In today's episode, Tyler breaks down a day packed with headlines that could reshape the future of our financial system. We'll unpack comments from Fed Chairman Jerome Powell, and more importantly, the late-breaking news from the CFTC, which just greenlit the use of stablecoins as tokenized collateral in U.S. derivative markets. You won't want to miss this action-packed VRA Investing Podcast.

Don’t look back because the market is closed. Good Tuesday afternoon everyone. Tyler Herriage here with you for today’s VRA Investing podcast. Hope you all had a fantastic day out there today. It was an exciting one out there outside of the market where we might have finished, you know, slightly lower on the day to day. But I had to switch up my podcast here right at the close as we got some late breaking news out there today. So buckle up. This should be a fun podcast today.

Got a lot of good stuff to cover here. First we’ll get into Jay Powell’s comments today speaking at an event in Rhode island and then the massive news that we got after the close, which really might make J. Pal’s comments absolutely irrelevant. Here is the cftc, the Commodity Futures Trading Commission announced an initiative to let stable coins be used as tokenized collateral for the first time in U.S. derivative markets. You know we’ll dive into exactly what that means, but I cannot understate this news here. I think for a lot of people this will likely fly under the radar because this is in depth to financial plumbing of how our system works here. So I’ll try to break it down quickly for you here and the real world impacts that we’re going to see from it and just how massive of an event this really is for flying under the radar like it will likely do.

[00:01:44]:
We’ll see what happens. But I would not be surprised to see that be the case here. We’ve got also got a few other big headlines to cover here today. An update from what we covered yesterday on M2 Money Supplies. We got the latest update there earlier in the session today at about noon Eastern time and a very very interesting chart to share here about what it means for the price of gold as well. I’ll give you a little hint. It’s certainly not bearish. So with that said, let’s go ahead and jump right in to to this action on the daytoday where our our major indexes did open higher.

On the day we saw a few intraday all time highs from our major indexes. Then J. Powell got in front of the microphone and as he’s known to do, sent the market lower. You know we talk about this here often. Jerome Powell, the head of the Federal Reserve has the worst track record of any Federal Reserve chairman of sending the market lower while he’s speaking. Now that usually applies to FOMC meetings, but today it also applies to his outside speaking engagements as well as he spoke at the Greater Providence Chamber of Commerce in Rhode island about the Fed’s economic outlook here. And we did get, you know, props to Jay Powell on this one. We got a rare IT admission from him that he might have been wrong about something, saying that the tariff effect on inflation is likely a short lived one, a one time price shift.

[00:03:24]:
Now of course he had to rationalize it and say, oh, it’s a one time thing, but it could be felt over quarters. Of course, you know, limited impact so far. You know, our view this is really a disinflationary and potentially deflationary part of Trump’s agenda here on the tariff side. That’s been a contrarian call, especially compared to someone like Jay Powell at the Federal Reserve. But from there, you know, he also acknowledged that tariff revenue has absolutely surged and that consumers aren’t absorbing much of the tariff costs like he said they would. Earlier this year he talked a lot about that tariffs were going to send inflation higher. They’re going to be passed straight down to the consumer. He kind of, you know, danced around this one at the last FOMC meeting just last week and you know, came right out and said it today that it’s likely going to be short lived.

We’ve said that’s going to be the case all along. But what didn’t help the market today was Jay Powell talking about slower consumer spending. And here’s the quote that really kind of marked in line where the market sort of fell off from this point. He said we do look at overall financial conditions and we ask ourselves whether our policies are affecting financial conditions. In a way that is what we’re trying to achieve. But you’re right, by many measures, for example, equity prices are fairly highly valued, similar to a remark he made in January, you know, just ahead of the Trump tariff announcements and the sell off that ensued afterwards. And you know, these are similar speeches. He’s given this a few times this year in April at a different economic event, stated that the Fed would not act to save the market.

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That contributed to a stock market sell off as well. When you have a Fed chairman, you know, basically saying that he doesn’t care about the market at all, you know, that’s not one of their mandates. So they won’t worry about that. You know, that’s a, they’re, they’re above those kinds of things. That’s absolutely not true from J. Pal. You know, he’s watching this every day. He’s invested in stocks as well, which is why we remain long stocks.

You get so many of these talking heads out there who try to bash the market doesn’t matter what administration it’s under. But then, you know, start to look into their holdings, their assets. These are the people who try to scare regular individual retail investors out of the market, usually while they’re buyers, right? That’s their plan. They’ve done it for decades now. And really you see it time and time again from these people. They are the ones who own inflationary assets. The Fed really controls the money printer, right? So he knows they’re printing more money. And a major theme of ours here has been that you must own inflationary assets in this environment.

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We just talked about money supply yesterday hitting another all time high. Now that may not lead directly to inflation, but it certainly leads to a devaluation of your dollar, which further emphasizes the theme cash is trash. It’s why we talk about it so much here. And I want to lead off with it in the podcast, why you must own inflationary assets. Meaning stocks, right? Meaning owning precious metals. That’s gold, that’s silver. And of course the miners. Those are stocks and assets like real estate and of course the newest asset class, Bitcoin or really cryptocurrencies as a whole, as you’ll see here in a minute.

Now from there, Jay Powell went to the same old tired script of uncertainty and we can’t be sure about this. And you know, over and over again, oh, there’s no risk free pass path ahead from here. You know, we, if we, if we cut rates too much, inflation will come back. But if we don’t do it, employment’s going to collapse. You know, he’s really in a catch 22. He’s trying to make you feel bad for the guy, right? Absolutely not. This has been one of the worst Fed chairman, the worst Fed chairman in modern history. Policy error after policy error.

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The biggest one of course being transitory inflation. He said that just before we saw inflation get to a 40 year high while the Fed sat on their hands and did nothing. Now he’s making the reverse mistake. We’ve said this for some time. Inflation is a rear view mirror issue and the Fed has remained restrictive for too long. I talked about this in my Charles Schwab interview yesterday. The Fed should have cut rates by 50 basis points and in their last meeting, but we got 25 basis point cuts. And here’s what the market is expecting.

Now we have the CME’s fed watch tool, which again, just a tool, definitely not, you know, something to be relied upon here because this does change pretty regularly. But the market, which is a far better predictor than The Federal Reserve, as we’ve seen from Jay Powell, continues to look for a 25 basis point cut at their end of October meeting. 94%. And even on a day where Jay Powell spoke, look, yesterday it was at 89, up almost 5% right after Jay Powell talked about uncertainty. You know, just the timing of that could not be better. And we are still looking at another rate cut in December, 25 basis points, that is the majority view here as well, at 77% also has been increasing here as well. So we do expect the Fed to continue on their rate cut path here, which, you know, if you’re an old time market watcher, this is a very much a don’t fight the Fed moment. Final points here.

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You know, again, inflation for us is a rear view mirror issue. And again, just J. Powell talking, this is, this is just another one of his big calls that he’s gotten wrong here. And after these comments, again, the market started moving lower. Once again, don’t put him in front of a microphone. And if he’s in front of a microphone, don’t let him answer any questions. Give him a script. He’s got to stick to it because when Jay Powell speaks, stocks fall.

And that’s exactly what we saw today. All right, that is enough about J. Powell and the Fed. Let’s get to the biggest news of the day of the week. You know, potentially just recently in general, because today the CFTC announced an initiative to let stable coins be used as tokenized collateral for the first time ever. Now, again, as I mentioned earlier, I can almost guarantee that this will go unnoticed by many and rightfully so. The, the financial intricacies of how just the plumbing of our financial system works. You know, even saying that, my eyes started to gloss over.

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Right? Most people start to hear things like that and just tune out. I don’t blame you at all. So I’ll try to break this down as simply as possible. This is an evolving story and will continue to evolve. So we’ll continue to talk about it here on the podcast, but I’ll try to break it down as simply as possible. First and foremost, it’s a big move to further legitimize crypto adoption, crypto assets, and furthermore, the tokenization of everything that Kip and I have talked a lot about here with our financial engineering theme. This is a theme we’ve talked about for years now. You know, really what it is is a recognition from the system here that dollar backed crypto instruments are now part of our system.

We can’t escape this anymore. We knew it was on the way. Now here we are, we are on the doorstep of this happening and it’s exactly what Scott Bessant and Donald Trump have talked about of, you know, taking another look at the U S balance sheet and finding ways to get creative here with the, the massive debt that we have here in this country. You know, debt many sides like to talk about. Oh, you know, it’s a tax problem. We’re not taxing enough. No, we have a spending problem in this country. Our government spends entirely too much money is incredibly wasteful.

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It’s their fault, not the people’s fault. Right. But this hopefully will lead us to some solutions that could get us out of this mess. And I’ll continue to break this down here a little bit because this is especially huge for treasury liquidity as stablecoin issuers here. You know, I got a few comments from Scott Bessant but if stablecoin issuers are allowed to back their either pegged one to one to the dollar, they’re going to own treasuries, adding liquidity to that market. Okay, so here’s what Scott Bessant had to say. I believe that stablecoin legislation backed by U.S. treasuries or T bills will create a market that will expand US dollar usage via stablecoins around the world.

I’m going to keep going here. This is another quote from him that recent reporting projects that stablecoins could grow into a 3, 3.7 trillion dollar market by the end of the decade, by 2030. That’s just four and a half years from now, less than four and a half years from now, from 0 to 3.7 trillion. That’s how much liquidity we’re talking about being added to the U.S. treasury market. You know, the genius act with this is a big reason why they passed this. What does that mean? Right, A thriving and he goes on to say a thriving stablecoin ecosystem will drive demand from the private sector for US Treasuries. Treasuries backed by stablecoins.

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This newfound demand could lower government borrowing costs and help reign in our national debt. Final one here. This groundbreaking technology will buttress the dollar’s status as the global reserve currency, expand access to the dollar economy for bitcoin billions across the globe and lead to a demand surge for U S Treasuries. What does the demand surge look like for U S Treasuries? It means bond prices go up and yields fall, fall, fall, fall again. Financial engineering here, that should bring forth much lower yields. It’s exactly how Treasury Secretary Scott Bessant plans to get around the Federal Reserve and around a stubborn Jay Powell who just refused, refuses to lower rates despite evidence time and time again that they are overly restrictive. Now as I said on my show yesterday as well, we don’t think they’re so restrictive that it’s going to hamstring companies. It’s not going to hamstring our economy at these levels, but they’re certainly overly restrictive and preventing the treasury from issuing new debt at lower rates.

[00:14:48]:
To refinance the debt that, you know, not to get too deep into it that Janet Yellen did on a short term basis with yields so low she could have done it on a longer term basis. It’s been. That was a major policy error on her end as well. So again, this is a major part of their plan to refinance the U. S. Debt burden. You know, in. On a bigger scale though, this is going to usher in a whole new paradigm of market and financial infrastructure in this country.

Imagine being able to tokenize all of your assets, right? You need to raise a little cash. Well, instead of a home equity line of credit, why don’t maybe you could potentially sell off part of your home’s value and define your own terms, maybe buy it back later. Write that into the contract there, all kinds of stuff, second, third and fourth, you know, down the line. Case examples for this, you know, just property is the easiest one to think about here. But it could be, it was really the tokenization of everything which I don’t think anyone fully understands what that means just yet. But what it will mean is that stable coins are now real money. Okay. And we will soon be living in a world where this, the divide between dollars, US Dollars and assets will be increasingly blurred and potentially really no longer exist.

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Where you can trade, you’ll have the liquidity to trade as much as you want. Again, further securing the US Dollar’s place in the world as the world reserve currency. I had one more note here on exactly that that I want to make sure that I touch on here. Yes. Okay, so I don’t, I can’t have it in front of me. But essentially what this would mean for global players is the ability to avoid banks as well and to transact internationally without all of the fees. We’ve seen, you know, cryptos that have been designed to do that. This again legitimizes that, that you can go make international trades without all of the fees and unnecessary restrictions from other countries.

You can just do it in US Dollars. Right. An incredible evolution for our system here. And here’s the proof of just how big this is going to be. The world’s largest stablecoin issuer is Tether. They just announced today a $20 billion fundraising round that will give them a private market valuation of half a trillion dollars. $500 billion valuation, essentially tying it for the world’s most valuable private company alongside ChatGPT. Right, our OpenAI, the makers of ChatGPT.

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That’s incredible. Again, how many people even talk about this story? How many even know about Tether? You know, you gotta be a little bit plugged into the financial system to know much about this at all. So buckle up here. This is not even anyone we, the game hadn’t even started for this just yet. The financial engineering is just beginning. So again, this is a developing story. If you’ve got anything out there or anything I may have missed, please send it over my way. I think that this cannot be understated, how big of a deal this will be going forward.

So make sure to to stay here with us on the VRA Investing podcast. We’ll continue to cover this here. All right, let’s quickly take a look at our market action on the day to day as we are getting closer and closer to the end of the third quarter here, which does mean we’ve, we are or have entered the share buyback blackout period for companies. So liquidity dries up a little bit. Again, talked about this yesterday as well. Pullbacks here need to be looked at as an opportunity to buy the dip. But on the other side of this, when we get into Q4, that means beginning of quarter fund flows, right? And end of quarter fun flows for that matter, from retirement accounts, money managers. So we’re just on the edge of the most bullish time of the year for the market, which is Q4.

So, so today again we did open higher on the session. The Dow Jones hit an all time high earlier in the day, but the NASDAQ did lead the way lower down just under 1%. We finished off of the lows of the day just slightly at 22,500. Excuse me. And 73. Next up here, the S&P 500 down just over half of 1% at 6,656. After that small caps down a quarter of 1% to 22,457. Sorry, I’m still a little excited about covering that stablecoin news.

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I again don’t think that that can be overstated here just how big of a deal this is. But then the Dow Jones did Lead the way down just 210 of 1% at 46,292. Looking at our internals on the day today, better numbers than you might have expected. These were actually positive earlier in the session when all of our major indexes had had turned lower. Did finish slightly negative on the day but mixed here. Negative, advanced decline, more declining stocks and advancing for both the Nyse and the NASDAQ. But no big beats there. 52E highs and lows which are a lagging indicator still came in positive 4 1/2 to 1 positive on the NYSE.

Better than 5 to 5 and a half to 1 positive on the NASDAQ. Then lastly here volume was able to remain positive for the nyse, just slightly negative on the nasdaq. Looking at our sectors on the day, actually a better sector day than yesterday. Yes some defensive names in there but we finished with 6 out of our 11s P500 sectors higher on the day led by energy which has been a laggard lately. Followed by real estate and utilities which once again utilities inching closer to that all time high as a forward looking mechanism tells us yields are moving lower then our laggards. Consumer discretionary tech and communication services. Finally here for today our VRA commodity watch where as I mentioned earlier, we’ll talk here quickly about money supply as we got the latest reading out at noon today. Take a look here.

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Another all time high from money supply. Again when M2 is on the rise you want to be long stocks. And in this scenario check out this great research from Marin Katusa here. You really want to be long gold. So while gold just hit an all time high today, he says the price is wrong to the downside, way, way undervalued here in gold especially compared to M2. So let’s zoom in on this a little bit here. Can you see that? All right. All right.

So there’s the price of gold again all time high today, just a little above that 3, 800 an ounce. Now if the, if the price of gold tracked M2, we’d be at almost $10,000 an ounce. This is why our price target over the next seven years is 50, $15,000 an ounce because we don’t see the money printer being turned off anytime soon here. Just phenomenal work here from Marin Katusa. You know even if it matched that 2011 number, you’re looking at $4,400 an ounce. So it’s been an incredible run. You know we started the year for gold at $2,600 an ounce. Just above that level.

[00:22:44]:
Now we’re at an all time high of $3,800 an ounce. Been an incredible move, but this tells you just how much further we have to go in gold in the miners. We cannot understate how, how bullish we remain here. Now. Gold did finish the day below $3,800 an ounce at 37, $3,796 an ounce. Silver also hitting its highest level in over a decade today closing at $44. 26 an ounce. Next up, copper at $4.63 a pound.

And oil, as you might expect, was higher early in the session, up to $63.41 a barrel. And finally here for today, you might have thought bitcoin might be up on that crypto news. You know, it’s been, it’s been a good run for bitcoin though as well. Now still roughly where it was yesterday at $112,000 a bitcoin. You know, we talk about this here often. There really is no greater supply and demand story than bitcoin. We remain long and strong bitcoin here as well. So, folks, that is all that we have time for here today.

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Please be sure to subscribe to receive our VRA podcast every day at the market close. You can sign up at VRA letter.com sign click the podcast link at the top and we’d love to have you with us. Thanks again for being here with us. We’ll see you back here tomorrow for the close.