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Powell Leans The Wrong Way Ahead Of Next Week's CPI


  • The Fed raised but signaled a data-dependent pause.
  • I've been bullish this year, but I'm concerned that the Fed pause comes just ahead of a CPI print next week that has some upside risk.
  • Anyway, net net, I'm bullish for this year, but I'm concerned about next Wednesday's reaction.
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Federal Reserve Chair Jerome Powell Testifies Before The Senate Banking Committee

Win McNamee

Fed Chair Jerome Powell made sure everybody knew today they pivoted without saying pivot. They stepped off the hike-pedal and moved to the sidelines. That should be good. The market did not react well which is not amazing. But just as Powell

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This article was written by

Elazar Advisors, LLC profile picture
Hi, I'm Chaim Siegel. I've run Elazar since inception. I've worked for big hedge funds as a trader, analyst, PM and water boy. 
Starting out I could make a mean straight black coffee. But ask me to add some sugar or milk though was a problem. So they got fed up and said, just give him some stocks to follow. That was in the 90s tech boom. Yeah. That worked out. 
So, now, mid-life crisis I enjoy second guessing the Fed, which is usually a good strategy. They are not traders, they have no risk discipline, they are having way too much fun with this QE-QT thing and because of their powerful position, are usually way too over-confident in their decision making which is a hint to bad decision making.
My customers have seen that I've been net net pretty good at consistently second guessing the Fed.
Our EPS estimates factor into Street numbers.
I've been on CNBC and a few other places.
But mostly I really just enjoy second guessing the Fed and keeping it simple.
Wishing you all continued success.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (31)

The Fed was always going to stick us with high inflation because it is better for the debt situation. The y/y (or y/y/y) comparisons start getting easier in July so watch out for a rebound. The stock market is completely insane. Apple at 30 times trailing earnings despite negative growth.
Elazar Advisors, LLC profile picture
@dstb i agree what a lot of what you said! I dont say that to everybody if you notice.
the FED is not on the wrong side of anything.
They have the almighty power to do whatever they want regarding our economy.
They are independent or are supposed to be independent..
Elazar Advisors, LLC profile picture
@FunInvesting When they lean from tightening but there's upside risk to the next cpi number, that's what I'm talking about. Read the article for the details. I agree they have a lot of power. They are not independent. I have a lot of evidence of that. They claim to be but they are not.
@Elazar Advisors, LLC Yes. Trump bullied them into rate cuts in 2019 for one.
Elazar Advisors, LLC profile picture
@T_Value Biden has his way as well.
Chancer profile picture
@Elazar Advisors, LLC :
Thanks for article.

In your opinion, do we get a recession?

If Powell keeps increasing rates, IMO, recession for certain.
Elazar Advisors, LLC profile picture
@Chancer I dont think recession, no.
jack kreg profile picture
Higher for longer, unless Fed borrow/spend gets blow out of the water by large reductions in Fed spending from recent Covid inflated levels!
dukenukum profile picture
Rate hikes do NOTHING for the common man.... if something is too expensive make more of it ...
jack kreg profile picture
@dukenukum Supply side Reagan!! I like your speak!
@dukenukum It basically just starts a race between lowering demand through layoffs which don't work anyway when people have excess savings and lowering supply by making it more expensive and risky for businesses to expand production capacity.
Yes, Transitory was a poor choice of words for The Fed but it's hard to put The Genie back in The Bottle once Companies make products Weigh Less and at the same time Raising Retail Pricing.
The longer you play with inflation the greater the pain! Paul Volcker was right. I hope Powell is correct, but if he’s not, the pain will be drawn out much longer. Not only that, but the government needs to pull back on their spending. It can’t be the Fed alone.
The Fed has no reason to cut rates this year unless a black swan event materializes. They do not want to have to cut and raise again making things worse, like the 1970s. They were late to the rate hike party. It is safer to over-hike than to under-hike.
Elazar Advisors, LLC profile picture
@T_Value I still think the Fed cuts later in the year.
@Elazar Advisors, LLC You are predicting a crisis then.
Fire that fool. Inflation is still hot and rates need to go up or government spending down.
@blasted The Fed is remembering Volker and will feel comfortable once we get to a 6% level in Fed Rates.
Allowing for a Longish
3% - 6% inflation is fine ? Who do these people speak for
@Elazar Advisors, LLC thanks for clarifying. Yes 3-6% inflation is probably fine for stocks, businesses with pricing power, etc. it’s pretty horrible for people who live on wages that rarely increase with inflation.
You say 3% to 6% inflation is fine. Do you believe the CPI & the PCE accurately reflect what consumers are actually experiencing in real life? If they understate inflation(my belief) then the CPI & PCE have to get down to 2% to get "street" inflation to your acceptable 3-6% target. What amazes me is everyone accepts the government numbers as being accurate even if in real life they know different. Powell pounds the table that 2% is their goal...he probably understands(but would never admit) that is really 5% inflation to the consumer.
Elazar Advisors, LLC profile picture
@9543151 I am using Street and pce/cpi numbers. I am not talking about reality. I am talking about stock market reality which is my business.
TraderJoeZ profile picture
👍👍 thanks for writing
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