#409 Danielle DiMartino Booth: Fed Is Hiking Into Recession, Consumers Tapped Out, & Credit Tightening

Danielle DiMartino Booth, CEO of QI Research and author of Fed Up, joins Julia La Roche to break down the Fed's 25 basis point rate hike under Chair Kevin Warsh. The statement first looked dovish, but markets reversed after Warsh's record-short 29-minute press conference hinted at more hikes. That sent the 10-year Treasury to 5.01%, its highest level since 2007. Danielle argues Warsh has broken his own "zero forward guidance" pledge and is "enamored with his narrative" of a Goldilocks economy. She points to a labor market already in recessionary territory, with long-term unemployed now outnumbering job leavers. She says core PCE inflation is on a steady path lower, while households face mounting strain from gas prices, utility bills, bankruptcies, and tightening credit. The two also discuss the K-shaped economy and why Treasury Secretary Scott Bessent may not be done acting on the bond market. Danielle explains why peak AI investment, propped up by hyperscaler accounting gains, is the biggest risk she sees. She closes on an optimistic note about the work ethic of today's college-age generation.

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Links:    

Danielle's Twitter/X: https://twitter.com/dimartinobooth  

Substack: https://dimartinobooth.substack.com/

YouTube: https://www.youtube.com/@DanielleDiMartinoBoothQI

Fed Up: https://www.amazon.com/Fed-Up-Insiders-Federal-Reserve/dp/0735211655

Timestamps:

0:00 Intro

0:40 Fed hikes 25 bps: the big-picture takeaway

1:22 Markets price in three more hikes after the press conference

4:21 Assessing Warsh so far: forward guidance despite his pledge

5:37 Fed projections: 2.5% core PCE, 4.1% unemployment

7:02 Sponsor: Augusta Precious Metals

8:26 Labor market already in recessionary territory

10:12 Warsh is "enamored with his narrative"

10:53 The household squeeze: gas, utilities, beef to chicken

11:47 Even the top of the K is losing confidence

12:19 AI was 100% of GDP growth, and real AI investment has turned

13:20 Payroll data quirks: the World Cup hiring surge

14:06 Sponsor: Monetary Metals

15:33 Trump's reaction: 10-year at 5.01%, stocks down

16:05 Scott Bessent isn't finished

17:04 Warsh gives Bessent the Heisman

17:41 10-year at a 19-year high, and the Fed was easing last time

18:14 What the Fed is getting wrong: August's one-off inflation blips

20:03 Core PCE is coming down, plus BEA methodology changes

20:56 Bankruptcy lawyers are making bank: record filings

22:23 Do rate hikes even work? Cash-out refis and credit tightening

23:29 The stock market isn't the economy: airlines and the top of the K

25:16 Is Warsh chasing the wrong monkey on his back?

25:47 Other worries: PE bankruptcies, rogue AI agents, socialism

27:22 Bernanke's 2% target and post-COVID stimulus

28:31 The risk keeping her up at night: peak AI investment

29:49 Hyperscaler accounting games and the "E" in P/E

31:40 What's making her optimistic

33:25 Wrap-up