‘Plain English’ Goes Awry – Again
Anecdotally, the market reaction to the Fed statement and Jerome Powell's post-meeting presser was even more schizophrenic than usual, and it all boils down to one word: "Transient".
The initial (i.e., knee-jerk) reaction to the statement and IOER tweak (the third in a year) indicated markets were on board with the notion that the Fed had "succeeded" in pulling off the expected "dovish hold". The inflation assessment was downgraded and the "patient" narrative was reiterated, tipping more of the
i.e., soon to be ex=Fed Chair Jerome Powell…
pfff, put the fourth wall back up and let people make investment decisions based on merit rather than a Fed backstop
nice tweet XD
Mgmt fees are sadly not transitory. The decline is secular.
This type of reaction just tells us how dependent the market is on the so-called Fed Put. It’s like the market expects another handout and has a tantrum if it’s not forthcoming. Reminds me of a principle articulated in a book entitled Danger in the Comfort Zone – entitled workplaces easily swing to the fear mode even when challenged lightly.
Ah. Got it. The markets lost 0.75% and the bond markets whipsawed because of an adjective that changed the ‘dovish hold’ the markets had priced in into a ‘neutral dovish hold’ or maybe a ‘dovish neutral hold.’ This all makes perfect sense and is in keeping with a fundamentally sound market.
A lot of interesting reading this morning and this comment pertains to all five posts because like the three blind Indians when asked what it was that they were examining (the Elephant’s Trunk ) if I recall all had different answers .
The short explanation might be something like this: The existing system has been manipulated by business and government to the degree that it is impossible for the mandates to be met that were designed as the goals of that system.. The Fed has in fact become the football in the game of Football.. The goal has become the levitation of equities by both Business and Government. The result is instability and a realization that the rules need to change to some kind of ‘have your cake and eat it too’ methodology. MMT is a different methodology… Charlie has an outlier point of view this Am in that he is downplaying the hysterics of yesterday ,and he is correct it was in reality of no consequence and the varied interpretations bear this out.
A final note here is that early in my business career someone told me Capitalist Economies have a difficult time going in reverse.. I was able to reverse in my business for a decade and quadruple my profit but the time frame I was dealing with was not perpetual merely my working career. This may in fact be the case today in our system and how it is functioning…SHORT TERM…