The Week in Review

Let's take a look at why the market threw  a (short-term?) tantrum as I elaborate on both of these points.

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Powell's press conference was very hawkish:

Jay really crapped the bed during his presser.  I was pretty surprised that he did so poorly as he usually is pretty good at obfuscating and soothing market participants.  I believe that this time he did so poorly because the FED is running out of options.  Remember I have been saying over and over that the FED is stuck:  If it raises rates, the markets falls and banks will falter, hugely.  If it lowers rates, then inflation will soar (more) and then the market will go bananas to the upside for awhile at least.

Here are some of the things that stood out to me as being hawkish; page references are to the transcript above:

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• Page 3: "the median projection is unrevised for the end of this year but has moved up by 1/2 percentage point at the end of the next two years"

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• Page 5: "the majority of participants believe that it is more likely than not that it will be appropriate for us to raise rates one more time in the two remaining meetings this year"

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• Page 6-7: "12 wrote down another single hike in one of the next two meetings that we have between the end of the year"

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• Page 7: "we've learned all through the course of the last year that actually we needed to go further than we had thought"

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• Page 8: "I think broadly stronger economic activity means we have to do more with rates"

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• Page 14: "is the heat that we see in GDP, is it really a threat to our ability to get back to 2 percent inflation"

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• Page 21: "You know, rates have moved up significantly"

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• Page 25: "by many forecasts, many, many, many forecasts call for growth to moderate over the course of the next year"

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The market was planning for CUTS and via the FOMC statement and Powell's answers, the FED is looking to hike AND has pushed out by a year when cuts could begin.  While Uncle Jay was pretty sanguine about it these two changes are a big deal.  You probably heard it already but this meeting can be summed up in a simple statement: "Higher for longer."  That is most definitely NOT what the FED was saying at its last meeting.

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Powell's contradictions and ridiculousness:

Powell made a lot of contradictory statements and statements that were just pure bullshit.  I offer the following list, with my comments, as examples.

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• Page 6: "So I wouldn't want to bestow upon it the idea that it's really a plan" - Well that's just great.  So you geniuses don't have a plan?

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• Page 7: "So we don't really know" - Super.  Just super.

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• Page 8: "rather than pointing to a sense of inflation having become more persistent, we've seen inflation be more persistent" - wtf? 

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• Page 10: "I've always thought that the soft landing was a plausible outcome, that there was a path, really, to a soft landing" - wait, I thought that a "soft landing" was the goal??

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• Page 11: "You're seeing, you know, inflation coming down." - oh realllly.  And where do you see inflation coming down?  Food? Gas? 

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• Page 13: "No one will look back at this and say, hey, we made a plan. It's not like that at all." - agreed, I certainly am not going to say any of them have a plan.

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• Page 15: "you're coming into this with an economy that appears to have significant momentum." - wtf.  Where is the Fed seeing the economy having significant momentum??

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• Page 16: "a soft landing is a primary objective, and I did not say otherwise." - uhmm, yes you did, 

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• Page 18: "Headline inflation, of course, has come way down, largely due to lower energy prices, some of which is now reversing" - uhhmmmm, energy prices are not down.

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• Page 19-20: "That's why we look at 12 months" and "we're also looking at six months and even three months, but really six months inflation" - so which is it? 3 months? 6 months? 12 months? 32 1/2 months?

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• Page 20: "And energy prices mostly don't contain much of a signal about how tight the economy is, and hence don't tell you much about where inflation is really going." - are you a freaking moron?

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• Page 21: "You know, rates have moved up significantly" and "But essentially, they're moving up. It's not because of inflation" - you have got to be f'ing kidding me.

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• Page 25: "If you're a person who spends all of your income, you don't really have any meaningful savings" - probably the single smartest thing he said - and no shit Sherlock.

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• Page 26: "I think overall households are in good shape." - maybe yours, and everyone else who lives in the swamp but didn't you just say that it was hurting low to moderate Americans?

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Wall Street is pissed because Jay was all over the place.  Usually his lies are much more subtle but this time, he managed to contradict himself a number of times within the span of 20 minutes.  I, personally, loved to see him finally paying the price for once.

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I have to note how many times he made it clear that this was a "group" decision.  Now why would he be so concerned with making sure the market knew this wasn't just him and that it really was everyone else???

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Finally, right on cue, the FED quietly announced a NEW program to buy back bonds, a day after he pooped his pants.  This is Quantitative Easing.  But I thought they were doing Quantitative Tightening???  This was a message for Wall Street: don't worry, we are warming the printers up -so your stocks will go up more.