MIND
coined by noted Fed Chair Alan Greenspan when describing the insanity of the dot-com bubble). At times, that 2000 bubble feels almost quaint in comparison with what we’re seeing now... When tweets and Reddit forums can send investors rushing into stocks or little- known cryptos, we have reached what I’d call a new kind of irrational exuberance . Howard Marks, the co-founder and co-chair of Oaktree Capital, just warned investors that markets are in an “everything bubble.” When tweets and Reddit forums can send investors rushing into stocks or little-known cryptos, we have reached what I’d call a new kind of irrational exuberance . Now, the economy is improving... even if it’s not as strongly as we’d all like. The jobs picture is showing some signs of strength, with 943,000 jobs being added to the economy in the month of July and unemployment falling to 5.4%. Yet, the labor-participation rate remains weak, and there are still more than 10 million jobs currently available. Translation? People don’t want to work . I mean, why should they when Uncle Joe is still handing out unemployment benefits? Those benefits are scheduled to end this coming month, but just like we saw with the eviction moratorium, there will be political
pressure to renew them amid the hysteria of the Delta variant. Even schools are talking about shutting down again... So how will
parents go to work without their kids in school? The Left will argue (again) that the benefits are a necessity, and sure enough, this whole cycle will repeat, with the Fed continuing its liquidity push. Now there are some sensible people on the Fed’s Board of Governors... I’ve known Fed Vice Chair Richard Clarida for many years, including when he was at investment management company PIMCO and at Columbia University, and have always been impressed by his logic on the economy. Rich is encouraging a pullback in the Fed’s tapering (the gradual slowing of the pace of the Federal Reserve’s large-scale asset purchases). And there are others who support this too, including St. Louis Fed President James Bullard and San Francisco Fed President Mary Daly. Heck, I wouldn’t be surprised if Powell himself comes out in favor of unwinding the bond asset purchases... But when that happens, you can expect a taper tantrum from Wall Street... and you can count on one from the White House, too. Keep in mind, the administration knows how this all works... They’ve got the former head of our central bank as Treasury secretary! They want lower rates and additional liquidity in the system, which explains the significant pressure on the Fed to keep the spigot open – even in the face of a declining unemployment
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August 2021
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