Have you ever tried to climb on top of a log that’s floating in the water?
I have. I don’t remember the circumstance. Maybe it was some Scout Camp thing. All I remember is that it was really, really tough. The log was typically much larger than the one pictured below, and as such, it was extremely tough to climb on top of it, because naturally when you reached up and tried to hoist yourself, the damned thing would just spin on its axis.
I’ve got to say, trying to climb atop a log is precisely what it’s felt like to try to “get on top of” this market lately. Just look at the IWM. Where were we five weeks ago? About $154. Where are we now? About $154. Absolutely maddening. No trend. No direction. Just noise.
As long as we’re being metaphorical, allow me to continue on a different tack, inspired, as I always am, by the lilting sonnet of Jerome Powell from today’s FOMC presser.
It’s getting hard to remember the last time we had anything resembling a true market. I guess the mid-1990s or so; if that’s the case, we’ve been in fake loony-land for about a quarter-century now. With each passing year, it’s become markedly more lunatic.
The Federal Reserve endlessly talks about more “accommodation” and more “easy credit”. Day after day, week after week, year after year, they just keep throwing trillions at this man-child known as the United States Economy. The entire charade reminds me of the proverbial boomerang kid.
If you are unacquainted with term, it refers to a child who grows up, leaves the house (probably for college), but for whatever reason comes back home. This can sometimes throw a monkey wrench into the plans of his (or her!) parents, particularly if he was the last to leave. Maybe the parents were looking forward to traveling the world, or at least not picking up clothes off the floor anymore. And yet, bless him, there he is again, our twenty-something year old child.
This is the way the Fed seems to be treating America. In a paternalistic, politburo type of way, the Fed can’t quite seem to understand why the country can’t get on its own two feet, but until that time arrives, they’re just going to give offering more credit, more time, zero interest rates, and as much loving aid as they possibly can. America, naturally, will cheerfully take it, like the aforementioned boomerang kid. That sort of endless welfare can make livin’ pretty sweet ‘n’ easy.
Of course, in a situation like this, if the kid just lingers……….through his twenties………into his thirties………..never really growing up at all……..his objective is eventually just going to be to hang out long enough for the ‘rents to die and leave him the house. Denied an opportunity to actually tough it out in the real world, his spirit and drive will merely wither away, and whatever potential that was there will be lost in a sea of insouciance.
The Fed, to me, represents a poisonous ocean of dependence-fostering market-ruining distortion. You know how in 2009 they all said “this will end badly some day“? We would be lucky to have the kind of “badly” they were imagining back then. What faces us now, when the day of reckoning finally arrives, is beyond even my own dark imagination.