Buy the dip.
Summary
TLDRIn this video, the speaker dismisses the immediate market reaction to the Federal Reserve's actions as an emotional overreaction, predicting a rebound from the sell-off. They argue that despite the Fed's indication of continued rate hikes, the impact on market value is diminishing, while the positive effects of interest income transfers are increasing. The speaker criticizes the Fed's approach and compares the market's behavior to a scene from the movie 'Trading Places,' emphasizing that selling off now would be financially unwise, as the economy is poised for growth and significant income transfers are yet to materialize.
Takeaways
- 📉 The speaker believes the market sell-off following the FED's announcement will be retraced, considering it a hyper-emotional and reflexive reaction.
- 🧠 The speaker criticizes the FED's approach, suggesting that rate hikes have a diminishing negative effect on net present value but an increasing positive effect on interest income transfers.
- 📈 Despite FED's comments, there was no significant change in fed fund futures, indicating market expectations for policy moves remain largely the same.
- 📊 The speaker created a graph for subscribers showing the diminishing impact of rate hikes and the increasing positive impact on fiscal transfers.
- 💰 There has been a significant year-over-year increase in fiscal transfers, with $11.2 billion added in the first four weeks of the fiscal year 2023 from treasury bills alone.
- 🗣️ The speaker finds FED's comments, particularly about over-tightening policy, to be misguided and indicative of a lack of understanding of the central bank's role.
- 🎬 A comparison is made to the movie 'Trading Places,' drawing a parallel between the film's plot and the market's reaction to FED meetings.
- 🛑 The speaker advises against selling based on FED comments, arguing that such moves would be financially unwise as the market is poised for recovery and growth.
- 🚀 The Atlanta Fed is raising its GDP forecast for Q4 2023, suggesting that the economy is rebounding from previous contractions due to fiscal spending cuts.
- 🌐 The speaker compares the current situation to historical economic periods, such as Reagan's first term, and suggests a potential for a significant bull market driven by income interest transfers.
- 💡 The final takeaway emphasizes the importance of considering all elements of the situation and warns against making emotional decisions based on one-sided views.
Q & A
What does the speaker believe will happen to the market after the Fed's sell-off?
-The speaker believes that the market will come back from the sell-off, as they think it was a hyper-emotional, reflexive reaction that will be retraced.
What does the speaker think about the Fed's current stance on interest rate hikes?
-The speaker thinks that the Fed's current stance, as indicated by Powell's comments, is misguided and shows a lack of understanding of the central bank's role and powers.
How does the speaker view the impact of Fed rate hikes on the market at this point?
-The speaker views the impact of Fed rate hikes as having a diminishing negative effect on the market due to the discounting of Net Present Value, but an increasing positive effect on interest income transfers.
What comparison does the speaker make regarding the current economic situation and a historical event?
-The speaker compares the current economic situation to Reagan's first term, suggesting that the income interest transfers could lead to a significant bull market similar to what happened historically.
What does the speaker suggest about the Fed's understanding of monetary policy?
-The speaker suggests that the Fed, and by extension Powell, adheres to an orthodoxy that has been proven wrong repeatedly and lacks a nuanced understanding of monetary policy.
What is the speaker's opinion on selling based on Powell's comments?
-The speaker considers selling based on Powell's comments to be a foolish move, as they believe it ignores the positive aspects of rate hikes and the potential for market recovery.
What does the speaker claim about the increase in fiscal transfers due to the Fed's actions?
-The speaker claims that there has been an extraordinary increase in fiscal transfers, citing an example of an 11.2 billion increase in the first four weeks of the fiscal year 2023 due to the discount on treasury bills.
What does the speaker believe the market's reaction to the Fed's meeting will be?
-The speaker believes that the market's initial reaction will be negative, but this will be short-lived and the market will recover, possibly by the end of the week.
How does the speaker describe the Fed's current monetary policy approach?
-The speaker describes the Fed's current approach as 'psychotic monetarism' and 'psychotic monetary view,' indicating a strong disagreement with their methods.
What movie reference does the speaker use to illustrate the market's reaction to Fed meetings?
-The speaker uses the movie 'Trading Places' to illustrate how the market reacts to Fed meetings, with initial moves often reversing after the release of information.
What does the speaker suggest about the role of stocks in protecting purchasing power during high inflation?
-The speaker suggests that stocks, even in countries with high inflation, have been a good hedge against the negative impact of inflation and bad monetary policy, protecting purchasing power.
Outlines
📉 Market Reaction to Fed's Policy Statement
The speaker begins by dismissing the significance of the Federal Reserve's (FED) recent actions, predicting a market rebound from a sharp sell-off they attribute to an emotional reaction to Fed Chair Powell's comments. They argue that despite the FED's indication of ongoing rate hikes, the market's discounting of future value has a diminishing negative effect, while the positive effect on interest income transfers is increasing. The speaker provides a graph to subscribers illustrating this point, noting that rate hikes have not significantly altered market expectations. They criticize Powell's comments as showing a lack of understanding of the central bank's role, suggesting that his approach is misguided and based on political reasons rather than sound economic policy.
🎬 Trading Analogy and Market Behavior
The speaker compares current market behavior to the plot of the movie 'Trading Places,' drawing parallels between the film's depiction of market manipulation and the real-world reactions to FED announcements. They highlight the predictability of market movements pre and post-FED meetings, suggesting that today's sell-off was a reflexive response that will likely reverse, as has happened historically. The speaker emphasizes the importance of income transfers, pointing out the significant increase in fiscal transfers due to higher interest rates, and predicts continued economic growth in the face of rate hikes. They also mention the Atlanta Fed's upward revision of the GDP forecast, indicating a positive economic outlook despite monetary tightening.
🚀 Historical Precedents and Market Outlook
The speaker draws a comparison between the current economic climate and that of Reagan's first term, suggesting that the current situation could lead to a significant bull market driven by income interest transfers. They criticize 'monetarists' for focusing solely on the negative aspects of rate hikes, arguing that the positive effects of income transfers are being overlooked. The speaker maintains that selling off in response to rate hikes would be a mistake, as the market is poised for a strong upside. They provide examples from other countries with high inflation, where stock markets have protected investors' purchasing power despite adverse monetary policies. The speaker concludes by urging investors to look beyond short-term volatility and consider the broader economic context, warning against the dangers of emotional decision-making in the face of market fluctuations.
Mindmap
Keywords
💡FED
💡Sell-off
💡Hyper-emotional reaction
💡Zombie-like reflexive selling
💡Monetary policy
💡Net Present Value (NPV)
💡Fiscal transfers
💡Treasury bills
💡Monetarist view
💡Over-tightening
💡Behavioral reactions
💡Income interest transfers
💡Ronald Reagan's first term
💡World War Three
Highlights
Market sell-off due to Fed's announcement is expected to be retraced as a hyper-emotional, reflexive reaction.
Fed rate hikes now have a diminishing negative effect on Net Present Value but an increasing positive effect on interest income transfers.
A graph was created showing successive rate hikes and their effects on fed fund futures, with no significant change post-Powell's comments.
Fiscal year 2023 has seen an extraordinary increase in treasury bill discounts compared to the previous year.
Powell's comments on over-tightening and supporting the economy later are criticized as showing a lack of understanding of the Fed's role.
Central banking is described as adhering to an orthodoxy that has been repeatedly proven wrong.
Behavioral reactions in the market are attributed to a belief in the Fed's influence, likened to a scene from the movie 'Trading Places'.
The Atlanta Fed is raising its GDP forecast for Q4 2023, indicating economic growth post-previous rate hikes.
The discussion of income transfers and their potential impact on the economy, drawing parallels to Reagan's first term.
Critique of the one-sided view of rate hikes as negative, highlighting the overlooked positive aspects of income transfers.
Advice against selling based on Fed comments, framing it as a potentially foolish move.
Comparison of stock market performance in countries with high inflation, suggesting stocks as a hedge against monetary policy.
Emphasis on controlling emotions and thinking rationally about market volatility and Fed actions.
Warning of financial suicide for those selling on rate hikes, suggesting they are missing out on potential market upside.
The forward economic environment is deemed positive, with the caveat of avoiding global conflict.
Final thoughts on the importance of understanding all elements involved in market dynamics and Fed actions.
Transcripts
hey what's up everybody it is Wednesday
uh November 2nd yeah
I'm not gonna talk too much about the
the FED today because you know I really
think that's kind of irrelevant I'll say
a couple of things I I will say this at
the outset that the sharps sell-off that
that's all going to be retraced the
Market's going to come back from that
you know that was a hyper emotional
reaction it was it was totally zombie
yeah
um reflexive selling you know I knew
that was gonna happen as soon as Powell
went to the uh press conference he was
going to dump all over the market and
he's going to say something like which
he said that you know we're not even
close to ending raid hikes uh and
everything is driven by this
you know psychosis monetarism and
psychotic uh monetary view everything we
know this and I I've been through this
like a million times
um the only thing I'll say is that Fed
rate hikes now have a diminishing
negative effect from the standpoint of
net the discounting of of Net Present
Value right uh but they have an
increasing positive effect on interest
income transfers so I actually created a
graph I sent it out to my subscribers it
basically shows that each each
successive rate hike now and you could
even they could even go one percent I
mean you know basically we have not even
after today's comments by Powell there
was no really no change in fed fund
Futures uh with respect to what they
have built in as the the expectation for
the next policy moves I mean there's
still you know 75 basis points today we
saw that uh it's still a 50 basis point
rate back in December of 75 basis point
rate hike probability probability excuse
me went up a little bit
it's a 25 basis point rate hike in
February so you know that's where it was
before the today and that's basically
still where it is but even if the FED
goes 75 in December I mean even if it
goes one percent 100 basis points in
December it could go 100 basis points in
February uh the the percentage increase
from the prior level of interest rates
now is is a diminishing slope it's a
declining slope
which means that the negative impact
from interest rates it's diminishing but
the positive impact with respect to
fiscal transfers that's going up I I
mean you have right now in the first
four weeks of this fiscal year 2023 we
have 11.2 billion was added just from
the discount on treasury bills okay
that compares to 153 million at the same
time last year I mean it's it's an
extraordinary gigantic increase year
over year and that's just a discount on
T bills that's not eventually what we're
going to see in uh interesting come on
on treasuries on tips you know all that
stuff so I mean you know that's just in
its very early stages so I mean just to
sum up right now
if you're selling based on these you
know stupid comments by Powell and I I
do uh believe they're stupid because he
said something too he said if we over
tighten it gives us room to
um support the economy later on so this
guy thinks like he has to reload like
the FED has to reload like in order he
thinks like that statement shows that he
doesn't even yeah he doesn't understand
even
the role or the function or the powers
if you want to use that term of the
central bank I mean here he is
running with negative cash flow
okay no problem on that
you know still conducting policy with
negative cash flow but yet at the same
time making a statement
which makes it sound like they gotta
build up some kind of you know uh a
cushion so that they could cut rates
again at some point in the future so
like
it's complete idiocy all right it's just
a guy who's a lawyer who got put there
for political reasons
and you know it's not just exclusive to
Powell I mean he's he's the Fed chair
but I mean all these guys I mean how
many times can I say it over and over I
mean all these guys
they just adhere to an Orthodoxy and
it's not even the FED it's it's
throughout Central Banking they just
adhere to an Orthodoxy that has been
proven wrong over and over and over
again and they just keep doubling down
and tripling down on the same thing
I don't pay any attention to it I
understand you know there's going to be
behavioral reactions because the people
are they they've been brainwashed into
believing that that this is the only
thing that counts I mean it's the only
thing anyone ever talks about hey have
you ever and today's I have to laugh
kind of today's activity because
it reminded me a lot
I don't know if you guys ever saw the
movie Trading Places with Eddie Murphy
and um
uh who else was in there uh I was a guy
who used to be on Saturday Night Live
but anyway Eddie Murphy
uh Trading Places it came out in the 80s
and Eddie Murphy was kind of this
homeless guy and uh he was picked up he
was he you know he got into this um
scheme uh where they were gonna teach
him the the owners of this big commodity
trading firm Duke and Duke they were
gonna prove that they could take any
person off the street even a homeless
guy and teach him and
um
you know uh make up a success and at the
end uh you know without going through
the whole entire plot at the end there
was a scene that was filmed on the
commodity exchange actually it's where I
used to work at the at the commodity
Exchange in the in the World Trade
Center you know that before it got blown
up uh and in fact I I knew some of the
guys in that scene they were actual
Floor Traders friends of mine but they
were like extras they put them in there
to fill up I think that thing was filmed
in the uh the orange juice pit in the
world in the commodity exchange but
anyway at that last scene
uh these guys Duke and Duke
they thought they had
um the crop report so they thought they
had inside information but really Eddie
Murphy was turning the tables on these
guys and they knew that what the the
true cop report was and so like the the
Duke and Duke Brothers the owners of
this big commodity firm they had their
Brokers bidding up
the price of orange juice because they
thought the report was going to be
bullish they were told that the the
information in the report was going to
be bullish so they were buying they were
buying the pit was going crazy orange
juice prices were going up we're going
up and then everybody turns to the TV
set when the uh USDA the Department of
Agriculture releases this uh the report
and Eddie Murphy and his his uh Co you
know conspirator in this they were
selling the entire rally because they
knew the report was going to be bearish
and then they released the crop report
and the crop report was like there's
going to be a over abundance a huge
supply of orange crop and everything
started crashing back down and it was
pandemonium and that was like today and
every fed meeting really like you get
this move before the fed and then it
reverses and I said to a friend of mine
you know I said the market was up right
after the FED meeting and I said watch
Powell come in at the uh you know at the
press conference and and dump all over
it and that's exactly what happened and
went down 500 points but again I started
out by saying and believe me on this you
know this is going to be uh that down
move today is going to be recovered I
wouldn't be surprised if it gets
recovered by Friday uh we got a positive
month in November and you know these
these physical flows these income
transfers I mean these are serious
serious significant things and this is
the reason why you know this is the
sixth raid hike
um the Atlanta fed is Raising its
economic uh GDP forecast for the fourth
quarter I mean we've had five raid hikes
coming into this one today
the economy has turned around from two
quarters of uh contraction which was
entirely due to what you guys know I've
been telling you the almost 2 trillion
that was taken away by the fiscal cuts
the spending cuts now we stabilize we're
back in growth in the third quarter and
we're gonna have even faster growth in
the fourth quarter and again the the big
income transfers haven't even started
yet I mean it's this 11 billion in the
first four weeks on T bills you know
that that's peanuts man that's peanuts
wait to these longer dated treasury
Securities start to mature and roll over
with the higher coupon and then you have
an elevated level of fiscal transfers I
mean this is this is classic
you know this is like what happened in
Reagan's first term
all right this is like what happened in
Reagan's first term and it was this was
the kickoff of basically what was the
greatest bull market I think in history
I I you know and it was it was all
income interest income transfers and
that's what's happening right now but
the monitorists you know as I've
explained or tried to explain so many
times they see only one side of the
equation to them rate uh hikes or Raid
adjustments they only see one side of it
it's you know and when you talk about
rate hikes to them
that is unequivocally negative to them
absolutely look it's one thing you know
if you were selling the market or taking
profits or moving to cash in March
before the FED uh started to do this
because yes there is a discounting
effect in the initially from raid hikes
because it reduces the net present value
of uh you know future Investments
because of the higher cost of capital
but then you know you reach a point of
diminishing returns and that's where we
are right now so if you were selling in
March if you were selling in May you
know even if you're selling it in June
but like now each successive rate hike I
just did a spreadsheet I mean you they
could go one percent they could go one
percent in December they could go one
percent in February they could go one
percent in uh uh what was the next one
after that March it's still diminishing
impact from those First Rate hikes but
the other side of that is it's a it's an
acceleration in those income transfers
and that's you know that is totally
totally being ignored
so you can ignore me you could sell you
can move to cash you could get out of
the market you could say that you know
that that's of course that's up to you I
don't decide what you do I'm just
telling you that that would be a foolish
move that that would absolutely be a
foolish move you should not do that and
um
you know there's there's a big I would
say the the the forward environment
is you know as long as we stay out of
world war three which some people say
and we're already in it uh but you know
and I hate to bring that back into the
into the equation but that's a serious
that's a real and a serious threat uh
but speaking just if I'm speaking now
just on the the economic environment
it's very positive and you know it's
it's suicide it's Financial suicide to
be selling on these rate hikes I mean
it's just you know you're selling into
diminishing returns and you're
completely
um excluding yourself from participating
in what's going to be a very powerful
upside as a result and you could look I
mean there's plenty of other examples if
you don't believe me I mean if you look
at rate hikes in other countries even
that have high inflation the stock
market in those countries in local
currency has been absolutely the best
investment to protect your purchasing
power
I mean if you look at Argentina if you
look at Turkey I mean it is absolutely
those markets have
counteracted
the negative impact from inflation and
and
um monetary policy bad monetary policy I
mean stocks are a good hedge against all
this I know it it may sound hard to
um believe right now because we have all
this volatility and I know like people
look at a day like today and it freaks
them out and they get scared you know
that's not my problem I mean you you
have to try to control your emotions and
you have to try to think
um
you know rationally and understand
all the elements that are involved here
and if you go along with a very
you know
um
one-sided View
then
you're setting yourself up
for a major disappointment anyway that's
it for today that's all I want to say
about the FED uh and we'll see what
happens all right everybody take care
bye
تصفح المزيد من مقاطع الفيديو ذات الصلة
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【突發】2024美元大貶值來臨,比衰退更大的雪崩還在後面?把錢放進這三個避險資產,反而更值錢?連巴菲特都不敢看好美國的國運?趕快準備好大型保險箱吧?
First I was in disbelief. Now I'm just laughing.
BITCOIN: SHOCKING TURN OF EVENTS!!!!!!! (jerome)
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