Latest / The Paul Barron Crypto Show / 90% Chance of Interest Rate Cuts?📈 w/ Danielle DiMartino Booth

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90% Chance of Interest Rate Cuts?📈 w/ Danielle DiMartino Booth · The Paul Barron Crypto Show

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Today we're going to be diving into rate cuts, what the probability might be,
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and also take a look at how this impacts the market on a bigger
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scale. I think you guys are going to love it. We're gonna have
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a special interview for you. My name is Paul Bera. Welcome back in
0:19
a tech path. Before I get started, do you want to thank our
0:21
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all sorts of things available to get into your IRA over there. I want
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to lead off the show today with a clip, and the clip is our
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guest breaking down the potential of a FED rate cut, maybe also what size
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of rate cut we're going to take a look at. So let's go to
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that clip. So week before the July thirty first FMC. If that doesn't
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make enough of a ripple in the headlines, such as he can press forward
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to get to September the eighteenth, he really will have waited for too long.
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So the longer he waits to typically the larger the rate cuts. So
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we could get to September and it might be fifty bases points, such that
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we could possibly have one hundred and fifty bases points of rate cuts in theory
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if he's going to be playing catchup. All right, So some pretty big
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statements there from Danielle de Martinell Booth, who is coming in and joining us
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today, who's the CEO and chief strategist over there at QI Research. Great
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to have you back, Danielle. How are you so good to be here
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with you? I'm great, I'm great. I'm happy to be here.
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Okay, So let's dive into your statements there. Obvious you're pretty bullish in
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the sense that chair pal needs to move pretty quickly. Here. The question
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I guess everybody's asking is what does that look like for the third quarter?
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Do we see a September, maybe in November, or even maybe pushing into
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December. What are your thoughts I think that once the FED does get going,
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unlike some of its international counterparts, I think that once the FED does
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get going, because we have waited so long, that it's going to keep
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going. And I suspect that if it begins with a fifty basis point with
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a half a percentage point rate cut in September, that we could probably see
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one two days after the election on November seventh, oh, when they unusually
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meet. It's fairly unusual for the Fed to have a two day meeting conclude
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on a Thursday, But that is the case, all right. I'm looking
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at a couple of the speculation markets out there, poly market, we follow
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this one pretty heavily. Right now. I'm looking at the September eight rate
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cut potential September eighteenth, This is about an eighty seven percent ability. It
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has been climbing right now, Danielle. When you look at September versus going
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into November or even into late year in December. What makes the market so
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bullish on this September date, Well, I think the market is bullish if
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you're betting on when the ratecats are going to a crist first, Yeah,
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you can put your money on anything, right, I mean, we can
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give bet on anything. I think they're bullish because the bad news in the
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job market is it's gaining enough critical mass to be highly problematic for the FED
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if they don't go ahead and make the move. So you think this is
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a scenario that it's forcing Palell's hand right now based on some of the macro
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elements that we're seeing obviously from jobs, what we're seeing in terms of the
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surprise, you know, inflation rate that started to adjust pretty significantly here on
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this last report. Do you think that's that's the key thing that Powell doesn't
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want to get in a position to where he cuts too late in the year
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and then gets blamed for a free fall in terms of the economy. Well,
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I think that I think we may be over analyzing Powell's the way he's
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thinking about approaching this first rate cut. I really do think that he is
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waiting for certain thresholds to be breached for certain a certain amount of duration and
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persistence in the direction of the data. You know, if we were to
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see the unemployment rate tick up again, I think that that would certainly be
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enough evidence for him. Given the Fed's own year end twenty twenty four target
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for the unmployment rate is four point zero percent, and it's already at four
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point one percent, and that's just through the June report. Okay, So
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let me throw a scenario at you. If we get a CPI rating on
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our next report and it's either flat or even slightly up, what would that
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do to Pal's position for a rate cut. So I think that that would
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certainly make him a little bit more reticent. And we have something called the
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base effect that we'll be kicking in later in the next few months to make
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it where you really would have to see much lower prints to not see the
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year over year CPI rate begin to tick up, so perfectly plausible that he
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would be able to say, you know what it was, It was a
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good thing we didn't go on July the thirty first, because we saw a
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little bit more pressure on the inflation front. But let's get real and data
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back to nineteen thirty six. Goods prices, goods deflation of negative four point
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one percent year over year. These are things that we want to buy.
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These are discretionary goods as opposed to things as opposed to things that we have
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to buy, which is filling up our gas tank. And putting food on
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the table. But that level of deflation negative four point one percent year over
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year is the deepest in data back to nineteen thirty six. Powell is arguably
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overdoing it right now. Yeah so, and I think that's what a lot
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of people are looking at. It's interesting that the market has been as resilient
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as it has been. Granted, there's been a variety of factors that have
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been in kind of implicating I think some of the growth, obviously with the
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tech stocks, but we've also seen what's happening here on the risk markets with
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what we cover a lot on the crypto side of things. You look at
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where the FED is right now and where the national debt is, and we
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continue to see the printing really accelerated. I mean just in the fact that
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of the amount of interest rate that we're incurring on a monthly basis, how
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does this play out for the FED on a more longer term scenario, Because
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I know you were talking about a pretty accelerated ramp on a rate cut.
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I'm looking at say two quarters into twenty twenty five, where do you feel
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like we will be in terms of our rates at that time? You know,
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it's perfectly feasible that the time we get into the first quarter of twenty
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twenty five, that we've got interest rates one hundred basis point one full percentage
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point below where they are today, if not even even possibly more. It
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really does depend on the rate at which job gains, excuse me, job
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losses accelerate. It depends on the rate at which disinflation continues to push its
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way through. I mean, goodness, gracious, you've got shelter inflation rising
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by three point three percent year over year. It wasn't but three four months
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ago that we were talking about shelter inflation being so sticky it wouldn't be coming
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down this year at all, and now it's back to pre pandemic levels.
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So he has to be very cognizant of the risk and the specter of deflation.
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Because central banks can fight inflation all day long, they have very few
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tools to combat deflation. Yeah. Well, and that's the thing that's been
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kind of tossed around a bit, is that it's a shift from disinflation seemingly
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more focus on deflation. To your point, the true inflation index, this
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is the US inflation index, continues to fall. We've continued to see that
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through the last couple of months here, pretty sharp decrease off that two point
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sixty eight and coming down to your point in a pretty pretty accelerated fashion.
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My question is how quickly do you think this continues at this pace? Because
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this is a pretty sharp pace. If you think of trueflation just on its
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own, this is a pretty sharp pace. Does this have that residual effect
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in the economy where we continue to see a pressure on prices goods and services,
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especially as jobs start to get a little bit softer in the overall market.
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Could we be seeing a little bit more of a bottom here in terms
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of inflation. Yeah, I think you got I think that you are speaking
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to the crux of the matter, and that is what's driving inflation, right.
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And if what's driving inflation is job laws, you're talking about somebody who
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going from having a paycheck to not having a paycheck. There is no stronger
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depressant on prices in the world than losing your paycheck. And what we know,
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because continuing claims have been as stubbornly high as they are, is that
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once you lose that job, it's become increasingly difficult to get a new one.
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And that is that's a serious shift from maybe eighteen months ago, when
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all you have to do is fog a mirror to get a job a good
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pain when at that so, we really have seen a marked change in the
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job market because it's it's just not what it was eighteen months ago. It's
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much more difficult to get a new job. Have you seen I know you've
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been covering this on QI Research and I read your quill A newsletter. You
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guys do a great job on that. Have you've been covering this for quite
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a while and you've seen these cycles before, obviously working at the Dallas Fed,
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et cetera. How important is this cycle with what we're seeing of how
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the Fed is responding to the current inflation scenario, the global economy impact that
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we're seeing from a macro standpoint, and what's happening in the job market.
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Is this a kind of a perfect storm that seems to be brewing right now.
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Well, it's perfect in the sense that when you see data out of
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Germany, for example, right the world's third largest exporting nation after the United
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States and China, when you see that its industrial sector is slipping back into
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recession and that consumer confidence is stepping back once again, when you see that
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the challenges in China's property market are not really improving as much as we would
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like to see. When you see the weakness in terms of lenders charging off
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credit card bad debts here in the United States, you do start to see
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a confluence of factors coming together at the same time. I think the difference
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right now is that is that now we're kind of finished talking about a soft
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landing. There are very few people out there anymore who we're talking about a
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soft landing. I mean very very few. So we've had the United States
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kind of as this as this cushion for the rest of the world for some
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time. I don't think that that's the role that it's going to play now,
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even as we're seeing Germany and China kind of double dip into weakness.
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So okay, So that goes into the point that you you know, you
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just reference there in terms of soft landing, the parameters that seem to be
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aligned right now from a global position from where the US is. Even if
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you look at what's happening in the bricks entities that are trying to dedollarize in
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terms of their trade. Now you play into just the US side of it
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from a job standpoint, At what risk does Powell have if we do see
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a landing that may end up in a very bad position in twenty twenty five
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or six. Where does Pale stand in terms? I was looking at your
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tweet right here, nineteen thirty three Supreme Court President, this was dictating that
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Powell could not be fired by a president. How does this play out if
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this goes sideways on Jerome Powell. Well, it's the closest parallel one can
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draw to the Supreme Court precedent is that of Congress always walking up to the
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edge of thinking about getting rid of the filibuster and then quickly stepping back and
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saying no, no, no, So right now, as the law stands,
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if let's just say J. Powell was to be fired the Federal Reserve
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Board in Washington, d C. They could opt to keep J. Powell
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in his position until the Supreme Court ruled on Humphrey, which was the nineteen
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thirty three president. So they would even though the majority the people on the
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Federal Reserve Board are not philosophically aligned with J. Powell, They're a lot
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more progressive. They advocate for things like monetary policy, addressing climate change,
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central banking, digital currencies, all things that Jay Powell is adamantly opposed to,
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even though they're not philosophically aligned. He's much more conservative than they are.
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Boy, they would not want to set the precedent if they could prevent
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it of having a president come in for political reasons and saying I'm going to
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switch you out. So they would make sure that they weren't in the same
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position themselves one day by keeping j. Powell in his position until the Supreme
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Court ruled. And we know that sometimes it takes the Supreme Court a while
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to rule on things, so you could theoretically easily get to May of twenty
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twenty six, the time this finally happened. If there's a change in the
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current administration, that won't really take place until call it February twenty twenty five,
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so there's not very much time there to get rid of Powell. And
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given how slowly the Supreme Court works, we would safely be able to keep
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him in office. Interesting. Here's one that and I want to just get
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your opinion on this. This came in from Kobe c. This is Financial
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Times. Donald Trump warns the US FED chair not to cut race before the
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election, so saying that, you know, this kind of puts a little
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bit of a political push on it. Yeah. Yeah, he's he's going
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on here durable. Yeah he is. He did the entire time. I
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mean he did, he did the whole time that Powell was in office.
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He he did. And you know, I I know on a personal level,
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So you can take it on exceedingly good authority that it didn't matter then
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and it's not going to matter. Powell was never swayed by by being bullied.
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He's not going to be swayed by being bullied again. I know that
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it is really hot and sexy stuff and people they've tweeted. I've had how
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many tweets have I had about this? I just had somebody else come in
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my feet. I pinned the nineteen thirty three president about why and how specifically
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how Powell cannot get fired. Not necessarily can Trump attempt to do to do
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this, Yes, but I've pinned the reason why he cannot be on my
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Twitter feed and I still get questions constantly, Yeah, what happens if he
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gets fired? You know what happens if if Trump bullies him? I mean,
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it's just and Powell's he doesn't care, Danielle, I want to play
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a clip for you. This is talking about where the market growth may go
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to. And we've seen obviously some pretty successful ETFs, the Bitcoin ETF.
15:35
We're getting ready to get an Ethereum ETF. These are, you know,
15:37
more of the blockchain side. I don't want to play this clip for you
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and get your opinion on it. Let's go to that clip. There's some
15:43
new wave that's going to open up. What are you What are you going
15:46
to tell people tonight? The next ten trillion dollars are going to be driven
15:50
by clients, not by us attending to the interest of young investors. So
15:54
do it for yourself, investors Millennias who are buying IDFs of for the first
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time. Ether is a much smaller product in terms of assets under management and
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bigcoin. What are we expecting? So give give you a six month run.
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I think we'll look at this and we'll say the EAT funds have about
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ten percent of what's in the bitcoin funds. The Solona ETF comes next.
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I think it's going to be an even smaller allocation. Do you have a
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strategy here? Yeah, Bob, I'm a big believer in digital assets.
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I think that whether we like it or we hate it, we have to
16:26
pay attention because this is where the money is going and this is where investors
16:30
are. But what's exciting to me is a digital asset two point zero?
16:34
What is the next version? And that's why we partner with the Galaxy Capital
16:40
because we think that the expertise lies with cryptonatives. What is this involved.
16:45
It's not going to be about the big coin, it's not going to be
16:48
about heater, It's going to be the entire digital assets ecosystem. How do
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we hedge the volatility within a portfolio? Interesting way to do this, all
16:56
right, So, Daniel, you guess mainly what I wanted to connect there
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was the fact that we're seeing a shift in the makeup of maybe Wall Street
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investment going forward over the next decade two decades. With that being a bit
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of a shift, how does that affect what happens on the bureau democratic side,
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whether it's the FED, what we'll see with the SEC. How do
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you see this playing out from that standpoint with a whole new it's no longer
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the boomers that are in control of the most of the funds over the next
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twenty years. Well, it's it will certainly be more concentrated in the hands
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of the gen xers right right, right now. I think one of the
17:37
challenges is that so many of the younger investor cohort is in the crosshairs of
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AI. So I think a large chunk of these generations are going to have
17:51
to reinvent themselves as something else interesting and there'll be a lot of multi generational
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household formation as a result. They're the least financially independent, if you will.
18:02
So I think it's going to take some time for these shifts that you
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describe to take place. We will definitely see more automation going forward in terms
18:12
of the mechanism by which younger people invest. But we've already crossed the threshold,
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right We're already seeing more than half of all new funds pour into an
18:22
index or an exchange traded fund. The structure of the market is forever changed,
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even for anybody in America who's got a four oh one K. So
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I think that that will continue. But along the way, if there's a
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serious correction in the stock market, I think that there might be an interim
18:40
period in which returning to old fashioned active management. Actually we're actually choosing which
18:48
investments to be in might be making a temporary comeback in between, just because
18:56
at some point you actually have to choose winners and lose, and I think
19:00
we might be headed that way. It's interesting you asked this question because the
19:03
Vanguard Total Stock Index Fund, which is the largest ETF on planet Earth.
19:10
While it's returned handsomely for the year twenty twenty four, in terms of flows,
19:17
they've been flat as a pancake. Yeah. So again, we're watching
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some of this. We're watching some of this occur in real time. We're
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going to have to get past the baby boomers leaving the market, and we're
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going to have to get past some of the very low anemic hiring that we're
19:33
seeing for the class of twenty twenty four before we can cross this lovely bridge
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to what you're describing, which I think will be more of a twenty twenty
19:41
six, twenty twenty seven possibly event interesting. Okay, all right, well,
19:45
I mean that's still around the corner. You look at this shift that
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is happening with Wall Street. We'll hit this on kind of our last topic,
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the shift that's happening with Wall Street. Larry Fink, I know you
19:56
and Larry have kind of been back and forth on a variety of topics,
19:59
but tokenized US treasuries reaching three billion by end of year, that's pretty accelerated
20:06
considering the current tracing of where we are right now. And even if you
20:10
look at some of the ones that have been on this, you look at
20:14
Biddle et cetera that has been which is part of the you know, the
20:18
effort of what Blackrock is trying to do in terms of changing this. I've
20:22
listened to Larry, you know, quite a bit in terms of his strategy.
20:26
He seems to be very all in on this shift that seems to be
20:30
happening with Wall Street as a whole. What is your opinion of that in
20:34
terms of tokenized treasuries, what we'll see in all sorts of these different kind
20:38
of macro markets, whether it's stable coins, global bonds, private credit,
20:42
et cetera. What's your thoughts? Well, I certainly do think that the
20:48
application is appropriate. And as far as Larry Fink wanting to be on the
20:52
ground floor, why not. Because if you're on the ground floor of say,
20:57
oh, I don't know, the spider, you might end up one
21:00
day running, you know, eleven trillion dollars is an asset under management you
21:03
never know, So being on the ground floor, strategically speaking, for anything
21:08
with that magnitude of potential is certainly an attractive position to be, and we
21:15
all want that first mover advantage, right. But I will say that the
21:18
central clearing of treasuries is a much more important development that we've seen this year
21:25
because now we're going to have a lot more in the way of transparency in
21:29
terms of who's transacting in that market, how much leverage they're using to trade
21:34
those treasuries. But again, much more like something that is cleared as opposed
21:41
to something that is traded in the shadows. So I take my hat off
21:45
for that evolution. Knowing that the Chevron decision and especially a new Trump administration
21:55
would change would defang a lot of some of the ideas that regulators have had
22:04
with respect to many different aspects of the financial markets. So I think that
22:10
the progress that we've seen that's been made might be arrested for a bit.
22:14
Yeah, for sure, Danielle. I want to get a prediction from you,
22:18
because you're kind of leaning into a couple of points here that I want
22:21
to touch on. One is possibly most likely not a soft landing. How
22:26
do you think this plays out from an economic standpoint? Do you think we
22:30
are in for a true recession coming in? Well, I think we are
22:34
in recession. As for when we exit recession again, if the Fed manages
22:41
to wait until September to launch, then they will have waited a similar amount
22:45
of time to that which they did before the Great Financial Crisis. And the
22:49
FED waiting that long even though even though we eventually came out of it,
22:56
it made for an eighteen month recession as opposed to your average post war which
23:02
is closer to ten years excuse me, ten months and eighteen month recession as
23:07
opposed to your average kind of a ten month slow down. So certainly the
23:11
Fed waiting for as long as they have could prolong the current recession. Danielle,
23:15
it was great having you on the show. If you guys want to
23:17
learn more about her, you can get her on Exit de Martinez Booth.
23:21
She's got all sorts of links in here, including her book fed Up,
23:23
which I've read and it's a fantastic book, so make sure and check that
23:26
out as well. Thanks for coming in on the show today. We appreciate
23:30
it and thank you for having me you ed Are you guys are tuned in?
23:34
Maybe on the podcast side of things, make sure and jump into the
23:37
YouTube channel. This is where you're going to get aditional content and also more
23:41
of an engagement. I think you know a lot of times the charts we
23:42
share that you don't get the full effect here on the podcast side. The
23:48
YouTube side is going to be the place for you like a video or too,
23:51
It's going to end up in your algorithm and in your feed. Hopefully
23:53
it'll take you down a rabbit hole and start your course on education around blockchain
23:59
and some of these new assets that are starting to populate the financial system.
24:03
If you're not a Diamond Circle member, get in on that as well.
24:07
It's very easy. We'll leave a link down below. Catch me out there
24:08
on x at Paul Baron. We'll catch you next time right here on tech Path