it came a cropper

market vibes

April 21…)

"Cupid's arrow is straight and sharp, never misses its mark, but it leaves one hell of an exit wound" Dave Preston

Let’s get right into it this morning.

Throughout 2024, there was a rising tide of expectations the Fed would begin to finally cut rates. By June, pressure reached a crescendo, yet Powell didn’t cut at the June meeting. He demurred with a tacit assurance he would cut in July. However, on July 11, the Nasdaq topped out and started falling.

And Dollar/Yen started to collapse (expressed here in CME Yen futures going higher). Thus began the narrowest escape of terrifying losses on Wall Street the morning of Monday, August 5. The Yen carry had broken out like a crazed murderer on death row, and its implications were dire.

Powell was committed to cut .25 on July 31, but he couldn’t because it would have weakened dollar/yen in a moment of maximum impact. If you glance at these two charts, you will recall the crackling ozone in the air on Sunday night, August 4.

At any rate, Powell did not cut. He tersely said “no,” departed the FOMC presser, and left a slew of jilted interest rate swaps at the altar again!

In the end, the FOMC did cut .50 in September, but it was unnecessarily too much and too late to be adequately conciliatory. Powell knuckled under, albeit bitterly, last July. In fact, since last September, his words have been few, his committee’s words even fewer. They cut 100. There you go.

There never was an explanation about what went down last August, but the dollar, shrouded in no less mystery, shot higher on October 1, 2024. However, I think, when Jamie Dimon was frantically telling everyone the Yen Carry had been covered in August, his (and Wall Street’s) immediate risk was paramount so, Powell toed the line. But as the months passed, Mr. Dimon cashed out, as did many other savvy bankers.

The strong dollar was “created” by massive and persistent intervention in August and September and the sellers of USD were forced to cover in Q 4. By February when the insiders were dumping their stocks, a strong dollar was no longer necessary.

“It came a cropper,” as the beloved Mr. Grant often said it would since the 80s. The risks have been neutralized, shares have been sold. In fact, a weak dollar adds a headwind to Trump’s agenda. Trade accordingly? You decide.

Next up this morning a technical recap of oil in the void last Friday, some relavent memories from the 70s in gold…. and the planet is not ready to self destruct yet in the vibe… Here we go!