The Federal Reserve has cut interest rates, and half of them are wrong
Overnight at 2 a.m., the Federal Reserve's September interest rate meeting ended as scheduled. Interest rate cuts have come to fruition, once and for all. It's not an interest rate hike, it's not a change; it's not a 25 bps cut. Instead, it's a big opening, and directly cut interest rates by 50 bps! Half guessed wrong. The faces of the “spiritual kneeling people” and “smart people” who insist that interest rates will not be cut are almost swollen.
Only one director voted against the sharp 50 bps interest rate cut because he wanted only 25 bps of interest rate cut this time. Federal Reserve Chairman Powell successfully convinced most voters.
He leaned against the marble wall and faced the sky, either in his heart or meditating: “Looking back on today in the future, will I be the one who saved America from collapse and disaster?”
By early morning, BTC had surged to 62k.
Powell's performance at the operational level was undoubtedly almost perfect for cutting interest rates by 50 bps, which exceeded expectations this time. Now that you've decided to raise the white flag, pose a little more handsome.
The education chain has continuously sent out signals of 50 bp of interest rate cuts in recent internal reports:
- [”9.18 Education Chain Insider: Keep an eye on the Federal Reserve tonight”]:
“For Federal Reserve Chairman Powell, it seems that a direct reduction of 50 bp is the best option, so that the risk of insufficient interest rate cuts can be minimized.”...
“Friends who often read the teaching chain articles should remember that when we resumed trading the past few times, we couldn't say that interest rate cuts caused the collapse; it was just that the Fed reacted too slowly and fell too slowly.”...
“If the Federal Reserve can learn a few lessons from history, it should resolutely choose a direct reduction of 50 bps this time around.”
The probability of cutting interest by 25 bp is 35%, and the probability of cutting interest by 50 bp is 65%.
- [”9.16 Education Chain Reference: Crypto Crisis and Liquidity Bull Market”]:
“(Sam said) Federal Reserve officials need to cut interest rates by 50 basis points to prevent a potential labor market recession and prepare for further action.”...
“Preventive interest rate cuts are probably right. Lest the Federal Reserve respond too slowly every time.”...
“Maybe Powell thought the same. But it depends on whether he can convince the other directors.”
The probability of cutting interest by 25 bp is 41%, and the probability of cutting interest by 50 bp is 59%.
“More and more people expect the Federal Reserve may take more aggressive action when it starts cutting interest rates next week.”
The probability of cutting interest by 25 bp is 50%, and the probability of cutting interest by 50 bp is 50%.
“The market is increasingly expecting that the Federal Reserve may take more aggressive action when it starts cutting interest rates next week.”
The probability of cutting interest by 25 bp is 59%, and the probability of cutting interest by 50 bp is 41%.
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By tracking the internal input of the education chain, you can clearly sense the macroeconomic situation and grasp the changes in the path of the current interest rate cut operation by the Federal Reserve.
Obviously, the turning point happened on September 13-15. Because just the day before, on September 12 [“9.12 Education Chain Reference: Insist on storing 1 BTC every day for 665 consecutive days”], monthly inflation and initial jobless claims data still guide the market to expect a small interest rate cut of 25 bps (85% probability) rather than a sharp 50 bps (probability 15%).
Let's review who the Wall Street agencies guessed right and wrong:
Guessed right (guess 50bp): J.P. Morgan (Source: 9.12), UBS (Source: 9.16)
Guessed wrong (guess 25bp): Bank of America, Goldman Sachs, Morgan Stanley, Barclays, Citibank (Source: 9.18)
Guessed wrong (guess not to cut or even raise interest rates): Some experts on the Chinese internet, big V, KOLs, and the frog at the bottom of the hole... haha, this is unique!
Readers and friends who have paid attention to the teaching chain earlier should have posted the teaching chain article as early as August 1“The Federal Reserve Raises the White Flag — The 10-Year Approach #28 (ROI 51%)”In interpreting the conclusions of the July interest rate meeting, I felt that the Federal Reserve would surrender in September.
At the time, the Federal Reserve took the initiative to find a level for itself, changing its focus on inflation to focusing on inflation and employment.
At the time, the probability of not cutting interest rates had already been reduced to 0.
August 14, [”8.14 Education Chain Reference: US PPI falls short of expectations. BlackRock says the Federal Reserve will cut interest rates in September”] According to the report, BlackRock expects the Federal Reserve to cut interest rates at the September interest rate meeting.
By August 22, the teaching chain was [”8.22 Education Chain Reference: Turns out, the Federal Reserve has long been ready to surrender”] The minutes of the July interest rate meeting disclosed by the Federal Reserve were reported. The minutes revealed, “The Federal Reserve has long seen the data and is ready to cut interest rates. The committee members are already discussing whether to drop 25 bp or 50 bp.”
Soon after that, on August 24, Powell delivered a speech at the Jackson Hole annual meeting, revealing his intention to cut interest rates starting in September. This is a teaching link article on August 24“Powell Confirms, BTC Has Skyrocketed”It has been carefully interpreted in.
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Earlier, on September 5, 2023, a year ago, [”9.5 Teaching Chain Reference: A Game of Chess on US Dollar Bonds & Estimation of the Approval Time for Spot ETFs”] In China, Education Chain mentioned that US Treasury Secretary Yellen paid more when issuing bonds in August 2023, overfinanced, and promised to buy back the US bonds overissued last year in 2024. Therefore, in the internal report of September 5 of last year, Education Chain deduced that in the middle or third quarter of 2024, that is, June-September, Powell will cut interest rates to match Yellen's buyback. September is the “deadline” (deadline) of this time window.
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If you learn from copper, you can get the crown right; if you learn from people, you can know your gains and losses; if you learn from history, you can learn to replace yourself.
The teaching chain is carefully tracking and reviewing with everyone in order to learn from the gains and losses of others. Other people paid the tuition fees, and I learned from the experience. Isn't that a lot less than paying for your own tuition to learn a beneficial experience?
As mentioned above, there are two categories of people who misunderstood this time: the first category is outrageously wrong, that is, they are determined not to cut interest rates and continue to raise interest rates; the other category thinks they will drop 25 bp first.
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Why does the first type of outrageous error occur? Having read the recent timeline just reviewed above, anyone with a clear eye can see that the people who make this kind of mistake simply sit back and watch the sky, shut their eyes and listen, and don't care at all about what stage or situation the world situation has actually developed, right?
That's right. The reason for such mistakes is self-isolation and refusal to open our eyes to the world.
However, now that the internet is well developed,Information overloadIn an age, what they closed was not their eyes, but their minds. It's not that they can't see; it's that they don't want to admit it.
Further analysis, the reason for the emergence of this kind of seated and observant view is also divided into several different situations: one is a person who takes money to fight a public opinion war for their master; two is a spiritual kneeling person, and when they see their master kneel, they feel like they are being tested; and three are overestimating the strength of their opponents, believing that the US will not rest and give up voluntarily.
The first category of misconceptions has been published several times to criticize the first category of misconceptions.
For example, September 15“The Federal Reserve's Last Battle”In it, the teaching chain wrote:
“The most important thing for the Federal Reserve now is for interest rate cuts to land safely at the same time as the US economy.
“Some people are infuriated that the Federal Reserve's interest rate hike cycle failed to achieve its strategic goals “in one fell swoop.” However, situations are stronger than people. You can't get past the 38-degree line; no matter how many American soldiers or American-made shells, you can't fill it. So I had to sign and confess defeat.
“In Anglo-Saxon culture, there is no such thing as a vow not to die. If they can't fight, they surrender; it's common practice.
“September is the 38th parallel of the Federal Reserve.”
Another example is July 12“Powell Unexpectedly Relieves, We Can Expect 100,000 BTC”In the middle, the teaching chain is drawn in white:
“A high interest rate that only lasts for two years is enough to make some mentality Mu Qiang unable to kneel down, thinking that the US dollar can continue to “harden” like this. Unfortunately, the old American dragon bell already has to rely on diapers to solve his physiological problems; he is no longer the slender teenager who was able to urinate three feet away in the wind. As a result, I was only able to take aphrodisiacs and continue to show my strength while standing behind my back; while hiring the Internet Sailors, I spent the whole day shouting “awesome,” “really hard,” and “really amazing,” bragging and coaxing, and providing myself with some emotional value.
“Powell was like Li Dequan, the eunuch director close to Emperor Kangxi. His heart was like a mirror. “Hooray, tonight, you can't flip the cards anymore!”
“Thinking that the dollar is hard or not is determined by the Federal Reserve is just as foolish and sweet as thinking that a man's strength is determined by the brain.”
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As for the person or agency that made the second type of mistake of guessing a gentle 25 bp interest rate cut, compared to the idiot who made the first type of mistake, apparently they still have some brains.
The logic of cutting interest rates moderately is mainly to worry that when economic data is still available, a sudden sharp interest rate cut will cause the market to overinterpret the Federal Reserve's intentions and increase concerns about the economic recession, leading to a repulsive panic attack and escape.
At [”9.16 Education Chain Reference: Crypto Crisis and Liquidity Bull Market”] China, Education Chain also said, “This may be one of the factors limiting the Federal Reserve's drastic interest rate cuts.”
US stocks also demonstrated the above logic with actual actions. Teaching chain article on August 3rd“US stocks are at risk”It reads, “People's fear of a recession still overwhelms their joy that the Federal Reserve is about to cut interest rates. On Friday, US stocks closed down all over the board...”
“The financial game between China and the US, dubbed by netizens as the “Low Blood Sugar vs. High Blood Pressure,” finally made it to the point where the eagle collapsed. After 15 years of painstaking efforts, we are about to see dawn and dawn. The offshore RMB suddenly appreciated against the US dollar, and USD/CNH broke through the 7.2 mark. Vaguely, the Assault was already sounding. The loud trumpet tore apart the intense darkness. Fish belly is white in the East.”
“What we want is not a real collapse of America, but a drama of collapse. As soon as the collapse began, US stocks were driven to death. The US economy was about to recede and “hard land,” and it fell to pieces. As soon as the Federal Reserve was afraid, it took advantage of high interest rates and quickly cut interest rates and rained.”
“Stop foolishly believing in the joke that “as soon as the Federal Reserve cuts interest rates, US stocks will collapse.” This is simply a result of reversing black and white. It is clear that US stocks are being driven to death. The Federal Reserve panicked and had no choice but to cut interest rates quickly and save the market.”
Powell's chess is at risk. The conventional way of thinking is to cut interest rates moderately to calm market sentiment. The reverse way of thinking is, if we can calm market sentiment, can we cut interest rates boldly?
To cut interest rates moderately, what you want is face. To cut interest rates drastically, what you want is profit.
If you want face, you might lose your inner self. If you can keep your face and want your inner face, will you have everything in your face?
If you die, you have to face sin; Powell isn't stupid.
Teaching link article on August 25“Shattering the Final Fantasy of Interest Rate Cuts and Collapses”Meanwhile, the so-called “interest rate cut-collapse” model, which has been major in the past, has been reinstated. In 2001, US stocks first collapsed, and the Federal Reserve cut interest rates was long overdue. In 2007 and 2019, the Federal Reserve learned its lesson and cut interest rates early, but it failed to stop US stocks from collapsing even after cutting interest rates.
Seeing the rooster chirping and then the sun rising east, they thought the rooster barking was the reason for the sunrise. Isn't that a big fool? The sunrise is the cause of the rooster's cry, not the other way around.
Powell is no fool. He knows very well that all of the lessons of the past are that interest rate cuts are either too late, or too slow, and not strong enough.
At the press conference after the interest rate meeting, Powell stressed that the US economy is resilient and there is no risk of recession.
This is the strategy everyone needs: in terms of action, cut interest rates by 50 bps and ask for profit; in words, calm the market, the economy won't decline; don't worry, save face.
Each chart collates the performance of Chinese and US stocks, US dollars, and ten-year US bonds in the past interest rate cut cycle.
As can be clearly seen from the table, preventative interest rate cuts have successfully turned the tide; bailout interest rate cuts have been a series of failures. Not all interest rate cuts have been accompanied by the collapse of the market. But almost all interest rate cuts will cause the dollar to depreciate.
Just like September 2nd“The Federal Reserve's Dilemma”As indicated in the teaching chain:
“If the Federal Reserve does not cut interest rates, it will only accelerate the penetration of RMB. If the Federal Reserve cuts interest rates, it will make a strategic mistake. The overflowing US dollar will inevitably experience significant depreciation without being recovered, thereby undermining the foundation of the dollar's credit.
“Sun Tzu's Art of War says that winning soldiers win first and then seek war; losing soldiers fight first and then seek victory.
“If the Federal Reserve were to cut interest rates in September, it would be a military risk. It is typical to fight first and then win, and to have serious consequences for the US dollar in terms of strategic failure.
“However, it is clear that the willpower of Federal Reserve Chairman Powell and other board members can no longer support the current high interest rates.”
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Looking ahead to the future market, the education chain has been described in recent or earlier articles:
Short-term outlook：“Macro Liquidity Is About to Enter a Cycle of Further Expansion”(2024.8.19 article). The circulation of the US dollar began to reverse, and liquidity was withdrawn from the US. Powell needs to lead the Federal Reserve to carry out faster and larger easing in order to promptly fill the liquidity vacuum left after the withdrawal of liquidity and avoid market collapse.
Mid-term outlook：“After the financial defeat, the US dollar may be forced to pour into the crypto market”(2024.8.29 article). When the US dollar was withdrawn, it was taken back by RMB, and I'm afraid it won't be that easy to go back now. BlackRock has been prepared for a long time and has set up ahead of time to open the US dollar to the crypto market (BTC ETF).
Long-term outlook：“Three Minutes of the World, 300W of BTC”(2023.10.21 article). Teaching Chain wrote “Xinlong and Middle Pair” last year, pointing out the three-step strategy for BTC to become a world currency: electronic gold -> three-point world currency. 100w -> 300w -> 1000w Currently, all of us are witnessing with our own eyes the birth and growth of the BTC:USD:RMB trifecta.
