Speaker 1: 0:01

Felix here and welcome to this. I was gonna say pre-market live stream. That's because not what's normally what I say, but it isn't because, well, today it is jimmy carter's funeral. I don't know much about the man, but he's uh, being remembered today, so the markets are closed for him. Weirdly enough, bond markets are open till 2 pm. That gives us some clue. Futures markets are also open, which gives us quite a lot of clue. Plus, we have a bunch of things that I think is very important for you to understand to become an amazing investor, which is our goal here. So let me share my screen with you and share with you what we've got in store for you.

Speaker 1: 0:34

I want to walk you through the Fed minutes from yesterday, just very briefly, what they actually mean for you. It's really only sort of one thing in there that is important Wall Street banks are warning us of an overreaction. They're saying the market shifted too far in one direction and what that means. That's actually a good thing if they're right. Now we have the big recession indicator that was triggered yesterday, and mainstream media will pick that up in a couple of days. They're usually a bit slow to the party, but it doesn't mean what you think it means. So I want to explain that to you as well. And then I want to do a huge q a to answer your questions here, and you're very welcome to put them into the q a thing or just in the in the live chat, and I will do my utmost to get through them all. So that sounds good. Does it sound like a plan? If you are here and ready and awake, um, say, um, put a smiley in the chat. I think that'll do to show me that you're actually paying attention. Horrible president, and not many people seem to be saying particularly kind things about Jimmy Carter, although I think when one people are dead, it is good to find something kind to say about them. I'm sure he was a lovely man somewhere, somehow. So let's jump straight into it then, shall we?

Speaker 1: 1:49

This is the best summary that I could find of the FOMC minutes and it paints it into very, very, very short things here. Questions here Justin, yeah, you can. There's also a Q&A thing at the top which might make it a bit more organized, but wherever you want, wherever you want, just put them there. Okay, the smileys are here. You guys are awake. Brilliant, that's always a good thing to do, a very good thing to do is also just stand up and jump around. Seriously, that helps. I can't see it, unfortunately, but it helps.

Speaker 1: 2:17

So what were they saying here? They're saying we are at or near a point at which it would be appropriate to slow the pace of easing. So they're saying we're still going to cut rates, but we're going to do it more slowly than in 2024. And the vast majority of participants, which is all the Fed muppets forecast it as appropriate to lower the target range in December. So they cut rates in December.

Speaker 1: 2:49

A number of participants indicated that incorporated placeholder assumptions regarding potential trade and immigration policy changes into their projections. So you know what they're saying. They're saying we think what Trump's going to do is going to drive inflation up through tariffs and tax cuts. So they could be really, really off on that. If Trump's tariffs come in a little bit lower than expected and if tax cuts are offsets by Elon's spending cuts, if Elon gets rid of $2 trillion of spending out of the federal budget a year, then we're going to be in massive deflationary hell. By the way, interest rates will go to zero tonight Maybe not tonight, but overnight. So they're also projecting lower GDP growth and a higher unemployment rate. So they're basically putting in pretty kind of negative, nasty assumptions here. And if you get lower taxes in the US, lower regulation, you might actually get higher GDP growth. So there's a lot of assumptions in there and they're basically saying we're just going to wait and sit it out.

Speaker 1: 3:56

And what did I say to you in November and December? I said I think the Fed's going to wait and see what Trump does and then they're going to react to it because that's kind of their job. So this is sort of just a wait and hold approach, and I think the market's overreacted to it somewhat, thinking well, we're not going to get any rate cuts, we're going to get rate cuts. The question is are we going to get two, three or four or five in 2025? I think it's not as dire as people are sort of making it out to be. Does that make some sense to you? Does that make some sense to you? If it makes some sense to you, put a number one in the chat here so that I can see it makes some sense to you, which is always useful, so that I know that what I'm talking about isn't complete rot.

Speaker 1: 4:35

So this is the federal fund rates futures, the what I know it's weird, isn't it? You can trade the US federal interest rates with futures. I know it's exciting. If you really got no life, that's something you can do. And essentially what it's saying is that by Okay, a lot of ones here. Brilliant, I like that. Thank you very much. 0.5, shadow of the legend that's also fine. It doesn't need to make 100% sense. I've just tuned a little bit more regularly and over time it'll make a little bit more sense and I'll try to be more clear as well.

Speaker 1: 5:10

But by December this year, at the moment we're looking at a 4% interest rate, which isn't terrible, right, it's not wonderful, but it isn't terrible. It's sort of two rate cuts. That's kind of what we're pricing in. I suspect we're going to get a little bit more than two rate cuts, and the easiest way to do that would be the government cuts the deficit, because that's really what the whole thing is about. You know, the whole story here is the market's down because US bond yields, the US interest rates in the market and the traded markets are up. Why? Because we're worried about how much debt there is. If the government is seeing more and more debt, they have to pay more and more interest to attract people to buy that debt. Therefore, the interest rates go up. So if they have less debt, if they issue less fresh debt, then the interest rates will go down. It's kind of a self-fulfilling cycle. Jp needs to step down. I don't think he will.

Speaker 1: 6:11

Carter's birthday not quite his birthday, but yes, end of life day Is that a day? Okay, so let's listen to our friends at Goldman Sachs. I say friends and I mean you know what I mean. Right? The buggers in Wall Street are saying the bond sell-off. This is a confusing phrase, right? Who's confused by bond prices versus bond yields? If that's you, put your hands up, just put a hands emoji out there or thumbs up or something like that in the chat and show me that you are slightly confused by bond prices and bond yields. Because, well, most of us are. I still am, and I've been doing this for like 20 years now. So you have bond prices and you have the yield, and the Can't see that, can you? The yield is basically a fancy word for interest rate. Okay, I'm glad a few of you are brave enough to also say this is confusing.

Speaker 1: 7:15

They work in opposite directions and the way you can think about that is, bond prices always start off at 100. So they're always worth 100, right, when they go down, say they go to 90, but eventually they will pay you back 100. So you've added a little bit of extra value that you're going to get back when the bond gets repaid. That's sort of it in a nutshell. So at the moment, yields or interest rates have gone up a lot, and that's simply the simplest way of thinking about that. Is you, you got money right. Money always wants to make. What more? Money and money can either go to stocks or it can go to bonds. Now if the interest rate on bonds goes up, so so you pay a higher interest rate there, say you pay 5%. That's quite attractive. So then more of the money will go to bonds and a little bit less will go into the stock market. So money will flow from the stock market to the bond market because yields are high, and that's what's been happening here the last couple of weeks really. John, thanks very much. You're very, very, very nicely summarized. So they're basically saying the markets have overreacted the disinflation trends, so lower inflation support a more dovish outlook, strong data, but softer job recalls may ease the pressure on the interest rates, and the only reason that bond interest rates are high is because there is so much government debt out there and there's a fairly good, decent chance that Elon might fix it. So they're basically saying I think they've overreacted by the fricking debt. They're not quite saying that, but that's what they're implying.

Speaker 1: 8:59

Now, what about this one here? I'm going to hit you with one more big data point and then we'll go to some of your questions. So put your questions like what are you struggling with into the chat here. I'd love to see it and literally put them into the chat, maybe start with a couple of stars or something like that, so that I can see them Start your question with something like that, and then I'll stand out in the chat as I scroll back up.

Speaker 1: 9:21

So this here is credit card debt, and what do you see? Well, you see that this December, the amount of credit card debt out there dropped very significantly right, very significantly, and you might be thinking that's a very good thing. The US consumer is getting more wealthy. They have paid off their credit card balances. They're finally seeing that buying shit that they can't afford with a credit card that's going to charge them 29% a month isn't a good idea. We finally achieved something with our financial education. I'd like to be an optimist. I know we're making an impact because I get all the kind messages from thousands of you every week and you know a lot of you making a lot of money, which is brilliant in your teaching your children and everything else which I love you for. But do you think that that's what's happening here? Do you think we've made such an impact that people have stopped spending on their credit cards? Yes, no, I put it in the chat. I'm leaning towards the no.

Speaker 1: 10:21

Generally speaking, the only reason people pay their credit cards off is that they think the world is about to end, as in they're going to lose their job, or recession is going to hit or something terrible is about to happen in the economy. That's really the only time that happens, and the last time we've seen that was 2020. It was COVID. Now, it did help that Papa Biden basically walked around, knocked on everybody's door and said would you like a few hundred million dollars? Here they are, no questions asked. Didn't quite happen like that, but more or less, and that helped. But, generally speaking, it's a bad thing when people pay off their credit card balances for the economy, which is another one of those Wall Street things, right. The economy, which is another one of those Wall Street things, right. Higher unemployment is good, more consumer debt is good, like I mean, really it's a really messed up world, isn't it Really messed up world?

Speaker 1: 11:12

Okay, most of you seem to be agreeing with me on the no thing.

Speaker 1: 11:14

Yeah, I agree with you on that one as well.

Speaker 1: 11:15

I think you're right. I think you're right. So this is a little bit of a fly in the ointment, but I think what I look at is you're getting a president in. Whether you like him or not don't really care, but he is going to put in. He's going to lower taxes, right. He's going to reduce regulation and he's going to be very business friendly. And he's going to be very business friendly, so very business friend. That's sort of my Chinglish here, which I'm sure is an offensive sentence himself, oh my God. And therefore I think the economy will do very well, at least temporarily. The whole thing might be debt funded and all of that Possible, but in the short term, I think the economy will do very well, at least temporarily, the whole thing might be debt funded and all of that possible, but in the short term, I think the economy will do very well. So I don't think this is the warning that mainstream media is going to make it out to be the whole. Like you know, the world's about to end thing.