Rig the market, until inflation hits
Was that the plan or did it just happen that way?
The markets have been swooning lately, with the NASDAQ index hitting levels not seen since November of 2020. Dow and S&P have also declined dramatically, with the prices of major cryptos like Bitcoin and Ethereum also down bad. Now the debate is about whether this is the time to “buy the dip,” as some investors have signaled. But as I felt cautious about making moves in the market a few months ago, I am still hesitant about where we are. The key problem is that the Fed massively stoked prices in 2020 with huge asset purchases, creating a distortion that they are now trying to reverse. Unsurprisingly, the Fed’s new tactics like raising rates and selling assets have now pushed the market into steep reversal. And if this were the end of the 2008-era market fixing that would maybe be one thing—but if precedent holds as soon as the wealthy see their hordes as being in peril once more in the next perceived crisis, the Fed and government will inevitably dive in again to save them.
The Fed tried to rig the stock market, and then it hit a wall with inflation. Now it’s trying to rig inflation. We are now seeing the obvious problems with Jay Powell’s Fed and the government trying to protect asset values—these are inevitably political choices that too easily get clouded by corruption and short-sighted maneuvering.
Disclosure: Through personal holdings that I control and through investment LLCs in which I am a partner, I buy, hold, and sell stocks, bonds, ETFs, options, NFTs, and cryptocurrencies, not limited to but including some of those discussed in this newsletter.