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for years we talked about this notion that the markets were going up while the fundamentals were sluggish and what was the difference central bank liquidity predictable and ample now even though the fundamentals are improving because the gap is so large the reaction is excessive to central bank withdrawal of ample and predictive overshooting where it should be do you think I think look let me tell you the good the bad and the ugly the ugly is it feels terrible prices on gapping there's no way to hedge even good names get thrown out with bad names this is very unsettling the bad is if we're not careful and this is a message to Washington if we're not careful bad market technicals can become bad ikan a lot of people in Washington who are you talking to are you talking to Jay Powell you're talking to Donald talking to everybody and anybody in the bail well as important as the rest of the world is slowing but the good is this was gonna happen at some point it would have been better if it had happened a little bit earlier would have been less violent but it's gonna create value and is it gonna create a more sustainable basis going form you know all these guys you know all these guys on the set and you're familiar with with the other things there are some people on the Fed Kashkari and Bullard others that that I'm sure we're arguing with Jay Powell about not only the action a couple of days ago but but sort of the commentary that came out did he make it was that a mistake or is he on the right track in your zeal I think the actions weren't a problem I think it was the communication of the actions that were a problem and part of that is because you don't have people on the Fed likely that in the past Kevin wash or like I did with Dudley that are sensitive to markets and have lived through marketplace Jay Powell was the one who is a private equity guy I have huge respect for him he's amazing but he didn't live on the trade floor he hasn't seen how technicals can dominate markets and completely ignore fundamentals so they said three things that made total sense economically but the market didn't want to hear but maybe that was intentional maybe they're trying to break the temper tantrum you know they're trying to break the codependence and the fact that the markets have held right but they have so what was wrong with the communication first it was to domestic oriented and the people said what about spilled backs on the rest of the world - it was to economic folk ok and the third I think the most important that people haven't quite realized is that they inherited for no fault of their own a balance sheet tool that's an automatic pilot and when your balance sheet tool which is really important is an automatic pilot the interest rate signaling mechanism causes undue fluctuations in markets because it has to carry the whole bird he should have said and I suspect you will in the future that nothing is off the table meaning they might slow down the wind down of the balance sheet to ISM if if it turns out that that we are more vulnerable to the outside world that's weakening and if bad market technicals become bad economics you know that I know for a fact that warsh got pretty close to getting that job but after reading that editorial I don't think he would be doing what Powell was doing right now I really don't think as hawkish as we thought he was last year the year before it and all you know him and Druckenmiller in terms of I don't know being behind the curve terms are winding down the balance sheet I don't know maybe not but but it's not I don't know I asked him but he might be much more duck given that editorial the other day might be much more dovish so not everyone would have raised rates here so you've heard me say this over and over again that the big mistake was to signal for hikes for this year they should have kept the options open stay at 3 and say we'll see the minute day they signal for hikes they were already backed into already back into it the market expected it it was if if they that's a weird reason to do it when the entire the world is depending on you to do the right thing my article in tuesday's st right was even a dovish hike yeah calm the markets yeah I saw that I know well in the statement it wasn't a dovish as people had been anticipating that was these well I don't know he I think chairman power went out of his way to say we data dependent with data that I mean he said it's look it's what I expected but it's not what the market wanted and then you get back to this codependency yeah I think it's a balance sheet issue and we're gonna focus a lot more on the balance sheet if you know even liceman admitted I was like if I had false teeth David it would have been they would have fallen right out he even said that that pal made a mistake in the way he communicated with the markets I think Steve kind of conceded you think but it's all I mean do you think he thinks that he did I think he looks at this and says two things one is the economic argument for what I did is solid rock solid that's the first thing you'll say and the second he'll say is it's about time that the market starts standing on their own feet you know this notion that the Federal Reserve is our best friend forever and they will give out what about it for the better oil in copper or what if there's no inflation you don't just you don't just look at prosperity in the face and say god I love the unemployment it's too low wages people are finally getting a raise we got to stop this you don't just cut off growth for the sake of cutting off growth if there's no inflation well imma do it for you to argue that a 25 basis points cut nine of like nine of them no no not nine of them from from December of you you Joel I know I know but but but so is everyone else when we thought they said maybe the reason that we were awarded because we stayed there too long I think the big supplies that they have to do a lot more work on is that the rest of the world is slowing significantly look at the numbers out of France is when coincident and lagging I looked at looking at coincident and let which is what the Fed always does we pay them and we hope that they can actually predict the future and they're horrible at it with their dot platter all they do is get so they're at there they're living in the past with where unemployment is over be fair I don't know it's i when we had this discussion mole has become almost a tradition that new Fed chair get get tried in a major way in the first couple of years that this is his trial we wouldn't we wouldn't live through this the economy is ok but it's also a tradition that when we do uh sure in a recession it's usually a Fed policy mistake by going either up too much or not realizing that something's coming it may be too much but we they just can't believe that we thought we're too tight at these levels I can't believe it we're gonna get a gtv number but what what does the economy look like 3% growth wait and we're gonna do is gonna have to screen how's the oil look that's a copper locate so remember how to stop my also stock market time I was here I told you be careful oil is in the perfect storm lower demand excess supply and the loss of credibility in OPEX plus price stabilization function I kept on saying this moment over giving the same point you are saying that these market conditions that could eventually lead to economic weakness do and then it be a signal of that I think I think the Fed o of correct by simply saying yeah okay we we are very sensitive to what's happening the rest of the world and we will continue to assess spill backs as the first one and second to hint that balance sheet policy is not off the table you
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