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[00:00:04] Doug McIntyre: CPI number comes out the tame, I think 2.7. It’s the sort of number that the Fed will look at and sort of, they’re damned if they do, damned if they don’t. it’s still higher than their target at 2%, but it’s, certainly not very high. It’s gonna, it’s part of the debate, violent debate between President Trump and some of the Fed governors about what you should do.
[00:00:30] Doug McIntyre: The president would argue that it’s very, very low and, cut rates. Yeah. But we have one fed governor who wants to be very aggressive. Right.
[00:00:42] Lee Jackson: Yeah, there was two of them when they met in July. There was two of them that, were not for, keeping rates of the current levels.
[00:00:52] Lee Jackson: And that hadn’t happened in years where two of them were against, the overall voting of the Fed governors and Michelle Bowman, she is She’ll probably, she could go hire in, in the, Fed reserve area, but she’s, saying, Hey, we need three rate cuts this year. Which probably means that they’d cut them in September, November and December.
[00:01:19] Lee Jackson: And it probably means that each rate cut would be 25 basis points, although some people have indicated that they could go for a shock 50 basis point cut in September. If the, it’s interesting, the job report for August in September will actually come after Labor Day because Labor Day is on the first this year and on Monday, or it’s always on the first Monday, but, it falls on the first of the month and that number will come out Friday prior to that.
[00:01:49] Lee Jackson: But with Michelle Bowman really, really pounding the table on it. It’s gonna be interesting to see. It’s gonna be really interesting to see if other Fed Governors start to fall in line because. the president doesn’t trust the jobs report, and if it comes in. In early September and it’s 50, 60, 70,000 jobs were created and there’s more downward revisions, which has been going on all the time.
[00:02:18] Lee Jackson: And they did this all during Biden’s time in office where they put out huge job numbers and two or three months later, well those are being revised back, 200,000. It’s like, oh, okay, but you already said 90 days ago that they were higher. But I think there’s a lot of skepticism regardless of who’s in the White House on the job numbers.
[00:02:37] Doug McIntyre: Well, if you look at the 72,000, net jobs added last month, if you took the revision sizes for the previous two months and applied them to last month’s number, yeah. You would’ve had negative job growth.
[00:02:52] Doug McIntyre: Yep. Exactly.
[00:02:54] Lee Jackson: Jobs would’ve gone down last month if you applied those revisions to the 72,000 number.
[00:03:02] Lee Jackson: Yep. So there are two sets of circumstances and I’d like to know from you which, which happens here. Okay, so let’s say two cuts. The odds are that it’s two cuts, 25 basis points each. Now in October, you get the CPI number for the previous month, and the tariffs have really, they’re just banged it hard.
[00:03:25] Lee Jackson: Yeah, banged it hard, let’s say it’s 4% CPI. What does the Fed do? Let’s say they’ll all get on Zoom right after it comes out. What’s the plan if you see a 4% print on the CPI?
[00:03:41] Lee Jackson: Well, let’s say they did raise ’em or cut rates 25 basis points in September, let’s say they did that, and then let’s say that did happen, and CPI blew way above the level and the core was higher.
[00:03:54] Lee Jackson: Like it was this, core was higher than they anticipated. That’s, X food and, energy, but they would immediately hit the brakes. That would be it. One, one cut would be it. Now think it’d be hard pressed to come in that high, but, I think one of the things that’s troubling to, the more conservative Fed members is if they start on a downward path.
[00:04:20] Lee Jackson: We have a stock market that’s already trading at all time highs. All time high. Yeah. There’s a ton of margin debt out there and most of this is retail, people pushing in higher. It, a lot of the big hedge funds and maybe your son is fund has been, they’re very, very, very bearish now because, and not because they’re necessarily bearish on the United States, but they’re bearish on the.
[00:04:43] Lee Jackson: That we’re trading, at all time highs and the forward, earnings numbers are lower, the forward earnings for the S&P is like 21 or two, but the trailing is like 28 and that’s 28.
[00:04:56] Doug McIntyre: It’s 28.
[00:04:58] Lee Jackson: It could go either way. I really think it could go either way. But the problem is again, cutting rates will help. This is the home building industry has just hit the wall, after being soaring in the early 2021, 22 era. And that’s just hit a wall. And so that, hits construction jobs. And mortgage rates, as we both know, Hey, six and a half mortgage 40 years ago was a deal.
[00:05:24] Lee Jackson: Now it’s the highest in, 20 years. It’s a real tug of war. It really is. And there’s a guy going to the office of that manages the numbers for the jobs staff.
[00:05:37] Doug McIntyre: BLS? Yeah,
[00:05:39] Lee Jackson: EJ and Tony and I love this guy. He is one of the sharpest dressers on Wall Street.
[00:05:43] Lee Jackson: He’s always got like the suit and the best and the matching tie and he looks great. But this guy is really smart and he’s been yelling about the, bogus numbers for years.
[00:05:55] Doug McIntyre: He’s from the Heritage Foundation, I think
[00:05:57] Lee Jackson: He was there at one point, then he went someplace else.
[00:06:00] Lee Jackson: He is got a nicely trimmed goatee. He looks sharp. He’s an economist that can speak, in easier terms.
[00:06:10] Doug McIntyre: Well, one of the things that people should ask themselves is if the Fed cuts two or three times. People don’t think about this. How long does it take for that to make it through the system?
[00:06:21] Doug McIntyre: I think most people think, well the Fed cut, gee, that means that my American Express card rate’s gonna go down the same day. I mean, it can take months for these things to work their way through the system. So, people may think it’s nice, but the real effects of rate cuts don’t, won’t kick in until next year.
[00:06:39] Lee Jackson: No. And again, it’s like the stock market, when the CPI number wasn’t dreadfully bad, takes off again, we’re off again. And the thing is, nobody likes a, role in upward stock market more than you and I, we’ve been in this business for 40 years. But there’s a point when, it’s supply and demand and the supply is getting thin and the demand is gonna get thin.
[00:07:03] Lee Jackson: And, we had a 20% decline almost in, in a couple of indices others that did hit it between February and April. And there’s nothing that says we don’t have another 10 to 20% decline this fall.
[00:07:17] Doug McIntyre: Entirely possible. Nothing that says you can’t,
[00:07:20] Lee Jackson: Yeah. So easy.It makes sense for our, viewers and readers.
[00:07:25] Lee Jackson: if you’ve got some big, huge profits, for goodness sakes, take some of ’em. Or at least sell half and keep half. If it goes higher, great, you still got some shares. If it goes lower, great, you sold some shares.
[00:07:37] Doug McIntyre: Yeah. I always had a rule of something doubled. Sell half. Yeah, exactly. So apply that rule everybody.
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