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Powell Party Persists

Daily Rap 12-01-2022

The futures were higher and lower overnight, but this morning's economic data was ever so slightly softer and helped spark a rally early on, despite carnage beneath the surface. Even with the Nasdaq up 0.5% in the first hour, Costco was down 7% because its comps were a bit light. Costco of course follows ugly news and commentary from Target, Walmart, and last night Dollar General. (Salesforce was also pounded for 10%, as that rollup appears to be finally fraying somewhat.)

In the Short Terms So, as I noted yesterday, the party that is being thrown in the equity market is largely about positioning and psychology, not fundamentals, which continue to deteriorate and will prospectively. One might only assume that Jay Powell's sanguinity yesterday could...more

Last year's posts for Ask Fleck

Q: Here are some yearly price increases to my normal shopping list. 6 poinsettias $30 now $36 a 20% increase, 8 glass Christmas tree bulbs $16 now $18 a 15% increase, mens casual shoes $35 now $45 a 28% increase, 4 pack of Coca-Cola 12oz bottles from Mexico with cane sugar $5.99 now $6.99 a 17% increase. There a several more. The point is 8% inflation is a joke. Well it is really A BIG LIE!! This whole Fed thing is a disgrace to society. To me having been born here and growing up here in America it is unimaginable we have allowed it to happen here.

My question is, have you seen, even with all the advances in technology, the deterioration in society along with the standard of living falling dramatically for most people? I know you have a pretty good some of money and have outpaced the inflation.

Fleck: Yes, while technology has advanced mightily, I would say that society overall has deteriorated in many ways, but some cities/states are far worse off than others.
(posted: 11/30/2022)

Q: Hi Bill,
Was 'portfolio insurance' from the mid '80s basically just selling of puts on the indexes in order to hedge any downside? If this is incorrect, can you briefly explain what 'portfolio insurance' was during that period?
Thanks you!

Fleck: It was automatic buying of puts at preprogrammed levels of decline. So people didn't sell on the way up, then too many had their "insurance" start selling at the same time, and it cascaded and fed on itself.
(posted: 11/30/2022)

Q: Quote from a book review in WSJ today:
You don’t ordinarily turn to a book about the Federal Reserve for comedy, and for the most part Christopher Leonard’s “The Lords of Easy Money: How the Federal Reserve Broke the American Economy” stays true to its genre. Mr. Leonard does, however, include one pointedly humorous moment that sheds light on so much of his subject matter.

The joke comes when he recounts an exchange among policy makers during a 2012 meeting of the Federal Open Market Committee (FOMC). The committee was in the throes of a monthslong argument about whether and how to expand the Fed’s easy-money policies. Richard Fisher, president of the Dallas Fed, chimed in with a warning. Texas Instruments, a major employer in his district, wasn’t treating existing Fed policies such as near-zero interest rates as a spur to investment and job creation. The company was merely reconfiguring its balance sheet toward cheaper debt financing and away from equity funding. This ran counter to the Fed’s theories about how its decisions filter through to the Main Street economy. To which Chairman Ben Bernanke replied: “President Fisher . . . I do want to urge you not to overweight the macroeconomic opinions of private-sector people who are not trained in economics.”

Fleck: You're right, that is pretty humorous.
(posted: 11/30/2022)

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