Is the Worst Yet to Come?
Headwinds up; headspace down
Approximately $1.25 trillion has been wiped out of the US stock market since Powell spoke at Jackson Hole, WY last week.
St. Louis Fed president Neel Kashkari was “happy” with the market’s reaction to Powell’s speech.
Analyst James Bianco had some interesting words for what the governor of PA is planning to do to combat inflation.
Michael Burry of The Big Short fame continues to make his case that a bigger crash is on the way.
Twitter’s Il Capo - someone who’s called this entire decline in Bitcoin (BTC)’s price correctly - thinks Bitcoin is headed to about $15k before bouncing back in October.
I’m not sure whether I feel relieved or more scared that Charlie Munger - American billionaire and second-in-command to Warren Buffett at Berkshire Hathaway - essentially supports many of the points I’ve made in this newsletter about the likely impending collapse of the financial system.
If a crash is imminent, the question is: Do the powers that be hold it off until after midterms? (Can they hold it off until after midterms?) I don’t know.
September is notoriously the worst month for investors.
Credit card debt hit an all-time high - $930 billion - as of August 2022.
I share all of this in a kind of haphazard way, because I haven’t really processed a lot of it. I’m finding it hard to think through all of this lately, to be honest.
Too many headwinds and not enough headspace.
I still don’t think the major bubble has popped, and I don’t know if it will before any sort of significant relief rally.
So, I share what I’ve shared just to say be careful.
No one knows whether the likes of Powell and Kashkari are just being hawkish in tone in efforts to scare investors so that prices come down so that they don’t really have to be hawkish in action or if they really plan to raise rates more aggressively and roll assets of the Fed’s balance sheet in the months to come.
I surely include myself when I say “no one,” and, to be honest, I’m getting tired of playing the guessing game.
It does look as though the Fed has begun to roll some assets off of its balance sheet. Just not as many and as quickly that some have claimed it would.
This might be one of those excellent times to buy assets at a discount at near-local lows - or it might be a time where you buy something that loses 50% of it’s value within a year.
Because, as an investor, managing risk is the only thing that is in your control, be careful is the only phrase that feels appropriate at the moment.
Personally, I haven’t been processing a lot of the above information as an investor, but more as just a human being. I’m blown away at the level of mess we’ve gotten ourselves into.
It’s been quite sobering to realize that there have been no adults in the the room.
Best,
Frank
Twitter: @frankcorva
P.S., I plan on being more constructive in the next email.
If you are looking for some hopium in the meantime, feel free to check out the third section of this article - “This Isn’t a ‘Crypto Winter’” - that I wrote for NASDAQ and/or the article below.
