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Chapter 1: What is the main topic discussed in this episode?
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Welcome to Profiteer Markets. I'm Ed Elson. It is June 18th. Let's check in on yesterday's market vitals. The major indices tumbled following the Federal Reserve's press conference. More on that in a moment. Treasury yields spiked, as did the dollar, and the odds of a rate hike before the year end are now at 62% on Kaoshi.
Meanwhile, SpaceX declined for the first time since it went public, ending the day down 5%. Okay, what's happening? Snap just unveiled its new augmented reality glasses, and despite a lot of anticipation and a lot of hype, it was a bit of a flop. The glasses, called Snap Specs, feature an in-frame display which overlays apps onto the real world,
They're priced at $2,195, making them significantly more expensive than Meta's Ray-Ban display glasses, which start at $800. CEO Evan Spiegel called SnapSpecs a leapfrog advancement and the computer of the future. But the market doesn't seem to agree. The stock closed down almost 8% today, and it's now off 40%. over the past year.
So here to tell us more about the Snap specs and potentially why it was such a flop to Wall Street, we're speaking with Mark Gurman, managing editor and chief correspondent for Bloomberg News. Mark, thank you for joining us. These glasses are all over my social media feed and not in a good way. Everyone is making fun of them. And I've got to say, I've looked at these things.
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Chapter 2: What were investors' reactions to Snap's new AR Specs?
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We're back with Prof G Markets. In its first decision under Chair Kevin Walsh, the Federal Reserve held rates steady. It was the fourth meeting in a row that rates went unchanged, but it was the first time this year that the vote was unanimous. Still, the committee is divided on the path forward. Nine officials expect at least one hike this year.
while eight expect to hold and one expects to cut. Meanwhile, Walsh declined to submit his own rate forecast, an unusual move for a sitting chair. As a reminder, inflation remains elevated, reaching 4.2% in May, the highest reading in three years.
Joining us to discuss this interest rate decision and Kevin Walsh's first press conference, we're speaking with Mark Zandi, Chief Economist at Moody's Analytics. Mark. Thank you for joining us on the show. The Fed has decided to hold rates here, which no one was surprised by. I think the one thing that really stands out to me, at least, is that the vote was unanimous this time.
No one voted to cut, which to me says that the Fed and all of its officials are really taking inflation seriously at this point, or at least maybe more seriously than they were before. What do you make of what we saw in this press conference?
Yeah, that's right, Ed. I think they're taking the inflation very serious. You know, as you point out, we're 4%-ish, and that's double the Fed's 2% target. And Chair Warsh did make a point several times about price stability and the 2% target.
And then you got the DOT plots, which are very clear that many of the Fed members want at least one rate hike this year or thinking there will be at least one rate hike this year and perhaps two. And that was much more hawkish than I had anticipated, certainly for this first meeting for Chair Walsh. Yeah, I was a bit taken aback by how aggressive they were at this first meeting.
Which is also striking given the rhetoric we've been hearing from the president, who has been aggressively calling for rates to be cut. This is what he was complaining about with Chair Powell for the longest time. There was a lot of debate over whether Kevin Walsh would kind of obey those demands, those sort of implicit demands, or if he would decide to be hawkish.
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Chapter 3: How did the launch of Snap Specs impact Snap's stock performance?
So even if he wanted to cut interest rates, that wasn't going to happen. And, you know, I think the data are pretty clear. I mean, it's irrefutable that, you know, the inflation is just too high. And yeah, there's some arguments as to why that might come back in as the Iran war winds down and hopefully oil prices come in and stay down and that translates through.
But there's a lot of reasons to be concerned that it will be more persistent as well. You know, we talked last time about artificial intelligence and the impact that's having on inflation, which will be more durable. So, I think the reality of what's going on is just too difficult to ignore. You just can't. And therefore, you have to be hawkish.
The other thing to consider – I don't know if the president would think this way, but I think it's clearly the case – that if you start trying to cut interest rates in a world where everything screams you should be raising interest rates, you might get the federal funds rate target down.
Chapter 4: What insights does Mark Gurman provide about Snap's future?
You know, by definition, you can get that down because you're the Fed. But long-term interest rates will go the opposite direction. They'll rise. And in fact, they did rise today. So I don't think Chair Walsh had any options here, right? He had to go along with this and be very hawkish in the way he's presenting things.
Yeah, just look at the odds on Kalshi of a Fed rate hike. It started around 12% towards the beginning of the year. Now we're up to 62%. So traders believe that the likelihood is that we will see a rate hike. I think I would agree. I would be interested to hear your perspective on that too. But just going to Iran for a moment, we have seen this deal memorandum
up for debate how real we think it will be, but seems certainly more real than previous announcements of deals that we have seen before because Iran has signed up for this and they've publicly spoken about it. Did we learn anything from the Fed
or at least on their views of how real this deal actually is, because it seems that what happens in Iran is the most consequential event as it relates to inflation and prices. So it seems that there's something that we might be able to learn about what's happening in Iran from the Federal Reserve. Did we get any insight on that front or still unclear?
I don't know that we get any insight into what's going on with Iran and how they're thinking about it. I mean, I'm sure they're as uncertain as we are about how this is going to play out. That's playing into their thinking that maybe we need a rate hike or two here just to keep things – inflation from becoming even worse. In the context of the uncertainty around the war –
But I didn't learn anything per se about the war and how that might unfold. I'm guessing there is in the dark about this as everyone else is. This thing can go in lots of different directions. I will say, Ed, you know, I mean, I'll push back on the rate hike. My sense is the economy is also pretty soft.
You know, yeah, we did get a couple, three months of good job numbers, but I suspect that's not going to be sustained, particularly as the deficit-financed fiscal stimulus that we've enjoyed since the beginning of the year fades into the background, and we're still paying higher prices for gasoline and groceries. So,
I think the Fed's got a problem not only with inflation, but they are also going to have a problem with growth, which is going to complicate things even further for them.
Oh, wow. So you would bet then that we probably won't see a hike this year? I mean, where do you stand?
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