Jeffrey Gundlach just told everyone that Jerome Powell's replacement won't be handing out free money like Halloween candy. Fed Chair nominee Kevin Warsh apparently believes in something called "monetary discipline." Disgusting concept.
The bond king said Warsh's approach lowers the chance of easy policy that could spark inflation and jack up long-term rates. Translation: all those retail traders who spent six months praying for rate cuts can go f*ck themselves. Warsh read a history book once. Saw what happened in the 1970s. Decided not to repeat it.
Here's what's funny. Gundlach is supposed to be telling you this is good news. Responsible central banking. Protection against runaway inflation. The kind of thing serious people nod at during CNBC interviews.
But retail heard "Fed chair" and "not easy money" in the same sentence and immediately started panic-selling their 0DTE calls. They thought appointing a new guy meant rate cuts. They thought it meant Powell 2.0 but nicer. They thought monetary policy was like ordering from a menu.
Warsh's entire thesis is that flooding the system with cheap capital creates problems. Revolutionary stuff. Nobody could have predicted that printing money has consequences. Except everyone. Everyone predicted it.
The market spent months pricing in a dovish pivot. Built entire portfolios around it. Bought growth stocks at 47 times sales because rates were going to zero forever. Then Gundlach shows up and says the new guy believes in math.
Every trader who leveraged their account betting on easy money just learned what "policy normalization" means. It means you're holding bags while someone explains why sound monetary policy matters for long-term economic stability. Riveting.
Warsh hasn't even started yet and he's already ruining Christmas.
Photo by Dan Dennis on Unsplash
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