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Doug Noland: No Bailouts Anytime Soon, So Let Those Short Bets Run

John Rubino profile picture
John Rubino

Now that equities are behaving the way they should have since, oh, 2013 - volatile with a pronounced down bias - everyone is wondering how far the crazy will go before the Fed starts buying the S&P 500.

Short sellers, of course, want to know when to close out their at-long-last-profitable bets (see David Einhorn). Cautious investors (see Warren Buffett) with money on the sidelines want to know when to step in and buy. And fully invested optimists (the vast majority these days), are wondering if they should keep buying the dips till the cavalry arrives.

Credit Bubble Bulletin's Doug Noland has been through at least three such cycles in his career as a short seller, and he's parsed the testimony of new Fed chair Jerome Powell to reach a conclusion that the shorts will love and the longs will hate. Here's an excerpt from his latest post:

The new Chairman is not in awe and, at least to commence his term, seems disinclined to pander to the markets. With greed waning, the change in tone was difficult for an uncomfortable Wall Street to ignore. Markets have grown too accustomed to central bank chiefs with an academic view of "efficient" markets - scholars wedded to doctrine that it's the role of central banks to bolster and backstop securities markets. Powell knows better. As the old saying goes, "he knows where the bodies are buried." Wall Street fancies the naïve. FT: "'Powell Put' Assumption Challenged as Fed Chief Shows Hand."

I believe Powell recognizes the perils associated with backstopping a speculative marketplace. That doesn't mean he won't be compelled to do it. At some point, he'll have little choice. But it likely means he will not act in haste. The Powell Fed will be much more cautious in delivering market assurances. He was skeptical of QE in

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John Rubino profile picture
John Rubino manages the financial website DollarCollapse.com. He is the co-author, with GoldMoney’s James Turk, of The Money Bubble (DollarCollapse Press, 2014) and The Collapse of the Dollar and How to Profit From It (Doubleday, 2007), and author of Clean Money: Picking Winners in the Green-Tech Boom (Wiley, 2008), How to Profit from the Coming Real Estate Bust (Rodale, 2003) and Main Street, Not Wall Street (Morrow, 1998). After earning a Finance MBA from New York University, he spent the 1980s on Wall Street, as a money market trader, equity analyst and junk bond analyst. During the 1990s he was a featured columnist with TheStreet.com and a frequent contributor to Individual Investor, Online Investor, and Consumers Digest, among many other publications. He currently writes for CFA Magazine.

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Comments (2)


I hope Doug Noland's reading of Powell is correct for more than one reason, the least of which is the fact that the former Fed and Fed chairpersons completely enabled Congress with respect to the Federal debt binge. Not one Fed testimony in front of Congress included Yellen or Bernacke emphatically warning of the debt binge downside for our country. Their role in the Federal debt binge is their sad legacy. The equity bubble will eventually correct, but, the 20 trillion they helped create will forever be with us. Those investors that pray for continued Fed enabling fail to see or care how it has contributed to the Federal debt pile we are leaving future generations. How sad.

Thanks for the article.
jprizzuto profile picture
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