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Fed's Powell won't stop rate hikes until he 'terrifies' wealthiest investors, says this CIO

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Investors are waking up to a whiff of positivity when it comes to stocks, after last week’s first-in-five gain, driven by weak wage growth.

Along with a grim service survey from the Institute for Supply Management, the data sends the message to some that the Fed now has more evidence to start ending its tightening cycle.

But not so fast said ours call of the day. This comes from Eric Peters, the Chief Investment Officer of One River Asset Management, who was chatting with a fellow CIO who offered his own line in the sand for when Fed Chairman Powell puts the brakes on.

Before the pandemic, a heavy jet cost between $7,000 and $9,000 an hour to charter. Now it costs $18,000 to $20,000,” the unidentified CIO told Peters and noting that his own private indicators show a still hot market. “All these guys worth $100 million have been sucked into a portfolio of 75% illiquid investments, 25% liquid. Guys like to spend $3-5 million a year and earn $2 million after taxes. They are bleeding slowly, but even after last year they are still not scared,” he said.

“Powell won’t stop tightening the tourniquet until he terrifies these guys,” he said. They need to feel that their private wallets are not coming back. They need to see their liquid portfolios even lower. They have to incur losses to raise cash. This happens every cycle. We are clearly not there yet.

The feel of 2022 was certainly bad, with major indices suffering their worst losses since 2008, including a 19.4% drop for the S&P 500.

When it comes to rich getting poorer, Tesla

CEO Elon Musk has become the only person in history to lose $200 billion, since peaking in wealth in November 2021, which some attribute to his time-consuming Twitter takeover. plus weak consumer demand in China and elsewhere. Yet elsewhere, according to Bloomberg’s Billionaires Index, Berkshire Hathaway Chairman Warren Buffett is about $3.27 billion richer than he was a year ago.

Peters’ CIO colleague goes on to explain how prices over the past few months have “fallen faster than monetary policy can explain.”

The next couple of months will tell if this is a weird move or something real. But I see problems for equities anyway,” he said. “If inflation stays high, the Fed will go up to 6%. And if inflation falls rapidly, margins shrink as wages remain high, and stocks are again under pressure.

And the economy is moving into an even tougher time for investors – the “stagflation quadrant” that leads to slower growth and lower inflation. “This is a quadrant where you have to look for idiosyncratic alpha, relative value trading,
types of cross-market opportunities. It’s hard.”

Read: ‘Markets will be shaken’ as Fed likely to hike rates, economist warns

the steps

Equity Futures



are pointing to a higher start for Wall Streetwith the dollar

continue to fall and bond yields


rising. Oil prices


are receiving a considerable boost as China reopens hopes of continuing to filter through the markets. Meanwhile, gold

reached new multi-month highs.

For more market updates and actionable trade ideas for stocks, options and crypto, subscribe to MarketDiem by Investor’s Business Daily.

The buzz

On Monday, three US-listed biopharmaceutical companies received takeover offers from European drugmakers. CinCor Pharma Shares

are up more than 100% in premarket trading after AstraZeneca

United Kingdom: AZN

announced a deal worth up to $1.8 billion. Amryt Pharma

is seeing similar gains after a $1.5 billion takeover deal announced by Italian Chisi Farmaceutici and French Ipsen agreed to buy liver drug maker Albireo Pharma

for at least $952 million.

Shares of the biopharmaceutical gene therapy group Ocugen

are up 7% after announcing positive results from a COVID trial.

lululemon stock

collapse in premarket after sportswear manufacturer lowered its margin guidance. Nike

and Under Armor stocks

fall in sympathy.

China’s long-running crackdown on internet companies is nearly over, a senior central bank official has reportedly said. It helped spur a slew of companies rising in the market, including Alibaba

who was also on the news co-founder Jack Ma is driving control from affiliated company Ant Group, potentially reviving IPO plans.

Goldman Sachs

is preparing to lay off 3,200 workers this week, according to Bloomberg.

Speaking of banks, the fourth quarter earnings season kicks off Friday, with Bank of America

JPMorgan Chase

and Citigroup

lined up to report.

A cargo ship briefly ran aground in Egypt’s Suez Canal, stalling traffic and rekindling memories of 2021, when a similar incident blocked the vital waterway for six days.

It’s another week of big data, highlighted by the CPI report due on Thursday. For Monday, we’ll have the New York Fed’s inflation forecast, comments from Atlanta Fed President Raphael Bostic, and consumer credit.

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Globalization is not dead faces a big extreme risk, according to this expert

Gen. The Z’s are dust off their parents’ digital cameras

Autistic journalists got French President Emmanuel Macron talking marry his former teacher.


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