“As the leader of two companies (Danaher and GE), I’ve learned the hidden truths about being a CEO the hard way.”
- Larry Culp
I’ve criticized the Fed for a long time. It’s not personal. I simply do not buy into either their premise or their process.
Their premise is that they can bend and smooth economic gravity. While they can’t do that, they can perpetuate market squeezes and crashes. While it’s endemically linked to it, the market is not the economy.
Powell’s forecasting process is a literal and backward-looking joke.
Back to the Global Macro Grind…
The aforementioned quote comes from the latest #behavorial book I am reviewing called Hidden Truths: What Leaders Need to Hear But Are Rarely Told. The foreword was by Larry Culp. The book is written by David Fubini from the Harvard Business School.
Harvard? Sounds serious. Well, it is.
And if learning by doing and LISTENING to the Risk Management firm that has never missed making a #Quad4 US economic turn somehow finds it’s way to Jerome Powell’s desk this weekend, I did my job as both a patriot and a contributor to American society.
While they can’t respect me, they probably respect Harvard. Here are some of the “Top Things” a CEO (or Fed Head) must learn:
- Arrive Prepared
- Avoid Half-Truths and Misperceptions
- Seek Truths In The Future
Let’s score Powell on the Top 3:
- He’s definitely prepared – but with the wrong research and risk management process
- He definitely doesn’t avoid half-truths – yesterday he said is sees “NO SIGNS” of a slowdown
- He’s seeking a hoped-for “truth” about the future that he wants/needs to seek
Since the Fed isn’t going to implement a modern-day multi-factor risk management process that uses both markets (Signals) and The Quads (nowcasting using real-time stochastic rate-of-change models)… and tell you about #Quad4, let’s skip #1 and go to #2 and #3.
A)“NO SIGNS” has to be the most absurd statement I’ve heard from this guy so far. While I shouldn’t need to waste your time recapping the last 3 months of US economic data #slowing, I have two real-time updates this morning: 1. NFIB US Small Business Outlook just hit -54 yesterday – that’s an ALL-TIME LOW… and 2. One of the Fed’s own departments (Atlanta Fed) just had their “GDP Now” forecast slow to ZERO
B) Hope is not a risk management process – at one point in the presser he called what’s on your screens this morning a “softish landing.” I couldn’t make that up if I tried but let’s compare what “soft” looks like in terms of Wealth Lost: 1. The Market Cap lost (in the SP500) during the hardest of hard landings (during the 2008 Financial Crisis) = $8.1 TRILLION – as of this morning that number is at $9.4 TRILLION (since JAN 3rd) and counting. Crypto has lost 2/3rds of its cap in 6 months (another $2 TRILLION)
Now let’s get back to “arriving prepared.” Powell, instead of looking backwards at what you called “eye catching” inflation expectations, at the next presser break down what the WEALTH EFFECT does to forward-looking Real GDP GROWTH forecasts.
Before I stop holding this unelected man to account (Old Wall Street and its media won’t), let’s review what apolitical and data-driven-truth the ONLY Research and Risk Management #Process that called for INFLATION to double twice (from 2% to 4% to 8%) sees:
A) US Headline CPI (year-over-year) Projections for June (Monthly Quad) = 8.4-8.6%
B) US Headline CPI (year-over-year) Projections for Q2 of 2022 = 8.47%
C) US Headline CPI (year-over-year) Projections for Q3 of 2022 = 7.71%
D) US Headline CPI (year-over-year) Projections for Q4 of 2022 = 7.19%
In what world is avoiding half-truths about real-time GROWTH expectations and talking up the misperception that the “Fed can get inflation down to 2%” acceptable? A: in the Establishment World many people in this country get paid by.
Other than on a higher interest rate on some of their Savings (50% of Americans don’t have savings), The People aren’t going to get paid by Powell being willfully blind about our bearish GROWTH and JOBS nowcasts (when growth #slows faster, people get fired).
He could have raised rates by 250 basis points and it WOULD NOT HAVE changed inflation NOT falling below 7% anytime soon. Both the US stock and bond markets are crashing. The Credit function is breaking. Sadly, Powell is perpetuating this through his ignorance.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 10yr Yield 3.01-3.57% (bullish)
UST 2yr Yield 2.79-3.56% (bullish)
High Yield (HYG) 72.22-77.18 (bearish)
SPX 3 (bearish)
NASDAQ 10,508-11,786 (bearish)
RUT 1 (bearish)
Tech (XLK) 120-134 (bearish)
Nikkei 26,104-27,158 (bearish)
DAX 13,001-14,022 (bearish)
VIX 26.58-36.67 (bullish)
USD 103.01-106.02 (bullish)
Oil (WTI) 114.04-123.54 (bullish)
Gold 1 (bullish)
Copper 4.06-4.34 (bearish)
Bitcoin 18,874-27,590 (bearish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
