Most Important Fed Meeting in Powell’s Career – “Buy crypto, buy gold”

Most Important Fed Meeting in Powell’s Career – “Buy crypto, buy gold”

That’s how billionaire Wall St legend Paul Tudor Jones described tonight’s US Fed meeting.  The gravity of that should not be treated lightly.  Jones came to prominence when he was one of the few that picked the 1987 Crash and has since maintained somewhat of a midas touch literally amassing several $billions in the process.

In a CNBC interview this week, and after the red hot inflation prints (as we discussed here), Jones said:

“If they treat these numbers — which were material events, they were very material — if they treat them with nonchalance, I think it’s just a green light to bet heavily on every inflation trade….If they say, ‘We’re on path, things are good,’ then I would just go all in on the inflation trades. I’d probably buy commodities, buy crypto, buy gold,”

And of course the other side is the Fed hinting at tightening in response to which he warns:

“If they course correct, if they say, ‘We’ve got incoming data, we’ve accomplished our mission or we’re on the way very rapidly to accomplishing our mission on employment,’ then you’re going to get a taper tantrum…..You’re going to get a sell-off in fixed income. You’re going to get a correction in stocks. That doesn’t necessarily mean it’s over.”

So here we are again with the Fed dilemma.  Jones clearly thinks it will be the former as he dismisses the ‘transitory’ inflation narrative of the Fed:

“The idea that inflation is transitory, to me ... that one just doesn’t work the way I see the world,”

The head of the world’s biggest bank, JP Morgan’s Jamie Dimon, yesterday said “I think you have a very good chance inflation will be more than transitory,” as it stockpiled $500 billion in anticipation of higher inflation.  That might seem counterintuitive to we mere mortals on the other side of the ledger.  Having cash amid higher inflation of course means you are going backwards in real terms and hence, in part, why gold becomes more attractive when real interest rates turn negative.  Some might say Dimon’s claim is disingenuous as many banks are literally stuffed with cash from the Fed’s QE program to the point where the Fed has had to buy it back in record high reverse REPO’s overnight to ease the system.

When the likes of Paul Tudor Jones use phrases such as “most important Fed meeting” it is time to listen.  Markets are on a speculative tear across the board on this free money show and now inflation, and the Fed’s response to it, is front and centre. 

The highly respected money markets analyst Scott Skyrm of Curvature Securities sums it up succinctly and also removed the ‘base effects’ dismissal of year on year prints (most relevant right now as it compares today with the depths of COVID crash a year ago):

“Big picture … did the Fed move the goal posts?

Let's look at some numbers.

Monthly inflation: wage growth +.5%, PCE +.7%, PPI +.6%, CPI +.7% - these are real scary when they're annualized.

GDP is projected to be 6.4% and the unemployment rate is projected to be 5.5% at the next report.

With these numbers, U.S. monetary is still "all in."

Overnight rates are at 0% and QE running at $120 billion a month.

On top of that, there will be more stimulus as the economy continues to reopen.

In my book, this economic situation calls for attention.

It's like the Titanic running at full speed. In fog. At night.

Perhaps it's prudent to ease up on the throttle.”

Let’s see tonight if they do.  God help them, and those not ready, either way.