I’m writing this from my hotel room in New York City—last night, I was at the nightclub Superior Ingredients in Brooklyn to see the great DJ John Digweed. He did not disappoint. It reinforced my desire to open a nightclub someday. So, keep buying those subscriptions, and someday I may get there.
As for the markets, this is not the opportunity of a lifetime. The opportunity of a lifetime typically emerges with the extremes—on the ding-dong lows or highs. Right now, we’re somewhere in between. We’re at the 50-yard line. Sentiment is getting back to neutral, and there is not much to do.
I still hold the belief that the lows on October 13 will be the all-time lows. Or at least the lows for a while.
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Monetary Policy
I may have explained this before, so forgive me if you’ve heard this. Jerome Powell is not a monetary policy dictator. What he thinks counts… but not as much as you would think. The Fed is an institution driven by consensus. Remember, the Federal Open Market Committee (FOMC) is made up of the seven Board of Governors (who are political appointees), four of the twelve regional Fed presidents (who are not), and the president of the New York Fed. Even the regional Fed presidents who are not voting members have a say in what’s going on.
Basically, we’re trying to predict the behavior of 17 super-rich government jackasses. A lot easier than you’d think, actually. As we learned last year, the only way you lose that gig is by trading e-mini futures around Fed meetings. (By the way, that trading scandal was a lot bigger than people think—and all these guys and gals were forced to divest their personal holdings… at the highs, naturally.)
The Fed is motivated by avoiding a loss of face. At first, the Fed was embarrassed by rising inflation. Now, the Fed has the potential to be embarrassed by overtightening and causing a nasty recession. They’re watching the data crater in real time. Lurching from one crisis to the next. Great central bank we got here.
This is all a long way of saying that I think the Fed is very close to being done with rate hikes, and I also believe they’ll cut rates before too long. Not back to zero, mind you—the days of zero interest rates are probably over. But we’ll be seeing some accommodation out of the Fed, which should be good for the stock market.
Columnist Helene Meisler runs polls every weekend on if people think the next 100 points in the S&P 500 will go higher or lower. The last one was a dead-balls tie. That’s about where sentiment is at this point in time, which means it’s not the right time to be making any large bets. Now is the time to be conservative and stay close to home. The only thing I will add is that we are in an uptrend, and trends tend to trend—that is what they do. This rally will continue until speculation returns.
One More Shoe Will Drop for Crypto
A lot of people looked at the Grindr SPAC and said, “Oh jeez, here we go all over again.” I would not read too much into the ebullient performance of the Grindr SPAC. It’s a good business, probably better than Bumble. And if you really want to look for signs of risk-taking, look no further than crypto, where there is no risk-taking at all.
I am not a crypto expert by any stretch of the imagination, but I do know sentiment, and I can tell you that sentiment in crypto is apocalyptic—exactly the type of stuff you want to see if you’re considering taking a position.
But I do think one more shoe will drop. People have been pointing out shady stuff and structural weaknesses in Tether for some time. At any moment, executive chairman and co-founder of MicroStrategy, Michael Saylor, could go bid wanted on all his Bitcoin holdings. Saylor, by the way, had some very not-nice things to say about Sam Bankman-Fried, former FTX CEO. Saylor is who he is, but he is not a crook. Unlike Bankman-Fried, he’s been 100% transparent about what MicroStrategy has been doing every step of the way.
Let’s put it this way: At some point, Coinbase is going to be a buy. But it will require getting scientific about the entry point.
I’m cautiously optimistic. A few weeks ago, I was super optimistic. Get the S&P 500 up another 6%–8%, and I will be pessimistic. I’m acquiring a reputation as a permabull, but nothing could be further from the truth. Just keep buying those value stocks, reinvest the dividends, and don’t look at them.
Music
I’d like to share a mix I created about a month ago called Silhouette. One of my favorites. I’ve been playing pieces of this live over the last two months. You can check it out here.
Jared Dillian
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