An Expensive Speech

Fed Chair Jay Powell's Jackson Hole speech yesterday was just 8-minutes long, but it packed quite a punch. After hiking Fed Funds rate by 75 bps in June and July, Powell tried to mollify investors with some unscripted soothing comments when he said, "the central bank had already reached a “neutral” setting -- where it’s neither stoking nor restraining consumer prices." Mind you the Fed Funds rate was only up to 2.25% while inflation was running at 8.5%. Larry Summers for one, called the comments "indefensible." But the markets loved Powell's words and interpreted it as a "pivot" to more dovish rate moves (i.e., reinstatement of the Fed put), extending a ferocious rally. Between June 16th and August 15th, the S&P 500 and NASDAQ gained 17.2% and 23.3%, respectively. 

However, Powell seemed to put an end to that nonsense this afternoon, when he reiterated that restoring price stability was Fed' #1 priority and that "will likely require maintaining a restrictive policy stance for some time.” And just for good measure, if there was any doubt, he pointedly reminded investors that “the historical record cautions strongly against prematurely loosening policy.” Summers approved.

Okay, so how did the markets react? As you might expect, with the S&P and NASDAQ down 3.4% and 3.9%, respectively. It also meant that it was an expensive day for America's richest, especially tech billionaires. Bloomberg helpfully calculated that Powell's short speech cost America's billionaires $78 billion. Elon Musk lost $5.5bn, while pal(?) Sergey Brin lost $4.7bn. But at least rival Jeff Bezos lost even more $6.8bn, right?

These numbers are absurd. According to the U.S. Bureau of Labor Statistics, the median annual personal income in the U.S. was around $51,500. Roughly speaking, it would take the median American over 106,000 years to make what Musk lost in just one day!

Yet, these numbers are still essentially a drop in the bucket to the fortunes of America's richest. According to wealth porn site Forbes, which runs the Real-Time Billionaire List, Musk was worth $257 bn at close of business yesterday and Bezos $155 bn. Wealth tax anyone?