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Asset Inflation Is Out of Control

Today the FOMC came out swinging, reducing their "dot plot" interest rate projections from three rate cuts down to one rate cut for all of 2024. It appears they are finally concerned about their super asset bubble which is now totally out ouf their control. All because we are witnessing the biggest monetary policy error in human history.

At the last FOMC in early May, Powell was inexplicably dovish and the FOMC voted to taper Quantitative Tightening which sent markets into a vertical rally that has accelerated through today. I have maintained all along that the biggest error the Fed is making is keeping their balance sheet too loose and interest rates too tight. They are using the wrong policy tool to contain inflation. The Fed's biggest mistake in 2024 was to signal guaranteed rate cuts, which today they officially walked back, despite being priced into markets. The same thing is happening globally. Last week, the ECB and Bank of Canada both lowered rates for the first time since the onset of the pandemic. In the process, they are stoking history's largest asset bubble.

We've never seen this before:

Since 2008, global central banks have come in to prop up markets AFTER markets became oversold. This is the first global easing that is taking place with markets at all time highs. Which means that markets have already priced in this easing and therefore central banks will be chasing markets all the way down, instead of pushing them up as they have done before. Now they can't prevent implosion, they can only accelerate the velocity of the inevitable decline.

All over Wall Street today pundits were complaining that these latest CPI figures show inflation is easing, if only minimally. That may be the case AND it's also likely that the economy may be finally rolling over, but asset markets are now vertical. However, today's market pundits are absolutely blind to asset bubbles, since it's their sole job to ensure they can only grow bigger. Fortunately for them, global central banks had no exit strategy from the pandemic, aside from making that super bubble much bigger by signaling to markets the exact date on which they would end tightening.

Making mass front-running of markets inevitable. Just make up any story you want.

Which is why today, the Fed was forced to slam on the brakes Volcker style.

Now we will see who goes through the windshield.

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