As promised, here is the podcast I recorded with Anthony Crudele. There is a great deal expressed in 52 minutes following the June 16 FOMC meeting. The fact that Chair Jerome Powell kept on keeping-on with full blown asset purchases leaves me in the camp of very little change regardless of the DOT PLOTS. As Powell said about the FED (and Wall Street economists), not a very good record of forecasting.
It is an important point to make as I did in the interview with Anthony: Powell cherry-picked his transitory inflation indicators by specifically mentioning LUMBER and USED CAR PRICES. As Simon and Garfunkel sang 50 years ago, a man hears what they want to hear and disregards the rest. The FED has been, is and will be GUILTY of bias fitting in an effort to control the narrative they desire to foist upon the investing public.
On Monday the markets across many asset classes breathed a sigh of “hawkish” relief as equities, precious and industrial metals, energy and foodstuffs all found some support. Even the DOLLAR lost some of its recent strengths as markets try to determine if the FED has moved to a tighter monetary policy. Trade this environment with patience and enter markets at levels of your choosing and pain threshold. We’ll continue to monitor the Chinese yuan to see if the notion of China’s impact on inflation continues to have credibility.
On Tuesday Powell is set to testify before the Select Subcommittee on the Coronavirus Crisis in the House of Representatives. The prepared testimony has already been released and it pays homage to the expected transitory nature of recent inflationary pressures. Powell returned to the employment criterion nature of its mandate for more than last Wednesday’s press conference,donning the cloak of Minister of Social Justice. As he wrote: “The economic downturn has not fallen equally on all Americans,and those least able to shoulder the burden have been the hardest hit.In particular,despite progress, joblessness continues to fall disproportionately on the lower-wage workers in the service sector and on African Americans and Hispanics.”
As a moral philosophy this is to be applauded. However, as the stance of the world’s most significant central banker with the fiduciary responsibility of the world’s reserve currency it is to be abhorred. We didn’t hear a PEEP about this last Wednesday as Powell was evidently cowed by Paul Tudor Jones. Enjoy the Crudele broadcast as we try to understand which master Powell desires to serve.