Kevin Warsh首次主持FOMC：放弃前瞻指引，市场定价加息

Hey everyone, and thanks for jumping back into the macroverse. Today, we're going to talk about the recent FOMC and the fact that it was Kevin Warsh's first time um on as the chair at the FOMC. If you guys like the content, make sure you subscribe to the channel, give the video a thumbs up, and also check out the sale on into the cryptoverse premium at intothecryptoverse.com. So, we're kind of in a new era now. Jerome Powell is no longer uh speaking at these FOMC press conferences, so things are going to be a bit different.

It appears like they are moving away from forward guidance and are sort of more so focusing on just stating like the facts rather than sort of speculating on on forward forward guidance. One of the things you'll notice is that the actual release is a lot shorter than the normal releases. If you look at say the last release that we had back in April, back when Powell was chair of the Federal Reserve, you can see it was, you know, almost a page and a half uh of of writing here.

But, if you go look at the recent one, it's you know, it's barely half a page. So, it's a lot shorter. I mean, it it mostly conveys the same sort of the same stuff, but we're going into a new era, right? Forward guidance is not going to be uh something that we're going to be receiving, and uh it is worth worth noting that. Now, with that said, we are still getting the summary of economic projections. However, Kevin Warsh did not add anything to the dot plot himself, right?

So, you can look at what everyone else was saying, and if you look here at the chart, it looks like there's about nine committee members who think that we should have a rate hike before the end of the year. In fact, if you look at the watch tool, the CME Group watch tool here, and you look at probabilities, you can see that the market is sort of speculating that we might actually get a rate hike in the second half of the year.

To the tune of by December, the market is pricing in only a 15 and 1/2% chance that the Fed hasn't hiked rates at that point. Which is pretty low, right? So, you know, one of the things that that Kevin Warsh should say is is that you know, inflation is a choice. And he's right, right? Like he's right. Inflation is a choice. Um there are ways to bring it back down. A lot of times, you know, some of the main things to bring it back down, the powers that be don't really want that stuff to happen.

Things like lower asset prices uh would would bring it back down, but that's not really what, you know, politicians would want, and so that's usually kind of the last thing that that that they want to see happen. But, when you think about, you know, the last 5 years, inflation has been above target basically the entire time, right? I mean, if you look at at inflation uh year over year, I mean, the the target is 2%, right?

And and while headline inflation did get down into the twos, it never actually made it to 2%. Now, today they talked about, you know, how Kevin Warsh historically has said he's more so concerned about what's to the left of the decimal rather than the right of the decimal, but look, we haven't been below 2% inflation since 2021. And you know, I mean, it would be nice if that could change. I was just looking at at at at you know, I mean, think about like all the sporting venues and whatnot.

Like I can't go to a game anymore without it costing like a ton of money. If you look at World Cup tickets, like it it's insane. And I remember when I was a kid growing up, now I just sound like an old man, right? But when I was back in my day, you know, this thing these things didn't cost nearly this much. Um and it kind of makes sense like when you think about if you're my generation, so uh like I was born in the '90s, so if you're my generation, if you're a millennial, then you've probably grown tired of hearing, you know, your parents say, "Well, back when I was a kid, this is what it was."

But look at it. Like look at when your parents were kids, if they were born in say like the '50s, '60s, or '70s, how inflation was relatively low, and then look at these major inflationary spikes that we had throughout the 1970s. And then look at the one we've had this decade. The Imagine the one we just had, but then imagine we get another spike, and how brutal that would be. So, part of the point of this is to say, "Look, over the long haul, the purchasing power of US dollars is going asymptotically to zero.

It is. That doesn't mean assets won't occasionally drop, but it is a reason why you're probably watching this channel to begin with. It's because in order to beat inflation, you know, you want to be invested in something, right? Now, I think a well-diversified portfolio works pretty well for most people. Obviously, that's a way you can sort of slowly grow your wealth. Taking on large bets can can, you know, theoretically increase your wealth a lot if if that's what you're trying to do.

If you can pick out the right things, but if you've if you're just trying to like, you know, take what you have and responsibly grow it, you know, then then a diversified portfolio um is one way to go about it, and that's why a lot of times you know, buying the mark the total market is is what tends to work out over over stock picking, okay? But, that doesn't mean you can't make money in individual stocks. I own a lot of individual stocks.

But, it it it's it's a much more difficult game, right? It's much more difficult game. And and it's one of the reasons why people just talk about, you know, just buy index funds and and go live your life and forget about all this other stuff. Um but, you know, if you look if you look at the summary of economic projections, they're expecting a rate hike, right? I mean, there's plenty of committee members expecting a rate hike.

If you look at the FedWatch tool, invest you know, market participants think a rate hike is coming. And furthermore, if you look at interest rates, one of the things to remember is that the Fed funds rate follows the two-year yield. So, if you look at the two-year yield, and actually, let's just set this to the same price scale. If you look at the two-year yield, one of the things you'll notice is that it's heading back up.

And like look throughout history, right? Look up throughout history. When the two-year yield starts to really move up, there is a risk that the Fed may may have to hike rates. Now, whether they do or not, it's a different story, right? I mean, you can see when the two-year yield started going up in the in the '60s, the Fed was forced to hike here. And then when it started going up again over here in the late '90s, the Fed was forced to hike.

Now, there are examples where the two-year yield sort of spikes up, and and interest rates don't immediately follow, but if the two-year yield were to stay elevated, the Fed would eventually have no choice but to follow through. Now, for me, this continues to be a a headwind for assets like Bitcoin, because they are really dependent on loose monetary policy. It's one of the reasons why you've seen crypto essentially underperform everything this year.

Um and not just Bitcoin. I mean, the mostly the entire altcoin market uh with the exception of a few alts. As always, I'm not talking about your alt. But this is, you know, when it doesn't really matter if the rate hike happens or not for crypto. It's the fact that we're pricing it in right now continues to be a headwind. And you know, wars came out and again, he didn't he didn't really provide forward guidance. Um and he he was pretty clear about that.

But he he's got to be I do not envy his position. I mean, he's basically put was put there by Trump to cut rates. I mean, is it it would be insane uh in in some ways if the first movie he eventually makes is to is to raise rates. But we even speculated about that a long time ago, maybe like a year or two ago, or maybe a year ago, about how you know, if they if they do start to run things

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