The Fed is on the verge of panic, but is reassuring

How often, we spend our days “waiting”. We are waiting for economic figures, protocols, speeches of the heads of central banks. We are currently awaiting employment figures. Every time we wait for the “big thing”, there is a certain belief that when we “know” that we have entered this phase of great knowledge, investing will suddenly become easier, clearer, more obvious. Every time we are almost certain that we will get the answer to all our questions and suddenly it will be very easy to invest 1000 francs, 1000 euros or 1000 dollars and become very rich. Very fast. And actually, then we realize that NO…

Audio recording from July 7, 2022

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They were waiting yesterday

Therefore, since the beginning of the week, we have been reviewing the minutes of the FOMC meeting. Minutes that summarized what was said behind closed doors at the FED in mid-June. In the middle of a heat wave. What did the stars of finance and the world economy really say during these two days of meetings, those who know and who are more equal than us poor mortals. What were their joys, what were their sorrows and what they would really like for the economy. As good soldiers who obey the orders of the global financial establishment, we waited. And finally, yesterday evening, the day of glory came.

And that’s when we analyzed the minutes of the FOMC meeting in June, which taught us so much that I almost wanted to stay up all night trying to save all this knowledge that the Fed gave us in a multi-page report written in fine print. . Finally, I read the summaries generated by the computers in less than 3 seconds 4 tenths after the exact time of publication, and I realized that waiting was absolutely useless. FED Minutes is like sitting on the beach and watching the sunrise and sunset and then coming back the next day: watching the sunrise and sunset and staying in bed for the third day, because it’s really the same thing every day.

Door breaking

So good about the FED, it’s not the same every time. But when we take the time to read what they tell us. Honestly, if you want to tell me something we didn’t already know, it’s that you spent the last six months on a desert island after your sailboat sank and the Coast Guard came to take you back to civilization for 30 pounds lighter and your basketball.

Before we go any further, you still need to realize that the FOMC meeting was three weeks ago. And three weeks ago oil was at $123.75, copper was 15% higher, the 10-year yield was at 3.47%, the SNB has yet to raise rates to MINUS 0.25%. Basically, the only thing that hasn’t changed in three weeks; it is the European Central Bank that continues to wait with its ass in the chair for inflation to fall on its own through the Holy Spirit and higher US interest rates. Now that we know that these protocols were published in a very different financial and economic world, we can ask if this smells a little warm.

Admit it doesn’t smell like heat…

Okay, so let’s face it, it doesn’t smell hot, and this news is as fresh and “up to date” as a 2.5 ton tuna with 4 pairs of eyes, twelve caudal fins and 4 legs, caught in the Japanese water at the foot of the Fukushima power plant. If we dig a little into the declarations of the Fed, we will say that in fact they did not teach us anything revolutionary…

No, since the fact that these minutes tell us that the Fed seemed really “hawkish” three weeks ago and determined to fight inflation even if it means slowing economic growth, I don’t think that’s a HUGE SURPRISE knowing that Powell repeated this at least 12 times since June 15 on different occasions.

Because the fact that these minutes are telling us that the Fed three weeks ago is pretty suspicious of inflation and concerned that rate hikes may not be enough to fight inflation, isn’t that what REALLY could be called a SCOOP.

Also, who would be surprised to learn that the Fed intends to regain control of the economy and inflation? hey who Simply put, we realized last night that three weeks ago the Fed gave more or less the same speech it has been giving for three weeks, BUT NOT releasing the minutes of the FOMC meeting. Basically, to put it simply: we’ve been waiting like idiots to find out about this shit, knowing that a lot has changed in three weeks and that the Fed could potentially give a different speech if it meets tonight. The most important thing we remembered last night is that it will be very important to wait for Friday’s employment figures because there will be things there that can potentially read the future. Or not.

Markets in Europe are recovering

European markets recovered yesterday. No FED protocol. Markets in Europe recovered as they refused to drop below the lows of the year, but also the Norwegians ended the strikes in the oil and gas sector, which allowed Europe to breathe a little and tell itself that maybe there is no need to chop wood in the forest for heating this winter . Not to mention that the ever-smiling Elisabeth Borne, King Macron’s prime minister, has said that France wants to re-nationalise EDF to control what little energy it still has at its disposal. We should also note the exchange rate of the euro, which in a few hours will be at parity with the dollar, which also clearly made it easier for exporters such as Airbus.

In the United States, we have been doing virtually nothing while waiting to find out what to think about the minutes of the FOMC meeting. Once we realized that this release would serve to reiterate what we all already knew, no one did anything and we waited for the close, waiting for Friday’s employment numbers and hypothetically next week’s CPI numbers. Realizing that oil has officially entered a bear market, most analysts are torn as to who will be right about the price forecast per barrel. Goldman Sachs is betting on $130 for the six months, and Citi is betting on $65. Deutsche Bank sees a barrel at $107 for Christmas. So, the Good, the Bad and the Ugly are back in the oil sector.

On the other side of the globe

Asia began the day wondering whether the Fed is sufficiently determined to tackle inflation. When in doubt, it goes either way. The Nikkei rose 1.3%, the Hang Seng fell 0.4% and China gained 0.5%. I will leave you to think about the logic of morning lessons. Meanwhile, at $99.19 a barrel, gold at $1,743, and Bitcoin at $20,000, it’s becoming almost as boring as gold.

It must be said that otherwise we are not full of interesting news. It will be recalled that Boris Johnson does not want to resign, although his last support may be down to the cat from Downing Street. Then again, the cat is probably more interested in the crumb than Mr. Johnson’s political prospects. There is also the Secretary General of OPEC, Mr. Barkindo, who has passed away. It should also be noted the good sales figures of Rivian, which gained 10%, as it sold 4,000 electric pickups. It remains only to know how we will recharge them when there is no electricity this winter. Tesla also just released a trailer that you carry with you that is equipped with solar cells for recharging, Tesla mentioned, that tows the trailer. We all look forward to going on holiday with our own trailer, especially in places where we can no longer park the car ourselves.

By the way, we learned that Elon Musk gave birth to the eighth and ninth children. This time, the mother is one of her co-workers at Neuralink, and we don’t know what mathematical formula will be used to name the two twins.

Economic figures

In terms of economic indicators, we’ll have unemployment in Switzerland, industrial production in Germany and lots of guys from the ECB and the Fed talking to get us the good word. There will also be oil stocks, which should allow us to speculate a little more on the barrel. Futures are currently up 0.14%, we are very happy to know that we still don’t know more than yesterday and that we still have to wait until tomorrow, that the market is in great shape.

Have a great day and see you tomorrow to wrap up the week.

See you tomorrow !

Thomas Veillet

“Life belongs to us to waste, not to save. – DG Lawrence