Nassim Taleb, hedge fund manager and author of “The Black Swan” discusses the limitations of financial models. He argues that most of the world is driven by Fat-Tailed processes and that using normal distributions in risk analysis is not accurate. Taleb explains that Modern Portfolio Theory, which uses a mix of stocks and bonds, does not make sense mathematically and empirically, and only worked because interest earned in bonds used to be able to finance losses in the stock market.
Analyst Peter Zeihan discusses the recent Ukrainian counter-offensive and explains the three separate assaults. Ukrainian forces are attacking through the province of Zapparnitzia in an attempt to achieve a breakthrough and drive straight south to the Sea of Azov, ultimately severing the land bridge from Russia to Crimea. If successful, this would render the Russians unable to supply the region with food or energy, making their position in Crimea untenable. Despite the Russians holding for the time being, the degree to which the conscripts are being used is crucial to the outcome of this assault. Zeihan also discusses the two other assaults, detailing the destruction of the dam that would have allowed an amphibious assault, and the heavy fighting required to take control of the Donbas Region.
Market odds for the Fed to raise the fed funds target range by +25 bp at Wednesday’s FOMC meeting stand at 28%.
Also, Novartis AG agreed to buy Chinook Therapeutics Inc for as much as $3.5 billion. M&A activity is supportive for stocks after Nasdaq Inc agreed to Adenza from buyout firm Thoma Bravo for $10.5 billion. U.S. stocks this morning are moderately higher, with the Dow Jones Industrials climbing to a 1-1/4 month high.
Powell has been careful not to tip his hand, along with New York Fed President John Williams, Richmond Fed President Tom Barkin, San Francisco Fed President Mary Daly, Chicago Fed President Austan Goolsbee, and Fed Governor Chris Waller, who have also signaled to keep their options open. “Inflation is not as low as they want, but heading in the right direction,” Luke Tilley, chief economist for Wilmington Trust, said in an interview. Last month, the Fed raised its benchmark interest rate to a target range of 5%-5.25%, the highest since 2007.
Will the fed….?
Cut
Increase
Do Nothing
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