Yesterday we saw yet another ridiculous display of our politicians using their few minutes on the mic, not to accomplish anything constructive, of course, but to try and appear tough and relevant and get their face on the news.
Senator Elizabeth Warren from Massachusetts used her two minutes during a senate hearing to lob insults at Fed Chairman Jerome Powell. Powell is the head of the Federal Reserve and the one who is ultimately responsible for keeping people employed and keeping inflation in check using interest rates and the money supply.
Warren: “So far, you’ve been lucky” that there hasn’t been a financial crisis like 2008.
“Your record gives me grave concern.”
“You are a dangerous man to head the Federal Reserve.”
Her accusation was that he, as a Republican, is favoring big banks and corporations and not looking out for the health of the economy.
Jerome “DANGER” Powell didn’t seem too bothered, or really even offer much of a defense. I assume because he just got us through an unprecedented and difficult time in our nation’s economy… and his work seems to be speaking for itself.
Jay Powell is no stranger to insults. He took the brunt of many of President Trump’s tweets. Marketwatch says, “All but one of Trump’s 14 tweets about the man he picked to lead the Fed were critical. Powell is a “bonehead,” “a terrible communicator” possessing a “horrendous lack of vision,” among other Trump characterizations.”
My favorite one was when Trump implied that Powell was equivalent to the Chinese…
Trump: “My only question is, who is our bigger enemy, Jay Powell or Chairman Xi?”
I don’t know about you all, but something tells me when both sides are using someone as a punching bag for not being political enough, they must be doing something right.
The work that Jay Powell and the Federal Reserve have done to get us through the last 18 months must now change. We can no longer keep interest rates as low as they are and expect inflation will not be a concern going forward.
Powell’s job is now to gradually reduce the economy’s reliance on low rates without spooking financial markets and slowing the economy down too fast.
This is a tall order and only time will tell whether he was successful, or not.
Markets
Because inflation is starting to show up and rates are starting to rise, stock markets are now showing signs of concern. This is the first volatility we’ve seen after a nearly uninterrupted run in the last 18 months. Don’t forget, though, volatility is natural and needed. Gains without pullbacks are how bubbles are formed in markets.
The upside to volatility is it provides opportunities to put some cash to work. Stocks are down almost 5% from the peak we saw several weeks ago. We are waiting to see closer to a 10% decline before we start putting cash to work in a meaningful way.
In the meantime, we’ve found a company that piqued our interest. Dutch Bros (BROS) went public on September 15th and is from Grants Pass here in Oregon. Travis Boersma (the Co-Founder) became the latest Oregon billionaire and his “cool kid” coffee stands draw a line of cars around the block. We believe the company will likely continue to do well as they shoot to increase their 400 stands to 4,000.
Although I don’t spend much time there, my girls are starting to ask us to stop there. We want to participate in their growth and we bought a starter position in our Growth Stock Portfolio the day it went public. The stock has gained since then, but we will likely buy more if the price drops back to where we bought it around $37/share.
We hope everyone had a fantastic summer and we look forward to talking with clients as we make calls in anticipation of year-end. If you need anything before we reach out to you, please don’t hesitate to contact us.
Thanks for reading,
