Jerome Will Protect His Ego At All Costs
Imagine you’re Jerome, if you don’t deal with inflation you’re doomed to become Neville Chamberlain
Everyone knows what is broken in markets, Jerome has made inflation his mortal enemy. Using “first principles” on this issue, Jerome’s ego will not allow him to knowingly “ruin” his legacy. He knows everyone is watching and inflation put him center stage more than a Trump tweet. He’s fighting for how he is remembered more than he is fighting the current issues of the day.
When the man with the unlimited bank account wants something, other people become collateral damage. A lesson of history we should all heed is, “A man driven by ideology is a dangerous man”. Imagine you’re Jerome, if you don’t deal with inflation you’re doomed to become Neville Chamberlain. Do you want to be remembered as the person who put the world on the path to a financial equivalent of a World War? Or would want to be remembered like Winston Churchill who was publicly humiliated before and after war but now is revered?
Historical figures are remembered for moments in time, not their lifetimes. Jerome knows he is in his moment of history. Failure is an option but then he is labeled as a failure, casting a shadow of humiliation upon his name and family tree. If people respect a Kennedy for the name, what do we think of a Ponzi? More important than any rate increase is the legacy Chairman Powell must craft from here until his last day.
Reviewing markets, it’s clear we’ve entered a world of remarkable pain. Pain at the pump, grocery story, retirement account and now in the workplace. Layoffs are here.
The ease in firing workers is unprecedented. Decentralized working environments allow for nearly automated firings. This style of de-humanizing uprooting of a life will add to angst in society. Once recessions, layoffs and inflation are in the common vernacular it’s hard to remove them. People still say GFC and expect everyone to know what the acronym means. Same common memory at work here.
If sentiment truly shifts in the culture we have a huge issue to deal with for longer than any interest rate which we can see in stocks.
The SPY 0.00%↑ was down for the week but it's still up for the rolling 15 days! Which. is nuts, we could fall a lot to simply price in the proper rate hikes in the future. Jerome will get his wish and the SPY 0.00%↑ will be $300. There is no price too low for fed.
The QQQ 0.00%↑ had a bit worse of a week but the 15 day rolling is still positive. We have a setup to short any bounce here. The Santa Rally could come at anytime but for now, stay vigilant.
IWM 0.00%↑ has me most surprised because it looks bullish to the eye. The week return wasn't horrible and the 15 day rolling return is over 7%. This leads me to believe shorting small cap growth with high multiples is the place to be for the next 2 months. Shorting earnings on shitty tech companies in the Russell is going to make some people a fortune this quarter.
When I say, I want to short small cap growth let me show you what’s possible. This week APPN 0.00%↑ showed you how easily a darling can become dumbbell in a lake. They reported earnings this week and were down 22% for the week.
