Federally Fueled Thursday – Did Powell Actually Say Anything That Bullish?

I wanted an unbiased opinion so I asked Robo John Oliver to comment first:  

😱 Did Powell Actually Say Anything That Bullish? The short answer: No. The long answer: Nooooooooooo.

But don’t tell that to our friends in the mainstream media. They’ve apparently discovered a new form of alchemy where they can turn Fed Chair Powell’s cautious mumbling into pure market gold. It’s like watching a group of overeager cheerleaders trying to hype up a chess match.

Let’s break it down, shall we? Powell essentially said, “We’re not confident we’ve achieved a sufficiently restrictive stance.” In human speak, that’s “We might need to keep tightening.” But somehow, the financial media heard, “Free money for everyone! Buy stocks now!“

It’s as if the entire financial press corps is suffering from a collective case of wishful thinking so severe it would make Pollyanna look like a doomsday prepper.

And let’s talk about this obsession with rate cuts. The Fed’s target inflation rate is 2%. Current inflation? 4.1%. Last I checked, 4.1 is still greater than 2. But apparently, in the upside-down world of financial media, that’s close enough for jazz.

The disconnect between reality and media narrative is so vast, you could fit the entire U.S. national debt in there. Twice.

But here’s the kicker: This isn’t just harmless fun. This is the financial equivalent of telling people it’s safe to pet the nice bear because it’s wearing a tutu. It’s irresponsible at best and downright dangerous at worst.

The media is not here to give you sound financial advice. They are here to keep you glued to your screens, watching ads for products you don’t need, bought with money you don’t have.

Remember, folks, the last time the media was this bullish about the market, we ended up with the 2008 financial crisis. It’s like they’re using the “This is Fine” dog as their financial analyst – and that dog’s name is, of course, Cramer!

The financial media, both television and print, operates under a façade of providing valuable information to investors. However, beneath this veneer lies a more sinister purpose: to funnel as much money as possible into the markets, regardless of whether or not it is in the best interest of the individual investors.

This profit-driven motive is deeply rooted in the symbiotic relationship between financial media outlets and their advertisers, primarily financial institutions and brokerages. These sponsors have a vested interest in maintaining a constant influx of capital into the markets, as it directly impacts their bottom line through fees, commissions, and asset management charges.

Historically, we can trace this phenomenon back to the 1990s, when financial news networks like CNBC gained prominence. The dot-com boom of the late ’90s saw these networks transition from providing sober market analysis to becoming cheerleaders for the new economy. They created a culture of FOMO (Fear Of Missing Out) that persists to this day, urging viewers to jump on the bandwagon of every market trend, no matter how speculative.

Phil’s note: There was a great clip of John Stewart highlighting all the BS from CNBC during the Financial Crisis but it’s been redacted from the web. We are truly living in an Orwellian nightmare – where the rich and powerful feel free to erase the past if it displeases them.

This FOMO-driven approach has had profound consequences. During the 2008 financial crisis, many financial media outlets continued to push a bullish narrative even as the foundations of the economy were crumbling. They amplified the voices of optimistic analysts while marginalizing those who warned of impending doom. The result? Countless retail investors were left holding the bag when the market finally crashed.

The media’s role in promoting market participation at all costs is particularly problematic for average investors. These individuals often lack the expertise, time, and resources to navigate the complexities of the market effectively. Yet, they’re constantly bombarded with messages suggesting that they’re missing out if they’re not fully invested.

This relentless push towards market participation creates a churn that primarily benefits the financial industry, not individual investors. Every trade, every reallocation, every new investment product sold generates fees. These fees, while seemingly small, compound over time, significantly eroding returns. A 2016 study by the Economic Policy Institute found that the average American household loses $155,000 over a lifetime to investment fees.

Moreover, the media’s focus on short-term market movements and “hot” stocks encourages frequent trading, which has been shown to underperform simple buy-and-hold strategies for most investors. A landmark study by Brad Barber and Terrance Odean found that the most active traders underperformed the market by 6.5% annually.

The financial media’s influence extends beyond just encouraging market participation. It shapes the very narrative of what financial success looks like. The constant parade of billionaire investors and corporate titans on financial news programs creates an unrealistic benchmark for the average investor. This can lead to excessive risk-taking and financial decisions that are misaligned with an individual’s actual goals and risk tolerance.

In essence, the financial media operates as a massive marketing arm for the investment industry. Its primary function is not to inform, but to persuade. It sells the dream of easy wealth, the fear of missing out, and the illusion of control in an inherently uncertain environment. All of this serves to keep the wheels of the financial industry turning, often at the expense of the very viewers and readers they claim to serve.

This is not to say that all financial media is inherently harmful or that the market is always a bad investment. However, it underscores the critical need for financial literacy and skepticism when consuming financial news. Investors must recognize that the interests of media outlets and their sponsors are not always aligned with their own financial well-being.

In an age of information overload, the most valuable skill an investor can cultivate is the ability to filter out the noise and focus on fundamental principles of sound financial management. This might mean ignoring the latest hot stock tip, resisting the urge to constantly check portfolio values, and instead focusing on long-term financial planning that aligns with personal goals and risk tolerance.

The path to financial well-being is rarely as exciting as the financial media would have us believe. It’s often paved with boring, consistent choices: living below one’s means, regular saving, and diversified, low-cost investing. But these unsexy truths don’t drive ratings or generate clicks, so they’re often drowned out by the cacophony of market hype and speculation.

As we navigate this landscape, it’s crucial to remember that true financial wisdom often lies in what the media isn’t saying, rather than what it is. The most valuable investment advice might just be to turn off the financial news and focus on your own financial journey, guided by patience, discipline, and a healthy skepticism of those who claim to have all the answers.

So, what is an ordinary investor to do? Well, for starters, maybe don’t take financial advice from people whose job it is to sell advertising. It’s like asking a fox with a journalism degree and a penchant for hyperbole to guard your henhouse.

Instead, do your own research. Read the actual Fed statements. Look at the real economic data. And for the love of all that is holy, don’t make investment decisions based on what some talking head on TV tells or any ad-dependent media tells you.

Because at the end of the day, the only thing the financial media is truly bullish on is their own ratings. And that, my friends, is the kind of inflation we should all be worried about.

This has been Robo John Oliver, reminding you that in the world of finance, if it sounds too good to be true, it probably is. And if it’s coming from a mainstream media outlet, it’s probably trying to sell you something. Good night, and good luck!

Wow, that was more than I bargained for but too good to cut! Anyway, as I noted in the Webinar and in Member Chat yesterday – I don’t see the Fed’s statement as being that bullish – the MUCH shorter statement than RJO just made is that the Fed has said they are very data-dependent and the data does not yet support a cut – nor is it likely to in the next 45 days.  

That starts with today’s Productivity Report, which came in at 2.3% (way up from 0.4% in Q1) and that has dropped Unit Labor Costs from 3.8% to 0.9% for Q2 and that’s great for our Corporate Masters and in now way, shape or form indicates an economic slowdown – so why would the Fed be lowering rates? 

Typically, rate cuts are implemented to stimulate a slowing economy or combat deflationary pressures, neither of which seem present based on this data. The Fed’s dual mandate is price stability and maximum employment. The current data doesn’t suggest a need for stimulus on either front. Improved productivity and lower labor costs generally boost corporate profitability, which doesn’t align with the need for stimulative monetary policy.

The Bank of England did lower their rates this morning by 0.25 to 5% – as was expected. The Pound has already fallen 2% in the past 30 days along with the Euro, after the ECB left rates unchanged at 3.75% at their July 18th meeting. The Dollar is already back over 104 and we’ll see if we’re back over 105 next week – which then puts Japan back on the mat.