In Fed Chair Jerome Powell’s appearance before Congress on February 11th, formerly known as The Humphrey-Hawkins testimony, he asserted that the U.S. economy was, “In a very good place” and “There’s nothing about this expansion that is unstable or unsustainable.” But compare Powell’s sophomoric declaration to what Charlie Munger, Vice-Chairman of Berkshire Hathaway and Warren Buffett’s longtime right-hand-man, had to say about the market and the economy, “I think there are lots of troubles coming…there’s too much-wretched excess.”
Mr. Powell’s comments rival in ignorance with that of former Fed Chair Bernanke’s claim that the sub-prime mort crisis was contained. That is until the Great Recession wiped out 50% of stock valuations and over 30% of the real estate market. And of course, don’t forget about Fed Chairs Yellen and Powell’s contention that their Quantitative Tightening program would be like watching paint dry and run harmlessly in the background on autopilot. At least that was their belief until the junk bond market disintegrated and stocks went into freefall in the fall of 2018. Therefore, it should not be a surprise at all that the Fed doesn’t recognize the greatest financial bubble in history: the worldwide bond market mania. Perhaps this is because central banks created it in the first place and therefore didn’t want to take ownership of it.