Powell’s Pain Index, an Elongate Update, & Peloton’s Future

Welcome back to Dry Powder, covering the inside story of what’s really happening on Wall Street.
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Good evening, I'm William D. Cohan.

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On Wednesday, I deciphered Dan Loeb’s punch list for Bob Chapek, which includes, among other things, potentially spinning ESPN. Today, I turn my attention to Jay Powell doing his best Paul Volcker impression at Jackson Hole, Elon Musk’s next ploy against Twitter, and whether someone—anyone?—will buy Peloton and put John Foley out of his misery.

Back on Wednesday,
Bill

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Powell’s Pain Index, an Elongate Update, & Peloton’s Future

News and notes on the most pressing questions obsessing Wall Street: Will JPow drop the hammer? Can the Chancery Court tame Elon Musk? And would somebody please put Peloton out of its misery?

WILLIAM D. COHAN

As much as I enjoyed the recent late summer stock-market rally—and I did, believe me—I knew in my gut that it was pretty much a chimera. Ask around on Wall Street and you’ll hear variations of the same observation. Sure, there was some optimism that Fed chair Jay Powell might have foamed the runway with his last two interest rate hikes, which probably helps explain why the market got so far ahead of itself these past two months.

But there can be no “soft landing” so long as inflation is running at an annual rate of around 8.5 percent. With the Fed Funds rate at a target of 2.25 percent to 2.5 percent, real interest rates are still negative, by a factor of around 600 basis points. In other words, if Powell & Co. want to really tame inflation, he is going to have to take up the mantle of his Carter-era predecessor, Paul Volcker, who famously declared that “the standard of living of the average American has to decline.”...

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