My focus today on that bit of reality... versus "market pundits" predictions...
Consensus emerging that "the Fed is lying"... still leaves dispute re which elements they're lying about... and more... not about "if" any more, but still confused about "how" it matters that they are... All done with a straight face in not addressing the "problem" of policy... or the management of expectations... deliberately based on lies... as the lies fail ?
The optimism... as it chooses to ignore basic things like... the truth... becomes a parody of itself... as based in hope that the lies MUST work... because we want them to... as a proof "the Fed cares" and "they're here to help"... and as reassurance that the Fed has all the capacity required to stop a bear market in its tracks... if they want to... and create "undervaluation" out of... a falling knife trade... because "powerful tools"...
And, as can... why wouldn't they want to... manipulate the trade in that way ?
But, the "powerful tools"... are needed in fighting inflation... and are only able to be used in reducing the market bubble fostered in asset prices... which seems it is the only bit of inflation they really can control ?
The Fed is not looking out for you... but are doing what they judge they must to retain "control"... to preserve their own power to make mistakes... which perhaps, given the "miss" on transitory and the inflation continuing to accelerate through their predicted "peaking" in March and April... does not mean "keeping market prices elevated"... rather than the opposite. They are taking markets down now... because doing so is the "powerful tool" they have to convince people to worry that deflation is a bigger risk than inflation... so, liquidity that QE had already throttled back to a negative velocity... has to be throttled back more... as it begins accelerating out of decades of suppression of its own accord ?
That has "market optimists" either encouraging leaping into the falling knife trade here... or "predicting a bear market rally"... even though "technically" only having not yet or just entered a bear market... depending on the index you choose... while pretending NASDAQ being in a bear market doesn't matter... if you focus on the SPY which (maybe) isn't... depending on where you draw your lines ?
"What if"...
Ends up offering only more of the same old in "the market could go up, or it could go down"... only more so...
But, while it requires a particular brand in the lack of situational awareness to see current circumstance as positive... they avoid that... and side with "bear market rally"... does not mean end of the bear, or new all time highs coming soon...
See very little discussion of the "how to"... in right sizing a controlled demolition of a market bubble... by "pulling the plug" using "powerful tools"... while raising rates only incrementally and ephemerally... and threatening, but not yet actually engaging in "QT"...
It probably tells you all you really need to know... that QT being mentioned... causes a liquidity crisis that drives market failures ? And, that's what the "optimists" are betting on... is that "QT" is the lie being told... as things are bad enough after fourteen years of QE that they can't possibly get out of this... and therefore they won't... which is great... since it requires... the Fed has already lost control... and more QE and lower rates to come means markets must resume a march higher ?
In the early days of Biden's team taking control of the economic machinery... I pointed it out a couple of times... that the operation in control of the economy... works much like a pit crew in auto racing... and they had dropped the lug nuts a couple of times early on... not instilling much confidence. That lack of confidence is now proven a more than valid concern... and, yet... is leaves some expecting that what's needed to win the race... is to inject a bit more nitro... knowing that will likely have the wheels come off... at best... or result in a
"rapid disassembly mode" at worst ?
"The market" seems not to have adopted a model for understanding or even parsing the risks inherent in "too much of a good thing" being a not good thing. The market is lying on its death bed... and they're insisting just a little bit more crack cocaine will rapidly cure all of what ails it ?
So, they avoid all that "reality" bit... and focus on... the benefit of the fact the Fed is lying to you... about what they intend... as they probably won't really do what they say they intend to do... maybe... ?
I don't see a "plan" that works... at all... much less to engineer "a soft landing"..
They're probably not wrong that administering another jolt of epi might cause a spasm... or that hitting the market with the paddles will have it jump...
But, as far as economic reality... impact on "the economy" and its residuals... versus realization that a huge part of the problem has been the massive bubbles inflated in assets, including excessively high stock prices...
I don't see anyone explaining how delivering that jolt... solves any of the Fed's problems ?
The Fed likely wants to avoid having the markets melting back to 2001 levels in a few weeks time...
But, they also can't succeed in what they do want to accomplish... as long as optimists continue their refusal to capitulate and accept that markets have been... and still are... over-valued... with that not giving a reason that they should become more overvalued still... just now ?
Other pundits are focused on thinking... we need some sort of an "event"... a Lehman moment... that will crystalize that understanding with revised situational awareness... that penetrates that bubble of optimism... as bottoms are not ever made... while the same old from optimists have them see each new leg lower... as a launching pad for the next bear market rally... even before we've moved 5 points into bear territory... having removed less than half of the last years blow off top ?
In the game of MOPE driven expectations... the failure of transitory requires... a larger shift in expectations is necessary in order to defeat inflationary expectations becoming "embedded"... and converting expectations into self fulfilling prophecy... And, in that battle... the Fed is far behind the power curve... and already losing.
Restoring the Fed's credibility... isn't going to happen... with inflation continuing to accelerate... at a pace that proves the "transitory" fib... is not the policy "outlier"... but the policy liar outed...
|
