What Do Hendrix, Picasso and Powell Have in Common?
Distortion, Distortion, Distortion
Jimi Hendrix utilized distortion techniques to create unforgettable guitar sounds. Pablo Picasso distorted reality in his famous paintings. The Federal Reserve distorted the natural beauty of private markets by turning them into something hideous, a place where logic and fundamentals have given way to “sentiment” and speculation. Over the past four years the equity market has transitioned from one bubble to the next and back again. I suppose random, speculative bubbles are to be expected when the Central Bank grows broad money (M2) by $6 Trillion over two years (M2 peaked on April 18th 2022).
The once private markets are held hostage by a clueless Central Bank that massively overstimulated the U.S. economy from 2020-2022 through a combination of its own foolish monetary policies (QE and various bail out facilities) combined with subsidization of irrational fiscal spending. Bankers are supposed to be the adults in the room, but Chairman Powell has zero credibility from where I stand. Powell’s policies may take 10-20 years to unwind, especially given the Fed’s glacial QT pace.
