Why the Fed's Bluff Will Cost Investors Trillions, Part 2

How a brazen move by the Fed averted disaster… June 29, 2021 UNSUBSCRIBE | ARCHIVES Why the Fed's Bluff Will Cost Investors Trillions, Part 2 >>INCOMING MESSAGE FROM JAMES ALTUCHER<< Did you know Coronavirus could have very little to do with these crazy up and down markets? And the reason your retirement account could go down to zero?   I’ve been warning readers about the REAL CAUSE behind this…   I explain everything in my video—you can click the image above to play it…   (Watch my short video now, before it’s taken down THURSDAY AT 9:30 AM) Dear Money & Crisis Reader, Yesterday I outlined how the Fed is extremely late to curb inflation. How do we know? The CPI has cleared 5%, the housing market is entering a bubble, stocks are roaring to new all-time highs, not to mention the prices of food and energy have been skyrocketing. Put simply, it only took an extreme level of frothiness as well as some of the worst inflation prints in decades for the Fed to decide it needed to do something. We’ve assessed how the markets initially reacted to the Fed’s move. But now it’s time to digest what the Fed actually did. A (Non)Intervention by the Fed Did it actually hike rates? No. Did it actually taper QE? No. Did it do anything besides change the market’s expectations regarding their monetary policy plans? No again. The Fed has clearly indicated it is willing to stomach higher inflation in the near-term to sustain the bubble in stocks and recovering economy. However, with inflation expectations rising (within 10 months they recovered over two years’ worth of declines)… …and Treasury yields getting dangerously close to breaking their long-term downtrend (see the chart below)… … the Fed was forced to temper those expectations. So, the Fed did what it does best: It made a verbal intervention — a statement of intent that things would be changing because of the current economic conditions. But was the Fed really serious about doing anything? Trump's Secret Tech Revolution ($15.1 trillion at stake) What if Trump recently did something that could see him become a HERO in Silicon Valley? According to the man dubbed “The Tech Prophet” by Forbes, it’s true. A single Federal Ruling in the final year of Trump’s presidency could be about to unleash a tech revolution worth an estimated $15.1 trillion. In the words of one tech insider – a CEO who works closely with Microsoft, Intel and Google – it “will rewrite the rules of what is possible.” And it could create countless ways for you to grow your wealth. Full story here. I can’t claim to be psychic in the sense that I can read Fed officials’ minds. What I can tell you is that I don’t think it’s a coincidence that: Within 48 hours of stocks selling off, the Biden White House convened a meeting with the President’s Working Group on Financial Markets (the so-called “Plunge Protection Team”). There have been SIXTEEN (16) Fed official appearances this past week, the vast majority of which have been to issue dovish statements about how the market overreacted to the Fed and that the Fed is nowhere near thinking about tightening monetary policy. Fed Chair Jerome Powell has appeared before Congress where he stated: The Fed will wait for actual inflation as a trigger for a rate increase The Fed won’t raise rates preemptively 5% inflation is not acceptable (We’re old enough to recall the 2% threshold) Inflation effects from reopenings were larger than expected High inflation is temporary and will abate The factors weighing on labor supply should abate as well It may take some patience to see what is really happening It’s hard to say when supply bottlenecks will disappear Enhanced unemployment benefits may have been a factor in the inflation He expects to see strong job creation in the fall It’s ‘very, very unlikely’ the U.S. will suffer anything like a 1970s inflation experience So… Powell is basically telling us the Fed is NOT going to act preemptively concerning inflation… that the Fed still believes inflation will disappear by itself… and that the Fed is in “watch and wait” mode. Put another way, the Fed spooked bond yields into dropping, and until they start rising again, the Fed is happy to let things bubble up in the markets. In this sense, what the Fed has done is move to curb future inflation expectations without actually doing anything. This in turn has pushed long-term bond yields back down again… which has opened the door to stocks roaring to even higher levels. I’ll have more for you tomorrow… Best Regards, Graham Summers Editor, Money & Crisis July 14th: America's Financial Extinction Event? The prophetic analyst who predicted the subprime mortgage meltdown… the financial crisis of 2008… and Brexit… Just issued another shocking prediction… If you and your family are not prepared for what he says is coming your way on July 14th… You need to take action now. Click here for the full details. To end your Money & Crisis e-mail subscription and associated external offers sent from Money & Crisis, feel free to click here. 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