Latest / Felix Nikolas Prehn's Podcast / Felix Prehn - FED Triggers UNPRECEDENTED LOSSES + Stock Market News 18 September 2024

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Felix Prehn - FED Triggers UNPRECEDENTED LOSSES + Stock Market News 18 September 2024 · Felix Nikolas Prehn's Podcast

• 0:15
  Speaker 1: Felix here with some sound.
• 0:16
  Speaker 1: I was going to say good morning to you, and this is the day that makes the market move, and what we've got today, of course, is the Fed rate decision, but it's not any old rate decision.
• 0:32
  Speaker 1: We haven't literally seen this set up in 15 years.
• 0:35
  Speaker 1: Yes, one, five.
• 0:36
  Speaker 1: I can't remember having seen a setup like this, and it's incredibly important to understand it because we've got two massively different expectations, both with massively different outcomes.
• 0:49
  Speaker 1: That will catch some people very, very, very off guard, and I don't want that to be you, which is why I'm going to explain it to you and break it down for you.
• 0:57
  Speaker 1: So let's jump straight into that.
• 0:59
  Speaker 1: I hope you can hear me by now that I've turned the mic on.
• 1:02
  Speaker 1: That probably helped, didn't it?
• 1:03
  Speaker 1: Probably helped, right?
• 1:05
  Speaker 1: So traders are facing unprecedented losses if we don't get a big cut, says Deutsche Bank, and the reason for that is that normally, a day or two before a rate cut, we basically know what's going to happen.
• 1:20
  Speaker 1: The Fed has sort of told us through you know the grapevine we're going to do X, or we're going to do X, or we're going to do Y, and we know, and everybody agrees on it, and therefore it's kind of a bit of a bit of a non event, but we have the largest surprise component in 15 years here from the Fed, and the reasons are as follows Wall Street's economists, which are basically overpaid Muppets who are usually wrong.
• 1:47
  Speaker 1: There are 114 of those, by the way.
• 1:49
  Speaker 1: There are 114 of those people who are overpaid and entirely unnecessary in my humble opinion.
• 1:55
  Speaker 1: I say that as an economist.
• 1:57
  Speaker 1: They're saying we're going to get a quarter cut, quarter percent cut, only a quarter percent.
• 2:09
  Speaker 1: Right?
• 2:09
  Speaker 1: So 114 economists at all.
• 2:13
  Speaker 1: The Wall Street institutions are saying quarter percent cut.
• 2:16
  Speaker 1: Don't worry about it.
• 2:17
  Speaker 1: But the market disagrees.
• 2:20
  Speaker 1: The market here.
• 2:22
  Speaker 1: 65% of the market says we're going to get a.
• 2:28
  Speaker 1: Let me get a different pen color here.
• 2:30
  Speaker 1: This is a 0.5% cut.
• 2:33
  Speaker 1: This is a 0.25% cut.
• 2:35
  Speaker 1: 65% of the market is expecting a big cut and that's a monstrous difference from what we had a week ago when that 65% number was only 14%.
• 2:47
  Speaker 1: So the economic data we got out in the last week has swayed the entire market to believe the Fed will do the opposite of what the economists are expecting.
• 3:06
  Speaker 1: Excuse me, I'm thirsty for that protein shake today.
• 3:09
  Speaker 1: So what does that mean?
• 3:11
  Speaker 1: Well, it means, as traders, we better do very little.
• 3:20
  Speaker 1: Today I have basically two trades open and we're doing.
• 3:21
  Speaker 1: We're just sitting on our hands, and sitting on our hands is what makes us money.
• 3:24
  Speaker 1: September is a month when we sit on our hands.
• 3:25
  Speaker 1: That's basically the rule.
• 3:25
  Speaker 1: That is how we're just sitting on our hands, and sitting on our hands is what makes us money.
• 3:26
  Speaker 1: September is a month when we sit on our hands.
• 3:26
  Speaker 1: That's basically the rule.
• 3:27
  Speaker 1: That is how we're up 93% this year so far 92% right, by doing very, very, very little Activity does not get rewarded out there.
• 3:38
  Speaker 1: I'm also super excited to announce a two-day beginner challenge where I'll teach you how we do that.
• 3:45
  Speaker 1: I'll teach you how we get to those 93% and we do that in three steps, three rules.
• 3:52
  Speaker 1: That'll be on Tuesday and Wednesday this coming week at 8pm New York time.
• 3:56
  Speaker 1: You can grab yourself a free seat felixfrensorg challenge and it'll be fun and we have a lot more time to spend about an hour each day to really dive into it and do some trades together and get you some financial education there, which is really what the whole point is of this little community.
• 4:13
  Speaker 1: So the Fed is basically trapped, the Fed, who are, by the way, in a blackout window, so they're not allowed to talk to us.
• 4:19
  Speaker 1: They just can't comment on anything.
• 4:21
  Speaker 1: They have two choices.
• 4:23
  Speaker 1: Choice numero uno is do a small cut 25 basis points, which is basically what they hinted at before the blackout period, and they'll be seen as hawkish.
• 4:36
  Speaker 1: And they'll be seen as we're still worried about inflation.
• 4:39
  Speaker 1: We think the economy is strong and the market is going to have an absolute bloodbath.
• 4:44
  Speaker 1: That's option number one.
• 4:47
  Speaker 1: Now option number two is they give us a big cut, the jumbo cut, the family cut.
• 4:59
  Speaker 1: And what is going to do that?
• 5:02
  Speaker 1: Well, it means we're going to expect another jumbo cut for November and December and so on.
• 5:09
  Speaker 1: And if they don't again, well, it's going to scare the market, isn't it?
• 5:22
  Speaker 1: It's going to scream recession, it's going to cause lots of volatility, lots of panic and the problem they've created, and it's quite.
• 5:31
  Speaker 1: I've never really seen a gap this big.
• 5:33
  Speaker 1: So on this little line here you have in green the Fed's dot plot, which is basically their projection of interest rates going forward by the end of this year.
• 5:47
  Speaker 1: They're basically saying we're going to have rates here at 4.25% Deal with it by the end of 2026, it'll be about 3.25%, deal with it.
• 6:01
  Speaker 1: But the market's saying no, the market is saying we're going to be down here by the end of this year.
• 6:07
  Speaker 1: They're saying we're going to be by the end of 2025, we're going to be at like 2.5%.
• 6:14
  Speaker 1: Now the difference between 2.5 and 4.25 is massive, massive.
• 6:20
  Speaker 1: We have never really seen a gap like that.
• 6:22
  Speaker 1: So this gap here is the problem.
• 6:25
  Speaker 1: The expectations we have and the expectations the Fed have given us are widely apart, massively apart, almost 2% apart.
• 6:34
  Speaker 1: So if they stick to their line, they tank the market.
• 6:38
  Speaker 1: If they come over to our line, they panic us because we now think the recession's near and maybe inflation's going to come back and all that kind of stuff.
• 6:46
  Speaker 1: So it's going to cause big volatility either way.
• 6:54
  Speaker 1: I think there is a way out of this and I'll explain to you in a second.
• 6:57
  Speaker 1: That's possibly what they're going to do, but let me show you why this story is so significant.
• 7:05
  Speaker 1: Everybody believes the soft landing miracle that the Fed has given us.
• 7:11
  Speaker 1: 79% of the market expects a soft landing.
• 7:17
  Speaker 1: Everything is wonderful, everybody gets, you know, sugar candy, and it's all fantastic.
• 7:21
  Speaker 1: We didn't turn the light on, did we Hang on?
• 7:23
  Speaker 1: That's a bit brighter, isn't it?
• 7:30
  Speaker 1: So what does it mean?
• 7:32
  Speaker 1: It means if you get a soft landing, you shouldn't get a lot of rate cuts?
• 7:37
  Speaker 1: Right, because the economy is pretty strong, the economy is good.
• 7:39
  Speaker 1: Why shouldn't get a lot of rate cuts?
• 7:40
  Speaker 1: Right, because the economy is pretty strong, the economy is good.
• 7:41
  Speaker 1: Why do we need a lot of rate cuts?
• 7:43
  Speaker 1: But the expectation is just to show you this again here rate cuts.
• 7:50
  Speaker 1: We're pricing in about 10 rate cuts.
• 7:56
  Speaker 1: Seriously, the market's saying that by the end of 2025, we're going to have 10 cuts, which is pretty extraordinary, which would imply the economy should absolutely fall apart, the wheels should come off and it'll come to a screeching halt.
• 8:13
  Speaker 1: And here is what Sockgen, the Frenchies, say.
• 8:18
  Speaker 1: They say such a steep cutting cycle would imply an economy in trouble and with the S&P is expected to see 14% earnings growth in 2025, 10% the following year.
• 8:31
  Speaker 1: That seems completely contradictory with the expected US sharp rate cuts and strong earnings.
• 8:41
  Speaker 1: If we get strong earnings, we shouldn't get sharp rate cuts.
• 8:43
  Speaker 1: So he's basically saying these strong cuts, so these cuts that we're expecting will be consistent with a 20% decline in profits or maybe a 30% plus drop in forward profits, which means the market should drop by 20 or 30%.
• 9:02
  Speaker 1: So you can see why this is kind of a momentous day today.
• 9:06
  Speaker 1: How the heck are they going to get out of this conundrum?
• 9:10
  Speaker 1: Well, by trading and making money.
• 9:12
  Speaker 1: Yes, we can always do that, and we can always do that, although probably today, I'd recommend you do very, very little.
• 9:18
  Speaker 1: And that's how we basically.
• 9:21
  Speaker 1: We sit things out right, so we sit stuff out.
• 9:23
  Speaker 1: So we took a lot of profits here, for example, which is when we got the August wobble or the late August wobble, and it means we just sit on a bit of cash and that's okay, because we've already turned $30,000 into $58,000 this year for our teaching portfolio, which is 93% up.
• 9:44
  Speaker 1: So we can afford to like sit on our hands for a bit.
• 9:46
  Speaker 1: That's our job.
• 9:47
  Speaker 1: Our job is to make money, not to be active, right?
• 9:49
  Speaker 1: So you're going to learn how we do that.
• 9:52
  Speaker 1: I'm super excited to run a two-day event next week.
• 9:54
  Speaker 1: We never do that.
• 9:55
  Speaker 1: So come and join me at felixfriendsorg slash challenge and learn our rules.
• 10:01
  Speaker 1: I'll show you how we're up 93%.
• 10:03
  Speaker 1: I'm not promising you those outcomes, but I show you the strategies that I employ and how we get there.
• 10:09
  Speaker 1: But before we round this off with how the Fed can get out of this bind and I think there is a solution I've done a gulp of this stuff and ask you to smash the like button.
• 10:25
  Speaker 1: Here is an interesting one today, and then we'll come back to the Fed.
• 10:28
  Speaker 1: Do you know this one?
• 10:29
  Speaker 1: It's stuck at the sticker symbol Luna Intuitive Machines.
• 10:32
  Speaker 1: It's up from about $5.50 to $8.50 this morning.
• 10:38
  Speaker 1: They've got a massive NASA contract.
• 10:41
  Speaker 1: These are the same people whose Luna moon lander toppled over here, literally toppled over, and took the stock price down with it.
• 10:49
  Speaker 1: Now why is it interesting?
• 10:51
  Speaker 1: Because the short float on that stock is about 25%.
• 10:55
  Speaker 1: So some people are waking up this morning and going whoops, the shorts are going to have a really unpleasant day without one.
• 11:03
  Speaker 1: Be interesting to watch.
• 11:05
  Speaker 1: Now you might also just say Felix, I don't care, how do I make money out of the situation?
• 11:09
  Speaker 1: Well, gold traditionally is a thing that goes up.
• 11:14
  Speaker 1: So traditionally this red line here is first rate cut in the cycle in the cycle, and the blue line is this one here is typically what gold does after a rate cut.
• 11:34
  Speaker 1: You get the idea right Tends to do rather well.
• 11:36
  Speaker 1: So we front run a little bit of that already, I think, as we've done quite a nice rally up here, but I think there is probably still some gas left in that gold tank not financial advice, obviously.
• 11:46
  Speaker 1: So what's the solution here?
• 11:47
  Speaker 1: I think they only have one choice, in my humble opinion.
• 11:51
  Speaker 1: I think we're going to get a 0.25% cut and we're going to get what I would call bullish commentary.
• 12:02
  Speaker 1: If I could spell commentary, I'm going to go with comments from our dear leader, the chosen one, powell.
• 12:12
  Speaker 1: So what is he going to do?
• 12:14
  Speaker 1: He's going to give us a quarter percent cut and he's going to give us a press conference where he basically says he's open to doing a lot more, but he sees the economy is doing well, everything is wonderful, rates are likely to come down and they're looking at similar sized cuts at the next meetings.
• 12:33
  Speaker 1: But if needed, they'll cut bigger, something like that, and by leaving the door open to that, the market won't freak out completely.
• 12:43
  Speaker 1: If he doesn't say that he might do bigger cuts down the road and kind of stays hawkish, then today could be a very, very hideous day.
• 12:51
  Speaker 1: But I don't think that's his intention.