Investment Gems

Picture credit: Federalreserve

One thing is for sure, the Fed under J. Powel is a very different beast. Yes, his predecessors started the unconventional monetary policies that have become the norm. However, Powel has brought it to a whole different level by nationalizing the whole credit market (not the whole, but close).

From an economic perspective, the move is bold and on the spot. It’s aimed at closing a huge dislocation that was happening in the credit market, as I’ve mentioned earlier, we were witnessing a de facto credit tightening provoked by the lockdown.

From a market perspective, this will inflate the everything-bubble even more, and without a surgical unwinding, it will likely end in tears. In other words, this might be the reignition of inflation and the beginning of the end of the US dollar as a reserve currency.

I must concede that for the next few hours, maybe days (hope not weeks), I’ll be lost on how to position my portfolio. I was defining this leg-up on the stock market as a bear market rally, but with the huge stimulus prop-up, a new meltdown might not materialize. I’m pretty much in shock about this because my instinct tells me that the right strategy, from now on, is to buy those distressed companies that could be heading to bankruptcy, and that is so counterintuitive for me. I’ll be closely watching the developments, and I’ll try to work on some thesis during the weekend.