Monsters

*YELLEN: NO REASON FOR INVESTORS TO FEEL NERVOUS ABOUT US DEBT, ran the headline. Well, if investors weren’t nervous before, they are now. The sober person does not go round telling everyone they are sober. The drunk does. Fast on the headline was the all-out dovish message from the Federal Reserve, sparking a chorus of alleluias and a buying frenzy of risk assets pushing stock markets to within a whisper of ATHs, leaving many an index in what technical analysts whisper as being ‘extreme overbought’. Perhaps the good news of the end of the rate cycle is already in the price. Or perhaps, not given many a Wall Street cheerleader is out with some aggressive 2024 year-end targets that may or may not have been plucked out the thick, steamy air of the team Christmas lunch. Time will tell. Whilst inflation appears to have eased, albeit leaving those who buy groceries or other staples of life, feeling a little out-of-the-loop; some argue that the Fed are done hiking rates as a debt-riddled economy can’t handle it. The goose was starting to crisp too fast, hence the high-style 180. Jay Powell even seemed to open the door to a return of QE, saying that if the Fed cut rates due to a weakening economy, continuing QT would not be ‘appropriate’. Indeed not. That markets historically top out around the first-rate hike adds further seasoning to the broader mix, with bets running hot that the Fed will be cutting five or six times into 2024. Petrol. Fire. All the while Warren Buffet has quietly been shuffling the deck chairs and now sits on the largest cash position in Berkshire Hathaway’s history. Grown-ups aren’t supposed to believe in monsters, but it sure feels like there’s something hiding in the attic. The case for owning hard assets becomes ever more compelling.