The Markets Have Gone Bonkers Again!

* Brainard speech on Monday .
* Market think she’ll spill the beans .
* Draghi doesn’t deep six the euro!
* Lots of global data, none here in the U.S!

And now. Today’s A Pfennig For Your Thoughts.

Good Day. And a Happy Friday to one and all! It’s raining cats and dogs outside, and has been for several hours. I should know, I was awake when the first thunderboomer pounded the sky. But I did, somehow, make all my stoplights on green again this morning, YAHOO! (technically, one was yellow though) I taught my grandson, Braden, that red is stop, green is go, and yellow is “go faster”! HA! Well, the markets have gone bonkers again, I really don’t want to talk about it, but it is carrying weight with the currencies and metals today, so. AC/DC greets me this morning with their great song: Shook Me All Night Long, which is exactly what the thunderstorm was doing to me!

Well, who would have thought that a late scheduled speech by a dovish Fed member would get the markets thinking that she’s going to use the platform to talk about a September rate hike? Not me! But that’s what the markets are thinking this morning, as late scheduled speech by Fed Gov. Lael Brainard, was added to the calendar for Monday, and the markets, for some unknown reason, believe that this dove Fed Gov. will use this platform to give the wink and nod that rates will be hiked in 2 weeks. That means the dollar has the conn, and the currencies and metals are getting whacked this morning. UGH!

In addition, there are reports overnight that N. Korea had another nuclear test, and that has added to the dollar’s gains, given that this is cause for some degree of a flight to the dollar. But that’s just an “add-on” for the dollar, because Treasuries got whacked yesterday, and Gold lost $6.80, and is down another $3.80 in early morning trading today. Yesterday morning, it looked like it was “game on” for the currencies and metals, and today, Wayne and Garth have had to move the hockey net, for “game off”.

On a sidebar. a 5.3 magnitude earthquake hit close to N. Korea’s nuclear test site last night. And geologists believe that the earthquake was “man-made”, meaning the nuclear test set it off.. UGH!

Well, I was wrong about what the European Central Bank (ECB) was going to do to the euro yesterday. For once, in a blue moon, I’m glad about being wrong! ECB President Mario Draghi, he of the famous line about doing everything possible to protect the euro, but then has gone about throwing it in front of the bus just about every time the euro starts to gain, was actually civil to the euro yesterday. He didn’t sound dovish at all! And didn’t mention dropping deposit rates, or extending the kind of bonds the ECB will buy in QE. He said that the committee didn’t discuss Helicopter money, or buying stocks. He simply stated that the ECB would continue to look at measures to ensure a smooth implementation of the QE that’s going on right now. WOW! But guess what happened to the euro? No. it didn’t take off for higher ground, it turned tail and ran to lower ground! What in hell’s acres is going on these days? A currency gets what should be good news, and loses ground, and vice ve
rsa when it gets bad news. UGH!

It really is a messed up world right now when it comes to fundamentals. And I can only hope that one day we return to normalcy, but until then, batten down the hatches, and let this storm pass overhead.

Most of the currencies are back to Wednesday levels. But the two Antipodean currencies of Australia and New Zealand, have taken on even more water, than the other currencies, and that is because these two currencies got marked up big time the past couple of days, when it appeared the U.S. data wouldn’t yield a rate hike in September, and now that the markets have a different thought on that, given the late scheduled Brainard speech, these two currencies are getting whacked.

Now, that’s interesting isn’t it? Fundamentals are missing from trading these days, except. Interest Rate Differentials (IRD’s). And the Aussie dollar (A$) and N. Zealand dollar / kiwi, have small positive IRD’s to the dollar, so any kind of move upward by the dollar, narrows that small positive IRD for the A$ and kiwi. That’s why they get whacked even more, but also get marked up more when the U.S. rate hike talk fades.

Up north, in Canada today, they will print their August Employment report. They usually print their jobs report the same day as the U.S. Jobs Jamboree prints, but not this month, and today is the day that we should see close to 20,000 new jobs created (consensus calls for 14,000) with the Unemployment Rate remaining unchanged at 6.9%… Not much for the loonie to get from this report, so traders will turn to the performance of the price of Oil.

In Norway this morning, I’m expecting to see their latest CPI (consumer inflation) print for August. CPI in Norway has been quite strong lately, printing above 3%, and this month should remain well above 3% at 3.4%, which would actually be weaker than the July print of 3.7%, but given how Norway has inflation and nobody else in Europe does, I think the krone will get a pass. But. should the data surprise on the upside, well then the krone will deserve to be treaty as royalty!

We will see some Industrial Production numbers from France and Spain today, and the Trade Balance and Construction spending in the U.K. while the Eurogroup finance ministers will be meeting. But don’t look for any data prints in the U.S. today, for there will be none, nil, zero, zilch, a big fat goose egg!

Speaking of economic data here in the U.S. where has it all gone? It sure seems like we just don’t get the data prints that we used to! For instance, there won’t be any meaningful economic data prints here in the U.S. until next Thursday, when Retail Sales prints. By then, we’ll have heard what at least 1/2-dozen Fed members, including the aforementioned Lael Brainard speech on Monday. After next Wednesday, the Fed members will be quiet though, as the week before the FOMC meeting blackout period. So, we get to hear a lot of Fedspeak until Thursday, and then Retail Sales will print, and if the BHI (Butler Household Index) has anything to say about that print, it will be very disappointing.

China will print their latest Trade Data this weekend (I think, with them it’s always a guess!), but the weekend is where they normally like to print data so that it doesn’t upset the markets right away. Well, the thing that’s really coming to a head here, is that market observers are growing every more cautious at believing what the Chinese print as data. I’ve always told you to believe about 1/2 of what they tell us, and back in the day, 1/2 of what they were telling us was pretty darn good. Nowadays, that’s not so good.

Remember when inflation in China was a real problem? I recall it running around 5%, and everyone having a cow about it, but guess where Chinese CPI is these days? Well, as luck would have it, we have the August CPI print right here in front of us! 1.3% year on year is the inflation rate in China these days. I bet the Chinese leaders are wishing, and hoping, and thinking and praying that those days of 5% inflation would return, because that would mean the economy was running on all 8 again!

The price of Oil has held steady Eddie in the past 24-hours, losing a little ground, but not too much, and maintaining the $46 handle. I wish I could tell you that this has helped the Petrol Currencies maintain their levels, but I can’t. This Brainard speech thing has really riled up the markets. Shoot Rudy, the 10-year Treasury lost nearly 10 BPS yesterday, going from 1.54% to 1.63%… I just can’t get my arms around why the most dovish person in the Eccles Building would be preparing the markets for a rate hike. But then, stranger thing have happened here in the past 10 years. So, I guess I should pretty much think that it’s a possibility. UGH!

And Gold, like I told you above, can’t find a bid these last two days. The not for profit sellers have the conn on Gold again, and it just infuriates me to no end! If you’re like me and you truly believe that there’s hanky panky going on with Gold, then you’ll want to go to my good friend, and the retirementor, Dennis Miller’s, website and read his interview with Ed Steer, and you can find it here:

To recap. The markets are all riled up over the addition of a late scheduled speech by Fed Gov. Brainard that will take place next Monday. They all believe she’s going to give the wink and nod for a rate hike in September. UGH! The currencies, metals, stocks, bonds, all got whacked. and are still getting whacked this morning! Economic data reports are due all around the world, except here in the U.S. And Chinas Trade data is expected to print this weekend. no data here in the U.S. has the markets leaning on the thought that Brainard will signal a rate hike on Monday. UGH!

Before I head to the Big Finish, I wanted to share this with you, as it was sent to me by my good friend, Dennis Miller. We were talking about how the medicine that’s infused in me every two weeks, causes me to have some insomnia, but that whenever I partake in a few beers at night, I tend to sleep better, but that I shouldn’t partake every night. And he sent me this quote from Martin Luther. “Whoever drinks beer, he is quick to sleep; whoever sleeps long, does not sin; whoever does not sing, enters Heaven! Thus, let us drink beer!” Now that’s funny stuff!

For What it’s Worth. This is pretty good. and it was sent to me by a dear reader, and it’s about market bubbles, and can be found here:

Or here’s your Snippet: “With hindsight, it’s usually easy to spot the asset class that starts things. In 2008, it was real estate; in 2001, dot-com companies. This time, it’s cash. With all the central bank experiments in Japan, Europe and even the U.S., there’s just too much money lying around.

Which poses the first dilemma. The dot-com bubble burst when it became clear many tech startups would never break even. The U.S. housing market popped after home prices detached so far from income it became obvious further rises weren’t sustainable. How can a central-bank-led cash bubble burst when there’s an ever flowing money hose?

The complacency index itself is also a leading indicator. It started to turn more than a year before the last bubble ruptured. So even if someone can figure out how to pop cash inflation, it alone is saying this bull has further to run.”

Chuck again.. So, what this article is telling me is that Central Banks can print money forever.. Well, I don’t believe that for one minute!

Currencies today 9/9/16. American Style: A$ .7610, kiwi .7367, C$ .7715, euro 1.1267, sterling 1.3305, Swiss $1.0265, . European Style: rand 14.3095, krone 8.2055, SEK 8.4445, forint 273.94, zloty 3.8450, koruna 23.9875, RUB 64.38, yen 102.60, sing 1.3560, HKD 7.7567, INR 66.73, China 6.6803, peso 18.75, BRL 3.2145, Dollar Index 95.04, Oil $46.87, 10-year 1.63%, Silver $19.54, Platinum $ 1,079.83, Palladium $682.29, and Gold. $1,337.80

That’s it for today. Well, if the Cardinals don’t figure out to win at home soon, they are going to miss the playoffs for the first time in 6 years. Cardinals fans have become spoiled with their success in recent years. I have to say that I called this year questionable from the get-go last spring, having watched them play 15 games in March, I was convinced they would have problems, and they have. This Sunday will be the 15th year since our second day of infamy, 9/11. I still shudder when I think of that day. And I still think that the changes that were made afterward to our civil liberties were not necessary.. But then, that’s just me thinking out loud. George Harrison takes us the finish line today with his song, from the All things must pass album: What Is Life? And It’s still raining cats and dogs outside! Now, let’s go have a Fantastico Friday, eh? And remember. Be Good To Yourself!

Chuck Butler
Managing Director
EverBank Global Markets
Editor of A Pfennig For Your Thoughts