My observations about the Fed’s actions, and why I’m not shorting this crazy market.
By Wolf Richter for WOLF STREET.
For those who are saying, all that matters is liquidity, fundamentals don’t matter, don’t fight the Fed, the Fed is throwing money into the market, just ride the gravy train – is that going to be as safe a bet going forward as it has been in the past couple of months? This is what Adam Taggart at Peak Prosperity asked me in an interview. My thoughts…
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A good site to get easily accessible historical market data (including the craziness of metrics – like PE ratio – during the 2009 crash)
The host has some strong opinions on the protests. Great response, Wolf! As always, factual and without any spin.
Not mentioned or discussed at all.
Not about the interview, but about passing fad -crises, does anybody recall the on-the-verge-of-WWIII with nukes with Iran in January that the media was trying to ignite?
Host called them riots. Watch the video chief.
Dude you’ve gained weight since your RT interview several years ago. Is it due to quarantine or good living? You look healthier and younger.
Thanks, yes, I’m definitely younger, for sure. Not sure about having gained weight. I swim nearly every day in the Bay, still do, even though the swim club is closed, but the Bay is open and free, and I don’t think I gained weight. However, the image was mercifully fuzzy, and so it smoothened out my face ?
Best bet is to not be greedy. Have only enough in stocks that you could take a 50% drop and not impact your quality of life. If that’s not possible then stocks are not for you.
What scares me more are the monetary rumors of digital only currency with a haircut of the dollar. If Wolf would give us his opinions on policies like that it would be appreciated.
“What scares me more are the monetary rumors of digital only currency with a haircut of the dollar.” More likely than a haircut, in my opinion, is the instituting of progressive taxation on (1) transactions, (2) income and (3) assets. If the ownership of a dollar or a dollar’s worth of something is only non-counterfit if recorded on a computer open to the government then such taxation could be efficiently implemented. Such a taxation system could be used to resolve problems of inequitable distribution and indebtedness. Or could be used as a near-universal chokehold.
The US dollar is the instrument used to allow the parasitic US banksters to transfer the wealth of US taxpayers’ to their cronies and themselves. They will not abandon it voluntarily.
The use of digital currencies, with some limits on their growth, would hinder the basic business model of the banksters who, as Simon Johnson’s The Quiet Coup in The Atlantic Magazine explained, have quietly bribed/”contributed” their way to controlling our country’s government. Digital currencies can be tracked which would allow tracing of their wealth.
Imagine that you had a printer and lived in a country that allowed you to print as much currency as you wanted to lend out to your family and cronies at ultra-low interest rates, to pay yourself commissions for the hard work of stealing other citizens’ earnings with your printer, to bail out your businesses and cronies when your gambling bets turned south at ultra-low interest rates, and even billions of “Federal” Reserve “dividends” for the “business” of operating the printing press to transfer US taxpayer wealth to cronies. You just had to be careful to give a portion of the profits from the printing press to the politicians, so they did not make what you did illegal– as in most other countries.
No, I do not think that the banksters who control our government via their “Federal” bankster Reserve will give up their US dollar scam voluntarily. However, every balloon will pop if you inflate it enough too suddenly.
Their trick has been to conduct their theft by slow stealing. Technology advances and foreign factories in low-wage countries, some benefitting from informal slavery such as Chinese communists’ use of slaves/prisoners to build US products, have meant that the slow loss of the purchasing power of the US dollars that you earn has been concealed.
Most Americans do not see how their life savings have been stolen, because televisions, computers, and other devices have gotten cheaper and more plentiful. Agricultural improvements, which would have occurred even if the “Federal” Reserve banksters had not been transferring US wealth to their cronies, mean that food is cheap and plentiful.
It is similar to how the Chinese communists have taken the credit for the growth of China: which works unless you look at little, neighboring Taiwan, which has grown much more wealth on a per capita basis without parasitic, corrupt, crony communists. Nevertheless, I think that even the “Federal” Reserve banksters have seen that they are so closely tied to the US dollar that they will not be able to continue their scams if hyperinflation starts due to more, too much, too rapid money printing and they just printed trillions: after a recession, if there are many more dollars out there, and all factories are at capacity and persons employed, the number of additional dollars chasing the same number of goods will mean inflation will escalate.
This is just like computer voting, like Stalin said “I don’t care who votes, or how they vote, I just care who counts the vote”
Just like “Bitcoin”, all these digital cash are from the Gov, if the ‘Gov’ could create infinite electronic only fiat, do you really think it would be any different than now? Who is to say or know? Sure some well say “But it will be on the public block-chain”, sure so what? Ever since the birth of the people have been skimming 10’ths of a cent, and if your doing a trillion transactions, your talking about real money.
It will always be corrupt just like now, like Rothschild said long ago “I care not who rules a country, I only care who creates their money”
It doesn’t matter how its created, the people who create it will figure a way to obfuscate-entry, and/or hide the books, just like ancient gold banks created ‘fractional’ or ‘reserve, the owners will always figure out a way to keep power.
Currently, we have lost a great deal of common sense and logic.
Going to save your life Wolf should you inherit any nasty chest infection.
Logic is when someone is choking or passed out from over indulgence, you roll them on their side to clear the breathing pathway.
In hospitals, they lay you on your back and gravity helps to keep your lungs filled.
Just a little observation.
lol, no offense Joe. Since when has the stock market represented common sense and logic, honestly now? My grandfather was not an investor, speculator or anything like that, but he lost everything (his grocery stores) in the ’29 crash, and committed suicide. How many of us have face slower deaths from stock market excesses, even unbeknownst? I have myself weathered at least 4 “downturns” that forced me into some fancy footwork including taking factory jobs so I would not lose my house. WTF?
1) Ignore the news.
2) NDX violent action during Mar 2020 bottom was longer, deeper and wilder in comparison to that of SPX.
3) Longer periods and volatility help market makers to accumulate more at the bottoms.
4) If the market popup too fast, market makers lose opportunity.
5) NDX made a new all time high, because there was more volatile in Mar.
6) Market maker use the media for stopping actions. Stopping actions are used at the tops and the bottoms
7) When there is selling in the background, good news are an excuse to send the market higher, to take out the shorts.
8) Market makers dumping, take profit, and send the market back up, Thanks the media. At the top they are testing demand. Existing demand screw up the plunge.
9) When the market is ready, market makers will send it down.
10) Volume is trending down, but volatility is up. Price swings, up and down, are longer and wider and crazier.
11) Since Jan 2018 the market misbehave.
FED is a cornered snake
At the top of the market in mid February, people, politicians, traders, investors, all had been bullish for a long time. Years. The market just ran out of fresh money and reasons to continue up. Just one month later everyone was totally bearish for a lot of good reasons.
So the market went up because all the nervous nellies had already sold leaving a lack of fresh selling.
Then the FED started pumping money into Wall Street, like never before, but not main street.
We are currently not at an extreme, bullish or bearish, as just mentioned. So the market will respond accordingly. Another week or two of an upward bias, then a few weeks of retracement downward IMO.
I occasionally buy a lotto ticket at the gas station. Now that I don’t get out much, I’m thinking of opening a Robinhood account and putting in my lotto money. Going all in too, may even fund it to $20.
Very adventurous! Can you not play Lotto online?
Maybe state lottos could band together to file class action lawsuits against the Fed to bar it from giving money to the stock markets, on the basis it’s robbing them of their due revenue as they can not fairly compete against the Fed free money printing capability. Las Vegas casinos could file friend of court briefs in support if not outright join the class action. After all, it’s only fair. States should get to partake in all the free money goodies being doled out.
I made the point before, on another thread, that Las Vegas will continue to be in trouble as long as millennials gamble on the stock market. No airfare or hotel costs involved as well. Robinhood is disrupting finance, the gaming industry, airlines, and hospitality.
Robinhood… I have always wondered exactly who they were supposed to be stealing from.
Predictions are hard, particularly about the future.
So when you come to a fork in the road, take it.
Here’s the “Fork in the Road” – No, REALLY!
200 Bellefontaine St
Pasadena, CA 91105
Wanted: Employment in the hangman industry. Willing to travel nationwide, will provide own car and black suit. Seeking to take a long term position in the upcoming market on banker necks. Do not expect free lunch, but travel expenses would be nice if paid in metals.
When money printer goes Brrrr…rrrrr…rrr……..rr…r………, the Doctor will be going short.
Wolf – Totally agreed that shorting is dangerous with the fed liquidity flow. If one wants to gamble, I suspect Oct/Nov will be volatile with a slightly greater than 50% chance of a “Blue Wave” according to the latest gambling odds, and also it seems like the census for another possible virus peak being Oct/Nov so everyone be careful with your investments this Fall…
So “perhaps” 4 months of futher gravey train is my best guess, yet I’m not very excited myself as SP500 going from Friday’s 3193 to say 2293 is only 6.3% gain, and say we hit 3500 by October….that is only 9.6%. Another 10% does not change my life in any way, nothing like the gains I already have from SP500 starting at 2200 to this point. Thus I personally have been cost averaging out. Will get back in around 3000, depending on what happens with virus and elections in November. Personally think only another outbreak can beat the Fed at his own game, as free money does not work in panic situations. I actually hope the virus does not return and we hit 4000 by end of 2021, that is the glass half full hopium which would be great.
Thanks for the free analysis. I do agree that the optics of having the SP500 at 4000 by this Fall would not be something the Fed, or any of the elites with power, would desire when looking at the big picture. Not sure the Fed can stop the gravy train easily, without crashing the real economy. The fed is in a real pickle…way too much power and responsibility for one human…
The whole situation is surreal. Go long, go short, cash, stocks, bonds, gold, Euros, Yen, etc…who knows. The economy has contracted somewhere between 25 and 40%. We really don’t know how many unemployed there are because of government programs and statistics at worst, hide or deceive and at best are unable to properly compute the real numbers. And yet the market is up because banks, corporations and financial institutions have gotten something like 80% of all government emergency support. Lets not forget rising hunger and long lines at food banks ( in cars no less), riots in the streets and a plague dashing about the world. I have no idea what is going to happen, or what anything is worth today, let alone tomorrow. All I know is we all live above a giant sink hole, and I don’t want to fall into it.
Wolf, I like how you mentioned about those mild mannered criticism that FED might get to maybe taper off QE. I think the FED will listen to these criticism about as much as when I used to listen to my mom nag about something and carry on as usual. The only form of criticism they’ll listen to is either coming straight from the Don or if these protest shift and gunning straight for them, but that would require the masses to understand what kind of stuff they are doing in the background, which is not very realistic scenario. QE might slow a little bit, although $60B a week is still insane in a supposedly free capitalistic market…moment market drops couple of hundred points..here comes papa Jerome to the rescue.
I dunno, I shorted the OMXSX30 today.
I think that “everything” is not as bad as expected and that this is already “baked in” with the last rally, so when those numbers come out about now, the markets will tank again like in March because “the expected” has now already happened and a new story has yet to be created.
That the USA is turning into Brazil (the movie) is not necessarily a bad thing either (since I don’t live there). Less of the random sanctioning should be good for everyones business; let’s call it “The Second Peace Dividend”.
The Fed will have to accommodate the issuance of 6 to 7 trillion of Treasury Bonds for the rest of the year, from one “estimate” I read. I am scared already.
Hope y’all have 1st-floor windows to fall out of …
Still gonna hurt, regardless of the safety glass!
America is moving towards the Bangkok model where a small coterie of wealthy sit in enclaves while the overwhelmingly poor sit huddled around the edges in the gloom. A bifurcation where the masses are deemed irrelevant to the economy. Markets in the 3rd world go up all the time.
Great analogy. Of course, that pretty much describes States like Florida already.
Many Homicidal/Suicidal thieving junkies
and professional victims won’t survive
the 4th of July.
Central Banks have created
the largest bubble ever,
dwarfing 1929 and 2000.
White-Collar Looting dwarfs
anything seen on the streets.
The Donald has not complained/tweeted about JP in a long time. I hope they’re happy about twisting the markets and adding to the wealth gap.
Wolf, is Stanley Druckenmiller is one of those people important to the Fed? In his interview this AM, he said that he “underestimated how many red lines, and how far, the Fed would go.” I am wondering if this is one of these mild mannered criticisms you discussed in the interview.
Yes it is.
Can’t recall a market correction based on the Fed withdrawing liquidity. The REPO window is one means of recycling previous liquidity injections. The market gains for two decades have lived off new money, and the notion that this money unwinds, through say margin calls, no longer applies. Investments are cross border, cross investment class, with third party derivative insurance. The only way these investments unwind is a currency event and those are unlikely while all currencies are losing value. A blowup in an EM, say Argentina would be met with massive liquidity. Some analysts crowing about Feds unique flexibility, which I doubt. Other central banks work without Congressional restraints. The second guy thinks it will be a political problem or debt problem. So far the FED has been out on a limb, out after curfew. Will the shoe drop? Both parties want the status quo. Only blacks don’t want the status quo.
@Ambrose – to refresh your memory about market corrections based on Fed liquidity withdrawals, google “taper tantrum”.
Its the Powell put…..Bernanke left his playbook….with some notes…