Which Way Wednesday – Fed Edition

The next meeting is May 3rd.  

After that June 14th and July 26th and then no more meetings until Sept 20th.  At the last meeting (Feb 1st), Powell sent the market into a 45-day dive by saying the Fed was going to make sure Inflation was well and truly dead and it was expected rates would keep going up at all 3 of the remaining meetings before the summer break.  

Since then, the Consumer Price Index (CPI), rose 0.4% in February – which was was down from 0.5% in Jan but still much higher than 0.2% and 0.1% in Nov and Dec.  Overall CPI is up 6.0% over the last 12 months, with 0.9% in the last two months – does that seem to be slowing?  The index for all items less food and energy increased 0.5% in February (SA); up 5.5% over the year.   

This is NOT under control but, unfortunately, all this inflation-fighting has caused the banking sector to collapse and the Government has had to jump in with a $2Tn bailout, which will ultimately cause more inflation.  So it would be ludicrous for Powell to announce, 6 weeks after saying they are going to be tough on inflation, that the Fed will stop tightening – it will make the Fed seem crazy and out of control which, sadly, they are.  

Inflation is like the monster under the bed: It’s scary, it keeps you up at night, and no one really knows how to get rid of it…  The Fed has been trying to slay this monster with a combination of interest rate hikes, bond buying, and jawboning, but so far, it hasn’t worked at all.  With the economy already on shaky ground, it’s hard to see how the Fed can keep playing this game of chicken with inflation.

As investors, we’re left to wonder: is the Fed’s current approach to inflation really the best course of action? Or are they simply grasping at straws, hoping that something, anything, will work? And even if the Fed manages to get inflation under control, what will be the cost to the rest of the economy?  

We sent out a Top Trade Alert from our Live Member Chat Room (join us here) for one bank that we think is going to be a winner and then we added two more financials and two more short put trade ideas for our Long-Term Portfolio – as we’ve learned not to look $2Tn bailouts in the mouth – even when the Government refused to acknowledge it’s a bailout.  

That’s a joke from 2008 but the joke is still on us in 2023, isn’t it?  Still, as noted by former Senator, Al Franken, yesterday on the Daily Show – none of it really matters as we’re all DOOMED anyway.