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Oh, that's not good. The time when the Federal Reserve drops a bombshell about a possible rate hike next month because of Kevin Warsh's mistakes. We'll talk about what just happened in a moment. This is very creepy. You see, the dot-com bubble burst when the Federal Reserve went back to raising rates after 2 years and 3 months .
And in the end, they raised the stakes six times. They raised the stakes in June '99, August, November. Then in 2000 they raised them in February. So, essentially, they, you know, skipped the meeting and brought it up again. March 2000, and then in May 2000, we got the final nail in the coffin . An increase of 50 basis points.
Rates eventually rose by 1.75% from 4.75% to curb inflation. So that's six rate hikes . But now there are calls for us to start with three rate hikes , starting as early as next month. Why is this creepy? Well, the scary thing about this is that the market peaked right in the middle of this rate hike cycle.
The market peaked in March 2000 , which was about 9 months after their first increase. And the time is very strange. You see, the Fed's " nail in the coffin" of the dot-coms came exactly 38 months after the last Fed rate hike. If the Fed raises rates on September 16, it will be exactly 38 months since the last interest rate hike.
This is a strange coincidence. Of course, it's not a perfect match, is it? Last time it was 38 months from their last raise to, well, their last raise again. This time it would be 38 months from the last Fed hike to the first Fed hike, but who knows? This could be their first and last, we don't know.
The point is, a 38-month gap is a bit strange. Let's call it a kind of coincidence. Maybe we should call it that because every time we compare the current times to the dot-com bubble, people start panicking and raging in the comments, as if I had n't done my own research. But people get angry and start saying, “Kevin, this time it’s different .
The profits this time are much better and more stable. You can't compare to the past. You know, everyone has Robinhood on their phone these days. They can all buy on the dip. "This time it's different, bro." These people are going to have an attack now. Sometimes it saddens me to see such an inadequate person.
Well, imagine how angry you have to be about the news to throw a tantrum in the comments under a YouTuber's video. My reaction to this is: what the hell? But, okay, let's focus and be a little more professional. Although that's probably the opposite of what we do on this channel. But, uh, Kevin Warsh started by, to put it mildly, screwing up his "to the left of the decimal point" speech.
And this creates an increased likelihood of a rate hike, because now he has to correct the consequences of that speech. The "left of the decimal point" speech was his first, where he said, "Look, we're not going to give forecasts, but we're going to predict that we're just going to focus on inflation left of the decimal point." And the bond market is like this: it's nonsense .
This is complete nonsense. Um, we'll raise the stakes for you. And ultimately, we saw two-year and ten-year bonds—you can look at the charts for yourself—soar between his first and second meetings. Kevin Warsh says at the next meeting, "Oh, I'm glad the market reacted well to me acting like an idiot." Of course, he didn't say the last part, but he literally used the phrase: "I'm glad the stakes have risen so much." Well, the market does n't really like it because, in my opinion, the bond market is pricing in an increased risk premium that is necessary because Warsh has lost credibility, is providing less guidance, and therefore increasing the risk of bond market volatility.
When volatility risk increases, or the expected future volatility of an asset increases , your discount rate should also increase. Let me explain this in simple language. Hey, if there's a chance these stocks will fall much harder and faster. I will pay less for them. This is essentially what is happening in the bond market.
Uh, and that makes sense. So now other committee members are trying to make predictions for him. They are actually taking over his powers. While Waller tries to be gloomy, Kashkari goes around with his speeches, saying we need to raise the stakes. We know that Hammack and Logan are also talking about raising the stakes.
And Kashkari literally says, "I don't trust the Iranians. The situation in the Strait of Hormuz is uncertain. Energy costs are high. Consumers and the labor market are holding up. Corporate profits are strong . To me, rates don't look restrictive at all. Mary Daley is also warning that higher inflation could soon lead to a rate hike.
You have a whole chorus of Fed officials. A whole company singing, 'Hey, we might have to start raising rates.' Bank of America isn't helping either. They're jumping in and saying, 'Hey, we actually think there should be three rate hikes this year.' We should..." Wait, wait. For this we need a suitable cup.
"Oh, we should see three rate hikes. One in September, then in October, and then in December." And do you know what you can do to prepare for all of this? Jackson Hole. Oh, great. We return to Jackson Hole again. Yes. Jackson Hole is already this month. Oh, I'll be doing a live broadcast. But Jackson Hole is literally at the end of this month, August 27-29.
And he is usually the main speaker. The main fool. But it's often a place where they can make things right, correct their mistakes, and set the stage for what comes next . You know, Jerome Powell has had some surprises in Jackson Hole before. So, you know, this is an important event to pay attention to when the whole world tends to pay attention to it.
So what's happening now? Well, what's happening now is that there's an article in the Financial Times suggesting that Kevin Warsh stick with the Fed's strategy. Okay, that's a headline that doesn't really tell us anything. But what is very telling here is that people close to Warsh say he has acknowledged that he made mistakes in his first 10 weeks at the helm.
This is normal. We don't expect this idiot to be perfect once he gets the job. But he also has a history of being a jerk. You know, he was the same guy who called for higher rates while the economy was collapsing in 2008 . In 2007: "We have to raise the stakes." In 2008: "We have to raise the stakes." In 2009, when the economy was struggling to get back on its feet: "Hey, we need to raise rates." It was a completely wrong decision, and he has a legacy of making completely wrong decisions.
So he has to not only overcome his legacy of mistakes, but now he has to overcome this "we're only going to focus on the digits to the left of the decimal point." He already has this self-confident, frivolous, or whatever, look as if we're going to behave professionally, but in reality I'm just stuck in a rut.
Yes, there is a puppeteer who controls me. This is actually Donald Trump. Uh, apparently Donald Trump keeps hanging up on him . Apparently, Donald Trump calls Kevin Warsh three or four times a week, then takes long breaks, then calls again three or four times. And he does this over and over again , asking for advice, for example, on AI?
What about Iran? Hopefully, we can assume that Kevin Warsh is giving him the right advice, saying you better make a deal or you'll have to raise the stakes. Do you understand? Eh, whatever . But what we should think about is that this article says, "Hey, well, inflation expectations are still stable." Good.
I mean, you can take any graph and call it stable. You can zoom out on the stock chart of technology companies, if you zoom out far enough, and call them stable. Technically, anything can be called stable . But here, look at this line. This is what is really important today. Kevin Warsh would be willing to raise interest rates at the September meeting if inflation figures released in the coming weeks are strong.
Oh, great. Good. So, this actually prepares us for the fact that we should be ready for a rate hike at the next meeting, actually. And every data point leading up to this meeting will be very important. This is what we talked about in the Alpha Report yesterday morning, and I'm just sharing it with you.
This is not advertising. Yesterday morning I said, " Listen, we just had two epic days of deleveraging. Monday and Tuesday, massive days of deleveraging. Be careful, because we have employment data on Friday ." This Financial Times article about the Fed, which came out today, makes tomorrow's employment data even more important.
But think about this. The market is up yesterday morning , you know how much we went up there yesterday. I think we were at 725. Yeah, we were at 725 yesterday morning. So we're in the Alpha report yesterday morning, and I'm like, "Hey, we just had two phenomenal days. Be careful. The market tends to fall before events, especially after a big rally, a big deleveraging—people take profits, but you usually see a decline before a big catalyst like an employment report." So yesterday was a day of caution.
So, look what happened. Look what happened in the end . So we made that prediction right here in the Alpha Report. Documented. And the market was literally bleeding. We fell from 725 all the way to 715. You know, we're reeling today. Okay, you know, hey, can we hold on to 715? Will we be able to maintain this level?
Some of this is buying back the decline of SanDisk and Western Digital, which, you know, are still in the red, even though they're being bought out, which is good . But I mean, focus for a moment. This makes tomorrow very important. That forecast in the Alpha report was great, but I want to be clear.
This makes tomorrow very important. Tomorrow I will probably go live earlier for course participants so we can analyze this employment data in detail. And I encourage you to join me. You can always join at meetkevin.com. The coupon expires on August 14. So you have a little time, but it's better to join now to be a part of this tomorrow.
We will review the labor market report. You can join using the vacation green coupon. Remember, you can write this off on your taxes. Most people do that. Check this with your accountant. You get every course in the package with your Alpha membership. You receive all trading notifications. Our private live streams, fundamental analysis, stocks we buy, stocks we sell, whatever , trade alerts, right?
You get them too. So be sure to check it out. But let's think for a moment about what the Catalyst Calendar actually looks like. And then let's also reflect on Greenspan's mistake. So let's start with Greenspan's mistake. By May 2000, Alan Greenspan had completed his six-step rate hike cycle. And this cycle of rate hikes is considered the reason the dot-com bubble burst.
And maybe that's because the cost of financing has increased by 1.75%. That's quite a lot, but you can already see how the cost of financing is increasing . Google is going to raise another $25 billion. dollars. return of sludge. It's something like a return of bad luck. Now we will have names related to " Star Wars".
You know, the rebellion of failures. A return of bad luck or something, right? Failures strike back. Failure 2.0 or whatever you want to call it. Failures, episode four. In any case, so we saw how Coreweave had to raise the interest rates on its offering to over 10% to raise money for its data centers.
SpaceX had to raise interest rates to raise capital and, you know, close its bond offering. Google plans to raise another $25 billion in a phased bond issuance. This is in addition to the $40 billion in shares they want to dump on the market, which as of June 30th they have not yet done. Who knows, maybe they did it in July, but we do n't know that yet .
Additionally, when Alan Greenspan completed his six rate hikes and the cost of funding rose to 1.75%, it is worth noting that Treasury bonds were at a five-year high at the time. Well, if we look at the yields on our Treasury bonds now, many of them are also at long-term highs. It seems like our 30-year paper just hit...Let's take a quick look at the 30-year Treasury, because right after the July meeting we hit a peak that was pretty unpleasant.
I think it was almost 5. Let's look at the 30-year Treasury...I don't know why they take so long to load. Oh, here they are. Yes, 5.17-5.19 is the level we are at now. Oh, here they are. Okay, here it is. So, after the July meeting, we briefly reached 5.27 at the closing price. This is amazing. So, if you zoom out, this is a five-year high for 30-year Treasury bonds.
And if you look at it more broadly, this is actually the highest level for these Treasuries since probably 2006, although the peaks take us back to around 2004. So, this is a very high figure. We're talking about a 20-22 year high for 30- year Treasury bonds. And the moment the Fed raised rates during the dot-com bubble also marked a multi-year high for Treasury bonds.
So don't just think about Fed rates. Think about what this means for the cost of financing for companies that are trying to spend more on capital investments and are struggling to raise funds. The stocks that suffered the most when the market began to sell off during that betting cycle were, of course, technology stocks.
Cisco, Intel, Oracle— they all collapsed then . And the NASDAQ 100 eventually fell 78% between March 2000 and October 2002 . So that's two and a half years of decline. It's like, you know , two...remember 2022 when we had a 10- month stock market crash? Okay , multiply that by three. You know, it's a long period of pain and suffering.
And I'm not saying that this will definitely happen. I say the risk is that the higher the financing costs, the less sustainable these capital spending cycles become. So, every time you get these rate hikes or even just bond yields rising, the market becomes riskier. And that's actually the point of raising rates, right?
Or, I mean, that's the point. Raising rates is aimed at cooling inflation and then capital spending. This is the mechanism through which this should happen. But you also get investors in the bond market who say, "Hey, I need more risk compensation." OK. So, that's not very good . Hmm, this article in the Financial Times also, in my opinion, indicates a certain desire to change course, saying that perhaps we do need some kind of forecasting guidelines.
Of course. So? You don't want the market to suddenly collapse, huh ? Isn't this what we learned from the example of Japan and the Japanese carry trading strategy, that predictive benchmarks are actually useful? Of course, then there are people, usually in X, who say, "Forecast benchmarks are Keynesianism." "This is disgusting, disgusting leftist nonsense." But as with everything, people with a higher IQ than the typical contributor to X, who is only looking for hype, who wouldn't understand the nuances even if they hit him over the head, realize this.
So people tend to admit that if we had no regulation of markets at all, and we had a completely free market—and I'm actually a proponent of free markets—I understand that if we had a completely unregulated market , we would probably be much closer to socialism and communism in America than we are now.
Or we would already be there. Mostly because the harm from a completely unregulated or unmanaged market is much deeper, right? Because there's no government trying to cushion the blow when the market bottoms out, right? In other words, this is kind of what Kevin Warsh tried to do in 2008 and 2009. And there are many people who think, "This is normal." "Let it all fall apart." "That's normal." I understand this argument.
I'm not saying that this is a low- intelligence argument—to say, " Let everything go upside down." This is normal. Let it all perish. I understand that. I understand this argument. I'm saying that not acknowledging the other side or nuance is a low IQ move. The high IQ step is: "I know." I know there are arguments for letting the market completely collapse and dumping all the garbage, letting everything crumble.
All zombie companies, let them all go bankrupt. Good. I don't care. We 'll be fine. We are simply sitting on $100 million in real estate, development projects, and securities with no bank debt. So, I don't care, dude. We will play any game. If we're going to cut rates to zero and bail out everything , then fine.
We will play this game. If we're going to let it all collapse and fall apart , we're going to play this game too. We are ready. But I know not everyone is that lucky, and so I recognize that when people say, "Oh, let's not involve the government or the Fed at all" . This creates a lot of human suffering.
A lot. And so, I think, there is now a reversal in this so- called " forward guidance." It's as if the Fed won't be giving any forecasts, but a hint that Kevin Warsh would be willing to raise interest rates at the September meeting. This again creates forward-looking guidance. They change position before your eyes in real time .
And it's crazy, because sometimes people say, "Oh, Kevin, you always say the Fed keeps changing rates ." They're changing, man. They're fighting like a fish I just pulled out of the water and threw onto the deck, it's fighting so hard it's come off the hook, and now it's under everyone's feet, and they're like, " Oh, that scaly reptile ." Yes, someone, pick this thing up.
Anyway, despite all of this, Bessen is now attacking Nick Timiraos. Our friend Nick T. Listen to this. One of the highlights of Warsh's Fed was watching stenographers posing as journalists, like Nick Timiraos of the Wall Street Journal. Thira-Thira-I- Thi-Timiraos. I always pronounce his last name wrong.
It's my fault. I'm too lazy to actually read that it's Tim and then, uh, I'm reduced to rehashing gossip from the Fed's backrooms because they're incapable of real economic or monetary analysis without clues. Essentially, Bessent is saying, “Oh, it’s a good thing we don’t have predictive guidance .” "Meanwhile, you know, it literally sounds like they're reversing the forecast guidance." So, you know, Bessent already looks like a fool here.
But we like Nick T. We really think he not only gives us good, uh, you know, kind of analysis. He is also known as " Nikki Leak", which helps provide us with predictive guidance. We, we, we believe that there were text messages between people at the Fed and Nick T. to leak information during quiet periods so as not to shock the markets.
This is done intentionally to ensure that markets do not collapse when the Fed acts. Of course, you know, Scott Bessant gets a lot of criticism because he ran in 2024 with Trump during the , you know, campaign and said, "Hey, we're going to have a 3-3-3 economic program." 3% annual growth, 3% budget deficit to GDP, and we will increase oil production by 3 million barrels per day.
"Okay, well, we didn't accomplish any of that." Okay, the average annual growth is closer to 2% , like 1.9% per year. Okay, not like volatile quarterly data. Er, budget deficits are twice as high as 3%. They make up about 5.8%, uh, as of September. And uh, oil production only increased by half a million barrels per day.
0.57, to be exact, and that's from January 2025. So, this is over an 18- month period. The only thing that has a three ahead of it is inflation. Thank you, Fassbender. So, what's important next? Uh, well, we have a few important dates to pay attention to. So, the next important thing is that tomorrow we have a report on the state of the labor market.
We expect 80,000 jobs. Uh, a weak reading would even be good, because it would potentially keep interest rate hikes in check. Uh , a stunning figure would be really bad, because then it's just: oh well, buckle up. We'll get our rate hike, you know, it's inevitable. The consumer price index is released on August 12.
This is 2 days after Lawrence's birthday. August 14th, that's 2 days after the CPI report. The promo code on meetkevin.com is expiring, prices are increasing. Uh, we're, we're really getting close, uh, probably this month, uh, or by August 14th or by the end of this month, we're going to have a big change in pricing, uh, and so I think you're going to want to catch up on that.
So you know, join us in August, because everything will change. Everything will become more expensive. So, BLS data on jobs, next report. August jobs figures will be released on September 4th, so mark your calendars. And then CPI, September 11th. Next up is the Fed meeting on September 16th. And, of course, the meeting at Jackson Hole on August 27th .
So we have a pretty eventful calendar, you know? It will be hot. We have something to work on. I will cover this. I will add context and clarity to all of this . So always make sure you are here. I know some people are saying, "Kevin, you mentioned the promo code." They said we don't have any sponsors on the channel.
The only thing I promote is House Hack. Only House Hack and Reinvest, nothing else. Here's where the money from Alpha membership goes. So if you join, you're just helping House Hack and Reinvest. And that's it. I believe this is as transparent as possible, as you requested. I don't get paid by Russian bots.
I am not paid by third-party companies. This is YouTube advertising revenue, followed by House Hack. That's it, boys and girls. And I think that's fair. We do not place advertising posts in the middle of videos. So I do n't even know. I can't imagine how you could be more transparent. Okay, friends.
Thank you for being with us. See you later. Well , goodbye. Good luck. Why not promote what you told us about ? It seems no .
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