Boy crikey mate: we witnessed the wild fed walking through the wild attempt to approach inflation, welcome back to trace trades guys today we're going to be talking about the rate hike futures and what the fed just said. That's going to impact the markets tomorrow and over the long term, i like to probably say i'm going to fly advising that financial advice, but you can say the green assault uh, let's just dive right into it. The fed today discussed their plan on rate hikes and got more aggressive. This is something that i hope to see.

This is honestly to me the best case scenario, if and only if they follow through with it, but that does not mean there's not going to be risks, and that does not mean there's not going to be economic tolls, and that's why i'd like to discuss this Today, economics are confusing, the fed is confusing, and especially when the fed, when asked the question specifically jerome powell uh says what was your question again, so we're gon na break it down we're gon na talk about all these things and uh get you underway in a Timely manner so what happened today? Uh the fed jay powell today raised rates and went on to describe his plan uh, followed by a q and a session later uh on what he plans to do to man. You know manage inflation, handle inflation first off one thing we know today they raise rates by 75 basis points. Now, if you recall watching yesterday's video, if you were there, i said there was three sort of scenarios that i see playing out uh in front of us, and we had one of them uh play out. It was situation, one in which we get a 75 basis.

Point rate hike announced: what does this mean? It means that they want to raise interest rates by 0.75 percent, and that is what we got. There were two scenarios: one of them was a dip and then a rip which means that intraday final pricing would happen followed by a move to the upside. This is what i would consider to be uncertainty, shifting to certainty or an immediate rip, meaning that uh, hey the market already priced in the entirety of a 75 basis, point hike. We got uh the first thing right.

We got the former instead of the ladder, which was a immediate dip, followed by a large large rip to the upside uh shortly after that, following so the market, obviously liked the certainty uh. This is gon na, be a commonality and a common theme is the market. Like certainty, it likes to know, what's happening well, uh. One good thing that came out of today is there is some form of certainty that was addressed, and that is that the fed is most likely to follow through with a 50 to 75 basis, point hike in july, which means that they are planning on being more Aggressive than have privacy previously in prior uh stated both of these things to me are good for the long term.

75 basis point today sucks for the short term. It sucks for the economy. We're gon na tell you about why uh 50 to 75 basis points in july, sucks right now, good for the long term. I think this is the taking the rip, the bandit off approach.

If the fed follows through - and i want to stress that - because the fed is so infamous for flip-flopping back and forth all the dang time uh, but if they stick to it, i'm actually happy with the aggression. I would like to see them actually do a hundred bps, because if you look at inflation stats uh, they just haven't seen any sort of follow through right. We've seen eight point, five. Eight point three eight point: six, it's only gotten worse through 25 to fifties uh, but maybe they think that hey it's better to to be not enough than to be too much because they have risks that uh sort of pose themselves if they are too aggressive.

The last thing: q a session there was a whole bunch of questions. He was asked things such as. Do you think quantitative tightening is going to hurt the economy uh and the stock market in which he replied? What was your question and then eventually went on to say we do not want to start a recession uh to me this is a joke, and i want to discuss this before we get into anything because we are in a recession. Savings are at all-time lows: debt levels, all-time highs, uh, the stock market, doing awful and the housing market is on the verge of a push down, which is all telltale signs of.

If it's not a recession, the beginning of one or uh, uh sort of a premonition of what is to come uh, we are certainly in a recession, and i think that j-pal knows it. He will not acknowledge it, and that is why they have finally moved towards being more aggressive uh before we get into the takeaway short-term long-term. This is only happening because the fed was too damn slow. They were too slow.

They waited a year to finally admit that inflation was not transitory, that it was a problem that they had to do something to fix it, something that people were screaming at them for a very long time uh. Admittedly, there were many who just enjoyed the euphoria myself. Being one of them right, i enjoyed the euphoria of the stock market and everything just going up up up up up. It was beautiful, it was great uh and there were phenomenal things, but uh this is happening because they waited too long to raise rates.

They waited too long to admit that there was a problem, and here we are today, and i want to say that, because this is not going to be pretty all the way through to me, it's just the lesser of the three evils that i thought existed, which Was uh do nothing, stop quantitative tightening right which would basically make stocks go up, but you have hyperinflation stay on the same path or just be a slower overall bleed or get aggressive, and i think, get aggressive and ripping the band-aid off is the best way to Go through things, but there will be pain, short-term and long-term. Let's go over these two things short-term. I think there's gon na be increased pain in the economy, housing market loans spending saving. I think all of these things are going to be impacted, and why? Because when you raise interest rates, you have less accessibility to money, people will not be as inclined to go.

Buy a house, as you can see, by looking at the housing market, which shows a lesser demand than previously existed, which shows uh a slowdown. Perhaps that jay powell had acknowledged today you're going to have less overall people taking business loans. Why they're not as cheap, if you're previously paying this as an example, a hypothetical two percent interest rate, but now you're paying five to six well you're gon na be less inclined to take that loan, as it previously may have been same thing with a home. If you're previously paying uh 2.5 apr on a 30-year fixed mortgage and now you're paying seven hey less inclined to go, buy a home, you might not like those prices, you might not like the the interest rate.

That's attached to those prices. This in turn will likely lower overall housing prices right, but i don't think they're at attractive enough levels for that divergence to make sense, there's going to be pain. There there's also going to be increased pain in the market, and i really want to stress this uh, because what you've watched over the previous couple of months has been the pricing in of both quantitative tightening and the fed talking about raising rates to combat inflation uh. I don't think we're done yet.

I think the the relief bounce today is exactly what i mentioned before yesterday, a short-term rally. It is an opportunity to get a breath of fresh air to come up above water uh and and get get a couple gulps of o2. Before going back down to hold your breath a little while longer right, i don't think the pain's over. I don't think it will be over until inflation goes down, but this aggressive approach 75 basis points, and if they do it again in july, uh will make inflation go down at least faster than with a 25 to 50..

They might have to be more aggressive. We'll have to have to wait and see. I wish they did 100 bps to be honest, but this will be a side effect long term which we'll get into later. Next, you have a chance, a higher chance of lowering inflation.

This is a short term. Good thing. This is a pro. The top two are cons.

The pro of obviously lowering inflation is that you could see. Relief in the markets come a little bit quicker. No, no more needs to be said about that. Lastly, a lower chance at recovered stock market and what i mean by that is expect to see more sell-offs, this kind of falls into two uh.

I think that this increases the chance at a flash crash. One of the reasons behind this is the housing collapse which i'm going to talk about here in a little while long term. What are the the things to be watching for long term? I think you have a much lower risk of hyperinflation, but you also have an increased risk of deflation uh when i said this isn't going to be pretty. What i mean by that is both of these are not perfect scenarios.

Both of these there are going to be costs that came at the fault of the leaders above us, the politicians above us that made certain decisions politically speaking, right uh if they do overcorrect, and if this aggressive approach is too much, you do risk deflation, which obviously Poses economic problems as well, when i mentioned this before i'll, say it again, you're on a scale, and you want to maintain equilibrium. Keep that thing balanced. One side is inflation. One side is deflation.

You never want to be on both sides of uh of the equation. Here right, you want to be right: squared dab in the middle which, for the fed, is a goal, interest or goal inflation rate of two to three percent right. They want to be here not on this side, not on this side. They want to be smack dab in the middle uh and you do have a risk.

You have a risk of over correcting and going over the other side, which is why i think they're likely going 75 bps uh instead of 100. This time around, you have an increased risk of recession, uh something that j-pal had mentioned today was we are not trying to start a recession. We do not think we are in a recession. We think that we can maybe have a soft-ish landing and i laughed hard when that question was asked.

But uh. There is an increased risk of a recession and why, if you decrease spending and you decrease savings - and you have a decrease in housing interest and a decrease in loan interest, there's less stimulation going into the economy, and this reflects in overall quarterly earnings that have come Out over the previous q1 that have gone over all these different metrics earnings are down across the board for a lot of big bloom chip stocks, and what this tells us is there's decreased spending why people have less money they're dipping into debt? They just don't feel as comfortable, because inflation is weighing a toll on things and when you decrease spending you increase the risk of a recession and raising interest rates will obviously increase that risk people need to keep spending money or you do pose that problem and people Who don't have money to spend, don't spend money, so it just kind of is what it is. There is a risk of that and there is a real risk of a two to three year period of time where the economy does not look great, but that stock market has an increased chance of going back up right. Lastly, you have a higher chance at recovered market, which is what i just mentioned.

Uh the market is going to be, probably, i would argue, more violent of a push down than if you were less aggressive, 25 to 50. I think it would be a less aggressive sell-off, but i think this will be a faster sell-off and i think then you have a higher overall chance at a recovered economy, a healthier economy which would then, in turn, lead to a healthier bull market, run to follow Afterwards, the risks too much rate hike. You have deflationary risks. You also have a housing collapse risk now why the united states housing market's not near as bad as uh as canada's, maybe some other countries whatever.

But the problem is that it is surely inflated and has gone through what some would call euphoric highs, uh very similar to the stock market, where everything seemed hyper inflated and hyperinflated and people were paying way too much for evaluation for for the stock same way as They were for homes uh and now that you're increasing interest rates we talked about this before you increase interest rates. You're gon na have a decrease in housing. Prices too fast of a decrease in housing. Prices could lead to a housing collapse, especially alongside interest rates where people have maybe not fixed aprs.

They have flexible aprs, which means the the interest rate they pay on their house over 15 or 30 year. Mortgage uh well you're, going to run into some problems where people will start having decreased housing prices, increased loan uh and what happens after that? Well defaults and foreclosures, and if this happens, this is the scariest probable situation. If the housing market collapses, i don't think that there's not there's not much. You can do to save the stock market at that point.

Housing market collapses, and i think that the stock market will go through a flash crash. It would be bad and i'm talking, like you're, hitting all sides of the spectrum at this point: cryptocurrency stocks, bonds, housing, that's great recession, territory, and that is also a risk at play here. In my opinion, if they this up, if they're too aggressive - and if the housing market does not react to it, well that's a risk because the fed was too slow. That's where we're at to me, this is the least evil of the three choices that the fed had.

I'm glad they're going this route and it matters because if they fix this problem, if they can actually manage to to to find a solution to inflation and bring it back down, stocks will go back up and what does that mean across the board? You guys make money on positions you've been holding for a long time. We make money on positions we've been holding for a long time. People just want things to go back up right, nobody enjoys being a perma bear and if you do you all right, people like watching the economy grow they like watching companies, they love grow. They like watching uh.

They like watching things, succeed, we're americans right. We want the economy to move forward, uh sure people can make money in a bear market. Don't get me wrong, but who the wants a bear market? Nobody right! We all want stocks to go back up, and this, if executed well, will bring us to that end. Uh faster - and i hope that's the case - i really do uh that's about what i got.

That's my thoughts could be right about some things. Here could be wrong about some things here, but that's my opinion. That's what uh i've been watching and uh. To be frank with you, i think i nailed that pretty spot on the head.

When i talked about the the rip and the dip you know did exactly that uh and that's what i've got for you so watch out for july. I hope that the fed continues to push uh aggression towards uh, quantitative tightening. I hope they don't back down and i hope that they continue to raise rates aggressively, because that is what it is going to take to manage the problem that they created. So that's all.

I've got for you guys i'll catch. You all later appreciate you tuning in much lovely taps as always and peace.