The Bull is Back

The Fed’s big dilemma. [Altucher Confidential] March 20, 2023 [WEBSITE]( | [UNSUBSCRIBE]( For short-term investors, I believe we are about to see a bull market in tech investments and crypto… at least until we see one thing happen. [Hero_Image] Return of the Bull: The Market Calls The Feds Bluff By James Altucher Attention! Before You Read Any Further… [Click here for more...]( Hey, it’s James. Before you read any further in today’s issue, an urgent situation needs your immediate attention. If you don’t plan on claiming this upgrade to your Altucher’s Investment Network subscription, you’re missing out on a huge opportunity. Right now is your chance to grab one of the biggest (and most valuable) upgrades our company has ever made to a newsletter. I’m taking Altucher’s Investment Network to an entirely new level and I’d hate to see you left behind. [To see how to claim your upgrade, just click here now.]( [James Altucher] JAMES ALTUCHER Back in the early nineties, I was in a computer science Ph.D. program at Carnegie Mellon (CMU). It didn’t last long. If you’ve ever visited the computer science labs at CMU, you’d understand why. The word ‘sexless’ tells you everything you need to know. Fortunately for you, this isn’t about my sex life. In my short time at CMU, I had the opportunity to work on the AI programs that mastered chess. The work was primitive compared to today’s AI. In order to win chess, the computer would calculate the most likely path the game would take for every single move on the board. I move my rook, they move their knight…. I move my queen, they move their bishop. Every single possibility is considered and scored until the best possible move is identified. Winning chess isn’t just about thinking one turn at a time… it requires thinking, two, three, or four moves ahead. Of course, there are always curveballs. The other player might drop the ball and overlook something…. Or maybe they make a move based on a longshot gamble that you’ll overlook something. Games are won and lost by catching those oversights. This week, markets caught a glimpse of a crucial oversight by the Federal Reserve. Undoubtedly, the Fed was in a bad situation. Inflation was soaring by the time the Fed started raising interest rates last year. They had three options. They could: - Do nothing, and let inflation spiral out of control - Tiptoe around the problem by raising interest rates slightly, and risk slowing the economy without meaningfully impacting inflation (the dreaded stagflation) - Raise rates aggressively, and effectively rip the bandaid off… crushing inflation and the economy in the process. Has World War III Just Begun? [Click here for more...]( NATO sends tanks to Ukraine… Russia prepares for a winter offensive… [Is the beginning of World War III?]( I’ve just released an urgent message with my thoughts. But more importantly, I’m offering to send you an [exact playbook]( on what I see playing out in the world and what you need to do to prepare. [Simply click here now to watch my short message and to see how to claim a copy completely free of charge.]( Based on the Fed’s experience fighting inflation in the eighties, options one and two don’t work. The only viable option would be option three. And so, over the past twelve months, the Fed has played the role of the mean parent, raising rates and claiming they were just getting started at every step of the way. Unfortunately for the Fed - and boombox manufacturers - we’re not in the eighties anymore. As I’ve mentioned numerous times in the past: the US government has more debt as a percentage of GDP today than it has ever had in its history. Simply put, as the largest borrower in the world, the cost of paying the interest on US federal government debt balloons with every tiny increment in Fed interest rates. At this point, the Fed is already near the limits of how high they can raise interest rates before bankrupting the US government. Which is to say, sooner or later, the Fed’s plan to rein in inflation by raising interest rates was bound to break. This week, we saw the first systemic fractures of this interest rate policy. In addition to the federal government, banks are also highly sensitive to increases in interest rates. A series of bad bets by Silicon Valley Bank (SVB) - and other regional banks - over the past two years created a situation where the investments they made - with depositor's money - have gradually lost value in a world of rising interest rates. In order to protect the financial system, the Fed and Treasury had to bail out SVB’s depositors on Monday. This brings us to the Fed's dilemma. Although inflation has been gradually trending downward over the past few months, it is still nowhere near the Fed’s target of 2-3%. But, any further hikes in interest rates threaten to bring down other banks…. And potentially the Federal government itself. Which means the Fed is now backed into a corner. Whether the Fed likes it or not, their days of using interest rates to bring down inflation are coming to an end. Although they may have a bit of runway left, it's beginning to look like the most pessimistic expectations around interest rates are off the table. In the short term, this is a great thing for markets. Stable interest rates reduce investment uncertainty which stimulates the economy. In the medium/long term, things might not be so rosy. If we see inflation start to re-emerge, the Fed will have to start getting creative around developing new tools to bring it down. If you’ve ever had the misfortune of dealing with regulators you already know that government bureaucrats and creativity don’t exactly sit well together. When it comes to investors - at this point, I’m more bullish than I’ve been in months. For short-term investors, I believe we are about to see a bull market in tech investments and crypto… at least until we see inflation gaining steam again. For investors focused on multi-year horizons, I’d look at natural resources and energy. Although these might fall out of favor in a looser interest rate environment, I believe these will perform strongly when we inevitably see inflation pick up again. Like chess, investors need to decide whether they want to focus on winning the next move or thinking several moves ahead. Both strategies can work, although playing short-term strategies requires greater attention and effort. And, in both cases, the game gets significantly easier when you’ve trapped your opponent in a corner. With the Fed quickly running out of moves, the game is about to get a whole lot more fun. Best, James Altucher For Altucher Confidential New LIVE Demo Video STUNS Crypto Investors In [this short 3:28 video…]( Crypto genius James Altucher reveals his most shocking crypto secret yet… A little-known secret that’s delivered over $1,170 in FREE crypto income per month. If you AREN’T using this affordable little device… You’re missing one of the best, easiest ways to earn real cash with cryptos. [Click here to watch this short 3:28 video NOW.]( [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2023 Paradigm Press, LLC. 808 Saint Paul Street, Baltimore MD 21202. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. To end your Altucher Confidential e-mail subscription and associated external offers sent from Altucher Confidential, feel free to [click here.]( Please note: the mailbox associated with this email address is not monitored, so do not reply to this message. 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