What Is Happening?

---

“When the collective consciousness stops believing growth can be created by money and debt expansion, the entire medium will fall apart violently, otherwise it will continue to be real.”

-- Artemis Capital Management (Letter to Investors, July 2018)

---

Happy Thanksgiving. Today I'm just thankful markets were not down again yesterday! As you relax (hopefully) over the coming days, here are a few observations to ponder . . .

Observations

• The Fed’s balance sheet has grown 400% since the 2008 Financial Crisis.

• Early this year, the Fed began shrinking its balance sheet. Since January, it’s declined by ~7%.

• The S&P 500 is down about 10% from September's highs, following a similar decline in January/February of this year.

• Quantitative Easing (QE) was a huge experiment. It’s never been done before.

• Quantitative Tapering (QT) is a huge experiment. It’s never been done before.

• QT is just starting. Markets are acting differently.

The Fed's Balance Sheet - Tipping Point?

We believe that since 2008 the main driver of rising stock markets, bond markets, real estate – of just about all assets – has been the unprecedented liquidity injection from central banks globally. The problem is that this party is winding down. This year the Fed has begun withdrawing the punch bowl. The Trump tax cuts have helped keep the party going. Folks are still dancing. The question is what happens next year when we lap the tax cuts, and the music stops?

I'm not the only one worried. Last week Paul Tudor Jones warned that we are in the late stages of a global debt bubble. Earlier this year, JP Morgan CEO Jamie Dimon said, "I don't want to scare the public, but we've never had QE… We've never had the reversal. Regulations are different. Monetary transmission is different. Governments have borrowed too much debt, and people can panic when things change." More recently, Stanley Druckenmiller said that he was on "triple red alert" over liquidity concerns in the face of rising interest rates.

If the Fed’s loses control of its QT experiment, this could lead to quick change in investors’ collective consciousness. With that would come a new reality of squeezed liquidity, risk aversion, and with that, lower securities prices.

Maybe a bear market in the large growth companies is underway. Maybe not. Regardless, now is a good time to rethink your portfolio structure. Markets like this are a good reminder of the need to diversify -- not merely to play defense but to play offense. We welcome the opportunity to help you review and rethink the structure of your family’s portfolio.

Our New Partner

Fielder is experiencing a bull market of its own. I’m proud to announce that Stephen Korn, CFA is joining Fielder as a Partner.

Steve and I met 20 years ago as students at Columbia Business School. Ever since, I have considered Steve one of the smartest people I know. He is also a good person. I trust his character. I trust his intellect. I trust his judgment. It is an honor that he has chosen to join us in building Fielder. You can learn more about Steve’s background HERE. We are excited to have him on board.

There couldn’t be a better time to have someone like Steve on your team to navigate this increasingly complex world.

Yours in the Field,

Frank Byrd, CFA

Disclaimer: While the information presented herein is believed to be accurate, Fielder Capital Group LLC (Fielder) makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in the document. Fielder is under no obligation to notify you of any errors discovered later or of any subsequent changes in opinions. Nothing herein should be construed as a recommendation to buy or sell any of these securities. It should not be assumed that any of the securities, transactions, or holdings discussed will prove to be profitable in the future or that investment recommendations or decisions Fielder makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Fielder or its employees may have an economic interest in securities mentioned herein.