Alone With My Thoughts – 10/17/2022

It is October and we have entered the Clown House of volatility with intra-day swings of 5%+, so buckle up for the ride.  For markets, the Fed’s reaction to inflation is the key, as higher interest rates are kryptonite to stock values.  Unfortunately, politicians do not seem to understand the basics.  If you throw literally trillions of dollars into the economy at the same time there are supply issues, you will by definition get inflation.  The Fed will then raise rates to slow the spending and cool off the economy.  Hard stop.  If the government continues to print money, the Fed cannot raise rates high enough and fast enough.  Politicians need to stop handing out money to voters.  A recent Barron’s article. “States’ Stimulus Spending is a Negative for the Fed”, points this out, that states are prepared to spend $31 billion in stimulus programs.  For example, Kirsten Gillibrand is doing the Thruway tour touting the $1 billion dollars of funding for higher heat costs this year.  Feel good moment, yes, helping combat inflation…just the opposite.  Social security going up 8.7%, a nice boost for seniors and a nice boost for inflation.  Forgiving student debt, does not forgive higher inflation.  The bottom line, inflation-relief measures tend to increase inflation which crushes the working class.  Beware the Clown bearing gifts.