Month: March 2018

As we noted in yesterday’s missive, the new Fed Chair Jerome Powell is rapidly changing the focus of the Fed in terms of monetary policy.

A large component of this stems from Powell’s experience prior to join the Fed. Indeed, Powell is the first Fed Chair with any kind of banking experience (albeit investment banking) since Alan Greenspan: former Fed Chairs Janet Yellen and Ben Bernanke were both career academics.

However, to say that Jerome Powell is strictly a private sector banker would be to overlook the most critical role of his career… namely, that… Jerome Powell was head of oversight for the Fed’s “too big to fail” banks.

In that capacity, Powell gave a speech titled Ending “Too Big to Fail” at the Institute of International Bankers 2013 Washington Conference in Washington, D.C.

During this speech, Powell emphasized that the Federal Reserve no longer has the authority to directly bail out a failing bank, stating, “Dodd-Frank eliminated the authority used by the Federal Reserve and other regulators to bail out individual institutions during the crisis, including Bear Stearns, Citicorp, Bank of America and AIG.”

So if the Powell Fed is not in the bail out business anymore… who is?

Shareholders and bondholders.

And guess who developed the plan through which this would happen?

Jerome Powell… the man Trump just picked for Fed Chair.

Powell was a central figure in the development of the “bail-in”  strategy in the US, having been involved in “simulations” of a large bank failure as far back as 2011, as well as the development of the strategies put forth in Dodd Frank bill, namely:

1)   That banks develop “living wills” or plans for “rapid and orderly resolution in the event of material financial distress or failure of the company, and include both public and confidential sections.”

2)   Bail-Ins: programs through which the FDIC would seize a failing bank systemic importance and wipe out all of its shareholders’ capital as well as much of bondholders’ in order to prop the bank up.

Put simply, according to current proposals the next time a financial firm gets into trouble, the Fed won’t come running with a bail out. Instead, the FDIC will seize the bank and then use the capital from shareholders and bondholders to “prop it up” before breaking it apart into separate entities…

And the Trump administration, under the influence of Treasury Secretary Steve Mnuchin chose the man who helped develop these strategies (and who is a large proponent of deregulation of the financial system) as its Fed Chair.

But Treasury Secretary Steven Mnuchin, who advised the president on the Fed search, pushed hard for Powell, having held discussions with him this year in drawing up recommendations to deregulate the financial system.

Source: Politico

Even more importantly, in nominating Powell, the Trump administration bucked a long-time tradition of reappointing the current Fed Chair.

…In deciding to move on from Yellen, who presided over record stock market advances and gained trust on Wall Street, Trump broke from historic precedent in which new presidents typically renominate Fed chairs they inherited.

Source: Politico

Put simply: when it came time to pick the next Fed Chair, the Trump administration:

1)   Broke with tradition (reappointing the current Fed Chair) and relieved Janet Yellen of her duties despite the media’s non-stop fawning over her.

2)   Picked a man who has extensive private sector experience, NOT an academic economist.

3)   Picked a man who was a central figure in developing policies through which the Fed would NO LONGER bail out failing firms.

This makes one wonder… did Trump pick Powell because Trump knows the US will be having another financial crisis in the near future?

After all, Trump routinely called the stock market a “big fat bubble” in the run up to the 2016 election. As one of the most connected financial elites in the US, Trump would know better than most just how leveraged the system had become.

Why else would Trump pick the man who literally “wrote the book” on how to deal with systemic failure for the US banking system?

A crisis is coming. And smart investors will prepare for it well in advance.

On that note, we are already preparing our clients for this with a 21-page investment report titled the Stock Market Crash Survival Guide.

In it, we outline the coming collapse will unfold…which investments will perform best… and how to take out “crash” insurance trades that will pay out huge returns during a market collapse.

We’ve extended our offer to download this report FREE by one week. But this week is the last time this report will be available to the general public.

To pick up one of the last remaining copies…

https://www.phoenixcapitalmarketing.com/stockmarketcrash.html

Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

As we noted in yesterday’s missive, the new Fed Chair Jerome Powell is rapidly changing the focus of the Fed in terms of monetary policy.

A large component of this stems from Powell’s experience prior to join the Fed. Indeed, Powell is the first Fed Chair with any kind of banking experience (albeit investment banking) since Alan Greenspan: former Fed Chairs Janet Yellen and Ben Bernanke were both career academics.

However, to say that Jerome Powell is strictly a private sector banker would be to overlook the most critical role of his career… namely, that… Jerome Powell was head of oversight for the Fed’s “too big to fail” banks.

In that capacity, Powell gave a speech titled Ending “Too Big to Fail” at the Institute of International Bankers 2013 Washington Conference in Washington, D.C.

During this speech, Powell emphasized that the Federal Reserve no longer has the authority to directly bail out a failing bank, stating, “Dodd-Frank eliminated the authority used by the Federal Reserve and other regulators to bail out individual institutions during the crisis, including Bear Stearns, Citicorp, Bank of America and AIG.”

So if the Powell Fed is not in the bail out business anymore… who is?

Shareholders and bondholders.

And guess who developed the plan through which this would happen?

Jerome Powell… the man Trump just picked for Fed Chair.

Powell was a central figure in the development of the “bail-in”  strategy in the US, having been involved in “simulations” of a large bank failure as far back as 2011, as well as the development of the strategies put forth in Dodd Frank bill, namely:

1)   That banks develop “living wills” or plans for “rapid and orderly resolution in the event of material financial distress or failure of the company, and include both public and confidential sections.”

2)   Bail-Ins: programs through which the FDIC would seize a failing bank systemic importance and wipe out all of its shareholders’ capital as well as much of bondholders’ in order to prop the bank up.

Put simply, according to current proposals the next time a financial firm gets into trouble, the Fed won’t come running with a bail out. Instead, the FDIC will seize the bank and then use the capital from shareholders and bondholders to “prop it up” before breaking it apart into separate entities…

And the Trump administration, under the influence of Treasury Secretary Steve Mnuchin chose the man who helped develop these strategies (and who is a large proponent of deregulation of the financial system) as its Fed Chair.

But Treasury Secretary Steven Mnuchin, who advised the president on the Fed search, pushed hard for Powell, having held discussions with him this year in drawing up recommendations to deregulate the financial system.

Source: Politico

Even more importantly, in nominating Powell, the Trump administration bucked a long-time tradition of reappointing the current Fed Chair.

…In deciding to move on from Yellen, who presided over record stock market advances and gained trust on Wall Street, Trump broke from historic precedent in which new presidents typically renominate Fed chairs they inherited.

Source: Politico

Put simply: when it came time to pick the next Fed Chair, the Trump administration:

1)   Broke with tradition (reappointing the current Fed Chair) and relieved Janet Yellen of her duties despite the media’s non-stop fawning over her.

2)   Picked a man who has extensive private sector experience, NOT an academic economist.

3)   Picked a man who was a central figure in developing policies through which the Fed would NO LONGER bail out failing firms.

This makes one wonder… did Trump pick Powell because Trump knows the US will be having another financial crisis in the near future?

After all, Trump routinely called the stock market a “big fat bubble” in the run up to the 2016 election. As one of the most connected financial elites in the US, Trump would know better than most just how leveraged the system had become.

Why else would Trump pick the man who literally “wrote the book” on how to deal with systemic failure for the US banking system?

A crisis is coming. And smart investors will prepare for it well in advance.

On that note, we are already preparing our clients for this with a 21-page investment report titled the Stock Market Crash Survival Guide.

In it, we outline the coming collapse will unfold…which investments will perform best… and how to take out “crash” insurance trades that will pay out huge returns during a market collapse.

We’ve extended our offer to download this report FREE by one week. But this week is the last time this report will be available to the general public.

To pick up one of the last remaining copies…

https://www.phoenixcapitalmarketing.com/stockmarketcrash.html

Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

As we noted in yesterday’s missive, the new Fed Chair Jerome Powell is rapidly changing the focus of the Fed in terms of monetary policy.

A large component of this stems from Powell’s experience prior to join the Fed. Indeed, Powell is the first Fed Chair with any kind of banking experience (albeit investment banking) since Alan Greenspan: former Fed Chairs Janet Yellen and Ben Bernanke were both career academics.

However, to say that Jerome Powell is strictly a private sector banker would be to overlook the most critical role of his career… namely, that… Jerome Powell was head of oversight for the Fed’s “too big to fail” banks.

In that capacity, Powell gave a speech titled Ending “Too Big to Fail” at the Institute of International Bankers 2013 Washington Conference in Washington, D.C.

During this speech, Powell emphasized that the Federal Reserve no longer has the authority to directly bail out a failing bank, stating, “Dodd-Frank eliminated the authority used by the Federal Reserve and other regulators to bail out individual institutions during the crisis, including Bear Stearns, Citicorp, Bank of America and AIG.”

So if the Powell Fed is not in the bail out business anymore… who is?

Shareholders and bondholders.

And guess who developed the plan through which this would happen?

Jerome Powell… the man Trump just picked for Fed Chair.

Powell was a central figure in the development of the “bail-in”  strategy in the US, having been involved in “simulations” of a large bank failure as far back as 2011, as well as the development of the strategies put forth in Dodd Frank bill, namely:

1)   That banks develop “living wills” or plans for “rapid and orderly resolution in the event of material financial distress or failure of the company, and include both public and confidential sections.”

2)   Bail-Ins: programs through which the FDIC would seize a failing bank systemic importance and wipe out all of its shareholders’ capital as well as much of bondholders’ in order to prop the bank up.

Put simply, according to current proposals the next time a financial firm gets into trouble, the Fed won’t come running with a bail out. Instead, the FDIC will seize the bank and then use the capital from shareholders and bondholders to “prop it up” before breaking it apart into separate entities…

And the Trump administration, under the influence of Treasury Secretary Steve Mnuchin chose the man who helped develop these strategies (and who is a large proponent of deregulation of the financial system) as its Fed Chair.

But Treasury Secretary Steven Mnuchin, who advised the president on the Fed search, pushed hard for Powell, having held discussions with him this year in drawing up recommendations to deregulate the financial system.

Source: Politico

Even more importantly, in nominating Powell, the Trump administration bucked a long-time tradition of reappointing the current Fed Chair.

…In deciding to move on from Yellen, who presided over record stock market advances and gained trust on Wall Street, Trump broke from historic precedent in which new presidents typically renominate Fed chairs they inherited.

Source: Politico

Put simply: when it came time to pick the next Fed Chair, the Trump administration:

1)   Broke with tradition (reappointing the current Fed Chair) and relieved Janet Yellen of her duties despite the media’s non-stop fawning over her.

2)   Picked a man who has extensive private sector experience, NOT an academic economist.

3)   Picked a man who was a central figure in developing policies through which the Fed would NO LONGER bail out failing firms.

This makes one wonder… did Trump pick Powell because Trump knows the US will be having another financial crisis in the near future?

After all, Trump routinely called the stock market a “big fat bubble” in the run up to the 2016 election. As one of the most connected financial elites in the US, Trump would know better than most just how leveraged the system had become.

Why else would Trump pick the man who literally “wrote the book” on how to deal with systemic failure for the US banking system?

A crisis is coming. And smart investors will prepare for it well in advance.

On that note, we are already preparing our clients for this with a 21-page investment report titled the Stock Market Crash Survival Guide.

In it, we outline the coming collapse will unfold…which investments will perform best… and how to take out “crash” insurance trades that will pay out huge returns during a market collapse.

We’ve extended our offer to download this report FREE by one week. But this week is the last time this report will be available to the general public.

To pick up one of the last remaining copies…

https://www.phoenixcapitalmarketing.com/stockmarketcrash.html

Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

The Fed officially has a new Fed Chair, Jerome Powell. And ever since he took office, it is clear that “something” has changed at the Fed.

That something is the famed “Fed put” or the idea that the Fed would immediately move to prop up stocks any time they began to fall.

Jerome Powell was sworn in as Fed Chair on February 5^th 2018. At that time, the market was in the sharp sell-off annotated in the chart below:

Powell made ZERO mention of the sell-off or of stocks in his prepared statements during the swearing in ceremony. Indeed, he didn’t mention the markets once. Instead he mentioned rate normalization, balance sheet shrinkage, and regulations.

He also mentioned the Fed has, “important responsibilities for the stability of the financial system and for the regulation and supervision of financial institutions, including our largest banks…

Again… Powell focuses on Too Big to Fail, normalization, balance sheet shrinkage, and regulations.

It would be easy to shrug this off as a one-time deal, except that I’ve picked up on a note shift in Fed official rhetoric since Powell took office.

Three days after Powell’s swearing-in ceremony, when the markets were falling even farther, NY Fed President Bill Dudley appeared in the media to make the following astonishing statement:

Judging by remarks this week from policy makers, who were unmoved by rising yields and the losses in stocks, the Powell Fed isn’t rushing to signal that tendency. New York Fed President William Dudley on Thursday called the stock selloff “small potatoes” and said it has no economic implications.

Source: Bloomberg.

To understand why this statement is astonishing, you first need to understand the source: Bill Dudley is one of the BIGGEST doves in Fed history. This is a man who always pushes for more Fed intervention/ liquidity.

In 2010, when QE 2 wasn’t even over yet, Dudley was already pushing for another round of stimulus.

In 2011 he was calling for the Fed to literally “prop” up the housing market.

In 2012, at a time when the Fed had already printed over $2 trillion and the US was supposedly three years into a “recovery” Dudley was calling for even “more aggressive” monetary policy.

By the way, Dudley was calling for this AFTER the Fed had already launched QE 3.

In 2013 Dudley called for more QE if unemployment didn’t fall. Again, this was in 2013… after the Fed had already implemented QE 1, QE 2, Operation Twist AND QE 3.

You get the idea.

With that in mind, the idea that Dudley would call a violent 10% stock market collapse such as the one the markets faced in early February “small potatoes” is incredible. And it indicates that the Powell Fed will have a very different attitude towards the markets.

We get confirmation from this on February 13 (the very next day after Dudley’s comments) when Cleveland Fed President Loretta Mester, stated the following:

The recent stock market sell-off and jump in volatility will not damage the economy’s overall strong prospects, Cleveland Fed president Loretta Mester said on Tuesday in warning against any overreaction to the turbulence in financial markets.

 “While a deeper and more persistent drop in equity markets could dash confidence and lead to a pullback in risk-taking and spending, the movements we have seen are far away from this scenario,” Mester said of a market rout that cut more than 10 percent from major stock indexes.

Source: Reuters.

The fact Mester uses practically the same language as Dudley (that a stock drop won’t impact the economy) suggests that Mester’s statement is part of a coordinated effort by the Powell Fed to remove the famed “Fed Put.”

Put simply, the new boss is not the same as the old boss for the Fed… at least for now.  The Powell Fed is clearly not interested in propping up stocks at every single drop.   

Which means, stocks have a long ways down before they finally bottom. Indeed, as I write this, the S&P 500 is forming a clear downward channel. The ultimate downside target for this move is 2,450.

Big gains are there to be made by those who play this move with the right investments.

On that note, we are already preparing our clients for this with a 21-page investment report titled the Stock Market Crash Survival Guide.

In it, we outline the coming collapse will unfold…which investments will perform best… and how to take out “crash” insurance trades that will pay out huge returns during a market collapse.

We’ve extended our offer to download this report FREE due to the market breakdown. But this week is the last time this report will be available to the general public.

To pick up one of the last remaining copies…

https://www.phoenixcapitalmarketing.com/stockmarketcrash.html

Best Regards

Graham Summers

Chief Market Strategist

The Fed officially has a new Fed Chair, Jerome Powell. And ever since he took office, it is clear that “something” has changed at the Fed.

That something is the famed “Fed put” or the idea that the Fed would immediately move to prop up stocks any time they began to fall.

Jerome Powell was sworn in as Fed Chair on February 5^th 2018. At that time, the market was in the sharp sell-off annotated in the chart below:

Powell made ZERO mention of the sell-off or of stocks in his prepared statements during the swearing in ceremony. Indeed, he didn’t mention the markets once. Instead he mentioned rate normalization, balance sheet shrinkage, and regulations.

He also mentioned the Fed has, “important responsibilities for the stability of the financial system and for the regulation and supervision of financial institutions, including our largest banks…

Again… Powell focuses on Too Big to Fail, normalization, balance sheet shrinkage, and regulations.

It would be easy to shrug this off as a one-time deal, except that I’ve picked up on a note shift in Fed official rhetoric since Powell took office.

Three days after Powell’s swearing-in ceremony, when the markets were falling even farther, NY Fed President Bill Dudley appeared in the media to make the following astonishing statement:

Judging by remarks this week from policy makers, who were unmoved by rising yields and the losses in stocks, the Powell Fed isn’t rushing to signal that tendency. New York Fed President William Dudley on Thursday called the stock selloff “small potatoes” and said it has no economic implications.

Source: Bloomberg.

To understand why this statement is astonishing, you first need to understand the source: Bill Dudley is one of the BIGGEST doves in Fed history. This is a man who always pushes for more Fed intervention/ liquidity.

In 2010, when QE 2 wasn’t even over yet, Dudley was already pushing for another round of stimulus.

In 2011 he was calling for the Fed to literally “prop” up the housing market.

In 2012, at a time when the Fed had already printed over $2 trillion and the US was supposedly three years into a “recovery” Dudley was calling for even “more aggressive” monetary policy.

By the way, Dudley was calling for this AFTER the Fed had already launched QE 3.

In 2013 Dudley called for more QE if unemployment didn’t fall. Again, this was in 2013… after the Fed had already implemented QE 1, QE 2, Operation Twist AND QE 3.

You get the idea.

With that in mind, the idea that Dudley would call a violent 10% stock market collapse such as the one the markets faced in early February “small potatoes” is incredible. And it indicates that the Powell Fed will have a very different attitude towards the markets.

We get confirmation from this on February 13 (the very next day after Dudley’s comments) when Cleveland Fed President Loretta Mester, stated the following:

The recent stock market sell-off and jump in volatility will not damage the economy’s overall strong prospects, Cleveland Fed president Loretta Mester said on Tuesday in warning against any overreaction to the turbulence in financial markets.

 “While a deeper and more persistent drop in equity markets could dash confidence and lead to a pullback in risk-taking and spending, the movements we have seen are far away from this scenario,” Mester said of a market rout that cut more than 10 percent from major stock indexes.

Source: Reuters.

The fact Mester uses practically the same language as Dudley (that a stock drop won’t impact the economy) suggests that Mester’s statement is part of a coordinated effort by the Powell Fed to remove the famed “Fed Put.”

Put simply, the new boss is not the same as the old boss for the Fed… at least for now.  The Powell Fed is clearly not interested in propping up stocks at every single drop.   

Which means, stocks have a long ways down before they finally bottom. Indeed, as I write this, the S&P 500 is forming a clear downward channel. The ultimate downside target for this move is 2,450.

Big gains are there to be made by those who play this move with the right investments.

On that note, we are already preparing our clients for this with a 21-page investment report titled the Stock Market Crash Survival Guide.

In it, we outline the coming collapse will unfold…which investments will perform best… and how to take out “crash” insurance trades that will pay out huge returns during a market collapse.

We’ve extended our offer to download this report FREE due to the market breakdown. But this week is the last time this report will be available to the general public.

To pick up one of the last remaining copies…

https://www.phoenixcapitalmarketing.com/stockmarketcrash.html

Best Regards

Graham Summers

Chief Market Strategist