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Powell Crushes the Stock Market

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Fear Seizes Wall Street | Powell Crushes the Stock Market - The stock market plunges after Powell?

Fear Seizes Wall Street [The Daily Reckoning] August 26, 2022 [WEBSITE]( | [UNSUBSCRIBE]( Powell Crushes the Stock Market - The stock market plunges after Powell’s Jackson Hole speech… - When the Fed will pivot from tightening to easing… - Then Jeffrey Tucker shows you why he believes the Fed’s war on inflation is fake… IMPORTANT: here’s the link. [Click here for more...]( Here’s your new link: [secure link for you]( Jim can barely contain his excitement. He can’t wait to tell you about his newest reveal… …and what it could mean for YOUR financial future. Go here now: [Secure Link For You]( Annapolis, Maryland August 26, 2022 [Brian Maher] BRIAN MAHER Dear Reader , “Brevity is the sister of talent,” wrote Chekhov. With the highest respect to the Russian playwright, we must file an exception — in the person of Mr. Jerome H. Powell — chairman of the Federal Reserve of the United States. The untalented fellow was expected to speak for 30 minutes in Jackson Hole, Wyoming, this morning. He talked for eight. A mere 1,301 words floated out of him. What did he promise in his eight brief minutes — his mercifully brief eight minutes? Pain: Restoring price stability will take some time and requires using our tools forcefully to bring demand and supply into better balance. Reducing inflation is likely to require a sustained period of below-trend growth. Moreover, there will very likely be some softening of labor market conditions. While higher interest rates, slower growth and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses. These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain… Restoring price stability will likely require maintaining a restrictive policy stance for some time. The historical record cautions strongly against prematurely loosening policy. Thus the market endured a severe letting down. Wall Street wanted the chairman to tickle its ears with dovish coos. It got hawkish screeches instead. The Dow Jones Industrial Average hemorrhaged 1,008 fearful and frustrated points. The S&P 500 shed 141, the Nasdaq Composite 497 red-drenched points of its own. Meantime, gold gave back $20, Bitcoin a full $921 — at writing, that is. Expert commentary came issuing in floods today… “In essence,” says LPL Financial’s Jeffrey Roach, “Powell is clearly stating that right now, fighting inflation is more important than supporting growth.” Adds a certain Michael Pearce of Capital Economics: Powell’s speech was concise by Jackson Hole standards and hawkish throughout... That appears to be part of a coordinated push from recent Fed speakers against the idea that the Fed is close to pivoting and will quickly turn attention to cutting rates again. If markets were expecting rate cuts in 2023 they could just have another guess, argues Penn Mutual’s Zhiwei Ren: Powell… cautioned the risk of ‘prematurely’ loosening. He also said restoring price stability will likely require maintaining a restrictive policy stance for some time. This is him pushing back the market pricing in rate cuts in 2023. “It’s a wake-up call for equities,” concludes Mitsubishi UFJ’s George Concalves, “as they are still looking for a Fed pivot. There has been a unified hawkish message from the Fed and Powell has been the capstone today.” Just so. Prior to Powell’s mummery this morning, markets gave 48% odds of a 75-basis-point September rate hoist. Upon its conclusion those odds jumped instantly above 60%. Of course the Federal Reserve cannot possibly elevate rates to equal the rate of inflation… much less exceed it. (Official) inflation runs presently at 8.5%. Is the Federal Reserve prepared to impose 8.5% rates — or even 5% rates? Wall Street would yell blue murder and take his scalp. Wholesale defaults would go tearing through business, one domino toppling down upon the next. It cannot be done. What cannot be done will not be done. We expect the good chairman to shove and shove until he shoves markets into another “Christmas Eve Massacre,” as Jim Rickards styles the late 2018 bear market mauling. At that point he will back off — depend on it. The business will transpire sometime next year. We will devour these words if wrong — without salt. Below, Jeffrey Tucker’s cynicism exceeds even our own. He believes the Federal Reserve’s hawkish talk and war on inflation is nothing but false fireworks. Read on to see why. Regards, [Brian Maher] Brian Maher Managing editor, The Daily Reckoning Editor’s note: Between inflation… war… sanctions… and rate hikes… It seems today’s market is simply bouncing from one big surprise to the next. But according to Jim Rickards (former adviser to the White House, Congress and the U.S. intelligence community)… [What’s right around the corner could be much bigger.]( As a result, he says if you aren’t prepared for what’s coming, then your portfolio could get blindsided (again). Jim has developed an all-new trading system that can turn financial and political surprises — which the world is full of these days — [into massive moneymaking opportunities.]( He developed these models based on his work with the CIA. Now you have the chance to benefit from Jim’s extensive experience. Please take one minute to watch this brand-new urgent briefing before the next big surprise hits your portfolio. [Go here now.]( [Man Who Predicted Bitcoin Warns: “Don’t Buy Bitcoin!”]( [Click here for more...]( James Altucher first predicted Bitcoin all the way back in 2013… And ever since, he’s been one of the biggest advocates for it. But now, he’s warning Americans that buying Bitcoin could be a big mistake… [Click Here To See Why]( The Daily Reckoning Presents: “We have every reason to expect a long and slow grinding of 7⁠–⁠10% inflation for years to come”… ****************************** The Fed’s Fake War on Inflation By Jeffrey Tucker [Jeffrey Tucker] JEFFREY TUCKER This morning’s news gave the Fed exactly what it was looking for. It has wanted an excuse all year to call off its interest rate boosts. All it needed was some evidence that its mild efforts over six months are calming inflation down a bit. That came in today with the so-called core PCE index. It showed a falling rate of increase for the first time since the lockdowns of 2020. This is politically very meaningful for the Fed because this is the Fed’s preferred measure of inflation. Why is it preferred? Because it is the only measure that shows that the Fed has more or less hit its inflation target over the last 10 years. We always prefer a scale that shows we are thinner than we are! That’s what this is all about. Regardless it gives the Fed the excuse it has been looking for to call off the dogs of war. Sadly, the measure excludes food and energy — you know, the stuff that people actually buy on a daily basis. So except for the stuff that makes up the bulk of your routine purchases, inflation is gradually going away! Terror at the Fed The Fed is always very anxious to avoid blame for some kind of political disaster this November for the Democrats. Some prognosticators are extremely worried about waking up Wednesday following the election and seeing the whole party — only recently in charge of the whole of the elected portion of the government — utterly demolished, not only at the federal level but at the state level too. As a way of avoiding this, the Biden administration is engaging in desperate moves like student loan forgiveness that most likely will not even stand up to legal challenge. In this country, legislatures are in charge of decisions over budgets and spending. What Biden did was impose a $300 billion burden on the entire country — or maybe much higher — to bail out the credentialled elite that votes disproportionately for Democrats. And he did it on a scale never before seen in peacetime! This is far beyond mere bread and circuses. This is brazen pillaging to pump up the politically connected. It makes zero economic sense: Even the chairman of Obama’s Council of Economic Advisers blasted it. It means that students will rush to take out more loans with the expectation that they will be forgiven, and colleges will raise tuition more in ways that they have heretofore avoided. Inflation is coming soon to all tuitions! Regardless, the betting odds right now show a 3-to-1 chance that the Democrats will lose the Senate and the House, plus the White House in two years. State houses will flip too. That’s the betting odds. They can be wrong. But they are generally more valuable than polls, and I’ve truly begun to suspect ALL polls on politics right now. After all, they show that Biden is rising in popularity. I simply cannot believe that is true. [Trump’s Final Gift To America]( [Click here for more...]( There’s a little-known way Trump could – one day – have his revenge. It involves a Federal Ruling he oversaw in the final year of his Presidency that could change America forever… unleash an estimated $15.1 trillion in new wealth… and create countless ways for everyday Americans to benefit. What is this little understood decision? And how will it impact you? All the important facts are here. [Click Here To Learn More]( In any case, if the Democratic Party does in fact euthanize itself in November, the Fed wants to avoid the blame. So it would rather coast between now and then with the appearance but not the reality of monetary tightening. It’s Old News The thing about economic data as it appears from the various bureaus of government is that it always reports old news. We are hearing about July in late August, just like we heard about June in late July. Meanwhile, economies operate in real-time. The numbers from July were helped by a dramatic fall in oil and gas following a dramatic rise, which in turn pulled down the whole index number, allowing even Biden to claim that inflation is zero. Meanwhile, have you looked at your electricity bill lately? This is the main area right now absorbing inflationary energy. It flowed out of transportation and into utilities. In real-time, too, food is again moving back up. And this follows months during which most food producers have already retooled their factories to package smaller amounts of the same thing at higher prices. Shrinkflation is the new reality. Prices that had been unresponsive earlier this year such as health care and education are now moving up even as sectors that exploded in price in the spring are pulling back. From a quick look at the data, however, meaning a comparison of M2 increases against the CPI, we have a very long way to go before economic processes absorb the fullness of monetary expansion. [IMG 1] We are also starting to see changes in the velocity of money, moving up for the first time after plummeting following lockdowns. That change alone could unleash inflationary forces far too powerful for interest rate shifts to affect. To add more insult, both Congress and the president are throwing away hundreds of billions by the day. There is no money in the bank. The Treasury has to create the debt, which the Fed then buys, and does so with newly created money. It’s the Fed’s job to do this. It can and will do nothing else. We have every reason to expect a long and slow grinding of 7–10% inflation for years to come. In three years, the dollar will have lost a third of its value from the pre-lockdown days. The Household Meltdown I mentioned utility bills earlier but that’s only the beginning. Most households making less than $50K today are saving absolutely nothing for the future. Savings rates continue to fall, which means less investment, less capital buildup and less prosperity. Credit card debt is soaring. Maybe everyone supposes that this too will be forgiven in the future! Who knows these days? Let’s take a step back and consider the investments that have actually performed consistently well over the last three years. Real estate. Not even housing as such but land. That’s right. We are back to the wisdom of the 1970s. Stick with what’s real and true and unchanging, in morals, finance and investment. That’s the path to survival over the long term. The storm is far from over. It might only have begun. Regards, [Brian Maher] Jeffrey Tucker for The Daily Reckoning Ed. note: Between inflation… war… sanctions… and rate hikes… It seems today’s market is simply bouncing from one big surprise to the next. But according to Jim Rickards (former adviser to the White House, Congress and the U.S. intelligence community)… [What’s right around the corner could be much bigger.]( As a result, he says if you aren’t prepared for what’s coming, then your portfolio could get blindsided (again). Jim has developed an all-new trading system that can turn financial and political surprises — which the world is full of these days — [into massive moneymaking opportunities.]( He developed these models based on his work with the CIA. Now you have the chance to benefit from Jim’s extensive experience. Please take one minute to watch this brand-new urgent briefing before the next big surprise hits your portfolio. [Go here now.]( Thank you for reading The Daily Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:dr@dailyreckoning.com) [Jeffrey Tucker] [Jeffrey Tucker]( is an independent editorial consultant who served as Editorial Director for the American Institute for Economic Research. He is the author of many thousands of articles in the scholarly and popular press and eight books in 5 languages, most recently Liberty or Lockdown. He speaks widely on topics of economics, technology, social philosophy, and culture. [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( The Daily Reckoning is committed to protecting and respecting your privacy. We do not rent or share your email address. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. To end your The Daily Reckoning e-mail subscription and associated external offers sent from The Daily Reckoning, feel free to [click here.]( Please read our [Privacy Statement](. For any further comments or concerns please [contact us.]( If you are having trouble receiving your The Daily Reckoning subscription, you can ensure its arrival in your mailbox [by whitelisting The Daily Reckoning.]( © 2022 Paradigm Press, LLC. 808 Saint Paul Street, Baltimore MD 21202. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized financial advice. We expressly forbid our writers from having a financial interest in any security they personally recommend to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of a printed-only publication prior to following an initial recommendation. Any investments recommended in this letter should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

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