Jerome Powell Talks Too Much

Destined for Fed obsession... Jerome Powell talks too much... He shrugged off his buddy Neel Kashkari's fairy tale... Another Powell critic speaks out... No map of the U.S. economy exists... With complexity comes risk... A 'Premier' level offer... [Stansberry Research Logo] Delivering World-Class Financial Research Since 1999 [Stansberry Digest] Destined for Fed obsession... Jerome Powell talks too much... He shrugged off his buddy Neel Kashkari's fairy tale... Another Powell critic speaks out... No map of the U.S. economy exists... With complexity comes risk... [A 'Premier' level offer](... --------------------------------------------------------------- Editor's note: History was made earlier today – and not in a good way... In case you missed the news, tech-focused Silicon Valley Bank collapsed amid a run on deposits. The bank worked mainly with startups and the investors who fund them. It became the second-biggest bank failure in U.S. history... As of the end of 2022, Silicon Valley Bank was the 16th-largest bank in the U.S. It had $209 billion in assets at that time, according to the Federal Reserve and the Wall Street Journal. But now, it's gone... Silicon Valley Bank announced a big loss on its bond holdings and plans to shore up its balance sheet earlier this week. That news caught many folks by surprise. And in turn, its stock tanked and customer withdrawals surged. The Federal Deposit Insurance Corporation took control of Silicon Valley Bank this morning through a new entity. It's called the Deposit Insurance National Bank of Santa Clara. This situation is still developing... Digest editor Corey McLaughlin will keep a close eye on everything throughout the weekend. And he'll be sure to pass along any relevant updates on Monday. For now, let's turn things over to Dan Ferris for his regularly scheduled Friday Digest... --------------------------------------------------------------- I (Dan Ferris) didn't get the Federal Reserve out of my system last week... [In last Friday's Digest]( I discussed the Fed's fairy tale of a so-called "soft landing." And more specifically, I railed on the central bank for not knowing what the heck it's doing... It's too much to believe that hundreds of bureaucrats in Washington, D.C., know how to make the economy expand or contract exactly (or even roughly) as much as they want. The belief is pure hubris. I also pointed out the Fed's messed-up sense of priorities... [Minneapolis Fed President Neel] Kashkari is saying the Fed's arbitrary 2% target is more important than your ability to put food on your table and gas in your car. Hey, maybe that's why the Fed's favorite inflation gauge is the personal consumption expenditures price index... It excludes food and energy! Anyway, I spoke my mind last week. And I was content to forget about the Fed for a while. But I've now realized that I can't make that type of resolution... That's because a resolution to forget someone or something requires the participation of the other person or other entity. For example, at this point, we've talked enough about [Cathie Wood's dumb moves and comments](. So as long as Wood doesn't make some new dumb move or say some new dumb thing that I haven't written about before... I don't need to write about her for a while. It's the same thing with the Federal Reserve... except that the Fed is a bureaucratic institution based in Washington, D.C. So it will probably outlast death, taxes, and the Rolling Stones' Keith Richards. And it will never stop doing stupid things that I must write about to prevent my head from exploding and anyone else from thinking the Fed isn't a ridiculous institution. So we can all hope that I'm done telling you how bad Wood is at her job. But I can never stop writing about the Fed without having to scream into a pillow for an hour each week. And right on cue, Fed Chair Jerome Powell spoke to Congress twice this week. So here we go... Powell delivered his semiannual monetary policy report to Congress this week... My colleague and Digest editor Corey McLaughlin already covered the key talking points earlier this week. If you haven't already, be sure to catch up [here]( and [here](. I'll give you my take today... First, Powell spoke to the Senate's Committee on Banking, Housing, and Urban Affairs on Tuesday. Then, on Wednesday, he met with the House of Representatives' Financial Services Committee. Through both days, Powell stuck to what he has been saying for months... He said the Fed is committed to returning inflation back to its 2% goal. He said they've "covered a lot of ground" and still "have more work to do." And just in case the elected mob was too dense to comprehend his intentions, Powell stated clearly... Although inflation has been moderating in recent months, the process of getting inflation back down to 2% has a long way to go and is likely to be bumpy. As I mentioned, the latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated. If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes. That's more blunt than his buddy Neel's 'tapping the brakes' song and dance last week... I actually like the juxtaposition with Kashkari's fairy tale. Kashkari's interpretation was so sultry and sexy for a few seconds. But then, he turned serious, ripped everyone's hearts out, and admitted that it was highly unlikely to happen. Now, it seems like Powell is just laughing in our faces... Oh that Neel... He's such a card. Soft landing? What's my incentive to even try to do that? Paul Volcker caused a massive "hard landing" by raising interest rates. And he's hailed as a hero who fixed the mistakes of his two predecessors, Arthur Burns and G. William Miller, who let inflation run too hot. So yeah, I'm going to be like Paul. I'll reduce your 401(k), your home equity, and your paycheck to financial rubble before I ever let inflation run too hot. I don't have a map of the economy, but I have a picture of Paul on my desk. That's good enough. See you in the unemployment line. Oh wait, no I won't. I'll still have my job. Haha, suckers! I'm not the only person who is critical of Powell's public comments... Earlier this week, economist and Bloomberg Opinion columnist Mohamed El-Erian accused the Fed of "repeated policy slippages" and the "lack of important structural and strategic underpinnings." Unlike me, El-Erian is too polite and professional to say it another way. So I'll do it for him... The Fed doesn't know what it's doing. And it shows. El-Erian also noted how the stock market doesn't seem to know what to make of Powell's public comments. From his latest column... Yet once again remarks by Federal Reserve Chair Jerome Powell fueled considerable volatility in markets that could risk both economic well-being and financial stability... Several times in the last few years, comments at the press conference that traditionally follows the conclusion of the two-day [Federal Open Market Committee ("FOMC")] meetings have caused significantly more volatility than the prior publication of the central bank's policy decision and Powell's written remarks. On Tuesday, the initial market volatility caused by the release of Powell's opening statement before the beginning of his semiannual congressional testimony was significantly amplified by his subsequent answers to senators' questions. It sounds to me like El-Erian wishes Powell would stop talking so much. Whether that's the case or not, El-Erian isn't wrong about Powell's comments and the market's movements. In fact, [I made a similar observation in The Ferris Report]( in December... Powell's press conferences always begin at 2 p.m. Eastern time. In the following charts, you can clearly see the consistent pattern of chaos that ensues immediately after his comments. The market goes haywire for several minutes around the time of the rate-hike announcement before it picks a direction. In that issue, I published four charts showing how the market goes nuts when Powell talks. Now, El-Erian was more specific with his analysis. He noted the difference between the market's reaction to the initial rate-hike statement and Powell's answers to questions. El-Erian implies that the Fed might one day do its job well... He makes it seem like the Fed might one day have credibility. I'm much harsher... I don't believe competence can ever exist at the Fed. And in my mind, the Fed will never be credible because its tools are ill-suited for its stated purpose of maintaining "price stability and maximum employment." The Fed is always overshooting targets and never quite knowing what to do until after something bad happens. The Fed had no idea that inflation was a problem until too late. And now that it's locked in a battle with higher-than-normal inflation, it has no idea where interest rates need to be. That's not even happening because Powell and all his buddies are bad at their jobs. It's happening because the job is undoable and the Fed shouldn't even exist. It reminds me of what author and trader Nassim Taleb said in his landmark book, The Black Swan... In a lengthy essay at the end of the book's second edition, Taleb made a list of 13 problems that folks have in understanding his message (and he notes the error's typical perpetrators in parentheses after each item on the list). The second problem he lists is... Saying the maps we had were better than having no maps. (People who do not have experience in cartography, risk "experts," or worse, employees of the Federal Reserve Bank of the United States.) This is the strangest of errors. I know few people who would board a plane headed for LaGuardia airport in New York City with a pilot who was using a map of Atlanta's airport "because there was nothing else." People with a functioning brain would rather drive, take the train or stay home. Taleb goes on to point out that the people who get involved in economics always seem to prefer using the wrong tools to using none at all. The Fed's 400-plus PhD economists don't have a map of the economy because nobody does. The economy is far too complex to model on a computer. But since the Fed does have 400-plus PhDs and offices full of computers, it seems to think that's better than nothing. So that's what it uses. They can't map the economy. They can't set interest rates. And frankly, why anyone believes the Fed can save them is beyond me... It's not like the Fed has a good track record... It kept interest rates low in the 1920s. That helped inflate the 1929 stock market bubble. Then, it made the Great Depression worse by jacking rates up too quickly. The Fed didn't fight inflation hard enough in the early 1970s. Then, once it took inflation seriously, it caused two recessions – one beginning in 1980 and another starting in 1981. Decades later, then-Fed Chair Alan Greenspan's loose monetary policy contributed to the dot-com bubble. And the Fed's policies after the dot-com crash contributed greatly to the housing bubble. Now, the Fed is likely making another big mistake – either by not hiking rates fast enough or by hiking them too fast. It's hard to tell at any given moment. As I've said before, the Fed's inherent lack of competence and credibility is pure hubris. It won't admit that it can't possibly have enough information to make the sorts of judgments it must make to set monetary policy. It's not fit for the job. Now, let's put some of the pieces from last week and this week together... Kashkari's fairy tale about a soft landing is an attempt to distract from the Fed's steadfast focus on hitting its 2% inflation target. The Fed will keep hiking rates until that happens. And it will keep rates higher for longer than anyone thinks right now. The market's distrust of Powell shows in the volatility that ensues every time he speaks in public. That probably won't change. So be ready for a wild ride after every FOMC meeting. Nobody has the knowledge or tools needed to simply tap the brakes and coolly maneuver a $26 trillion economy. No map of the economy exists, either. So the Fed and its 400-plus PhD economists do what all economists do... They use whatever kind of map they do have. Distracting fairy tales notwithstanding, these three points suggest more pain lies ahead. And this pain will occur not only in the stock market, but also in housing – one of the most important sectors for the overall economic picture. I don't believe the Fed will stop hiking rates and beating back economic activity it finds excessive until it does what Volcker's Fed did. As you'll recall, he bludgeoned our credit-dependent economy with a 20% federal-funds rate four separate times until a brutal recession arrived. And I don't believe anybody can really anticipate the level of economic destruction that would follow if that were to happen again. The economy and its financial system were smaller – and therefore, less complex – when Volcker aggressively hiked rates. The larger anything becomes, the more complex it gets. And with complexity comes risk. Taleb addresses that topic in The Black Swan, too... I realized that as they become larger, companies appear to be more "efficient," but they are also much more vulnerable to outside contingencies commonly known as "Black Swans" after a book of that name. All that under the illusion of more stability. Add the fact that when companies are large, they need to optimize so as to satisfy Wall Street analysts. Wall Street analysts (MBA types) will pressure companies to sell the extra kidney and ditch insurance to raise their "earnings per share" and "improve their bottom line" – hence eventually contributing to their bankruptcy. Economies have the same problems as big companies. They seem stable, but they're just more vulnerable to a big, unexpected change – like a pandemic, for example. Messing with interest rates doesn't help. It's just another way to set off a series of events that could easily lead to a big, unexpected change. Finally, it must seem like I just criticize everything and everyone in the financial markets... I might even seem downright cynical. I think that's mostly an effect of believing we're at the end of the top of the biggest financial mega-bubble in all recorded history. But subscribers to The Ferris Report know I'm optimistic about several macroeconomic and microeconomic trends right now. And Extreme Value subscribers know I'm optimistic about the long-term return prospects for plenty of excellent, cash-gushing companies. The Fed is a clown show. It's destined to not fulfill any of its mandates or hit any of its targets without creating much bigger problems than it will ever solve or prevent. But that doesn't mean the world is devoid of opportunity... For example, in the March issue of Extreme Value, I just highlighted one of the best opportunities in the market right now. The issue hit subscribers' inboxes about an hour ago. In the report, I provided an in-depth update on my No. 1 recommendation. I believe this stock's value has strong potential to rise roughly 10 times over the next several years. It's a great time to buy. So sure, it might seem like I'm obsessed with the Fed. And I might seem cynical lately. But the Fed keeps giving me reasons to talk about it... It's my duty to help you see through the façade. Unlike the Fed, I'll do whatever it takes to ensure your financial well-being. That's what I would want if our roles were reversed. Maybe next Friday we'll cover something else. Or maybe not. --------------------------------------------------------------- Recommended Links: # ['If I Had to Put ALL My Money Into ONE Investment, THIS Would Be It']( A top analyst goes on record saying, "This is it: the No. 1 investment to buy today." For a short time longer, he's sharing the full details of the best investing setup he has seen in his 20-plus-year career. It's a rare opportunity that could make you 10 times your money, no matter what the market does next. [Click here for details before Monday's opening bell](. --------------------------------------------------------------- # [Up 588% in Three years – and a BUY Today]( No analysts at Stansberry Research are currently recommending this stock, but a widely followed name is speaking out about it in a big way. [Get the recommendation 100% free on this page here](. --------------------------------------------------------------- New 52-week highs (as of 3/9/23): inTEST (INTT). In today's mailbag, good thoughts on "drunken sailors"... interest rates in the 1980s... and some more opinions about the length of our Digests and the Fed. Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com. Several subscribers have recently commented that our government is 'spending money like drunken sailors.' This is an insult to drunken sailors, who at least have the acumen to stop spending when they run out of cash. Unfortunately, our government shows no such restraint." – Paid-up subscriber L.B. "Why don't [we] just address the root cause of the problem... government spending!!!!! It's like you got a huge cut that needs stitches... and you're arguing about what kind of band-aid to put on it. Maybe if you didn't play with knifes in the first place, you wouldn't have gotten cut." – Paid-up subscriber Lee D. "In 1982 we bought a lot and contracted to build a house. The bank said its mortgage rate was 22%. My wife said 'we can't do this.' She was pregnant with our first child. I told her 'if rates aren't down to 12% in six months when we close we'll be in a recession and it won't matter.' We closed six months later at 11% and rolled it into a 6% rate a couple years later that I paid off in 1994." – Paid-up subscriber Mike S. "You guys don't need to change the length of the Digest. It is fine. I've been reading your stuff every day for the last 10 years and the size is good enough for me. "The inflation of the '70s was caused by Nixon getting off the gold standard. The removal of Bretton-Woods is what caused the dollar to collapse in value. "Without the gold standard, there is no way for the Fed to prevent inflationary or deflationary cycles. They have no way to measure inflation, other than using the Phillips Curve. This means that every measure of well-being for the average worker is treated as a cause of inflation, up to and including actually working. "Look at how the Fed is reacting to a 'tight' labor market. Tight labor markets are exactly what you want. That's what guarantees a job." – Paid-up subscriber M.P. Good investing, Dan Ferris Eagle Point, Oregon March 10, 2023 P.S. If you're not already an Extreme Value subscriber but want to read the latest update on my No. 1 recommendation, you're in luck... We recently put together a special offer for "premier" level memberships to Extreme Value. And in addition to the March issue (and all my previous issues), you'll receive instant access to my brand-new "The Ultimate Commodity Hypercycle Portfolio"... This seven-stock model portfolio gets the stamp of approval from 50-year commodities market wizard Rick Rule. And it's not the only benefit to a premier-level membership. [Click here for all the details](. --------------------------------------------------------------- Stansberry Research Top 10 Open Recommendations Top 10 highest-returning open positions across all Stansberry Research portfolios Stock Buy Date Return Publication Analyst MSFT Microsoft 11/11/10 908.5% Retirement Millionaire Doc ADP Automatic Data 10/09/08 786.9% Extreme Value Ferris MSFT Microsoft 02/10/12 780.2% Stansberry's Investment Advisory Porter HSY Hershey 12/07/07 574.4% Stansberry's Investment Advisory Porter WRB W.R. Berkley 03/16/12 564.4% Stansberry's Investment Advisory Porter ETH/USD Ethereum 02/21/20 518.4% Stansberry Innovations Report Wade BRK.B Berkshire Hathaway 04/01/09 440.5% Retirement Millionaire Doc AFG American Financial 10/12/12 418.3% Stansberry's Investment Advisory Porter ALS-T Altius Minerals 02/16/09 317.7% Extreme Value Ferris FSMEX Fidelity Sel Med 09/03/08 306.0% Retirement Millionaire Doc Please note: Securities appearing in the Top 10 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the model portfolio of any Stansberry Research publication. The buy date reflects when the editor recommended the investment in the listed publication, and the return shows its performance since that date. To learn if a security is still a recommended buy today, you must be a subscriber to that publication and refer to the most recent portfolio. --------------------------------------------------------------- Top 10 Totals 4 Stansberry's Investment Advisory Porter 3 Retirement Millionaire Doc 2 Extreme Value Ferris 1 Stansberry Innovations Report Wade --------------------------------------------------------------- Top 5 Crypto Capital Open Recommendations Top 5 highest-returning open positions in the Crypto Capital model portfolio Stock Buy Date Return Publication Analyst ETH/USD Ethereum 12/07/18 1,216.5% Crypto Capital Wade ONE-USD Harmony 12/16/19 1,116.2% Crypto Capital Wade POLY/USD Polymath 05/19/20 1,046.6% Crypto Capital Wade MATIC/USD Polygon 02/25/21 896.5% Crypto Capital Wade BTC/USD Bitcoin 11/27/18 442.2% Crypto Capital Wade Please note: Securities appearing in the Top 5 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the Crypto Capital model portfolio. The buy date reflects when the recommendation was made, and the return shows its performance since that date. To learn if it's still a recommended buy today, you must be a subscriber and refer to the most recent portfolio. --------------------------------------------------------------- Stansberry Research Hall of Fame Top 10 all-time, highest-returning closed positions across all Stansberry portfolios Investment Symbol Duration Gain Publication Analyst Nvidia^* NVDA 5.96 years 1,466% Venture Tech. Lashmet Band Protocol crypto 0.32 years 1,169% Crypto Capital Wade Terra crypto 0.41 years 1,164% Crypto Capital Wade Inovio Pharma.^ INO 1.01 years 1,139% Venture Tech. Lashmet Seabridge Gold^ SA 4.20 years 995% Sjug Conf. Sjuggerud Frontier crypto 0.08 years 978% Crypto Capital Wade Binance Coin crypto 1.78 years 963% Crypto Capital Wade Nvidia^* NVDA 4.12 years 777% Venture Tech. Lashmet Intellia Therapeutics NTLA 1.95 years 775% Amer. Moonshots Root Rite Aid 8.5% bond 4.97 years 773% True Income Williams ^ These gains occurred with a partial position in the respective stocks. * The two partial positions in Nvidia were part of a single recommendation. Editor Dave Lashmet closed the first leg of the position in November 2016 for a gain of about 108%. Then, he closed the second leg in July 2020 for a 777% return. And finally, in May 2022, he booked a 1,466% return on the final leg. Subscribers who followed his advice on Nvidia could've recorded a total weighted average gain of more than 600%. You have received this e-mail as part of your subscription to Stansberry Digest. If you no longer want to receive e-mails from Stansberry Digest [click here](. Published by Stansberry Research. You’re receiving this e-mail at {EMAIL}. Stansberry Research welcomes comments or suggestions at feedback@stansberryresearch.com. This address is for feedback only. For questions about your account or to speak with customer service, call 888-261-2693 (U.S.) or 443-839-0986 (international) Monday-Friday, 9 a.m.-5 p.m. Eastern time. Or e-mail info@stansberryresearch.com. Please note: The law prohibits us from giving personalized investment advice. © 2023 Stansberry Research. All rights reserved. Any reproduction, copying, or redistribution, in whole or in part, is prohibited without written permission from Stansberry Research, 1125 N Charles St, Baltimore, MD 21201 or [www.stansberryresearch.com](. Any brokers mentioned constitute a partial list of available brokers and is for your information only. Stansberry Research does not recommend or endorse any brokers, dealers, or investment advisors. Stansberry Research forbids its writers from having a financial interest in any security they recommend to our subscribers. All employees of Stansberry Research (and affiliated companies) must wait 24 hours after an investment recommendation is published online – or 72 hours after a direct mail publication is sent – before acting on that recommendation. This work is based on SEC filings, current events, interviews, corporate press releases, and what we've learned as financial journalists. It may contain errors, and you shouldn't make any investment decision based solely on what you read here. It's your money and your responsibility.