Why Jerome Powell And The Fed MUST Cut Rates By 0.50% (Not 0.25%)

0:28Hello, everyone. We've got a lot to discuss today. 27 subscribers, but my goal is to get to 1 million. So hit that subscribe button and let's kick it off today. All right, ladies and gentlemen, the big day is here. The Federal Reserve, the Central Bank of the United States, they are starting their two-day meeting today, and all eyes are on what Jerome Powell is going to do with interest rates. People know that he should cut rates, but the whole question is, how much is he actually going to cut? Now, Powell's in a weird position. He is now having to prioritize the labor market over potential inflation.

0:58Now, if you go back and you look, the recent jobs report gives the Fed permission to finally cut rates and they can save face. See, the thing is that the Fed's been behind the curve for months now. They should have been cutting rates, but they were always saying that they were worried about inflation that was incoming. Now, here's the thing that people seem to forget. For years, the Federal Reserve kept telling us we are data dependent. That means that they look at the data, they analyze it, and they do whatever the data tells them to do. But that's not what they've been doing for the last couple of months.

1:28The Fed somehow, they pivoted, maybe under the new administration. And the Fed started to say, well, we're not going to cut rates because now we're going to become forecasters. We believe that inflation is coming, even though the data didn't tell them that it was here. And if you go and you look at real-time alternative inflation metrics like Truflation, that's showing that inflation is actually near 2%, not near 3 % like the Fed keeps telling us. And so what is going to happen over the next 48 hours is going to be very important for markets. The investment community is pricing in a 25 basis point cut.

2:01That's what they expect the Fed to do. But I believe that the Federal Reserve should cut 50 basis points. They have to show people that they are serious. They have to surprise people by being more aggressive rather than less. Because the Fed's been behind the curve, they have to fix these issues. They've got to catch up. And companies and the U.S. economy both depend on cheap capital. And of course, the housing market, that needs lower rates as well. People in America can't afford a home right now. And Jerome Powell and the Federal Reserve, they hold a magic wand that could fix some of that problem.

2:34So cut rates, but don't just cut it 25 basis points. We need a 50 basis point cut tomorrow. Show us you're serious. Show us that you're in charge as a central bank and make sure that everyone from investors to everyday citizens understand that the Federal Reserve is taking this risk in the labor market seriously and that they're going to stimulate the economy. Because hopefully Jerome Powell doesn't bring a knife to a gunfight. The president's son was on CNBC this morning talking about Bitcoin. But Eric Trump wasn't just talking. He was spreading the gospel of the digital currency. Take a listen to what Eric had to say.

3:12But you're also seeing assets like Bitcoin. Bitcoin has become the modern day gold. People all over the world are pouring into it. companies from Fortune 500s, a company like ours, the sovereign wealth funds, so the richest families on earth are all hoarding Bitcoin. It's become such an incredible asset. It's immediately liquid. It's probably the greatest hedge to real estate that there is, right? Because again, you have massive liquidity. It's all around the world. It's protected by kind of the greatest ecosystem of energy mining companies in the world that safeguard it. Bitcoin has become, I think, the truly greatest asset of our time.

3:48Now, it's not every day that you hear someone with a direct line to the president say, Bitcoin has become the greatest asset of our time. Not only is that a big, bold statement, it sounds awesome, but the devil's in the details as always. Daniel Pico points out that gold is outperforming Bitcoin so far in 2025. Gold's up 40%. Bitcoin's only up 22. Now, some of you may be worried by that fact, but I wouldn't jump to conclusions yet. Gold outperformed earlier in the year. Bitcoin eventually caught up and then surpassed gold's performance near the summertime. And then gold recently recaptured the lead in recent weeks.

4:21Why does that happen? Well, it appears that gold has become a leading indicator for Bitcoin's performance. I shared this chart right here from Jack Green back in May. It shows that Bitcoin tends to break out and catch up to gold's performance on an approximately 100 day lag. So gold runs and then Bitcoin waits about three months or so. And then it quickly follows. Given this dynamic, you can think of Bitcoin as a coiled spring right now. The digital currency is waiting to thrust itself higher. Because of this, Timothy Peterson shows that Bitcoin is having its worst bull market year ever. Oh no, it's only up 23%.

4:56Plenty of Bitcoiners are disappointed by this performance. Classic Bitcoiner mentality. Any other investor in the world would be ecstatic about the 23 % annual return. But Bitcoiners are used to significantly higher returns in the past. They don't want tens of percent. They want hundreds of percent return and they want it every single year. I wouldn't hold my breath for that level of performance though. Now, I personally do believe Bitcoin is going higher through the end of the year. We have the interest rate cuts that should occur this week and that should bring cheap capital into assets like Bitcoin.

5:27But we also have analysts like Frank Fetter that's highlighting the Bitcoin MACD is showing green for the first time in weeks. Now, what's the Bitcoin MACD? It's the Bitcoin Moving Average Convergence Divergence Metric. It is a momentum measurement that historically does a good job of showing when sentiment is flipping bullish. As the market becomes more excited, capital flows and Bitcoin goes higher. You don't have to overthink everything. Sometimes it really is just that simple. And lastly, Axel Adler, he points out the three-year Bitcoin risk index is measuring 23 % right now. The last time that that index was so low for an extended period of time, we saw Bitcoin rise from below$30 ,000 per coin to nearly$60 ,000 per coin.

6:08That happened between September and December of 2023. Now, here's the thing. I'm not saying Bitcoin's gonna double in price over the next 120 days. That'd be awesome if it did, but that's not what I'm saying. I do think though we are seeing numerous data points line up for Bitcoin to go higher in the coming weeks. The Bitcoin bull market is not over. The bears are wrong. Stop listening to them. There is still plenty of fun for people to have. Just don't expect this bull market to look like past ones. Before I let you guys go, I've got a very special treat for you. Jordy Visser recently joined me at the Independent Investor Summit in New York City.

6:42Now, Jordy's somebody that I really respect. I talk to him every single week. He's somebody who's been on Wall Street for 30 years. He understands the macro economy, but he also understands disruptive technology. And Jordy sat down and he gave us all a masterclass on artificial intelligence, Bitcoin, robotics, and the macro economy. Here is our conversation from the Independent Investor Summit.

7:29as an investor over 30 years that now is being driven by this technology. All right. And I think to start this off, what I am going to do is connect it back to your retail comment at the beginning. Because I was at the Robin Hood event. I've spent enough time now talking to retail. And I just want to give you guys two lines, one from a movie that I'm sure many of you have seen, which is Rounders, which is if you can't find the sucker at the table, that means you're the sucker. and that is what's happening with wall street right now relative to retail um they think they know more they're focused a lot on the history that they have but as i say all the time in a world of artificial intelligence before you know the the migration into crypto it's garbage in garbage out with the memories they have of everything all these charts these overlays and i was looking at one today that someone had put in saying well bond yields are going down but stocks are going higher.

8:25This is wrong. There's a recession coming. And they just jump to these equations. And part of the reason is because they don't understand Bitcoin. And so I do want to say one thing on this topic that is kind of the irony in the end of the movie, which is what brought me to really focus specifically on Bitcoin as the endgame. But it's this disruption happening from artificial intelligence that's really important for people to grasp. Every single company is being disrupted by it, and computers every year, especially going forward, will make more and more decisions. You guys probably saw that Oracle reported just monster numbers this quarter, and it was all because of inference, and inference is thinking.

9:05So when NVIDIA was working, it was all about learning, going to school. They're memorizing every piece of human knowledge that's been created, but now we've migrated into thinking and the next year is going to get into something above thinking which is really going to be digital employees leading into humanoids and everything else this will never end so for people that are waiting for a recession or a depression or inflation to spike or bond yields to fall or some kind of catastrophe artificial intelligence is going to speed up what was already happening and i will leave you with one thing just so you guys can remember the irony of this movie ends with that the only thing that has outperformed bitcoin of any size over the last six to eight years is the Magnificent Seven.

9:48They have dominated investments around the globe. They are the ones funding the acceleration of AI to eventually have digital employees make investments that will be focused on the best assets based on data and sharp ratios. And that means they're actually accelerating their own demise. And that is part of the thing that I talk about is artificial intelligence in the end will destroy all businesses, but it will leave us a situation where entrepreneurs and innovations will just speed faster and faster. And that ends up being something related to Bitcoin. So you talk a lot about artificial intelligence destroying.

10:22It also seems to be accelerating many of the businesses that are large. Oracle, huge numbers this week. We've seen the Facebooks or metas of the world accelerate. But we've also seen private companies, things like OpenAI or the humanoid companies. These companies seem to just be going much faster. I've been very fascinated by Coinbase came out and said 40 % of all code is being written by AI inside of the company. Many others have come out and said similar types of numbers. How does the acceleration of these businesses change the way that investors think about their portfolio? And Oracle might be one of the best examples of you don't think a company that's worth hundreds of billions of dollars is going to go up 40 % in a day, right?

11:04That's not the asymmetric bet in your portfolio historically. And so it does feel like the way that you evaluate your portfolio construction may be changing based on how these companies can move now. Yeah, but what you just said, so if you go through X and especially macro people where I grew up, the number one thing associated with AI is bubble. It's not how to make money off of it. And this is the beauty of it. You're describing situations, especially on the private businesses, where it's not just open AI, Anthropic, XAI, they've all gone up. I mean, these companies are now close to a trillion dollars in valuation.

11:38None of them make money yet. So people have missed these. The humanoid companies will be next. I mean, I really believe that next year is the beginning of the humanoid valuation side. And I know you have Chris on today, and I'm sure he's going to talk about that. It's all starting now because once you get to thinking, you get to the next phase. So for people that are sitting here looking for ideas and things, you can find them. You just have to believe that AI is not a bubble and it's not a bubble. It's something that might end with a lot of bad investments. So I do agree with Sam Altman on what he said.

12:10But for the next three to five years, if you want to actually make returns on things and you want your portfolio to do well, you have to have an opinion that AI is going to continue to grow and that they're going to continue to spend money on this. And the entrepreneurs and Mark Cuban spoke on the All In podcast at their summit. And he literally said the words of if you have kids, you don't want them to take a job at a big company. You want them to become entrepreneurs and take jobs at small businesses so they can grow. And even if you fail, you will learn more in that failure and it'll set you up for the next job.

12:41If you go into a big company and one of the places that I work for, you're going to be in a very, very dangerous situation of just businesses that are doomed to failure at this point in terms of adopting AI. Let's talk about the stack in the AI world. You have everything from power generation all the way up to the consumer application that has an interface that people will go and type into chat GPT, perplexity, et cetera. Where do you think the investment opportunity is maybe best suited in terms of the risk reward? Is it the power generation infrastructure? Is it the consumer applications? Is it all of the above?

13:16Yeah. So I do think the hyperscalers have already shown you that the Mag 7 this year is barely outperforming the S &P. And that includes Nvidia, which is up close to 40%. So X and Vidya, they're underperforming. And a lot of them, it's all the companies spending money and it's Apple who hasn't figured out a plan on what to do. They're spending their money buying back stock, which is different than what the other guys are doing. So you've kind of already run to the point where they've had trouble. The Oracle situation, and to give you guys the numbers, and I posted this on X, but their orders increased from the last earnings report to today by$317 billion.

13:50dollars. Total nominal GDP acceleration for Q2 in the U.S. was$360 billion. So we're talking about something where the only way that they're going to be able to meet those orders is if there's more electricity, because we don't have enough electricity for the orders that they have. So the build out in the power is happening. And for those names, they're not going to be triples and quadruples, but you will find companies that make pumps that'll go up 50 % this year that make transmission all different parts of the power side it's not an energy thing it's not an oil thing it's not a natural gas thing those commodities won't go up until the power is actually used someone asked me the question i said that's great if we're going to build lots of restaurants but they don't need the food until they actually have the people and until the data centers are built we don't need excess amounts of commodities generators are going to do well batteries are going to do well solar companies believe it or not even these are perfect time to be spending on these because they're part of this green energy panic that people went through all power is necessary we don't have enough power in this country to fuel what's the build out is for oracle's orders so there's going to be a lot of money spent this year and i will say that i really do believe um this is the year where people start to really start to value humanoids with inside the public markets it will start this year tesla is going to be the reason in my opinion and it's going to start this coming year.

15:17I know you've done a lot of work on Tesla in particular. You talked about the robo taxis, but you and I have also talked about this idea. Elon Musk is essentially teaching machines to think and look, right, or see. Explain a little bit more about this idea of once you have machines that can see and they can think, it kind of feels like we're not ready for understanding that as an investment opportunity. Yeah, and again, I'll defer to Chris, who's heavily involved with Apptronic and speaks a lot about these and knows all these companies inside and out. He's a wizard on this stuff. But in my opinion, what Elon Musk is doing with the vision side is not understood by anybody that I talk to on Wall Street in any kind of way.

16:02he is viewed in a negative way the company's viewed in a negative way where we are right now with vision which has to happen and if you guys haven't seen it there's a documentary that i i referenced on a bunch of interviews i did but in particular one of my weekly things that adam jonas put together at morgan stanley which is really important because the amount of artificial intelligence compute that's necessary for a computer to make real-time decisions for it to truly be a generalist robot, not a specialist robot that's doing the same thing every day where you just keep training it until he does it, but one that learns on the fly and actually does things.

16:43RoboTaxi and his software has reached a point where I believe based on a bunch of other dot connections that he believes he's made a significant advancement here and that you're going to start to see this move faster and faster. And that's why I believe next year will be the year that people realize what it takes to go from learning in school, so the training side of these models, the thinking side, and just putting together that knowledge in a way that you're connecting dots and thinking. But it's another thing to be driving down the road as a person driving. See a person with a dog that maybe isn't looking at the light but starts to come out.

17:16How does a car figure out how to do that unless it's anticipating and it's learned through experience what is happening? That's what he's been working on while Waymo has been doing things based on geofencing and GPS and LIDAR, which is A, too expensive. But secondly, it won't allow you to do the things that I was just saying with the dog. So we're at a point now where if he makes that advancement, whenever it happens, that is the thing that brings that$10,$20 trillion opportunity further ahead. And the way that the stock market works is it starts being discounted when people can actually see that future in front of them.

17:50And that's why the advancements for Tesla, if they happen, I believe you'll see the company triple next year because I think the valuation on the company for a$10 trillion opportunity should be$2,$3 trillion on something that's below a trillion still today. While all of the disruptive technology is happening, I think what many people in this room are very excited about, we also have the Fed who's trying to figure out, you know, did inflation go up by 0.1 % or not? It feels like the tech industry is trying to hit home runs. The Fed is trying not to strike out. How do you think about the Fed's data, their analysis and their decisions so far this year?

18:32Oracle's orders did not really care what the Fed was gonna do. So this is just one of those macro topics like inflation that I think everyone gets overexcited for. theoretically the Fed should be making decisions on where inflation should be in two three years just like I just talked about the stock market there should be I mean these are supposed to be the smartest people in finance thinking further ahead when you hear Elon Musk talk about sustainability for the human race by putting people on Mars and the Fed is talking about inflation from two years ago I don't think we're dealing with a let's say an organization or a setup that is relevant anymore and I think this goes for a lot of the government side.

19:12We all know that the government wastes money. We all know that we should be finding ways to change this. So I've been a fan of the thought process that it's been a mistake for people to believe that the Fed is independent. It's not. It can't be. Because human beings, all of them, everyone in this room has a bias. They have a bias from when they grew up with their parents and what they did. They have a bias from their religious beliefs, from what they believe in, just everything. Everyone has a bias. So there's no such thing as an independent thinker. It's just not possible, particularly in a polarized world like we're in.

19:42So I think the Fed's going to lower rates. I don't think it's going to make a dramatic change in terms of the economy. But I do think as part of what Donald Trump was elected for, there's a rebalancing in the economy that lower rates will help. You will get a housing acceleration, in my opinion, this year, partly because of rates coming down. We've already seen mortgage rates come down to 30-month lows this week. I also think they're going to do things from the targeting of the national emergency. They're doing clear on housing because housing is affordability for sure. And my kids, I mean, they can't afford to live in the cities they want to live in because the rent is too high relative to them working in the medical field.

20:25So we know that the housing problem is very real. A lot of it comes from local zoning laws and things that the federal government probably can't affect. but interest rates is one component. And then this whole idea of a national housing emergency being declared, how important is housing to investors here today in terms of what happens in their portfolio? If we solve the housing problem, does everything get better, capital flows, and all of a sudden asset prices are up? Or are these two things much less related? And so it's like, hey, we want to help people get housing, but your investment portfolio doesn't really depend on it.

21:03I'm going to answer this in the same way that I think artificial intelligence is disrupting everything. So the belief that I came to to care so much about connecting macro back to technology was really when I started consuming a lot of Jeff Booth's work on just innovation, creating this situation where the distribution of wealth inequality gets bad. And this is all Joseph Schumpeter stuff, but it's real. And so whatever they're going to do for housing is not going to fix the problem. They can't fix it. The only thing that can fix it is to not have the top 1 % in the country own 50%. I mean, it's just not possible to normalize it because if the prices come down too much, then people go, this is a great investment.

21:48I'll go buy it. So I don't think you can rebalance things. That is why I believe in Bitcoin so much because in the end, And the only thing that normalizes this stuff is the crypto world. It's tokenization. It's Bitcoin. It gives people a chance. And so I've always said that the hope that comes and the fact that I set up strategic Bitcoin reserves for my kids, because it was the only solution I saw where they could actually have the hope that they wanted to still live their life. You can't give kids money and say that's it. But if you give them Bitcoin and you say you have to hold on to this, never sell it, then they're rooting for something to go higher.

22:24They're thinking more about investments. It is a different feeling to give them something that appreciates than to give them something that they spend. It's just a very different mindset. And I think that's the reason why no matter what you come up with for helping normalize these things, it's not going to work. Can the government stop spending money? Can they stop spending money? No, they can't. What are the ramifications of that in terms of an investment portfolio? You know, Lindaldon, nothing stops this train, just asset prices go up forever? No. So, you know, since I am a big believer in the concept of abundance, and I do believe that we're entering the longevity side of the acceleration of AI and the benefits will start to show up in that side this year.

23:11Most of the liabilities that are in the future are related to the aging of people. So whether it's Social Security, whether it's Medicare, Medicaid, it's related to the fact that people are older and they're not healthy. And so if we get to the point where we can reduce the medical costs significantly, then all of a sudden the government entitlements go down that way. Is it going to happen in the next three years? No. But I do think over the course of the next 10 years, we will gradually hit a point where that won't happen. And I still think there'll be economic growth. And if there's economic growth and you're making people not have to go into hospitals much because we're catching everything real time.

23:47and then we have cures for things and people can live longer and they can actually live a life that is healthier and they can be active until the day they die. I think that's the best way of dealing with that. So I'm an optimist in the fact that technology will get us there. It's funny you say the word optimist. There's a couple of people who are going to come on stage today. We're all part of a secret club. It's called the Optimist Club and not a lot of not a very popular club to be in earlier this year. In April, the president, they were doing like a science fair posters. They were and how much they were going to tariff everybody.

24:19I think I read that there was going to be a recession, a depression, empty shelves, the world was going to end, and everything in between. You, I, and a couple other people here today were basically like, this is crazy. You guys are idiots. That's not going to happen. It hasn't happened. And I'm surprised at how many people still today keep using the R word. They keep saying there's going to be a recession. Do you think there's going to be a recession? no i don't think they exist anymore but more importantly um yesterday to me with the inflation data was the official ending of the tariff yesterday was it so meaning in in the in the world that i was in dealing with my investors consistently you have to make money for them every quarter you have to make money for them every year they they get a monthly return you can't afford to be negative forever.

25:14You can be negative. You can be worried. But when the inflation data came out yesterday and the market had a sigh of relief, it's not like anything good happened yesterday. If anything, the inflation data is slightly higher than what people were expected in the guts of it. But the reality is it's like, what are you waiting for now? What are you trying to accomplish? There are plenty of companies that you should be investing in right now. And again, this inflation stuff and the tariffs and the recessions and all these, these are just big words that people throw around. Stagflation is now being thrown around.

25:43It's just, they just say words. A lot of them now are just posting on X. I'm not even really sure they have jobs anymore. Kind of like me. It's not like I go into an office every day. I feel like I'm in one right now, but I don't go into them anymore. Like I'm sitting in front of the boss ready to get fired. I prefer principal. Principal, actually. School, these are the students. My eye comes in right at your chin. Can we vote? Is that what you said? There's no recession. There's no more fears on this. Can there ever be a recession? I think this is the bigger thing is people are like, OK, maybe there's not going to be a recession right now.