Danielle DiMartino Booth: Powell Is Committing Policy Errors to Quietly Dig at the Administration
Summary
Fed Policy: The guest criticizes Powell for politically tinged decisions, arguing cuts are warranted and unemployment risks are rising.
Sector Trade: She outlines a paired trade to go long Utilities and short Financials, citing a restrictive Fed and mounting credit losses.
Commercial Real Estate: Highlights capitulation with office property sales, realized losses, and increased bankruptcies, pressuring financials and supporting the short side.
Precious Metals: Notes strong public enthusiasm for gold and silver, viewing gold as a hedge but cautioning on meme-like behavior despite potential upside.
Consumer Stress: Warns about surging Buy Now Pay Later usage, especially for medical, dental, and utility bills, and higher credit card balances among users.
Labor Market: Expects a higher unemployment rate ahead, referencing survey-based indicators and revisions that point to labor softness.
Market Outlook: Suggests Dow outperformance versus Nasdaq signals a defensive rotation, reinforcing the case for utilities and caution on financials.
No Stock Picks: No specific tickers were pitched; the focus was on sector-level positioning and macro risks.
Transcript
I think that that Powell has in the past claimed to not be political in making monetary policy, but been political. And I've been saying this for months. He's when it comes to making monetary policy, he's been committing policy errors to quietly dig at the administration. >> Should he have cut today? >> Yes, without a doubt. >> Where do you think we should be on the Fed funds rate? Hey everyone, welcome back to another special in-person episode of the Julia Larose show on FOMC Day. We are joined by none other than Danielle D. Martina Booth, CEO and chief strategist at Qi Research, author of the Daily Feather newsletter on Substack and author of the book Fed Up, friend of the show. Great to see you as always for the first FOMC of the year. >> It is great to see you on I mean you're the most exciting thing that's happened since J Pal took to the podium. >> Oh cuz it was such a snoozefest. Oh my gosh. >> I mean, he he took he he put the pins back in four grenades in a row. Just just like that. 1 2 3 four. >> Yeah. I mean, did we really expect him to answer, though? >> Nope. Nope. That was that was my prediction going in was don't expect anything. They'll come right out of the gate asking, but he's not going to say anything. >> Okay. So, let's unpack it a bit more. Um, so the subpoena, the video, you were one of the people I wanted to get a reaction to when that came out. What was that? January 11th. Yeah. So, it comes out Sunday evening. >> Yeah. My chat room was hopping all over. >> Okay. What was your take? What was your take before we get into the Fed FOMC stuff? Um, I was not surprised because even though I don't agree with the policy he makes many times, >> if nothing else, uh, Jay Powell is a civil man and he's a gentleman and that's how I perceive him and he's always kept his calm. But there are certain lines in this world you don't cross, including criminal charges. >> Mhm. And I think it was such an affront to his integrity that there was a line that was crossed. Uh what was most intriguing in the aftermath was finding out that he had already retained counsel prior to the charges being made. >> He knew it was coming. >> He knew it was coming. >> Okay. >> But I mean I I think he's known it's been I think he's known something was coming for a long time. >> Mhm. Um, but I I think a what he did was to me at least expected. You impinged his integrity. I don't blame him at all for doing that. But what happened afterwards, the palace intrigue shifted over to the White House and the deny, deny, deny. the obviously awful optics. Bill Py saying he had nothing to do with it. Trump saying he had no knowledge of it and Bessant playing it down. I mean, it it felt a lot like there was a rogue idea that was then taken all the way to the finish line without consulting a few more adults in the room >> about what the implications of this would be and the going into this matter, the betting markets, because that's all we talk about these days, Ky blah blah blah blah blah. But going into this episode, the odds that that Jay Powell, and you can bet on this >> Oh, yes. >> would would leave um by August were 90%. And today they're at 60%. >> Mhm. >> And when asked at the press conference today whether or not y >> he was leaving and when he might let everybody know, he just said nope. >> Didn't have an answer for them. >> Nope. And nope. So that really really I don't think I think the betting markets were right before these criminal charges were were made that he was leaving >> and I I think he's enjoying the cat and mouse because right now the the shoes on the other foot he is the cat playing with the mouse and the mouse is Donald Trump >> and so Donald Trump can't name anybody until he knows if he's going to have one or to vacancies. >> Interesting. >> He's in a holding pattern. >> Do you think then that this ch Okay, Betty Marks before showed 90% he was going to leave. I don't know the exact numbers, but I'm going to take your word for it. >> And now that's dropped to about 60%. Do you think that maybe this has changed his own mind that maybe >> That's my point. >> Okay, >> that's my point. So >> again, um I I think that that Powell has in the past claimed to not be political in making monetary policy, but been political. >> Um in not at least conceding to where survey material is, whether you're talking about the University of Michigan or you're a Daily Feather reader. I mean, we've had six months in a row with higher unemployment expectations north of 60%. >> Mhm. >> There's one president in US history, that was March 2009. And when that happened, the unemployment rate had risen by one full percentage point >> within 6 months. >> Right? These are things that let me tell you, you get 800 PhD economists in a room, they can take a long series like the University of Michigan or conference board and plot it out and tell you what happens to the unemployment rate that he is he's ignoring. >> Okay. You all right, as you point out, he's ignoring that and the employment rate. You have been really focused on this area. >> Do you what do you think? I mean, what explains the shift then? We can we kind of know but like what do you think? All right, let's elaborate. >> I think that um let's go back to J. Pal the pragmatist. >> Okay, >> J Pal the pragmatist um would never upset the markets willfully. So he actually did move the goalposts. Prior to Powell being chair, you actually had to have a 75% probability priced into the market of a rate hike or a rate cut before the Fed ever acted. it was just it's there. You can you can plot it out >> and put it on a spreadsheet. >> He actually lowered that threshold to 50%. As chair, uh when he needed to be more aggressive in hiking rates when when he finally got off the transitory, which we know why, um train, he had to be more aggressive in tightening. So, he moved that threshold down to 50% probability, but no probability at all. There was no way that he was going to do anything today because the the markets had fully priced out a rate cut. And that meant that you had to find justification for not cutting rates. Going so far as to say that he'd seen a solid firming in the US economy. Mm- that was a bit disingenuous. And that's where you get to the part where he's being political. Hey everyone, I hope you are enjoying this interview. If you can take a quick moment and hit that subscribe button, we are on a mission to hit our next goal of 100,000 subscribers and your support could really help us get there. Thank you so much and enjoy the rest of the interview. We also talked about beginning he's a man of integrity. Okay, he's going to defend himself. Does this also does it kind of contradict that if you're ignoring that? That's the American people right there. the hard work and that is where I I mean I I am um I think most of my followers on Twitter officially think I'm schizophrenic >> um because I think that for the sake of Fed independence, for the sake of the Federal Reserve Board not being stacked the way we were talking what 18 months ago about possibly stacking the Supreme Court. Mhm. >> I I think that that is one situation where it sounds like J. Pal's on the right side, but you're right. He is derelict in his underlying duty to make monetary policy for the public good. He is referencing financial conditions being as easy as they are. They are. But that's not a factor of Fed policy right now >> at all. That's a factor of passive investing, period. >> Anybody with a brain right now knows that valuations are completely off the rails and that we just we're sitting back witnessing the power of P passive and we are completely helpless in terms of getting in front of that train. But um but you're right, it's highly contradictory because he's not making monetary policy for everybody. and falling back on GDP data when funding has been slashed so much that the Bureau of Economic Analysis does not have it in its budget any longer to buy income data from the Treasury Department. They can't even craft GDP. They can't even properly revise GDP after these deep revisions to payrolls or it's going to take them a really long time to do it with an abacus or something. So the shutdown has affected the integrity of the data. >> So to be falling back on official data that you know in years to come could possibly be a mirror image of itself I I find to be highly hypocritical and that's where he is being political. But he's been, and I've been saying this for months, he's when it comes to making monetary policy, he's been committing policy errors to quietly dig at the administration. >> Mhm. So, we had a pause today. >> We had a pause >> and there's almost nothing priced in through the rest of his term, which ends in late May. >> Do you think we're just not going to see any cuts? Like what? I want to hear more. Okay, maybe reaction to the pause, but your outlook for the year. So again, when we see the labor differential between jobs hard to get, jobs are easy to get, um, in conference board, when we see that labor differential have a a three number in front of it, you cannot go back all the way to 19 to the early 1970s. You cannot go back to that Rubicon being crossed unless the United States is in recession. Unless Americans are deliluding themselves about the labor market and lying when they're taking these surveys, the unemployment rate will rise. >> In looking at the labor market, what does that tell you about the state of the economy and the trajectory that we're on? the labor market outside of education and health care, which I mean, we have an aging US population. I mean, if you want to be a home health aid right now, you're you have full job security. Of course, it doesn't pay you anything. Um, but outside of those two industries, we've had job losses since April and we've seen deep revisions to payrolls. And yet Powell is focused solely on the U3 unemployment rate that you see on the front page of any newspaper in America the Saturday after the payroll report and just GDP which we know is going to be revised once we can get the data in hand to incorporate the revisions to payrolls to back out the income that was not made by the employees who were not employed. >> Should he have cut today? >> Yes, without a doubt. Where do you think we should be on the Fed funds rate? >> Um, I think it's reasonable to be aggressive in cutting uh 100 basis points, one full percentage point, four rate cuts. I think that's a reasonable place to go and then pause because you have to understand that you're falling down on your you have to at least recognize admit that you're falling down on your employment mandate and then address it. >> Mhm. >> And then take a pause. >> The last time you and I spoke >> it's a premature pause. >> A premature pause. >> Okay. Is it a political pause? >> It's both. >> Yeah. It's both. >> The last time you and I spoke was in December. Um, and you had written an open letter on behalf of every hardworking American >> which has been roundly disregarded. >> You wrote another one. >> I did. >> Can you explain the second letter and the message you wanted to get across? So this was based on uh may he rest in peace uh uh the senior pastor at at the church that I attend and this was uh it was a 2016 sermon that he gave that said as contentious as this presidential election is if you don't cast a vote you can't complain for the next four years. So just put that put that in your pipe and smoke it. And this this sermon kept coming back to me after I'd written the open letter uh that states that at the first January FOMC meeting of every year, the chair and the vice chair of the FOMC are elected by law. Today, the 19 members of the FOMC elected Jerome Powell to be chair of the FOMC. They elected John Williams to be vice chair. This is all based on tradition. My open letter part two provided an actual blueprint as to how electing Christopher Waller when you're considering the four top contenders, the one who's going to be the most impartial, the one who's going to be truly data dependent, the one who dissent it today because he recognized that the labor market was softening and that the Fed funds rate was north of neutral still restrictive. The reason I wrote the letter is that although most won't say it behind closed doors, everybody on that committee knows that Christopher Waller is the man for the job. You don't invite the Fox into the hen house. I completely respect a lot of Rick Reer's views on the markets. He understands them as he should. Should somebody like that be running the Federal Reserve? I don't know. Would he be making monetary policy for the markets or for the American people? He's a markets kind of a guy. But my point is, my point is, had the 19 members today elected Christopher Waller to be chair of the FOMC for the calendar year 2026, that would have backed this administration into the tightest corner of all time. >> And they would have had to do it today. >> They would have had to Yes, that's that's the law. the first January first FOMC meeting of every calendar year. You must vote for that for that calendar year only. >> Mhm. >> For the FOMC chair and vice chair. >> Why wouldn't they? I mean, obviously we're passed now, but Yeah. >> Well, I mean that that that's when that's when I say they can't complain for the next calendar year. >> I see. >> That's where the sermon comes back. >> Yep. If they all want to get out on CNBC and Bloomberg and whail and lament and moan and nash their teeth, if there's somebody, a political appointee who's put in a a yes man, a yes woman, whatever it may be, they're not allowed to say anything because they could have they could have controlled their destiny. They chose the person who's going to be behind the podium at every single meeting this year. >> Okay. All right. Who who do you think is going to be the next Fed chair? We can go off betting markets, but who do you >> I mean I'm >> not who it should be, but who do you think it will be? Or we could do it who you who it should be. >> I I don't think it's going to be Rick Reer. >> Okay. >> I think that >> is he leading in the betting markets >> very much so. Okay. >> About 38% or so. >> But those those have been quite volatile on the >> They have been they've been as high as 48. >> Yeah. Um, and we did see a pop in Christopher Waller's odds today when he desented. So, >> absent the Fed heating to its ability to vote its fate, per my advice, which it did not do today. The only other option to keep Waller in the running was Waller dissenting. >> Mhm. He needed to desent probably for the Yeah. Um, you've been a Fed insider. You kind of know, you know, you wrote the book on Fed Up, so you know how the institution works. What is something that we might not understand about this process? Like when you have a new Fed chair, like is consensus really important? building consensus with your commens nuances that we might not understand as outsiders that >> so so one of the reporters today asked Powell should a new chair be appointed what would that transition look like >> he also refused to answer >> that question a good question though we go back to my open letter too and the fact that he will not say whether he's staying on as a governor Jay Powell could end up being the chair of the FOMC for all of 2026. Should he stay on as governor? How does that work? >> Well, when the new chair comes in, tradition is always held that the newly appointed and nominated and confirmed chair is then you hold a special election, they become the new FOMC chair as well. >> Interesting, huh? But this is a bunch of bureaucrats. I doubt they'll ever do it, but they could. >> They could. >> And Pal's refusing to say if he's staying or going. >> Okay. Obviously, this was a snoozefest for the presser. >> My gosh, it was so >> What questions did you want him to answer? Like, realistically, there are some we know he can't answer. We know he could have. >> So, what I wanted was for for the reporters to not just say stabilization, regurgitate what he was saying. I want it for the reporters to bring out some solid evidence. I want it for the reporters to say, "Dude, Amazon, UPS, a lot of other companies that are reporting not as big numbers, but as they report, this company stock popped. They're laying off this many people." I wanted for the reporters to ask him specifically about you used to be you founded the industrials group at at Carile. You know from your CEO network about all these layoffs. Why do you refuse to listen to the news on the ground and only make your deductions and conclusions based on very flawed official data and by the way just the two you choose to look at the unemployment rate and GDP. It's only because they look at those data sets though, right? They have >> But somebody could have asked him about the University of Michigan. Somebody could have asked him about Conference Board. >> Sir, we've never had these readings without being in recession. What do you make of that? Why do you say that that that there's been stabilization in the labor market when American households are telling you that the un unemployment rate is going up unless this time is different? How do you explain this away? I think some specificity in the questioning would have been welcome because he he told you he wasn't talking about anything that anybody was interested in. So, you know, grow a spine and and ask him some real questions because we all left that press conference unsatisfied. The people who wanted the National Enquirer headlines about politics and criminal charges and Lisa Cook and will he stare, will he go, they're disappointed. >> They didn't get anything. Yeah. But the economics community is is just as disappointed because the questions that we have also were not asked. >> Yeah, it's a good point Danielle. Um what are the what are the dynamics that you're seeing in the labor market right now that are like >> you know how it's like okay you have the official data but there are things that okay you have taught this show a lot about like warn notices for example the war act and you look on the state level but like you have to have of a certain threshold before you could report. So it could be like trickling and all sorts of what are the weird things that are happening under the surface. >> So we have been following very closely which is it's very easy to do because Google trends is alive 24/7. >> We've been following the percentage of Americans who are searching for file unemployment >> and boy that has not stopped rising which means >> post shutdown. Yeah. with >> well past we're talking about live today. >> Yeah. >> And that means >> that a lot of people are investigating in their given state of residency. >> I want to know what happens if I file for unemployment. What am I going to make? And they're like >> confidencing. They're worried. >> Is that all? >> It's not that they're laid off, but they're anticipating, right? Or >> Yeah. Or they've been laid off because file unemployment means >> Yeah. Huh. Anything else that's on your radar? Because that's interesting. Yeah, I like I like these kind of hidden data sets that aren't the most >> It's right there. I mean, all you're tracking is just search interest in >> um I'm also tracking some very scary trends in buy now pay later. In fact, I'm writing about it this week. >> Okay. Yeah. Um there is a certain deviv with with >> Jenzers. >> They're they're willing to to take out buy now pay later to go to a concert or to take a vacation. >> You can even do it for ordering food online now. >> Thank you. >> Yeah, that's wild. Yeah. >> But they're of the generation where hey, it's time to buy silver in their parents' basement. it. Um, they bought GameStop and now they're buying silver, but they follow these trends. They've lived in this passive investing environment. Stocks only go up. It's all they know. So, it's a very instant gratification backdrop in which they've matured. Mhm. >> So their attitude is if it's there, I'm going to take it. So if I want the vacation and I don't have the money, I'm still going to take it. >> If I want to go to the concert and I don't have the money, I'm still going to go. That's call that one side of the barbell. But the fastest growing area that we're seeing in buy now pay later is medical and dental bills. And we're seeing about 25% of consumers who use buy now pay later use it to pay their utility bills. >> Wow. >> Now that tells you that they're searching for file unemployment ain't going to pay the bills. >> And those are the >> I'm going to go drive for Uber >> because unemployment won't pay me enough. >> Wow. Those are like the basic things too in life. Oh, >> those are the basic things in life. >> Wow. Okay. That's a sign cavity. It needs to be filled. >> Buy now pay later. Goodness. >> But it's not. And the average American who's using buy now pay later, the average buy now pay later user also has a $1,000 marginal higher credit card balance. >> Now, does the buy now pay later data does that not show up in the regular data sets that folks would look at? Like is it >> it's not it's not typically reported. >> Okay, that's interesting too. And as it does begin to become more publicly available, it's going to be very it's going to be a young data set >> and hard to track. >> Yeah. You mentioned something really interesting like with Gen Z. It made me think um I'm a millennial so I got I graduated post financial crisis and it was like wow unpaid internship. Get in early, stay late, work your butt off, try to get the job. Um Matt and I were actually we were actually interns at the same time. Matt and I, we didn't know each other, but we had the same internship, our same employer. >> Shout out to Matt. >> Yeah. Um, he's the best. But it does make me wonder that the the environment you grow up in, >> I'm talking about like when you're coming into working, you have money and you can invest. It probably shapes you as an investor, too. Absolutely. I definitely feel like millennials were probably a little bit more scarred for a while. >> It's what creates your your aversion or lack thereof to risk. >> Yeah. >> It it places you on the spectrum. Ask any 21, 22, 23 year old right now. They're riskaverse. >> They can't get jobs. Um, >> but a little bit older than them, maybe not so much because they are riding a lot of meme stocks and stuff. Yeah. >> Yep. Yep. But that that the current batch of of college gradu graduates, they are they're going to they're going to grow up with a completely different perspective. >> Yeah. Um, yeah, that's it's Yeah, I just think about the way it shapes you. Okay, you also mentioned I have to ask you this. >> Gold, silver. >> Okay, >> you got you made a comment about it being meme stock and the audience kind of is like meme stock. Okay. >> And how has it behaved? >> What's been on a tear? >> It has been. >> Yeah. >> Okay. Let's just say for the moment and and bear in mind I own gold. >> I own gold, too. Yeah. I mean, I'm pretty happy about it. And I own platinum, >> but I've owned it for a long time. I've owned it since 2011. So, which was actually a bad time to buy it cuz I bought it August of 2011. I just I know bad time, but I didn't do anything with it. >> And good for you. >> Yeah. But that's >> because that it's it's it's the ultimate hedge against impending financial doom. >> Mhm. Um, but if gold is not a meme stock, why did my taxi cab driver today who picked me up at the New York Stock Exchange where I just done a live TV hit and dropped me off at Bloomberg where I was going to go to go do another hit? Why did my taxi cab driver ask me, "Are you on TV?" And I said, "Yes, yes, I am." because people don't fall out of bed looking like I look. And then he said, "Central banks are buying gold. Will it go to 10,000 or 15,000?" >> You probably watch the show. >> And I'm like sitting there going, "This I am in a meme. >> It's a meme. >> I'm starring in a meme." And he was he was he wanted to sit there and chat. >> Look, a meme doesn't mean it's not going to go higher. >> Oh, no. Of course not. >> No, no, no, I'm not. >> Yeah, >> it was just surreal. >> Yeah, >> it was absolutely surreal. >> It's become part of the conversation where it's like now it's like the everyday person's going to talk about it. Everybody's talking about Yeah. Mhm. For a while like no one really cared. Like we would my audience got excited about gold and silver. >> They used to be like gold bugs. Po. I mean we they used to be like the most hated investor type. I mean all the big all the big sells the Morgan Stanley's that they they would be asked you know what what proportion of my >> investment you know portfolio should be allocated to >> to precious metals none I mean it was >> it was it was a hated asset class >> and now it's like everybody's in it dude >> okay I'm going to get you're I'm going to get >> now they're not be nice to Danielle come on they will be nice and actually it makes a lot of sense too like the way you describe it It's like in 1999 2000, you know, pets.com. I mean, but but the same conversations happened. >> Mhm. >> In the same type of settings. >> Yeah. Yeah. Okay. So, you were out in LA at the Double Line Roundt. >> It was a lot of fun. >> I know. That was like what, their seventh year of doing it. >> Yes, indeed. >> So fun. Um, you guys talked about the economy, you talked about markets, best ideas. what's kind of your now that you've had a lot of these amazing conversations, what's kind of your broader outlook for 2026? What are the things that are going to be on your radar for this year? So, um, we actually had a paired trade that I find to be interesting because it's it's an actual trade, but at the same time, it it really is a big macro call. >> Okay. um when you see the Dow outperform the NASDAQ, which we've been seeing from time to time here, whereas the Nasdaq, whereas the the QQQs have been driving the train most of this rally, but we've had some intermittent days when the Dow has been on a tear and the NASDAQ's kind of been flattish or even down. >> Okay? And that signals to me people looking for the safety of utilities. We've also been seeing uh especially my Twitter feed and on my Bloomberg terminal and everywhere else, there are a lot there's a lot of capitulation going on in commercial real estate right now. A lot. And buildings are finally being sold. Losses are finally being realized. Extended pretend is because office properties have office sales have taken off. They're rising. That's a good thing. >> Yeah. But that means that if you're sitting on a dud after this and it and you still can't get rid of it, >> sell it. Yeah. >> But the point is, and you know, I I was joking with my director of research a few days ago. I'm like, did all the bankruptcy attorneys go to Davos or something? And it was I was just kidding. But these last few days, it's like they've all come back from the snowy ski slopes and the bankruptcies have gone hunk and taken right back off. My point is the paired trade was go long utilities, go short financials because it looks like these losses are going to be realized. But that's also kind of a reflection of the current macro backdrop because the Fed is still still restrictive with its policy stance. >> Okay, >> just to reiterate, go long utility, short financials. >> That was one that was one of the calls that we made. >> Very interesting. Um Danielle, I love doing this with you. We're going to do this in another six weeks. We are the March meeting. Well, it was Was that the March meeting? >> Yeah, >> March meeting. I might be out of the country. It's the one meeting a year that I'm actually not physically in New York. >> I'm going to be in New York because I'll tell you there there's this conference of college students from all across the country. It's called the game I forgot what game forum stands for, but uh it's >> it must be because it's spring break. >> It's an asset management conference for college kids. U my mom's students are coming up, but I I was thinking of you. I'm like, "Yeah, they got they they need to hear from Danielle." >> Oh, wow. Yeah, I would have for you. >> Yeah, it's happening on my mom's birthday, but uh >> Wow. >> I should do that sometime. >> Well, I'm going to be a guest lecturer at UT here in a few weeks. I'm excited about that. >> Well, maybe next year. That I think the college kids would do well hearing from someone like you. I always love our conversations. So, before I let you go, I'm going to ask you Ooh, this is a new one for you. Not Not the go-to. Okay. Uh >> oh. >> What is Let's do predictions. What is something that would be a bold prediction today, but a year from now when you're we're sitting down, it might seem obvious to me that's easy. A higher unemployment rate, how high? >> Oh gosh, it's it's so hard to There's so many moving pieces. J Pal's wrong when he says that the need to create jobs has been eliminated. So this whole this this this yarn is getting a little bit old that there's been so much out migration that we don't have to create any jobs anymore. No, there's there are still people coming into the labor force because they're graduating from US colleges and they can't get jobs. Um and we've seen the unemployment rate rise by a full percentage point while there's been this no firing >> back and yet the unemployment rate is rising. So I would expect that we would have at a bare minimum a year from now a six handle on the unemployment rate. >> We will definitely have that conversation a year from now. Danielle, um final parting thoughts before I let you go. >> So this is something that I actually tweeted out. Um these winter storms are not over. You know, I always get my public service me. >> I love your public service messages. >> These winter storms are not over. Um, they've devastated the South. And what I tweeted out a few days ago when I saw everything hitting was, "We always take care of our friends. We always take care of our families. Don't forget about your neighbors." >> Well said, Danielle D. Martino Booth, CEO and chief strategist at Qi Research, author of the Daily Feather on Substack. Go subscribe, everybody. And author of the book Fed Up, friend of the show. Always wonderful to have you. Really appreciate you taking the time. >> Thank you.
Danielle DiMartino Booth: Powell Is Committing Policy Errors to Quietly Dig at the Administration
Summary
Transcript
I think that that Powell has in the past claimed to not be political in making monetary policy, but been political. And I've been saying this for months. He's when it comes to making monetary policy, he's been committing policy errors to quietly dig at the administration. >> Should he have cut today? >> Yes, without a doubt. >> Where do you think we should be on the Fed funds rate? Hey everyone, welcome back to another special in-person episode of the Julia Larose show on FOMC Day. We are joined by none other than Danielle D. Martina Booth, CEO and chief strategist at Qi Research, author of the Daily Feather newsletter on Substack and author of the book Fed Up, friend of the show. Great to see you as always for the first FOMC of the year. >> It is great to see you on I mean you're the most exciting thing that's happened since J Pal took to the podium. >> Oh cuz it was such a snoozefest. Oh my gosh. >> I mean, he he took he he put the pins back in four grenades in a row. Just just like that. 1 2 3 four. >> Yeah. I mean, did we really expect him to answer, though? >> Nope. Nope. That was that was my prediction going in was don't expect anything. They'll come right out of the gate asking, but he's not going to say anything. >> Okay. So, let's unpack it a bit more. Um, so the subpoena, the video, you were one of the people I wanted to get a reaction to when that came out. What was that? January 11th. Yeah. So, it comes out Sunday evening. >> Yeah. My chat room was hopping all over. >> Okay. What was your take? What was your take before we get into the Fed FOMC stuff? Um, I was not surprised because even though I don't agree with the policy he makes many times, >> if nothing else, uh, Jay Powell is a civil man and he's a gentleman and that's how I perceive him and he's always kept his calm. But there are certain lines in this world you don't cross, including criminal charges. >> Mhm. And I think it was such an affront to his integrity that there was a line that was crossed. Uh what was most intriguing in the aftermath was finding out that he had already retained counsel prior to the charges being made. >> He knew it was coming. >> He knew it was coming. >> Okay. >> But I mean I I think he's known it's been I think he's known something was coming for a long time. >> Mhm. Um, but I I think a what he did was to me at least expected. You impinged his integrity. I don't blame him at all for doing that. But what happened afterwards, the palace intrigue shifted over to the White House and the deny, deny, deny. the obviously awful optics. Bill Py saying he had nothing to do with it. Trump saying he had no knowledge of it and Bessant playing it down. I mean, it it felt a lot like there was a rogue idea that was then taken all the way to the finish line without consulting a few more adults in the room >> about what the implications of this would be and the going into this matter, the betting markets, because that's all we talk about these days, Ky blah blah blah blah blah. But going into this episode, the odds that that Jay Powell, and you can bet on this >> Oh, yes. >> would would leave um by August were 90%. And today they're at 60%. >> Mhm. >> And when asked at the press conference today whether or not y >> he was leaving and when he might let everybody know, he just said nope. >> Didn't have an answer for them. >> Nope. And nope. So that really really I don't think I think the betting markets were right before these criminal charges were were made that he was leaving >> and I I think he's enjoying the cat and mouse because right now the the shoes on the other foot he is the cat playing with the mouse and the mouse is Donald Trump >> and so Donald Trump can't name anybody until he knows if he's going to have one or to vacancies. >> Interesting. >> He's in a holding pattern. >> Do you think then that this ch Okay, Betty Marks before showed 90% he was going to leave. I don't know the exact numbers, but I'm going to take your word for it. >> And now that's dropped to about 60%. Do you think that maybe this has changed his own mind that maybe >> That's my point. >> Okay, >> that's my point. So >> again, um I I think that that Powell has in the past claimed to not be political in making monetary policy, but been political. >> Um in not at least conceding to where survey material is, whether you're talking about the University of Michigan or you're a Daily Feather reader. I mean, we've had six months in a row with higher unemployment expectations north of 60%. >> Mhm. >> There's one president in US history, that was March 2009. And when that happened, the unemployment rate had risen by one full percentage point >> within 6 months. >> Right? These are things that let me tell you, you get 800 PhD economists in a room, they can take a long series like the University of Michigan or conference board and plot it out and tell you what happens to the unemployment rate that he is he's ignoring. >> Okay. You all right, as you point out, he's ignoring that and the employment rate. You have been really focused on this area. >> Do you what do you think? I mean, what explains the shift then? We can we kind of know but like what do you think? All right, let's elaborate. >> I think that um let's go back to J. Pal the pragmatist. >> Okay, >> J Pal the pragmatist um would never upset the markets willfully. So he actually did move the goalposts. Prior to Powell being chair, you actually had to have a 75% probability priced into the market of a rate hike or a rate cut before the Fed ever acted. it was just it's there. You can you can plot it out >> and put it on a spreadsheet. >> He actually lowered that threshold to 50%. As chair, uh when he needed to be more aggressive in hiking rates when when he finally got off the transitory, which we know why, um train, he had to be more aggressive in tightening. So, he moved that threshold down to 50% probability, but no probability at all. There was no way that he was going to do anything today because the the markets had fully priced out a rate cut. And that meant that you had to find justification for not cutting rates. Going so far as to say that he'd seen a solid firming in the US economy. Mm- that was a bit disingenuous. And that's where you get to the part where he's being political. Hey everyone, I hope you are enjoying this interview. If you can take a quick moment and hit that subscribe button, we are on a mission to hit our next goal of 100,000 subscribers and your support could really help us get there. Thank you so much and enjoy the rest of the interview. We also talked about beginning he's a man of integrity. Okay, he's going to defend himself. Does this also does it kind of contradict that if you're ignoring that? That's the American people right there. the hard work and that is where I I mean I I am um I think most of my followers on Twitter officially think I'm schizophrenic >> um because I think that for the sake of Fed independence, for the sake of the Federal Reserve Board not being stacked the way we were talking what 18 months ago about possibly stacking the Supreme Court. Mhm. >> I I think that that is one situation where it sounds like J. Pal's on the right side, but you're right. He is derelict in his underlying duty to make monetary policy for the public good. He is referencing financial conditions being as easy as they are. They are. But that's not a factor of Fed policy right now >> at all. That's a factor of passive investing, period. >> Anybody with a brain right now knows that valuations are completely off the rails and that we just we're sitting back witnessing the power of P passive and we are completely helpless in terms of getting in front of that train. But um but you're right, it's highly contradictory because he's not making monetary policy for everybody. and falling back on GDP data when funding has been slashed so much that the Bureau of Economic Analysis does not have it in its budget any longer to buy income data from the Treasury Department. They can't even craft GDP. They can't even properly revise GDP after these deep revisions to payrolls or it's going to take them a really long time to do it with an abacus or something. So the shutdown has affected the integrity of the data. >> So to be falling back on official data that you know in years to come could possibly be a mirror image of itself I I find to be highly hypocritical and that's where he is being political. But he's been, and I've been saying this for months, he's when it comes to making monetary policy, he's been committing policy errors to quietly dig at the administration. >> Mhm. So, we had a pause today. >> We had a pause >> and there's almost nothing priced in through the rest of his term, which ends in late May. >> Do you think we're just not going to see any cuts? Like what? I want to hear more. Okay, maybe reaction to the pause, but your outlook for the year. So again, when we see the labor differential between jobs hard to get, jobs are easy to get, um, in conference board, when we see that labor differential have a a three number in front of it, you cannot go back all the way to 19 to the early 1970s. You cannot go back to that Rubicon being crossed unless the United States is in recession. Unless Americans are deliluding themselves about the labor market and lying when they're taking these surveys, the unemployment rate will rise. >> In looking at the labor market, what does that tell you about the state of the economy and the trajectory that we're on? the labor market outside of education and health care, which I mean, we have an aging US population. I mean, if you want to be a home health aid right now, you're you have full job security. Of course, it doesn't pay you anything. Um, but outside of those two industries, we've had job losses since April and we've seen deep revisions to payrolls. And yet Powell is focused solely on the U3 unemployment rate that you see on the front page of any newspaper in America the Saturday after the payroll report and just GDP which we know is going to be revised once we can get the data in hand to incorporate the revisions to payrolls to back out the income that was not made by the employees who were not employed. >> Should he have cut today? >> Yes, without a doubt. Where do you think we should be on the Fed funds rate? >> Um, I think it's reasonable to be aggressive in cutting uh 100 basis points, one full percentage point, four rate cuts. I think that's a reasonable place to go and then pause because you have to understand that you're falling down on your you have to at least recognize admit that you're falling down on your employment mandate and then address it. >> Mhm. >> And then take a pause. >> The last time you and I spoke >> it's a premature pause. >> A premature pause. >> Okay. Is it a political pause? >> It's both. >> Yeah. It's both. >> The last time you and I spoke was in December. Um, and you had written an open letter on behalf of every hardworking American >> which has been roundly disregarded. >> You wrote another one. >> I did. >> Can you explain the second letter and the message you wanted to get across? So this was based on uh may he rest in peace uh uh the senior pastor at at the church that I attend and this was uh it was a 2016 sermon that he gave that said as contentious as this presidential election is if you don't cast a vote you can't complain for the next four years. So just put that put that in your pipe and smoke it. And this this sermon kept coming back to me after I'd written the open letter uh that states that at the first January FOMC meeting of every year, the chair and the vice chair of the FOMC are elected by law. Today, the 19 members of the FOMC elected Jerome Powell to be chair of the FOMC. They elected John Williams to be vice chair. This is all based on tradition. My open letter part two provided an actual blueprint as to how electing Christopher Waller when you're considering the four top contenders, the one who's going to be the most impartial, the one who's going to be truly data dependent, the one who dissent it today because he recognized that the labor market was softening and that the Fed funds rate was north of neutral still restrictive. The reason I wrote the letter is that although most won't say it behind closed doors, everybody on that committee knows that Christopher Waller is the man for the job. You don't invite the Fox into the hen house. I completely respect a lot of Rick Reer's views on the markets. He understands them as he should. Should somebody like that be running the Federal Reserve? I don't know. Would he be making monetary policy for the markets or for the American people? He's a markets kind of a guy. But my point is, my point is, had the 19 members today elected Christopher Waller to be chair of the FOMC for the calendar year 2026, that would have backed this administration into the tightest corner of all time. >> And they would have had to do it today. >> They would have had to Yes, that's that's the law. the first January first FOMC meeting of every calendar year. You must vote for that for that calendar year only. >> Mhm. >> For the FOMC chair and vice chair. >> Why wouldn't they? I mean, obviously we're passed now, but Yeah. >> Well, I mean that that that's when that's when I say they can't complain for the next calendar year. >> I see. >> That's where the sermon comes back. >> Yep. If they all want to get out on CNBC and Bloomberg and whail and lament and moan and nash their teeth, if there's somebody, a political appointee who's put in a a yes man, a yes woman, whatever it may be, they're not allowed to say anything because they could have they could have controlled their destiny. They chose the person who's going to be behind the podium at every single meeting this year. >> Okay. All right. Who who do you think is going to be the next Fed chair? We can go off betting markets, but who do you >> I mean I'm >> not who it should be, but who do you think it will be? Or we could do it who you who it should be. >> I I don't think it's going to be Rick Reer. >> Okay. >> I think that >> is he leading in the betting markets >> very much so. Okay. >> About 38% or so. >> But those those have been quite volatile on the >> They have been they've been as high as 48. >> Yeah. Um, and we did see a pop in Christopher Waller's odds today when he desented. So, >> absent the Fed heating to its ability to vote its fate, per my advice, which it did not do today. The only other option to keep Waller in the running was Waller dissenting. >> Mhm. He needed to desent probably for the Yeah. Um, you've been a Fed insider. You kind of know, you know, you wrote the book on Fed Up, so you know how the institution works. What is something that we might not understand about this process? Like when you have a new Fed chair, like is consensus really important? building consensus with your commens nuances that we might not understand as outsiders that >> so so one of the reporters today asked Powell should a new chair be appointed what would that transition look like >> he also refused to answer >> that question a good question though we go back to my open letter too and the fact that he will not say whether he's staying on as a governor Jay Powell could end up being the chair of the FOMC for all of 2026. Should he stay on as governor? How does that work? >> Well, when the new chair comes in, tradition is always held that the newly appointed and nominated and confirmed chair is then you hold a special election, they become the new FOMC chair as well. >> Interesting, huh? But this is a bunch of bureaucrats. I doubt they'll ever do it, but they could. >> They could. >> And Pal's refusing to say if he's staying or going. >> Okay. Obviously, this was a snoozefest for the presser. >> My gosh, it was so >> What questions did you want him to answer? Like, realistically, there are some we know he can't answer. We know he could have. >> So, what I wanted was for for the reporters to not just say stabilization, regurgitate what he was saying. I want it for the reporters to bring out some solid evidence. I want it for the reporters to say, "Dude, Amazon, UPS, a lot of other companies that are reporting not as big numbers, but as they report, this company stock popped. They're laying off this many people." I wanted for the reporters to ask him specifically about you used to be you founded the industrials group at at Carile. You know from your CEO network about all these layoffs. Why do you refuse to listen to the news on the ground and only make your deductions and conclusions based on very flawed official data and by the way just the two you choose to look at the unemployment rate and GDP. It's only because they look at those data sets though, right? They have >> But somebody could have asked him about the University of Michigan. Somebody could have asked him about Conference Board. >> Sir, we've never had these readings without being in recession. What do you make of that? Why do you say that that that there's been stabilization in the labor market when American households are telling you that the un unemployment rate is going up unless this time is different? How do you explain this away? I think some specificity in the questioning would have been welcome because he he told you he wasn't talking about anything that anybody was interested in. So, you know, grow a spine and and ask him some real questions because we all left that press conference unsatisfied. The people who wanted the National Enquirer headlines about politics and criminal charges and Lisa Cook and will he stare, will he go, they're disappointed. >> They didn't get anything. Yeah. But the economics community is is just as disappointed because the questions that we have also were not asked. >> Yeah, it's a good point Danielle. Um what are the what are the dynamics that you're seeing in the labor market right now that are like >> you know how it's like okay you have the official data but there are things that okay you have taught this show a lot about like warn notices for example the war act and you look on the state level but like you have to have of a certain threshold before you could report. So it could be like trickling and all sorts of what are the weird things that are happening under the surface. >> So we have been following very closely which is it's very easy to do because Google trends is alive 24/7. >> We've been following the percentage of Americans who are searching for file unemployment >> and boy that has not stopped rising which means >> post shutdown. Yeah. with >> well past we're talking about live today. >> Yeah. >> And that means >> that a lot of people are investigating in their given state of residency. >> I want to know what happens if I file for unemployment. What am I going to make? And they're like >> confidencing. They're worried. >> Is that all? >> It's not that they're laid off, but they're anticipating, right? Or >> Yeah. Or they've been laid off because file unemployment means >> Yeah. Huh. Anything else that's on your radar? Because that's interesting. Yeah, I like I like these kind of hidden data sets that aren't the most >> It's right there. I mean, all you're tracking is just search interest in >> um I'm also tracking some very scary trends in buy now pay later. In fact, I'm writing about it this week. >> Okay. Yeah. Um there is a certain deviv with with >> Jenzers. >> They're they're willing to to take out buy now pay later to go to a concert or to take a vacation. >> You can even do it for ordering food online now. >> Thank you. >> Yeah, that's wild. Yeah. >> But they're of the generation where hey, it's time to buy silver in their parents' basement. it. Um, they bought GameStop and now they're buying silver, but they follow these trends. They've lived in this passive investing environment. Stocks only go up. It's all they know. So, it's a very instant gratification backdrop in which they've matured. Mhm. >> So their attitude is if it's there, I'm going to take it. So if I want the vacation and I don't have the money, I'm still going to take it. >> If I want to go to the concert and I don't have the money, I'm still going to go. That's call that one side of the barbell. But the fastest growing area that we're seeing in buy now pay later is medical and dental bills. And we're seeing about 25% of consumers who use buy now pay later use it to pay their utility bills. >> Wow. >> Now that tells you that they're searching for file unemployment ain't going to pay the bills. >> And those are the >> I'm going to go drive for Uber >> because unemployment won't pay me enough. >> Wow. Those are like the basic things too in life. Oh, >> those are the basic things in life. >> Wow. Okay. That's a sign cavity. It needs to be filled. >> Buy now pay later. Goodness. >> But it's not. And the average American who's using buy now pay later, the average buy now pay later user also has a $1,000 marginal higher credit card balance. >> Now, does the buy now pay later data does that not show up in the regular data sets that folks would look at? Like is it >> it's not it's not typically reported. >> Okay, that's interesting too. And as it does begin to become more publicly available, it's going to be very it's going to be a young data set >> and hard to track. >> Yeah. You mentioned something really interesting like with Gen Z. It made me think um I'm a millennial so I got I graduated post financial crisis and it was like wow unpaid internship. Get in early, stay late, work your butt off, try to get the job. Um Matt and I were actually we were actually interns at the same time. Matt and I, we didn't know each other, but we had the same internship, our same employer. >> Shout out to Matt. >> Yeah. Um, he's the best. But it does make me wonder that the the environment you grow up in, >> I'm talking about like when you're coming into working, you have money and you can invest. It probably shapes you as an investor, too. Absolutely. I definitely feel like millennials were probably a little bit more scarred for a while. >> It's what creates your your aversion or lack thereof to risk. >> Yeah. >> It it places you on the spectrum. Ask any 21, 22, 23 year old right now. They're riskaverse. >> They can't get jobs. Um, >> but a little bit older than them, maybe not so much because they are riding a lot of meme stocks and stuff. Yeah. >> Yep. Yep. But that that the current batch of of college gradu graduates, they are they're going to they're going to grow up with a completely different perspective. >> Yeah. Um, yeah, that's it's Yeah, I just think about the way it shapes you. Okay, you also mentioned I have to ask you this. >> Gold, silver. >> Okay, >> you got you made a comment about it being meme stock and the audience kind of is like meme stock. Okay. >> And how has it behaved? >> What's been on a tear? >> It has been. >> Yeah. >> Okay. Let's just say for the moment and and bear in mind I own gold. >> I own gold, too. Yeah. I mean, I'm pretty happy about it. And I own platinum, >> but I've owned it for a long time. I've owned it since 2011. So, which was actually a bad time to buy it cuz I bought it August of 2011. I just I know bad time, but I didn't do anything with it. >> And good for you. >> Yeah. But that's >> because that it's it's it's the ultimate hedge against impending financial doom. >> Mhm. Um, but if gold is not a meme stock, why did my taxi cab driver today who picked me up at the New York Stock Exchange where I just done a live TV hit and dropped me off at Bloomberg where I was going to go to go do another hit? Why did my taxi cab driver ask me, "Are you on TV?" And I said, "Yes, yes, I am." because people don't fall out of bed looking like I look. And then he said, "Central banks are buying gold. Will it go to 10,000 or 15,000?" >> You probably watch the show. >> And I'm like sitting there going, "This I am in a meme. >> It's a meme. >> I'm starring in a meme." And he was he was he wanted to sit there and chat. >> Look, a meme doesn't mean it's not going to go higher. >> Oh, no. Of course not. >> No, no, no, I'm not. >> Yeah, >> it was just surreal. >> Yeah, >> it was absolutely surreal. >> It's become part of the conversation where it's like now it's like the everyday person's going to talk about it. Everybody's talking about Yeah. Mhm. For a while like no one really cared. Like we would my audience got excited about gold and silver. >> They used to be like gold bugs. Po. I mean we they used to be like the most hated investor type. I mean all the big all the big sells the Morgan Stanley's that they they would be asked you know what what proportion of my >> investment you know portfolio should be allocated to >> to precious metals none I mean it was >> it was it was a hated asset class >> and now it's like everybody's in it dude >> okay I'm going to get you're I'm going to get >> now they're not be nice to Danielle come on they will be nice and actually it makes a lot of sense too like the way you describe it It's like in 1999 2000, you know, pets.com. I mean, but but the same conversations happened. >> Mhm. >> In the same type of settings. >> Yeah. Yeah. Okay. So, you were out in LA at the Double Line Roundt. >> It was a lot of fun. >> I know. That was like what, their seventh year of doing it. >> Yes, indeed. >> So fun. Um, you guys talked about the economy, you talked about markets, best ideas. what's kind of your now that you've had a lot of these amazing conversations, what's kind of your broader outlook for 2026? What are the things that are going to be on your radar for this year? So, um, we actually had a paired trade that I find to be interesting because it's it's an actual trade, but at the same time, it it really is a big macro call. >> Okay. um when you see the Dow outperform the NASDAQ, which we've been seeing from time to time here, whereas the Nasdaq, whereas the the QQQs have been driving the train most of this rally, but we've had some intermittent days when the Dow has been on a tear and the NASDAQ's kind of been flattish or even down. >> Okay? And that signals to me people looking for the safety of utilities. We've also been seeing uh especially my Twitter feed and on my Bloomberg terminal and everywhere else, there are a lot there's a lot of capitulation going on in commercial real estate right now. A lot. And buildings are finally being sold. Losses are finally being realized. Extended pretend is because office properties have office sales have taken off. They're rising. That's a good thing. >> Yeah. But that means that if you're sitting on a dud after this and it and you still can't get rid of it, >> sell it. Yeah. >> But the point is, and you know, I I was joking with my director of research a few days ago. I'm like, did all the bankruptcy attorneys go to Davos or something? And it was I was just kidding. But these last few days, it's like they've all come back from the snowy ski slopes and the bankruptcies have gone hunk and taken right back off. My point is the paired trade was go long utilities, go short financials because it looks like these losses are going to be realized. But that's also kind of a reflection of the current macro backdrop because the Fed is still still restrictive with its policy stance. >> Okay, >> just to reiterate, go long utility, short financials. >> That was one that was one of the calls that we made. >> Very interesting. Um Danielle, I love doing this with you. We're going to do this in another six weeks. We are the March meeting. Well, it was Was that the March meeting? >> Yeah, >> March meeting. I might be out of the country. It's the one meeting a year that I'm actually not physically in New York. >> I'm going to be in New York because I'll tell you there there's this conference of college students from all across the country. It's called the game I forgot what game forum stands for, but uh it's >> it must be because it's spring break. >> It's an asset management conference for college kids. U my mom's students are coming up, but I I was thinking of you. I'm like, "Yeah, they got they they need to hear from Danielle." >> Oh, wow. Yeah, I would have for you. >> Yeah, it's happening on my mom's birthday, but uh >> Wow. >> I should do that sometime. >> Well, I'm going to be a guest lecturer at UT here in a few weeks. I'm excited about that. >> Well, maybe next year. That I think the college kids would do well hearing from someone like you. I always love our conversations. So, before I let you go, I'm going to ask you Ooh, this is a new one for you. Not Not the go-to. Okay. Uh >> oh. >> What is Let's do predictions. What is something that would be a bold prediction today, but a year from now when you're we're sitting down, it might seem obvious to me that's easy. A higher unemployment rate, how high? >> Oh gosh, it's it's so hard to There's so many moving pieces. J Pal's wrong when he says that the need to create jobs has been eliminated. So this whole this this this yarn is getting a little bit old that there's been so much out migration that we don't have to create any jobs anymore. No, there's there are still people coming into the labor force because they're graduating from US colleges and they can't get jobs. Um and we've seen the unemployment rate rise by a full percentage point while there's been this no firing >> back and yet the unemployment rate is rising. So I would expect that we would have at a bare minimum a year from now a six handle on the unemployment rate. >> We will definitely have that conversation a year from now. Danielle, um final parting thoughts before I let you go. >> So this is something that I actually tweeted out. Um these winter storms are not over. You know, I always get my public service me. >> I love your public service messages. >> These winter storms are not over. Um, they've devastated the South. And what I tweeted out a few days ago when I saw everything hitting was, "We always take care of our friends. We always take care of our families. Don't forget about your neighbors." >> Well said, Danielle D. Martino Booth, CEO and chief strategist at Qi Research, author of the Daily Feather on Substack. Go subscribe, everybody. And author of the book Fed Up, friend of the show. Always wonderful to have you. Really appreciate you taking the time. >> Thank you.