Today is likely the last one for Jay Powell.
While we don’t know for certain, the Fed chair takes the mic today after chairing the Federal Reserve Open Market Committee for what’s probably the last time.
It matters because the most powerful force in the universe outside God is monetary policy. I don’t mean to be blasphemous. Money prices things. Unfortunately.
Look at the Nikkei 225, the stock index for the Japanese market. It’s gone parabolic, rising from 33,600 Apr 11 last year, to 60,000 Apr 27 this year.
In Dec 2020, a dollar would buy 103 Japanese yen. Today you can get about 160 yen for a buck. In 1971, a dollar bought 358 yen. By April 1995, the exchange rate had dropped to 83 yen, as the dollar imploded. (The subsequent rise for the dollar preceded The Dot Com Bomb).
Looking across the whole data set, the Nikkei rose from about 2,500 in 1971 to 39,000 in 1989 and then collapsed near 7,500 in 2009 before the long grind back to a new all-time high on Halloween 2024, above 39,000. Except now it’s 60,000.
Who cares? Well, to get to new highs, the yen lost 50% of its purchasing power.
How do we know the value of things? Prices. Except what are prices but measurements at disparate times of the fluctuating value of currencies?
All currencies are constantly in motion, just like the prices of everything in the stock market. Legendary value investor Ron Baron says he trades depreciating assets called dollars for appreciating ones called stocks.
But what if stocks plunge even when currencies are weak? Then what?
You wonder, is the Nikkei at 40,000 now the same as 40,000 in 1989? Or does the Nikkei need to be 80,000 or 100,000 to account for vast declines in the value of the US dollar and other global currencies? So is the Nikkei even up?
Before all our heads explode, I’ll stop.
I bet Jay Powell will be glad not to worry about these things anymore, ceding the job to Stanley Druckenmiller acolyte Kevin Warsh, who famously (well, in some circles) declared that “inflation is a choice.”
What’s this got to do with you and the stock market and investor relations, and reporting earnings (GOOG, META, AMZN, MSFT all after the market closes today, AAPL tomorrow)?
Things that fluctuate foster arbitrage. The FX (foreign exchange) market is the world’s largest, trading nearly $8 trillion daily vs $4 trillion daily in options in US markets, about a $1 trillion of stocks daily.
Add up the net trading revenue for Jane Street, Susquehanna, Hudson River Trading and Citadel (the market-making arm) for 2025, and it’s over $80 billion for the stock market’s fastest middlemen. Jane Street alone made $40 billion on fluctuations.
Mostly through intermediating tiny spreads among stocks, options and ETFs. JP Morgan had gross – not net – markets revenue of $35.8 billion in 2025. Jane Street is bigger than that, with a couple-three thousand people. Of course, JP Morgan moves $10 trillion daily in 120 different currencies across 160 countries.
Stuff fluctuates.
T Rowe Price has $1.8 trillion of assets under management. But investors pulled $57 billion in 2025, reflecting a long-term downtrend for active managers.
Morningstar shows that small-cap actively managed funds lost more than $50 billion of assets in 2025. Doesn’t seem like much in a market worth trillions? All of the Russell 2000 is about $3 trillion. NVDA alone is over $5 trillion.
As in currencies, the stock market’s most profitable endeavor isn’t investing. It’s intermediation. It was the movie Layer Cake that posited something half-Trumpian, half Jane Street: The art of the deal is being a good middleman.
And boy is Jane Street doing deals a hundredth of a penny at a time. It’s comparable to LiveNation/Ticketmaster getting all the revenue instead of the artist at a rock concert (there’s been some legal action in that regard).
Public companies, this is why your stock surges or plunges the instant you report. Intermediaries set prices in microseconds.
So change your reporting practices to reduce intermediation, mitigate volatility – and give your core investors, Passives, reason to stay put and not dump you because you’re veering from the benchmark.
If you want to know more, ask us. We’re battle-hardened at it. While I see in our profession more talk all the time about new ways to address volatility, we’ve been doing it for three years, helping companies navigate our mathematical market for 21 years.
Investors, don’t let the intermediaries setting all the prices fool you. Don’t trade price, trade Supply and Demand (our model portfolio – data, not advice – is up more than 26% year-to-date).
And the money? I think Judy Shelton has a point. It should have fixed, constant, timeless value. Demand and supply should fluctuate. Not the money. What if the value of your money was always the same?
Imagine that. I hope Kevin Warsh is imagining it too.
What you don’t have to imagine is adapting to this market. We can help.
We’re off to Nashville to embrace music and perhaps a mint julep on Derby Day. Catch you next week.
