Speaker 2
Yeah, you mentioned in the book that somebody gave a presentation and they're talking about corporate spreads widening almost always leads to recession, and so you could see why the Fed would want to target spreads. But to me, we've always, as market watchers, many of us have always watched the Fed, and especially QE, when they switched over to QE as a specific targeting of asset prices in the stock market rather than any other guys that they might purport. But to me, it was a paper came out recently that showed a stock market decline better predicts the FOMC's behavior than any of the 38 macroeconomic indicators available in Bloomberg's database. To me, that made it plain, right? They're really targeting the stock
Speaker 1
market. They are targeting the stock market, but they're targeting the stock market through
Speaker 2
the credit bond.
Speaker 1
So, I mean, this is a story that I can tell in my sleep, and it is that on Halloween 2018, the debt of general electric was downgraded, and overnight it was trading in junk territory, 41, two weeks later, November the 14th, junk bond issue into the United States froze solid. That prompted the bloodbath that we saw Christmas Eve, the meltdown in the stock market. And the freezing up of the credit markets prompted CFOs saying, well, we might not be looking at corporate at share buybacks anymore. And that followed through into the stock market, and on January the 4th, we had the Powell pivot. And if you see the move come unhinged, corporate volatility, that is going to get J Powell's attention much faster than the VIX rising, because one feeds the
