Is The Fed Put Kaput?

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Since the Great Financial Crisis of 2008, it has never made sense to be bearish. Why? The so-called Fed put. The belief that, should financial markets ever wobble, the Federal Reserve would step in to allay concerns, prevent contagion and generally ensure the upward march of asset prices and collateral. That all worked in a regime of low-inflation.

But what happens when inflation is persistent and material? Then the world's leading central bank can no longer afford to accommodate financial markets. And in the end, if asset prices have to go down, thereby destroying demand, then so be it. Which is to say that the Federal Reserve won't back stop this sell-off until inflation comes down in a clear and obvious way. And right now, it's difficult to say when that may be. 

So we raise cash, the least trash.