"The Fed Is A False God"

A Contrarian Take On The Federal Reserve

Reviewing my Market Watchers list on X, I came across a contrarian take on the Federal Reserve. I've shared it below, for those of you who are curious. Before we get to that, a couple of quick updates: 

1. We took a loss on our Nvidia (NVDA) trade yesterday. You can read more about that here.

   Nvidia: Tails We Lose
   
   Why we had better odds on our Salesforce trade. $NVDA $CRMhttps://t.co/SlmYHrqXm2

   — Portfolio Armor (@PortfolioArmor) August 29, 2024

2. We made a nice gain on our Salesforce (CRM) trade yesterday. You can read about that trade here, or with the accompaniment of The Cult's "Nirvana" below.

   @dpinsen

    

   ♬ Nirvana - The Cult

If you want a heads up when we place our next trade, you can subscribe to our trading Substack below. 

Now on to @BackTheBunny's Federal Reserve rabbit hole. 

The Federal Reserve does not control interest rates

The Federal Reserve does not control interest rates

It’s one of the most powerful, manipulative lies that exists. Recognizing it will be both uncomfortable and liberating.

Fed control is a mass delusion. You’ve never inspected any of their claims, have you?

Let's do that. 

Thus far, this series has focused on the Fed’s asset-swapping programs, namely QE.

None of them actually create new assets, they’re simply optics games that distort M2 charts and bank balance sheets.

Read Part Zero, 1, 2, and 3 after this to understand why (linked at end)

QE moves bank assets from savings (bonds) to checking (reserves) to savings again and gets everyone to chant “liquidity” while not examining what's actually happening with these accounting gimmicks.

Fed obsession ignores the culprit and hyperventilates about his lackey.

"QE does something because it causes asset-price inflation! Stocks go up."

Oh? Perhaps you should look at the stock markets of Japan and Europe (huuuge users of QE) and reexamine this claim. Weird how the "asset-price inflation" thing only seems to happen in the US. 

I’d now like to now go after the granddaddy of Fed claims: we control interest rates.

No sorry, no you don’t.

"The price of money, we change it at whim.” says the FOMC. They gather around and observe some lagging indicators and then tell you they've decided what money costs. 

You obey and accept Fed power without a second thought. Yes sir, no sir, thank you may I have another sir.

Then they hold a series of interviews and press conferences trumpeting their claims. They tell you to jump, and you leap as high as you possibly can.

Why do you do this?

IMPORTANT: An institution that *reacts* off of *lagging* information...

DEFINITIONALLY DOES NOT LEAD ANYTHING.

You’d laugh at anyone that told you he drives via the rearview mirror and also dictates traffic by yelling at it. Don’t make exceptions to this.

You have never critically questioned Fed power. Because absolutely no one does.

Not *should* they do it, but *CAN* they do it.

You’re told the omnipotent magical institution did some magic, and then look to advocates of the omnipotent magical institution to confirm the claims. 

You have the same beliefs about the Fed as BlackRock, The Economist, the State, every Fed employee, Davos, CNBC, etc..

You get ALL of your information about the church from its clergymen. And you find this credible?

Why do you accept this when you’d reject it anywhere else? 

Every single money manager, normie, pundit, retail trader, hedge fund analyst, and everything in between accepts it uncritically.

You’re told “don’t fight the Fed” just like a Catholic tells you “don’t question God”.

Let's review the church's divine monetary grace together 

WHAT ACTUALLY HAPPENS WHEN RATES ARE “CHANGED”

What exactly goes down when the Fed tells you it’s raising or lowering interest rates? How is it implemented and enforced?

Let’s get really specific. 

The Fed provides a target range for the Federal Funds Rate (FFR) when it announces rate changes.

The Fed doesn’t actually set the FFR; it’s an overnight market lending rate set by supply/demand in the repo market (important plumbing for money markets). 

The FFR is a rate for overnight collateralized borrowing between banks. The Fed provides a desired range for the FFR, and then encourages it with economic incentives.

It holds a series of extremely flamboyant press conferences when it does this. 

Please sear this into your mind:

When the Fed “changes interest rates” it is quite literally giving a range it would like an overnight bank lending rate to be.

Read the rest here.

And if this has frightened you into considering hedging, you can download the Portfolio Armor hedging app here, or by aiming your iPhone camera at the QR code below.