Prepare for the FORCED Recession | The Fed's Great Reset.

oh if there's one thing that could push us into a recession it's this we're going to talk about a realistic bear piece from Nick T and the Federal Reserve which really outlines exactly what our risks to our economy are which means if you're invested in Risk assets like stocks or even crypto or to some extent real estate you probably ought to pay attention to this video and if you make it to the end I will give you a beautiful drawing that Max made on my notes as well as a small little update for the channel which will be pretty exciting for some of the regular viewers with that said let's get into the bear talk so Nick T just reported on another two very interesting pieces one was Wall Street Journal piece hero he's of course our fed mouthpiece in case you're not familiar with him he's the guy who tends to be the FED leaker of information and after he posts something people like okay that's basically the FED trying to Prime markets for what the FED is up to and so one piece was the Wall Street Journal uh an article he wrote there and then a second piece was from the San Francisco fed that he retweeted I'm gonna look at both of these in conjunction now a lot of people wonder Kevin why do you bother looking at Bear pieces why can't you just be happy that stocks are green or things are going okay your Nike Swoosh recovery is playing out why pay attention to the bear pieces well I'm a big believer that if you're not aware of what your Achilles heel is then you won't see the attack coming and you'll get be you'll end up being caught blindsided it's kind of like you don't want risky profitless companies going into a recession you have to Pivot and dump those or if you're a fighter and let's say You're really weak handed with your right hand well then you want to make sure that you're in a position to fight with your left all the time okay bad fight analogy probably that's maybe why I should have just stuck with the Achilles heel analogy of if you actually get stuck there you die but whatever point is you got to pay attention to what your weaknesses are so you can position yourself appropriately and I hate to say it but a lot of the content that I see on social media is a string of nonsense I saw it again yesterday I didn't have any juicy Goldman Sachs pieces to read because it was Sunday so I watched a video and what did I see in the video you know um inflation's at a 40-year high that's bad and then this one was even more almost criminal you ready for this let me give you this one this was criminal in my opinion somebody made a video going U.S banks are abruptly freezing bank accounts and it was this is basically it enticing headline of like oh my gosh they're they're freezing bank accounts and I thought the Creator would potentially look and go okay look you know here's really what the story is but no it was literally title of a video U.S banks are properly freezing bank accounts and then the content of the videos this is why you can't trust the banks this is why you should only trade this is why the economy is doomed and I'm like good Lord okay what what's going on so we do a little bit of looking and yeah it is true that Bank of America has had an increasing number of accounts Frozen recently but why is the part that matters and Bank of America well first of all the Articles and the journalists quote that oh well Bank of America says it was shut down you know their accounts were shut down and they refused to give the customer an explanation basically saying the customers stuck at the bank with no access to their funds and now they're enforced poverty which sounds really bad but it's not until you actually get two-thirds into the article that you hear that they're actually banking policies that require Banks follow up on suspicious activity reports and freeze accounts that may be the subject of fraud but it gets even worse when you actually get to the bottom of the story Bank of America told the news outlet that this particular complainer that his bank was frozen actually submitted at a fraud report to the FBI why the F suggesting that a scammer was impersonating them and then the bank got that report from the FBI and the bank froze the person's account but the person who made the social media video suggesting thanks for phrasing people's accounts this is a sign the economy is going to collapse didn't bother reading past probably the first third of the article I was thinking myself oh this is a disservice to social media it's embarrassing uh anyway look I wanted to start with this preface I know it's a little bit of an elongated preface but I think it's really important because it shows us that you know headlines and the things people talk about you know they go for beer and they're like hey man you heard yeah Bank of America has been freezing more bank accounts it's like hey man did you read the rest of the article no but but people do that all the time I hear headlines all the freaking time even from people around me and I try to minimize them I always fight back but it's hard because it's just the world we live in is just so so headlight driven okay anyway so let's get to the Nick T piece hopefully you appreciated that extra free bit of a perspective in Psychology if you do like that remember I've got a coupon code expiring in the next two days for the program so I'm actually building your wealth with actual psychology for not just investing in stocks investing in companies and researching companies but also the same thing for Real Estate going from zero to millionaire real estate it's very possible I did exactly that and you can too uh so let's get started with Nick T finally after like five minutes although I think that was very productive so Nick T is lamenting that there are two sides of debate right now one where economists are concerned that easing inflation will be temporary that basically prices are going to start skyrocketing again and inflation will rise again and the others say that the FED is looking in the rear view mirror and they're totally ignoring that price pressures have already started to subside now this is interesting because it sets up a very casual debate but there's actually more to this and I want to show you where the real red flag is that could drive us into recession so the real red flag actually comes from okay not that earnings piece hold on a sec that's the earnings call we broke down it actually comes from this Federal Reserve Board of San Francisco economic letter and what I think is really incredible about this and there's a lot of technical wording in this we're going to simplify it is they make it a very very clear what the real fight actually is and I'm going to simplify that because if I read all this out I'm going to lose you so let's start simply first we know that the prices of oil gas natural gas energy and a lot of things have been growing at a slower Pace or just outright falling that's good we've also been seeing rents start declining that's good well I mean let me clarify that rents haven't actually started declining whereas inflation has started declining very different things right right rents declining are like yay my rent went from 1900 to 1850. rental inflation declining is like yay my rent only went from 1900 to 1910 as opposed to from 1900 to 2000 right anyway so we've expected and have been watching rental inflation come down that's great the part that's left is the non-housing super core Services side we've already heard that that's old news but here's the new part this is the concerning part okay so remember three parts of inflation we're good on Goods so far we're good on housing maybe asterisk we'll come back to that and number three non-housing super core services and the San Francisco board piece which Nick T references talks about two problems one could be good one could be bad number one if you have super core inflation based on what's going on with how much people are being paid for wages and therefore how much the cost of services are going up like hotels air travel very labor intensive or medical services financial services whatever when those wages go up those prices tend to go up as well at least so we thought the San Francisco Federal Reserve here board they suggest well we find that core service inflation actually goes up the most with rent inflation this is a high sensitivity environment so in other words rent goes up and all of a sudden like all of the doctors and maybe the hotel folks or whatever everybody's raising their prices not because of wages but actually because rent Skyrocket that was a weird crack but anyway that's crazy because pause for a moment we've regularly been thinking it's wages that cause inflation to go up I in fact I just started by reiterating that idea but the board of San Francisco actually thinks no it's rents going up Okay cool so if that's true that rents Drive Services inflation then as long as we remain highly sensitive to rents driving inflation for core Services inflation should plummet because rent inflation is falling that would be good that would be called the high sensitivity scenario that would be very very good however there are two really big problems that could come first as we go back to what was historically normal and that was going back to 2019 where we had low sensitivity of rent inflation affecting Services inflation this could potentially not be so good because it could mean that even though rent inflation is falling core Services could keep going up so in other words if we want to draw the uh sort of a couple little sad faces here a sad face would be either number one rent inflation falling not really affecting so we'll put a equals does not not really affecting core inflation that would not be ideal and this unfortunately is possible the other thing that is possible as well and this is a danger that all of us can track we could look at leading rental data from apartment list Zillow Redfin a core logic every month they give you rental price increase data and that data suggests that rents are slowing in their growth which is good but if for some reason rent inflation goes down and then pops up again it's going to be a problem given that housing is rebounding in terms of housing prices it is possible that rents could go up again and so that would also be really bad because either rent inflation keeps going down but it doesn't affect core which is bad or rent inflation actually goes up and it does affect core which would also be bad right so really what you want is you want rental inflation to keep falling and it to affect core okay there's a lot there let me simplify that a little bit and we're going to get back to the Nick T piece here because there are more insights to go simplifying this we need to see core inflation fall we already know that we need to see rent inflation stabilize now anecdote which means it is from my personal research there is more competition coming for rentals in every single Market I go into but it's not just more competition for rentals it is also more competition for houses we are finally at least in the areas that we are searching for Real Estate noticing that finally the supply of homes is starting to rise that's good even though transactions are down and that has part of the equation of it four months Supply we are starting to hear more Realtors talk about hmm it seems like inventory is slowly starting to rise now is that enough to make for any kind of housing crash where everybody's going to be able to buy the dip on real estate for pennies on the dollar no no that's very unlikely however will it potentially create a more balanced environment where you could finally go buy some wedge deals like I teach in the courses on building your wealth link down below step by step a lot of people by the way lately have been bundling zero to millionaire real estate investing and I was surprised by this but they're bundling zero to millionaire real estate investing and the income course which features AI the how to make more money and get sh90 done faster with AI then I got to thinking about it I'm like but wait a minute if you actually increase your income before you go into an opportunity to buy real estate you have more income to buy more real estate and maybe that does make sense so I thought that was really cool uh anyway a little other anecdote so keeping that in mind that we want to track what's going on in rental world right now the good news is it appears housing inventory both for rentals and for sales is rising which should be a leading anecdotal indicator that rent inflation will stay low that's what we want but it doesn't mean that low rental inflation is definitely going to solve core inflation for the fat and that's where we get to the rest of what Nick T talks about so before we talk about that debate let's give you a quick update right now we have no SCP coming for the FED meeting in two days we also know that there's a 99.2 percent chance of a 25 BP hike on Wednesday I know this is a little weird psychology but the FED is basically explaining this away by arguing they kind of just extended the time frame of doing a 25 BP hike it's kind of like arguing we did to 12.5 hikes we didn't stop and start again like we had the problem of doing back in the 70s which is really bad that's at least what they're trying to excuse fine September actually has an 81.5 chance of remaining flat there's about a 17.9 chance of getting 5.5 percent so another 25 PP okay fine so now we're caught up we want to see rental inflation grow fall we want to see core inflation fall we want to see rental inflation effect core we are kind of separated from wages a little bit and this is interesting because that's what the San Francisco Federal Reserve board suggests is that it's not really so much wages right now and this I thought was really sneaky what's on screen now the last time we heard Jerome Powell speak he actually suggested that three percent wage growth would be consistent with two percent inflation that was incredible and then when we looked at the research we saw that over the long term we generally had about two percent two point seven percent wage growth and it did equal actually less than two percent inflation so historically that has been true but what I thought was interesting here is it looks like they just moved the goal posts look at this Nick T just wrote officials are likely to see 3.5 percent annual wage growth as consistent with inflation between two and two and a half percent huh wait a minute why are we talking about two and a half percent for inflation why are we talking about three and a half percent for annual wage growth keep in mind that wage growth over the last year has been 4.5 percent Junes in inflation rate for wages was actually 0.4 which is more than what we've been growing the past year which annualizes out to 4.8 percent so so far wage growth isn't actually going in the right direction and instead the FED is moving some of the goal posts but that's not necessarily terrible because maybe wage growth isn't what matters as much I based on what the San Francisco Federal Reserve board is saying is this is actually rental inflation and the leading indicators of that are positive that's good as you can see a lot of thought so far went into this like I really try to find those Achilles heels or those you know weekends Okay so uh this then talks about okay this you know these different views on inflation this was a little boring uh we talk a little bit about how here wages and the wage Market is starting to slow although I just said this maybe doesn't matter so much but there's some talk about how uh wage gains seem to be slowing the number of new jobs filled seems to be slowing the number of openings is slowing everything is suggesting we're getting into sort of a smaller or or more calm labor market and we just have to watch now what happens with the rental market so what I like to do is set the game plan fed right now has a weird license to wait in other words we have some signs of softening unemployment though we're not sure how much that's going to hit inflation we have signs that inflation is moderating but we're not sure if core is being sticky we know that the next Labor report is on August 4th write that down on your calendar next CPI report is August 10th write that down on your calendar because it's Lauren's birthday and it's a CPI report and then we'll find out in the September meeting are we going to get another hike or not probably based on these two reports uh we'll also have a summary of economic projections in September now I promised you a picture and some scenarios to bottom line all of this first this is Max's picture he started drawing me a house I kind of like it with the exception of the fact that it looks like a guy with really short hairdo uh droopy eye and a sad face so I'm gonna have to have a conversation with him about the meaning of this house that he's drawing here because yesterday we went tubing in Big Bear Lake and I have to say he hit a blast he's five and he goes faster uh or or you know tells the driver of the boat to go faster than Jack does who's seven like Max is like the little brute Jack's the kind of one you kick in the butt and he'll go oh Dad why'd you do that Max who kick in the butt and he'll turn around I'll fight you he's like that little Chihuahua that's kind of crazy uh anyway we'll have to talk to him about what what he's trying to create here uh before I talk about these scenarios as well quick thing I'm gonna try something uh uh this is this could be a little wild but I'm gonna try something uh I what I'm thinking about doing is having this interesting schedule where we basically go we do like a 520 maybe earlier uh Public Live and then about 6 25 we do the course live okay ready for it around 8 or 8 30. I go live again and we'll do Market reactions uh commentary maybe Politics as well so it'll sort of be like the midday stream and I'll actually likely do a lot of this on a different set uh it'll give me a little bit more flexibility because I'll actually be in the office with the team while we do that and then we'll probably Fly For Real Estate uh after the Bell which remember the Bell here is 1pm so it actually gives us a really cool time zone hack to still have the second half of the day so we'll see I think that's kind of cool all right now let me know in the comments what you think about something like that but anyway here are the scenarios so bad news this is what the Bears are going to say is that we stay with a strong poor a core and rent inflation doesn't happen either it doesn't happen or just doesn't affect core this would be bad however I wrote house hack my real estate startup finally submitted for that reggae by the way so stay tuned we'll be able to raise funds for that very soon we're still doing the one-to-one valuation you can already go to the SEC website and start looking at the filing there though it still has to be qualified for the by the SEC so stay tuned for that uh and then uh you'll see here that wage inflation does not uh you know moderate more could potentially be an issue though people are still up in the air of what inflow age inflation is going to do obviously the mid scenario here is moderating core rent inflation occur or disinflation occurs but it you know stabilizes however you look at it around two three ish percent the grade would be that core just starts plummeting and we can keep a strong economy my guess is that usually things tend to just work out with a middle bias so we're probably not going to get the best case scenario we're probably not going to get the worst case scenario and we can find this you know we will see this at house hack if we start going in this bad scenario we will see the rental inflation at house Act not only that but we'll obviously see those those core numbers really destabilize so we could we have the indicators to watch for that so overall I'm optimistic but there's definitely stuff to pay attention to when it comes to the fed and this is a full outline for you so if you found this helpful consider subscribing to the channel share the video with anybody you think uh would find this useful and folks we'll see in the next one thanks so much and goodbye now I want you to know this when it comes to AI time is what's going to make you money and if you can prove that value to an employer you'll always be able to be employed so this is another way of making sure that you don't get replaced but

Channel: Meet Kevin

Views: 58,843

Keywords: investing, stocks, stock market, real estate, money, making money, passive income, wealth, starting to invest, meet kevin

Id: HnGhDJvyhoc

Length: 21min 39sec (1299 seconds)

Published: Mon Jul 24 2023