DHUnplugged #817: I am The House

I am the House! Bessent on Yen and other matters (he has inside information).

Straight of Hormuz – There is no movement people.

CPI coming Friday – many say ultimate Fed test.

Gen-Z Dumps the bubbles.

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Warm-Up

- I am the House! Bessent tonight on Yen and other matters (he has inside information)

- Straight of Hormuz - There is no movement people

- CPI coming Friday - many say ultimate Fed test

- Gen-Z Dumps the bubbles

Markets

- Chips up, making up for some time

- Oil UP! and UP!

- Yields keep climbing

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BOND YIELDS KEEP CLIMBING

- Japan now has a 3% 10-year yield while carrying government debt above 200% of GDP.

- Higher Japanese yields also create an incentive for domestic investors to bring money home rather than reaching overseas for returns.

- The broader bond selloff is hitting the U.S., Germany, U.K. and Japan at the same time.

FED HIKE ODDS RISE

- Warsh said the Fed still has “work to do” if officials are not confident inflation is returning to 2%.

- Fed Governor Christopher Waller has left open the possibility of holding rates steady if inflation cools.

- The September decision is increasingly being dictated by incoming inflation data and oil.

- It is kinda funny.... The “data-dependent Fed” is now apparently oil-dependent, jobs-dependent and whatever-CPI-says-next-week-dependent.

OIL KEEPS PRESSURE ON INFLATION

- Renewed U.S.-Iran tensions have pushed oil higher and revived fears about supply through the Strait of Hormuz.

- The Strait remains one of the most important chokepoints for global energy flows.

- Oil is working directly against central banks trying to bring inflation back toward target.

- Basically, central banks can raise rates all they want yet it is too bad that the the Strait of Hormuz does not attend FOMC meetings.

SCHWAB VOLATILITY TRADE

- Barron's argues low market volatility may not last as fall seasonality and macro risks build.

- Schwab could benefit if volatility drives heavier customer trading activity.

- The suggested trade used an October risk reversal built around $110 puts and $120 calls.

BEAR INVASION

- Colorado has logged more than 7,000 bear sightings this year, already a record.

- Drought and poor natural food supplies are pushing bears into homes and businesses.

- New Mexico and Utah have also reported unusually high numbers of bears being euthanized.

- One Colorado homeowner found two bears inside his hallway; another wandered into a vape shop.

- Is this a warning for markets?????

META SETTLEMENT

- Meta agreed to pay up to $18 billion over 10 years to settle state claims involving harm to children.

- States had been seeking penalties approaching $200 billion.

- Teen accounts will face time limits, overnight restrictions and muted school-hour notifications.

- Meta did not have to eliminate personalized recommendations or targeted advertising.

BROADCOM: NEXT AI CHECK

- Broadcom reports Wednesday after the close, another major test of AI spending after Nvidia.

- Focus will be on AI semiconductor growth, hyperscaler demand and the outlook for custom AI accelerators.

- Broadcom's guidance matters beyond the stock because it offers a read on whether huge data-center spending plans are still accelerating.

WEIRD ONE: SHEIN'S UPSIDE-DOWN IPO

- Shein is looking to raise about $1.8 billion in its Hong Kong IPO while paying roughly $3.6 billion in cash and stock to early investors.

- The payouts stem from investor protections triggered after Shein's valuation collapsed from about $98 billion in 2022 to roughly $26.8 billion.

- Some of the same early investors receiving compensation are coming back as cornerstone buyers in the IPO.