Ladies and gentlemen, there was once a man named michael reeves, who made a video talking about a goldfish that he had programmed to beat not only the majority of hedge funds that invest in the stock market, not wall street bets, but the nasdaq as a whole. This goldfish was a a very solid contender to compete in the space of finance and, in my opinion, my humble opinion uh. That goldfish would be better suited to do jerome powell's job than probably jerome powell or any other person on planet earth. For that matter, because if we have learned one thing - and one thing only is that the fed has absolutely no clue what they're doing i mean it is, it is absolutely brutal, guys welcome back to trace trades where we freaking talk fast and don't need to ask That they're probably saying i'm not a firefighter expert, so think what i say: the greatest salt, let's get into the video uh today, was a red day for the market.

We look at the spy right now down one and a half percent for the spy, iwm suffering greater losses, uh down 2.24 and a very gnarly gnarly gnarly day uh - and this is coming off of j powell. Talking about a a 50 basis, point rate hike or a half point, half percentage, uh rate hike, which is quite aggressive right. It's a very aggressive rate hike, and i want to take the time to sort of talk about this today and some historical data, because i'm a little bit sweaty, i'm not gon na lie. Looking at the current state of inflation and the way that the fed is kind of uh attacking this, they they're they're they're not quite doing the job.

For me, i'm not very satisfied with their approach uh and i'm gon na talk to you about why so today, if we read this article right here, what you're going to notice is that uh, j pow jerome powell, who is the the the head of the the Fed came out and talked about a 50 basis. Point hike, federal reserve chairman jerome powell, confirmed on thursday afternoon that the u.s central bank will be considering a more aggressive path to monetary policy, tightening when officials meet for their next policy meeting in less than two weeks. Uh and what i find to be quite interesting is this: compared to the central bank's 2004-2006 tightening cycle, inflation now is higher, and yet monetary policy remains more accommodative. Powell said uh, and what he's kind of getting at here and i've got this pulled up by the way, is, if you look back on the inflationary period between 2004 to 2006 and uh sort of the accommodations that took place, the tightening and loosening of the economy.

Uh they were, they were far more aggressive back then, to manage inflation than what you were seeing right now and i've got this pulled up. Let's just look at the historical inflation data back at 2004-2006.. So if we look back at 2004 to 2006, i wouldn't argue that inflation was terrible. I mean you had one bad month here back in august of 2005.

uh you had a couple months lead up to that peaked at about 4.7, then slowly declined uh. Until eventually, you had a good year of inflation, well come to 2007 right right before 2008 happened, you're gon na see 4.3 4.1 2.8, and it stays in that four to five percent range for a little while until hitting a year of deflationary conditions, and that is Inherently also a bad thing, and what i, what i mean by that and let's kind of just draw this out uh in the easiest way possible uh. I got this sort of idea from uh meet kevin, so shout out to you man. I appreciate you hopping in this is sort of like the the the where you want to sit uh spot right.

This would be sort of like a two to three percent net inflation per year. Inflation is inevitable uh. It is going to happen no matter what right people make more money uh, they got to pay out more money, the fed prints, more money and really what it comes down to is the fed prints more money to be quite frank, uh, and this is sort of Like the ideal situation and up here, you've got sort of like a plank in which balances, and over here on the left would be deflation, and over here on, the right would be hyper inflation right now, i would argue we're on the hyperinflation side of the scale. This is certainly leaning down towards that way.

There's a lot of uh a lot of weight, sort of being bare that looks kind of like a piece of, but this is like a hundred pound weight holding down that hyper inflation uh right now as we're watching the economy. Well, deflation is also bad, and you witnessed this back in 2009 and this was sort of the ramification of uh. What happened in 2008 with the housing market crisis, you got a whole year of deflationary periods. Uh.

Let me just move this. You can see it. You got a whole year of deflation uh, while the fed tried to combat and do some damage control with uh what took place uh in the housing market right now. The housing market right now is a scary, scary beast, but this is actually going to be a video that i make on saturday.

So if you want to watch that, you want to see that video uh watch for it, then it will be out on saturday, but deflation was a real risk both of these things, bad, both not great for the economy uh. It's two hyper extremes in both directions. Right, so why would deflation sort of take place? Why did deflation take place back here? Well, very simply, put the economy got too far tightened when you want to combat hyperinflation. What do you do? You tighten the economy and that sort of moves the weight of the scale back to what is ideally two to three percent inflation right.

They were too aggressive and when you're too aggressive guess what the weight just shifts it goes to the other side of the scale. Now, you're on the deflationary side of things because you've over tightened and then you have to compensate in the opposite direction. How do you compensate in the opposite direction? By loosening the economy? You stimulate the economy, you lower interest rates, this flip-flopping sort of massive tidal wave. I mean the way that i describe this is by pumping on the brakes too much too fast, too hard, and you witnessed this back in 2006, 2007.

2008 uh into 2009 when you got that deflationary period. Now, why is this important right? Why do i find this to be important? Well before i get into it uh? I think it's important to discuss elon's take on this, because i share the same consensus with them, and i've talked about this before as as much of twitter. I don't think this is a hot take this, isn't it really isn't elon musk says he thinks inflation is worse than reported and likely to continue through 2022.. You look at this and he noted that some suppliers are requesting 20 to 30 cost increases for parts from 21, 2021 to 2022, well above the 8.5 inflation rate imported by labor department debt on tuesday, and i share the same consensus.

You know. Obviously, i'm not the ceo of tesla, i don't. I don't run a company like that. What i can tell you is my basic cost of living has increased more than 8.5 percent.

I go out to eat and i get myself a burger and the price has gone up more than eight point. Five percent, where i live out here in oklahoma uh, i wan na go buy some clothes well. This is kind of a bad example. I don't really buy clothes but, let's just say i wan na buy a pair of pants.

I've looked i've seen the prices they're going up, it's, i think it's drastically more than 8.5 percent and why? I think this is important and why i think it's important that elon musk mentioned this is because, since that information is lagging since that data seems to be lagging uh, i think that the fed reacting the way that they are has something to do with the fact That they probably recognize inflation is worse than people. Think it's worse. I genuinely think that. So why is this important? Why do i want to mention this in the first place, because, as we're watching the market sort of have a meltdown today in a reaction and a price into the talks of the 50 basis, point hike the uncertainty really starting to set in now until it is Either executed - or it is not, i find this to be important because i think that the fed is going to over correct.

I wrote down uh over correcting here, because we witnessed this back here and obviously history doesn't exactly repeat itself, but sometimes it rhymes most. The time it rhymes and you look back at 2007 8-9 if this taught us anything, it's that the fed typically is too slow, they're too slow. When was the the right time to start combating inflation to really start raising interest rates, maybe here 4.2 in april - think about all this uh all this all this all the way up to december, you had 7.0 inflation data in in december of 2021 and the defend Still just chilling finally getting off the argument that inflation is transitory. What the do you mean it's transitory.

I mean you look at what wha? What are you? What are you looking at? Let's just look at how much money the fed's printed, how much money has the fed printed? I know the number, but it's it's 16 trillion dollars in the last two years check this out. Eighty percent of all u.s dollars in existence have been printed in the last two years to do the math on that. That's 16 trillion dollars - and this is as of january 20th, 2022.. So what does this tell? You tells you that there's going to be some inflation all right now, i'm not a rocket scientist, i'm not a pinball wizard.

I know how to solve a rubik's cube and that's about it all right, i'm not that smart. But if we printed 80 of all money in existence in the last two years and we're looking at, i don't know basic supply and demand where you increase supply and obviously demand goes down. The worth of the dollar goes down, and you see that inflation in april is 4.2 percent, and you start correcting aggressively in april of 2022 a year later. What are you doing, and this to me is going to cause over correcting, because what the fed is doing right now is they're realizing we were too slow.

We didn't hop on the train, quick enough. We didn't try to correct this when it was really the right time when it was the right time to start correcting things and they're gon na over correct. I really genuinely think that they're talking about a 50 basis, point hike right now and i was on the opposite side of the spectrum and at this point man uh, i just don't have enough. I don't have enough faith in the fed.

I think they're gon na just they're gon na over correct they're gon na overreact, and this is going to force a recession. Why do i think that i think you're gon na watch a repeat of a deflationary period, don't think it'll be in 2022, maybe in 2023, for i don't know, but this overcorrecting uh, if you over, tighten remember this fulcrum. This scale that we just mentioned before you move from hyperinflation over to a deflationary period, in which case they're gon na have to re-loosen the economy. If i was the fed right now what i would be doing consistently nickel and dime my 25 basis point hikes and just recognize that the pain is going to happen.

It's gon na take longer because i was too slow and you have to accept that and just be straight with americans say to americans. Look, we were late. We were wrong. A year ago we should have started raising rates, we should have started tightening the economy.

We should have stopped giving money to banks, but we didn't now we recognize we were wrong and we're going to do the necessary things. What we have to do to correct the problem. Instead, they're not doing that they're they're, overreacting, they're flip-flopping every single day. They said they were gon na, do a 75 basis, point hike and then two days later, they retracted.

That statement i mean come on this to me is just a state of panic. I don't, i don't think the fed uh feels like they have control over the situation and that's a scary sort of thing to me and how is that applicable to the market i think slow. I think the market is going to be not necessarily slow in terms of volatility. I think it's going to be incredibly volatile during this period of time, but when i say slow, i mean it's not going to have a lot of growth, the spy in general.

I think the spy is going to be very slow if it's not bearish uh. I think there is a possibility that uh, the broad market really gets some sort of breakout and and continues its move up, but today was a huge step backwards. Let me put it that way. I mean look at this on the the daily and you look at these levels: false breakout all the way back down to the bottom of this, this line at 436 bucks.

I mean this is an aggressive, aggressive sell-off that you witnessed today uh from the spy, and this is really indicative of something the market realizing holy crap. This is some. This is some wild stuff, and these swings man. These swings and confidence to uncertainty to confidence to uncertainty is the fed's doing.

This is all the fed man i mean it genuinely. Is these guys up? They were too slow. They couldn't look at this back in 2021 and see 4.2 percent huh. Well, what happened last time we had 4 inflation.

I don't know it stayed there for a while. We had to correct it. I mean it makes sense and even back at 4, you had deflation. You telling me that right now we're at 8.5 inflation the highest.

It's been in 40 years: we're not gon na have some form of uh over correction. I just don't believe it. I don't believe it. I think this is some scary stuff in the short term uh, i think it's just gon na mean slowness.

Slowness in the market. Lots of volatility in the market uh and when there is growth, it's going to be very whiplashy and it's uh. It's going to be a trader's paradise. I'll.

Tell you that if you're, if you like trading, this volatility, is like surfing a beautiful wave out in the pacific ocean man uh, but as an investor, this is gon na, be rocky rocky rocky rocky. I don't like it. I don't like it and probably the last thing that i should say uh what i find to be important and, like i mentioned before, i'm gon na make a house a video on the housing market soon. But the last thing that i'd like to say you know about this is uh.

Oh i had it. Then i lost it. Oh the market right how's. This now wait, hey you know what.

Maybe it probably wasn't anything? I guess that's about it. Sorry. I thought i had something else to say, but i guess i don't uh anywho, that's my take. That's my take on the current outlook of inflation and the fed.

I i really don't like their reactions. I i really genuinely feel like they're over pumping the brakes right now. This feels like they're over correcting, and they just don't feel like they have control, which they probably shouldn't, but that they should just be straight, and this is gon na really do some good for the long term. I think it would take volatility out of the markets.

I think uh you'd have an initial price in an initial correction to that that admittance of of guilt whatever, but in the long term i think it'd be a good thing and i i hope they come to their senses. I guess i don't know i'll catch. You guys all later appreciate you tuning in much lovely taps: peace.