Latest / Felix Nikolas Prehn's Podcast / BREAKING: FED *Just* Flipped 📈 + Stock Market News 11 April 2024

Transcript

BREAKING: FED *Just* Flipped 📈 + Stock Market News 11 April 2024 · Felix Nikolas Prehn's Podcast

• 0:00
  Speaker 1: Welcome to this live pre-market madness and I want to walk you through what's actually happening and what actually matters, the post-inflation trauma that we all seem to be suffering from, as is the market, and what it really means.
• 0:16
  Speaker 1: We've also just got producer price index inflation data out.
• 0:21
  Speaker 1: It couldn't get any more exciting than that, could it?
• 0:23
  Speaker 1: And pre-market that's could it and pre-market.
• 0:25
  Speaker 1: A quick glance at pre-market we're looking pretty sweet.
• 0:29
  Speaker 1: Pre-market, just to take the anxiety edge off, so you can put the Prozac down for this morning and think that everything is going to be all right.
• 0:42
  Speaker 1: Because why is that?
• 0:45
  Speaker 1: Well, I want you to understand that.
• 0:46
  Speaker 1: I want you to be a properly well-informed investor so you can make better decisions, make better money.
• 0:53
  Speaker 1: And actually, on that note, I've been reading a fair bit lately.
• 0:57
  Speaker 1: I've been reading a bunch of books.
• 1:00
  Speaker 1: When you work on Wall Street, they make you read a bunch of books, and there is a list out of the most popular books that Wall Street investment bankers have to read, and I put a little summary together of those so you can download that summary for free, felixfrenzelogcom, and save yourself having to read the bloody things.
• 1:19
  Speaker 1: Some of them are better than others, but anyway, it's a eight-page document, eight-page summary.
• 1:25
  Speaker 1: So it's pretty brief, pretty succinct, but it'll hopefully tell you whether or not you want to read them and it'll give you a sort of basic takeaway of each of those books.
• 1:34
  Speaker 1: So get your pause on that.
• 1:36
  Speaker 1: At felixfriendsorg books, of course, it's completely free of charge.
• 1:40
  Speaker 1: Winston forgot to wind his watch Indeed yes.
• 1:42
  Speaker 1: Which charge?
• 1:45
  Speaker 1: Winston forgot to wind his watch Indeed yes, which is kind of interesting.
• 1:47
  Speaker 1: Now he also forgot to smash the like button.
• 1:48
  Speaker 1: Apparently Only 20 people have done it so far.
• 1:50
  Speaker 1: So what have we just got out?
• 1:51
  Speaker 1: Producer price index.
• 1:52
  Speaker 1: I always think this is kind of more important than inflation because it's a little bit less manipulated, because companies don't vote and therefore you don't need to bribe them as much they tend to do the bribing and it's a little bit more leading because, if you think about it, manufacturers, companies are here, consumers are down there.
• 2:12
  Speaker 1: So if inflation is high up here, it'll be higher at the consumer level later down the road.
• 2:17
  Speaker 1: And PPI has come in lower than expected, much lower than expected.
• 2:23
  Speaker 1: So that's a good thing, right, that's a positive Core PPI, basically as expected.
• 2:29
  Speaker 1: That's also positive.
• 2:30
  Speaker 1: Jobless claims pretty flat.
• 2:33
  Speaker 1: Continuing jobless claims slightly higher.
• 2:36
  Speaker 1: I don't think either of those numbers really moves the needle and what have we got here?
• 2:44
  Speaker 1: X food energy and trade even lower.
• 2:48
  Speaker 1: X food energy trade month-to-month 0.3%.
• 2:50
  Speaker 1: Okay, I don't think it matters a great deal.
• 2:54
  Speaker 1: I think overall these are positive numbers.
• 2:56
  Speaker 1: I think that's also part of the reason the market's looking a little bit more bouncy today.
• 3:01
  Speaker 1: And let's dive a little deeper into what the Fed's doing here, what they're saying.
• 3:08
  Speaker 1: A bunch of Fed presidents speaking today, which is going to be important, and I'm just going to turn my aircon off one second Now.
• 3:25
  Speaker 1: I will undoubtedly regret that decision about 10 minutes, when the lights warmed the room up very nicely, but at the moment it feels perfectly tempered.
• 3:33
  Speaker 1: Now the Fed is still shredding money.
• 3:37
  Speaker 1: Right, they're on that journey.
• 3:40
  Speaker 1: I mean we're never going to get back down to the original Fed pre-COVID levels.
• 3:45
  Speaker 1: That'll never, ever, ever happen.
• 3:47
  Speaker 1: The money is out there, it's in the pockets of the wealthiest and they're very happy to hold on to it.
• 3:52
  Speaker 1: But what the Fed has just said in the minutes that just came out?
• 3:57
  Speaker 1: They said look, the disinflation process is continuing along a path that is generally expected to be somewhat uneven, as in.
• 4:05
  Speaker 1: They don't care for a single data point.
• 4:07
  Speaker 1: A little bit of a bump up or down doesn't really matter.
• 4:09
  Speaker 1: That's what they said and that's what they're expecting.
• 4:12
  Speaker 1: I think the market likes that comment.
• 4:13
  Speaker 1: And then they're also saying it'd be appropriate to take a cautious approach to reducing the money shredding, because they're shredding money at the moment.
• 4:24
  Speaker 1: The vast majority of participants, that's Fed presidents thus you don't hear that word used often enough to you thus judged it be prudent to begin slowing the pace of runoff fairly soon.
• 4:36
  Speaker 1: So they are going to, before they start cutting rates, they will slow down the money shredder somewhat and that will be good for us.
• 4:46
  Speaker 1: And they're saying they generally favoured keeping the existing government multiple sector securities, but adjusting the cap on treasury.
• 4:53
  Speaker 1: So they are going to basically slow down the runoff of treasuries, which is essentially how they made up all the money that the Fed just bought government debt, which are called treasuries.
• 5:06
  Speaker 1: Now they're letting them expire, potentially even selling them, and that's what's shredding money.
• 5:11
  Speaker 1: So that's positive.
• 5:12
  Speaker 1: And they're basically saying if we keep shredding money at the current rate, the money markets, the bond markets, are going to experience stress, and you don't want bankers on Wall Street to be stressed.
• 5:30
  Speaker 1: Would you know that would be terrible.
• 5:31
  Speaker 1: No, no, no.
• 5:32
  Speaker 1: So they're not going to do that.
• 5:34
  Speaker 1: No, essentially what they're saying is, if they keep shredding money at this rate, they're going to cause banks to collapse.
• 5:39
  Speaker 1: They don't put that in there like that, but that's essentially the implication.
• 5:42
  Speaker 1: And then he said Powell said on the third but given the strength of the economy and the progress on inflation so far strong economic activity they also revised their estimates for growth up to 2.1% and core inflation up to 2.6% by the end of the year.
• 6:04
  Speaker 1: So the Fed isn't really surprised by this data.
• 6:06
  Speaker 1: The Fed's going.
• 6:07
  Speaker 1: We made up the data and it's coming out exactly as we wanted it to.
• 6:10
  Speaker 1: Surprise, surprise.
• 6:13
  Speaker 1: Now the real thing that's going to actually matter for the stock market here and the moment.
• 6:20
  Speaker 1: It's looking pretty good.
• 6:23
  Speaker 1: Here.
• 6:25
  Speaker 1: It is pre-market, looks pretty good.
• 6:26
  Speaker 1: Right, it's going to be profits.
• 6:31
  Speaker 1: That's really what matters to the market right now, and right now we're seeing pretty big upgrades in terms of profits.
• 6:40
  Speaker 1: So the market is expecting profits to grow faster at the big boys.
• 6:47
  Speaker 1: And have a look at this.
• 6:48
  Speaker 1: So you've got in red here, in red, the S&P 500 chart going back to 2012.
• 6:59
  Speaker 1: And then in black, do we have a black pen?
• 7:02
  Speaker 1: Seems a little morbid.
• 7:03
  Speaker 1: In black you've got PE forward PE.
• 7:09
  Speaker 1: So one year, expected PE for the next year and they move sort of in line.
• 7:14
  Speaker 1: Really.
• 7:15
  Speaker 1: I mean, that's kind of the idea, isn't it?
• 7:17
  Speaker 1: The stock market goes up because profits go up, and as long as profits are therefore going to stay on this expected upward trajectory, the stock market should do relatively well, and are they Well?
• 7:34
  Speaker 1: The expectations for communication services, which is basically IT and IT is IT, we're expecting a huge boost in profits 20 to 26 percentage points.
• 7:49
  Speaker 1: Huge boost in profits 20 to 26 percentage points and that should make the market very happy.
• 7:56
  Speaker 1: That should continue, this bold, beautiful rally that we're on.
• 7:57
  Speaker 1: It might even encourage one or two of you to find the like button and smash it.
• 8:00
  Speaker 1: You never know.
• 8:01
  Speaker 1: Is that done?
• 8:10
  Speaker 1: You can't hear me.
• 8:11
  Speaker 1: Sound quality audio is good here.
• 8:12
  Speaker 1: Thanks, brett.
• 8:13
  Speaker 1: Thanks for sharing.
• 8:14
  Speaker 1: Now we have an idea for you.
• 8:16
  Speaker 1: If you want to get some cheap post cpi trade ideas, then I would check out these at trading floor.
• 8:24
  Speaker 1: Whispers dot actually, no, the easiest way to get felixfriendsorg slash sub, as in subscribe, it's a newsletter that we put out two or three times a week with actual, real trade ideas written by a real market maker.
• 8:43
  Speaker 1: So if you want to check that out, do felixfriendsorg slash sub.
• 8:46
  Speaker 1: I'm not going to walk you through the actual trades.
• 8:48
  Speaker 1: You can read it yourself.
• 8:50
  Speaker 1: What I'm more interested in is this this is credit card data and I talked about that last year I think I was very much strolling around Tokyo and talking to you about that that more and more people are making the minimum payment only it's now almost 11%, which is generally a fairly good indicator of economic stress, and the balances that they're therefore kicking down the road with a horrible interest like 25, 30% interest people are paying on those credit card balances is now 600 billion plus, and that's a bit of an indicator of the consumer is actually in trouble, right.
• 9:35
  Speaker 1: Then have a look at credit scores.
• 9:37
  Speaker 1: The bottom 10 and bottom 25% of people's credit scores are also both coming down pretty significantly, so that might make you think okay, so the consumer is struggling.
• 9:53
  Speaker 1: How does this really fit in?
• 9:55
  Speaker 1: Well, zoom out, my friend.
• 9:57
  Speaker 1: Delinquency rates look like they're shooting up a lot, but if you go back historically, the Bloomberg lot made a decision to cut the data here at 2012 to make it look terrible.
• 10:21
  Speaker 1: You see that 2012 is where they started and that makes the data look very dramatic.
• 10:27
  Speaker 1: Oh my God, look at the consumer.
• 10:29
  Speaker 1: Oh my God, look at the consumer, whereas if you look at historic records, you know the 2000s, the 1990s, we're actually way I don't remember being a particularly horrid year, you know.
• 10:56
  Speaker 1: I think Clinton was in power.
• 10:58
  Speaker 1: It was particularly entertaining from a political point of view.
• 11:00
  Speaker 1: I did not have, you know, sexual relations with that woman Always a good way to describe a woman.
• 11:07
  Speaker 1: That woman usually means you're in trouble.
• 11:09
  Speaker 1: Here is one I'm watching today.
• 11:11
  Speaker 1: That woman usually means you're in trouble.
• 11:13
  Speaker 1: Here is one I'm watching today, maybe even for the next week Adobe.
• 11:16
  Speaker 1: It had in 2022, what is known on Twitter as a death cross, because it's dramatic and it looks like we're heading for the same direction.
• 11:25
  Speaker 1: When we did that last time, we fell 44 percentage points and really going to watch out for Adobe earnings because they are kind of the poster child for subscription businesses and they're not really managing to make enough money from the AI subscriptions, which is sort of the criticism thrown at them really.