June 8, 2020

The Chairman of the Federal Reserve, Jerome Powell, recently did an interview on 60 Minutes. It was historic in the sense that the Fed chair hardly ever speaks in dire terms about the American economy and rarely uses the term “extraordinary.”

He said, ““While the economic response has been both timely and appropriately large, it may not be the final chapter, given that the path ahead is both highly uncertain and subject to significant downside risks.”

Translation – we’re going to need more trillions.

It reminds me of the movie “Jaws” and Chief Martin Brody. This beast is bigger and badder than we thought.

He needed a bigger boat. Today, we’re gonna need more money.

Powell said additional support could be costly, but worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery. He went on to describe the scale and historic relevance of this downturn, saying it’s worse than anything since World War II. The scope and speed of the decline are without modern precedent.

A decade of job gains have been erased. Unemployment could hit 25 percent nationally. I agree with him that we’ll get through this – but it will take a while. To me, that means he’s assuring us the economy won’t die and we won’t see a replay of the 1930’s.

“We won’t repeat the Great Depression” isn’t an optimistic outlook.

Compare what Powell is saying to what legendary investor Warren Buffett is saying (and doing).

In 2008, Buffett said things were a mess, but to buy American like he was. It worked out. Now feels like 2008. But Buffett is worried about the future this time.

His words may not indicate that directly – talk of “American magic,” and such. But his cautious words and evasive actions tell a different story.

For someone with a seemingly endless holding period, Buffett was sure about exiting Berkshire Hathaway’s entire $6 billion position in U.S. airlines.

Similarly, his firm has $137 billion in cash on hand, yet sees no opportunities to put it to work. They’re worried about worst-case scenarios. What scenario would quickly blow through $137 billion in cash? I don’t want to know.

And there you have it. This is America right now.

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