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Saturday, August 27, 2022

Reflections From Overnight -- Now That I've Had A Chance To Think About It -- August 27, 2022

Most prescient headline ever. Posted at 6:53 a.m. Friday morning, hours before Jay Powell's 8-minute warning:

Later, 3:26 p.m. CT after market close: Dow falls 1,000 points and NASDAQ slumps 4 percent. 

For investors: all things being equal, after Jay Powell's speech yesterday,

  • would you have preferred getting a 6% APR dividend; or,
  • a WSJ article telling you "your" company authorized more stock buybacks

Jay Powell, a new sheriff in town:

  • I don't think pundits truly understand what happened yesterday;
  • the timing came right after the Inflation Reduction Act was passed and the Student Debt relief order was announced;
  • Powell started his speech even before CNBC was ready to televise it;
    • CNBC talking heads were standing by, waiting, never got the word, and were caught off-guard when they joined Powell's speech already in progress
  • shortest major Fed speech ever; shortest Jackson Hole speech ever;
  • most transparent Fed speech ever
  • mispronounced "recession" when he said "pain"
  • pushed a few incumbents under the bus
  • the speech will be interpreted as empty words by many if Jay Powell doesn't announce a Fed meeting this next week (to convene before August 31, 2022)

The speech, link here.

3 comments:

  1. In 6 months (maybe sooner) we will know if jay powell knows what he is doing or not when it comes to running the fed. At this stage , I am not optimistic about mr powell’s capabilities . Right now all he has proven he can do is to scare the bejesus out of investors. Whether said investors move long term in the direction mr Powell desires remains very much an open question.

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    Replies
    1. Even decades after decisions are made, economists continue to argue whether the Fed chairman made the right decision(s) or not. What interests me is the way a Fed chairman changes over time and the timing of decisions. The actual decisions and how pundits interpret them (as to right or wrong) interest me little. Volcker gets a lot of good press now, but he was chairman 35 years ago.

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  2. Well volker unquestionably made the right decision when he broke the inflationary cycle in the early 80s. No disputing that. I disagree that fed decisions remain obscure for decades.

    Reminds me of the definition of flying an airplane as being hours and hours of boredom interspersed with moments of stark terror.

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