The Federal Reserve is likely to maintain tight monetary policy due to strong small business optimism and job growth, but a significant decline in commodity prices and other indicators suggests underlying demand weakness that could eventually force rate cuts.
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I think the fed's committed to keeping
money tight for the foreseeable future
but we'll find out tomorrow when the
jury returns in the guys of fed Chief J
pal it's pretty easy to stay tighter the
backbone of the US economy is small
business and small business optimism is
the highest it's been all year that
means more hiring on top of the 272,000
people who got jobs last month hard to
imagine getting rate cuts when small
business is that optimistic instead the
FED needs be obviously Vigilant against
inflation natural gas prices spiked
today there's been less drilling so that
won't reverse the that won't reverse
easily the median sale price of homes is
up about 30% since 2019 that's an
inauspicious number for certain although
it used to be 40% so at least we're head
in the right direction so yes it's easy
for pal to leave rates higher for longer
at least on the surface but you know me
I look at the stocks and the stocks are
actually saying otherwise consider the
stock of Cleveland Cliffs an amalgum of
all sorts of Steel that thing's getting
clubbed down almost 26% for the year and
off about eight points from its $23 Peak
Cleveland CL has been annihilated now
just now we're starting to get
downgrades fellow steelmaker new course
down more than 10% for the year these
are real world situations not surveys
they represent a lack of demand that
will mean lower prices for many
important goods down the road iron's
down big too according to data from the
St Louis fed on pricing for property
casual insurance premiums one of the
most intractable sources of inflation
these premiums are finally rolling over
at l yes that won't be a
problem Commodities Lumber rolling over
iron rolling over nickel rolling over
wheat sugar soy getting clobbered corn
aute commodity because you need it for
animal feed to get meal uh meat and
poultry it's down big cotton the
indicator of the intractable
inflationary power category is now down
big from its 2024 highs even copper seen
as the most intergal of cost for the
data center is getting pummeled China
had been a vicious consumer of copper
but now it's cutting back on all prices
as part of a state sponsored plan hey if
it helps us beat inflation I'll take it
so much for the copper super cycle it's
natural to believe that Autos will be
next too many pieces of cars coming down
at Price when you see these building
block prices coming down you have to
start thinking that everything could
roll over even Autos even housing
because the Commodities don't weaken
like this unless there's a problem with
demand so I think the FED has every
right to be vigilant against inflation
especially with such strong job growth
last month but the big hiring Vision may
actually if you break it down came from
government and healthare which don't
depend on the broader economy there's a
bit of strength in travel and
Hospitality but those I believe are
still part of that Revenge travel
movement left over from covid almost all
other industries were static again
something that happens before the
rollover these are the brown shots the
down shots that figures and will explain
why some economists keep clinging to a
September rate
cut I think these lower prices have to
go through a pig and a python style
before we see the FED take any action
but they'll have to take action if the
downward spot spiral continues it's
likely though because believe it or not
we're still dealing with shortages that
stem from the pandemic and the are
finally winding down we don't have
enough people to do everything we need
because of retirement without
replenishment of the labor pool it's
just not the way it used to be all that
said prices are coming down companies
that don't lower them will lose business
it's the brutal natural order of things
and it's going to play out within the
next year the only wild card is
immigration if the policies are random
and the enforcement near to non-existent
then wages the stickiest of all
inflation problems will come down too at
which point the FED can really start
cutting race remember the FED has to
take it all in I don't envy J pal but I
like them I trust him and I believe
he'll figure things out why because he's
done it before and he now deserves the
benefit of the doubt I like to say
there's always bull market somewhere I
promise try to find it just for you
right here on M money I'm Jim Kramer see
you tomorrow last call Starts Now [Music]
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