Interest Rates Are Plummeting…Here's Why That's Bad
Summary
Interest Rate Trends: The podcast discusses the recent decline in interest rates, highlighting a significant drop in the 10-year Treasury from 5% to 4.4%, which is contrary to the narrative of rising rates due to lack of demand for treasuries.
Economic Implications: Lower interest rates are viewed as a negative indicator, reflecting declining growth and inflation expectations, particularly due to a weakening labor market.
Labor Market Concerns: The podcast emphasizes the troubling trend in non-farm payrolls, with recent negative numbers suggesting a potential recessionary environment.
Yield Curve Insights: Despite central bank actions, the podcast argues that interest rates are primarily driven by growth and inflation expectations, not by yield curve control or quantitative easing efforts.
Market Sentiment: The speaker expresses skepticism about the stock market's current highs, suggesting a preference for gold over equities given the economic uncertainties.
Upcoming Economic Data: Attention is drawn to upcoming benchmark revisions and CPI data, which could further influence interest rate movements and market expectations.
Investment Strategy: The podcast advises against a passive investment approach, encouraging listeners to be informed and consider the broader economic context in their decision-making.
Transcript
Hello rebel capitals. Hope you're well. So we have interest rates plummeting. Now most people might think that's good news, but unfortunately they are very very wrong. That's actually bad news to say the least. Extremely extremely bearish not only for the economy, but it could be bearish for the stock market. Let's go into exactly what's happening and connect the dots. So, first and foremost, we hear this narrative constantly that there's no demand for treasuries that interest rates are skyrocketing. And this narrative is completely removed from reality. Uh, let me show you what I'm referring to. We're going to start with the 10-year Treasury. And I had a year-to- date chart. Let's look at a year-to- date chart. Now, if I hid this from you and said, "What do you think the 10-year Treasury has done this year?" You'd probably say based on what you hear in social media that it's up like a 100 basis points or maybe more when in reality it's down. In fact, at one point, I think this might be, you know, this is probably like a a daily weekly chart. I think intraday it almost got up to 5%. Almost got up to 5%. So we've gone from let's say 5% all the way down to 4.4 we are today. So that's a drop of let's say 95 basis points. 96 basis points. I So it's not up by 100 basis points. It's down by almost 100 basis points. And what's even more kind of frightening is what it has done more recently. So we go to the last month and we see this big drop here which doesn't look that bad on the chart but this was a call it 25 basis point drop within a matter of a couple days. Now you guys know why this happened. It's not because the deficits decreased. It's not because all of a sudden central banks started buying treasuries because they're scared of Donald Trump. It's not because we reduced the debt. It's because growth in inflation expectations are plummeting due to what's happening in the labor market. More on that in just a moment. But it's not just the 10-year because a lot of people think that somehow they're doing yield curve control, which even if they are, it doesn't really impact rates because rates are all about growth and inflation expectations. And if you want proof of that, just look at QE 1 2 and three, which is basically yield curve control where they're doing quantitative easing. The Fed's buying. What happened to rates? With all that additional demand, artificial demand from the Fed, rates went up, didn't go down. Why? Because the market sold even more than the Fed was buying because growth and inflation expectations were increasing. So, at the end of the day, the banks are the marginal buyer. The banks are the marginal seller. and the Fed or the central planners, they they no matter what they're doing with the buying and the selling or the manipulation of the curve or the issuance, they're really not going to have a huge impact over the long run um o over uh interest rates, especially the long end of the curve. Okay. So, now let's look at the two-year, though, because the two-year is going to be far less um about, you know, issuance or something like that if you want to have that argument. And here we go to a year-to- date chart and we start at call it 4.26 and we're down at 3.5. So this is a 75 basis point drop in in the 2-year Treasury this year. So I mean somebody forgot to tell the Treasury market that there's no demand for treasuries. And I I just like to remind maybe some of you that are new, there's an inverse relationship between the price and the yield. So if the yield is going up, price is going down. That would mean more supply than demand. But if the yield is going down, the price is going up. That means there's more demand than there is supply. And it's not just at long end of the curve where there could be an issuance argument, although I think it's a bad one. Uh it's even at the two-year Treasury. So, and it's also, by the way, interest rates have gone down so much in the last couple days due to the softening labor market, to put it mildly. Even the 30-year Treasury, even the 30-year Treasury is now lower on the year. So, we started the year 4.78. Today, we're trading at 4.69. So, even the 30 year is down on the year. And you know, most people say, "Oh, that's great. Mortgage rates are coming down and it's going to be good for stocks." But what these people miss is the reason why interest rates come down. And interest rates don't control the economy. They're simply a reflection of the economy. So for all those people out there who are wishing for lower interest rates, be careful what you wish for because yes, you might get lower interest rates, but you're also going to have a recession or you're also going to have a much much much worse economy than it is right now even if it doesn't go into recession. So again, the lower interest rates don't produce a recession. They're not the catalyst for a recession. They're simply a reflection of what's happening in the underlying economy. So we don't want lower interest rates. That that that's that's not good. That's not good because all else being equal, we would much rather have let's say say Fed funds at 5% with an upward sloping yield curve. we that would be much better for the US economy or that would mean that the US economy was doing much better for society at large than an economy where the Fed funds rate is at whatever 1% and the 10-year Treasury is trading at 1.5 or something. We would much rather have the economy where we're at five and at let's say seven with an upward sloping yield curve. Okay. So now the question becomes, okay, George, I get what you're saying, but the Fed dropped rates by 100 basis points at the end of 2024. And whoa, the yield the yields on the 10-year Treasury actually went up because of growth in inflation expectations. So maybe if the Fed starts dropping rates, we're going to have the long end blow out again, which is going to make it even harder on the economy. Not really. Obviously a possibility, but that's definitely definitely not my base case this time around. Let me tell you why. This we go back to the non-farm payrolls. So, first and foremost, this goes back five years. I want you to look at this trend and I I want you just to kind of focus on this for a moment. Let's look at this trend. And obviously we have the jobs go way down, but then it kind of overcorrected. Then comes back to kind of an average up here around, let's say, 600 to 800,000 jobs per month. Sounds like an astronomical number based on what's happening more recently. But then look at this trend. Down, down, down, down, down, down, down, down, down. But look at what happened when the Fed started dropping rates. This would have been September of 2024 going into the election, by the way. it. We had this big jump in non-farm payrolls. We go up, boom, 240. We have a down, you know, 44, not great, but we go 240 and this 44 is sandwiched between a 240, a 261. And then in December, when interest rates really peak out, we're 323 on the non-farm payrolls. 323. What's happened since then? Well, we go from 323 in December to -13 in June. That is a bad trend. So my point that I'm making right now is that if we do have the Fed cutting by 25 or 50 or whatever they cut, that is way way way way different as far as growth in inflation expectations than what they were doing in September of 2024 when we had a labor market that was in fuego. The labor market was was jamming back then, if you believe the numbers. And more on that in just a moment. And now you've had the dropping, but you have the labor market that's that's by any measure, even the normies out there, the talking heads on CNBC are looking at this labor market saying, "Eh, boy, this does not look good. This looks recessionary." And they've got a a good reason to say that because usually when you get a negative number, this is like 90% of the time with the exception of the anomalies of weather or a big strike by Walmart or something. 90% of the time you are straight in the no bueno zone as far as being in a recession even a recession that would be defined as a recession by the NBR which in the end of the day you know that's what the market really cares about and now this late this latest print as you guys know was 22,000 and that's before revisions so why is this so important why do I keep harping on the revisions well let's go to the BLS class right here and you can see what the headline number was for each month this year. We go from 143, we had 228 in March and then we go down to a 22. But look at this third. This is the final revision here. So we had a revision down in total in January -32,000 -49,000gative 108 thou 108,000gative 10819,000gative 120,000 and in June negative 160,000 160,000 we go from 147 a positive 147 seven. And I remember when that number came out, everyone was like, "Oh, look at how great the labor market's doing. See, recession, no way. This economy is on fire." And you're like, "I don't know. It doesn't really feel like it's on fire. Anecdotally, definitely not on fire. Look at the interest rates. Look at the negative interest uh the the swap spreads being negative. Look at what the yield curve is doing. All of these indicators are saying, "Eh, you know, the two-year Treasury trading way below Fed funds or even reverse repo, and you're like, this does not something's off right here." And then sure enough, we get the revisions 160,000. So the point here is that the minimum the minimum downward revision we have had this year, it when everything is said and done was 19,000. That was for the month of April. But the average is I just ballparking it here. Maybe what? 75,000 roughly. So let's say the average is 75,000. Okay. Well, what does that do to 22? This headline number that we just got. Okay. Now we're at 50,000, right? As far as the final revision. And if it's higher than that then we and you know by the time we get to the final revision in July that could be negative. I mean we could be we could easily in fact most likely will be at negative numbers for the month of June, July and August when everything is said and done. And what does that say about the trend? That's not just one month of negative non-farm payrolls. That's three months that and again we'll have to see how it plays out but it's very likely that we see at least at the very least three months of non-farm payrolls in the red. Now another thing that I wanted to discuss and I think interest rates are really sniffing this out right now and it's another reason why these interest rates plummeting is not good news. It's it's it's bad news and that's what comes out tomorrow. We got to pay very close attention. And for some reason, this is not on our handy dandy market watch calendar. I don't know why, but um it's to me it's a really big deal. It's 10 a.m. Eastern time tomorrow. What I'm What am I referring to? I'm talking about the benchmark revisions. So, let's check this out. BLS benchmark revisions. So this comes out tomorrow. Now let me just read this so we're all on the same page. So each year, in fact, it's not just the only thing that comes out tomorrow. The current employment statistics, I guess that's CES estimates are benchmarked to comprehensive counts of employment from the quarterly census of employment wages. This count okay blah blah blah. So we bottom line is we get that tomorrow and in addition to that we get the benchmark revisions for an entire year. So tomorrow we get the benchmark revisions. I guess these are after the final revisions. Um and that would be let's see that will be from I believe it's February 2024. Come on. This for uh revisions for March 2025. I know that goes back 12 months. So, we're basically, let's just say February 2024 to March of 2025 for all 50 states. So, we're going to get that tomorrow. So, then we look at the number of jobs that were added as of right now to basically that year time frame. We'll call it February 2024 to March 2025. And then we're going to be able to tell okay what what was the real real number and so uh we could see huge downward revisions there as well. So my point is if you get massive downward revisions um from this 12 or 13month time period. I'm not sure exactly what it is. I I know it's just roughly February 2024 to March 2025. But if we get massive downward revisions to this, we get a negative QCEW number or CES. I'm not sure exactly what it is. And then you combine that with what we had last week. You combine that with what we're looking like in the future for the revisions. And then you look at the trend for the nonpar non-farm payrolls right here. And then you look at what yield you're doing and you're like, "Okay, th this is not good. This is not good." I'm not saying that we're going to have a stock market crash. I'm not saying that we're going to go into some financial crisis, but the the probabilities are definitely definitely increasing. I mean, this is not investment advice, but my goodness gracious, stock market at all-time highs. Um, I'd rather be in gold, let's just put it that way, than the S&P 500 right now. That that's for sure. So, another piece of research that I did that I thought was fascinating I think you guys would love is I went back and looked at all the times that we did have these negative non-farm payroll numbers without a recession. I briefly talked about that on a video last week. So, let's start with the 1970s. What I'm going to do, I'm going to go here. Let's just do 1970 and I'm going to do two 1980. Let's take it decade by decade. So, check this out. Here we we've got a negative 58,000. That was right around a recession. You do have this 1972 and I looked this up on Mr. for chat GPT helped us with this one. So the 1972 was minor dip during Okay, so that was an example of just a kind of a flash crash, if you will, in this overall number. So, like I said, it it's it's not a 100%, but it's 90% of the time when you see just um kind of a random it's it's kind of like a um a weather event or like I said a a a strike at like a huge employer like FedEx or Walmart or something like that. But notice here, we do get a negative 49, but look at the trend. that the trend is nothing like we see today. Nothing like we see today. And then when you get the big negative numbers, obviously that's a recession. We get a a negative number here that spiked back up, but we're headed right into recession. So now let's look at 1980 to 1990. And you know, obviously negative here when we're in a recession. We have this big uh down and then back up. This was one of those strike things where all the workers stried, so everyone's laid off and they hired them all back or something like that. That's why you have this big whipssaw thing. So you've got to just omit that here. Uh93 and 86. Let's look that up. See what that was. that was uh decline concentrated industries. So this was not broad-based. This was just certain industries and it was partly or mainly due to according to chat GPT the 1986 oil price collapse. So you had just the a lot of oil producers just getting crushed and that's what really caused that um that decline that negative number. But then again, look at the trend. The the trend and then it just bam, it goes right back to 318. So, this is not like what we're seeing today. This is more like what we're seeing today or or th you know, and I'm talking about the trend down. So, now let's go to uh that was 1990. Okay, let's go 1990 to 2000. Okay, so here you see quite a few of these just little dips down, but most of these were a result. We go back to chat GPT is these kind of one-off events. And it makes sense because look at the trend again. The trend here is just straight up and whoops, you have a negative 44. So it's not like you can put a lot of weight in that negative 44. here. You might have a little bit of a downtrend, but uh you know, all these numbers were fantastic going into it. They just had a couple really bad months and it just snaps right back. You have another one and again I think let's do that actually 95. Let's look to see what that was. So 95 uh minor negative uh small statistical noise. But see, look at this one. in 96 it was a massive blizzard and temporary federal government shutdown or something like that. So you've got to really kind of take that one with a grain of salt. Although the negative 18,000 I mean that's I think legit. So the bottom line I mean I could go through the 2000s and 2010s but we'd see the exact same pattern. And the pattern is usually when you get just a one-off event, it's like weather or something um out of right field. Other than that, when you get a negative non-farm payroll, it's usually around 90% of the time, let's say, it's in a recession or very close to a recession. And then 10% of the times it's just it's noise. Um you know, there is a negative non-farm payroll that just snaps right back. But the point there is usually you don't see that trend. And again, let's look at the last five years. You don't see this. So there are no certainties. There are only probabilities. But for me, this negative number, especially with what we're seeing with the revisions, holds a lot more weight than just kind of a oneoff number, negative number. Let's say 1995 or something like that. and especially when you see what's happening with interest rates because interest rates are are telling you that this is a problem and I would be very surprised if the long end of the curve goes up this time um as a result of the Fed dropping rates because I think it's just a completely different situation around growth and inflation expectations. Now, that said, we've got the CPI coming out this week, and it's it's going to be really, really, really important. So, I cannot wait to see what we come out with and how the market responds. But if this is a if this we're expecting a 2.9, I think that's because of uh base effects. If this is lower than 2.9, if we get like a month over month at like 0.1 or like flat, oh boy, now all of a sudden we're the Fed might drop 50 and there no way long into the curve is going to go up on that. And also I would say that whatever the Fed does, you know, I think that's priced into the 10-year as of right now. I mean, it'd be crazy to think that it wasn't. And let me just refresh here. Right now, the market's probability that it's attaching, oo, it went up a little bit for the 50. Yesterday, it was like at 8 or nine. Uh, today it's at 10.6 on the 50 and 89.4 on the uh 25. So, if we get a 25, I don't know that the 10ear does that much, but if we get a 50, I think it goes down. I do not think it goes up. Um, and again, my rationale for that is because the labor market is so much different now than it was in November, December of 2024 when the Fed was cutting, but the long end was going up. So, bottom line, I would really pay attention to that CPI this week. We'll be going over that on this channel, so stay tuned. And make sure that you're looking at interest rates. Watch the two-year. Watch the 10-year. And by the way, the two-year is now 75 basis points under reverse repo. I mean, think about that one for a while. Why is that important? Because you could take your cash and park it at the Fed and collect 4.25%. At the Fed, that that's risk-free. The Fed ain't going bust. I can assure you. They have negative equity, but they're not going bust. So, you could park your your cash if you're one of these big financial institutions at at the Fed for 4.25%. But instead, you're choosing to buy a 2-year Treasury and basically park that cash in another vehicle that's only paying you 3.5. You're taking a 75 basis point haircut. Why would anybody buy a 2-year Treasury at 3.5 when they could just park that money at the Fed and get 4.25? Would you do that? I think the answer is obviously no. So, who would h how how are these rates? So, and by the way, that's the Fed's instrument to try to put a floor on interest rates. It that is reverse repo. So if you're looking at things through the lens of the Fed, it's impossible for or it should be impossible for interest rates to go below reverse repo. In other words, it should be impossible for interest rates anywhere in the curve to go below 4.25%. That's what reverse repo is for. That that's the reason the Fed has it is to put a floor on interest rates across the curve. That ain't working too well. So, you got to ask yourself why. Why are the market participants doing this on net? Why why are they why is it 7? It's not like it's 7.5 basis points lower. It's 75 basis points lower. So, the reason they would be doing that is because they they value th those treasuries that they're buying have value above and beyond just the interest rate if we go into an economic downturn. And you guys know the reasons from watching my videos because they even the two-year can act as that collateral. Obviously, not as good as the the u the T bills, but acts as collateral. they can rehypothecate and they think that there's good riskreward when by giving up the 75 basis points to keep that on the balance sheet in order to if the stuff hits the fan, they're going to be able to rehypothecate. They're going to be able to lend that out because there's going to be a a scarce collateral and there's going to be liquidity problems and they're going to be able to lend that out and make way way way more than the 75 basis points that they're giving up to begin with. So that's not the only thing that's going on. Obviously with these interest rates, there's thousands of variables, but that's one variable that is definitely going into the price action or the interest rate action, the yield action that we're seeing on these treasuries that we have to be cognizant of. You can't just sit there and say, "Oh, that's part of the plumbing, George. I don't care about it. It's too esoteric. I'm not going to factor that into my analysis." That's just that's that is not a good strategy. That's what I call the ostrich strategy where your only investment strategy is just to buy the S&P 500, buy and hold, and then just bury your head in the sand. That that's that's not an edge. Let me tell you, you don't want to do that. You don't want to do that. You guys are too smart uh to employ the ostrich strategy for investing. You want to be cogn cognizant of what's going on and you want to make informed rational decisions. So everything that we talked about in this video should be going into that decision-making process and into your analysis. That is really why I did this video. And that's the bottom line because Stone Cold said so. All right, guys. Enjoy the rest of your evening. As always, make sure you're standing up for freedom, liberty, free market, capitalism. We'll see you on the next video.
Interest Rates Are Plummeting…Here's Why That's Bad
Summary
Transcript
Hello rebel capitals. Hope you're well. So we have interest rates plummeting. Now most people might think that's good news, but unfortunately they are very very wrong. That's actually bad news to say the least. Extremely extremely bearish not only for the economy, but it could be bearish for the stock market. Let's go into exactly what's happening and connect the dots. So, first and foremost, we hear this narrative constantly that there's no demand for treasuries that interest rates are skyrocketing. And this narrative is completely removed from reality. Uh, let me show you what I'm referring to. We're going to start with the 10-year Treasury. And I had a year-to- date chart. Let's look at a year-to- date chart. Now, if I hid this from you and said, "What do you think the 10-year Treasury has done this year?" You'd probably say based on what you hear in social media that it's up like a 100 basis points or maybe more when in reality it's down. In fact, at one point, I think this might be, you know, this is probably like a a daily weekly chart. I think intraday it almost got up to 5%. Almost got up to 5%. So we've gone from let's say 5% all the way down to 4.4 we are today. So that's a drop of let's say 95 basis points. 96 basis points. I So it's not up by 100 basis points. It's down by almost 100 basis points. And what's even more kind of frightening is what it has done more recently. So we go to the last month and we see this big drop here which doesn't look that bad on the chart but this was a call it 25 basis point drop within a matter of a couple days. Now you guys know why this happened. It's not because the deficits decreased. It's not because all of a sudden central banks started buying treasuries because they're scared of Donald Trump. It's not because we reduced the debt. It's because growth in inflation expectations are plummeting due to what's happening in the labor market. More on that in just a moment. But it's not just the 10-year because a lot of people think that somehow they're doing yield curve control, which even if they are, it doesn't really impact rates because rates are all about growth and inflation expectations. And if you want proof of that, just look at QE 1 2 and three, which is basically yield curve control where they're doing quantitative easing. The Fed's buying. What happened to rates? With all that additional demand, artificial demand from the Fed, rates went up, didn't go down. Why? Because the market sold even more than the Fed was buying because growth and inflation expectations were increasing. So, at the end of the day, the banks are the marginal buyer. The banks are the marginal seller. and the Fed or the central planners, they they no matter what they're doing with the buying and the selling or the manipulation of the curve or the issuance, they're really not going to have a huge impact over the long run um o over uh interest rates, especially the long end of the curve. Okay. So, now let's look at the two-year, though, because the two-year is going to be far less um about, you know, issuance or something like that if you want to have that argument. And here we go to a year-to- date chart and we start at call it 4.26 and we're down at 3.5. So this is a 75 basis point drop in in the 2-year Treasury this year. So I mean somebody forgot to tell the Treasury market that there's no demand for treasuries. And I I just like to remind maybe some of you that are new, there's an inverse relationship between the price and the yield. So if the yield is going up, price is going down. That would mean more supply than demand. But if the yield is going down, the price is going up. That means there's more demand than there is supply. And it's not just at long end of the curve where there could be an issuance argument, although I think it's a bad one. Uh it's even at the two-year Treasury. So, and it's also, by the way, interest rates have gone down so much in the last couple days due to the softening labor market, to put it mildly. Even the 30-year Treasury, even the 30-year Treasury is now lower on the year. So, we started the year 4.78. Today, we're trading at 4.69. So, even the 30 year is down on the year. And you know, most people say, "Oh, that's great. Mortgage rates are coming down and it's going to be good for stocks." But what these people miss is the reason why interest rates come down. And interest rates don't control the economy. They're simply a reflection of the economy. So for all those people out there who are wishing for lower interest rates, be careful what you wish for because yes, you might get lower interest rates, but you're also going to have a recession or you're also going to have a much much much worse economy than it is right now even if it doesn't go into recession. So again, the lower interest rates don't produce a recession. They're not the catalyst for a recession. They're simply a reflection of what's happening in the underlying economy. So we don't want lower interest rates. That that that's that's not good. That's not good because all else being equal, we would much rather have let's say say Fed funds at 5% with an upward sloping yield curve. we that would be much better for the US economy or that would mean that the US economy was doing much better for society at large than an economy where the Fed funds rate is at whatever 1% and the 10-year Treasury is trading at 1.5 or something. We would much rather have the economy where we're at five and at let's say seven with an upward sloping yield curve. Okay. So now the question becomes, okay, George, I get what you're saying, but the Fed dropped rates by 100 basis points at the end of 2024. And whoa, the yield the yields on the 10-year Treasury actually went up because of growth in inflation expectations. So maybe if the Fed starts dropping rates, we're going to have the long end blow out again, which is going to make it even harder on the economy. Not really. Obviously a possibility, but that's definitely definitely not my base case this time around. Let me tell you why. This we go back to the non-farm payrolls. So, first and foremost, this goes back five years. I want you to look at this trend and I I want you just to kind of focus on this for a moment. Let's look at this trend. And obviously we have the jobs go way down, but then it kind of overcorrected. Then comes back to kind of an average up here around, let's say, 600 to 800,000 jobs per month. Sounds like an astronomical number based on what's happening more recently. But then look at this trend. Down, down, down, down, down, down, down, down, down. But look at what happened when the Fed started dropping rates. This would have been September of 2024 going into the election, by the way. it. We had this big jump in non-farm payrolls. We go up, boom, 240. We have a down, you know, 44, not great, but we go 240 and this 44 is sandwiched between a 240, a 261. And then in December, when interest rates really peak out, we're 323 on the non-farm payrolls. 323. What's happened since then? Well, we go from 323 in December to -13 in June. That is a bad trend. So my point that I'm making right now is that if we do have the Fed cutting by 25 or 50 or whatever they cut, that is way way way way different as far as growth in inflation expectations than what they were doing in September of 2024 when we had a labor market that was in fuego. The labor market was was jamming back then, if you believe the numbers. And more on that in just a moment. And now you've had the dropping, but you have the labor market that's that's by any measure, even the normies out there, the talking heads on CNBC are looking at this labor market saying, "Eh, boy, this does not look good. This looks recessionary." And they've got a a good reason to say that because usually when you get a negative number, this is like 90% of the time with the exception of the anomalies of weather or a big strike by Walmart or something. 90% of the time you are straight in the no bueno zone as far as being in a recession even a recession that would be defined as a recession by the NBR which in the end of the day you know that's what the market really cares about and now this late this latest print as you guys know was 22,000 and that's before revisions so why is this so important why do I keep harping on the revisions well let's go to the BLS class right here and you can see what the headline number was for each month this year. We go from 143, we had 228 in March and then we go down to a 22. But look at this third. This is the final revision here. So we had a revision down in total in January -32,000 -49,000gative 108 thou 108,000gative 10819,000gative 120,000 and in June negative 160,000 160,000 we go from 147 a positive 147 seven. And I remember when that number came out, everyone was like, "Oh, look at how great the labor market's doing. See, recession, no way. This economy is on fire." And you're like, "I don't know. It doesn't really feel like it's on fire. Anecdotally, definitely not on fire. Look at the interest rates. Look at the negative interest uh the the swap spreads being negative. Look at what the yield curve is doing. All of these indicators are saying, "Eh, you know, the two-year Treasury trading way below Fed funds or even reverse repo, and you're like, this does not something's off right here." And then sure enough, we get the revisions 160,000. So the point here is that the minimum the minimum downward revision we have had this year, it when everything is said and done was 19,000. That was for the month of April. But the average is I just ballparking it here. Maybe what? 75,000 roughly. So let's say the average is 75,000. Okay. Well, what does that do to 22? This headline number that we just got. Okay. Now we're at 50,000, right? As far as the final revision. And if it's higher than that then we and you know by the time we get to the final revision in July that could be negative. I mean we could be we could easily in fact most likely will be at negative numbers for the month of June, July and August when everything is said and done. And what does that say about the trend? That's not just one month of negative non-farm payrolls. That's three months that and again we'll have to see how it plays out but it's very likely that we see at least at the very least three months of non-farm payrolls in the red. Now another thing that I wanted to discuss and I think interest rates are really sniffing this out right now and it's another reason why these interest rates plummeting is not good news. It's it's it's bad news and that's what comes out tomorrow. We got to pay very close attention. And for some reason, this is not on our handy dandy market watch calendar. I don't know why, but um it's to me it's a really big deal. It's 10 a.m. Eastern time tomorrow. What I'm What am I referring to? I'm talking about the benchmark revisions. So, let's check this out. BLS benchmark revisions. So this comes out tomorrow. Now let me just read this so we're all on the same page. So each year, in fact, it's not just the only thing that comes out tomorrow. The current employment statistics, I guess that's CES estimates are benchmarked to comprehensive counts of employment from the quarterly census of employment wages. This count okay blah blah blah. So we bottom line is we get that tomorrow and in addition to that we get the benchmark revisions for an entire year. So tomorrow we get the benchmark revisions. I guess these are after the final revisions. Um and that would be let's see that will be from I believe it's February 2024. Come on. This for uh revisions for March 2025. I know that goes back 12 months. So, we're basically, let's just say February 2024 to March of 2025 for all 50 states. So, we're going to get that tomorrow. So, then we look at the number of jobs that were added as of right now to basically that year time frame. We'll call it February 2024 to March 2025. And then we're going to be able to tell okay what what was the real real number and so uh we could see huge downward revisions there as well. So my point is if you get massive downward revisions um from this 12 or 13month time period. I'm not sure exactly what it is. I I know it's just roughly February 2024 to March 2025. But if we get massive downward revisions to this, we get a negative QCEW number or CES. I'm not sure exactly what it is. And then you combine that with what we had last week. You combine that with what we're looking like in the future for the revisions. And then you look at the trend for the nonpar non-farm payrolls right here. And then you look at what yield you're doing and you're like, "Okay, th this is not good. This is not good." I'm not saying that we're going to have a stock market crash. I'm not saying that we're going to go into some financial crisis, but the the probabilities are definitely definitely increasing. I mean, this is not investment advice, but my goodness gracious, stock market at all-time highs. Um, I'd rather be in gold, let's just put it that way, than the S&P 500 right now. That that's for sure. So, another piece of research that I did that I thought was fascinating I think you guys would love is I went back and looked at all the times that we did have these negative non-farm payroll numbers without a recession. I briefly talked about that on a video last week. So, let's start with the 1970s. What I'm going to do, I'm going to go here. Let's just do 1970 and I'm going to do two 1980. Let's take it decade by decade. So, check this out. Here we we've got a negative 58,000. That was right around a recession. You do have this 1972 and I looked this up on Mr. for chat GPT helped us with this one. So the 1972 was minor dip during Okay, so that was an example of just a kind of a flash crash, if you will, in this overall number. So, like I said, it it's it's not a 100%, but it's 90% of the time when you see just um kind of a random it's it's kind of like a um a weather event or like I said a a a strike at like a huge employer like FedEx or Walmart or something like that. But notice here, we do get a negative 49, but look at the trend. that the trend is nothing like we see today. Nothing like we see today. And then when you get the big negative numbers, obviously that's a recession. We get a a negative number here that spiked back up, but we're headed right into recession. So now let's look at 1980 to 1990. And you know, obviously negative here when we're in a recession. We have this big uh down and then back up. This was one of those strike things where all the workers stried, so everyone's laid off and they hired them all back or something like that. That's why you have this big whipssaw thing. So you've got to just omit that here. Uh93 and 86. Let's look that up. See what that was. that was uh decline concentrated industries. So this was not broad-based. This was just certain industries and it was partly or mainly due to according to chat GPT the 1986 oil price collapse. So you had just the a lot of oil producers just getting crushed and that's what really caused that um that decline that negative number. But then again, look at the trend. The the trend and then it just bam, it goes right back to 318. So, this is not like what we're seeing today. This is more like what we're seeing today or or th you know, and I'm talking about the trend down. So, now let's go to uh that was 1990. Okay, let's go 1990 to 2000. Okay, so here you see quite a few of these just little dips down, but most of these were a result. We go back to chat GPT is these kind of one-off events. And it makes sense because look at the trend again. The trend here is just straight up and whoops, you have a negative 44. So it's not like you can put a lot of weight in that negative 44. here. You might have a little bit of a downtrend, but uh you know, all these numbers were fantastic going into it. They just had a couple really bad months and it just snaps right back. You have another one and again I think let's do that actually 95. Let's look to see what that was. So 95 uh minor negative uh small statistical noise. But see, look at this one. in 96 it was a massive blizzard and temporary federal government shutdown or something like that. So you've got to really kind of take that one with a grain of salt. Although the negative 18,000 I mean that's I think legit. So the bottom line I mean I could go through the 2000s and 2010s but we'd see the exact same pattern. And the pattern is usually when you get just a one-off event, it's like weather or something um out of right field. Other than that, when you get a negative non-farm payroll, it's usually around 90% of the time, let's say, it's in a recession or very close to a recession. And then 10% of the times it's just it's noise. Um you know, there is a negative non-farm payroll that just snaps right back. But the point there is usually you don't see that trend. And again, let's look at the last five years. You don't see this. So there are no certainties. There are only probabilities. But for me, this negative number, especially with what we're seeing with the revisions, holds a lot more weight than just kind of a oneoff number, negative number. Let's say 1995 or something like that. and especially when you see what's happening with interest rates because interest rates are are telling you that this is a problem and I would be very surprised if the long end of the curve goes up this time um as a result of the Fed dropping rates because I think it's just a completely different situation around growth and inflation expectations. Now, that said, we've got the CPI coming out this week, and it's it's going to be really, really, really important. So, I cannot wait to see what we come out with and how the market responds. But if this is a if this we're expecting a 2.9, I think that's because of uh base effects. If this is lower than 2.9, if we get like a month over month at like 0.1 or like flat, oh boy, now all of a sudden we're the Fed might drop 50 and there no way long into the curve is going to go up on that. And also I would say that whatever the Fed does, you know, I think that's priced into the 10-year as of right now. I mean, it'd be crazy to think that it wasn't. And let me just refresh here. Right now, the market's probability that it's attaching, oo, it went up a little bit for the 50. Yesterday, it was like at 8 or nine. Uh, today it's at 10.6 on the 50 and 89.4 on the uh 25. So, if we get a 25, I don't know that the 10ear does that much, but if we get a 50, I think it goes down. I do not think it goes up. Um, and again, my rationale for that is because the labor market is so much different now than it was in November, December of 2024 when the Fed was cutting, but the long end was going up. So, bottom line, I would really pay attention to that CPI this week. We'll be going over that on this channel, so stay tuned. And make sure that you're looking at interest rates. Watch the two-year. Watch the 10-year. And by the way, the two-year is now 75 basis points under reverse repo. I mean, think about that one for a while. Why is that important? Because you could take your cash and park it at the Fed and collect 4.25%. At the Fed, that that's risk-free. The Fed ain't going bust. I can assure you. They have negative equity, but they're not going bust. So, you could park your your cash if you're one of these big financial institutions at at the Fed for 4.25%. But instead, you're choosing to buy a 2-year Treasury and basically park that cash in another vehicle that's only paying you 3.5. You're taking a 75 basis point haircut. Why would anybody buy a 2-year Treasury at 3.5 when they could just park that money at the Fed and get 4.25? Would you do that? I think the answer is obviously no. So, who would h how how are these rates? So, and by the way, that's the Fed's instrument to try to put a floor on interest rates. It that is reverse repo. So if you're looking at things through the lens of the Fed, it's impossible for or it should be impossible for interest rates to go below reverse repo. In other words, it should be impossible for interest rates anywhere in the curve to go below 4.25%. That's what reverse repo is for. That that's the reason the Fed has it is to put a floor on interest rates across the curve. That ain't working too well. So, you got to ask yourself why. Why are the market participants doing this on net? Why why are they why is it 7? It's not like it's 7.5 basis points lower. It's 75 basis points lower. So, the reason they would be doing that is because they they value th those treasuries that they're buying have value above and beyond just the interest rate if we go into an economic downturn. And you guys know the reasons from watching my videos because they even the two-year can act as that collateral. Obviously, not as good as the the u the T bills, but acts as collateral. they can rehypothecate and they think that there's good riskreward when by giving up the 75 basis points to keep that on the balance sheet in order to if the stuff hits the fan, they're going to be able to rehypothecate. They're going to be able to lend that out because there's going to be a a scarce collateral and there's going to be liquidity problems and they're going to be able to lend that out and make way way way more than the 75 basis points that they're giving up to begin with. So that's not the only thing that's going on. Obviously with these interest rates, there's thousands of variables, but that's one variable that is definitely going into the price action or the interest rate action, the yield action that we're seeing on these treasuries that we have to be cognizant of. You can't just sit there and say, "Oh, that's part of the plumbing, George. I don't care about it. It's too esoteric. I'm not going to factor that into my analysis." That's just that's that is not a good strategy. That's what I call the ostrich strategy where your only investment strategy is just to buy the S&P 500, buy and hold, and then just bury your head in the sand. That that's that's not an edge. Let me tell you, you don't want to do that. You don't want to do that. You guys are too smart uh to employ the ostrich strategy for investing. You want to be cogn cognizant of what's going on and you want to make informed rational decisions. So everything that we talked about in this video should be going into that decision-making process and into your analysis. That is really why I did this video. And that's the bottom line because Stone Cold said so. All right, guys. Enjoy the rest of your evening. As always, make sure you're standing up for freedom, liberty, free market, capitalism. We'll see you on the next video.