The Fed Credibility Narrative Has Turned | Ben Hunt on AI, the Consumer and Financial Repression

**SPEAKER_1** (0:00)
We are excited to announce the launch of a new podcast, Why Am I Reading This Now with Ben Hunt. Stories are driving the market more than ever, and Ben and his team have developed a unique system to quantify them. In each episode, Ben and Matt Zeigler will look at the major issues facing us as investors through their unique narrative lens and help us all understand the impacts on the market. We have included this episode in the Excess Returns feed, but if you want to keep receiving new episodes, you can subscribe to Why Am I Reading This Now on all major podcast platforms or our YouTube channel using the links in this episode description. Thank you for listening. We hope you enjoy the new show.

**Matt Zeigler** (0:28)
You're watching Excess Returns, a channel that makes complex investing ideas simple enough to actually use or better questions lead to better decisions. With me today, I feel like I'm going to need an AI image of us at an amusement park, riding the teacups around and around for this one. Because I saw him privately give this credibility as a teacup presentation last week. And I said, please tell me, this is the foundation for our next episode of Why Am I Reading This Now? And he said, why yes, yes, it is. It's Epsilon Surrey, Percy and Zone, Ben Hunt. Welcome back, Ben.

**Ben Hunt** (1:00)
Thank you, Matt. Great to be here, as always.

**Matt Zeigler** (1:03)
All right. You titled it Credibility as a Teacup. Before we get into some of the slides, ideas and everything else, what just happened in the last month that made you put this one together?

**Ben Hunt** (1:13)
Well, this idea that credibility as a teacup is something I think is really important. Not just for how I want to talk about it, which is the credibility of Kevin Warsh, the Fed Chair, the credibility of Scott Besson, Treasury Secretary, but the role of just credibility and believability, reputation in our business, our world of investing. This is one of the first lessons I learned from my mentor, the people who hired me when we got into this crazy business of investing other people's money. And I know you know this, Matt, but in this business, your reputation is everything. It's everything. And there is never, you should, this is a wonderful career to have in investing in financial services, whether as an advisor like you are, whether as a manager, an asset manager like I've been and I try to do. But through all of this, there will always be places where there'll be a temptation to cut corners or to, you know, to just, we all know what I mean, right? And you can't do it. You should never do it.
There is no possible advantage on a trade or with a client or anything that should ever let you do anything that chips at your reputation. Because once you break, once you crack your reputation, you can try to glue it back together. That's why I use the analogy of a teacup. You break or you chip the teacup, and you can glue it back together, and it can still be a functional teacup, but it's never the same. It is never the same.
So credibility, whether you're a Fed chair, whether you're a financial advisor, whatever you do here, credibility, your believability, your reputation is the most important thing. And you can't put that ever at risk. And that's what's happened, right? So the teacup has been broken. The teacup got broken with Kevin Warsh for his press conference at the end of August, sorry, the end of July, where they didn't hike rates. He was talking like he was gonna hike rates, and they didn't do it. It would have been easy for him to do. And then if he had, we wouldn't have any of this now. He would be cemented in everyone's perception as, yes, you said what you meant, and you meant what you said about being an inflation fighter. And so now we believe you, and then that's when the market does the work for you, as he likes to say is the goal here. But when you come out and you say what he said, which was basically, new boss, same as the old boss, lots of words, lots of talk talk, but they will never do anything to raise rates if they can possibly help it.
Then that's when gold skyrocketed. I'm going to show you stuff on our narrative signals. This shows just what a supernova this was at the end of July, when he basically broke his credibility as being an inflation fighter. Now, he's tried to reclaim the credibility at Jackson Hole with his speech last Friday. And the market correctly said, oh, this is a very hawkish speech, but he's got himself in such a bind now because it'll just be more words. It'll just be more words if he doesn't actually pull the trigger on hiking rates in September. And I'm telling you, for all the reasons we're going to describe here, no one in this administration or in markets wants him to raise rates. They really don't want him to raise rates. But now he's painting himself in a corner. He's trying to repair his credibility.