Kevin Warsh could be next Fed Chair. He’s currently favourite in betting markets. A recent meeting with Trump has been confirmed. So, who is he?

Albert Edwards is not known for his optimism (I've worked with him, I should know!) The macro strategist, currently at SocGen, has mostly been an Equity bear for the last decade or so, and has the Ice Age thesis (West would slowly replicate Japan’s experience of the 1990s by descending into outright deflation) on deflation.

But Edwards has written very positively about Warsh. Not something I’ve come to expect from Albert regarding policy makers. This from Edwards after hearing Warsh speak in a Oct 2016 meeting:

“[Warsh] explained  that the Fed has been “captured” by a  groupthink  of  academics led  by  the ‘Secular  Stagnation’ ideas  of  his  friend, Larry  Summers. Rather  than admitting they are  wrong,  this  group, who failed to predict the current economic malaise,have constructed this theory to explain why ever more  stimulus  is  required. In particular Warsh warned that the Fed  had  become  the slave  of the S&P.”  

For Fed watchers it’s worth looking at these articles. Warsh in WSJ in August 2016. He writes:

“The conduct of monetary policy in recent years has been deeply flawed. U.S. economic growth lags prior recoveries, falling short of forecasts and deteriorating in the most recent quarters.”

“Two major obstacles must be overcome: groupthink within the academic economics guild, and the reluctance of central bankers to cede their new power...

First, the economics guild pushed ill-considered new dogmas into the mainstream of monetary policy….

The second obstacle to real reform is no less challenging. Real reform should reverse the trend that makes the Fed a general purpose agency of government…

Warsh as Chair would be shaping a different kinds of Fed it would seem.

And interview with Warsh on CNBC below:

Read a thought on valuations here.  Cross fertilise. Read about the autistic mind here and ideas on the arts here. Ray Dalio on populism and also a thought on risk and valuations. Or Black Swan author, risk expert, on life lessons from his commencement address.