Transcript of HOLY SH*T: THE FED RESERVE *JUST* BAILED US OUT
Meet Kevin
0:00The New York Fed is now coming out and0:02running cover for Mr. Warsh, probably0:05because Donald Trump called up Kevin0:07Warsh going, "Yo, bro, why is the0:0910-year Treasury at 5.9%?0:14Kevin Warsh, do your damn job. I put you0:18in a position to lower rates, and they0:21are going sky high."0:23And so, now we have the president of the0:26New York Fed running cover for Kevin0:28Warsh, and it has now shifted0:31expectations for rate cuts for the rest0:34of this year. Take a look at this,0:36partly written by Mr. Nicky Leaks0:38himself, Nick Timiraos over here.0:41Fed Williams hints next rate hike0:45can wait.0:46It looks to me like there was a little0:48bit of freaking out going on about bond0:51yields, because just earlier today, we0:53were at 5.29.0:55And I mentioned earlier, I'm like,0:57I I hate doing this, but I feel like0:59five and a quarter is where I I have the1:01balls to say it. I'm going to say it.1:03I think we're getting to peak yields.1:07Inverse trade me if you want. I'll have1:09the balls to say it, and I'll have the1:10balls to tell you I was wrong.1:13But I think we might be knocking on the1:14door of peak yields.1:16The reason I said that, and I've talked1:17about this before, is TLT, your 25-year1:20average bond uh maturity over here on1:22T-bills, or uh Treasury bonds, the1:23longer-term ones. Bills are shorter in1:25duration. Anyway, nobody cares. But1:27anyway, I think this line, which we have1:30bypassed in the past before, broken1:32through, I think we hold this line, or1:34we will regain this line, the 78-77 line1:36on TLT.1:38Uh and so,1:39this would be a potential play for peak1:42yields. Now, I'm not saying I'm going to1:44tell you what the Fed said. I'm not1:45saying that I'm betting on TLT. The only1:47thing I did was just for lols, cuz I1:50thought it was really funny, is I1:52actually1:53uh took my own affiliate link. And they1:56let me do this. I thought it was really1:58cool cuz you you know, we're going to1:59talk about John Williams in a moment,2:00but I took my own affiliate link and I2:03signed up for Kalshi and I'm like, "I2:05want to make a bet." I'm going to show2:06you the two bets I made. One of them's2:08up. One of them's down and you'll see2:10the net position in just a moment. But2:11yeah, I mean, they're a sponsor of the2:12channel. So, kalshi.com/r/w Kevin. I2:14know people are always like, "Oh, Kevin,2:16don't promote gambling to children." And2:18I'm like,2:19I look at this as a market tool for what2:22people are thinking and where their2:23heads are because then I can kind of2:25like inverse invest. So, in other words,2:27if people are really bearish,2:30then I like to buy the dip in the stock2:31market. Besides, children don't watch my2:33child uh channel anyway. Like my my2:35average age on this channel is like 352:37to 45.2:39>> [laughter]2:39>> We appeal to a different audience. But2:42anyway, so I did this.2:43I signed up myself and uh I I used my2:47own little affiliate link and I'm going2:49to show you the little positions I got2:50here and then we're going to show you2:51what John Williams uh said. So, I took2:53two positions over here.2:55Uh I don't even know why my name is2:57Solar Hyena. That I should change that.2:59I didn't even know I had a name over3:00here. Uh but what Can I change it right3:03now? Let me just see if I can change3:04this right now.3:05Uh3:06oh, I can. Name. Ooh, oh, you can add an3:08X account, too. Oh, that's it. Uh well,3:11I'll change this later. Cuz I I3:13That's for some reason that's not3:14working. But anyway, you can see no3:15closed positions as well. So, I got two3:17positions here. Here's my L1 so far,3:20okay? I think the odds of an Iran deal,3:24like a nuclear deal, before March 1st3:27are higher than 19%. So, I put like 503:30or 60 bucks on it. I think it was 603:31bucks I put on it. I'm down 12 bucks on3:33that.3:34But over here,3:36thank you, Mr. John Williams,3:39I made a bet3:41that there would be exactly one hike.3:44And this is based on the commentary that3:45I've seen from the Fed and I thought 9%3:49odds or whatever it was were way too3:51low.3:52So, I put money in. I put I don't know,3:54like I think I put $100 in.3:57I put $100 in and it's now up to 176.4:01Well, that puppy's up 76%.4:04>> [laughter]4:05>> That's kind of cool cuz it ran up to a4:0625% chance after this dovish talk.4:10It's kind of neat. So, honestly, shout4:12out to Kashkari here. That said, I want4:15you to see why. Okay? So, Kevin Warsh4:18tells us no forward guidance, but here's4:21the problem.4:22Here's the problem. Okay?4:25Even though Kevin just got himself my4:28tie money.4:29Oh, damn it. I already drew all over the4:31board.4:32Here's the problem. When you have4:34somebody like Kevin Warsh who comes out4:36and says, "I don't give forward4:38guidance." That sounds like half Trump4:40there.4:42Then4:43the market gets spooked. And they think4:46Treasury Besson, and think about it for4:47a moment. Treasury Besson can't do4:49anything to control Treasury yields.4:52Then, they try to bail out the Treasury4:53market. Oh, everything goes to crap. It4:55doesn't work. So, then what happens?4:58Well, then what happens is you get5:00Oh, crap.5:02Bonds are going up because the war in5:03Iran's not over. And then they5:05skyrocket. That leads to I think there5:08was a bank failure like a small5:09community bank in California failed.5:11That leads to all of a sudden the5:1310-year yield skyrocketing. It leads to5:15problems. It leads to shocks.5:18How do you actually prevent the shocks?5:20Well, if you're silent, you can't.5:23If you're literally silent and you're5:24like, "Whatever, man. Let the market5:26take care of it." Okay. Here's what you5:28get, Mr. Warsh. The market is taking5:30care of it. The market is tightening5:32financial conditions, tightening the5:33screws on those those regional banks and5:36sending 10 years up vertically. If5:38that's what you want, fine, but it's5:40going to break backs and then you're5:41going to have to come out and rescue5:43them because that's what you guys always5:46end up doing.5:47So,5:48what do you do? By the way, if you feel5:50overwhelmed because there's a lot of5:52content we produce and share, no5:54worries. We made a simple email list5:57once a day, that's it. You get a once a6:00day email and it breaks down, here's6:02what Kevin said in this video, here's6:04the bottom line to consider. If you want6:06more details, you could watch the video,6:08but this way it organizes the videos6:11from the last 24 hours in an email once6:15a day. That's it. We're not selling your6:17email or giving it away. It's our6:20personal email list to make this easier6:22for you and help provide value to you.6:25It costs us a lot of money to do it. You6:27can get it totally for free though. Just6:29scan the QR code or go to the link in6:31the description and we'd love to have6:33you there. So, what do you do? You get6:36on the phone6:38and you go,6:39Williams,6:42just say something optimistic. We need6:44to stop the rising yields. Just6:48anything.6:49Just stop making the market think6:51we're not going to hike five times over6:53the next year. Anything.6:57Okay.6:58Instructions clear.7:01Here's your face. Here is the face of7:04we're not going to hike five times.7:07And what was said was7:09the vice chair of the Fed rate-setting7:11committee, who typically views his7:14commentary as the committee's center of7:17gravity rather than his own personal7:20view. Boy, that wasn't a Fed line to the7:22Wall Street Journal. Here, Wall Street7:24Journal, just publish this.7:27A top Fed official suggested Tuesday7:29that the central bank7:30could wait until December7:33before we raise rates. Inflation does7:35remain too high and maybe another rate7:38increase could happen late this year and7:40that could be appropriate, but you know,7:43we can potentially take our time to7:44review additional data before tightening7:46policy further. You know, we we did just7:48act in September. There's no need to7:51rush.7:52Huh.7:53This sounds like literally a directive7:56that was handed down on a yellow legal7:58pad from Donnie T himself. Fix it.8:03>> [laughter]8:04>> Oh, I guess we can wait. Oh, boy.8:07>> [laughter]8:08>> And so, what do you get? Well, now all8:10of a sudden the odds of getting two rate8:13hikes this year, two more rate hikes,8:14have plummeted.8:16We are now actually for the October8:18meeting at less than a 50% chance of8:20actually getting a hike. Sure, we got8:22data coming out. Yes, yes, yes, yes, we8:24have PCA A data coming out tomorrow.8:26Somebody rightfully mentioned that in8:27the comment section. Thank you for that.8:29Uh that was uh Gabriel8:32mentioned that in the comments.8:34Uh we do have ADP coming out tomorrow.8:36We got a jobs report Friday. We don't8:38expect the jobs reports to come in weak.8:40Who knows? They could. Jobs of $75,0008:42on ADP, we're looking at 90,000 75,0008:45not $75,000.8:47Uh 90,000 jobs on nonfarm payrolls, PCE8:50is expected month over month at 0.3,8:52uh month over month core at 0.3 year8:55over year 3.7, year over year core 3.3.8:58Honestly, we'll probably meet those8:59expectations because the PCE numbers are9:01manufactured from CPI and PPI, which we9:05already have that data. So, I'm not9:06really expecting any kind of like bad9:08news or shocking news tomorrow, but who9:10knows? Maybe they know something we9:11don't.9:12If anything, I think it'll kind of9:14remove some of the pressure over here,9:16and we'll kind of see the odds of of9:18rate hikes going down even more.9:20Uh that would be my opinion. But,9:22anyway, if I go over here9:24to December, we could see that we are9:27still at a combined about 62% chance,9:3162.3% chance we're going to get one more9:33rate hike. But, that's a whole lot9:35better than where we were, where we were9:37like, "Oh, we're definitely getting two9:38rate hikes this year." So, they've9:39definitely softened this in the market.9:41Uh and if you look over here, even this9:43long-term has softened.9:46So, the odds of just getting9:48uh let's see here. We're here. Long-term9:51softened. Uh I mean, it's still up9:54there. We're at 3.75. Five total would9:57be this percentage. This is six.10:01So, the odds of getting five total would10:03be the inverse of these numbers over10:04here.10:05Five total has gone down to10:08plus 0.2, the inverse of that, give 100.10:12The odds of five total has now gone down10:14to 67.5%.10:16That was at like 80 to 90%.10:19So, you've definitely seen some10:21softening here on that pricing. And I10:23think their goal is to try to put a a10:25lid on yields. I think they realize10:27they're losing control and they're about10:28to break stuff. Honestly, kind of like10:30Donald Trump might get a text message10:32from Jamie Diamond that's like, "We are10:35getting over here. Stop it."10:38Oh, but Warsh said he doesn't want to10:40give forward guidance. Then use someone10:42else.10:44>> [laughter]10:45>> Like, I'm pretty sure all these like10:47backdoor people are looped together in10:50like signal group chats, and that's10:52basically exactly what happens. I have10:54high confidence in that. I don't have10:56knowledge, I just have confidence. Maybe10:58I'm just very jaded, but I think that's11:00exactly what happens. It's like, "This11:01is turning to crap. We're getting a11:03bunch of phone calls from the other11:042,000 people that work at the Fed, and11:06they're all freaking out."11:08>> [laughter]11:10>> Uh anyway,11:11the approach carries risks if mar- of11:13not, right? So, of Warsh not announcing11:16verbal cues.11:17No verbal cues carries risk. If markets11:20come to expect a move that officials11:22aren't prepared to make, the Fed must11:24choose between surprising investors and11:26following through on an increase it11:29might think isn't actually necessary.11:31So, they don't want to surprise11:32investors.11:33Williams' comments Tuesday could help11:34the Central Bank avoid that bind.11:37Long-term rates are now at a 19-year11:38high, tightening financial conditions.11:40Williams is already arguing that some of11:42the underlying inflation pressures could11:43be easing on their own. Mind you, we11:45could also get a deal on Iran soon.11:47Starting to sound like a broken record11:48on that though. Housing prices, major11:50spending category for consumers, have11:51already decelerated. And it would also11:53be a little weird to hike just a few11:55days before midterms because maybe11:57that'd be considered political. But then11:59again, we were talking about rate cuts12:00with Jay Powell a little bit before the12:02election. But in fairness, the labor12:04market was falling off a cliff at that12:05point. And there's Nick T.12:07Anyway,12:08this is interesting.12:11So,12:12I see this12:14as a reiteration of bullishness. Does12:17that mean we have a deal with IRAN YET?12:19NO. LOOK, Al Jazeera is literally12:21reporting that the US State Department12:24spokesperson is highlighting $15 million12:26rewards to get more information on12:28screwing the IRGC.12:30It doesn't sound like we're close to a12:31deal yet, unfortunately, with that12:33information. But it does sound like12:34we're really trying to tighten the12:35screws. And it could also be part of the12:38negotiating strategy. It's like, "Hey,12:40we'll offer millions of dollars to screw12:43you guys financially." You know, they're12:45going to see that reporting and go,12:47"Ah, now I have to worry about traders12:49too. Maybe we should just take a12:50freaking deal."12:52>> [laughter]12:53>> Anyway,12:54I maintain my bullish posture. And I now12:58have the balls to say it. I put some13:00money on this yesterday too. And I'm not13:01talking about Cal-shi. I I sold some13:03puts on something, not TLT, that I think13:05will do well uh on an Iran deal. And13:08then I'll pick up that [music] premium.13:09Uh obviously, send that over to course13:11members. But anyway,13:12thanks for being here. Good luck. See13:14you next one. If you like that video,13:16check this one out. I think you're going13:18to love it.13:18>> Why not advertise these things that you13:20told us here? I feel like nobody else13:21knows about this.13:22>> We'll We'll try a little advertising and13:24see how it goes.13:24>> Congratulations, man. You have done so13:26much. People love you. People look up to13:28you.13:28>> Kevin Paffrath, there, financial analyst13:30and YouTuber, [music] Meet Kevin. Always13:32great to get your take.
2,500 words · 395 lines
