Latest / Felix Nikolas Prehn's Podcast / A once in a lifetime stock market opportunity + Stock Market News 21 March 2024

Transcript

A once in a lifetime stock market opportunity + Stock Market News 21 March 2024 · Felix Nikolas Prehn's Podcast

• 0:00
  Speaker 1: Felix here and good morning to you.
• 0:02
  Speaker 1: It is the day after the Fed event, and what does it mean?
• 0:07
  Speaker 1: Well, it's a big fucking deal Sorry, pardon my French and it is baffling in many aspects, and I want you to understand this, because this is a huge opportunity.
• 0:21
  Speaker 1: This is a huge shift in Fed policy.
• 0:26
  Speaker 1: What we would traditionally expect the Fed to do, they are just doing their own thing, for reasons we shall get into.
• 0:34
  Speaker 1: So smash the you know what.
• 0:36
  Speaker 1: Let's get into this.
• 0:37
  Speaker 1: I will walk you through the key data.
• 0:39
  Speaker 1: We'll also look at jobs, data out just and of course, it'll answer all your questions.
• 0:43
  Speaker 1: So pop them in the chat.
• 0:44
  Speaker 1: That's where they will be answered and let's get cracking.
• 0:49
  Speaker 1: Here we are.
• 0:51
  Speaker 1: Oh yes, also, you want to understand how Fed policy actually works, like.
• 0:55
  Speaker 1: What's the impact of interest rates up or down?
• 0:57
  Speaker 1: How does that actually translate into changes in the real world?
• 1:00
  Speaker 1: How does that actually impact stock prices?
• 1:03
  Speaker 1: How does it impact particular sectors, particular companies?
• 1:06
  Speaker 1: I wrote that out for you.
• 1:08
  Speaker 1: Just go down below to phelxfriendsorg and you get like a six, eight page document or something that walks you through it, hopefully in language that's fairly easy to understand.
• 1:18
  Speaker 1: That's always my goal.
• 1:19
  Speaker 1: So let's have a look at this, then this is what really changed.
• 1:22
  Speaker 1: This is the March, the dot plot.
• 1:25
  Speaker 1: And what the heck is a dot plot?
• 1:27
  Speaker 1: It's basically all the muppets at the Fed saying where our interest rates going to be at the end of 2024 and at the end of 2025 and beyond that, nobody really cares, because who the heck knows what happens in the long run.
• 1:42
  Speaker 1: And well, except that we'll all be dead.
• 1:45
  Speaker 1: That's that's.
• 1:47
  Speaker 1: That's cheerful, isn't it?
• 1:48
  Speaker 1: Now, I've cheered us up.
• 1:49
  Speaker 1: I've depressed somebody.
• 1:50
  Speaker 1: One of the viewers has just gone.
• 1:52
  Speaker 1: Oh no, he said we'll all be dead in the long run.
• 1:54
  Speaker 1: They always say taxes and death are inevitable.
• 1:57
  Speaker 1: Right, death is taxes.
• 2:00
  Speaker 1: I don't know, I don't think it's inevitable, but all right.
• 2:04
  Speaker 1: So what is it?
• 2:04
  Speaker 1: What we were, we were before, is we had a lot of dots down here that no longer exist, and that's being the Fed being bizarrely more cautious.
• 2:16
  Speaker 1: So the vast majority now see interest rates at 4.75% at the end of the year, which means what that means?
• 2:27
  Speaker 1: Two cuts, two cuts this year they seem to be okay with, and a couple of people are thinking only one cut, and then a couple of people up here are thinking no cuts whatsoever.
• 2:39
  Speaker 1: That's sort of the picture, in short, and we can live with that.
• 2:43
  Speaker 1: Why can we live with that?
• 2:44
  Speaker 1: Because that's precisely what we were already expecting, but it gets better for us long stock investors here.
• 2:53
  Speaker 1: That's what that chair Powell said.
• 3:03
  Speaker 1: The inflation data that's been higher the last two months.
• 3:06
  Speaker 1: He sort of said, yeah, but we're still making good progress, and he's basically saying he will be careful, be safe, to data speak, but he's sort of like poo-pooing the higher inflation rate and he's basically saying inflation tends to be stronger in the first half of the year.
• 3:23
  Speaker 1: We're not gonna overreact to two months of data.
• 3:25
  Speaker 1: So he's no longer the like I will raise rates and I'll keep them there forever.
• 3:30
  Speaker 1: Guy, that guy has left the building.
• 3:31
  Speaker 1: I don't know what happened to him, but he's you know he moved to a small island of South America and joined his friend and that's quite positive.
• 3:40
  Speaker 1: So the market is absolutely freaking, loving this.
• 3:44
  Speaker 1: Look at the pre-market here.
• 3:45
  Speaker 1: Pre-market, there we go.
• 3:49
  Speaker 1: Everything is green.
• 3:50
  Speaker 1: Big tech is green.
• 3:52
  Speaker 1: Nvidia green, meta green, google green, microsoft green, amazon green, tesla green.
• 3:57
  Speaker 1: Apple isn't why not?
• 3:59
  Speaker 1: The Department of Justice is gonna sue them for something or other, which they were gonna do anyway, but the market doesn't obviously like that very much.
• 4:07
  Speaker 1: Fines will come out.
• 4:09
  Speaker 1: But let's have a look at a couple of it.
• 4:12
  Speaker 1: I'm gonna show you some charts and I appreciate sometimes the charts I show seem a little in depth.
• 4:16
  Speaker 1: That isn't for everybody, I also get that.
• 4:19
  Speaker 1: But I wanna give you real value, not just sort of like is the headline like SCNBC or something where people are just talking right To just fill space?
• 4:29
  Speaker 1: They can slide out those into it.
• 4:32
  Speaker 1: Financial conditions what the heck are financial conditions?
• 4:35
  Speaker 1: It's the blue line here.
• 4:36
  Speaker 1: Financial conditions it basically says to you how easy is it to borrow money?
• 4:45
  Speaker 1: How freely are banks lending?
• 4:49
  Speaker 1: And the higher they are, the worse they are.
• 4:54
  Speaker 1: The lower they are, the better they are.
• 4:55
  Speaker 1: So down here is good, up here is bad.
• 4:59
  Speaker 1: Is that simple enough?
• 5:00
  Speaker 1: And you can see that since 2023, they've come down tremendously and at the same time, interest rates up here in red have gone up tremendously.
• 5:12
  Speaker 1: How does that make any sense?
• 5:14
  Speaker 1: Surely higher interest rates should like, restrict the market, should restrict lending.
• 5:19
  Speaker 1: They've done the opposite.
• 5:21
  Speaker 1: So that's a really weird place to be.
• 5:24
  Speaker 1: That makes absolutely bugger all sense.
• 5:27
  Speaker 1: And we also have the effective interest rate.
• 5:35
  Speaker 1: And how do you look at that?
• 5:38
  Speaker 1: You're basically saying what's the current interest rate?
• 5:43
  Speaker 1: And then we take into account financial conditions and then we take into account what are the cuts gonna be in the next 12 months?
• 5:51
  Speaker 1: Why?
• 5:51
  Speaker 1: Because the markets are forward-looking beast.
• 5:54
  Speaker 1: So just to explain that again, it takes into account what the market expects and that's actually the thing people react to, not what the bank says.
• 6:04
  Speaker 1: The interest is right now and we've got this massive drop in financial conditions, which just means like we're loose.
• 6:13
  Speaker 1: I mean, we're really loose.
• 6:16
  Speaker 1: We're running around naked, going.
• 6:18
  Speaker 1: Oh my God, the world is free, everyone's throwing money at us, which is really weird again.
• 6:23
  Speaker 1: So how the heck does that happen at the same time that interest rates go up?
• 6:26
  Speaker 1: Well, it's a very unusual event, a very, very unusual event.
• 6:36
  Speaker 1: And at the same time, inflation is still somewhat elevated not massively elevated, but still somewhat elevated.
• 6:44
  Speaker 1: So why would they come out, like in December, and say look, we're gonna cut rates?
• 6:49
  Speaker 1: Coming out again yesterday is basically saying we're gonna cut rates when inflation's high, when they've actually made money more freely available than pretty much ever before.
• 7:01
  Speaker 1: And that's a weird thing.
• 7:06
  Speaker 1: That's a really, really weird thing.
• 7:08
  Speaker 1: I'm gonna score past a couple of these here.
• 7:09
  Speaker 1: We don't need to look at them all.
• 7:10
  Speaker 1: And the US economy is capacity, usage of sort of factories is really high.
• 7:17
  Speaker 1: We've got job openings pretty extraordinarily high compared to where they have been historically.
• 7:24
  Speaker 1: That's jobs.
• 7:25
  Speaker 1: So the economy is tight, inflation is still modestly high and the fed's going we're gonna cut rates.
• 7:32
  Speaker 1: Well, what's that gonna do?
• 7:34
  Speaker 1: Well, it's gonna do two things.
• 7:37
  Speaker 1: One, it's going to reduce debt cost of the government and secondly, it's going to make the rich richer like a lot.
• 7:55
  Speaker 1: Why?
• 7:56
  Speaker 1: Because they're basically inflating asset prices.
• 7:59
  Speaker 1: They're making real estate more valuable, stocks more valuable, but everything is going up.
• 8:03
  Speaker 1: Everything is going up like it is today.
• 8:05
  Speaker 1: And what's the conclusion?
• 8:08
  Speaker 1: Honestly, honestly, you want to be able to talk about this, all about.
• 8:15
  Speaker 1: If you look at what they did during COVID, right?
• 8:17
  Speaker 1: So we had COVID, I mean, we probably had COVID.
• 8:20
  Speaker 1: It was like flu.
• 8:21
  Speaker 1: I think it is flu, isn't it?
• 8:23
  Speaker 1: And so a year ago, I couldn't have said that they would have shut the channel down?
• 8:27
  Speaker 1: Weird world, right?
• 8:28
  Speaker 1: What happened is the Fed printed 40% of all the US dollars in existence and the dollar has been around for a while.
• 8:50
  Speaker 1: So in one year, 40% of all the money that's out there right now was created in just that one year.
• 8:57
  Speaker 1: Isn't that staggeringly, insanely, irresponsible?
• 9:01
  Speaker 1: And then what did that do?
• 9:04
  Speaker 1: That caused inflation, duh right, but what did it also do?
• 9:08
  Speaker 1: What was the second side effect?
• 9:10
  Speaker 1: Can't spot the world inflation.
• 9:12
  Speaker 1: What's going on here?
• 9:13
  Speaker 1: Are we pressed a button?
• 9:14
  Speaker 1: Seriously, what is going on Inflation?
• 9:21
  Speaker 1: The second thing that went on is stocks went up, property went up.
• 9:29
  Speaker 1: Pretty much every asset class out there went up massively and the rich got way, way richer and I'm not talking about the 50 farmer billionaires that were created, I'm just talking about everybody who owns assets.
• 9:44
  Speaker 1: If you own assets, you're kind of part of the rich.
• 9:47
  Speaker 1: That could be stocks, that could be real estate.
• 9:49
  Speaker 1: Everything went up because you created more money and the money.
• 9:54
  Speaker 1: What does money do?
• 9:55
  Speaker 1: What happens when you have more money, more money?
• 9:59
  Speaker 1: What does money do?
• 10:00
  Speaker 1: Money seeks a return.
• 10:07
  Speaker 1: Oh, let's me make that simpler.
• 10:09
  Speaker 1: Let's see wants to make more money.
• 10:17
  Speaker 1: As simple as it is.
• 10:19
  Speaker 1: When people have a lot of cash lying around, they look to invest it, right?
• 10:25
  Speaker 1: So people wanna invest that money.
• 10:27
  Speaker 1: That's what this is all about and therefore they're looking to make a return on that money.
• 10:32
  Speaker 1: And you print more money.
• 10:35
  Speaker 1: More people wanna buy the house, more people wanna buy the stock, more people wanna buy the bond.
• 10:42
  Speaker 1: So they're more biased and therefore the prices go up.
• 10:45
  Speaker 1: Right, so you basically are just creating more bias.
• 10:49
  Speaker 1: More bias mean higher prices all around.
• 10:53
  Speaker 1: Higher prices mean what?
• 10:54
  Speaker 1: Higher prices mean more wealth.
• 10:59
  Speaker 1: Now you might be thinking and if you got this wrong, they just wanted to protect the little guy, they wanted to protect the suffering Americans who couldn't afford to buy stuff, right?
• 11:09
  Speaker 1: Well, if you believe that the problem that all of this is all of this created what Inflation?
• 11:16
  Speaker 1: It made stuff more expensive.
• 11:18
  Speaker 1: Who suffers from inflation?
• 11:20
  Speaker 1: The have-nots, the poor, because they don't earn any assets.
• 11:31
  Speaker 1: So they don't earn anything.
• 11:34
  Speaker 1: That's gone up, but their food prices have gone up, transportation prices have gone up, rents have gone up, oil has gone up, everything's gone up.
• 11:41
  Speaker 1: So they are poorer.
• 11:43
  Speaker 1: If you wanted to protect the poor, you would kill inflation, right?
• 11:47
  Speaker 1: So it's the opposite.
• 11:49
  Speaker 1: This is a get rich if you're already wealthy scheme.
• 11:55
  Speaker 1: That's all this is.
• 11:56
  Speaker 1: That's all this is.
• 11:57
  Speaker 1: And if you look at, where does the Fed share come from?
• 12:00
  Speaker 1: Right?
• 12:01
  Speaker 1: Do you know where you worked before?
• 12:03
  Speaker 1: Jerome Powell areas Wikipedia, right, that'll do the trick.
• 12:12
  Speaker 1: Right?
• 12:13
  Speaker 1: You went to Princeton, georgetown, law, and then he was a partner at the Carlisle Group.
• 12:19
  Speaker 1: What's the Carlisle Group?
• 12:21
  Speaker 1: It's a private equity group.
• 12:23
  Speaker 1: They manage $400, $500 billion in asset management financial services.
• 12:30
  Speaker 1: And who's he making rich?
• 12:32
  Speaker 1: The Carlisle Group guys and everybody else who's just like them, right?
• 12:37
  Speaker 1: So this, in my view, is just self-serving stuff.
• 12:42
  Speaker 1: But the good news is you're here, you've got some stocks, you've got some money, you've got some investments you can enjoy in the fricking party.
• 12:49
  Speaker 1: That's what we're gonna do, right?
• 12:50
  Speaker 1: We're gonna make more money.
• 12:52
  Speaker 1: That's as simple as that.
• 12:53
  Speaker 1: We're gonna enjoy everything going up.
• 12:54
  Speaker 1: So have a look at the stocks this morning QQQ, nasdaq's upper percentage point, the SMP, is up half a percentage point at 5,311.
• 13:06
  Speaker 1: What about some of our favorite little tech stocks they have so far is up almost 3%.
• 13:12
  Speaker 1: What about Palantir, our warmongering friends, is up 2.6.
• 13:16
  Speaker 1: And everything is up.
• 13:18
  Speaker 1: Why?
• 13:18
  Speaker 1: Because there'll be more money, there'll be looser money, there'll be lower interest rates and everything will be worth more.
• 13:25
  Speaker 1: So if you're not invested, if you're not part of it and you don't know how to make money out of it, you'll be left further, further, further behind.
• 13:31
  Speaker 1: That's the honest truth.
• 13:32
  Speaker 1: So there we are.