–Back in December, in the depths of the market nausea, we started to hear trial balloons that the Fed was changing their stance. They were raising rates and their talk was of raising a few times in 2019. We stayed bearish all the way down for obvious reasons. And then, it happened. Live on tv, Powell did his 180…which got us to change our bearish stance while we were on live tv. It is usually something we see that changes our stance but in Powell’s case, this was about what we heard. Markets hardly looked back…all the way into late April. This has been the market’s modus operandi since the “Bernanke put.”–
–The talk out of the Fed has been “we will be patient!” Of course they could be patient. Markets were cooperating. Remember what we have told you. It is not about the economy. It is about the markets. And then…the old fly in the ointment.–
–Even with very low rates, even with negative rates in Europe and Japan, even with China continuing to ease, the economy here started to slow down. The 10 year yield did a cliff dive. The stock market started to correct. What happens? Like good easy money dolts, there goes the patience. We told you weeks in advance. Every time markets get in trouble, the fed floats an easy money trial balloon. If that doesn’t work, they come out with “not by accident” rhetoric of easy money. If that doesn’t work…then here comes the easy money.–
–But this time, it is not just easy money rhetoric. On top of Bullard’s easy money rhetoric yesterday, Jay Powell actually hinted this morning that both QE and 0% rates and even negative rates could be on deck with “perhaps it is time to retire the term “unconventional” when referring to tools that were used in the crisis. We know that tools like these are likely to be needed in some form in the future.” In other words, what used to be unconventional will become conventional. He then went on to state “the next time policy rates hit the lower bound-and there will be a next time-it will not be a surprise!” Jay Powell just told the markets that they had their back again. Easier money is coming and coming soon.–
–He then went on to blah blah blah about the economy, about trade and all that crap but the bottom line, Powell and the rest of the Fed continue to show it is all about the markets as they know they cannot lose the asset bubble they have all created because that would take away their all-important wealth effect.–
–AND THE MARKETS, like a behaving puppy dog, jumped quite nicely off of the oversold conditions we told you about yesterday. The last time the Fed did their 180, we came off our bearish stance but that was off a much bigger drop. This time, it only took a whopping 7% drop in the S&P to get the fed quivering. We will just say we think A low has been put in again and will let more cards come out of the deck. We still have to deal with what the 10 and 30 year yields are saying as well as the tariff addiction by the president. You should be way past calling them tactics as the president even wanted to go after Australia.–
1 reply
  1. Avatar
    Larry Warren says:

    Trump was the one that said the Fed needed to back off rate hikes. Of course the Trump haters won’t acknowledge this either.

Comments are closed.