6-18-26 Kevin Warsh's First Day at the Fed

[00:00:00] Speaker 1: and now for something completely different forget everything you've been told by others before [00:00:05] Speaker 2: i have a cash problem yeah every time i put cash in my wallet get ready for the real deal kind of like this is a really old thing right old people have cash in their wallet this is one of those things right we're just not into this full digital thing everywhere the full story i just feel comfortable having cash in my wallet i like cash in my wallet the whole enchilada but every [00:00:25] Speaker 1: time i put cash in my wallet things happen it's money news and information you can use like my daughter shows up and needs gas money to grow financially healthy wealthy and wise or you [00:00:37] Speaker 2: know in our neighborhood there's all we have girl scouts all over our neighborhood so we can't obviously buy from one of the girls in the neighborhood and not the other girls that [00:00:45] Speaker 1: wouldn't be fair that would not be fair now welcome in the real deal the real investment show with lance roberts she showed up yesterday and so twenty dollars out the door [00:00:56] Speaker 2: thin mints presented by ria advisors and welcome to the show this morning is of course thursday second best day of the week it's actually the best day of the week this week because tomorrow is a federal holiday that's right it's june 13th junteeph sorry not june 13th it's junteeph tomorrow um so the markets aren't closed tomorrow bonds and stocks it is a federal holiday so your bank is also closed tomorrow so if you need to get you know cash for your wallet as we were just talking about you need to do that today um unless you're using atm um so the uh so today's going to be a fairly you know interesting trading day from standpoint got a lot of things going on we're going to get into this morning michael leibowitz is on vacation today so you just have me today to talk about kevin morse yesterday in the fed we're going to get into the whole press conference uh as well i've got a clip from that we'll listen to that this morning um because it was a very very different press conference from previous press conferences lots of announcements coming out lots of changes coming to the fed we're going to get into all of that this morning what that means for the markets what that means for the dollar all these type of things we'll get into we'll cover a lot of that this morning um but again very interesting day yesterday markets didn't like it um for a couple of reasons and we'll talk about that as to why but markets sold off pretty decently yesterday on after following the fed markets were kind of holding in fairly stable yesterday um but after the fed announcement really during the press briefing uh the market sold off pretty decently across the board so again we'll get into all that this morning um outside of that some interesting news you know we talked about earlier this week that all the europeans that are coming to the united states are just absolutely amazed at the greatness of america and everything gobsmacked they are they are gobsmacked that was a great word for that and of course you know they've just been fed all these stories overseas about you know from the the press and stuff and the media um internationally that you know how terrible america is that you know there's my rogue maga gangs running around you know beating everybody up and there's detention camps for people yeah and they're getting here and it's like this is the greatest thing and the people are awesome and they are having a great time um there if you've watched any of the the twitter feeds or the the tick tocks that have been running around of these europeans in the states it's absolutely amazing how good of a time they're having and the stuff like they are just over the moon with stuff like fried chicken from kentucky fried chicken and it's like that's okay chicken that i've got nothing that's kind of fried chicken but you go to a really good diner that's some fried chicken you know yeah so there's taco bell like top of the list for these people so you got to have good mexican food while you're here but interestingly enough bucky's oh yeah bucky is bucky's is amazing it's like an amusement park for these people but here's the story i'm getting to they ran out of beer in boston what in boston like mind you they ran out of beer because they're hosting the scots and the scots basically drain them of all the beer in boston that considering that's where there's a lot of beer made in boston you know a lot of ipas come out of boston they ran out of all that stuff so drink boston dry dallas was just report even in dallas they are reporting record bar sales uh for alcohol and food consumption so they so hey the economy is going to get obviously get a lift from from all this spending that's occurring but hey we are glad you're here we are glad you're enjoying yourselves and yes this is the greatness of america and that is that i'm glad you're seeing that uh anyway ran out of beer in boston couldn't believe that that was crazy story anyway all right let's get to let's get to work this morning we got a lot of stuff to get into uh across the board let's talk about what you need to know before the bell this morning as i said uh marcus did sell off yesterday so we had had come down to the 50-day moving average we rallied back up now there's a couple of things technically um that is going on that we want to kind of pay attention to here and again nothing dramatic at the moment but you know we've had a very very large run from this uh april low that we had um up to the recent peak and so a couple of things happening here just to pay attention to at the moment again nothing nothing extraordinarily concerning at the moment but there is some technical action that's happening and again just kind of watching this first of all momentum as is is on the sell signal right now so again that's putting some pressure on prices moving up so as we talked about before when that sell signal kicked in that's going to limit the upside in the markets we had this very nice rally that 50-day moving average but now what we've got going on here is is a couple of things first of all we just set a lower top in the markets so again not nothing overly concerning about that but that is at least setting a lower level of overhead resistance now and so markets are starting to show a little bit of weakness here at the same time we have this rising bottom so we're getting a little bit of a pennant pattern being built here so depending on where this breaks over the course of the next few days will be very important because of this compression that's happening price we break out to the upside it's fine markets are going to make new highs and we'll start moving moving a bit higher here but if we break to the downside we're going to come back down potentially retest this 50-day moving average and that 50-day moving average is becoming much more critical support for the markets uh a break below that we're going to look at 7 000 potentially which is around where the 100-day moving average is currently trading so there is some certainly some downside risk in the markets markets are not exceedingly overbought here but they're not exceedingly oversold either so we're kind of in no man's territory right now where this market is trading momentarily and again nothing to be overly concerned about markets are looking to point up this morning uh nasdaq is going to be up about 400 points again it's going to be back into semiconductors today it's going to be kind of that same chase that we've seen as of late in those areas so again the market's going to kind of work through this this kind of consolidation process but where we kind of move from here is going to be kind of the next move again the kind of the next important direction so kind of a breakout of this consolidation at this point and we clip out these these previous highs then we're going to be in good shape now having said that the end of june starting actually today the end of june tends to be weaker in terms of trading days um for the for the month of june it tends to be the weakest part of the month of june a couple of reasons for that first of all we are now moving into uh blackout for corporations so all the stock buybacks are now going into to uh blackout mode which means there won't be any that kind of that support of corporate buybacks won't be there for the next couple of weeks so you're essentially removing a buyer from the markets that contributes to some of that weakness we also have end of the quarter rebalancing coming up here over the next two weeks so all pension funds mutual funds hedge funds anybody that runs any type of allocation type strategy 60 40 70 30 80 20 whatever it is they're going to rebalance this their portfolios and after this very very large run and particularly in the semiconductor sector where a lot of these stocks have just had tremendous runs over the course of the last couple months in particular they are now going to be overweight those stocks to a large degree they're gonna have to bring those back into to target weightings um potentially move some money into bonds which are a little bit underweight in portfolios right now so we may see a bit of a rotation in the markets just simply from that rebalancing effect that occurs over the next two weeks as we head into the end of the month so uh so the the whole point i'm making here is that simply the market's okay nothing nothing extraordinarily you know concerning about the markets at the moment but there's certainly a little bit of technical weakness that's showing up breadth still remains fairly weak for the overall markets and then you've got a couple of other factors coming in towards the end of this month particularly rebalancing and blackouts that potentially adds to a bit of weakness in the market so again just kind of look at your portfolio manage your risk take profits if you need to but particularly in areas that have had very very large significant moves as of late where potentially there is some risk of rebalancing selling and particularly like semiconductors some of the other stocks and some of the smaller mid cap stocks as well we've got a lot of stocks that have had very very large gains over the last couple of months take some profits on those because those are likely going to be subject to rebalancing more than just about anything else so again just something to think about there's no guarantees of any of that happening but just something to kind of think about risk-wise in your portfolio all right that's what you need to know before the bell this morning when we come back we'll pick up we'll talk all about the fed what kevin moore said yesterday what it means for the markets don't go away [00:10:01] Speaker 1: get daily investment news you can use delivered at the speed of the internet at realinvestmentadvice.com [00:10:08] Speaker 3: life insurance is more than ostriches geckos and mayhem and it's more than just protection life insurance should be planned for not sold and our next candid coffee takes you beyond protection what life insurance can really do saturday june 20th with john penn and jonathan mccarty we'll show you how to use life insurance as a valuable financial planning tool for every stage of life how to create financial flexibility and liquidity support your retirement and legacy planning goals register today for our next candid coffee beyond the protection what life insurance can really do saturday june 20th with mccarty and penn register now at realinvestmentadvice.com realinvestmentadvice.com [00:10:55] Speaker 1: you're listening to the real investment show [00:11:03] Speaker 2: i'm going to agree with this comment in our chat by java joe this morning he says i've been busy jp if i'm not here don't worry i'm doing something immoral or fattening i am completely on agree with you so especially the fattening part so uh a couple of things let's talk a little bit about kevin morse yesterday and what he said because this was a very very different meeting on a lot of different fronts yesterday i want to show you uh we're going to start out with i just want to show you a copy of the actual fed state minister and i've actually got we're going to actually listen to what if you missed the press conference yesterday i'm gonna i'm gonna let you just listen and we're gonna kind of you know break it up as we go and we're gonna make some comments along the way but i've actually got kevin warsh's you know official statement yesterday so we're going to kind of go through that break it up a little bit talk about it but let me just show you the the uh the actual fed statement the printed fed statement this is the one that they adjust every month and normally what happens is that this is a set statement and what they do is they they red line one or two words um and that's because so they may say employment was moderate last month and it's strong this month so they just they mark out moderate and and now it's strong right so this is the red line this is what's called the red line version of the fomc statement what you'll notice is the massive amount of red line in this statement this is what they've now taken out of the statement the blue is what they're basically saying the statement is and again you can see how short this statement has become and there's a there's a couple and and so kevin warsh will go through and discuss why it's so short but this is a very significant change to what the fed is thinking about in terms of managing the markets and and expectations going forward but here let's just start with let's just get into first of all and again i'm just going to i'm going to just tell brent to stop the conversation as he makes certain points along the way um but well let's just listen to what what chairman warsh said yesterday and we'll kind of break this down a little bit and then we'll add on to the back end of this i've got some other data points that came from that meeting yesterday that we'll get into so go ahead brent it's an honor a true honor to be back at the federal [00:13:36] Speaker 4: reserve and to take up this duty at a time of such consequence i've been especially heartened by the warm welcome of old friends and new colleagues both and i've listened closely to my fellow fomc members for a lot of new ideas new thinking and genuine interest in moving the fed forward this week's fomc meeting exemplified the very best of the fed's traditions rigorous debate open-mindedness commitment to mission responsibility and accountability for performance in this business they all add up to one one thing getting monetary policy right or as near to it as we can do that is our north star my colleagues and i are here to serve our legislative remit which you've heard us say before price stability and maximum employment and these objectives guided our business in the meeting just concluded as you saw a few moments ago the committee decided to maintain the target range for the fed funds rate at three and a half to three and three quarters percent in support of the fed's dual mandate the committee also reaffirmed its policy of maintaining ample reserves in the banking system economic activity is expanding at a solid pace despite elevated uncertainty that owes in part to the conflict in the middle east productivity growth and capital investment both strong job gains have kept pace with the workforce and the unemployment rate has changed little hold that [00:15:29] Speaker 2: right there okay so real quick here so again he's just now going through this very shortened statement that the federal reserve has now come out with and you know he notes a couple of things here first so he does give a nod towards the fact that the the crisis in the middle east has significantly impacted the inflation run because of oil prices well that's now and we talked a little bit about this yesterday that with the oil price declining fairly sharply that the fed would likely not hike rates yesterday which they didn't because that inflationary push from oil prices is now somewhat reversing so that's going to feed into oil prices here over the course of the next couple of months sorry that will feed into the inflation data here over the next couple of months as that oil price subsides now we're about to get we've had the cpi report out recently we've had the ppi report out recently the the which is the consumer price index and producer price index those two indexes have seen increases in the inflation push caused by energy the energy throughput into the markets right so we've seen that energy push through that we've seen those prices increase and both the cpi and ppi side that's going to feed into the pce which is the personal consumptions expenditure index for inflation that's the index that the fed pays attention to so we're going to see a higher pce run in the in this upcoming report that we're about to get because that the input into that pce report was when oil was above 90. so now with this drop the next pc reports that we get over the next couple of months are going to be lower because of this decline if and again this is assuming oil prices remain you know back down at these levels over the next couple of months we'll see we'll see some easing of that pressure so by the time that we get to the next fed meeting so the next fed meeting is in six weeks we may see a little bit of change to the tenor of the meeting if we're starting to see some some disinflation from falling oil prices feeding into the data okay but overall he's right a couple of things are is that inflation has been impacted by the middle east conflict but at the same time job gains you know the the employment report remains fairly stable job gains remain fairly stable as well so there doesn't seem to be a lot of pressure right now for the fed to either hike rates or cut rates in either direction because everything is pretty much status quo at the moment okay so let's finish up because he's actually [00:18:01] Speaker 4: going to talk about inflation next go ahead we recognize that inflation has been running well ahead of the fed's long stated inflation goal of two percent that's been going on for more than five years persistently high prices are a burden for the american people but the recent past need not be prologue i am pleased to report that members of the fomc are unambiguous and unanimous this committee will deliver [00:18:34] Speaker 2: price stability so that is the very interesting part of the statement which is that there is an unequivocal statement and he repeats this so so he went on for another 15 minutes or so following this this this kind of announcement answering questions and every time somebody asked about the inflation data he said unequivocally we're getting to our mandate now he doesn't ever state during this entire conversation that we have for 15 20 minutes in the q a period he never states exactly how we're going to get there he just says unequivocally we are going to get to the two percent target inflation rate and which which i found very interesting because again he doesn't really discuss the the monetary policy tools that they're going to use to do that but they are very convinced and at least from his from at least his viewpoint as fed chair the two percent target rate is achievable and that they will they will achieve that mandate over the course of the forthcoming months so so this so so after that he starts taking on on q a here a bit and and we'll do a little bit of that for you go ahead at any institution a change [00:19:58] Speaker 4: in leadership is a natural and timely opportunity to reaffirm its mission to review current practices and to consider whether those practices best meet our objectives my fed colleagues and i will be working in close collaboration to ask what changes might improve the conduct of monetary policy on that score you might have already noticed something a difference in today's policy statement it's a bit shorter a bit simpler and it dispenses with some older language that statement just gives you the facts as best we can judge it absent also is so-called forward guidance which we agreed was not well suited to the current policy conjuncture this afternoon you also received the usual summary of economic projections it's been the practice of this committee for participants to submit these projections and i have encouraged my colleagues to continue to do so okay so a couple of things here that are very [00:21:06] Speaker 2: important um he talks specifically about this forward guidance and this is going and during the press conference q a section he got into this a bit more and and and we're going to touch on this here in a second but he makes some very important comments about this ford guidance and they are they are getting out of the business of ford guidance so so to me this means a couple of things first of all the economic projections that the fed produces this is this is a relatively new thing this started back under ben bernanke post 2008 when ben bernanke felt like there needed to be a whole lot more visibility with the fed and what they're doing and and kind of looking at their projections for the economy those type of things that all need to be public information i will not be surprised if under kevin morse's kind of tenor that he begins to move away from these economic projections one they're not really useful and the reason is is that you know you're looking at long-term projections saying okay the economy's gonna grow at 1.8 or 1.9 percent you there's you know trying to predict that far ahead is is pretty much a fruitless exercise because so many things can happen you have a recession you can have an economic boom so you know really these long-range projections don't really provide a lot of good information so and again just from a forward projection standpoint and again if he's trying to get away from forward guidance and i'm gonna tell you why he wants to get away from forward guidance here in a second but if you're trying to get away from forward guidance i think that's something that goes away i think something else that eventually goes away is the dot plots about how everybody's voting because there's a lot of read into that dot plot about what the fed's thinking so you know we we provide this uh rorschach's test every you know every fed meeting and everybody's trying to read into this you know dot plot about oh does this mean they're going to hike rates they're going to cut rates those type of things and and we've and we've talked about specifically here on the show over the last few years that we moved away from the markets trading on fundamentals to the markets just trading on fed policy and we just drifted from one meeting to the next right it's like oh we're you know markets are rising now because the fed is hinting that they may cut rates or the fed might cut rates so we're going to run the markets up or the fed might hike rates so we're going to sell off the markets and so the market has been very tied to fed policy and what these fed policy announcements are and so he's talking now is that they're going to start removing this ford guidance from the markets and there's a specific reason for that but but we're going to get to that in just a second but here let's continue i however have refrained from offering any [00:23:50] Speaker 4: projections of my own consistent with my long-held views on the scp at least as currently structured in the median projections real gdp rises at 2.2 percent this year 2.3 percent next year and total pc inflation runs at 3.6 percent this year 2.3 percent next year the unemployment rate stands at about 4.3 percent the median participant judges that the appropriate federal funds rate to be at 3.8 at the end of this year and 3.6 at the end of next let me turn now to a few words on a key initiative [00:24:31] Speaker 2: that we're announcing today okay hold on uh so real quick and we're about to get into these initiatives which this is this this next segment of his discussion is probably the most important thing coming out of the fed meeting itself yesterday and i'm gonna we're gonna get into this in a little bit more detail here but um as i said you know these long-range projections don't hold a lot of water and but you know they they do kind of lay out what they're thinking at the moment but that's all subject to change again you have a recession all that stuff kind of goes out the window so he said though if you listen to what he said very carefully he said that as it stands right now so this scp this forward-looking guidance as it stands right now that's what that's what's going on but he refrained from putting any any vote into that that was just basically the vote of the other 18 members of the of the of the fomc board he refrained from putting any any data points into that which means that you know at least you kind of expect from what he's saying is that that is going to change how that is produced and how that is and if it remains produced that's going to be the other question do they get rid of it entirely do we go back to the way it was pre ben bernanke and we don't have these types of of reports coming out which would probably be useful as i said many times the fed needs to be seen and not heard um but we'll see how this changes but the important thing that he that he does talk about during his q a session is this importance of ford guidance and as i said the market has been trading off of this ford guidance for quite a while we've gotten away from fundamentals we've gotten away from looking at the you know the underlying data in the markets those type of things and as we've talked about on the show a lot is that the market tells you everything you need to know right so when people are running around and we talked about these narratives before about you know the death of the dollar or this or that or the other thing just pay attention to the market because the market will tell you whether or not that narrative has any truth to it and the market is a very important signal and this is something that kevin warsh directly addresses in his in his conference yesterday he said look the market is a very important signal that we need that information from the problem is is because of this ford guidance the market has been trading off the ford guidance and not giving us the signal that we want for monetary policy in other words what the fed wants is the market to trade based on the fundamentals and the data that's readily available to the markets about what's happening economically what's happening on a real-time basis and he gets into a lot of this during his q a is discussing the importance of real-time data and in fact we're about to get to that section one second but um that signal from the market is very important for the fed to make better monetary policy decisions but because of this ford guidance it skewed that signal over the last few years which has made the management of monetary policy more difficult because the market was trading off the policy rather than the policy trading off of the markets and so we'll get it but but here's this important but again he's going to about to start talking about the initiatives that he's going to undertake with the fed from now through the end of this year which are going to be really a game changer to the entire fed structure and this is something that we've talked about here on the show a lot over the last couple of years in particular me and mike um discussing the the issues with the data collection and he addresses this [00:28:04] Speaker 4: in particular go ahead i'm appointing a task force in each of five areas that are central to the broad conduct of monetary policy first fed communications second the fed's balance sheet third our use and reliance on existing data sources fourth productivity and jobs in an era of transformation and last the fed's inflation frameworks these subjects are timely consequential and in my view worthy of a fresh look my colleagues and i discussed them with energy and purpose over the last couple of days for each of these independent task forces i'm enlisting some of the very best minds both inside and outside economics profession they will be supported by subject matter specialists from our superb fed staff and they'll have a straightforward charge start with first principles ask hard questions examine current practice consider alternatives and ultimately propose next steps for policymaker consideration since last summer my colleagues discuss possible improvements in the form and function of fed communications this new task force will build on that effort and i expect propose some well-considered changes including to the sep i mentioned a few moments ago the second task force the one on balance sheet policy will review the benefits and risks of the current ample reserves regime and the composition of the fed's balance sheet they will assess alternative frameworks for the conduct and operation of monetary policy the third task force the one on data will evaluate new information sources and consider methodological changes to improve data gathering with the aim of giving policy makers more accurate relevant contemporaneous and perhaps most important actionable information on the state of our economy fourth the task force on productivity and jobs it'll survey the pace the reach the economic impact of new general purpose technologies including ai and explore the implications for the pet for the fed in pursuit of our employment and inflation mandates the last task force the one on inflation frameworks that'll examine the drivers of inflation first principles and weigh the full range of ideas for delivering price stability in a changing economy you'll hear quite a bit more about these task forces and this overall initiative in the coming weeks enough for now to make a simple statement each task force will serve an objective shared by everyone in the system shared by everyone around that table that i sat with over the last couple of days a federal reserve that is clear-eyed about its mission fit for purpose and focused on the future [00:31:21] Speaker 2: and with that i appreciate your attention and uh so that wrapped up his initial conference then we get to the q a um so let's talk about these task force because this is the most sweeping change potentially coming to the fed that we've seen well that i've seen probably in my lifetime um you know most of the time you know ever since really alan greenspan going forward it's been pretty much the same type of policy structure going forward there's been some minor changes here and there again the the scp for guidance is an example under bernanke um you know that was a small change and that was that was certainly welcome jenny yellen tried to institute a a different type of employment analysis that failed miserably so that was removed pretty quickly so we've had some small changes but nothing's sweeping as to the the magnitude of what uh kevin warsch is actually proposing here so these five task force i've got here and just so we can review them a little bit i've got a graph of these uh to show you so let's just start with fed communications because there's some important things that he did discuss during the q a section so if you didn't hear the listen to the q a a a lot of this was brought up because immediately all of the reporters out there was like well you know what what what do you think about interest rates and he's like well he says go back to the statement we're focused on our two percent mandate and i mean he did not budge whenever they tried to push him to get forward guidance he's like i'm not giving you forward guidance we're going back to the statement and he kept referring people back to that statement over and over again or he would refer to the task force that are currently under measure so again back to fed communications that's his first task force this is what i'm saying is that the ford guidance that's coming out of the federal reserve is going to change probably rather dramatically and this the the role of the scp this ford guidance that they they provide out um the statements that they make again just take a look at the shortness of the fed statement for the fomc meeting three paragraphs and that was pretty much it very very short to the point this is it this is our mandate that's what we're sticking to not a lot of fluff and again that was what the the market was paying attention to was more of this guidance more of these dot plots those type of things and so i would suspect and again i could very well be wrong but i would suspect that a lot of these things that we were used to coming out of these fed meetings like the dot plots the sc the scps etc that may very well change dramatically or go away entirely the fed balance sheet was a very interesting one as well because this is obviously one that a lot of people are focused on all the time is you know the qt the qe what's ever going on with the fed balance sheet but this task force to focus on the fed's balance sheet to review the benefits and the risk again this is something that has been a topic that mike and i have talked about for a long time is making sure that the management of that fed balance sheet does provide the the reserves that are needed for the banks obviously we need the banks to be able to operate they need to be able to lend they need liquidity they need those types of aspects but that balance sheet structure and makeup should be in line with the current market environment and it should not be overly supportive of the market environment to where it influences markets to trade outside of their fundamental ranges so again that's going to be i don't know how that that task force is going to come to fruition what that's going to look like but i'm very interested to see what their conversations start looking like around the management of that fed balance sheet um this the the third one is the most interesting one to me personally because this is something that mike and i have discussed many many times in the past when we talk about employment data right as an example employment data is lags by a very large degree the sampling method that's used to collect employment data is you know questionable at best right and look even most americans right you get the cpi report you get the employment report everybody goes ah you know it's it's you know it's bs it's not bls it's the bs employment report um because nobody believes it right and so this was one thing that uh when when kevin warsch was questioned about this he said look he said this is a problem for the fed we recognize it's a problem for the fed by the time that we get the employment data it's a lagging indicator we're trying to make real-time policy decisions based on lagging economic data and today because of all the information sources that we have there's a lot of real-time data available that we can be using so this this third task force on the use and reliance on existing data sources to evaluate new information sources consider methodological changes that's a word um and changes to improve data gathering and this is going to be this is going to be really interesting to see because again you know there's been a lot of talk you know people have questioned us before we've talked about it for us like for instance with inflation you have the truflation index which may you know measures a million prices it's a fairly real-time indicator now they're not going to use the truflation index i i would imagine but what i'm saying is is there's a lot of real-time data on the ground look adp we don't pay much attention to the adp report every month but that's much more real-time data that's a company that actually collects payroll data how many people were hired how many people were fired in the last week what's the employment change they have that real-time data there's paychecks there's pay lossy there's all these other payroll companies that are out there that have real-time on the ground data about what's happening with employment and hiring and firing and all that why are we relying on a phone sample of 60 000 people and households that we do once a month on the first tuesday of every month i mean it's just you know there's so much data that's out there real-time and with the the databases that we have the data collection ai that we can lay on top of that to analyze the data it's about time and and again i'm very excited about this particular task force because it's been a long time coming that we start to upgrade how we start looking at data particularly when it comes to doing monetary policy and making monetary policy changes that needs to be on real-time data not data that's lagging by three months or six months in some cases and and then making a decision based on you know housing is a good example of this um you know the housing data that we look at the homeowner's equivalent rent that we measure inside of cpi as an example is the three-month lag and it's not even a good measure of that as well because it's simply just a questionnaire it's like well what do you think you could rent your house for that right i mean by the time you collect that data it's it's old and so that really and so if you're trying to base your your rate hikes or rate cuts based on economic data that's three months or six months old you can see where the problems you know become from this so this is going to be a very significant change if they start to adopt a lot more real-time data that's going to be a very healthy very good for the federal reserve but also could change the dynamics of how markets react to the economic data that we're seeing coming in as well and and may change the data that we're actually looking at right so instead of focusing on the bls report every month maybe we start focusing more on the adp reports in terms of how market dynamics work again i don't know this is just we're just discussing this this morning but this was a pretty big change uh number four is productivity and jobs task force um again you know ai obviously the the big concern here the big look this is obviously changing how the markets are operating it's changing how we're employing people so this task force to focus on the transformation of employment is going to be very important and then of course the feds inflation frameworks that's going to be the again this is going to be another very important one here to pay attention to because they're going to re-examine the drivers of inflation and this is we've had some hints about this about kevin warsch wanting to maybe change the the the measures that they look at like for instance using the the trim mean median pce looking at the dallas trim mean pce those type of things um to to strip out some of the volatility of inflation but also this task force to focus on the actual drivers of inflation in a new economy because again he brought this up during the the q a section is that a lot of the data that they look at currently is based on stuff that we were doing in an economy two decades ago three decades ago the economy is different today than it was even a decade ago the economy is very different today and so we need to make sure that the things that we're looking at again you know the last time we had a major change to the cpi calculation was coming out of the boskin commission in in the late 90s during the the clinton administration and so the the environment the world has definitely changed a lot about the way that we calculate inflation what drives inflation in the current economy we have a lot more services in this economy than we have manufacturing that has very different impact on inflationary pressures so a a deep dive and a task force that really digs in to looking at inflation how we measure inflation how we calculate inflation this is going to be very important to getting the markets in a position to trade better against that data in the future and again all of this comes back to the the the overriding arch of this which is he expects to have these task force completed by year end so this is not something that's going to complete in the next month or two this is going to be something they hope to have more resolution on by the end of this year but the market's going to start looking forward into this as we go forward and the the important part that i discussed earlier is that what the fed wants is for the markets to trade on their own so that the federal reserve can take the signal from the markets rather than the markets taking the signal from the fed because if the markets are taking the signal from the fed it distorts the signal that the market that the market could be giving the fed and and kevin wars was very clear about this fact that he wants the markets to go back to trading on their own leaving the fed out of it for the most part and just working off the data that the fed is the fed is actually working with as well so this is this is a very very big change we'll see how this all works out and again there's a you know there was a lot of question about you know going into this first meetings like well you know kevin wars he's just a trump puppet he's gonna do whatever trump says it doesn't appear to be the case um you know i've said this before every you know when powell came into office everybody was like oh he's going to be so different and he's going to be such a different fed governor because of his background etc he's not going to be like yellen and bernanke but he was because he ran into a crisis kevin wars is going to have to deal potentially with a crisis at some point does he come back to you know being kind of the more the standard fed just going straight back to qe those type of things i don't know nobody does but from the the outset at least this appears to be a a person that's very dedicated to getting the fed to operate on its mandate with a very specific task and changing how they're approaching that task to update those measures update those policies update those practices to the real world that we live in today not the world that we were living in 10 years ago 20 years ago or 30 years ago so this is going to be very interesting to watch it's going to have some important information and uh you know we'll see what happens with the markets anyway um thank you all very much for joining the show today it's it's been good i want y'all wish y'all a very long happy weekend of course with tomorrow being a holiday the markets will not trade tomorrow right now futures are pointing up about 44 points on the s p 500 the nasdaq is going to be really strong today semis back in the run today so we're just going to all pile back into semis i guess today now it's going to be up about 68 points so yeah nasdaq got 376 right now so big day for the nasdaq today we'll see what happens tomorrow uh have the newsletter out this weekend of course everything so get by the website realinvestmentadvice.com y'all have a great day thank y'all so much like and subscribe to the channel we appreciate it very much see y'all on tomorrow [00:44:33] Speaker ?: we appreciate it very much appreciate it and thank you very much for joining us today we appreciate it very much for joining us today we appreciate it very much for joining us today we appreciate it very much for joining us today we appreciate it very much for joining us today we appreciate it very much for joining us today we appreciate it very much for joining us today we appreciate it very much for joining us 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