Unleash the Tepper!

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by James Corbett, The International Forecaster:

What’s it all mean? Are we at an inflection point in market land now, and the big bull market is over? Probably not just yet. That said, Quad hangovers can indeed extend several days, as traders reposition and rethink their futures roll outs. But make no mistake, the Fed’s statements, along with Bullard’s opinion, has changed the narrative some. We might see a much more volatile next two weeks as they try and square up all of this. Caution is warranted.

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You all know the story. Inflation measures for the past 3 months have been soaring, with the PPI and CPI making historic month over month gains. You also know that on Wednesday, Chairman of the Fed, J. Powell released the FOMC’s statement about policy.

There were several significant changes in the statement and they caught the eye of Mr. Market in a big way. In it they found that the Feds realize that inflation is hotter than expected, and they now think there will be two rate hikes in 2023.  That bothered them and the market was significantly lower heading into the 2:30pm question and answer period.

Even as Powell was speaking, the market didn’t know what to do. Basically, they had the written statement saying ugly things, and Powell was doing his best to “soften the blow.” But at the end of the day, it was clear that the market wasn’t happy. NOT because of rate hikes, that doesn’t happen until a year and a half at least. (if then)

What they feared instead was that the Fed would begin “tapering” its bond and mortgage buying. That’s a rational fear. Right now, they’re still spending 120 BILLION a month buying bonds and another 40 Bill, buying Mortgage-backed securities.

Well, think about it like this: The ONLY reason the market is as high as it is, is because of all the Fed accommodations. The DOW didn’t get to nosebleed valuations because of earnings growth, or anything else. It got there because Fed money always finds its way to the markets. So, it is indeed a real worry that if the Feds remove just a few ounces from the liquidity punchbowl, the overall market would come down.

Heading into Thursday morning, they still weren’t happy about what Powell’s cabal had said. The futures pre market were red across the board, as all they could talk about was “what if he starts tapering back the buying in the fall?!”  So, we were rushing headlong into an ugly open, and Wall Street was starting to panic over that.

What did they do? They got the dolts from CNBC to call David Tepper and get his opinion. See, Tepper runs money, lots of it. Billions. And he’s right more than he’s wrong, so he’s become somewhat of a legend. Sort of like “When Tepper speaks, markets listen” sort of thing. Well, Tepper said he loved how Powell handled things and then said “the market’s fine.”

Well, that’s all it took, especially in tech land. The NASDAQ went green minutes after all the other financial outlets picked up the Tepper news and plastered it all over the web. It looked for a few minutes like Thursday was going to turn into a big bright green day.

But as the morning wore on, the DOW just wasn’t buying it. While the NASDAQ was up over 120 points, the DOW was hitting the day’s low, off 399 points. The DOW at that point was down 1000 points in just nine sessions.

You know the markets in trouble when they have to unleash the Tepper. So, what’s the big worry? The worry is what I mentioned above. It’s pretty basic logic. If gobs and gobs of Fed money ultimately ends up in equities, and those gobs send the markets to all-time highs, then it stands to reason that less gobs of fed money will have the effect of a falling market.

You know that. Tepper knows that. The members of the FOMC knows that. But you’re not supposed to know that. You’re supposed to think the market is at these nosebleed levels because everything’s so good. Well, all the above-mentioned groups know that things are NOT good. On that very day they brought Tepper out, first time unemployment claims jumped higher, well over 400K people seeking monetary help. Things aren’t so hot when almost half a million people need unemployment help.

I could NEVER be a Fed member. I couldn’t look at the reporters and lie like they have to. But Powell is pretty good at it. He knows inflation is somewhere north of 18% but he admits that it’s a bit hotter than they expected at 3.4%. Really? 3.4?  Used cars went up 17% in two months.

Now, he says that this is all temporary because of supply chain issues. I have no problem with that, because yes…some of this is because of more demand than supply. But let’s not kid ourselves. The Chapwood index, which measured the price of 500 common goods in 50 US cities, recorded inflation between 7% and 12% every year from 2015 – 2019 where it mysteriously ended reporting.

My point is that the Feds continually say they have a target of 2% inflation, when for years it’s already been 10%+ and now with the covid baloney on top, it’s 18 – 22%. So yeah, maybe some of that works its way off, but we’re NEVER going to see his mythical 2%. I don’t think we’ll ever seen under 12% again, not with those very fed’s spending trillions.

They’re boxed in and they know it. Their only choice is 1) continue blowing the bubble, or 2) stop blowing the bubble and we crash. Oh, and by “we” I mean the stock market AND what’s left of the economy. So much of modern life is tied to equities, it’s been said by some big-name people that keeping the market up is a matter of national defense. And so they’ve done that, but to extremes.

Taper off the buying and then hike rates, we implode. Continue on the current path and a wheelbarrow full of dollars will buy a gummy bear. They are completely boxed in. But, in a way, they don’t mind. If you haven’t noticed, the Fed with all its trillions in spending, has literally been buying up America. Since the elites have said that they see a world where you don’t own anything, and you rent all your needs from them, it makes sense seeing the Feds buying anything not nailed down.

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