A word that crushed the market

November’s Fed rate hike came, as expected.

The Fed announced its November interest rate resolution, in line with market expectations, raising rates by 75 basis points, the U.S. federal benchmark interest rate came to 3.75%-4.0%, in addition to maintaining the $95 billion/month tapering plan, while the cut in rate hikes on the next two meetings, was also largely confirmed.

Since this rate meeting was not a quarterly meeting, there were no economic forecasts or dot plot either.

U.S. stocks are the biggest risk market in the world, but if you observe last night’s U.S. stocks, you will see that it was up and then down.

First up, because the market expected the Fed to cut the rate hike in the next two rate meetings thing, should rise.

So, why did it fall again later?

This is because; the Fed Chairman Powell said this.

Let me say this, it is very premature to be thinking about pausing.

(Listen to me; it is very premature to be thinking about pausing.)

It is this sentence, all of a sudden let the Fed stop raising interest rates is expected to completely disappear, the market began to turn down, and in the Fed in the next question and answer session, are basically around this sentence in the turn.

Let’s say someone asks about market risk management, overseas market risks and whether interest rate hikes are too much, Powell said, we are now considering not enough tightening and too much easing too soon, we have price stability in the United States, which is good for the long-term global economy, and we never worry about too much tightening, anyway, interest rate hikes can come down again after the head, but not enough tightening, inflation can’t be controlled……

Powell also explicitly acknowledged that as interest rates remain high, the path to a “soft landing” will become increasingly narrow – a “soft landing”, as I put it in yesterday’s article, to avoid The U.S. economy from falling into recession.

About the contents of the Fed’s November rate meeting, basically these.

It was Powell’s words and subsequent explanations that sent U.S. Treasury yields soaring, and the Fed Watch Toes terminal rate at the end of the first quarter of 2023 came in at 5-5.25%, with the two-year Treasury yield once topping 5%, which is exactly why U.S. stocks plunged.

Looking at Powell’s impassioned look now, I think of how grateful he was for former U.S. President Donald Trump’s nomination when he first took office as Fed chairman, then, watching him respond awkwardly time and again under pressure from the muckraking Trump’s verbal cannon, then, watching him get respect after Biden took office and finally be able to act like a dry Fed chairman……

Inexplicably, I was reminded of a famous person in Chinese history.

Qi a Qi a Yi

Who was Qi a Qi a Yi?

Qi a Qi a Yi was a literary leader in the late Ming Dynasty. He was very learned and talented, with deep attainments in history and Buddhism, and was a great poet and singer. In other words, he advocated that people should follow their true emotions.

Because he was good at poetry and song, Qi an Qi an Yi’s path to the imperial examinations went smoothly, first as a scholar and then as a scholar, and he won the third place in the imperial examinations, that is, the scholarship – as we know, the first name is the scholar, and the second is the top one.

After entering the civil service, Qi a Qi a Yi became a member of the Dangling Party because his mentor who promoted him was a member of the party, so he became a member of the party and began to show his seriousness in defending traditional morality.

Qi an originally appointed himself as a “purist” and did not care to be an official, but after entering the government, he was keen on fame and fortune and was repeatedly caught in the political whirlpool. After the death of Emperor Chong Zhen of the Ming Dynasty, he actively defected to the Southern Ming court, regardless of his identity as a member of the Dangling Party, and sang the praises of Ma Shying, who was in power in the Southern Ming Dynasty, and sided with the Clique; when the Southern Ming court failed, he surrendered to the Qing Dynasty, and fell into the name of traitor for hundreds of years so far.

What’s more, in his old age, Qi a Qi a Yi began to engage in anti-Qing activities, trying to rebuild his life values on the traditional moral values again.

In the first year of Dongguan of the Southern Ming Dynasty (the second year of Shenzhen of the Qing Dynasty, 1645), the Qing army was approaching Nanjing, Qi an Qianqing and other ministers of the Southern Ming Dynasty, originally clamoring for martyrdom, especially Qi an Gianni‚Äôs concubine Liu Rudi, also persuaded Qi an Qianqing to throw himself into the water with him to die for the country, unexpectedly, Qi an Qianqing pondered speechlessly for a long time, and finally went down to the pool, tried the water, and said “cold extreme naive “, and then, Liu Rudi “body wants to sink in the pool”, but to Qi an Qi an Yi hard to hold.

What does “cold pole what” mean?

It means that the water is too cold, cannot go down.

When the Qing dynasty Dodo army iron cavalry into Nanjing, issued a “hair shaving order” when, has always believed that the body hair and skin of the parents of the people of the Ming people have been a mass of emotion, most of the head to shave the money rat tail indignation, and just entered the Central Plains of the Manchu, is deliberately through such a vicious obedience test, completely eliminate The will of the Ming people to resist.

When everyone was hesitant to shave the ghost head, Qi an Qi an Yi suddenly said: “scalp itchy”, and then went out and went, while the family thought he went to grate his hair with a grate, but, as a result, not long after, it was he cut his hair and came in with braids.

So, Qi a Qianqing in Chinese history is famous for his “cold water” and “itchy scalp”.

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Why do I say that Powell looks like Qi a Qianqing?

In my opinion, Powell and Qianqing Yi are essentially the same kind of people, they both have certain abilities, and, they are not bad, but the bones are not hard enough, and will not stick to their own ideas for certain things, but will always be ready to shake and change their behavior according to the pressure of reality …… nice to say, this is called “The man who knows the time is a good man”, the bad words, this is “political chameleon”.

What I mean to say is –

For Powell reiterated “inflation rate back to 2%”, “never worry about tightening too much” these words, do not take them too seriously, in the next time, Powell’s ruling Federal Reserve, will certainly adjust monetary policy at any time according to the situation of the U.S. economy.

The key to judging the future of interest rates in the United States is not in what Powell said now, but in judging the U.S. economy, when will it fall into recession? If the U.S. economy falls into recession in the fourth quarter of 2022, into negative economic growth, unemployment rate steep rise, then, the Fed’s road to raise interest rates will immediately slow down ……

A man like Powell, when faced with a strong president like Trump who is a hooligan, he will choose to yield; on the other hand, when faced with a president like Biden who gives him enough respect, he also has the idea of “payback”.

How to repay the Biden administration?

Since April 2022, the most important concern of the American people is inflation, so as long as the Federal Reserve is strong on inflation, then the Biden administration will have a wave of support, so the best way to “pay back” the Biden administration is to be strong on inflation.

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On Nov. 8, the U.S. House and Senate will begin the midterm elections. At this juncture, Powell must take a strong stance on inflation, which is a major concern of the American people, in order to gain political resources for the Biden administration.

However, after the midterm elections, once the U.S. recession really hits, along with the rising unemployment rate, inflation is likely to cease to be a major concern of the public – even if the public still cares about inflation, but the midterm elections have passed, the Biden administration will consider pursuing as mild a recession as possible, rather than letting the Federal Reserve continue Violent rate hikes……

So, if you ask me, it’s clear that rate hikes are nearing their end, and at this point –

Powell, what are you pretending to be?

 

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