The usual outfit for the man who works on Wall Street is the $3,000 suit and tie. Over the years, we’ve switched to a more casual outfit. But if I’d been told that in 2022, we’d go to the straitjacket; I wouldn’t have believed it. The beauty of a straitjacket is that you can’t move your hands and it’s harder to press the “SELL, SELL, SELL” button with your tongue. However, looking at yesterday’s massacre. It seems that despite these new dress codes in the Manhattan Peninsula, we have still found a way to pull the trigger to take the market.
The audio of May 6, 2022
Download the podcast
If you read yesterday’s column and accept the fact that markets exploded after the FED speech BECAUSE POWELL said the US Central Bank was “not actively working on a potential rate hike to 0.75%”. Well, you can forget everything you’ve seen, read or heard about this topic. In reality ; in less time than it takes to say, “But are we completely stupid or just a little bit stupid??? », the three US indexes and everything they contained were literally slaughtered. I believe the term is not used too often. We might even label yesterday’s session a “bloodbath”. Even in the multiple episodes of “The Chainsaw Massacre” and “Friday the 13th” together, we haven’t managed to see as much hemoglobin as we did yesterday on Wall Street.
It is clearly all the fault of the rates and also a bit of the economy. As for the rates, it seems that the “experts” needed a little more time to “FORCE” the announcement the FED made Wednesday night. It’s kind of strange because most of the time we manage to read the minutes of last month’s FOMC meeting in 8 seconds and 12 tenths to draw conclusions. But there it took us almost 24 hours to realize that:
1) If Powell says that “the FED is not currently actively working on an opportunity to raise interest rates by 0.75% each time”; That doesn’t mean he NEVER will. However, it does mean that if inflation keeps kicking us in the ankles, it could still happen. On a misunderstanding.
2) The second point is that it also took us almost 24 hours to realize that rates were a long way from going up and when rates go up it’s bad for everything technology, growth, e-commerce, electric cars, smartphones, semiconductors and so on and the best. So when the 10-year US crosses the 3% rate and the 2-year threatens to do the same in the coming days, it won’t help consolidate the recovery that started just after Wednesday night’s announcement.
Friday the 13th, the return of Jason and his ice hockey mask
We are therefore not going to hide our face: the market was literally destroyed last night. While most of the published numbers changed the market, boxes like Etsy or Shopify collapsed almost as quickly as Netflix and Lyfts combined, but on top of that, we started telling ourselves that “this was just the beginning,” “that the market is still could fall much more” and that the “breath” (difference between falling and rising stocks) looked more and more like a pre-pandemic panic of 2020. Moreover, the indices hadn’t inflated this much since June 2020. That blessed time when central banks were our friends and when our good governments showered us with money on every street corner Yesterday it was all memories and fear kicked up a gear, props were damaged, volatility rose above 30% again, all that was missing was a terrifying economic figure and we had the winning triple.
In addition, we even found an economic figure that terrified you and that the sum of all fears awakened among fans of the economy and aficionados of Joseph Stiglitz and Nouriel Roubini: the productivity of non-agricultural companies fell by 7.5 % in the first quarter. You have to admit you had to go get it. We’ve been bothered by the employment figures (NFP) for months – coming out tonight – we’re stuck with the CPI, the PPI, the ISMs and the PMIs of all colors, but we haven’t had a sketch with the productivity of not yet -agricultural enterprises. Yet yesterday’s figure was the worst since… 1947. A time when everyone drove V8s and drum brakes, everyone thought that was “normal” and we didn’t risk getting hit by some jerk on an electric scooter who races down the sidewalk at 87 kilometers per hour with the ultimate goal of saving the polar bears.
So we have the rates going up vertically that tend to point out that “the FED isn’t aggressive enough” and so much to tell you that if it’s the rates that say that, it’s that they have a reason to be. It’s kind of like when Goldman Sachs speaks. In addition to rising numbers, we have economic indicators that indicate growth is hitting above the knee – indicators that are just as important as the productivity of nonfarms – you add in companies with technology growth that stem from the meager numbers. and guidelines that would almost make you want to hit yourself with stinging nettles. And you have a “perfect storm” that scares everyone and gives the impression that this market is completely stupid, has the attention span of an 8 week old Labrador for a kilo of beef tenderloin and that it would be good to put him in psychiatry and stuff him full of sedatives.
Obviously, if you take a huge cauldron – the type Getafix uses to make the potion in Asterix – you’re putting an economy in it that shows signs of slowing down, inflation that shows NO signs of slowing down. That you subtly sprinkle in a rate hike that isn’t aggressive enough to curb inflation, but aggressive enough to curb growth… And you’ve got a recipe for something absolutely undrinkable that will make you want to buy gold bars and put them back. at the bottom of the garden. If consumers stop consuming and employment slows down, it can look like a Kebab’s backyard that failed the health department’s inspection. Right now the good news is that consumers are consuming and that the COVID crisis has made it possible to create almost 2 trillion additional savings for consumers (which I am not a part of) and that related to employment ; we’ll know at 2:30 p.m. whether the 400,000 jobs that should have been created in April are real or simply the result of the fantasy of some economists who have made up their conclusions by making a mess.
Texas Chainsaw Massacre 2
In any case, what is good about these kinds of markets; it’s that when it descends at this rate, at this intensity, we don’t have to talk about anything else. And then, what’s also nice is that when the FOMC Meeting MINUTES comes out in 19 days – those minutes that will tell us EXACTLY the same thing Powell explained Wednesday night; we get the same slap in the face again because we’ve been told the same thing twice, but we weren’t sure if we understood it the first time.
In any case, it is the Europeans who are not disappointed. They missed Wednesday night’s rebound because they were already closed. They tried to take advantage of it yesterday morning and we sent them back to niche in the afternoon with this huge sale in New York. In summary, for Europe it was two bad days in a row and the only thing that doesn’t fall: it’s oil!!! It really feels like there’s a man up there who thinks he’s god, the man laughs as he pushes his pawns forward on the chessboard. Basically it should look like this:
“So… let’s see what I’m going to do.” Let’s sum it up… Inflation is at 40 years high, rates will rise for 2 years… Hmmmm, I’m going to put a good economic slowdown in their hands to see what it does… And then Come on, I’m coward, I’m going to raise oil to $108 and screw them up with a Russian dictator with a brain tumor and a stockpile of nuclear weapons at his disposal. Hmmmm and if that wasn’t enough, I’ll be throwing them an eighth wave of COVID in September with a new strain that’s impervious to their vaccines and their boosters. That should keep me busy for the rest of the year. Come on.. Hop, a cigar, a whiskey, I’m sitting in my chair of God and I’m waiting for the son’s birthday on December 24th”….
In short, we came out clean and tidy. The Nasdaq chart looks like nothing anymore, Bitcoin is definitely correlated with the Nasdaq and things are not getting any better. Meanwhile, Hong Kong is in free fall at 3.53%, China is trailing it, falling 1.8%. There is only Tokyo that is not going down and that is unchanged, but that is mainly due to the fact that it is closed for Children’s Day. The barrel is therefore still in top shape at $108.75, while EVEN gold is not rising and is lagging at $1875. Talk about a safe haven.
In the rest of the news, we’ll remember that Musk has found friends to buy Twitter; Oracle’s Ellison, as well as Binance and the Sequoia fund are with him. Musk could even become CEO of Twitter in the transition phase. News that had the merit of greatly satisfying Tesla shareholders who rushed to sell their shares and are NO MORE Tesla shareholders. The share priced 8% in the teeth. 6% because the rates went up and when the rates go up: it’s bad. And 2% because Musk makes 22 hares run at once. As the mood is super good – almost euphoric – the Bank of England has decided to calm things down and yesterday hiked interest rates by 0.25%, warning of a recession that could kick in by the end of the year from here.
Please ! The word is set. And I think the word RECESSION will benevolently become THE WORD of 2022 – well, if there isn’t a 14th wave of OMICRON-COVID-BA2 in September – no, because if you read the papers this morning, you’ll see that you have a a plethora of articles talking about recession or hard landing or, to be more politically correct, that achieving a “soft landing will be practically impossible”. Which amounts to the same thing. Yes, because if a plane misses its landing, we can’t say it crashed “just a little bit”.
The numbers of the day
You don’t have to look any further. The number of the day will not be nonfarm productivity, but rather nonfarm payrolls for the month of April. There will also be unemployment in Switzerland and the same NFP in France. Except the French version, nobody cares. For now, futures are still in the red and I’m not convinced we have the courage to backtrack before the weekend. I think it would be wiser to leave immediately before the weekend and tell your employer that we confused this Friday with Good Friday and that we will be back next Tuesday. It will do everyone good to sleep on this one!
It only remains for me to wish you a nice weekend and I’ll see you on Monday! May the strength be with you, for it will take strength.
See you on Monday !
“Be who you are and say what you feel because those who mind don’t matter and those who matter don’t mind.”
—Bernard M. Baruch