Despite my sounding a bit bearish in my past articles, I am not -- AFTER the Fed gives up on its nonsensical and guaranteed to fail attempt to raise interest rates.

The core inflation rate was expected to decline when announced on Thursday October 13. Core inflation is more important than the regular inflation rate because it reflects inflation without energy and food. The reason it’s important is that it indicates to some extent how much inflation has become embedded in the broader economy.

As we have mentioned many times before, you can’t raise interest rates in a bubble economy. All of our asset prices, stocks, real estate and bonds, have been re-priced to a much higher level due to low interest rates. Raise those rates and the asset values have to fall, which, in a bubble economy, can eventually precipitate a price collapse.

The most powerful driver of the stock market this year is not the economy, it’s not earnings, it isn’t even Fed announcements of new interest rate hikes. No, the driver of this year’s stock market is the yield on the 10-year Treasury bond.

As the S&P 500 has been struggling with its first bear market since 2008, it’s been interesting to watch various pundits and money managers talk about when the market will bounce.

Please read the article in MarketWatch at the link at the end of this article. We completely agree with their assessment that US government I-bonds are a good place to keep some cash. The interest rate on I-bonds moves with inflation as measured by the Consumer Price Index. So, they are currently paying 9.6%.

The Fed started playing with fire on Thursday, April 21, when Fed Chairman Jerome Powell described his plans to raise interest rates a half percent at the May 4 Fed meeting. Afterward, the market slowly but surely melted down for the rest of the week. The Dow closed almost 1600 points lower than where it was before Mr. Powell spoke.

It’s hard to imagine a simpler or more elegant solution. Plus, it works!

Theoretically, the Federal Reserve can control inflation. To do so, it simply decreases the money supply by selling its enormous stockpile of bonds rather than buying them. That’s not just theory, that’s how it actually works.

And no one dares to mention it.

A notable exception in this global vow of silence is Mark Hulbert, one of the best writers at MarketWatch (article link below), who recently pointed out a very uncomfortable truth:

It’s hard to beat the S&P.

Despite the Fed's wishful thinking that it's only temporary, rising inflation is the biggest threat to the stock and bond markets -- not only according to our many books predicting the coming big bubble pop, but also according to billionaire hedge fund manager Paul Tudor Jones, who correctly called the 1987 stock market crash.

The Wall Street Journal wrote an interesting article on China's huge property conglomerate, Evergrande, which is in deep trouble (the link to the article is at the end of this post). Evergrande’s problems reflect a much broader future problem for the Chinese economy.

Wouldn’t it be great if the talking heads on TV explained what’s really driving the markets?

For example, two weeks ago the market had a big drop due to the release of a transcript of a recent federal Reserve meeting where the members talked about reducing money printing later this year. In addition, there was growing fears of the Delta Covid variant starting to hurt the world’s economy, and evidence that the US economy was slowing faster than expected after the last round of stimulus.