Powell’s Pickle

Red hot inflation may stay the Fed’s hand. [Morning Reckoning] April 11, 2024 [WEBSITE]( | [UNSUBSCRIBE]( Powell’s Pickle Asti, Northern Italy April 11, 2024 [Sean Ring] SEAN RING Good morning Reader, As soon as Greg Ip wrote his asinine “[What’s Wrong With the Economy? It’s You, Not the Data]( piece in The Wall Street Journal last week, I had a funny feeling Karma was about to bite The Establishment in the ass. Well, Karma acted like a real Karen yesterday when the inflation numbers came out. In a showing that surely made Joke Biden take a deep sniff, the CPI rose 3.5% in March. Core prices, which exclude volatile food and energy costs, rose by an even greater 3.8%. Credit: [The Wall Street Journal]( You see, Biden looks increasingly desperate at the polls and would like a little help from his Federal Reserve Chairman. But cutting rates into higher inflation is a big ask. And it’d look like the Fed isn’t independent, as we all know it is. As the kids say… Whatever. Meanwhile, at the Eccles Building, Jay Powell wonders if it’s possible to remain Fed Chairman without getting a new boss. But I’ll get to Biden and Powell in a bit. First, let’s look at what Ip said: In The Wall Street Journal’s latest poll of swing states, 74% of respondents said inflation has moved in the wrong direction in the past year. This assessment, which holds across all seven states, is startling, sobering—and simply not true. I’m not stating an opinion. This isn’t something on which reasonable people can disagree. If hard economic data count for anything, we can say unambiguously that inflation has moved in the right direction in the past year. In the 12 months through February, inflation, according to the century-old consumer-price index, was 3.2%, compared with 6% a year earlier. Use a slightly different time horizon, or a slightly different measure (such as the index the Federal Reserve prefers) and you get similar results. Take out food and energy—or for that matter look only at food and energy—and inflation is still down. Yes, some individuals faced higher inflation (someone who bought a house, for instance) but, for the average person, inflation went down. Yet the average person thinks it went up. [Urgent: Claim Your Copy Of This New Book From America’s #1 Retirement Expert!]( [Click here to learn more]( Forget everything you’ve ever been told about retirement. According to [this new book]( – written by America’s #1 retirement expert – you don’t have to wait until you’re 65+… and you don’t need millions of dollars. [The strategy you’ll find outlined inside this book]( is completely different… All you have to do is tap into the little-known income streams revealed inside this book… And you’ll learn exactly how you can generate almost effortless income every month… instantly, in some cases! [And today, for a limited only, you have the chance to claim a copy of this book for just $1. Click here now to claim your special book offer.]( [LEARN MORE]( First, define “hard” economic data. Everyone, and I mean everyone, knows the numbers are massaged whenever they need to be. But that’s nothing. The fundamental error is how Ip thinks about economic numbers versus the unimpeachable evidence of a person’s increasingly light wallet. Ip is examining the change in inflation from year to year. The “century-old” CPI was 6% and then 3.2%. According to Ip, if you think inflation went up, you’re a bonehead. Here’s what Ip’s missing. If an item cost $1 two years ago, last year it would’ve cost $1.06 ($1 x 1.06). This year, it costs $1.09 ($1.06 x 1.032). That’s a 9% price increase in aggregate. And members of the “Intelligentsia” wonder why you’re not grateful that your President reduced inflation! How very dare you, you ingrate! Another problem with his “logic” is this: who’s the average person? Hint: nobody. Let me use dice to make the point. Take a die (one-half of a pair of dice). It’s got six sides. You can roll a 1, 2, 3, 4, 5, or 6. What’s the average, or, as mathematicians would say, the expected value of a roll of that die? It’s 3.5 [(1 + 2 + 3 + 4 + 5 + 6) / 6 = 3.5]. Can you roll a 3.5? No! That’s why casinos use a pair of dice, where the expected value (3.5 x 2 = 7) is a possible outcome. So Ip expected an “average” answer from someone who doesn’t exist. Some reporting! As Zero Hedge posted on X: Credit: [@zerohedge]( The upshot is you’re not crazy. It’s them, not you. Now, let’s get to Biden and Powell. Meet the New Boss, Same as the Old Boss With Roger Daltrey screaming those lyrics in his ear, Powell knows, ceteris paribus as his PhDs say, his old boss, one Donald J. Trump, may very well be elected his new boss this November. How can this be? Powell must ask himself this every day. After all, Trump was the man who initially shut down the country during the pandemic-inspired government-mandated private-sector shutdown. Trump ran up the national debt to previously unheard-of levels. (One of his successor's few “successes” is beating Trump deficit-wise.) Finally, Trump let Jerome Powell cut rates to practically nothing to save the stock market from tanking in late 2018. “How can Trump even be in this race?” It’s about as likely as Joe Biden finding the phantom corners in his Oval Office. And yet, here we are. Here’s Powell’s Pickle: how can he get Biden back into the Oval Office while not sacrificing the Fed’s alleged independence and his legacy? It already looks like [Biden is pulling a Nixon to Powell’s Burns]( Credit: [@QTRResearch]( Credit: [@zerohedge]( But here’s the thing: the Fed really only acts when the stock market is in danger. According to Bob Byrne, one of James Altucher’s deputies and Paradigm’s Dealmaker-in-Chief, that will be the catalyst for a cut. Strategic Intelligence contributor and the most complex working man in the newsletter business, Dan Amoss, agrees. “If we see a 5-10% quick correction, I wouldn’t put it past him to do a 50 bps cut!” But if this weren’t an election year, would we even discuss a possible rate cut? In Another World… Pictured taking a deep breath of relief after the President pardoned him on Thanksgiving, Larry Summers posted this on X: Credit: [@LHSummers]( Oh, Larry. Larry, Larry, Larry. Don’t you know this is Clown World? Or, as pols call it, an “election year.” All the rules, including raising rates to fight high inflation, go out the window. At all costs and against all odds, the Democrats must return Joke Biden, or his skinsuit, to the White House. If they don’t, The Donald will return with a vengeance. Wrap Up So that’s the plan. Get Biden in. But how? They’ve got to get the Fed to buy in. Or, just go over the Chair’s head to get the cuts done. The cuts will temporarily goose the stock market, and Biden rides the wave back into 1600 Pennsylvania Avenue. And Jay Powell’s legacy? Who cares! One man sacrificed for the greater good. I’ll say this about Powell’s Pickle: it ain’t no gherkin! All the best, [Sean Ring] Sean Ring Contributing Editor, The Morning Reckoning feedback@dailyreckoning.com X (formerly Twitter): [@seaniechaos]( [Doctors Use AI On Dying Baby And You Won’t Believe What Happens]( It’s something new mothers dare not even imagine . A newborn baby… barely 8 days old … was facing death from seizures. Doctors didn’t know what to do. So, they turned to A.I. What happened? [>>THIS did<<]( [LEARN MORE]( In Case You Missed It… A Monster Move in Bitcoin Greg Guenthner, Editor [Greg Guenthner] GREG GUENTHNER Good Morning Reader, As Bitcoin once again approaches new highs this week, let’s take a moment to dissect crypto’s incredible 2024 rally — and where it might go from here. First up: some eye-popping statistics: Bitcoin has rallied 70% year-to-date, and nearly 160% over the trailing 12 months. It finally posted a new high in March after eclipsing $73,000, its first all-time high following the ugly “crypto winter” bear market that began in early 2022. Bitcoin has now gained more than 350% off its bear market lows. And it doesn’t appear to be slowing down anytime soon… Crypto speculators are now looking toward this month’s main event: the halving. Will the halving lead us to the promised land? Or will it turn out to be a non-event? Let’s dig into the details… First, what is the halving? It takes a certain amount of processing power to mine Bitcoin. Currently, Bitcoin is mined at a rate of 900 per day. After the halving, that rate will drop to 450 a day. According to our intrepid crypto expert Chris Campbell, the halving will occur at block height 840,000 (block height is the number of blocks connected in blockchain). Chris notes that there are many variables in the halving equation, including hash rate changes, difficulty adjustments, etc. that can affect how long it takes to reach 840,000. So we won’t know the exact day or moment until it happens. Our best guess is sometime between April 18 - 22. That gives us less than two weeks until the big event. And after the halving takes place, the new supply of bitcoin will get crunched — while demand is ratcheting higher as the bull run continues. I can’t speak on the intricacies of the crypto ecosystem or any technical details of the halving. But I can discuss price, trends, and trading strategy — all of which are critical when dealing with a volatile asset such as Bitcoin. Since this isn’t the first halving, we actually have a short track record to review. This is good news for the Bitcoin bulls because the past 3 halving events have led to a massive run-up in price. While a perfect 3-for-3 record is encouraging, it’s not statistically significant. So it doesn't guarantee we’ll see a massive bump later this month in the post-halving crypto landscape. Still, I like our chances for the rally to continue based purely on the fact that Bitcoin has been constructively consolidating for the past month — and it’s now beginning to press toward the top of its range. If there’s one thing that’s almost always bullish, it’s new highs. But I also understand if some investors are skittish when it comes to how Bitcoin might react to a major news event. If recent history is our guide, price action could get a little messy. What if Crypto Investors Sell the News? With the halving approaching, you might be worried Bitcoin is barreling toward a sell-the-news event that will result in a nasty pullback — or worse! Sure, it’s possible. We don’t have to go too far back to find another Bitcoin event that led to some downside volatility… We just witnessed a chaotic Bitcoin news cycle back in January when the SEC officially approved the first US-listed Bitcoin ETFs. The announcement sparked plenty of excitement throughout crypto exchanges and news providers, as well as the broader investing community. The mainstream media even dubbed the approval a watershed moment for Bitcoin and the broader crypto industry. For traders attempting to play the news, this watershed moment failed to yield spectacular gains immediately following the announcement. Instead, the new crypto ETFs started to fall. Bitcoin also failed to hold its gains. In fact, the ETF approval hype led to an ugly $10,000-plus Bitcoin drop that took two weeks to play out. But the drop was short-lived. Bitcoin found a floor near $40K, pivoted and broke to new highs by mid-February. Yes, some traders attempting to play a very short-term bump at the ETC approval announcement might have taken some losses. But anyone who was early enough and had the fortitude to hold onto their position through the volatility did just fine. The assets always change. But we can count on investor behavior to stay the same, whether we’re dealing with tech stocks, commodities, or crypto. Assets like crypto that produce bigger moves over shorter time frames are going to be more volatile than slower-moving stocks and sectors. Bitcoin will always get too far ahead of itself as positive momentum builds. Conversely, it will probably overshoot to the downside during corrections and pullbacks. Again, this is normal behavior. If we expect big swings in both directions before we jump in the crypto deep end, we’re less likely to fill our portfolios with poorly timed trades. And we probably won’t have to worry about the next shakeout scaring us out of perfectly viable positions. Here’s What to Do Next… Big, obvious news catalysts can cause a lot of stress if you aren’t prepared. As the halving approaches, remember the following… Bitcoin is somewhere in the middle of a powerful bull cycle. It has just recently posted new highs after coming out of a bear market. We’re probably not at the end of this secular bull run just yet. Next, we need to accept that the faster the rally, the more volatility we will likely encounter. It’s the price we pay for playing the crypto market. Know your time frame and goals for any trade before you enter your position. Smart planning will help you weather any potential storms along the way. Finally, don’t allow a quick reaction to a news event to catch you off guard. Sharp moves happen as markets quickly absorb new information. Stay alert and understand that we might see some fake outs — higher and lower — before Bitcoin settles into its “new normal.” Finally, buckle up and enjoy the ride! This monster Bitcoin rally isn’t over yet. Best, [Greg Guenthner] Greg Guenthner Contributing Editor, Morning Reckoning feedback@dailyreckoning.com Thank you for reading The Morning Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:dr@dailyreckoning.com) [Sean Ring] [Sean Ring, CAIA, FRM and CMT]( is a former banker and financial educator and is the editor of the Rude Awakening. Sean has trained interns and graduates from Goldman Sachs, Morgan Stanley, Citi, Bank of America, Standard Chartered Bank, DBS (Singapore), the Abu Dhabi Investment Authority (ADIA), Bank Indonesia (the central bank), HSBC, Barclays, RBS, and BlackRock. He knows the global economy is being corrupted by forces that most people can't understand and has used his unique and worldly experiences to help people navigate the markets. [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2024 Paradigm Press, LLC. 1001 Cathedral Street, Baltimore, MD 21201. 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 note: the mailbox associated with this email address is not monitored, so do not reply to this message. We welcome comments or suggestions at feedback@dailyreckoning.com. This address is for feedback only. For questions about your account or to speak with customer service, [contact us here]( or call (844)-731-0984. 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 allow the editors of our publications to recommend securities that they own themselves. However, our policy prohibits editors from exiting a personal trade while the recommendation to subscribers is open. In no circumstance may an editor sell a security before subscribers have a fair opportunity to exit. The length of time an editor must wait after subscribers have been advised to exit a play depends on the type of publication. All other 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. The Daily Reckoning is committed to protecting and respecting your privacy. We do not rent or share your email address. Please read our [Privacy Statement.]( If you are having trouble receiving your The Daily Reckoning subscription, you can ensure its arrival in your mailbox by [whitelisting The Daily Reckoning.](