YOU WERE WARNED! POWELLITIS TAKING OVER!
We have warned you since Christmas of 2018 about Jay Powell. We doubly warned you October of 2019 when amazingly, he started money printing again even though markets were near highs, unemployment was in the 3s and GDP was in shape. We then yelled and screamed about the outcome of an un-elected and unaccountable man that had no oversight when he decided to print a gargantuan amount of conjured up money out of thin air to the tune of $9 trillion with lemmings around the globe following suit. Quite stunning that the lemming at the ECB is even worse as they are still at 0% while inflation burns hot across the pond. And now, even the easy money dolts over there are talking tough. We expect some serious raising of rates soon as their bonds markets have been screaming at them also. We have never seen in our history so many amateurs running the show. These are the most important people on this planet and not one has a clue to what is happening in the real world. We say this with no joy.
These are the outcomes we worried about, told you about, whined and complained about. All have come to fruition.
We worried and warned you about bubbles. We told you to read EXTRAORDINARY POPULAR DELUSIONS AND THE MADNESS OF CROWDS. What was the outcome? The biggest bubbles we have seen in history. Coins, SPACS, 3d, marijuana, meme stocks, no sales anything, NFTs,…you name it, we warned about it. Some of the meme stocks have even woken up recently before being crushed again. The outcome? All have popped with the many going to $0 and next to go…mark our words…is housing. We warned you about housing over a year ago. Inventory has skyrocketed. Days to sell are growing. Price is coming down.
We worried and warned you about the distortion of price and yield. After all, this man decided to play God with markets. Junk bonds that should have been paying 9% were paying 5%. Bonds that should have been paying 5% were paying 2%. Zombie companies were able to put out debt at ridiculous yields. How about Austria doing a 100% year bond at less than 1%? That bond is down 60%. But don’t worry. In 100 years, you will get your money out of it. We are sure you have seen what bond markets around the globe have done, including ours. Massive losses for bond markets over the past year.
We worried and warned you about inflation…before anyone even mentioned the word inflation. We were stunned how so many stayed quiet as one man printed up to $9 trillion. Of course, there was going to be only one outcome. That’s not just too much money chasing too few. That’s unimaginable amounts chasing nothing. Economics 101. Of course, he had help. Throw a dose of gargantuan spending from a place called DC and you have one heck of a 1-2 punch. Throw in an administration and a treasury secretary saying much ado about nothing.
We worried and warned you about wealth inequality as one man screwed savers but bubbled up every asset under the sun, including some over-the-top crazy stuff. Did you hear about the man who bought an invisible sculpture for $18,000? We warned you when inflation hit and when we started hearing the “transitory” nonsense. We warned you that this man and the rest really did not have their finger on the pulse even though they get a bazillion bits of info on a daily basis. Hear no evil, see no evil, speak no evil.
We worried and warned that we thought this man believed he could do no wrong and that he was omnipotent. After all, all those trillions bought a lot. Markets did exactly what they wanted but they did not realize outcomes. All they were good at was cutting another credit card with a higher credit limit to pay for their last credit card. We made up the mantra “nothing is ever wrong as long as the market goes higher!” And higher it went.
This brought us to our next worry and warning. Massive debt and leverage. This man enabled massive debt and leverage because why not take on more and more when rates are at 0%? Margin balances pulled an Eiffel Tower move right into the highs. This fueled markets even more…UNTIL IT DIDN’T!
And our biggest warning and our biggest worry…the one we have mentioned a dozen or more times. The one we are now dealing with. The one that has us even more worried about economic trouble ahead. But don’t worry. All the fedheads were out this week saying they do not think we will go into recession even though we have already had 2 quarters of negative GDP, even though savings rates are plunging, even though credit card usage is skyrocketing, even though the wealth effect is in reverse, even though housing is heading south. Our worry and warning has been and is loud and clear. WHAT HAPPENS IF WE EVER GET TO THE POINT THAT BECAUSE OF ALL THE DISTORTIONS AND INFLATION THIS MAN LIT THE FUSE ON AND CREATED…THAT HE HAS TO ROLL IT BACK AND AT THE WORST OF TIMES?
Yes, Jay Powell is now talking tough. He is talking Volcker. He is talking about people losing their jobs, pain and suffering. Yes…the trouble we have right now, caused by the inflation and distortions he lit the fuse on are now being met with further tightening by a man THAT WOULD BE LOWERING RATES AND ADDING MONEY PRINTING AT TIMES LIKE THIS. Instead, he is forced to do the opposite. Jay Powell has to now raise rates rapidly just to play catch up to the real world and into a suspect economy if not worse. Europe and China seem to be worse. Jay Powell does not want to do what he is doing. He is forced to. THIS IS THE WORST POSSIBLE SCENARIO coming from one man who played God and to this day, has too much control of a $40 trillion market and a $23 trillion economy. We still do not know how we got to the point where one person can take over markets with an unlimited amount of funny money. He was wrong to print those amounts. He was wrong about inflation. He was wrong about his slowness to fight inflation. He is still behind the real markets but now has to play catch-up and quickly. It sickens us that Wall Street has to continue to follow every move and listen to every word said and what every central banker says. (They never shut up!). There was no need to talk tough Friday. He could have just said that they will fight the good fight but Jay Powell needs to prove himself. All of a sudden he cares about sound money when forever, sound money left the building. He thinks he can say anything because again, he can do no wrong. He still thinks everything is just fine out there. Let us also not forget another biggie. Since promising the roll back of the money printing with QT, their (our) balance sheet has dropped a whopping 1.3% from the $9 trillion April 2022 high despite promising a lot more. We do not think there is any way they can shove $95 billion into the market every month as promised and so far, they have done nothing.
We believe we are headed into recession that may not be so garden variety both here and around the globe. This will be guaranteed if we lose the job market. Frankly, it seems that is what they want. As far as markets, we told you recently the longer term resistance was hit and sold into. We also got very worried recently as massive froth and speculation had picked up just weeks off of a low. After Friday’s drubbing, markets are already oversold but we think all thoughts of a fed pivot were thrown out the door Friday so anything possible. We are already seeing the new low list expand in advance of the big indices indicating deterioration. We also believe not until the deeper troubles show up in housing and employment that Powell will BE FORCED AGAIN to change course. Inflation had better be dead by that time. All this and now to add a touch of nausea, we have an administration that is raising taxes into an economy on the ledge and threatening good Americans who amazingly, they are calling out as tax cheats. All this, coming out of a pandemic. Lovely!
We were going to make this missive pithy but we just kept on writing. We wish we had better news but all our worries we have been whining and complaining about to you and to anyone who would listen since Christmas of 2018 have indeed come to fruition and the people who caused it are still running the show. Again, we take no joy in this. We would rather be praising those in power but almost $31 trillion of debt says otherwise.
Lastly, if you so choose, we did a lot of this Friday on our radio show. We were quite blunt! You can listen to it here:
Thanks Gary for telling it like is. Most people don’t want to hear the truth and stick their heads in the sand. Keep speaking brother and God bless.