Are markets donezo?
082: Jackson Hole, fed news, and weekend dumps
Happy Friday folks - hope you made it through the week okay. As we wait for markets to make their decision on where they go next, we have an announcement from God of the Fed Jerome Powell who is in Jackson Hole right now probably laughing about how rekt all the longs were from yesterday while drinking whiskey and ripping a cig before flying back to DC.
Crypto and equity markets continue to get hammered with heightened volatility, layoffs are beginning to scale at a range of companies, and the Biden Administration has ramped up Ukraine weapons aid as well as canceled student loans for those making less than $125,000 per year.
If you had a gender studies degree or masters in cooking, congratulations you’re now 10,000 dollars richer.
The vibes we’re getting on the back of JPOW’s remarks today are indicating that if we aren’t already in a recession, we very well could be by the Fall as a deliberate result of Fed hawkishness AKA not a soft landing at all. It’s grim.
There are few catalysts that would give us overwhelming bull vibes again for now. Our only hope from a mid term perspective is mid terms.
You can expect a possible pivot/fed switch off a local bottom around/before that time as I doubt the administration wants a sky diving market on it’s hands from an optics standpoint though it is possible they decided to crash the market in exchange for $10,000 off loans to gain votes.
A good trade off!
MARKETS & NEWS UPDATE
Federal Reserve Chairman Jerome Powell spoke at the annual economic policy conference in Jackson Hole, Wyoming at about 10:00 AM ET this morning.
Powell emphasized his commitment to mitigating inflation, saying that he expects the Fed to continue raising interest rates in a manner similar to recent actions.. He mentioned he expects this to cause "some pain" to the U.S. economy.
Powell’s comments were mostly expected though he definitely kept a hawkish tone indicating their is no intention to pivot soon.
"Restoring price stability will likely require maintaining a restrictive policy stance for some time. The historical record cautions strongly against prematurely loosening policy,"
Jerome Powell
Powell’s comments sent eager markets into a dump early Friday morning as traders and institutions reacted to the speech that committed to another potential .75 bps hike.
The Dow is down 1.9%, S&P 500 down 2.2%., Nasdaq down over 2.8%.
Nobel Prize-winning economist Richard Thaler said "I don't see anything that resembles a recession”.
Fed chairman Jerome Powell warned that the central bank’s mission to get a grip on inflation will result in “some pain” for US households.
Powell added that the path to reducing inflation would not be quick or easy, saying that the task, "requires using our tools forcefully to bring demand and supply into better balance (CNN).
The Justice Department released a partially redacted copy of the affidavit used to get a search warrant for Donald Trump's Mar-a-Lago crib.
A page of the Trump Affidavit Ethereum’s highly anticipated merge event is coming up in September. Almost instantly Ethereum's energy consumption will see a sharp decline after the Merge.
By eliminating mining, projections from the Ethereum Foundation and analysts see the protocols energy consumption — which currently needs as much power as Finland — dropping by 99.5% (Yahoo Finance).
A tangible impact to supply and demand as a result of the merge is not expected until 8-12 months after it’s implementation (for you traders out there)
An analysis done by Moody’s analytics found that 183 of the 413 largest regional housing markets in the U.S. are "overvalued" by more than 25 percent.
The Nasdaq is currently at it’s biggest intra day drop since June 28th, down over 2.9% as of 12:36pm ET.
Well if you’re anything like me with a very risk on long term portfolio, my tech names are absolutely obliterated (NVDA, AMZN, MSFT), my crypto holdings (BTC/LINK/ETH) are solidly underwater and it seems that the markets are ready to give us more pain. I will go shopping for some consumer and tech stocks that I want to have in my brokerage soon but for now I am just window shopping and seeing what the market gives us at present.
We’ve talked about what to do in these markets from a dollar cost averaging angle but the other major component of being able to weather these shitty market times is to MAKE MORE CASH.
It’s like in budgeting when people say oh well you shouldn’t go to Starbucks to get a coffee each morning, make your own and you will have safe an additional $20,000 by retirement age!!!! Nice! Now I can finally afford a sex swing mounted to the ceiling with gold for my 69 year old wife.
Why not just hold yourself accountable and say I am going to go make more money so that this isn’t even a consideration - that’s abundance mentality and that’s a proper mindset.
You should be thinking of ways to get a promotion, increase cash flow on the side, and work sides jobs to stack as much cash as you can.
Have we repeatedly said that cash is trash? Yes. On a long term horizon we believe cash will become useless. Just look at what the Biden administration is doing right now after two years of insane economic stimulus and billions of dollars given to Ukraine. Now they’re “forgiving” loans. Funny money. Literally doesn’t mean anything. How can such a system ever be sustainable?
Just because cash/DXY is doing well now doesn’t mean it’s not hosed further down the line. As far as crypto goes, crypto is a risk on asset, it will likely continue to get hammered alongside legacy assets as retail and levered actors panic sell/are forced to sell. I remain just as bullish as I always was on blue chip crypto assets like BTC, ETH, LINK, MATIC, etc.
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If you’re okay getting basic market/news updates as is that works as well.
Back to what I was saying.
Lots of the traditional finance dweebs are dancing about the slaughter of crypto market caps(while stocks get murdered as well lmao) and while that vindication must feel good after we told you to have fun staying poor for 2 years, the reality is, the consequences of the Fed’s policy, our government spending, and sky high inflation will ultimately be contributing factors in the downfall of fiat systems over time.
It simply doesn’t make any sense and there are too many inefficiencies I think we will see addressed with smart contracts, oracles, and other rapidly growing technologies.
Does that mean I don’t hold gold, equities, or cash? No of course not. But it means I have my horses picked for the next 5-10 years and now it’s simply a waiting game. Waiting has always been a facet of successful crypto investing or any type of investing for that matter.
Worst case? We get a stagflation ridden recession with a housing market crash and another 20% off the equity markets. That could last for 5 months or for 3 years, so build good habits now so that you’re equipped to take advantage of better times. For reference the IPO market is absolutely fucked right now.
There will be large layoffs on Wall Street in the coming months between September and Spring of next year most likely.
So expect things to get spicier and act accordingly with your cash allocation. When you want buy assets that you are long term bullish on and stack up your bags so that you’re building a good base during awful market action.
Just make sure you’ve thought about how long you can afford to sit on those assets from a liquidity perspective. This is personal and depends on your expenses, cash flow, and risk tolerances.
After buying or DCA-ing into what you’d like to bolster, build a cash position back up.
Hold a higher standard for yourself and commit to generating more cash so that you have the options to:
A.) buy the blood and not overextend
B.) have a big enough base/savings amount so that you have flexibility
There are some shitty market times ahead of us but you have to stay strong, not get emotional and fumble your bags positions, stack cash and ride it out. That’s it. It’s simple.
Don’t get cute, just double down on working, generating more cash, and being mindful of the macro when you’re choosing what to invest in.
For me from a professional and business stand point right now I am just watching. I think people would do well to watch what business models, companies, and sectors emerge from this down period we are in.
Whether that’s biotech, defense, smart contracts, high end consumer goods, cyber security, etc.
If you’re making any moves or have plans to quit a job, if you just got fired, or if you’re looking to switch industries I think it’s a great time to evaluate your options and come up with an attack plan to implement as things devolve around us on the whole.
Remember hard times make strong men. We’ve been coddled with up only markets for sometime and now it’s time to go into the valley once more. Like everything in life it comes in cycles.
Ride the wave, weather the storm, and learn some valuable lessons to implement when we start going up again.
Have a great weekend kings, lords, and queens.
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