Trump, Powell and the Kowtow

-By Gary Kaltbaum- November 28,2018-
-Jay Powell just kowtowed to Donald Trump’s tantrum over a measly 2% Fed funds rate as well as a market correction. Looks like the president knows the easy money game. It is not hard for the president to check out a chart of the markets with the easy money, bubble making policies of past years. Markets dropped, just ease. Markets drop more, ease more. Markets really crack, print. Markets really crack again, print a crap load more. In other words, there is no independent central bank. Powell is now a puppet to Trump. Trump might as well be the head of the central bank.-
-Here is what just changed:-
-Fed Chair Powell now says current interest rates are “just below”neutral. Early last month, Fed Chair Bernanke, we mean Powell, said that the fed funds rate was a “long way from neutral!”THIS IS A MAJOR BIGLY CHANGE! This was not changed by accident. The statement was meant to change the playing field. Jay Powell may say there is no preset policy path but we now know better. Jay Powell may say that their dual mandate is stable prices and sustainable employment but we all know better. Their policy is to keep markets from cracking. President Trump will now start complimenting Jay Powell again.-
-We predicted in our recent past few reports that we expected this. We expected that Jay Powell would raise one more time and that’s it. We expected it because of the pressure from the president but also because many years ago Powell was quoted as saying investors knew the fed had their back. But it still irritates the heck out of us as real price discovery moves down the road again. The fed was never supposed to kowtow but kowtow they are. The fed was never supposed to backstop the markets but backstop the markets they are.-
-The A LOW we called after Monday’s close may just turn into THE LOW as central banks and their moves matter. We have learned that over the past bubble making years. We will get a better feel after the close and the days ahead as most everything is still trading BELOW longer term moving averages…but looks like they are going to continue to inject the steroids…with GDP over 3% and unemployment under 4%.-
-And lastly, as we finish writing this, we are listening to Powell whining about boom/bust cycles. Unfortunately, it has been these same central banks that are the creators of the boom/bust cycle…not the savior. More to come!-