The usual outfit for the guy who works on Wall Street is the $3,000 suit and tie. Over the years, we’ve moved on to more casual clothing. But if they told me that in 2022, we would go to the straitjacket; I wouldn’t have believed it. The good thing about a straitjacket is that you can’t move your hands and it’s harder to press the “SELL, SELL, SELL” button with your tongue. However, looking back at the carnage of yesterday. It seems that despite this new regulatory dress code on the Manhattan peninsula, we still found a way to pull the trigger to shoot the market.
May 6, 2022 audio
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If you read yesterday’s column and accepted the fact that after the Fed’s speech, markets exploded BECAUSE POWELL said the US Federal Reserve “was not actively working on the possibility of raising the rate by 0.75%”. Well, you can forget everything you’ve seen, read or heard on the subject. in force; in less time than it takes to say: “but are we completely stupid or just a little stupid??? », the three American indexes and everything they contain were literally massacred. I believe the term is not overused. Perhaps we could even qualify yesterday’s session as a “bloodbath”. Even in the multiple episodes of “The Texas Chainsaw Massacre” and “Friday the 13th” combined, we didn’t get to see as much hemoglobin as we did yesterday on Wall Street.
Obviously, it’s all the fault of the fees and also a little bit of the economy. As for rates, it looks like the “experts” needed a little more time to “DIGEST” the announcement the Fed made on Wednesday night. It’s very strange because we can usually read the Minutes of the FOMC Meeting from the previous month in 8 seconds and 12 tenths to draw conclusions. But there, it took us almost 24 hours to realize that:
1) When Powell says that “at the moment, the Fed is not actively working on the possibility of raising rates by 0.75% each time”; That doesn’t mean he NEVER will. It does mean, however, that if inflation continues to kick us in the ankles, it could still happen. In a misunderstanding.
2) The second point is that it also took us almost 24 hours to realize that tariffs were far from finished going up and that when tariffs go up, it’s bad for everything technology, growth, e-commerce, electric cars, smartphones, semiconductors and so on and the best. So when the 10-year US crosses the 3% yield and the 2-year-old threatens to do the same thing in the coming days, it doesn’t help to consolidate the recovery that began shortly after Wednesday night’s announcement.
Friday the 13th, Jason’s Return and His Ice Hockey Mask
So let’s not hide our face: the market was literally destroyed last night. Since most of the numbers that were published made the market change, boxes like Etsy or Shopify dropped almost as fast as Netflix and Lyfts combined, but beyond that we started telling ourselves that “this was just the beginning”, “that the market could still go down a lot more” and that the “breath” (difference between stocks going down and stocks going up) looked more and more like a pre-pandemic panic of 2020. Also, the indices haven’t burst like this since June 2020. Back then blessed when Central Banks were our friends and when our good governments showered us with money on every corner. Yesterday, this was all just memories and anxiety increased a little, supports were damaged, volatility rose above 30% again, only one scary economic number was missing and we had the triple winner.
In addition, we even found an economic figure that scared you and awakened the sum of all fears among economics fans and Joseph Stiglitz and Nouriel Roubini aficionados: Nonfarm productivity dropped 7.5% in the first quarter. You have to admit you had to go get that one. We’ve been bothered for months with the NFP’s employment numbers – which will be released tonight – we’ve been bogged down with CPI, PPI, ISMs and PMIs of all colors, but I haven’t sketched out the productivity of the non-agricultural companies. Still, yesterday’s number was the worst since… 1947. A time when everyone drove with V8 engines and drum brakes, everyone thought it was “normal” and we didn’t run the risk of getting shot by some idiot in an electric scooter speeding along the sidewalk at 87 kilometers per hour with the ultimate goal of saving the polar bears.
So we have the rates that go up vertically and that tend to want to point out that “the Fed is not aggressive enough” and so much so to tell you that if the rates say so, they are right. It’s a little bit the same as when it’s Goldman Sachs talking. In addition to rising rates, we have economic indicators that suggest growth is being tackled above the knee – indicators as important as non-farm business productivity – you add to that tech growth companies coming out of the lackluster numbers and guidance that almost do. you want to whip yourself with nettles instead. And there will be a “perfect storm” that scares everyone and gives the impression that this market is completely idiotic, has the attention of an 8-week-old Labrador in front of a kilo of filet mignon and that it would be good to put him in psychiatry and fill him with sedatives.
It is clear that if you take a huge cauldron – the kind Getafix uses to make the magic potion in Asterix – that you are putting an economy in it that is showing signs of slowing down, an inflation that is showing NO signs of slowing down. That you subtly sprinkle in an interest rate hike that is not aggressive enough to contain inflation, but aggressive enough to contain growth… And you have a recipe for something absolutely unpalatable that makes you want to buy bullion and store it. them at the bottom of the Garden. If the consumer stops consuming and employment decreases, it can start to look like the backyard of a Kebab that didn’t pass the inspection of the secretary of health. For now, the good news is that the consumer is consuming and that the COVID crisis will have made it possible to create almost 2 trillion in additional savings for the consumer (which I am not a part of) and that as far as employment is concerned; we will know at 2:30 pm if the 400,000 jobs that should have been created in April are real or simply the fantasy of some economists who fabricated their conclusions by throwing darts.
Chainsaw Massacre 2
Anyway, what’s good about this type of market; is that when it falls at that speed, with that intensity, we don’t need to talk about anything else. And so, what’s also nice is that when the FOMC Meeting MINUTES launches in 19 days – those minutes that are going to tell us EXACTLY the same thing that Powell explained on Wednesday night; we’re going to get the same slap in the face again because we’ve been told the same thing twice, but we weren’t sure we understood the first time.
In any case, the Europeans are not disappointed. They missed Wednesday night’s rebound because they were already closed. They tried to take advantage of it yesterday morning and we sent them back to the niche in the afternoon with this massive sale in New York. In short, for Europe it was two rotten days in a row and, besides, the only thing that doesn’t fall: it’s oil!!! It really looks like if there’s a guy up there who thinks he’s god, the guy must be laughing his ass off as he advances his pawns on the chessboard. Basically it should look like this:
“So…let me see what I’m going to do.” Let’s recap… Inflation is at its highest point in 40 years, rates are going to go up for 2 years… Hmmmm, I’m going to put a nice economic slowdown in their hands to see what that does… And so let’s go there, I’m a coward, I’m going to raise oil to $108 and fuck them with a Russian dictator with a brain tumor and a stockpile of nuclear weapons at his disposal. Hmmmm and if that wasn’t enough, in September I launch them an eighth wave of COVID with a new variant that is insensitive to their vaccines and their boosters. That should keep me busy for the rest of the year. Let’s go.. Hop, a cigar, a whiskey, I sit in my God chair and await my son’s birthday on December 24th”….
In short, we were knocked out and tidied up. The Nasdaq chart doesn’t look like anything anymore, Bitcoin is definitely correlated with the Nasdaq and not doing any better. Meanwhile, Hong Kong is in free fall of 3.53%, China is far behind, down 1.8%. There’s only Tokyo that’s not falling and that’s unchanged, but that’s mostly because it’s closed for Children’s Day. The barrel, therefore, is still in its best shape at $108.75, while gold EVEN is not rising and is at $1875. Talk about a safe haven.
For the rest of the news, we’ll remember that Musk found friends to buy Twitter; Oracle’s Ellison, as well as Binance and the Sequoia fund are with him. Musk may even become CEO of Twitter during the transition phase. News that had the merit of greatly pleasing Tesla shareholders who rushed to sell their shares and NO LONGER be Tesla shareholders. The stock priced 8% on teeth. 6% because rates were going up and when rates are going up: it’s bad. And 2% because Musk takes care of 22 hares at a time. Given that the weather is super good – almost euphoric – the Bank of England decided to calm things down, yesterday it raised rates by 0.25% warning of a recession that could set in from here until the end of the year.
There ! The word is defined. And I think the word RECESSION will kindly become THE WORD of 2022 – well, if there is no 14th wave of OMICRON-COVID-BA2 in September – no, because if you read the papers carefully this morning, you can find a plethora of of articles that talk about recession or hard-landing or, to be more politically correct, that achieving “soft-landing will be practically impossible”. Which is the same. Yes, because when a plane misses the landing, we cannot say that it crashed “just a little bit”.
the numbers of the day
There’s no need to look any further. The day number will not be the productivity of non-farm enterprises, but the non-farm payrolls for the month of April. There will also be unemployment in Switzerland and the same NFP in France. Except the French version, nobody cares. For now, futures are still in the red and I’m not convinced we have the courage to recover before the weekend. It seems wiser to me to leave immediately for the weekend and tell your employer that we have confused this Friday with Good Friday and that we will be back next Tuesday. It will do everyone good to get some sleep on it!
It remains for me to wish you a great weekend and see you on Monday! May the force be with you, because it will take strength.
I see you Monday !
“Be who you are and say what you feel, because those who care don’t matter and those who matter don’t care.”
– Bernard M. Baruch