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OUR JAY POWELL INTERVIEW

-“OUR JAY POWELL INTERVIEW”-
-We love David Rubenstein. David Rubenstein  is an “American financier and philanthropist best known as the co-founder and co-executive chairman of The Carlyle Group!” We have followed his great career as well as his great interviews on Bloomberg. Mr. Rubenstein had an interview with Jay Powell today at some Economics Club. The back and forth was something we wanted to watch and to hear. We thought he asked some substantive questions and some important questions but sorry, for us, it was too cutesy. Cutesy is not good. We believe Mr. Rubenstein had a missed opportunity.-
-We do not think there is anything cute about $22 trillion of debt. We do not think there is anything cute about $trillion yearly deficits. We do believe it has been the fed who has enabled a lot of this and has done nothing to change the trajectory of all this. So in the interest of fairness, here is what we would have asked Jay Powell.-
-1) What do you tell all the savers that were screwed by the Fed by keeping rates at 0% on their risk-less income investments for 8 years…and handing that money they would have been earning over to the banks and lenders that caused the financial problem in the first place?-
-2) Why since 09, every time the markets get in trouble, the Fed either talks easier money or enacts easier money? (We would show Mr. Powell a chart going back to 09 including what markets have done leading up to his changed his stance right at the recent lows.)-
-3) Why do you keep calling it the Fed’s balance sheet? A balance sheet is supposed to contain real assets. Your “supposed” assets is nothing but the fed printing money out of thin air.-
-4) You just said you fought to have the debt ceiling raised. Many years ago, it was a sin to raise the debt ceiling. Politicians fought against raising more debt but now, you, economists, politicians and ratings service have conned everyone by saying that if we DON’T raise more debt, we would be in trouble. What happened to economics 101 that says more debt, out of control debt, is bad?-
-5) Depending on which abacus you use, there is $15-20 trillion of central bank-printed money around the globe. Europe is still printing and has negative rates. Japan is still printing and has negative rates. China is easing markedly it seems every week. Are we to the point where what central banks have done has made markets addicted to your steroids and there is no way out of this web?-
-6) And to that point. We are starting to see recessionary-like numbers from places like Japan and Germany. What ammo could they possible have left if this is true?-
-7) Where would the markets be and where would economies be around the globe if all central banks just normalized?-
-8) Will we ever be normalized?-
-9) There is now more than $250 trillion of government debt around the globe, record corporate debt around the globe, record junk debt around the globe with many saying enabled by the ridiculously low rates brought on by the central banks. What happens if economics 101 finally come into play and the markets stop reacting to everything central banks say or do?-
-10) You do know that economics 101 states that the more debt there is, the higher the rates should be? But Bernanke et al artificially kept rates down that enabled all this debt.  So what if rates finally give the middle finger to central banks that have rigged rates lower for years with the conjured up money that you say are assets but are not really assets and rates skyrocket? What is your next move if let’s say the 10 year yield goes to 5% regardless of your futile attempts to print more money to take them down?-
-11) Do you think this economics 101 scenario can play out? Is the magic number $260 trillion? 300 trillion? Higher?-
-12) Did you know that in the coming year, because of all the debt, the first $500 billion of precious taxpayer dollars is going towards interest on the debt that was created by government? That’s $500 billion not going towards the poor, the indigent, the children, the elderly, the roads, bridges and all the infrastructure promised. $500 billion to nothing. Did you know this and how do you feel about this?-
-13) If the  DOW dropped 2,000 points in the next two weeks, what would be your reaction? How about 5,000 DOW points over the next 2 months? Should it continue to be the Fed’s place to react to these market moves?-
-Mr. Powell.Thank you for your time. We know that we asked some tough questions but numbers do not lie. We are very worried. It seems many of the same people who put us in this position are still running the show and simply showing they do not give a crap about doing anything about all of this. We are now starting to see you go into your friend’s playbook that many call the “Bernanke put!” Instead of letting markets be free, it seems you are now measuring yourself based on market moves and worry this will do more harm longer-term than good shorter-term. After all, markets were supposed to be free and not move based on the whims of a few people running central banks around the globe.-
-We would have loved to ask you about your bicycle riding or your guitar playing or your salary but we think there is much bigger fish to fry going forward. We wish you well. Ladies and gentlemen, that concludes this interview. Have a great lunch and drive home carefully!-

MARKETS/PRE MARKET

We remain in rally mode off of some of the most oversold, stretched and extended conditions to the downside we had seen since the 87 crash. Price on the upside has still not satisfied buyers. We are now in the midst of massive overhead resistance, the place where the ‘waterfall” dropped occurred. We are not yet to the declining 50 day moving average which is below the longer term 200 day moving average. In and around there will define what this rally means. We believe this rally is unlike the two rallies in October and November that failed miserably but we want to see how the market reacts to a couple of stalling or pullback days. So far, there has been positive rotation on the way up. Also, foreign markets have been up off their lows. They have lagged badly since last February.

The bears now trying to figure out what went wrong and why we are rallying. Just take one part extended to the downside combined with the Jay Powell “put” and away we went. That’s all. Need not look further than that. You know how much emphasis we put on these central banks that refuse to let price be discovered. Bear markets are against their religion. Again, we had better not get to the point where markets ignore their wishes. Looks like we are not there yet.

 

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Characteristics And Rules Of Bear Markets

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MARKETS/PRE MARKET

Even though price is about the same as the previous two rallies, this one feels different. We are seeing beta/tech acting better. We are seeing a few names in that SOFTWARE group setting up or edging out of range. We are just feeling the overall tone as being much better.

But:
We are now starting to close in on that massive “waterfall” breakdown…which should provide near-term resistance. We are now starting to close in on that massive “waterfall” breakdown while markets are now very, very, very overbought…with all major indices still below the 50 day moving average, which is still below the longer-term 200 day moving average.
Potentially coming out of bear markets takes time. It takes 2 steps up, 1 step back. It takes some scare days. It takes a process. We are not in the “new bull phase” camp yet but are open to the possibility. We have moved up in price about as much as the past two failed moves. If sellers show up soon, it would not be good news as rallies and failures into resistance are a part of bear markets…but again, the Fed matters. We hope it’s a new bull so we don’t have to write as much. Next up…not earnings but what will matter more, the reaction to the earnings…and oh yeah, the Fed has 9 speeches this week including one by the head honcho, top dog, big cheese.

 

PRE MARKET

Futures flattish and that is actually good news. Need some working off the latest surge off of extreme conditions both in price to the downside and bearish sentiment.

This rally feels better than the last two. We completely doubted the last two as they were nothing more than bear market rallies. Both lasted less than 7 days. This one ‘feels” like it can last longer but leave no doubt, if sellers start showing up, a word to the wise…careful. Every major index is still BELOW the recent “waterfall” breakdown and also below the declining 50 day moving average which is below the longer-term 200 day moving average. Also, we cannot find one new high but we can find a few SOFTWARE names near the highs and seeing a few beta names turn the corner.

Lastly, we believe the fed is back holding hands with the market. Whether or not it matters, time will tell. For years, it has mattered.