The Fed raised its key interest rate by 75 basis points on Wednesday, which was accompanied by hawkish rhetoric from Fed Chairman Jerome Powell. As the Fed continues to raise interest rates and weaken demand, this will “crack” the market, said Lobo Tiggre, editor of TheIndependentSpeculator.com.
“I will be very surprised if we get too far into 2023 before there are any real signs of pain,” he said. “I think we’re looking at major layoffs. They certainly haven’t come yet.”
He added that “there are going to be protests with a downward trend that I think will last for years.”
Tiggre spoke with Kitco News anchor and producer David Lin.
Market reaction to Fed rate hike
After the Fed announced its rate hike on Wednesday, the S&P 500 fell 2.5 percent, shedding billions.
“It was a surprise [in Powell’s] language,” Tiggre said. “That’s why the market went vertical at the time.”
Tiggre argued that Powell would rather do “too much” on inflation, which is 8.2 percent in September, than appear weak.
“He quickly assured his audience that… [The Fed] he has the tools to step in and support the economy if it goes too far,” Tiggre said. “In other words, they’re planning to go too far… The Fed is absolutely going to bust this economy.”
However, Tiggre also said the Fed is struggling to bring down inflation and that it will require “a lot more pain” that could lead to job losses.
Inflation and Government Policy
Tiggre warned that inflation could increase as the government increases spending to combat a weak economy.
“If Washington’s response is … we send them stimulus checks, you could see a lot more inflation with this recession,” he said. “You can see commodity prices going up.
President Joe Biden and other politicians have blamed recent price increases on Russian President Vladimir Putin’s war in Ukraine. However, Tiggre said that inflation cannot be tied solely to the Russian leader.
“This ignores the fact of the COVID-19 shutdowns and the resulting interventions and what that did to inflation before the war started,” he explained. “The US administration is talking about Putin’s oil tax… but [oil prices] were high before the war began.”
Musk’s Twitter Plans
Elon Musk recently bought Twitter and plans to monetize the microblogging app by charging $8 a month for verified users.
Tiggre welcomes this change.
“I have to side with Musk on this one,” he said. “Musk’s proposal is like a toll lane on a highway … it’s congestion pricing … I’m happy to pay $8 and have that verified account that might help me fend off scammers and scammers.”
Watch the video above to see Tiggre’s thoughts on mining stocks
Follow David Lin on Twitter: @davidlin_TV
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