The markets were so confused?

• The Dollar gets sold in the overnight markets.

• What's the confusion all about?

Good Day... And a Tub Thumpin' Thursday to one and all! Where have all the bats gone, gone time passing? (Peter, Paul and Mary) That's the song that kept coming to me last night, as I watched my beloved Cardinals lose again, and show very feeble at bats... It was embarrassing, it had to be for the players, who found it difficult to hit a ball out of the infield, while the Reds hit homer after homer... UGH! I'd like to tell you that I'm feeling stronger every day (Chicago) but I can't... This loss of all that blood has really taken its toll on me... The doctor told me to rest... Well, I've followed those instructions to the T... And I see no progress... Oh, quite your moaning, Chuck! OK, I see now where this was going, and I apologize... REO Speedwagon greets me this morning with their song: Like You Do... Gary Richrath was the guitar player for REO, and I put him in the same category as the great Terry Kath, and that is very underrated.

Well, the confirmation that inflation is melting away didn't come from the STUPID CPI yesterday, as the annual rate remained at 3.0%... I'm telling Jerome Powell now, so maybe he'll hear me later, but this is NOT the time to cut rates... I harken back to the late 70's early 80's when inflation was soaring, and then head Fed Head, Paul Volcker, cut rates too early, and had to go back an hike them again... That was real snafu folks... You had to be in the markets like was at that time to recall the market's reaction to having to hike rates again, after cutting them.

So... The dollar selling ended yesterday after the STUPID CPI printed, and gained 1 index point in the BBDXY... Why did the dollar selling end? Well, you could look at this 2 ways... 1. No melting away means that maybe the Fed Heads will not cut rates, and 2. The markets and media made a Big Deal out of the STUPID CPI print, saying that inflation, "softened"... But not enough to warrant a rate cut... The euro was able to hold onto the 1.10 handle as the day went along... But the thing in the back of my mind is that I believe the Fed Heads are going to cut rates, hell or high water, at their next meeting, and they don't care that the STUPID CPI is still 3.0%, and not nearing to their 2% target...  And in my mind, this will prove to be a BIG Mistake by the Fed Heads, just like it was for Paul Volcker, oh so many years ago.

Gold lost its $10 early morning gain, because of the thought about no need for the Fed Heads to cut rates, and finished the day up $6, and Silver lost 10-cents.. Gold closed at $2,448.20, and Silver at $27.82.

Gold & Silver are just biding their time, waiting on the Fed Heads to go down the wrong road and cut rates... It's coming folks... The markets are forcing the Fed Heads to cut rates... I say that with a lot of conviction, folks... Ever since Big Al was the chief Fed Head, the markets have run roughshod over the Fed Heads... I'll say no more.

The price of Oil lost another buck yesterday, and ended the day trading with a $77 handle... It was just two days ago that the price of Oil reached $80... That was all about the buildup of forces in the Middle East, and Iran's announcement that they would not turn the other cheek... And the 10-year's yield rose a bit to 3.85% on the day.

I have to say that to me, the markets looked to be quite confused about the STUPID CPI print... They weren't sure how to take the print, and left unknowns... And I've told you many time in the past, that's one thing traders do not like... Unknowns.

In the overnight markets last night... The dollar slipped a bit, as the scenario that I'll lay out for you later in the letter for today, seems to have some legs... The BBDXY starts today at 1,240... The euro remains above 1.10, and the rest of the currencies all look healthier... It's time to get back to the task at hand, which is selling dollars because the Fed Heads will be cutting rates soon enough... Gold is up $6 to start the day today, and Silver is up a whopping 22-cents... Gold has really outperformed Silver in recent trading days, and that has widened the Gold/ Silver ratio, but when things really get hopping, Silver will outperform Gold, like it has so many times in the past. 

The price of Oil remained trading with a $77 handle overnight, and the poor 10-year's whipsaw continues... We started this week with bonds getting bought and the 10-year's yield dropping to 3.80%, and today its yield has risen to 3.91%... Back and forth, back and forth.

I think that today, we'll see the markets get past their confusion over the STUPID CPI print, and get back to the idea that the Fed Heads are on track to cut rates at their Sept meeting... And with that, we should see dollar weakness, Gold strength, and bond bought...  But remember what I told you above, as time goes on... It will be apparent to the Fed Heads that they shouldn't have cut rates before inflation met their target rate of 2.0%.

I don't know if you've been following the rally that's going on in Asian currencies or not.. If you have, you'll have noticed that the Japanese yen, Singapore dollar, Chinese renminbi, and Hong Kong dollar have all booked some decent gains VS the dollar... So, if you've been reading a long time here, you'll recall me telling you how the Asian currencies are all kind-a-tied together... The Asian Countries all compete with each other for exports... Which means that no Asian Country can allow their currency to get out of line with other Asian currencies...  One of the better performing Asian Currencies has been the Singapore dollar... Here's Bloomber.com with their thoughts on the Singapore dollar: "The Singapore dollar extended gains to an 18-month high versus the greenback as forecasts for the local central bank to keep a tighter monetary policy relative to the Federal Reserve this year favored the Asian currency.

Singapore’s dollar rose as much as 0.2% to 1.3154 per dollar on Wednesday, the highest since Feb. 2, 2023. The currency is set for its biggest monthly gain in August since 2023 and is the second-best performer among Asian currencies so far this year after the Malaysian ringgit and the Hong Kong dollar."

Chuck again... This rally all started with the Japanese yen getting off the mat that it had lived on for years! These currencies in this region don't pay interest rates that compete with the rest of the world, but if the currency gains continue, then you could outweigh the lack of interest, with currency gains... I'm just saying.

Moving on to other things... Before we go to the Big Finish today, I wanted to point out that today in 1969, the music festival Woodstock began... A long time ago, when I ran the operations of Mark Twain Bond Dept, i used have a VHS tape of the movie Woodstock, and I would lend it to each new employee, and tell them to watch it... When asked why, I said, then you'll know more about me...  The album Woodstock only had a handful of songs on it, but I heard recently that a box set of ALL the music played at Woodstock is coming out... I can't wait! 

The U.S. Data Cupboard today has the July Retail Sales report for us to see... The Butler Household Index (BHI) tells me that the July Retail Sales will be soft... Not strong, and not weak... But right in the middle... We'll also see the July prints for Industrial Production, which I see coming in as a negative, and Capacity Utilization, which will be basically unchanged.

To recap... The dollar selling ended yesterday, as the STUPID CPI print was confusing at best, and didn't indicate that it was sure thing the Fed Heads would be cutting rates at their next meeting... Chuck of course, thinks that the rate cut is already baked into the pie... He also things that it will be proven to be a Big Mistake for the Fed Heads to cut rates before reaching their target rate of 2.0%... And then Chuck talks about the recent Asian currencies rally.

Here's your snippet: "The mere mention of a “Minsky moment” — a sudden crash of markets and economies that are hooked on debt — is enough to send shudders through policy makers. The theory stems from the work of Hyman Minsky, a US economist who specialized in how excessive borrowing fuels financial instability. From time to time, booms in financial markets or sky-high debt levels around the world lead to renewed interest in Minsky’s theory or warnings from the International Monetary Fund, among others. US Treasury Secretary Janet Yellen once described his work as “required reading.”

1. What makes a Minsky moment?

The term refers to the end stage of a prolonged period of economic prosperity that has encouraged investors to take on excessive risk, to the point where lending exceeds what borrowers can pay off. At that point, Minsky wrote, there’s an increase in “speculative and Ponzi finance.” When a destabilizing event as simple as an increase in interest rates occurs, investors can be forced to sell assets to raise money to repay loans. That in turn sends markets into a spiral amid a demand for cash. There have been attempts to distinguish between a Minsky moment and a Minsky process that leads up to it.

2. Have there been Minsky moments?

Yes. In 1998, following the bursting of asset bubbles in Asia, Russia defaulted on its domestic debt and devalued the ruble. (It was during that crisis that Paul McCulley, then an economist at Pacific Investment Management Co., coined the term “Minsky moment.”) The global financial crisis of 2007-2008 is considered another Minsky moment, since it was caused by the implosion of the US subprime mortgage market."

Chuck again... The article is a bit of a misnomer, it that it's titled: What's a Minsky Moment, and why are there Worries About One? Well, the article explained what a Minsky Moment is, but they failed to explain why there are worries about one...  

Market Prices 8/15/2024: American Style: A$ .6630, kiwi .6014, C$ .7297, euro 1.1012, sterling 1.2864, Swiss $1.1540, European Style: rand 17.9922, krone 10.6705, SEK 10.4229, forint 358.04, zloty 3.9875, koruna 22.8793, RUB 88.93, yen 147.30, sing 1.3172, HKD 7.7824, INR 83.95, China 7.1578, peso 18.87, BRL 5.4556, BBDXY 1,240.90, Dollar Index 102.54, Oil $77.84, 10-year 3.91%, Silver $28.40, Platinum $945.00, Palladium $940.00, Copper $4.15, and Gold... $2,454.74.

That's it for today... August 15th... This was always the day that we began 3 a day football practice... Sometimes it was just 2-a day... It was always hotter than the midday sun, (Rob Thomas) , and those practices were intense! It was a rainy day here in my little river town yesterday, and that was fine with me, as you've got to have some rainy days to make the sunny days even better! Little Evie and brother Braden are with us during the day this week, and yesterday, I played 5 games of Candy Land with Evie, then we put together 2 puzzles, and she got up and said, "I don't know what to do, it's so boring here"... I about fell out of my chair! I told her to go find something to play with for I was finished playing with her! Little girls... I shake my head and wonder where they get their gumption? The Moody Blues take us to the finish line today with their song: Ride My Seesaw... Something the Bond boys have been humming, eh? I hope you have a Tub Thumpin' Thursday to day, and please Be Good To Yourself!