Latest / Felix Nikolas Prehn's Podcast / Felix Prehn - Why Everybody is WRONG about the Market and FED Pivot + Stock Market News 23 August 2024

Transcript

Felix Prehn - Why Everybody is WRONG about the Market and FED Pivot + Stock Market News 23 August 2024 · Felix Nikolas Prehn's Podcast

• 0:00
  Speaker 1: live stream.
• 0:01
  Speaker 1: Somebody just wrote wake up Felix in the chat, which is why I'm laughing.
• 0:06
  Speaker 1: I was actually knee deep in NVIDIA, a fairly technical article which is very, very, very interesting, but I'll have to reread that again a few more times and then I'll break it down for you.
• 0:18
  Speaker 1: I might make a video on the basis of that, but it looks good.
• 0:20
  Speaker 1: That's sort of the first thing here, but of course, today isn't about that.
• 0:23
  Speaker 1: Today is about the Jackson Hole.
• 0:25
  Speaker 1: Today is about interest rates.
• 0:27
  Speaker 1: Today is about the dreaded R word yes, the recession word and why the heck did we dip yesterday?
• 0:34
  Speaker 1: What's happening today?
• 0:35
  Speaker 1: What's power going to say and which way is the market headed, so that you, my friend, are the best informed investor out there and you can make more money than anybody else out there.
• 0:43
  Speaker 1: That's always our goal.
• 0:44
  Speaker 1: Of course, this isn't financial advice.
• 0:46
  Speaker 1: Some of you are still complaining I'm late.
• 0:51
  Speaker 1: I think we're live.
• 0:53
  Speaker 1: I think we're live.
• 0:53
  Speaker 1: It says you're live.
• 0:54
  Speaker 1: I think you should be able to see it.
• 0:56
  Speaker 1: So let's get cracking.
• 1:01
  Speaker 1: And I think there must be a delay in the chat here, because it still says wake up Felix.
• 1:06
  Speaker 1: There he is.
• 1:07
  Speaker 1: Okay, brilliant, we've seen you.
• 1:09
  Speaker 1: Fantastic, all right.
• 1:11
  Speaker 1: Jackson Hole keynote speech in 58 minutes.
• 1:15
  Speaker 1: And what is that all about?
• 1:18
  Speaker 1: Well, we'd like to hear when is he going to cut, how much is he going to cut by, and at what pace are cuts going to come for the rest of the year?
• 1:28
  Speaker 1: But he isn't going to tell us that.
• 1:30
  Speaker 1: So let's get back to that in a moment.
• 1:33
  Speaker 1: The first thing you need to understand is that the market is predicting massive, massive interest cuts, massive, massive interest cuts.
• 1:46
  Speaker 1: The market right now is saying that by the end of the year, interest rates will fall.
• 1:50
  Speaker 1: By what is that?
• 1:52
  Speaker 1: Where are we right now?
• 1:55
  Speaker 1: 5.4, right, so about a percentage point, a little bit more than that, something like that.
• 2:00
  Speaker 1: And that's on yesterday's retreat.
• 2:03
  Speaker 1: So yesterday we were even lower than that, than expectation.
• 2:06
  Speaker 1: So 1% lower rates is what we were expecting.
• 2:11
  Speaker 1: And what has the Fed told us?
• 2:13
  Speaker 1: The Fed told us this green line, which is what is that?
• 2:19
  Speaker 1: Two cuts, something like that, cut on a half.
• 2:23
  Speaker 1: So you know, call it 0.4%, something like that.
• 2:26
  Speaker 1: So the difference between these two is fairly significant between that 0.4% and that 1%.
• 2:34
  Speaker 1: So in red is Mr Market, that's what the market is saying, and in green is what the Fed is saying.
• 2:43
  Speaker 1: What's the problem with that?
• 2:44
  Speaker 1: You can't see my screen?
• 2:44
  Speaker 1: Oh, geez, there it is there.
• 2:45
  Speaker 1: Fed is saying what's the problem with that?
• 2:45
  Speaker 1: Oh, you can't see my screen?
• 2:46
  Speaker 1: Oh, geez, there it is.
• 2:46
  Speaker 1: There.
• 2:47
  Speaker 1: It is what happened to me.
• 2:47
  Speaker 1: What happened to me?
• 2:48
  Speaker 1: I'm translucent, now officially.
• 2:51
  Speaker 1: That was a longstanding problem, but now it is official.
• 2:55
  Speaker 1: There I am.
• 2:56
  Speaker 1: And, as I say, why is that actually a problem?
• 3:00
  Speaker 1: And I was actually thinking of moving myself back to the other corner.
• 3:03
  Speaker 1: What problem?
• 3:10
  Speaker 1: And I was actually thinking of moving myself back to the other corner.
• 3:11
  Speaker 1: What do you think about that?
• 3:12
  Speaker 1: I think it's a bit more natural, somehow, when you have the market expecting 1% rate cut and the Fed only offering 0.4%, somebody's wrong.
• 3:15
  Speaker 1: And the outcome of this is as follows.
• 3:17
  Speaker 1: And this is why yesterday was a little wobbly and there will even be more wobbles to come.
• 3:22
  Speaker 1: It's a lovely word, isn't it?
• 3:23
  Speaker 1: Wobbles.
• 3:24
  Speaker 1: So two outcomes the Fed is wrong, fed is wrong and cuts more.
• 3:34
  Speaker 1: Why would they cut more?
• 3:36
  Speaker 1: Because you get a recession.
• 3:41
  Speaker 1: That's the only reason they'd cut faster, because the economic data comes in, and it's just terrible.
• 3:47
  Speaker 1: What's the second option?
• 3:49
  Speaker 1: The market is wrong.
• 3:51
  Speaker 1: And what happens if the market's wrong?
• 3:57
  Speaker 1: The market is disappointed because we're pricing in all these rate cuts and therefore stocks fall.
• 4:04
  Speaker 1: So it's not a brilliant situation really.
• 4:10
  Speaker 1: We're just too far ahead.
• 4:11
  Speaker 1: We're just too optimistic right now and I love optimism, but on the rates front, I think we're too optimistic to expect four cuts or more by the end of the year.
• 4:20
  Speaker 1: I think you might get three.
• 4:22
  Speaker 1: If you're lucky, maybe you get two, but if you get four it's because recession fears are a real thing.
• 4:28
  Speaker 1: That's a little bit the problem.
• 4:30
  Speaker 1: Press the like button and he will go mad.
• 4:35
  Speaker 1: If you don't, says Christian yes, absolutely, he will lose his, he'll pop his collar and all of that.
• 4:40
  Speaker 1: So, yes, I would appreciate that.
• 4:42
  Speaker 1: 650 people, 84 kind people and 550 ungrateful morons Just kidding.
• 4:52
  Speaker 1: And it's apparently become harder to hit the like button.
• 4:54
  Speaker 1: I think you need to be logged in to Google.
• 4:56
  Speaker 1: That's at least how I justify to myself that my viewers hate me.
• 5:00
  Speaker 1: So, yeah, that's the problem with that chart.
• 5:05
  Speaker 1: Now, what is therefore happening in the stock market yesterday?
• 5:09
  Speaker 1: Well, microsoft's going mad too.
• 5:13
  Speaker 1: What happened is that we, the NASDAQ here this is QQQ, if you can't read, can't hit the like button, can't read.
• 5:22
  Speaker 1: Quality of our viewership is going down the tube, just like the market.
• 5:26
  Speaker 1: That was the recent high, that was the resistance, and guess what we bottled out just before it on the QQQ, and that's not good.
• 5:35
  Speaker 1: That's kind of a slightly lower low, not brilliant.
• 5:40
  Speaker 1: Now, what happened, though, yesterday?
• 5:41
  Speaker 1: Let me find a slightly thinner pen.
• 5:45
  Speaker 1: That yellow line.
• 5:47
  Speaker 1: There is the 50-day moving average, and I know some people think moving averages don't matter.
• 5:52
  Speaker 1: Well, it's exactly where we stopped yesterday, and you see this massive collapse down here.
• 5:57
  Speaker 1: Guess where that stopped?
• 5:59
  Speaker 1: At the 200-day moving average line.
• 6:01
  Speaker 1: It's almost as if these lines matter.
• 6:03
  Speaker 1: It's almost as if lots of people make lots of money on the basis of these lines.
• 6:08
  Speaker 1: But no, no, no, there's nothing in charts.
• 6:10
  Speaker 1: Nothing in charts.
• 6:11
  Speaker 1: Come and learn charts with us, seriously.
• 6:14
  Speaker 1: Join me on Tuesday, felixfrenzorg slash workshop.
• 6:17
  Speaker 1: I'll teach you.
• 6:17
  Speaker 1: But fundamentally, if you go back into recent history, the Jackson Hole event is here, right.
• 6:27
  Speaker 1: So where are we today?
• 6:28
  Speaker 1: Here, that's you and me.
• 6:31
  Speaker 1: We are all standing there right now and we're waiting for Jerome Powell.
• 6:35
  Speaker 1: We're going.
• 6:36
  Speaker 1: What's he gonna say?
• 6:36
  Speaker 1: What's he gonna say?
• 6:37
  Speaker 1: Pretty much no matter what he says in the following month.
• 6:44
  Speaker 1: The market tanks.
• 6:44
  Speaker 1: It did so in 2022, it did so in 2021, it did so in 2023, and it's fairly likely it's going to do the same thing again in 2024.
• 6:49
  Speaker 1: So just be prepared for that, even if you get a little bit of exuberance, because I don't know he gives us all a big, fat, wet kiss or something Likely.
• 7:00
  Speaker 1: That September is going to be not a great month Statistically.
• 7:03
  Speaker 1: That's the case.
• 7:04
  Speaker 1: 2021 caught you out.
• 7:08
  Speaker 1: Somebody says lost in BKK, would they drive into a recession during election season?
• 7:12
  Speaker 1: Well, the government will do its best to outspend any impending recession and you're right, that is the light at the end of the tunnel.
• 7:21
  Speaker 1: The question is are they able to?
• 7:24
  Speaker 1: Can they do it quick enough?
• 7:25
  Speaker 1: With all the things that's going on with electioneering and so on, it's a little harder to spend money.
• 7:28
  Speaker 1: Okay, there we are.
• 7:38
  Speaker 1: You are very welcome Now.
• 7:42
  Speaker 1: This basically sums up Jerome Powell's speech today.
• 7:46
  Speaker 1: You might be wondering why there is a lady flying in the air, because I thought this was very, very apt.
• 7:52
  Speaker 1: This is a high bar.
• 7:56
  Speaker 1: Okay, we're expecting Jerome to say he's going to cut.
• 8:02
  Speaker 1: We're going to expect him to say he's going to cut multiple times and we'd quite like him to say he's definitely going to cut in september and that, at the same time, everything is just fine.
• 8:17
  Speaker 1: He's just not going to do that is just fine.
• 8:23
  Speaker 1: He's just not going to do that.
• 8:24
  Speaker 1: So even if he comes in, I think the best case is that he says very, very little.
• 8:25
  Speaker 1: The best case is that he just says we're looking at rate cuts as an option, we're going to decide this, it's data dependent and then he just walks away.
• 8:36
  Speaker 1: That's actually the best case scenario, because everything else he could say that.
• 8:40
  Speaker 1: You know, we're not looking at big cuts, we're not looking at multiple cuts, we're just looking at one at a time, or we're concerned about the labor market you know stuff like that, just like screams recession, right or we're not going to do enough.
• 8:54
  Speaker 1: So the likelihood of him disappointing today is, I think, greater than a lot of people think.
• 9:02
  Speaker 1: And go back a couple of days, I was quite bullish on this Jerome Powell speech, but if you look at market expectations, we're basically saying to him do this.
• 9:11
  Speaker 1: I can't quite see Jerome Powell doing that.
• 9:14
  Speaker 1: She got out of a cannon, says Danzo, no, no, no.
• 9:25
  Speaker 1: I think she's one of those high jumper people which is very.
• 9:28
  Speaker 1: Have you ever tried that?
• 9:29
  Speaker 1: It's actually very, very, very difficult.
• 9:31
  Speaker 1: I tried it once over a three-foot fence.
• 9:33
  Speaker 1: Still couldn't manage it.
• 9:36
  Speaker 1: And then, meanwhile, just in time, just when we don't need it and the Japanese are usually very polite and very quiet.
• 9:44
  Speaker 1: They don't know the word no.
• 9:46
  Speaker 1: But what does he say?
• 9:47
  Speaker 1: What did he say?
• 9:49
  Speaker 1: The essentially Fed chief of the Japanese.
• 9:53
  Speaker 1: He comes out, ueda, he's called and he says we're still on the path to raise interest rates.
• 9:59
  Speaker 1: Do you remember last time he raised interest rates what happened?
• 10:02
  Speaker 1: The stock market dropped 5%.
• 10:04
  Speaker 1: And he also signaled the central bank reiterates its policy blah, blah, blah, and that they don't really have anything to do with the global market route.
• 10:13
  Speaker 1: So helpful?
• 10:14
  Speaker 1: No, not so much.
• 10:16
  Speaker 1: Not so much.
• 10:16
  Speaker 1: Would have been much better if he kept quiet.
• 10:18
  Speaker 1: But yeah, that's what he's saying over there.
• 10:20
  Speaker 1: So if you look at pre-market here, that's actually something I'm going to show you, super excited by it.
• 10:25
  Speaker 1: But this is pre-market.
• 10:27
  Speaker 1: It's looking pretty good, but this was yesterday, right.
• 10:32
  Speaker 1: So Tesla down 5.5% and Vita down 3.7%.
• 10:36
  Speaker 1: So the pre-market you go 1.5% up, but you went down 3.5%.
• 10:40
  Speaker 1: You're still down.
• 10:41
  Speaker 1: So, yes, there is optimism, there is a lot of optimism.
• 10:45
  Speaker 1: Before he speaks, he better say everything, exactly how we want him to.
• 10:49
  Speaker 1: If he doesn't, then it doesn't look amazing.
• 10:51
  Speaker 1: Okay, have you closed any trades prior to the Fed talk today?
• 10:56
  Speaker 1: I haven't, actually.
• 10:57
  Speaker 1: No, I haven't.
• 10:58
  Speaker 1: I was feeling, especially after yesterday's drop.
• 11:02
  Speaker 1: I think we've dropped already in a sense, and all of my trades have a longer time horizon, so I've closed my SPY trades out already, like two days ago.
• 11:12
  Speaker 1: Well, they did that themselves.
• 11:14
  Speaker 1: But yes, what do we want Jerome Powell to do?
• 11:17
  Speaker 1: We want him to say we will cut in September, we will cut in November, we will cut in December, we will cut on every meeting until the end of time, but there will be absolutely no recession never.
• 11:26
  Speaker 1: And then he'll do it as a little sort of magic wand thing and then everybody believes it.
• 11:30
  Speaker 1: That would be ideal.
• 11:31
  Speaker 1: Do you think he's going to do that?
• 11:36
  Speaker 1: Japan they need to raise interest rates because their state economy is the past and the economy is actually doing reasonably well.
• 11:43
  Speaker 1: Many others so they're actually worried that they might get inflation again.
• 11:45
  Speaker 1: So that's why they're raising interest rates, which is an interesting one.
• 11:49
  Speaker 1: So, yeah, here's Tesla, for example, yesterday recovering a little.
• 11:54
  Speaker 1: There's that blue line here, but obviously not quite enough.
• 12:00
  Speaker 1: And if you look at NVIDIA, yeah, we dropped.
• 12:08
  Speaker 1: We didn't drop through that yellow line, that 50-day moving average line.
• 12:12
  Speaker 1: So our indicator in the background here still saying green.
• 12:14
  Speaker 1: I am quite optimistic for earnings next week, but then I'm a bit of an optimist.
• 12:19
  Speaker 1: So yesterday it wasn't a disaster.
• 12:22
  Speaker 1: We just basically hit this.
• 12:23
  Speaker 1: We're hitting a plateau here.
• 12:25
  Speaker 1: We're sort of consolidating, dropped below 50.
• 12:27
  Speaker 1: Things look a little bit ugly again, but for the moment things seem to be okay.
• 12:32
  Speaker 1: Are you going to be live streaming this speech?
• 12:34
  Speaker 1: No, I don't think I will because I actually have a meeting with our developer team.
• 12:37
  Speaker 1: I hate meetings, but okay, you have to take the occasional meetings and so then that's happening.
• 12:45
  Speaker 1: At the same time, I'll say, from a time usage point of view and I'm a very like, spend as little time as possible on stuff that doesn't make a difference.
• 12:52
  Speaker 1: I'll read the transcript because it's much quicker than listening to the whole drivel live.
• 12:58
  Speaker 1: And I'm not going to I have nothing on that I would change because he says this or that or the other, really, so we have plenty of time to digest it over the weekend and then see how we come out next week.
• 13:08
  Speaker 1: Powell, speaking in 45 minutes, by the way, and yeah, I think, vilko, I think there's a fairly decent chance that NVIDIA will save us next week.
• 13:18
  Speaker 1: And speaking of NVIDIA, you know we're building well, we have tradevisionio, which is.
• 13:23
  Speaker 1: Is there a link?
• 13:24
  Speaker 1: Yeah, this one down here.
• 13:25
  Speaker 1: You can get a 30-day free trial too.
• 13:28
  Speaker 1: We're going to upgrade it next week, upgrade our indicator, which at the moment is this sort of red and green thing here, which is pretty good, right.
• 13:36
  Speaker 1: Just look at where it dips.
• 13:37
  Speaker 1: It says red and green.
• 13:38
  Speaker 1: It's green goes up, and we're changing that to an even better algorithm.
• 13:44
  Speaker 1: And if you look at this over the last two years this is on Tesla, for example Tesla actually is down 47%.
• 13:53
  Speaker 1: Right, we actually were up 84% if you followed our indicator here, which, of course, you couldn't have done because we hadn't built it yet.
• 14:02
  Speaker 1: But yeah, I'm very, very excited by this because it's just so simple and so beautiful and it does very, very, very well across most things.
• 14:09
  Speaker 1: So very excited to launch that, hopefully in the coming weeks.
• 14:13
  Speaker 1: So if you want to be the first to get your paws on this, play with it completely free of charge for a month head over to tradevisionio.
• 14:19
  Speaker 1: You got to put your credit card in, otherwise we don't give you access to it, but we won't charge you until like day 30, so you can cancel on day 29.
• 14:26
  Speaker 1: So just put that in your diary if you wish.
• 14:31
  Speaker 1: Um, micro to macro is going to stream, cool.
• 14:32
  Speaker 1: Yeah, watch him, say hi to him.
• 14:34
  Speaker 1: He's a lovely guy and you're still getting commercials.
• 14:39
  Speaker 1: It's so freaking irritating because I'm not running any ads on my live streams ever.
• 14:45
  Speaker 1: Okay, there are no ads whatsoever.
• 14:47
  Speaker 1: So let me take another screenshot and I'll send it to the nutters at youtube see if they can do something about that.