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yes the jolt stata came in hot old news it's January joltz data that literally just came out let's actually talk about the FED hell let's star widely now believed to potentially reintroduce a 50 basis point hike in fact one of the best people to kind of give us a little bit of a heads up on this is my favorite mouthpiece of the Wall Street Journal nikti nickt is so wonderful because he actually gave us a video this morning talking about exactly some of his thoughts let's look at his video Let's comment on exactly that video remember Nick T is the guy who works for the Wall Street Journal and he's widely believed to be the guy who kind of gets a heads up of what the FED is going to do before they do it now right before the FED meeting yesterday in Congress Nick T warned that the Fed was likely to come out and talk about a higher terminal rate and that's exactly what the Fed did so when Nick T says something we generally pay attention to a much like we pay attention the FED after we listen to what Nick T says we're going to jump on into what Kenny G has to say Kenny G's got some nice things to say about the FED as well actually maybe not that nice but we'll listen to both so let's see if I can make this technology function and let's listen in to Nick t Powell now sees what everybody else sees which is that the market is priced in 50 and so this will be his opportunity to reset expectations if he wants to but what he said yesterday was that the data is going to play an important role here and he doesn't know what the payroll report is going to be Friday we will get the joltz some job openings survey today and then of course the inflation report next week retail sales so there's still data that could make up their mind here but what I thought was important yesterday was that Powell also pointed to the revisions so it wasn't just the January the hot January data we got but it was the revisions that changed the profile of what the economy looked like late last year and it seems unlikely that that's going to change in the next batch of data so the revisions seem important here yeah this is could not be more true so I want to actually talk specifically about that before we talk Kenny G because there's something important in this first of all the jolts data the job opening and labor turnover survey that we're going to be getting today in my opinion don't get too excited about it the reason you'll want to get too excited about it is because it's from January the jolts data that's coming out now in March March 8th is actually relevant to January not February so there's a lag of an additional month in the joltz report so I would expect that joltz report to be hot today mostly because all the January data has been pretty dang hot so I wouldn't put too much weight on that instead one thing that I found that was very interesting about Nick T's comment here was that Jerome Powell was paying attention to the revisions now not only is he paying attention to the revisions of the end of last year which the revisions of end of last year were bad right they ended up telling us that oh no inflation was worse than expected that's not great right we thought inflation was a certain level of low and that actually worsened in the fourth quarter more so than we thought that it would right that's not ideal we generally don't want to hear that inflation is revising into a worse direction right we don't want that now what's interesting though is if Jerome Powell is paying attention to the revisions what it actually means is the January revisions from the February data could be especially important now that's something that we've started talking about over the last few days I've started warning when these reports start coming out the Friday jobs report which I'll be covering it two days and the CPI report next week we really want to pay attention to how much was January revised that'll be critical so we'll pay attention to that but those those are two important things to keep in mind so the jolts don't I personally kind of casting that aside pay attention to revisions like Nick T says the FED is paying attention to now let's take a listen to Kenny G here what does Kenny G tell us about the Federal Reserve let's listen in but then what's your take on what Jerome Powell said today that the Fed was prepared to increase the pace of rate hikes and that the terminal rate is likely going to be higher than previously anticipated a lot of people are reading that as a sign that they're going to go faster so he created space today to move by 50 basis points on the next hike you know they'd come to this year pretty clearly telegraphing that 25 basis points was going to be the per meeting rate hike for the early part of the year and then in some sense taking the foot off the brake and seeing where the economy lands and and In fairness the fed the interest rate tool as a means of controlling inflation is a it's like a it's like having surgery with a Dull Knife it is a really difficult tool to get the job done with member yesterday when Jerome Powell was testifying before the Senate today he'll testify before the house keep in mind that usually the purpose of these events is to get politicians who can then clip their hardcore questions for Powell and Powell's just deflecting them so generally I don't pay much attention personally to the second day of Powell testifying because there's going to be the same answers as we got the day before generally obviously I'll pay attention to potential differences but but that's my expectation but anyway this this idea about rates being a blunt policy instrument is something that Jerome Powell has himself said before he says look the only tool we really have is changing interest rates to affect demand but that's pretty blunt it's pretty broad affects everything it's not like a surgical tool like Kenny G here is reiterating that creates some problems because we don't really know what the lag is of the Federal Reserve raising rates as much as they are not only do we not know what the lag is but it makes you wonder hey wait a minute what about quantitative tightening don't even go there the FED is almost arcanely lost when it comes to the impact of quantitative tightening so we'll see but let's keep going uh with uh Kenny G's comments here because you hit the housing sector you hit the manufacturing sector you hit Parts the economy that have a very high sensitivity to interest rates and you tend to leave the rest of the economy relatively untouched so the FED doesn't have as much impact with their tools you might hope and although they've raised rates considerably it's not clear how long the leg effects are for the impact Bingo and once the impact starts to play out how it how damaging that impact is so they are they're in Uncharted Territory it's a difficult place to be might you know if I could if I could tell one thing to the chairman I would I would tell them to say less I would just be write a message we're going to put the inflations you need back in the Box no I actually I don't know if I agree with that I actually really have enjoyed the federal reserve's mandate of more communication the reason for that is it creates substantially less uncertainty now Kenny G basically got even more Mega rich last year shorting the market so last year was a fantastic opportunity for short sellers to to short the market that doesn't mean Kenny G is always a short seller right just means he played the market very well I mean hats off to a fantastic job trading but the problem is Jerome Powell saying less could potentially activate substantially more fears that this Market is going to end up getting what I call Paul volckert and getting Paul volckert I think is actually the worst case scenario fear for the markets in fact if you follow me on Twitter you'll see the thesis that I posted yesterday which I actually thought was a very well thought out see I'm complimenting myself here but anyway you could see my thesis on Twitter and take a look at it here so what I posted was the following I wrote my 2023 Market thesis the feds fight against inflation will take much longer than anyone expected this puts upward pressure on Treasury yields and downward pressure on housing however the stock market most fears Paul volcker the punishment following an uncontrolled second explosion of inflation now what's really important here is Jerome Powell regularly communicates to us the conditions of Paul volcker the conditions of Paul volcker specifically are a wage price spiral and unanchored and inflation Expectations by Jerome Powell continuously communicating those those requirements of Paul volcker to us us as Market participants can determine how close are we to trending towards Paul volcker and regularly we hear inflation expectations are anchored there is no side of a wage price spiral in fact there's less of a sign of a wage price spiral right and you know what's really also phenomenal is more and more now I'm actually seeing people talk about job loss rather than uh than like all the benefits and perks of their job like the job loss era is really happening now I want to go back to that tweet but I figure I'm going out and building on tangent on tangent over here but that's okay because these are actually quite interesting I have to give a shout out to this Tech talk because it was absolutely hilarious now generally I don't like watching tick tocks but this one was great hold on I'll play it for you Riff to you okay this is not my first recession so I'm going to explain the Circuit City Griff to you okay if you're under 35 you don't know about this one okay there was a store a national chain back in the day called Circuit City it was just like Best Buy it was basically the same store but instead of their color being blue their color was red all right I will say one thing that was substantially different about Circuit City and Best Buy was Circuit City really paid extremely well for commissions uh they they did a phenomenal job for their employees but it's probably one of the reasons they went bankrupt because their their employee expense was so high I personally have found memories of actually going to Circuit City and then going to Best Buy like we would go to both my dad and I that was right after eating at Quarterdeck in South Florida anyway let's keep listening to this because this is actually really interesting on we're talking about the wage price spiral so I know you might be thinking what does Circuit City have to do with the wage price spiral watch it's hilarious this is a great great argument and I'll summarize part of it at the end here but let's keep going it's called Circuit City it went out of business one day it went out of business and it was right around the time of the Great Recession so all of my friends had gaps in employment they had all these other issues and they were stuck in entry-level positions they couldn't move up in anything so what did they do they all got together and they started covering each other's resumes that each of them had worked at different positions at Circuit City now covering means you you put somebody else's like your other colleague or your friend's phone number in as your HR reference or whatever right that's what he means by covering because the company's bankrupt I wasn't did they ever actually work there no were they been have they been a busboy for the last five years yes but now on paper they were a floor manager at Circuit City boom they got more money oh actually I was the director of procurement for Circuit City boom nobody could prove otherwise there was no HR department to call there was nothing you could verify this information against nothing and the reason why I bring this up is because I okay then he talks about the how inefficient HR obviously is at Twitter and you could basically now say that you've worked at Twitter and you're just part of the 6 000 people who got laid off at Twitter and maybe you could land yourself a better job I think it's very interesting but as Brandon Howard here says this is basically fraud uh it is uh it's funny but in some way it's kind of showing the pain that employees are going through right now like this is the second day in a row now that I'm sharing imagine this take Talks on YouTube of people complaining about how how difficult it is to find a new job and now basically it's so hard to find a new job people are resorting to fraud to get a new job what what to me what that actually says is this signal that yes we do not have the conditions for the Paul volcker wage price spiral that's probably the most important condition of this market and that's why I say I personally believe the stock market most fears Paul volcker it does not fear higher for longer in fact that's what I say here the next line although as long as we don't face a Fed rugging I believe the stock market will basically look through higher for longer is what I argue here therefore absent of rapid and intense re-intensification of inflation or reanimation of inflation I believe in volatile's Nike Swoosh recovery is ahead of us in stocks with 2022 representing the down the down part of the switch right in English slow gradual uptrend for pricing power stocks slow gradual downtrend for real estate pricing power stocks are those that favor higher income individuals higher income businesses those with high free cash flow some SAS businesses included like for example look at bill.com they have negative net income but in insanely High free cash flow only once in a recession with inflation averaging note averaging very important not achieving that's very different C flexible average inflation targeting I expect the Federal Reserve will fulfill basically a mission accomplished U-turn this is only likely to happen once excess savings evaporate yes the savings rate is lower today but excess savings may give businesses and consumers spending power for another three to 12 months unfortunately by the time a recession is confirmed Staples Industrials Commodities and the Dixie are likely to suffer that's my opinion obviously especially Upon A fed pivot as yields fall Staples which were stocks uh some fled to uh due to you know for to say it for safety whatever Coca-Cola McDonald's Costco Walmart Johnson Johnson Procter Gamble IMO are likely to suffer suffer do not make the mistake of course of confusing a Fed pivot with a market correction while it's possible that something breaks and the FED will only pivot if they're if something does break in my opinion the FED will only pivot once they're convinced inflation is under control and that is after all the pain point of this recession this recession is being caused because inflation is out of control so if inflation is under control then the only reason for really forcing the recession goes away that's that's the point now I do still believe that Staples in certain companies will suffer whereas higher income individuals and businesses will will succeed because they'll be able to spend through this recession longer Apple Nvidia trade desk Tesla Taiwan semiconductors to some extent some of the housing stocks and face solar Edge and of course layoffs are now hitting those white collar jobs potentially more than blue collar jobs however personally I'm I'm I I don't know that that's actually going to have a dramatic impact because you're really just you're shaving off almost off the top of the tech sector if you will it's not like the entire Tech sector is getting paid off there's still massive amount of investment going in of course then I get some general rules like stay out of margin and we'll likely look back in seven years and wish we bought more now uh invest in the down cycle of the real estate cycle good idea consider using ETFs blah blah blah blah anyway so I tweeted this on on Twitter of course uh so I recommend you follow me on Twitter but but the point of this is really to say I am a big believer that the Federal Reserve or or the concern of the stock market today is a fear of Paul volcker and if the fear is Paul volcker then as long as we get more communication we actually avoid Paul volcker and that's what's what Kenny G I think here is missing is that uh telling Jerome Powell to communicate less is a problem because what you're doing is you're actually enhancing the likelihood for something to break in markets because you're not properly communicating the markets that we're not going into a Paul volcker style scenario if we are going into a Paul volcker style scenario I would like to know that as well because then I will flip-flop and sell faster than a flip-flopper on YouTube anyway let's keep going with what Kenny G says bottle we're going to do what it takes to make that happen and we're going to raise rates consistently until we see very clear evidence that we put this behind us because every time they take the foot off the break or the market perceives they're taking the foot off the brake and the job's not done they make their work even harder and at the same time remember they're impacting in a very very harsh way a very small part of the economy and that's really tough for those businesses that live in that part of the economy yeah so he's making this argument that hey if the FED like basically pumps the market they're making their job harder with the FED affecting the stock market at least according to economic literature has little to do with what actually happens what matters more is what happens in the bond market with financial conditions not so much the stock market housing market and bond market those two have much more of an impact now there's some good comments here that are worth talking about so Daniel uh here a member writes one to nine or sorry 1.9 to one jobs available so they may be proud to temporarily work at a lower paying job okay so really when we make this argument about the jobs and labor turnover survey which we will be getting today by the way of course but again for January data 1.9 to one jobs available implies that the labor market has so many available jobs the problem is we have a substantial mismatch of jobs right so and I think that's what Daniel is alluding to here is that look you know you you may be skilled in Tech but now you have to go work in a restaurant just to be able to pay your bills because you signed up for a lease that's more expensive than what you can now afford right that's unfortunate but I do think that the covet pandemic has created such weird dislocations in the job market that it is true you just don't have enough people to fill the jobs and the roles where we actually need them I don't know that this is necessarily trying to say this is the tightest labor market ever even though that is what Jerome Powell says I think we we just literally don't have people either willing or able to work in certain Fields especially in Hospitality or health care you know Health Care is is nine hundred thousand jobs short of where they should be according to Trend so it's very very interesting in my opinion someone else here writes but hire for longer will affect EPs and slower multiples lower Market yeah potentially uh I mean I think the multiples have already been priced in but you're right if you multiply a lower multiple by lower EPS you you end up getting a lower stock price however I am personally under the impression and this is just my opinion that the bottom like 38 percent of the Fibonacci retracement that we've seen for the NASDAQ and the Spy or whatever is actually representative of Paul volcker fear and it's really the top 60 percent that is representative of eps fear and multiple compression fear uh like at in October of last year markets were actually legitimately worried that inflation was never going to go back down remember we've had the luxury over the last six months of actually seeing inflation Trend down right we did not have that luxury in October that's really important uh somebody's asking if I have a comment on someone else's video but I actually don't watch other people's videos to the extent that I'm capable of resisting so I have no idea when somebody else makes a video about me most of the time it takes somebody else asking me about it and then I'm also generally not very interested in looking that's a psychological thing and I also don't know why we're talking about that on sort of the FED talk pick but you know what let me put it this way it's a lesson to everyone I actually the very first video that I made on YouTube that brought me from 12 subscribers to a thousand subscribers where I was talking about real estate in 2017.
I talked about this concept of the toxicity of Relativity of comparing yourself to the opinions of others and I warned myself like the most dangerous thing is doing that in real estate and Business and Entrepreneurship and it's even worse and more toxic on YouTube because YouTube is so easy to measure views subscribers growth rates it's so toxic but unfortunately as the I believe the Bible says a comparison is the the thief of Joy don't don't don't do it and what I like to do is I like to purposely not watch other people's commentary in my space because I don't want to start rhyming like other people I like to provide a very unique perspective uh you know that's not to say I don't study all day long of course I do uh but uh but not not other content creators oh God no anyway so when it comes to the Federal Reserve uh I actually I am very very uh look I hate to say I like I don't want to sound you know dare I say like a clown who is always bullish because I'm not always bullish I think everybody who watches me knows I when I turn bearish was the right time to turn bearish I became bullish too early I admit my fault uh but uh but the point is like no if if I see the conditions of going bearish I'm gonna flip very fast but I don't see that in fact I think most of the feds speak yesterday and today is really just clickbait I mean no Jerome pal sorry I shouldn't say that because some people watch this with children but like really if the data comes in hot you're gonna go 50 duh right like but that's what we I mean we've been talking about that since before the FED meeting what I've been saying on the channel look I I think the FED would shoot themselves in the foot in terms of credibility uh if they go 50 the data would have to be so ridiculously intensely high for them to go 50 that I don't think they're going to do it in fact it's hilarious and I'm not trying to say like oh you know JP Morgan's watching my videos and like Pat myself on the back as much as I would like to be able to say that I'm not going to say that JP Morgan released a piece on exactly that just yesterday and what they wrote was uh they're basically that they're like look the FED will confuse markets if they go 50.
if they go 50 they will send such a confusing signal to markets that they have no control that you could actually cause more damage to markets here it is it was jpmorgan's Chief investment officer Bob Michelle two first names if employment data is very strong you've got 50 BP pack on the table but that's a pretty high hurdle once downshifted if you go back to 50 it would be pretty confusing to the market I hope they don't do it they were really willing to run a strong or sorry a string of 25 BP increases exactly it's like just add another 25 BP but don't confuse the market with a 50.
I think I think that would be silly uh somebody here writes uh somebody who's watching on Twitch says data says 50 now no data says between now and may 50 is in the bag but that's two rate hikes right we we are sitting at about 50 50 for a 50 in March boy that sounds very confusing uh now you're saying Futures leading slightly 50.
okay all right that's a better clarification yes they're teetering on the 50 50 level last night they were teetering towards uh 25 by about uh a 52 margin maybe they flipped a tiny little bit with Futures this morning either way I don't think it terribly matters let's wait for the data we'll see that but again what we're hearing from the FED here is very important it's no public or but yes it is it is a volatile path forward and that's very very important a 50 50 when it was just 15.
you are correct yes yes you are correct don't get me wrong I I'm not saying Mike trades here is wrong you're correct we have substantially moved towards 50. but in a weird way I actually think that could be bullish because think about it I think the hurdle to go 50 much like what JPM says is very very high so the Market's pricing at 50 give me a rally baby give me a rally on the 25.
uh so so yes the market is trying to price that in my two week old won't stop saying sh9t they thanks Kevin two week old congratulations that's that's awesome man I want to have a baby dude I don't have a baby anymore like I look you have a two week old I know you're going through hell right now uh probably lack of sleep and all the crap that goes along with that enjoy it man like everybody always told me that when I had a two-year-old I didn't believe him I'm like ah come on man this is like I got plenty of time looking at these like tiny hands and tiny feet and stuff I have a seven-year-old and five-year-old now and I'm like dude I literally don't have a baby anymore I'm like I want babies I want I want like 10 more babies so we got to get we got to get to work but but I'm just house hacking so much that you know I'm not fulfilling my duties here uh anyway okay we're gonna get off that now
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