Broker Check

April Is the Cruelest Month

April 01, 2024

April Is the Cruelest Month

                                    Chaucer; 1238

 

April will bring an increase in the potential for money market and short term asset risk. A result of changing Federal monetary policy: reduction in QE and RPP (the Fed's Reverse Repo Program).

 

As they have just said today, the Board at the Fed has no real concept of 'the correct' amount of easing of interest rates, nor whether these actions will impair or help the economy. They continue to fly blind, hoping for the best. They have forgotten the simple Econ 101 lesson: excess capital raises inflation and interest rates.

 

This is also known as whistling past the graveyard – so as not to disturb the occupants therein. This cautious complacency is disturbing to institutional investors like the major global banks. They have had an easy time of it since at least 2010. Once the Fed increased its QE commitments, no risk was allowed in the cash markets, the overnight markets or the money markets.   

 

2019 brought new ‘data’ from East Asia in the form of a biologically engineered virus with enhanced kill properties. The social, moral, cultural, economic and monetary/fiscal responses were felt globally. Millions died and billions of USD were ‘lost’. Congress and the Administration forced an open hand upon Adam Smith’s invisible hand while the Fed created an infinite supply of capital, forcing banks to liquify the cash markets with the above mentioned RPP. QE had the same effect upon the equity markets: the Fed simply bought anything and everything that no one wanted in the markets. iris balance sheet exploded. Simultaneously, its cash balances also exploded from their RPP machinations.

 

A significant number of people who do what we do at TRG – asset managers – no longer accept as true such items below as promulgated by the Federal government.

 

  1. Inflation, excluding energy and food is declining
    1. it is illogical to exclude the two most important costs for virtually every family in America, energy and food.
    2. This is like saying you child is doing well in school – except in class
  2. Unemployment continues to remain low
    1. Solely because of high rates of employment in the lowest paying jobs and in government jobs
    2. Neither of which create real wealth
  3. Deficits don’t matter because we can always print more dollars
    1. This fiscal nonsense adds to the already massive deficit of $34 Trillion, which has an annual cost now of $1 Trillion
    2. See the Weimar Republic, Zimbabwe, Venezuela, et al.
  4. Adding 8-12 Million ‘newcomers’ to the U S economy helps everyone to a brighter future
    1. Except those Americans who are the poorest and weakest
    2. Blacks, veterans, Hispanics and the undereducated
  5. Existential threats must be countered with massive government spending
    1. These include meteors, aliens, carbon and humanity
    2. If only we could join the aliens on their meteorites and leave this dying planet!

 

To counter these facts, we are offered a choice between two old men of limited appeal, judgement and heart. Tweddle Dumb and Tweddle Dee. Vote early, vote often.

 

This is not a political rant. It is a statement of fact. The young, vibrant, excited, honest and faith based leadership we deserve is absent from the battlefield. Even God is forbidden from the word wars we hear each day from the media. Atlas has shrugged yet again.

 

We are left to our own devices and they are paltry. We accept a dipole decision tree as the only possible choice.  We listen to our masters in power, government, politics and from the street. They must be right, eh…

 

Or, the light may be appearing on the horizon. Italy, Argentina, Israel, India , Hungary and other nations have recently radically altered their governments. Russia, Europe and the U S have wasted billions and lost tens of thousands in Ukraine - but the unrest has not spread globally. Israel is severing Hamas from its UN lifelines. ESG has seen market losses exceeding a Trillion dollars in 2023 and the hemorrhaging continues. Distributed power sources of wealth and creativity are gaining strength as gold and digital currencies like Bitcoin become real asset classes, not just pinups.

 

These are the brightening red skies promising new days, new financials and new opportunities for all. Let us move forward from the nightmare to the light.

 

Eat wisely

Sleep well

Love with Abandon!

 

 

 

John Graves, AIF, CLU, ChFC                        

Registered Principal
The Renaissance Group, LLC

 "These are the opinions of John Graves and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice."