Watch Live: Chair Powell Explains Just How Dovishly-Hawkish The Fed Is

Watch Live: Chair Powell Explains Just How Dovishly-Hawkish The Fed Is

While we feel a sense of deja vu all over again… again, this Fed press conference could be his most high-wire-act-like performance of Powell’s career as he balances rescuing the poor from soaring inflation with rescuing the rich from asset-wealth destruction.

Danielle DiMartino Booth, CEO and chief strategist of Quill Intelligence and a former adviser to Richard Fisher, the former president of the Dallas Fed, says:

“The Fed’s biggest challenge is figuring out how to implement policy measures that are hawkish enough to lower inflation, but that also keep financial markets afloat, because volatility in financial markets may bleed into an economy that is already showing signs of slowing. The Fed is faced with choosing the lesser of two evils.”

We know what side The Fed has been on for the last few decades…

But will non-transitory 7% CPI be the difference-maker this time?

Watch live here: (due to start at 1430ET)

Tyler Durden
Wed, 01/26/2022 – 14:25

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Fed Warns “Soon To Be Appropriate” To Raise Rates, QE Ends In March

Fed Warns “Soon To Be Appropriate” To Raise Rates, QE Ends In March

Since the last FOMC meeting, on December 15th, Gold is the lone asset-class that is higher while bonds and stocks have been monkey-hammered and the dollar is weaker…

Source: Bloomberg

All US equity markets are lower since the last Fed meeting with Tech/hyper-growth hammered and all the bubble-markets blowing up.

Financial Conditions have tightened significantly since the last Fed meeting (after easing dramatically into the Santa Claus rally)…

Source: Bloomberg

Rate-hike expectations have soared since the last Fed meeting too with March now fully priced-in and more than 4 hikes priced in by year-end. The last few days of market weakness prompted a dovish drop in rate-hike odds, but the last two days have seen it shift hawkishly once again…

Source: Bloomberg

And before we get to The Fed’s decision, there is also this chart to consider… President Biden’s approval rating has crashed below that of Trump’s

Source: Bloomberg

We suspect the politicians will learn that lack of jobs is way worse for being reelected than inflation… and indirectly pressure The Fed (if they haven’t already) to walk-back the QT and rate-hike trajectory plans… at least until after November maybe.

So what did The Fed say/do…

The market is pricing-in liftoff in March (followed immediately by QT) and four rate-hikes by year-end (just like The Fed’s “Dots”) – did Powell and his pals jawbone any of that hawkishly or dovishly today?

In a word: NO.

  • The Fed says it “will soon be appropriate” to raise funds rate.

  • The Fed says asset-purchases will end in March

  • And The Fed says that balance-sheet-shrinking (QT) will start after rate-hikes commence.

Arguably the Fed was ‘dovish’ because it did not bring forward the end of QE or explicitly name a time for QT.

*  *  *

Of course, we know what the stock market will do… at least to start with anyway…

*  *  *

Read the full redline below:

 

Tyler Durden
Wed, 01/26/2022 – 14:05

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Police Chief of Alabama Town That Was Getting Fat on Fines Steps Down Amid Bipartisan Outrage


policestop_1161x653

The police chief that defended a small Alabama town’s rapacious fining of drivers has resigned following media coverage and outraged calls for action from both Democratic and Republican state officials.

The tiny town of Brookside, with a population of less than 1,500, became a national news story last week when John Archibald of the Birmingham News reported that its mayor and Police Chief Mike Jones had embarked on a system of ramping up fines and forfeitures to bankroll its government. Archibald calculated that the town’s revenue nearly tripled across four years entirely from these fines, targeting primarily anybody passing through or nearby Brookside on Interstate 22.

This wasn’t just a speed trap to catch the unwary. The town is facing at least five federal lawsuits from people who claim that the police fabricated charges and retaliated against those who complained. The monthly traffic court was swamped with people attempting to fight or resolve traffic charges. By 2020, half of the town’s $1.2 million in annual revenue was coming from fines and forfeiture, and the money was being funneled to a disproportionately large police force for a small town.

Jones defended the town’s predatory practices to Archibald, seeing the mass fining as a “positive story” and saying he’d be able to get even more money with more officers. Within a week of Archibald publishing his story, Jones had resigned. Archibald wasn’t able to reach Jones for an explanation, and the town itself would only confirm he was gone.

It turns out everybody else understood the corruption problems with police going around fining people solely for the purpose of funding the police department. Both the state’s lieutenant governor (a Republican) and the chair of the state’s Democratic Party said they’re going to work on legislation to try to stop overly aggressive small-town policing that attempts to milk fines from drivers. There’s already a law in the state that stops cities with populations of less than 19,000 from stopping speeders on interstate highways. Brookside’s police have adapted to the rule by looking for any other possible justification to pull somebody over instead of speeding, like accusing drivers of following too closely or driving in the left lane (rather than just passing). Lawmakers are considering a bill to ban small police forces from ticketing highway drivers at all.

That would be good—pulling over drivers for minor traffic violations that aren’t actual safety threats creates unnecessary opportunities for conflict as it is.

One of the ideas lawmakers noted is the possibility of directing the revenue for fines and forfeitures away from police and general city funds. That’s a great thought that’s worth exploring. Police being able to keep what they seize is one of the primary motivators for fine and forfeiture abuse, and it’s obvious to everybody except for the mayor and the police department that’s what was happening in Brookside. Without that incentive, the police would not be sniffing around every single car it comes across for a potential score. And, incidentally, a town of 1,500 people with no traffic lights and only one store probably wouldn’t be able to afford 10 police officers, each driving a fancy vehicle.

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Oil Could Be The Haven Stocks Traders Need To Shelter From Fed

Oil Could Be The Haven Stocks Traders Need To Shelter From Fed

By Nour Al Ali, Bloomberg Markets Live commentator and analyst

Oil is starting to look like an unlikely haven from the stocks selloff in the run-up to anticipated Fed tightening.

Traders are pricing lower volatility in the commodity than in the Nasdaq and S&P 500. Barometers of market anxiety for both indexes have shot up recently, suggesting trader sentiment is souring. Meanwhile, the CBOE Crude Oil Volatility Index, which measures the market’s expectation of 30-day volatility of crude oil prices applying the VIX methodology to USO options, shows that oil prices are expected to remain relatively muted in comparison.

With a producer cartel to support prices, the outlook for oil is more sanguine, even if the Fed raises rates. The commodity has ample support, with global oil demand expected to reach pre-pandemic levels by the end of this year. The U.S. administration has been pushing oil-producing nations under the OPEC+ cartel to ramp up output, while the group has stuck to a modest production-increase plan and is expected to rubber-stamp another 400k b/d output hike when they meet next week. This means that oil is likely to stay a lot more stable than in recent years.

The relatively low correlation between the asset classes provide diversification benefits. The relationship between the S&P 500 and the global oil benchmark is weak and lacks conviction; it’s even weaker between the Nasdaq 100 and Brent crude contracts. The divergence in price action this week could indicate that stocks have been tumbling in fear of a hawkish Feb, more so than geopolitical risk alone. That would perhaps offer traders an opportunity to seek shelter amid stock volatility in anticipation of the Fed’s next move.

Oil might have tracked the decline in stocks at the beginning of this week, but the commodity is back to its highs now. It’s up close to 15% this year, while the S&P 500 is struggling to reclaim its footing after plunging as much as 10%.

Tyler Durden
Wed, 01/26/2022 – 13:45

via ZeroHedge News https://ift.tt/3u40JpA Tyler Durden

Police Chief of Alabama Town That Was Getting Fat on Fines Steps Down Amid Bipartisan Outrage


policestop_1161x653

The police chief that defended a small Alabama town’s rapacious fining of drivers has resigned following media coverage and outraged calls for action from both Democratic and Republican state officials.

The tiny town of Brookside, with a population of less than 1,500, became a national news story last week when John Archibald of the Birmingham News reported that its mayor and Police Chief Mike Jones had embarked on a system of ramping up fines and forfeitures to bankroll its government. Archibald calculated that the town’s revenue nearly tripled across four years entirely from these fines, targeting primarily anybody passing through or nearby Brookside on Interstate 22.

This wasn’t just a speed trap to catch the unwary. The town is facing at least five federal lawsuits from people who claim that the police fabricated charges and retaliated against those who complained. The monthly traffic court was swamped with people attempting to fight or resolve traffic charges. By 2020, half of the town’s $1.2 million in annual revenue was coming from fines and forfeiture, and the money was being funneled to a disproportionately large police force for a small town.

Jones defended the town’s predatory practices to Archibald, seeing the mass fining as a “positive story” and saying he’d be able to get even more money with more officers. Within a week of Archibald publishing his story, Jones had resigned. Archibald wasn’t able to reach Jones for an explanation, and the town itself would only confirm he was gone.

It turns out everybody else understood the corruption problems with police going around fining people solely for the purpose of funding the police department. Both the state’s lieutenant governor (a Republican) and the chair of the state’s Democratic Party said they’re going to work on legislation to try to stop overly aggressive small-town policing that attempts to milk fines from drivers. There’s already a law in the state that stops cities with populations of less than 19,000 from stopping speeders on interstate highways. Brookside’s police have adapted to the rule by looking for any other possible justification to pull somebody over instead of speeding, like accusing drivers of following too closely or driving in the left lane (rather than just passing). Lawmakers are considering a bill to ban small police forces from ticketing highway drivers at all.

That would be good—pulling over drivers for minor traffic violations that aren’t actual safety threats creates unnecessary opportunities for conflict as it is.

One of the ideas lawmakers noted is the possibility of directing the revenue for fines and forfeitures away from police and general city funds. That’s a great thought that’s worth exploring. Police being able to keep what they seize is one of the primary motivators for fine and forfeiture abuse, and it’s obvious to everybody except for the mayor and the police department that’s what was happening in Brookside. Without that incentive, the police would not be sniffing around every single car it comes across for a potential score. And, incidentally, a town of 1,500 people with no traffic lights and only one store probably wouldn’t be able to afford 10 police officers, each driving a fancy vehicle.

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Japan’s COVID-19 Strategy, Focused on Warnings Rather Than Mandates, Points the Way Forward


https://en.wikipedia.org/wiki/Tokyo#/media/File:Skyscrapers_of_Shinjuku_2009_January.jpg

Throughout the COVID-19 pandemic, people with different policy preferences (including me!) have played a game that goes like this: Look at a jurisdiction where the government adopted either relatively strict or relatively loose mitigation measures, then present its experience as evidence that you were right all along. Given that more rigorous comparisons of places with different policies have reached conflicting conclusions, such cherry picking remains tempting, despite its obvious drawbacks.

With that caveat in mind, Japanese virologist

By the end of February 2020, Oshitani says, he and his colleagues recognized three important facts about COVID-19 that were clearly relevant for policy makers weighing the costs of various disease control measures against their likely benefits. First, “the coronavirus was being spread by people who were asymptomatic or hadn’t developed symptoms yet.” Second, it seemed likely that “aerosols—tiny infectious particles or droplets suspended in the air—were playing a role in how the coronavirus was spreading.” Third, retrospective contact tracing, which aims to figure out how a confirmed carrier was infected, indicated that “the coronavirus was being spread predominantly by small numbers of infected individuals who then go on to seed super-spreading events.”

Based on an investigation of clusters in Japan, Oshitani and several other researchers reported in April 2020, “it is plausible that closed environments contribute to secondary transmission of COVID-19 and promote superspreading events.” Oshitani notes that “more data from public health centers in Japan confirmed that most Covid-19 clusters occurred in close-contact indoor settings, such as dinners, night clubs, karaoke bars, live music venues and gyms.”

While all this “has become common knowledge now,” Oshitani says, it informed public policy in Japan from the beginning. At a time when most countries and all but a few U.S. states were imposing broad lockdowns that closed schools and “nonessential” businesses, restricted social interactions, and forbade a wide range of activities, including many that entailed little risk of virus transmission, Japan took a less draconian, more targeted approach.

If COVID-19 “was being spread by aerosols and people could spread the virus before they developed any symptoms,” Oshitani writes, “it meant that Covid-19 was largely invisible and would be extremely challenging to eliminate.” Since “a strategy of containment would be too difficult,” he says, “Japan needed to figure out an approach to living with Covid-19.” The result was a public information campaign that emphasized the importance of avoiding “the three C’s”: closed spaces, crowded places, and close-contact settings. “The Japanese government shared this advice with the public in early March [2020],” Oshitani says, “and it became omnipresent.”

What did following the government’s advice mean in practice? That depended on “individual circumstances and risk tolerance,” Oshitani says. “Some people may be able to stay home. Others may remain silent on crowded trains as they commute to work to avoid spread. Some people may dine out but avoid sitting immediately across from one another. Most people are likely to continue to mask.”

Oshitani notes that social pressures may have played an important role in encouraging such safeguards even by people who otherwise were not inclined to follow them. “Japan has a tendency toward adherence and responding to powerful peer pressure,” he writes. “Not everyone may agree with preventive measures, but many are reluctant to face the disapproval of their friends and neighbors.”

But contrary to the conventional wisdom in most other developed countries, Oshitani says, “drastic measures, such as lockdowns, were never taken because the goal was always to find ways to live with Covid-19.” He adds that Japanese law “does not allow for lockdowns, so the country could not have declared them even if we had thought them necessary.”

How did that work out? “Broadly speaking,” Oshitani says, “Japan has weathered Covid-19 well.” If anything, that is an understatement. According to Worldometer’s numbers, Japan has seen 147 COVID-19 deaths per 1 million people. The rate for the United States is 18 times as high. The U.S. currently ranks 19th on Worldometer’s list of countries by COVID-19 fatality rates, while Japan is 154th. Even U.S. states that imposed lockdowns early and often, such as California and New York, have much higher fatality rates (about 2,000 and 3,300 per million, respectively) than Japan.

Japan is currently experiencing the same omicron surge that other countries have seen. Newly reported cases have exploded since early January. But as in other countries, the increase in daily deaths has been much more modest, thanks to vaccination, naturally acquired immunity, and the relatively mild symptoms this highly contagious variant tends to cause.

Oshitani, who describes the “three C’s” campaign as his brainchild, may be especially inclined to credit that policy for his country’s low fatality rate. He notes that Japan did impose “some travel restrictions for residents” and “has prohibited foreign tourists from entering the country.” Schools were closed in the spring of 2020, although without any measurable effect on virus transmission, and Japan has imposed restrictions on large gatherings. The country also has a relatively high vaccination rate: 79 percent of the population has received at least two doses, compared to 63 percent of Americans.

Nor should the “tendency toward adherence and responding to powerful peer pressure” that Oshitani mentions be discounted. While Americans responded to COVID-19 by sharply curtailing their outings even before they were legally required to do so, lockdowns may have had an additional effect. Given cultural differences between the U.S. and Japan, it is not clear how a strategy focused on warnings rather than mandates would have played out here. And as Oshitani notes, voluntary precautions, even without lockdowns, have a serious economic impact, so it would be a mistake to attribute all the hardships that U.S. businesses have experienced to government policy.

Some countries with much stricter COVID-19 policies, such as Australia, China, and New Zealand, have even lower fatality rates than Japan, while others, such as the U.K. and France, have fared much worse. The most we can safely say based on such simple comparisons is that neither lockdowns nor less invasive policies are consistently associated with death rates. And as I mentioned, more sophisticated attempts to measure the impact of lockdowns have reached divergent conclusions, ranging from large public health benefits to no significant effect.

While that debate will no doubt continue, we are, thankfully, beyond lockdowns now. As The New York Times noted yesterday, even Democratic politicians like Michigan Gov. Gretchen Whitmer and Pennsylvania Gov. Tom Wolf, who imposed some of the country’s most sweeping and arbitrary mitigation measures earlier in the pandemic, did not breathe a word about reviving that approach in the face of the omicron wave. The strategy that Oshitani describes, focused on giving people the information they need to make their own decisions about which safeguards are sensible and which risks are tolerable, points the way forward.

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Japan’s COVID-19 Strategy, Focused on Warnings Rather Than Mandates, Points the Way Forward


https://en.wikipedia.org/wiki/Tokyo#/media/File:Skyscrapers_of_Shinjuku_2009_January.jpg

Throughout the COVID-19 pandemic, people with different policy preferences (including me!) have played a game that goes like this: Look at a jurisdiction where the government adopted either relatively strict or relatively loose mitigation measures, then present its experience as evidence that you were right all along. Given that more rigorous comparisons of places with different policies have reached conflicting conclusions, such cherry picking remains tempting, despite its obvious drawbacks.

With that caveat in mind, Japanese virologist

By the end of February 2020, Oshitani says, he and his colleagues recognized three important facts about COVID-19 that were clearly relevant for policy makers weighing the costs of various disease control measures against their likely benefits. First, “the coronavirus was being spread by people who were asymptomatic or hadn’t developed symptoms yet.” Second, it seemed likely that “aerosols—tiny infectious particles or droplets suspended in the air—were playing a role in how the coronavirus was spreading.” Third, retrospective contact tracing, which aims to figure out how a confirmed carrier was infected, indicated that “the coronavirus was being spread predominantly by small numbers of infected individuals who then go on to seed super-spreading events.”

Based on an investigation of clusters in Japan, Oshitani and several other researchers reported in April 2020, “it is plausible that closed environments contribute to secondary transmission of COVID-19 and promote superspreading events.” Oshitani notes that “more data from public health centers in Japan confirmed that most Covid-19 clusters occurred in close-contact indoor settings, such as dinners, night clubs, karaoke bars, live music venues and gyms.”

While all this “has become common knowledge now,” Oshitani says, it informed public policy in Japan from the beginning. At a time when most countries and all but a few U.S. states were imposing broad lockdowns that closed schools and “nonessential” businesses, restricted social interactions, and forbade a wide range of activities, including many that entailed little risk of virus transmission, Japan took a less draconian, more targeted approach.

If COVID-19 “was being spread by aerosols and people could spread the virus before they developed any symptoms,” Oshitani writes, “it meant that Covid-19 was largely invisible and would be extremely challenging to eliminate.” Since “a strategy of containment would be too difficult,” he says, “Japan needed to figure out an approach to living with Covid-19.” The result was a public information campaign that emphasized the importance of avoiding “the three C’s”: closed spaces, crowded places, and close-contact settings. “The Japanese government shared this advice with the public in early March [2020],” Oshitani says, “and it became omnipresent.”

What did following the government’s advice mean in practice? That depended on “individual circumstances and risk tolerance,” Oshitani says. “Some people may be able to stay home. Others may remain silent on crowded trains as they commute to work to avoid spread. Some people may dine out but avoid sitting immediately across from one another. Most people are likely to continue to mask.”

Oshitani notes that social pressures may have played an important role in encouraging such safeguards even by people who otherwise were not inclined to follow them. “Japan has a tendency toward adherence and responding to powerful peer pressure,” he writes. “Not everyone may agree with preventive measures, but many are reluctant to face the disapproval of their friends and neighbors.”

But contrary to the conventional wisdom in most other developed countries, Oshitani says, “drastic measures, such as lockdowns, were never taken because the goal was always to find ways to live with Covid-19.” He adds that Japanese law “does not allow for lockdowns, so the country could not have declared them even if we had thought them necessary.”

How did that work out? “Broadly speaking,” Oshitani says, “Japan has weathered Covid-19 well.” If anything, that is an understatement. According to Worldometer’s numbers, Japan has seen 147 COVID-19 deaths per 1 million people. The rate for the United States is 18 times as high. The U.S. currently ranks 19th on Worldometer’s list of countries by COVID-19 fatality rates, while Japan is 154th. Even U.S. states that imposed lockdowns early and often, such as California and New York, have much higher fatality rates (about 2,000 and 3,300 per million, respectively) than Japan.

Japan is currently experiencing the same omicron surge that other countries have seen. Newly reported cases have exploded since early January. But as in other countries, the increase in daily deaths has been much more modest, thanks to vaccination, naturally acquired immunity, and the relatively mild symptoms this highly contagious variant tends to cause.

Oshitani, who describes the “three C’s” campaign as his brainchild, may be especially inclined to credit that policy for his country’s low fatality rate. He notes that Japan did impose “some travel restrictions for residents” and “has prohibited foreign tourists from entering the country.” Schools were closed in the spring of 2020, although without any measurable effect on virus transmission, and Japan has imposed restrictions on large gatherings. The country also has a relatively high vaccination rate: 79 percent of the population has received at least two doses, compared to 63 percent of Americans.

Nor should the “tendency toward adherence and responding to powerful peer pressure” that Oshitani mentions be discounted. While Americans responded to COVID-19 by sharply curtailing their outings even before they were legally required to do so, lockdowns may have had an additional effect. Given cultural differences between the U.S. and Japan, it is not clear how a strategy focused on warnings rather than mandates would have played out here. And as Oshitani notes, voluntary precautions, even without lockdowns, have a serious economic impact, so it would be a mistake to attribute all the hardships that U.S. businesses have experienced to government policy.

Some countries with much stricter COVID-19 policies, such as Australia, China, and New Zealand, have even lower fatality rates than Japan, while others, such as the U.K. and France, have fared much worse. The most we can safely say based on such simple comparisons is that neither lockdowns nor less invasive policies are consistently associated with death rates. And as I mentioned, more sophisticated attempts to measure the impact of lockdowns have reached divergent conclusions, ranging from large public health benefits to no significant effect.

While that debate will no doubt continue, we are, thankfully, beyond lockdowns now. As The New York Times noted yesterday, even Democratic politicians like Michigan Gov. Gretchen Whitmer and Pennsylvania Gov. Tom Wolf, who imposed some of the country’s most sweeping and arbitrary mitigation measures earlier in the pandemic, did not breathe a word about reviving that approach in the face of the omicron wave. The strategy that Oshitani describes, focused on giving people the information they need to make their own decisions about which safeguards are sensible and which risks are tolerable, points the way forward.

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Stephen Breyer Is Retiring from the Supreme Court, Reports Say


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Associate Justice Stephen Breyer is planning to retire after 28 years on the Supreme Court, according to multiple news outlets. He informed President Biden of his decision last week, POLITICO reported. 

Breyer is currently the oldest justice on the Court, and the longest-serving member of the current liberal wing, which includes Justices Sonia Sotomayor and Elena Kagan. His record is not especially admirable from a libertarian perspective: in 2014, Reason‘s Damon Root described him as “a pretty reliable vote for the government” who has shown tremendous deference to both Congress and the police.

Like Justice Ruth Bader Ginsburg before him, Breyer has long faced pressure from progressive activists and pundits to time his retirement so that a Democratic president could appoint his successor—and a Democratic-controlled Senate could confirm them.

With the GOP poised to potentially take back the Senate in 2022, Biden currently has a small window in which to guarantee the appointment of a liberal justice. The 50 Democratic senators with Vice President Kamala Harris as the tiebreaker can confirm whomever Biden appoints, assuming that no one breaks ranks. Democratic Sens. Joe Manchin (W. Va.) and Kyrsten Sinema (Ariz.) have thwarted aspects of the Biden agenda in the past; there’s no real reason to think they would prevent the president from replacing one liberal justice with another, though these are strange times.

Assuming that Biden is able to replace Breyer with someone of similar ideological predilections, the composition of the Court will remain relatively unchanged, with 6 Republicans and 3 Democrats.

Reason‘s Damon Root will have much more to say about Breyer’s legacy in a forthcoming article.

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Four New Justices in Six Years

According to reports, Justice Breyer will step down at the end of this term, or when his successor is confirmed. In all likelihood, the Supreme Court will have added four new members in the span of six years. Justice Gorsuch was confirmed in April 2017, Kavanaugh in October 2018, Barrett in October 2020, and now Breyer’s replacement in 2022.

The last time the Supreme Court saw such a rapid turnover was during President Nixon’s tenure. Chief Justice Burger was confirmed in 1969, Justice Blackmun in 1970, and Powell/Rehnquist were confirmed in 1971.

Still, FDR set the modern-day record. Between 1937 and 1943, Roosevelt made nine appointments: Black, Reed, Frankfurter, Douglas, Murphy, Stone, Byrnes, Jackson, and Rutledge. The ultimate record, however, belongs to the OG GW. President Washington appointed five Justices in 1789, and six more during the rest of his tenure.

Let us not forget that Justice Breyer was the junior justice between July 1994 and January 2006. We may never again see a court with so much stability. Meanwhile, Justice Barrett was the junior justice for about two terms. Soon, someone else will have to answer the door.

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Even One Of The Biggest Bears Expects A Post-Fed Rally

Even One Of The Biggest Bears Expects A Post-Fed Rally

Larry McDonald, author of the Bear Traps report has, for much of the past year been, as his publication’s name implies, one of the bigger market bears-cum-commodity bulls, correctly expecting and predicting the violent reversal in growth and value names we are currently observing. But not even Larry believes that today’s Fed announcement will precipitate a crash: after all, for all the “inflation fighting credibility posturing” the last thing the Fed will ever risk is a full market crash and as recent market events have clearly warned Powell, it will take just one word out of place for the world’s most hyperfinancialized economy to collapse… right after its market.

Below we excerpt from McDonald’s latest Bear Traps Report in which he lays out his short-term and longer-term trading strategy following today’s 2pm main event, with the following punchline: “The slightest backtrack is all that is needed to trigger a large counter trend rally – gold and silver miners will be 15-25% higher on any softening of the language. “

The beast inside the market is NOT happy – it all started the Wednesday before Thanksgiving.

The Fed has been using their Street pawns – namely Goldman Sachs – to rachet up rate hike and quantitative tightening (QT) expectations.

All this noise out of the Powell trombone has come with tightening FCIs. As we learned in Q4 2018, when front rates (2s from 20bps to 100bos since September) scream higher – financial conditions behind the scenes tighten FAR faster than clueless academics can measure on the fly. They NEVER have been proper risk managers, have they?

The serpent will keep pushing the central bankers early this coming week – but Powell has enough of a recent economic soft patch in the data to walk-back his insane declarations (4 hikes in 2022 and QT, for six-seven total).

The slightest backtrack is all that is needed to trigger a large counter trend rally – gold and silver miners will be 15-25% higher on any softening of the language. Powell won ́t be doing high-speed “Michael Jackson moonwalk” in the opposite direction, but he will be moving gently that way.

That should be enough of a fire hose to calm things down – for now. Look for a large rally in risk assets by the end of the week.

We look to lighten hedges – long volatility VXX exposure early – into the Fed meeting. The VIX is up 70% year to date, close to a 30 handle on Friday – that is the highest reading to start the year since the 2008-2009 Lehman era.

As we stressed in November and December, Nasdaq new lows rarely ever crossed 600 without touching 800 within three months, Monday we kissed 1353

These are classic buys signals – we love the XBI Biotech ETF for a counter-trend rally – looking out 30 days.

“The Fed is up against a classic Keynesian dilemma. The U.S. economy is slowing – yet inflation is still rising. Should tapering QE and raising rates be priority over stimulating growth? We suspect the FOMC shifts into walk-back mode very soon.” CIO, Macro Fund in our Live Bloomberg Chat, we agree.

Above all, we are entering a new bear market, enjoy the rallies – but they must be faded. Exit growth stocks on the bounce, we continue to favor hard assets over financial assets in 2022.

Tyler Durden
Wed, 01/26/2022 – 13:25

via ZeroHedge News https://ift.tt/3onehJl Tyler Durden