We have been warning you since Christmas 2018 when Jay Powell stopped raising rates only because markets were dropping. We warned you when he kept lowering rates in 2019 every time markets dropped. We warned you when Jay Powell started his “Don’t call it QE” October 2019 when GDP was around 3% and unemployment was in the 3s. We warned you when he went ridiculously too far printing unimaginable amounts and sat there as we came out of covid.
As we write this:
30 year yield – 3.022%
10 year yield – 2.987%
5 year yield – 3.046%
2 year yield – 2.836%
1 year yield – 2.157%
3 month yield – 0.932
Jay Powell will be raising fed funds to a whopping 0.75%- To the rescue? We don’t think so!
Yet, when we turned on the tube this morning, a national media channel show was on telling us that because of Jay Powell’s move today, our mortgage rates and cost of loans will be going up. Say what?  We weep for those who watch those who do no homework on the facts. The fact is real rates, the rates that matter most, have been skyrocketing for months. Jay Powell is just playing catch up. Jay Powell is behind by miles. Jay Powell kept printing trillions into a strong economy coming out of covid. He is now raising rates into what is already a contraction of one quarter and most likely, more to come.  And you wonder why we think he should be replaced immediately.The market itself, has already done the tightening…without him.
0.75% is still ridiculously easy money. Jay Powell is not tightening. As stated, he is just playing catch up and he is still way behind after today. Do not be snowed into believing he is on the ball. He is way, way, way, way, way behind what the markets are screaming. All eyes will be on Jay Powell today when all eyes should just be on real world yields. If they continue going higher, nothing good happens. We do not expect any tough questions today.
Jay Powell and the rest are now in prayer mode. Their imbecilic “transitory” showed their incompetence while so many of us knew exactly what was going on. We are in hopes their prayers come true and inflation backs down. Unfortunately, he (they) are doing nothing to fight inflation. And to make matters worse, the dolts running the ECB make Powell look like Paul Volcker. They are still in negative rate mode.
We have stated the biggest bubble was in the bond market…the market that was interfered with with unimaginable amounts of money. We warned of the eventual unwind. Global bonds have now dropped $8 trillion from the highs.
Jay Powell will be going to 0.75% today while the 1 year…the 1 year is yielding 2.147%. He will still even behind the 3 month t-bill yielding 0.932%.
After an over 11% drop in the NASDAQ in 8 trading days and an almost 8% drop in the S&P 500 over that same time, markets are bouncing a bit from these stretched, extended and oversold conditions. Bearishness has picked up big time. Keep in mind, the main trend remains the main trend. After the latest deluge, about the only areas staying in gear but wobbly are the oils and commodities.
2 replies
  1. Craig
    Craig says:

    I believe in rate shock. 1% plus rate increases would have a huge psychological impact, and I believe this would hurry the downward pressure on inflation. It takes months for rate hikes to work through the system. I’ll accept the downside impact of such a rate move. Good economics? In my opinion, it’s better then what the Fed is planning now.

  2. Avo
    Avo says:

    You are 100% right on rates, real world without spin. The market did its job.
    Only, is not Dr. Copper in a down trend?

    P.S. Nice that you write as opposed to the radio show. The read took 2 minutes against 30.
    Thank you, and keep up the good work.

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