Yes, again.
The Fed just pulled the trigger on another quarter point rate hike and said that another rate hike in May is likely. They are now expanding their balance sheet to create liquidity for failing banks which is creating more inflation via monetary expansion. And, at the same time, they are pushing the middle class into insolvency with rate hikes. The net effect of this hyper-moronic policy is that financial conditions are STILL too loose, as we see in the chart below. So, they really gave themselves no choice.
In addition, during today's press release, Powell asserted that Silicon Valley bank collapse was an "outlier". So he is ignoring all of the dominoes falling, exactly as the Fed did in September 2008 when Lehman failed:
"On the morning after Lehman Brothers filed for bankruptcy in 2008, most Federal Reserve officials still believed that the American economy would keep growing despite the metastasizing financial crisis"
The Fed’s policy-making committee voted unanimously against bolstering the economy by cutting interest rates, and several officials praised what they described as the decision to let Lehman fail"
As we know, Treasury Secretary Janet Yellen was there in that exact same FOMC meeting back in September 2008.
Today, in her testimony to Congress, after weeks of vacillation she said that there is no plan to implement blanket FDIC insurance:
"U.S. Treasury Secretary Janet Yellen said on Wednesday that the Federal Deposit Insurance Corporation (FDIC) was not considering providing "blanket insurance" for banking deposits following the collapse of two prominent U.S. banks this month"
"The treasury secretary, Janet Yellen, pledged to protect depositors at smaller US lenders on Tuesday from “contagion” after bank runs led to customers pulling billions in funds"
In comments after the speech, Yellen said the current situation was different from 2008, which she described as “a solvency crisis”, while “what we are seeing is contagious bank runs”
Let's unpack this: We are seeing a contagious bank run and pledging to protect small banks by not protecting uninsured deposits which is half the deposit base.
No surprise, having just got double teamed by dumb and dumber, regional banks gave back most of their "gains" from this week's limp dick rally.
On Twitter I showed this chart indicating that only mega caps have been holding up the market since the bank collapse:
Look up, and look down.
Now, bulls are going to find out what it's like to go through a financial meltdown WITHOUT any bailout insurance.
Hint: It's not as much fun.
In summary, I have said for months that this right shoulder would unleash biblical criminality. So far, it has shown its potential. However, in the analogy of making popcorn, all we are seeing so far are the first few kernels flying across the kitchen.
Soon, the popping will explode in every direction. And, the bowl is far too small for what is coming.
Believe it, or not.
