When in doubt, I always turn to This Is Spinal Tap for my financial acumen. When our intrepid heroes are stuck in a hotel lobby by the incompetence of their manager, Ian, they run into Duke Fame, an old acquaintance from their large-stadium touring days, who is obviously still successful, having sold out the local "Enormodome."
Nigel, Derek and David describe Duke thusly:
"Wanker. What a wanker. What a wanker.
No-talent sod. He's got this much talent. This much, if he's lucky.
We carried him. We had to apologize for him with our set.
That's right. People were still booing him when we went on.
It's all bull. It's all hype."
Yes, I would describe that adulation that Fin TV gives to Fed Chair Jerome Powell in the same way. It's all bull. It's all hype.
Powell has been so relentlessly feckless in the face of a not-seen-in-40-years wave of inflation, that the markets are very worried. In fact, here's what Goldman Sachs reportedly said:
The four-session tech unloading marked the biggest sale in dollar terms in more than 10 years, reaching a record since Goldman Sachs' prime brokerage started tracking the data.
Those four sessions encompassed the period ending yesterday, and the Nasdaq is down yet again today. This move -although we are heading back toward the flat-line as I write this - is a clear, unadulterated rejection of Powell's particular brand of money printing. Check out this link to Trading Economics if you can stomach reading the U.S. Treasury's M1 figures. Extraordinary.
This is what happens when market sentiment shifts. I have seen it many times, going back to my days working as a high school intern in the financial mecca of Lebanon, Pennsylvania in 1987. I have learned many clichés in the past 35 years, but "the stock market follows the bond market" is a useful one today.
No one, or certainly no hedge fund manager, wants to be on the other side of a back-up in long rates, and that is exactly what we are seeing this week. Rates on the 10-year UST have risen 29 basis points in the past month, coupled with a 34 point back-up in the yield of the 30-year UST.
The potential removal of the Fed's artificial support for yields is having exactly the impact economists would think. Securities with higher duration, which generally includes the Nasdaq, as things like Tesla's (TSLA) self-driving cars, which don't actually exist today, have to be discounted back from a future launch date at higher interest rates. That gives you a lower present value. It's all economics!
And the one person that should know that, Jay Powell, is so out-to-lunch that D.C. just has no clue what is going on. This is the problem of the rule of unelected technocrats. They sip their chardonnay at cocktail parties and do not give a damn that inflation makes the prices for things we use everyday - and try to obfuscate by presenting the numbers "ex-food and energy," as if no one drives or eats on a daily basis - rise. They don't care.
My head has exploded so many times in the past six months listening to Powell pontificate about transitory inflation, but it was actually his European counterpart, Christine Lagarde, who pushed me over the edge. She mentioned that she was aware of inflation, because, shock, horror, she actually shops for her own groceries. You know who else does? Everyone! But these no-talent wankers are so removed form the plight of the average citizen that they don't know that.
They send each other idiotic messages on Twitter (TWTR) and think they are doing something. They aren't. The worm has turned and the game is changing.
I revealed my HOAX portfolio in my RM column two weeks ago, and snarkily used Cathie Wood's (ARKK) as a benchmark. Two weeks in, HOAX is up 3.6% and ARKK is down 14.7%. That's a mere 1830 basis points of relative outperformance, and I have had an amazing - unprecedented for one of my RM columns - amount of interest from retail investors looking to use my strategy.
Join me. I live in the real world.
Jerome, Janet , Cathie, Christine... they just have no idea. I will keep mocking them in my RM column... and outperforming them in my managed portfolios. I hope they are nauseous at the unprecedented bubble they have created with free money and apocalyptic mythologies, but I am not optimistic.