Join us at the Independent Investor Summit in NYC on September 12th!
Markets are breaking records. Public equities are outperforming. And individual investors are driving it all. It’s officially the rise of the retail investor.
On September 12th in NYC, I’m hosting the Independent Investor Summit — a one-day event built exclusively for self-directed investors.
We’re bringing together some of the smartest public market investors I know for a full day of macro insights, market predictions, and one-on-one fireside chats. Speakers include Darius Dale, Jordi Visser, Jeff Park, Chris Camillo, Tom Sosnoff, Jon & Pete Najarian…plus more to be announced.
Pomp Letter subscribers can use code POMPLETTER50 for 50% off GA tickets if you register here by August 8th. See you all there.
To investors,
We had a good old-fashioned internet debate on our hands after Jerome Powell’s press conference on Friday. The drama started with a summary of the Fed’s position from Bloomberg. The article read:
“Powell said the Fed has adopted a new framework that removes a reference to the central bank seeking inflation that averages 2% over time and one to it making decisions on employment based on shortfalls from its maximum level.”
First of all, that sentence is a mouthful. It takes an Einstein-level genius to understand what is being said, right? Not really. You could just read the words and believe them.
But it seems many people had a hard time doing that though. This is where the big controversy comes in. Each X account that shared the summary from Bloomberg was immediately met by a smattering of nerds who claimed the summary was wrong.
They said the Fed wasn’t abandoning the 2% inflation target that has been the bedrock of monetary policy for the last few decades. But the detractors were lost in the sauce and completely denying reality.
Bloomberg tracks the changes to various Fed policies and statements. In those tracked changes, you can see the Fed removing the sentence that says “the Committee seeks to achieve inflation that averages 2% over time” and replacing it with a sentence that says “the Committee is prepared to act forcefully to ensure that longer-term inflation expectations remain well anchored.”
So as the famous phrase goes, who you going to believe…me or your own eyes?
If people don’t want to acknowledge reality when presented with the source material of changes to Fed policy, no one is going to be able to help them. It doesn’t change the fact that the Federal Reserve finally waived the white flag on Friday.
We know the Fed has previously given up on the 2% inflation target in practice. They haven’t seen inflation at 2% since February 2021. That is more than 50 months without the Fed achieving their “goal” of 2% inflation. That is such a long time that it is obvious they aren’t even trying anymore, regardless of what they kept saying at press conferences.
But now we are seeing the Fed actually SAY something different too. Ben Hunt, who is someone I have long disagreed with about bitcoin, explained it well when he wrote the following:
“We’ve reverted to 2% inflation as a long-term aspirational goal rather than a definitive target to be achieved in this cycle. This is a *profoundly* dovish shift by Powell, and if you don’t understand that you will continue to get ripped by this market.
For the past 3 years, Powell has said that 2% inflation was not aspirational and not something to get close to, but something to actually achieve. That language is now gone. We will not see 2% in this cycle.”
To be honest, this development from the Fed is not surprising. Asset prices are at all-time highs and the central bank is about to cut interest rates. What do you think is going to happen? Our politicians continue to print money and drive the national debt higher. What do you think is going to be the impact on inflation?
So here is the dirty secret — the Federal Reserve knows they have zero chance of getting inflation back down to the 2% target as measured by the Bureau of Labor Statistics. A combination of bad input data and inaccurate calculation methodologies means the CPI metric is operating in an anti-gravity environment.
It doesn’t matter that Truflation is showing their real-time, alternative metric hovering around 2% for the last few weeks. The Fed isn’t smart enough to point at the alternative metric and claim victory. They are focused on the government data, which is now essentially guaranteed to go higher as we get the September rate cuts.
Ben Hunt goes on to highlight exactly why this language change is so important:
“Powell has been asked a bazillion times over past 3 years if getting close to 2% was enough, and he has *always* said no. Now he’s saying yes. You may think that’s just being realistic, but it is also a VERY dovish shift.”
That is it, folks. The prudent central bank game is over and we are about to enter back into the fun zone. Rate cuts are coming. Cheap capital will flood the market. Asset prices are going much higher. And the bears will be weeping from the sidelines as they continue predicting the 17th recessions this year.
Jerome Powell and the Fed governors have made a decision. Their 2% target ain’t happening and they are going to bend the knee to the public pressure. Sure, the central bank is going to blame the labor market and claim they have to cut rates because they are worried about a weakening outlook.
Maybe that is true, maybe it is not.
I thought Jordi Visser put it well this weekend when he told me the Fed cares more about the labor market weakening than inflation running hot. Labor market over inflation. This is the new framework, which in a way is same as the old framework.
Take a listen to how Jordi explained it to me:
Jordi’s perspective makes sense to me. Powell made things very clear in his speech. All you have to do is listen to his words. And realize the Fed isn’t removing specific language from their policies and speeches by accident.
Ladies and gentlemen, start your engines. The US economy is about to run hot and investors are going to do very well.
Hope you all have a great start to your week. I’ll talk to everyone tomorrow.
- Anthony Pompliano
Founder & CEO, Professional Capital Management
Why Isn’t Bitcoin Going Up?
Jordi Visser is a macro investor with over 30 years of Wall Street experience. He also writes a Substack called “VisserLabs” and puts out investing YouTube videos.
In this conversation we talk about Jerome Powell’s recent comments, why PMI is important, why bitcoin isn’t going up, AI bubble, MAG7 getting cheaper, and where Jordi sees risk right now.
Enjoy!
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