by Jared Dillian, The 10th Man
Iām writing this from my hotel room in New York Cityālast 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 extremesāon the ding-dong lows or highs. Right now, weāre somewhere in between. Weāre 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.
Monetary Policy
I may have explained this before, so forgive me if youāve heard this. Jerome Powell is not a monetary policy dictator. What he thinks countsā¦ 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 whatās going on.
Basically, weāre trying to predict the behavior of 17 super-rich government jackasses. A lot easier than youād 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 thinkāand all these guys and gals were forced to divest their personal holdingsā¦ 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. Theyāre 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 theyāll cut rates before too long. Not back to zero, mind youāthe days of zero interest rates are probably over. But weāll 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. Thatās about where sentiment is at this point in time, which means itās 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 trendāthat 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, āOh jeez, here we go all over again.ā I would not read too much into the ebullient performance of the Grindr SPAC. Itās 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 apocalypticāexactly the type of stuff you want to see if youāre 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, heās been 100% transparent about what MicroStrategy has been doing every step of the way.
Letās put it this way: At some point, Coinbase is going to be a buy. But it will require getting scientific about the entry point.
Iām cautiously optimistic. A few weeks ago, I was super optimistic. Get the S&P 500 up another 6%ā8%, and I will be pessimistic. Iām acquiring a reputation as a permabull, but nothing could be further from the truth. Just keep buying those value stocks, reinvest the dividends, and donāt look at them.
Music
Iād like to share a mix I created about a month ago called Silhouette. One of my favorites. Iāve been playing pieces of this live over the last two months. You can check it out here.
Copyright Ā© Jared Dillian