FOMC: Fear Of Missing Crash

Remember SPACs (Special Purpose Acquisition Companies) which were the locus of IPO-related fraud back in 2021 at the height of the pandemic bubble? Well, they are back. Just another sign of the froth that is percolating higher along with this market as the S&P 500 re-approaches its all time high set earlier this year.

"The SPAC boom ended abruptly when market conditions deteriorated, affected by tighter regulations and declining stock prices of companies that went public through SPAC mergers."

Last week I mentioned the resurgence of meme stocks led by Palantir and CoreWeave. Of course back in 2021, the biggest "meme" stock was the infamous Gamestop. I don't know what the term "meme stock" is supposed to mean, I only know that the end result is a total wipeout of retail investors and substantial profit for the Ponzi schemers who sell at the top.

Now once again we are seeing a massive Ponzi surge in commodity metals and stocks, led by platinum. This was something we also saw during the 2021 pandemic bubble, coinciding with peak retail speculation.

Then there are the Ark ETFs managed by Cathie Wood which also made their highs back in early 2021. Those are going bonkers again right now, albeit at a lower high as one should expect after -90% losses.

Which gets us to this action packed week. I will begin with a recap of recent events.

Last Thursday, reports emerged of an imminent attack by Israel on Iran. The market shrugged it off and ended higher. However, when the attack was launched Thursday night, the S&P futures exploded lower. Friday was a major selloff. Over the weekend the war escalated, but on Monday markets shrugged it off and recovered all of the losses from Friday. Now on Tuesday the market is (so far this morning) lower again on news that the war is escalating. For the Fed, higher oil prices are further complicating monetary policy that was already complicated by the trade war:

"If there is something the Federal Reserve (Fed) does not want to see today, as it approaches this week’s Federal Open Market Committee (FOMC) meeting, it is a shock to oil prices. The reason for this is that it brings back memories of the 1970s and 1980s, when oil prices surged and contributed to higher inflation during those decades. But the similarities don’t end there. Some of the actors of the events that triggered the shocks to oil prices are also familiar and involve Israel and Iran."

aka. 1973 oil embargo.

If the Fed is hawkish tomorrow as they should be given the circumstances, then markets will implode. After the Fed meeting is a U.S. markets holiday on Thursday for Juneteenth. Which will leave only one trading day left this week for U.S. gamblers, whereas the rest of the world will be trading ahead of the U.S. both on Thursday and again on Sunday.

In summary, Trump keeps blaming Powell for holding rates too high for too long, however the combination of Trump's trade war, his inflationary tax cut and now this war in the Middle East, are what is keeping inflation high at the end of the cycle.

History will say this was indeed a policy error, just not a Fed policy error.