The FOMC cuts rates 50 bps, but there's nothing wrong with the economy?

• Currencies & Metals see short paper trading after the rate announcement.

• But get bought in the overnight markets last night.

Good day... And a Tub Thunpin' Thursday to one and all! I arrived back home last night to watch my beloved Cardinals blow their 2- lead.. and thought... well this game is lost... only to watch the Cardinals rally with a 6- run inning! Where was that all year? Yes, it depends on the pitcher, but C'mon just a little life in those bast would have gone a long way for my team this year... I'm just saying...... Had a good time last night with my good friend, Rick B. Whenever the two of us are together,, my mind wanders to what it would be like to have retired at age 56? OH, well, for one thing I would have missed the beat earning years of my career, so there's that...  A Flock of Seagulls greet me this morning with their song: Space Age Love Song...

Well, the Fed Heads did the dirty deed, done dirt cheap (AC/DC)... They cut rates 50 Basis Points or 1/2% yesterday... I have to question their intellgence, or maybe they know something we don't... For in the past, outside of the emergency rate reductions during Covid, the last time the FOMC cut by half a point was in 2008 during the global financial crisis. Yes, the great financial crisis... Is that what we're up against again? Or is this just the Fed Heads kowtowing to the markets, yet again? Probably the latter of the two, don't you think? 

And what happened after the rate announcement? Well, it played out just like I thought it would... The short paper traders made sure Gold & Silver didn't take off for the moon, and the PPT was in buying the dollar making sure it didn't fall off the cliff... The BBDXY gained 4 index points yesterday, and Gold lost $10, while Silver registered a 60-cent loss...  The price of Oil bumped higher to a $71 handle, and the 10-year got sold... Wait, What? Yes, the 10-year got sold and saw its yield rise to 3.72%.... Don't ask me, what's going on there... Because the Fed Heads didn't leave any question that they plan to cut 50 more basis points before year-end.... 

I the overnight markets last night, at least these guys got it right... The dollar got sold, and Gold & Silver are soaring in the early trading today... The Fed Heads said that they "were dot plot dependent, and that they told us indicated that interest rates would be cut another 50 Basis points before year-end... That would equal 100 Basis Points of rate cuts, or 1 full percent... The Fed Funds rate is now 4.75%... No reason I can see to buy dollars... The BBDXY has lost the 4 index points it gained yesterday in the overnight markets, last night... The Big Winner of currencies last night was the Aussie dollar (A$).. But there were quite a few currencies that came in 2nd place... So, what did I tell you a couple of weeks ago? I told you to back up the truck, and load up with currencies & metals, so this is the scenario I was thinking about then... But I've been on the wrong side of the PPT so many times in the past, that if you didn't heed my call, I understand... But what's stopping you now? 

The Bank of England met this morning, and decided to keep their official rate unchanged... Now, I find this very interesting, in that the BOE has talked a good game of rate cutting needed... And after the Fed Heads laid the brickwork for the BOE to follow in their path, The BOE decided to take a different road.... The BOE's main rate remains at 5%... Hmmm. That's higher than the U.S. rate, now, isn't it?  Why yes, it is, Chuck....  Well, back in the day when currency traders actually called on the phone another currency trader and traded currencies, this scenario would have brought a ton of buying of sterling, because of the interest rate spread to the U.S. 

It's all done over the internet now... And the internet doesn't know the BOE left rates unchanged this morning... I used to wear a headset, because I was on the phone most of the day... I talked to traders here in the U.S., Canada, England, Germany, Australia, New Zealand, and others on a daily basis... That's where I received a lot of the Pfennig Pfodder... (spell check doesn't like that spelling, but I don't care!) Once I was shown the door at TIAA Bank, shoe bought EverBank, I was persona non gratis with those traders I talked to for years... 

I had to switch gears and try something new for the Pfennig...  

OK, you didn't open up the Pfennig this morning to have me wax all nostalgic on my old trading days, so we'll move on now... sorry!

The U.S. Data Cupboard has a couple of real economic prints this morning for us... First up is the usual Thursday fare of Weekly Initial Jobless Claims... Last week was a full week of reports, so i expect to see more than the 230,000 that were reported last week, from the previous week. In addition, we have the Leading Indicator which has been printing negative for some time now... This report is for August, and I expect to see yet another negative number, which is not a good omen for the economy... 

And I found this on this Tub Thumpin' Thursday morning.... "Tupperware Brands, the Orlando, Florida-based consumer goods company that produces the iconic line of containers, said it was seeking Chapter 11 bankruptcy protection after struggling to revitalize its core business and failing to secure a tenable takeover offer."

I found that on the AP newswire this morning... You know things just aren't right, when Tupperware files for Bankruptcy.... I'm just saying... 

To recap... Well, yesterday in the U.S., everything played out exactly as I thought they would, with the Fed Heads kowtowing to the markets, and cutting rates 50 Basis Points or 1/2%... The short paper trades made sure Gold & Silver didn't take off for the moon, and the PPY made sure the dollar didn't fall off the cliff.... But... In the overnight markets, where there was no interference, Gold & Silver are on their rally horses, and the dollar is getting sold... The Fed Heads said that 50 more basis Points will be cut by year-end... That will bring the U.S. Fed Funds rate to 4.25%.... What were the Fed Heads to do? Bond servicing costs has just tipped the scales at $1.2 Trillion, and if they didn't get rates lower soon, the bond servicing costs were going to be Larger than Soc. Sec. costs.....

Everyone wants to talk about how the rising debt is unsustainable (everyone except the Candidates) But no one wants to be the boogie man and cut deficit spending... The Fed Heads are saying, "well, if you're not going to cut deficit spending, then we'll lower the cost to service the debt".... So, the Fed Heads have played their cards, that reveal that they've chosen to inflate... They could choose between Inflate or die.... 

For What It's Worth... Well, since yesterday was all about the 50 Basis Points rate cut by the Fed Heads, I thought this explanation of why it was 50 BPS and not 25 BPS, by Fed/ Cabal/ Cartel, chairman, Jerone Powell, would be FWIW worthy today... While you're reading this, think... Lies, lies, and more lies.... And it can be found here: ‘I don't see anything in the economy that suggests that the likelihood of a downturn is elevated’ - Fed Chair Powell | Kitco News

Here's your snippet: "Kitco News) – Federal Reserve Chair Jerome Powell used the press conference that followed the central bank’s hefty 50 basis point cut to the benchmark interest rate to insist that the move was not made to support incumbent President Joe Biden on the one hand, nor was it a response to an impending economic collapse on the other.

Powell acknowledged at the outset that recent inflation and employment data led the FOMC to the conclusion that 50 basis points was justified.

“We had the two employment reports, July and August,” Powell said. “We also had two inflation reports, including one that came in during blackout. We had the QCEW report that suggests the payroll report numbers that we're getting maybe artificially high and will be revised down. We have also seen anecdotal data like the Beige Book.”

“We concluded this was a right thing for the economy, for the people that we serve, and that's how we made our decision,” he said.

Asked how markets should determine whether to expect a 25 or 50 bps cut at future meetings, Powell said “A good place to start is the SEP. If you look at the SEP, you will see that it's a process of recalibrating our policy stance away from where we were a year ago when inflation was high and unemployment low, to a place that's more appropriate given where we are now and where we expect to be.”

“There is nothing in the SEP that suggests the committee is in a rush,” he added. “This process evolves over time.” 

Chuck again... OK, so he did it "for the people".... I call BS here!

Market Prices 9/19/2024: American Style: A$ .6880, kiwi .6247, C$ .7375, euro 1.1152, sterling 1.3285, Swiss $1.1793, European Style: rand 17.4352, krone 10.4696, SEK 10.1576, forint 353.87, zloty 3.8267, koruna 22.4798, RUB 93.09, yen 143.20, sing 1.2935, HKD 7.7936, INR 83.68, China 7.0658, peso 19.27, BRL 5.4200, BBDXY 1,222.40, Dollar Index 100.69, OIL $71.50, 10-year 3.72%, Silver $31.14, Platinum $988.00, Palladium $1,065.00, Copper $4.35, and Gold... $2,586.03.

That's it for today and this week... I saw sad news on the wire yesterday, J.D. Souther, one of my favorite artists from the 70's, died at 78... J.D. Souther wrote songs for the Eagles, and Linda Ronstadt... Well, my beloved Mizzou Tigers play Vanderbilt this Saturday in their first SEC game of the year... No coming out flat this week boys! Go Tigers! And my beloved Cardinals play their last weekend in St. Louis this season this weekend... They'll have to finish on the road, and then it's splits Ville for the team's players, who will head out to wherever... No playoffs again this year... Before we know it, our Blues will start their new NHL season! But right now it's all about College football for me! Bob Dylan takes us to the finish line today with the only song by him on my iPod... Knocking On Heaven's Door... I hope you have a Tub Thumpin' Thursday today, and a Wonderful Weekend ahead... And Please Be Good To Yourself!