I’m writing this at about 8:00pm ET after digesting what I heard on the conference call between reporters for the mainstream media, both general news, business/financial and Chair of the Federal Reserve, Jerome Powell. The questions and the responses were in many ways surreal.
When it came to the questions posed they sounded like they were being asked by people who had absolutely no clue on what they were asking or why. It had the feel of “Hey, this one sounds like it will make me look smart, but I really have no idea what it means, but I’ll ask it anyway just to hear the answer.” The only issue worse were the answers many times coming from Mr. Powell seemed almost as inane. I was left slack-jawed far too many times for my own comfort.
With that said, here are the two main takeaways that say it all. First…
Approximately 45 minutes before the U.S. futures markets opened (e.g., 6:00pm ET) the Fed dumped interest rates by 100 bases points effectively bring it down to zero. (e.g., 0.0 to 0.25 target range) In addition they set the “printing presses” into hyper-drive with an additional $700 Billion of QE (quantitative easing).
So dismissive of whether it’s now QE or another round of the now analogous “Not QE” the Fed Chair basically stated (paraphrasing) “I really don’t care what its called.” All I’ll say to that is: All righty then!
Why this is so important to understand is the context, because this is on top of the already “throwing of the kitchen sink” at the markets just a week or so ago, and literally could not wait even three more days till its official conclave on Wednesday. This is absolute panic coming out of the Eccles Building. I use the example of China’s PBoC throwing not just “the sink” via its latest policy actions but “throwing the entire restaurant.” In equivalent terms – The Fed didn’t just “throw the restaurant.” It threw the “entire dining district of NYC!”
The true issue now stands to where I alluded to which there were two issues. The above is the first. The second?
Where over the past 11 years every time the Fed. surprised the market with even a hint that they were going to print more money – the markets rose, giving rise to the term “BTFD” (buy the f’n dip) When they actually delivered on that promise it was BTFD horns-over-hooves. But when the surprised the market and printed money like it was on sale? It was BTFD not just with backing up the truck, but backing up the earth-mover! Need I remind you of January 2019 after the famous “Call from Cabo” via a vacationing Secretary Mnuchin and the follow thru via Mr. Powell?
So what happened this time? Hint: Rhymes with “Lock-Limit-Down.”
The futures were open for as many minutes (and it was no more than about 10 or 15) to fill the sell orders to reach the shut off 5% down and are now closed till tomorrow’s cash open 9:30am ET.
And that dear reader is all you need to know to understand just how perilous of a situation these “markets” are in. Just as I warned back in November of 2019.
But it was I that was told “Mark, you worry too much, after-all, the Fed’s got our back!” And they knew this to be true, how?
Some guy that bangs buzzers touting financial advice told them so.
But then again he’s on TV so he must know what he’s talking about right? Right?
© 2020 Mark St.Cyr