Tuesday: Warsh Holds, December Hike Looms

Rush LindellTuesday. One decision from the Fed lands Wednesday, and it can move your mortgage, your 401 , and your mood at the gas pump.

ReaganOne decision? Rush, it's a committee.

Rush LindellFine. One committee and its chairman. Welcome to the show. I'm Rush Lindell, this is Reagan, and this week we run the scorecard.

ReaganWhich means we grade each other too, out loud, with receipts.

Rush LindellOoh, I'm counting on it. And I want you to know I've been sharpening my pencil since breakfast. Bumper's coming.

ReaganSharpened pencils, noted. Quick word first. Lear Capital is our sponsor, helping folks look at gold and silver for their savings.

Rush LindellOne line, done. Moving on.

ReaganNow, the setup. We're talking Tuesday, the decision comes Wednesday, and markets overwhelmingly expect a hold, CNBC reported. The attention is on whether Kevin Warsh signals more tightening.

Rush LindellSo the hold is the easy part, and the hint is the whole fight. Everybody's staring at the one sentence he might say.

ReaganAnd whether he says it at all. Voters are a week from the polls, so every word gets weighed twice.

Rush LindellHold now, hint later? Hold on. Wait. You said more tightening.

ReaganI did.

Rush LindellSo somebody already tightened?

ReaganBumper. First, the correction. This isn't a Fed that has never moved.

Rush LindellReagan, the correction. Say it slowly for the folks at home. This is not a Fed that has never moved.

ReaganRight. The Fed already hiked in September under Warsh. The funds rate sits at 3.75 to 4%, a quarter point hike. And Quartz notes it was unanimous. Nobody dissented.

Rush LindellUnanimous. So when somebody tells you a hold is the Fed going soft, I want you to picture that room voting yes on a hike.

ReaganWhich matters for the framing. A hold on Wednesday follows a hike under Warsh. It's a pause after a move, and that's a different animal from a pause in a vacuum.

Rush LindellOh, man. That's a pause with a pulse.

ReaganFine. Keep that one.

Rush LindellAnd the brief on my desk says the October 28th decision is expected to hold at that same 375 to 4. So the number we're grading is the number we've been staring at.

ReaganRight. No surprise in the rate. The surprise, if there is one, lives in the words.

Rush LindellNow the calendar. Reagan, you've got the date.

ReaganThe Associated Press says this is Warsh's fourth meeting as chair, and it lands six days before the midterms.

Rush LindellSix days. Hold on. You can't make this up.

ReaganWhich means every word out of that press room gets read by a voter who is days from casting a ballot.

Rush LindellWhich is exactly why I don't buy the calm everybody's selling.

ReaganCareful. You haven't heard him speak yet.

Rush LindellI don't need to. Hold in October, and the question becomes what he whispers about December.

ReaganFair. Though I'd note a hold isn't nothing. It means the committee wants more data before it does anything else.

Rush LindellOr it means they wanted to get past a Tuesday in November without a fresh headline.

ReaganYou don't know that.

Rush LindellI know what I know, and I'm happy to be graded on it.

ReaganThen let's find out who was closer. Time to grade.

Rush LindellGrade me, Reagan. Go ahead. I called a hold, and I'd like my trophy now.

ReaganYour odds were right, Rush. I'll give you that cleanly. CNBC's analysis said that as of October 16th, futures put the chance of an October hike at 15%.

Rush Lindell15. That's a rounding error with a necktie on.

ReaganAnd it said other top officials had signaled they were comfortable holding. So the room was already leaning your way.

Rush LindellWhich proves I read the room.

ReaganDoes it? Or did you read the same headline everybody else read?

Rush LindellCome on.

ReaganI'm asking. Calling the consensus isn't a forecast. It's a quote.

Rush LindellHold on. I called it before the press conference, before the vote, before the coffee got cold. That takes nerve.

ReaganNerve with 15% against you.

Rush Lindell85% for me. Do the math, professor.

ReaganThen let's be precise about what you called. A hold in October. That's one meeting. It says nothing about December, and December is where voters are going to feel something.

Rush LindellFine, but a miss would've been brutal. A hike on a day everybody expected a hold, and I'd be the guy who read the room and got it wrong.

ReaganTrue, and a miss would have embarrassed more than you. The market and the officials who'd signaled they were comfortable holding would've been wrong right alongside you.

Rush LindellCrowded boat, Reagan, but I was in it, and I stayed dry.

ReaganFine. Right on the odds. Credit still pending, because the decision isn't final until the committee actually announces it.

Rush LindellShe's withholding my trophy on a technicality.

ReaganOn a fact. Rush, the same analysis points to a wrinkle. Warsh said at the IMF event in Bangkok that he wasn't signaling a decision either way.

Rush LindellOf course he did. The man treats a hint like a tax audit.

ReaganHe's also rejected traditional forward guidance. The CNBC piece calls the communications risk real.

Rush LindellMeaning the market can be sure and still be wrong.

ReaganExactly. A 15% chance isn't zero.

Rush Lindell15% is a ghost story. You don't believe it, but you check the closet.

ReaganAnd the ghost is why a grade has to wait. A forecast graded before the answer is just a mood.

Rush LindellA mood with a B+ on it.

ReaganSo your grade is a B+ pending the announcement.

Rush LindellB+. I'll frame it.

ReaganFrame it after the vote, Rush. And the odds are the easy part. Nobody at a gas pump is checking futures.

Rush LindellRight. So let's go to the numbers voters feel in their wallets and figure out who owns them. Okay, pump first. Gas prices. Everybody's got a number in their head from the last fill-up, and it makes them wanna throw the phone.

ReaganAnd the official number is worse than the vibe. Quartz has September CPI at three point seven percent year over year.

Rush LindellUp from?

ReaganUp from three point four in August. So it's accelerating, not drifting.

Rush LindellOh, man, three point seven. That's your grocery bill and your gas bill sending a joint letter.

ReaganNow, I'll complicate your letter. The same Quartz piece has core CPI at two point six percent.

Rush LindellHold on. Core is two point six?

ReaganCore is two point six. Strip out food and energy, and the picture is calmer.

Rush LindellWhich is exactly what economists say right before a voter tells them to go price a gallon of milk.

ReaganFair, but the gap matters. Headline runs hot, core runs cooler, and the difference is the stuff people actually see on the sign and the receipt.

Rush LindellSo the pain is real, and the Fed's favorite measure shrugs at it.

ReaganThat's a tension the Fed has to live with, yes.

Rush LindellAnd voters don't live in core. They live at the pump.

ReaganThe AP's preview of this meeting says as much. It describes the midterms as shaped by affordability worries, soaring gas prices, and elevated grocery prices.

Rush LindellSoaring. The Associated Press used the word soaring. Not me, the wire service.

ReaganRight, and notice that's the framing going into the vote, one week out.

Rush LindellSo where does that leave Warsh?

ReaganSomewhere uncomfortable. A Motley Fool article by Sean Williams argues a new source of inflation has put Warsh and the FOMC between a rock and a hard place.

Rush LindellA rock and a hard place. Love it. Which one's the rock?

ReaganThe article's line is that there may not be a winning scenario for the Fed or Wall Street. It doesn't hand you a tidy answer, and I won't pretend it does.

Rush LindellOf course not. Nobody wants the bill.

ReaganWhich brings up the obvious thing.

Rush LindellWho gets the blame? Because I have a theory, and I'm telling you right now, it's got a name and a war attached.

ReaganUgh. I've seen your theory, Raj. I have a problem with it.

Rush LindellReagan, you said I have a problem. I have a diagnosis. The pain at the pump is the war. Trump's Iran war, full stop.

ReaganFull stop? The Fed hiked in September. That's a choice somebody made.

Rush LindellHold on. Let me finish.

ReaganFinish?

Rush LindellPrices jumped because of a shock the Fed did not cause. Jerome... I'm sorry. Kevin Warsh did not close a shipping lane.

ReaganFine, I'll concede that, but the Fed owns its response. Whether it answers that shock with a hike is a decision, and voters will blame whoever made it.

Rush LindellHmm. Meanwhile, the president is already shopping for a villain. The AP's preview of this meeting says Trump told Warsh he might as well vote for a hike.

ReaganWait, Trump said that?

Rush LindellThat's what the AP reported, and he called the committee hostile and political.

ReaganThe man who picked the chair is calling the committee political.

Rush LindellOh, man. You can't unhear that.

ReaganAnd notice the order. He said it ahead of the meeting. He's positioning for the blame before the decision even lands.

Rush LindellOf course he is. Everybody in this story has a lawyer for their feelings.

ReaganNow, here's the part voters should care about. Quartz says futures show better than 80% odds of a December hike.

Rush Lindell80?

ReaganBetter than 80. So if you're hoping Wednesday's hold means relief at the pump, that's not what the market is pricing.

Rush LindellHold on. Futures aren't a vote.

ReaganAgreed. They're market implied. But Quartz also says Jefferson and Williams want to review more data first.

Rush LindellWhich sounds like patience.

ReaganOr like a schedule. Quartz reads it as hikes at alternating meetings.

Rush LindellAlternating. So September, skip, December.

ReaganThat's the pattern the market is betting on, yes.

Rush LindellSo the hold isn't a promise of calm. It's an intermission.

ReaganThat's the tamest version of it, Rush.

Rush LindellI'll take tame, but I'm still saying the war built this fire, and the Fed shouldn't pour gasoline on a family budget that's already smoking.

ReaganAnd I'm still saying the Fed picked up that hose. Somebody decided how to answer.

Rush LindellHere's what gets me. A family budget doesn't come with a footnote saying which shock came first. The war hit the price, and now the answer to the price is a higher rate on the loan.

ReaganAnd that's the fair version of your argument, so I'll grant it, but a central bank can't only act when the cause is its own fault. Somebody has to respond to a shock it didn't create.

Rush LindellThen respond with patience. The hold is patience. The hike is the pile-on.

ReaganThat's a defensible line, and it's a different claim from the Fed having no responsibility. You just moved from the first to the second, and I'll take the move.

Rush LindellNeither of us is calling it a ruling.

ReaganNo ruling, but the voter at the pump doesn't care whose fault it is. They feel it now.

Rush LindellRight. No, December can wait. Bumper. Parody time, courtesy of the chairman who says nothing.

ReaganPlease be gentle with him.

Rush LindellNever. Reagan, I need you to picture the podium. Camera's up. Reporter stands, asks the one question America cares about.

ReaganWill he signal a hike?

Rush LindellAnd Warsh, bless him, is reluctant to signal anything, and CNBC says that's because he wants to move the Fed away from forward guidance.

ReaganWhich is a coherent position, Rush. You can't preach no guidance and then hand out guidance.

Rush LindellCoherent, fine, but I've got a transcript for you. Totally made up. Parody. Clearly labeled.

ReaganPlease say it's labeled.

Rush LindellLabeled in neon. Ready? Mm-mm. Reporter one, "Mr. Chairman, will rates go up?" The chairman of maybe says, "A fascinating question about the future, which I will now describe using only the past."

ReaganOkay, that's fair

Rush LindellReporter two: "What about December?" The chairman says, "December is a month. Months happen. Next?"

ReaganWait, wait. Reporter three asks about gas.

Rush LindellAnd he says, "I am pleased to announce that I've heard of gas."

ReaganAgain, parody. Nobody said any of that.

Rush LindellNobody. Which is the point. Speaking of things people actually say, I wanna tell you about something I've been wrestling with personally, because I'm a man who watches the price of everything.

ReaganOh, man. Here we go.

Rush LindellMy friends at Lear Capital are doing something I've never seen before. They're selling a one ounce silver American Eagle below spot price. That's right, below what silver is actually trading for right now, and Lear is covering the shipping and taxes.

ReaganHold on. Below spot? I'd read the fine print on that.

Rush LindellHere's what you need to know. Priced below spot. Lear is selling this at a loss to get silver in your hands. Limit one per person. New customers only. Free shipping, fully insured by Lear, and this is a twenty-four-hour offer only.

ReaganAnd spot doesn't cover everything, right?

Rush LindellSpot price doesn't include the cost to mint the coin, ship it, or any dealer overhead. Buying at spot is already a deal. Buying below spot almost never happens.

ReaganI'll admit, the coin itself isn't obscure.

Rush LindellIt isn't. The silver American Eagle is one of the most recognizable and sought-after coins in the world, backed by the US government for weight and purity. One ounce of point nine nine nine fine silver, IRA eligible, a tangible asset you can hold in your hand. I like holding things. Inflation, you can't hold.

ReaganFair.

Rush LindellGo to www.rushcoinoffer.com right now. This is a twenty-four-hour offer. The URL goes dark after that. And when it's gone, it's gone. www.rushcoinoffer.com.

ReaganOkay, Rush, back to the actual podium. Our fake chairman dodged December, but the real question sits right there. Is a December hike the prudent call or a betrayal of voters already feeling this?

Rush LindellOh, I have a view. Reagan, I'll start where the money is. Deutsche Bank's Brett Ryan expects Warsh to say further tightening will likely be needed over time. Over time. That's a December hike in a trench coat.

ReaganRyan also says skipping October gives officials more time to assess the data. That's the prudence case, and it's a decent one.

Rush LindellDecent? Oh, man. Here we go.

ReaganHear me out. Hiking into a data gap is how you overshoot. If Thursday's numbers soften, you've tightened on a ghost.

Rush LindellA ghost? The voter isn't seeing a ghost. He's seeing a bill that went up.

ReaganAnd a hike doesn't undo that bill. What it changes is the next one. Rates work with a lag, so a December move is about where prices are headed, not where they are today.

Rush LindellThen let's talk about who pays for the lesson. Higher rates tend to show up over time in borrowing costs. Mortgages, car loans, credit cards. That's the household that's already stretched.

ReaganThat's the strongest version of your case, and I'll concede it. The cost lands on borrowers first, but the alternative cost is inflation that gets baked in, and that one never sends a bill. It just quietly shrinks every paycheck.

Rush LindellNow who's being theatrical? A hike is a betrayal when it lands on voters who feel inflation right now.

ReaganThen grade the alternative. Wait, and prices run hotter, and the hike you dodge in December becomes two in the spring.

Rush LindellHmm.

ReaganAnd here's one for you. The Associated Press says economists would read a Warsh line that inflation is too high as a sign of a December hike. So the chairman doesn't need a promise. One sentence does the work.

Rush LindellWhich he'd deny is a promise. Beautiful. He signals without signaling.

ReaganHe's allowed. Markets hear what they hear.

Rush LindellThen the hint is the policy, and nobody voted on it.

ReaganSomebody did vote. The committee votes on the rate, and the words are what the market makes of it. That's why I'd rather he say less than say too much.

Rush LindellFine. Scorecard time. Your prudence argument, Reagan, I give it a B. Solid logic, zero empathy.

ReaganGenerous. And yours gets a C+. Great volume. And you argued against your own hike twice in a minute.

Rush LindellTwice? I contain multitudes.

ReaganYou contain a lot of something.

Rush LindellOuch. Okay, but here's my real complaint. Prudence is easy when you're not the one choosing between the electric bill and the grocery bill.

ReaganAnd betrayal is easy when you're not the one explaining why inflation got baked in. Both are true. I just think waiting for data beats guessing.

Rush LindellData. Everybody loves data until it says something inconvenient.

ReaganThen you'll love Thursday.

Rush LindellWhy? What's Thursday?

ReaganThe numbers that could tilt this whole argument one way or the other.

Rush LindellThursday, Reagan. The Fed will have voted by then, the hold is expected, and then the numbers drop anyway. Q3 GDP and September PCE, same day.

ReaganAfter the decision. So whatever Warsh says Wednesday, the data gets to grade him on Thursday.

Rush LindellExactly. And Ask Traders has the consensus for GDP at about three point two percent.

ReaganWhich is up from two point two in the second quarter.

Rush LindellA full point faster. Oh, man, so the economy is running hot while your gas bill's running hotter.

ReaganHold on. Strong growth cuts both ways. Hawks read it as room to hike. Doves say, "Fine, people are still working, so why panic?"

Rush LindellWhich side are you on?

ReaganI'm waiting for the inflation line. That's the one that matters.

Rush LindellFine. PCE.

ReaganHeadline PCE is forecast at three point six percent year over year, up from three point four. Core is forecast at three point one, up from three point O.

Rush LindellForecasts, not results. Economists have been wrong before, and I have the scars.

ReaganYou have a podcast full of them.

Rush LindellOuch. Okay, so what number flips you, Reagan? Be specific.

ReaganCore PCE. If it comes in at three point one or lower, I say December's a judgment call. If it prints above that, I think the case for a hike gets hard to argue against.

Rush LindellMine is the headline. If it jumps past that three point six, I stop calling the hold an intermission and start calling it a delay, and I will say it with great sadness.

ReaganYou will say it with a microphone.

Rush LindellFair. But if it cools, I'm telling every voter in America the Fed blinked at the right time.

ReaganAnd if it lands exactly on forecast, nobody wins.

Rush LindellWhich is why you need to vote. You, the listener, the one person I'm talking to right now. Who won this argument? Me or Reagan?

ReaganWas it Rush with the war built the fire theory or me with the Fed owns its response? Cast your vote.

Rush LindellAnd be honest. Reagan already has a C+ from me, and I'm still holding it.

ReaganYou're not wrong that it stings.

Rush LindellHit that vote, and cue the bumper. Reagan, I promised the folks at the top of this hour that I'd grade you and you'd grade me. Scorecards are on the table. Pens are down.

ReaganAnd we still don't have a verdict. That's what the listeners are for.

Rush LindellExactly. Here's my callback, and I mean it with love. We opened this show by saying the Fed already moved once. Wednesday, it's expected to sit still. Thursday, the numbers show up, and nobody in that building gets to say they weren't warned.

ReaganMm, fair, though expected isn't settled. We'll see what the committee actually does.

Rush LindellFair. She said fair. Mark the tape.

ReaganDon't get used to it. Here's the one question, and it's simple. Who won the argument? Rush, who says the war lit the fire, or me, who says the Fed owns what it does about it? Or did we both just talk past the gas pump?

Rush LindellVote for me. Vote early. Vote like your grocery bill depends on it.

ReaganWhich it does. So subscribe, leave a five-star review, and tell one friend who argues about prices at dinner. New episodes land every weekday.

Rush LindellAnd if you disagree with Reagan, tell two friends.

ReaganGood night, Rush.

Rush LindellGood night, everybody. Music, please. My terms, my bumper, my last word.