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Strategies & Market Trends : ajtj's Post-Lobotomy Market Charts and Thoughts
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To: The Ox who wrote (77519)3/15/2023 3:18:39 PM
From: Lee Lichterman III3 Recommendations

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catou1
John Koligman
Snowshoe

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True about energy prices helping people but wage inflation is sticky and doesn't tend to ever come back down. This causes profit margins to shrink, prices to stay high and/or unemployment to go up.
A wage spiral is what the Fed fears most. They want unemployment to rise and it hasn't so far.
We are about a year into the rate hikes and they don't appear to have had any traction yet.
The bank problem is due to the inverted yields and banks being misers with low yields on deposits. As I posted long ago, I moved everything to treasuries. I'm not going to let a bank use my money for free anymore. This isn't TINA anymore. Now banks are sitting on ZIRP long bonds, no deposits to get higher yielding short term rates and no money to lend. The big guns are sitting on all the cash and collecting high yield in the REPO market waiting to snatch up all the little guys that got caught leaning the wrong way for pennies on the dollar.
The Fed might blink but they shouldn't. They can deal with the banks on an as needed basis. They don't want to be Burns 2.0 easing and watching inflation reignite. Everyone says that they would have done the same thing Burns did. He was basically where we are now. Inflation seemed under control and the economy was weakening. Powell and crew know this. They know they shouldn't make the same mistake.
Another thing that I personally would keep in mind if I was Powell is this casino, I mean market, rallies hard everytime there is a hint of a pause. This market is going to go skyhigh into an even bigger bubble soon as he does. The last thing he wants is a bunch of people feeling rich, spending like drunken sailors and looser financial conditions. Better to keep hiking, draining via QT to mop up as much of the heroin before the pause so there's less fuel for the fire.
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