It's More What Powell Says

Than How Much Rates Rise

Everyone knows rates are going up by another 1/4 point on Wednesday. It’s a given and so stated “baked” in. That being said Powell’s words will have greater weight this week than in prior statements. Besides that the Aussie’s just put another 1/4 on the “barbecue” . . . take that “outback” and grill it mate; they were expected to pause.

Surely First Republic Bank is not the last of the big regional banks, you know those mismanaged “wanna be” behemoth dinosaurs, to go belly up. But Powell and every one who has anything to do with the upper echelons of our financial world knows the “fix” is in . . . let the top tier pick up the pieces and further consolidate their power. JPM won the last battle for First Republic; I wonder who’s next in line for the coming “fish fry”.

They call this a “plan” and I’m starting to see why. How many additional corporate managers will JPM hire to run the bargain basement it just acquired in First Republic assets? My guess is few to none; surely not the bloated overpaid upper end corporate staff who drove this latest failure into the ground, eh? I wonder how much they paid in bonuses to themselves prior to their demise? Claw it back only this time please use real bears to do so.

So those who think the Fed is going to “pause” because of the banking problems are sadly misdirected. Unless the pace of the failures accelerate these problems have been taken care of. The only question remaining to be answered is who’s up first in the next round to fatten their balance sheet?

With the bank failure problems in the rear view mirror Powell can morph into Voelker and take rates higher in June and July. Then, if increasing inflation has subsided and a few more people are standing in the unemployment lines Powell can take a break and evaluate where we stand. Who knows, the much overdue recession might actually take flight especially if China brings an end to the Russian / Ukrainian conflict.

This pause will be complimented by an increase in the debt ceiling. When Voelker took rates to astronomical levels in the early 1980s increases in the money supply came from Regan and Reagan lowering taxes. This time it’s coming to a Democratic bastion near you brought to you by Congress. Face it, an election is coming and the last thing our “swamp monsters” want is a reason their voters will kick them out of their cush elected seats. If anyone thinks that any Congress will ever vote for term limits please contact me; I have some beachfront property for sale that’s only under water half of the day.

In any case, pay close attention to what Powell and his merry men and women have to say next week. Chances are the hawks will be flying, what that does to the markets is anyone’s guess but if you can earn 5%+ in a riskless treasury bill who really cares.

Hope you enjoyed this post. I’m just a young 68 years old; my Dad became a broker when I was 13. It’s time for me to ‘give back’ to all of you what’s in my head. It’s not always pretty but it’s based on history . . . and history, unchecked, repeats itself.

Everyone learns at their own pace. If you pick everything up the first time through, great but if not email me at dzimmer@substack.com so we can further help.

Only fair to give Family Guy its due at times like these . . . ah, they just don’t make them like they used to.