All Hail Chairman POW

All Hail Chairman POW
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Before I go into charts some things just have to be said: All pretense has been laid to rest. Bears have been proven right. Markets are managed by a central planning committee. Jerome Powell’s spectacular policy reversal produced the strongest January market rally since 1987 demonstrating once again the ugly truth that the Fed remains the largest price discovery mechanism driving markets. Powell spoke once, twice and thrice in January and each time markets went: All Hail Chairman POW. Not earnings, nor revenues, not growth, nor fundamentals mattered. All play second fiddle to the workings and mutterings of central bankers. Why even pretend we have a free market system? A system that is never allowed to price in bad news for more than a few days is doomed to bubble toward infinity. Too urgent is the reflexive impulse to intervene, too desperate is the realization the economy is only one risk-off event away from a recession. Jim Cramer squarely blamed the December sell-off on the Fed and attributed the Fed’s to leading role for the strong January rally: The implicit message: The Fed screwed up and had to rescue markets from its mistake. But what was really the mistake? The Fed had embarked on the slowest rate hike cycle in history. They weren’t too aggressive. No, the mistake originated in accelerating the balance sheet reduction which in real world speak is removal of artificial liquidity. Some claim reducing the balance sheet is the equivalent of stealth rate hikes. If […]

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