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Tag: Federal Reserve

The Bear Market Returns

Published August 22, 2022

The following is an amended form of the Aug. 22 Daily Contrarian. This briefing and accompanying podcast are released to premium subscribers each market day morning by 0700. To subscribe, visit our Substack.

Stock futures are selling off in Monday’s pre-market, continuing the trend that started early Friday with the crypto flash crash.

Meme stocks are seeing the worst of it, with AMC Entertainment (AMC) dropping more than 30% ahead of the new APE listing. Shares of GameStop (GME) and Bed, Bath & Beyond (BBBY) are down multiple percent as well.

There is once again no clear catalyst for the move downward. There have not been any new developments with the Fed, nor new earnings or economic data that could have caused this.

There may be concerns ahead of the Jackson Hole Symposium, which starts Thursday. Before that we’ll get some earnings, though frankly last week’s retailer earnings were probably more important. Friday is Powell’s speech at Jackson Hole and the PCE Deflator to provide some more intel on inflation.

Or maybe the bear market is back? There doesn’t always have to be a clear catalyst for investors to dump risk assets. Maybe the bear never left. Bear markets do have rallies, sometimes quite significant ones.

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Hugh Hendry, OG Contrarian (Szn 4, Ep21)

Published August 9, 2022

Hugh Hendry is a man who needs no introduction to contrarians. Over the course of this 90-minute conversation, he provided many views on markets, the economy, the Federal Reserve, China, and a lot more. Of particular interest to investors are his bullish views on commodities, oil producers, and luxury goods makers…

Content Highlights

  • Hendry’s most contrarian opinion right off the bat: The Fed is not responsible for the asset price bubble (2:40);
  • “We find ourselves in the fourth depression of the last 200 years” after “les miserables” period of 1830 to ~1855, 1870 to the late 1890s, and the 1930s (8:11);
  • “I don’t think we have inflation.” Sales of non-discretionary items are not increasing (13:53);
  • Very few people understand money and money creation. What are they missing? (28:56);
  • What’s behind the stock market rally this summer? It may be commodities, at least in part… (39:49);
  • Markets are ‘bucking broncos.’ Volatility can be a major distraction and nothing happens in a straight line. But commodity producers and uranium should be in good shape over the long term (46:55);
  • Background on the guest. As an ‘OG contrarian’ Hendry joins an exclusive list (54:58);
  • A little insight into Hendry’s current life and psychology (1:10:40);
  • Betting on the Chinese yuan weakening (1:14:37);
  • The odds of the 10-year treasury making new lows (1:22:44);
  • China invading Taiwan? Hendry sets the odds at 20% and says China will never have a stronger bargaining positioning vis-a-vis the U.S (1:24:16).

More Information on the Guest

Quick Highlights From Our YouTube Channel

MoreHugh Hendry, OG Contrarian (Szn 4, Ep21)
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The ‘Fed Pivot’ Debate

Published August 1, 2022

Powell clearly hinted at ‘neutral policy,’ but was he speaking out of turn?

The following is an amended form of the Daily Contrarian of Aug. 1, which today also featured the host singing the opening of the Swiss national anthem in honor of Swiss national day. This briefing and accompanying podcast are released to premium subscribers each market day morning by 0700. To subscribe, visit our Substack.

As we start the week there are fresh doubts about this ‘Fed pivot’ that drove much of last week’s rally. If you’ll recall, comments by Fed chair Jerome Powell at his press conference led investors to conclude the Fed was going to reverse course on interest rate hikes and soon. This conclusion was refuted by Minneapolis Fed President Neel Kashkari late Friday, which has led to much pontification on Twitter and elsewhere.

Here is what Powell said that led investors to pile in to risk assets on Wednesday afternoon to start a rally that held the rest of the week.

Quote from Fed Chair Jerome Powell press conference, July 27, 2022.
Source: Jerome Powell press conference, July 27, 2022. Meme via IMGflip.com

Handicapping the Fed is a dangerous game but so far the market doesn’t appear to be too concerned by Kashkari’s comments. We’ll hear from other Fed officials tomorrow and again later in the week. That’s what’s scheduled, at least. If the Fed is serious about reeling back Powell’s comments they can have officials do interviews on CNBC and elsewhere. So that is maybe worth watching. Maybe Kashkari was the one speaking out of turn?

It’s another busy week for earnings, which should drive things most of the week. The main event however is Friday’s non-farm payrolls. As we know, the labor market has proven itself quite resilient so far in the face of tighter monetary policy, though unemployment claims are up.

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