Micromanagers

The Fed can't get out of their own way.  They are worst type of manager.  The micromanager.  Always having to do something.  Always saying too much.  Always reacting to the markets. Remember, their forward guidance is worth the amount that you paid for it, nothing.  They are the same clowns that predicted zero rates until 2023.  Team Transitory throughout 2021.

Apparently, the Fed is starting to feel some heat.  Not from the inflation readings.  From the weak stock market.  That inflation fight isn't so urgent, even with a CPI reading at 8.3%.  The stock market selloff has shaken their convictions.  All the permabears calling for a recession has infected their psyche, their fear of a hard landing.  At less than 1% Fed funds, there is already talk of a pause!  While you had the highest CPI in decades.  You can't make this stuff up.  No wonder the market always believes the Fed is eventually going to come to the rescue.  That's been conditioned into investors since 1987.  

The Fed clearly doesn't fear high inflation.  They probably think its still transitory, and if they just talk about fighting inflation, the inflation will just go away.  They believe their own BS about supply chains eventually resolving and lowering prices.  I'm sure they'll find a way to blame Putin and the war for the inflation, to absolve themselves of any responsibility for this mess.  Powell is about as nonchalant as can be when he makes these rate moves.  He does the minimum expected, and is loathe to surprise the market with anything too hawkish.  He says he's worried about inflation, but he doesn't act like it.  Going for 25 bps in March even as commodity prices were surging higher along with the CPI because of Russia/Ukraine.  Taking 75 bps off the table at the May meeting.  What's his next dovish stunt?  Talking about pausing the rate hikes later in the year to observe how the rate hikes are digested?  

Its almost as if he's an ambulance driver on some scenic drive, taking his time getting to the destination, stopping here and there, smelling the roses, taking pictures, while the destination is a disaster area, filled with masses of injured and dying.  There is no urgency to hike rates.  There is a huge mismatch between action and words.  

A hard landing for the stock market is in process.  With the valuation excess, its unavoidable, even with Powell having a Bernanke moment, cutting rates to zero while inflation is high and then going to QE again.  The Fed cutting rates in 2001 didn't stop the market from going down for another 18 months.  The Fed cutting rates in 2007/2008 didn't stop the market from going down for another 17 months.  

We're not even at that stage, the Fed is still tightening!  That's what's so crazy about this market, its skipped all the steps required for a classical bear market, and gone straight to a bear market as soon as the Fed started hiking rates.  That's usually happening in the middle of a bull market, not at the start of a bear market.  That's how late Powell has been.  

This is unlike any Fed cycle I've ever seen.  Its a 1970s type of environment, which most investors have no idea how to trade.  In the 1970s, stocks and bonds were poor investments, and commodities were great investments.  The macro environment feels like 1973, and the investor asset allocation feels like 2000. 

With the Fed so late, by default, they will be late to cut rates, although I do expect them to eventually get to zero and do QE again by 2024.  Even with high inflation.  But the market will have to stay in a bear market and continue to trend down, like I expect for several more months before the Powell pivot.  Will he pivot to try to prevent a hard landing in September?  October?  My bet is on September.  I don't think he'll let the markets keep going down, it makes him nervous.  Clearly high inflation doesn't.  

A huge rally over the last 2 days, and gapping up in pre market.  I sold all of my index longs yesterday, a bit too early.  Now waiting for the bulls to get overaggressive on the long side to short NDX.  12600-12800 is my ideal entry point for a NDX short.  Expecting the Nasdaq tech names to be lagging the market until the Powell pause.