balance sheet, I want you to think about the money printer days.
Okay? So, think about this as simply as possible. Oh no, the economy's in the pooper. bring out the money printer. You run the money printer. Basically, what you're doing is you're growing the balance sheet. Okay? You're printing money. And the way you print money is you just digitally go into a spreadsheet and you go, "Well, we were at 6 trillion.
Let's just change the number to 9 trillion." So, you literally just change the number on the spreadsheet. And all of a sudden, out of thin air, you've created $3 trillion. And then you go, "Here you go, Congress. go shower the economy with money and save the world. That's basically money printing in a nutshell.
That has now substantially increased the Federal Reserve's balance sheet. Now the Federal Reserve is interested in reducing the balance sheet, which they've been doing since 2020. They're like, "Ah, we've gone too much. We're reducing the balance sheet." Now the Fed is talking about no longer reducing the balance sheet.
So think about increasing the balance sheet running the money printer. Think about reducing the balance sheet as vacuuming. So you're you're like, "Ah, we put too much money going around sucking money back out of the economy." You're absorbing uh by basically saying, "Hey, we're going to sell bonds.
We're going to take money out of the economy and we're going to try to use that as a tool to restrict." Well, now Jpal's like, "We've done a lot of vacuuming. We're just going to go over here and go click." So, in the coming months, he's going practically do for us? Like, what's what's the trade, bro?
Kevin, tell me what what's the trade? When you turn the vacuum cleaner off, what you're really doing is you're saying, "Okay, we are going to go and no longer put this pressure on the treasuries market, which could mean that we might end up seeing yields actually start coming down, which is nice. We might also see because remember the whole point of vacuuming up money is to increase market rates.
And if you increase market rates, you're basically tightening to try to control inflation. You say, "All right, we've done enough vacuum cleaning." You stop doing that. You stop sucking money out of the economy. You stop selling those bonds. By selling bonds, what you're really doing is you're increasing the supply of them.
I know that gets a little bit complicated. You increase the supply of them, the price goes down, yields go up, right? You stop doing that. You actually let yields come down. So bottom line, I know that gets complicated. When the vacuum cleaner turns off, yields get to start falling. Now, he told you which part of the curve.
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But he told us, JPAL specifically told us which bonds. He said ideally we want no mortgage back securities in the future. So they want to get rid of all of those. Once they're done with those, they're not they're not interested in MBS's. All they want are treasuries and they said that right now they are overweight longerterm treasuries and underweight shorter term.
This means that once we kind of get rid of the rest of these longerterm treasuries, that's where you might see some of the biggest shift by turning off the vacuum cleaner, which is probably bullish long-term rates coming down, bullish mortgage rates coming down. the 10 to 25 year end of the curve probably coming down.
Now, why would Jerome Powell do that? Why turn bullish here? Or should I say dovish? This was more dovish, right? Which is bullish in the short term for the stock market. In fact, that's what we wrote over here. I actually originally thought we were going to get a neutral powell and that we would end up getting yields up.
But what we actually got was a dovish powell. And we thought, okay, but if we get a dovish powell, then we will end up seeing yields come down, which is what we're seeing now. What does this mean? Why is he going dovish? Well, one of the reasons he's going dovish, he was asked about at the end, is because he says we might now be at the point where the beverage curve is normalizing.
Now, this is another complicated one to understand. Man, I'm going to keep this as simple as possible because if you're not familiar with the beverage curve, you're like, "Okay, what are we talking about? Like Coca-Cola or Pepsi or like you know what? What's the play here, man? I don't understand." Look, this is very simple.
This chart is the normal version of this chart. The non-perverted version of this chart. It's basically how it normally operates and has operated for the last 40 years. Okay. Something very odd has happened recently though with this chart. And if you look at the chart, I'm going to throw these little stars over here.
The vacancy rate has plummeted. So, we started putting a bunch of dots basically where these stars are. And this is what Powell said when he goes, "Ah, yeah, beverage curve. That's uh that's gone straight down." He says, "We've been fortunate of that, but we may now be at a place where the unemployment rate starts going up.
that turning point may be now. Okay, that's bad because what this means is if you normalize this curve and you start getting data that pushes you this way, which is the normal path of the curve, then data points start coming out along this way of the curve and the unemployment rate is going to skyrocket to 10 to 15%.
Rapidly and he says we may now be at that turning point. So think about this. He's actually being mega dovish here without saying, "Hey, we're going to rapidly cut a bunch of, you know, do a bunch of rate cuts." He's telling you, "Yeah, we're turning off the money the money vacuum because we need to start stimulating the economy because we have serious risks here on the labor market." On the other hand, he's like, you know, we don't want to send the signal that we're going to cut rates really rapidly because that's going to mess with people's inflation psychology, which he was also worried about.
He's like, look, most of the pricing pressures right now are coming from tariffs. He says structural inflation very, very low right now. Most of the pressures are from tariffs. So, think about what he's doing. Okay, there are three prongs to what Powell is doing here. Three prongs. All three of the prongs tell you you should join the Meet Kevin membership.
Oh, that's a funky little video there, isn't it? Cuz you had like two pictures of me on top of each other. Let's go with it. Okay. Join the Meet Kevin membership. People say the ad goes away once you join. Potentially tax uh tax deduction. You get our trading strategies every day, short, medium, long-term.
Top 10 stocks to buy for the next 10 years. You see when I start trimming uh Nvidia stock or selling Nvidia stock uh in this uh crazy AI bubble that we're in. and uh would love to have you in the membership. Anyway, no, the the three prongs that we just saw from Powell. Think about this. Three things he just did, all of them point in the same direction.
He told us one, beverage curve normalization is upon us. That's part one. Okay. Part two, he tells us that inflation from tariffs is the remaining inflation. But normal like structural inflation, structural inflation not present only tariff inflation basically. Okay, that's prong one. So prong or well I should say prong one is beverage curve normalization may be starting.
Okay, that's a red flag. Okay, this is important red flag for recession. You get a normalization of the beverage curve, we will be in a recession faster than you can blink. He actually also told us which is very interesting. He actually said that uh the first thing to slow with rates is purchasing. Labor uh takes much longer.
That's the long and variable lag portion. Right. Okay. Number two, structural inflation is not present. Only tariff inflation, which again all of these reiterates support jobs. Okay. Reiterates doubbishness. only tariff inflation. What does that do? Support jobs. Doubbish. Okay. Then the third one. So beverage curve normalization.
We got that. We got structural inflation uh not present. Uh and then obviously we got his argument that very clearly we are seeing uh a desire to get back to neutral. So back to neutral support weakening labor market which somewhat is is reiterated by the beverage curve. Anyway, but put pull all of this together.
Uh, this shows up. How do you do this? Balance sheet runoff stopping. That's probably the better way to put number three, right? Balance sheet runoff stopping is basically to support jobs. It's actionably dovish. Like, this is not Powell being verbally doubbish. It's him literally saying, "Hey, we're about to take action to stimulate because the jobs market is starting to show serious signs of issues." He's discounting the BLS data for now, saying we have other data we can get our hands on.
But he also says, "Hey, we're about to miss out on a lot of data." Like, we're about to walk into uh and this is where the Bureau of Labor Statistics came out with um or sorry, Bloomberg was reporting on the BLS this morning. They actually wrote that the September report will be very important. We might not get it though.
The October's report will be missing starting if the government shuts down about, you know, is still shut down in about a week from now. So, if we're still shut down next week at this time, which we probably will be, we're going to start screwing up the employment survey and the payroll survey for October.
Remember, the government shut down on October 1st, so we probably had a lot of our surveys already sent for the September data. And a lot of that data is probably bad because it would show the Doge layoffs and the the you know the voluntary dismissals. Those were supposed to show up in the September report.
Now we would have adjusted for that. We would have added that back in. But you know we expect the break even rates basically 0 to 20,000. So what if the labor report showed -50 and 50 of those were you know from the government the voluntary departures. Okay. Add that back in. You're at zero. So maybe you're right at break even.
unemployment rate doesn't really change, right? Fine. But what if it was negative 100k? I don't know. You know, it's maybe maybe Donald Trump purposefully doesn't want these job reports out. I mean, he wants CPI report out because he wants the COLA adjustment for 69 million voters who are receiving retirement benefits like Social Security.
And Donald Trump, you know, scores really well amongst older voters. So, of course, he wants them to get their cost of living adjustments for Social Security payments. So, he brings the CPI report back. Why does he I mean, then he obviously has the power to bring the same damn people back to give us the jobs report, but why would he do that?
That would just make him look bad. So, leave that part of the government shut down. A little manipulative, right? But that's exactly what's happening right now. So, as a result, Powell's like, we know the data is probably bad. I mean he referenced he's like not only can we look at state unemployment claims but we can also look at ADP data.
Now in fairness he said so far data on the economy and GDP are actually stronger maybe just as firm as what we had at the uh last meeting but he does make it clear that like hey you know we could look at other data look at ADP for example and what happened with ADP ADP at the beginning of this month we were expecting 51,000 the prior read was 54,000 remember what we got -32,000 and then it's like oh but what if you average you know add back in the 40,000 adjustment.
Add them back in, you're still at like 8 to 14,000 jobs. That's a terrible ADP report. So, it's not a surprise. Like, if you actually break down what JPOW just did, he actually just turned dovish. Now, it's probably going to take a while for the market to to like digest all this stuff, but Powell turning dovish is exactly what they should do to avoid being too late.
Powell doesn't want to be Mr. T too late. So consider that again the three big components here. Uh number one, we're turning the vacuum cleaner. Well, number one is the beverage curve normalization. We could be at that point. That's really dovish. It's like uhoh, we're at the turning point. Two, structural inflation isn't present.
It's only tariff inflation, which they've said they're going to look at that as sort of like a onetime occurrence. Not necessarily at one point, but over time and then one time. Uh and then that's doubish, right? because you're not worried about inflation as much. And then of course, balance sheet runoff, you know, stopping soon, turning the vacuum cleaner off.
That's huge. So, all of these things are dovish. This is a massive dovish flip from Powell. And it's it's potentially a gamecher for, you know, what we're going to do in the alpha report in terms of our uh top 10 stocks for the next 10 years. We've got six of them are posted. Stocks 7, 8, 9, and 10 are coming out soon uh in the Me Kevin membership in the alpha report.
Uh and then of course uh you know, check out the sponsor uh investing.com. Use that coupon code me Kevin and you can ; to join us in the um me Kevin membership. But uh let me just make sure I didn't miss anything here on Powell. And I'll look at some of your comments here. Somebody says, "Do you think that rates will go down 50 basis points?" No, because they don't want inflation expectations to get screwed up.
So, if you actually look at Wall Street, you'll find that currently we are pricing in a 96.7% chance of a cut October 29th and a 98.4% chance of another cut December 10th. So, we are pricing in a full two rate cuts, but everything that we've seen here is broadly bullish on yields coming down. Now, is that potentially recessionary because Powell's waking up?
Sure. That's the struggle that we're going to have to balance out with the stocks. That's where we have to look at it and go, "All right, well, you know, if we are about to have pops up and then we go look at like Salesforce to show us earnings on Agent Force AI, which is like a scam in my opinion." Uh, oopsies.
That might not be a very good bucket to reach into. It's sort of like, hey guys, hey guys, everything is everything's fine. We have this AI bucket. We have all this AI bucket of revenue. And then all of a sudden, unemployment rate starts skyrocketing because the beverage curve normalizes just like it always does in history.
And it's like, it's okay. It's okay. Look at all this money we're making from AI. Oh The whole thing has no legs. You know, the whole thing implodes then. Uh, so it's no surprise that gold is doing what it's doing. I mean, look at gold in the last year. This is like a double on gold. When does gold return a double, dude?
In a year. That was crazy. It's not quite a double, but it's it's pretty pretty shocking. So, he says, "Just curious. employers layoff, continuous uh and high profits, strict immigration enforcement, stock market pushes up, uh exchange by inflation, government shutdown with better. I'm not really sure if you're asking a question, though.
That was a really good list, though. So, somebody asked, "Will that put pressure on the leverage side?" Well, I mean, look, you s you should already have your debt warnings from what you saw Friday. like triple and double double leveraged ETFs will go probably go bankrupt in the next downturn, but we literally saw uh you know last week an inverse AMD triple leveraged ETF went bankrupt, evaporated and you're going to see more of that um you know than the next debt cycle.
It's going to be crazy. It's going to be crazy. Uh so somebody here writes uh technology isn't showing up in productivity numbers yet. No, the reason for that, and I wrote that down, too. One of the reasons you may not actually see uh I'm going to explain this, okay? So, if you're you're still with me here, good for you.
You're going to get some extra insight here. So, the question is, why are we not seeing uh some of this AI stuff show up in our productivity? Okay, let me give you the most simple explanation as to why you're not seeing AI in productivity numbers. AI in productivity numbers. Okay. So, uh let's make an example of how this is done.
Okay. So, widgets produced equals 100 per hour. Okay. Uh demand for widgets is 1,000. Let's just say. Okay. And um let's say uh AI makes it so uh you know, or well, let's put it this way. Let's say to do this we need two guys working five hours to do this. All right to to make this happen. Let's say AI makes it so that one guy can do a 100 widgets or you know can do a thousand in 5 hours right that one guy's productivity doubled.
Company output stayed the same. company costs on labor haved in this example, right? This could be like shipping software. It doesn't really matter what it is. All right? So, the company costs hald, but the company output stayed the same. So, did net productivity change? Did net productivity change economically?
No. The output is the same. Okay. The output is still the same except who won. Who won? The corporation won by spending less money. Revenue didn't go up necessarily because of AI. And that's like whether you call this a widget or you call it a service or whatever. This is what you logically have to think about.
Is artificial intelligence going to change how many emails we can send per hour? Yes. Is it going to change how efficient we are? Yes. Is it going to change demand for our goods and services? Not necessarily. That's the problem. So AI might change the costs of the corporation and how much money they could earn, but it does not necessarily mean that their revenues or or their ability to sell goods and services is all of a sudden now blowing up.
So that's a downside for labor. you increase corporate costs and improve efficiency, but that does not automatically increase demand or total economic output. So basically aggregate productivity growth doesn't actually show those efficiency gains. So when PAL's like, yeah, we're not seeing AI show up in the productivity stuff.
Well, duh. And this is what people forget about artificial intelligence is again, let me let me just give you I'm going to leave you with a basic example, okay? Let's say you go, "Hey, I'm an attorney and I've got 10 customers who need a trust drawn up." Okay. Two years ago or three years ago, I'd have to have like, you know, three interns or parillegals drafting these trust documents and then I have to proofread them and it goes back to them and grammar errors and spelling and all this bull crap.
3 years ago, I need myself and three people to do my 10 trust documents for clients. Okay, today I could go, "Oh, y'all parallegals are fired." And then I could go GPT Pro, make trust document for those 10 people. Then I read it with my lawyer hat and give my professional opinion on top of that. That's why people hire the attorneys still because the G the attorneys are using GPT as well, right?
But then they add, oh, we need to put this clause in. you know, it's that extra 10% that you're paying the attorney for, right? So, they put their little 10% on. Does that mean the attorney has more than 10 clients to service? Well, not necessarily. Now, technically, the attorney now has more money available.
What could they do with that more money? Well, maybe they can go run more ads. But then the question is, even if that attorney has more money to run more ads, are there more than 10 customers right now who need those trust documents? Cuz if every attorney is now running 10% more ads, people are saturated with 10% more ads.
They feel like they have more choice. Does it actually mean more customers for that attorney? Not necessarily. They might be spending more ad money just to stay par. But again, that attorney's net income is higher because they spend less money on that entry-level labor. That's look, this is just coming from from experience.
We saw exactly this over the last two or three years at at House Hack. We're like, "Wow, we could do the same amount of work with like half the staff or less than half the staff." And we're like, damn. So, we're looking at it as a corporation going, oh man, this is great for our shareholders because earnings per share is going to go way up.
And we're like, this is great. You know, does that mean the company is more productive? Well, obviously, I think the company is growing and being very productive. But as you're saying, oh, net, does it actually mean a company's more productive? No. We're getting the same done with less, which is great for corporations, great for shareholders, not great for labor.
And that's why Powell is probably flipping a little dovish here. So in the short term, it's actually great for markets because in the short term, the market's just going to look at it and go, "Damn, Powell dovish. The punch bowl still rich and full of booze. Let's keep the party going." Obviously, we're probably going to walk off a cliff at some point, but I mean, for now, this is great. This is bullish. This is fantastic. And you know what else is fantastic? .
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