Author: admin

March 8, 2021

* currencies & metals  both get sold by the tuck load

* What will the Fed do to limit the 10-year’s yield rise? 

Good Day… And a Marvelous Monday to you! What a weekend! Besides Saturday which had some rain, the weather was great, and youngest son, Alex, and girlfriend, Grace, enjoyed the warm sun and ballgames!  My teams did not have good weekends… Mizzou and SLU lost their respective basketball games… I think Mizzou will make the NCAA Tournament, but SLU, is going to just miss making it… The Blues split a pair of games, but the way they lost the one game was disheartening, as they gave up a 3-goal lead…  I should be hearing back today or tomorrow from my oncologist about my blood test last week…  No worries, for me…  The Rolling Stones greet me this morning with their song: I Can Hear You Knocking…  Great guitar work in this song by Keith Richards…

Well, Friday is a day that most currencies not named the dollar, would like to forget… The dollar bugs came out of the wall boards and soon were dancing in the streets, as the dollar climbed higher and higher, with the Dollar Index climbing to 91.94, from the last reading on Wednesday last week of 90.93…  So, it appears to me that what was once looking like a new weak dollar trend, has been thrown to the wayside, and we’re back to dollar strength… 

I’ve said this before, so forgive me if I sound like a broken record, but I just don’t get this dollar strength… Friday’s dollar rally started with the BLS Jobs Jamboree, which said that the U.S. created 379,000 new jobs in February… Wait! What?  Yes, 379.000 new jobs created..  Even if you back out the jobs created from thin air, 131,000, it was still a bang up job of job creation in February…  From what I could see in the numbers the largest gains were in hospitality and leisure…   You know… bartenders, etc.  Not that there’s anything wrong with a bartending job, it’s just that it’s not going to allow you to live a life of luxury… Or, contribute to the local economy…

So, the markets got al ga-ga over the jobs numbers, and didn’t stop to think that most of these jobs created in February, if they were created at all but that’s a story for a different day, are jobs that will not help the economy grow…   But it is what it is, right? And so today we pick up the currencies from the canvas…  

Gold ended the day on Friday with a $3.20 gain on the day… Although at one point in the day, it was must higher… Silver lost 11-cents on the day… Gold’s closing price was $1,701.10, and Silver’s was $25.32…

In The overnight markets… There’s been more dollar buying and the Dollar Index is 92.30!  The currency pendulum has really swung back in the dollar’s favor. Shoot Rudy, even with the price of Oil soaring, the Petrol Currencies can’t find a bid, and the Aussie dollar (A$) and kiwi, two of the stronger currencies recently have given back most of their gains… 

Last night before I went to bed, I checked Gold’s price and saw it up $12, but that didn’t last as overnight Gold got sold and in the early trading today the shiny metal is down $14.40… And Silver has given back another 14-cents…  Well… according to the Big Mac Index, the dollar was overvalued before this turn around… I would say it’s really overvalued now…

Last week, GDP for the 4^th QTR was revised to 4.1%…  What a bunch of bunk as far as I’m concerned… Remember when I told you that in the 4^th QTR Consumer Spending was down 10%? So, riddle me this Batman, how does an economy that depends greatly on consumer spending, grow at its fastest rate in over 10 years when Consumer Spending was down 10%?  And that got me thinking…

OK… do you remember 2013?  It was not only the 100 year anniversary of the ill-fated implementation of the Federal Reserve, by the all-time worst president, but it also was the year that the GDP calculations were changed to include the amount spent on intellectual property outlays such as pop song production and drug patents… I recall talking about this back then and how stupid it was, as who could calculate intellectual property? But the inclusion of these two items would increase GDP by 2-3% per year…  I got to thinking about this because a dear reader reminded me that I had talked about this back in 2013…

So… As I’ve documented here for many years that since the Great Recession, we as a country have only averaged 2.10% GDP every year…   So, let’s us use the previous way GDP was calculated before those hedonic adjustments were added in 2013, and we end up with 0% growth for the last 7 years! And the 4^th QTR real GDP was only 2%…   But let’s not get in the way of all the spin doctors’ singing about how great this economy is…

And that got me thinking about what could be done here in the U.S. to turn things around…  I thought long and well, I thought long… and came up with this…

I think it would behoove us as a country to elect a leader that would have the intestinal fortitude to bring back the “Heyday” of 20th Century capitalism, when workers’ wages were still on the rise, when college tuition and health care were still affordable, and when the American Dream was still within reach of the average guy. People were happier then because they felt that if they applied themselves, worked like hell, and stashed their savings in the bank; they’d eventually reach their goal. But that’s not true anymore. People are much more pessimistic now and no longer believe that America is the land of opportunity….  I’m just saying…

And don’t think for a moment that little old me came up with that thought on his own…  Russian President, Putin, is the one that came up with that thought… Let that sink in your head a bit… now we’ll move on… 

Yes, the American Dream…  It’s still alive, but barely has a pulse…  And that’s a shame, for what will the young people starting out in jobs use as their inspiration to do a good job?  Oh well, I’m an old retired guy and know that I have nothing to do or add to help young folks with their, whatever it is, American Dream…  And the folks that we elect should be  all over this like a cheap suit… 

The price of Oil soared higher at the end of last week, and this morning, the price of Oil is trading with a $66 handle!  That’s quite a jump from last midweek’s price of $60.83…   Whatever it is that pushed the price this higher in what seems like a blink of an eye, I know that I paid about 30-cents more for gallon of gas than I did the last time I filled up…  

The 10-year Treasury’s Yield rose to over 1.60%, but then fell back to 1.58% by the end of the day… This rise in the yield is really beginning to grab the attention of the Fed Heads, Treasury geniuses, and economists…  I truly believe that the Fed is not going to sit idly by and watch the Treasury market dictate rates to them…  I, of course have always said that the bond markets should set the interest rates, and not the Fed…  but since that’s not the case, I believe the Fed will introduce another round of Operation Twist… Selling short term Treasuries and buying the 10-year, thus brining yields back under control… Mark my word on that folks… The Fed is NOT going to allow the bond markets to dictate interest rates, or the Treasury yield curve!

The U.S. Data Cupboard this week will be lacking for data again…  And there’s really nothing today or tomorrow to speak of, and it won’t be before we get to Wednesday when the stupid CPI (consumer inflation) for February prints… I’m thinking that there’s got to be some give in the CPI print and that inflation will begin to show up… The so-called experts think that inflation will rise by .4% in February… I’m thinking that even with all the hedonic adjustments in the CPI, that it will show real inflationary pressure…  

There is one thing I want to point out from here on out…  Last March we began the shutdown of the economy… So, going forward, anytime some economist tries to make 2021”s prints look good, by comparing this year with last year, will be trying to pull the wool over your eyes!   So, keep that in mind, and I’m sure I will remind you of this…

To recap… The currencies would like to forget about what happened on Friday, as the dollar bugs came out of the wall boards and began dancing in the street… The Jobs Jamboree said we created 379,000 jobs in February, and Chuck calls them out on that number… Gold found a way to gain $3.20 and Silver lost 11-cents on the day…  Chuck talks about how we need to get back to what we were good at… working hard, and saving money…  And the Data Cupboard this week is lacking at best…

For What It’s Worth…  Well, for along time now I’ve expressed my liking of the Russian ruble… But on Friday, that liking was put to the test, due to the word traveling around that the U.S. and U.K. could be adding additional sanctions on the Russians… And that threw some cold water on the ruble’s recent attempt to rally alongside the rally in the price of Oil.  So, now the ruble has to go back to the drawing board and start over… This article talks about those sanctions and can be found here: Ruble Rocked by Rumors of Tough New Sanctions – The Moscow Times

Or, here’s your snippet: “ The Russian ruble and government bonds sank Friday morning on reports that the U.S. and U.K. are considering a second round of tough sanctions against Russia over the poisoning and jailing of Kremlin critic Alexei Navalny.

Washington and London could be prepared to slap asset freezes and travel bans on Russian oligarchs deemed supporters of the Kremlin and put new restrictions on trading Russia’s government debt, Bloomberg reported, citing anonymous sources familiar with the deliberations.

That would be the most dramatic escalation of sanctions against Russia since 2018, when the U.S. shook global markets by placing Russian metals giant Rusal — controlled by oligarch Oleg Deripaska — on its sanctioned list, triggering a surge in worldwide commodities prices.

Placing more restrictions on Russia’s sovereign debt has been dubbed the “nuclear option,” as it could trigger a multibillion dollar sell-off of Russian bonds and hike borrowing costs for the Kremlin.”

Chuck Again…  One of these days, we’re going to kick the dog while it’s down and it is going to jump up and bite us…  I’m just saying…

Market  prices 3/7/2021: American Style: A$ .7657,  kiwi .7114,  C$ .7878, euro 1.1865, sterling 1.3836, Swiss $1.0708, European Style: rand 15.5090, krone 8.5813, SEK 8.5830,  forint 309.71,  zloty 3.8743,  koruna 22.2598, RUB 74.31, yen 108.60, sing 1.3485, HKD 7.7687, INR 73.28, China 6.4912, pesos 21.51, BRL 5.6892,  Dollar Index 92.30,  Oil $66.23,  10-year 1.59%, Silver $25.18, Platinum $1,138.00, Palladium $2,388.00, Copper $4.00, and Gold… $1,686.70

That’s it for today… Well, we’re coming into birthday season… This week will have a few and then the following week more, and then there’s my birthday later in the month! You know, I never really got into celebrating a birthday, but, ever since I was faced with the idea that I may not get to celebrate any future birthdays, I have not taken them for granted any longer! Each year, that I grow older, I thank the Good Lord for allowing me to live this long and watch my kids become adults, and have kids of their own… NCAA Tournament Selection Sunday will come at the end of this upcoming weekend… And yesterday I sat in the seat I’ll be sitting in for the remaining games at Roger Dean Stadium… Right behind home plate! In the wheelchair section of course, but I’m not going to complain one iota about my view of the game! The Electric Light Orchestra (ELO) takes us to the finish line today with their song: Telephone Line…  Oh, Oh, telephone line, give me some time, I’m living in Twilight…  I hope you have a Marvelous Monday, and please Be Good To Yourself!

Chuck Butler

 

March 3, 2021

* Currencies & metals rally on Tuesday, but get sold overnight!

* Aussies do something they haven’t done in 60-years! 

Good Day… And a Wonderful Wednesday to you! Well, at the last minute yesterday we decided to go to the baseball game, where the Cardinals were the visiting team, but still at Roger Dean… There weren’t 1,000 people there, and we had some great, hot,  seats out by the Marlins’ bullpen… But a nice breeze was blowing in and we watching another tied game… My good friend, and spring training buddy, Gus, said “well if they tied every game it’ll be easy to remember their record this year”…  I laughed, and my adult beverage almost, oh well, I don’t need to go further…  My former boss, and good friend, Frank Trotter will like this one… Jethro Tull greets me this morning with their song: Locomotive Breath… “And old Charlie stole the handle, and the train it won’t stop going, no it won’t slow down”

Well… the obsessive dollar buying stopped on Tuesday… The Dollar Index, which began the day, yesterday at 91.15, ended the day at 90.78…  And Gold found a way to hold on to its early morning gain and add to it for the first time in what seems to be a month of Sundays! Gold began the day at $1,730.40 and ended the day at $1,739.30, up $13.50 on the day, and Silver gained 23-cents to close at $26.50…   So, all-in-all, it was a good day for the currencies and metals on Tuesday…

It’s nice to see when the price manipulators decide to back off for a while and allow the currencies and metals to run higher isn’t it? I wonder, whenever the price manipulators decide to stick their noses into the markets, just what it is they are trying to achieve? I mean I know that they are under the guidelines of the Gov’t to keep a lid on things that might persuade investors from selling dollars, but besides that, what else are they attempting to achieve?  Because I get so fed up with them that it makes me want to yell at the kids… Well, I don’t have kids at home any longer, so that wouldn’t do me any good… Maybe yell at the walls, because no matter where I am when I’m writing, there are always Wall around to yell at! Unlike kids who seem to come around when their hungry, or want something!  OK… I’m just kidding there… I thought I would do my best impression of the Great Mogambo Guru!

In the overnight markets, Gold has seen the price manipulators return and is down $15.20 in the early trading today… Silver isn’t doing any better and has given back 23-cents this morning. The Dollar Index starts the day at 90.93, up a few shekels from the close of 90.78 yesterday.. 

There was good news to support the recent rise of the Aussie dollar (A$), yesterday…  For the first time in 60-years, The Aussie economic growth was above 3% for two consecutive quarters!  I would say that’s a trend, but my wife says I don’t see very well, so I’ll leave that discussion for someone else… HA!  This report really stunned the economists that follow Australia, but that’s nothing new… Two handed economists… “On one hand we could see this, and on the other hand we could see this”…  Worthless! 

Yesterday, I talked briefly about how Copper was rising in price and reflecting inflation fears… And then I saw this on Twitter, “Framing lumber prices are soaring as are foodstuff prices. This headline: “Soaring lumber prices add $24,000 to new house price since April”. And my favorite headline: “U.S. Homebuilders Urge Biden to Help Ease Sky-High Lumber Costs.”

Inflation is all around us folks, and sooner or later it will be reflected in the CPI (consumer price index) but… the CPI Index, as I’ve explained before was changed under the Clinton administration to allow hedonic adjustments and changes to allow inflation to remain low, and keep interest rates low, to allow everyone to buy a house…  The problem is….  Even house prices are going through the roof right now! It’s everywhere, It’s everywhere, it’s everywhere!  Inflation that is… and you had better get your inflation hedges in place, which in my opinion is Gold & Silver…  I’m just saying…

The Fed has said that they will allow inflation to rise past their 2% target… And I’ve said that once inflation is rising it will be difficult for the Fed to stop it…  Think about that… OK, now that you’ve thought about it, let me see if you’re thinking like me (heaven help you!)   To combat inflation a country increases their interest rates…  if interest rates were increased to a normal level and not even one associated with fighting inflation, which would be 6%, The bond servicing level on our outstanding debt would become a major problem for the U.S. and probably cause it’s financial system to collapse! I’m dead serious about that folks… those kind of interest rates would put the kyboshes on this economy… and financial system. 

Jerome Powell claims that the Federal Reserve is not blowing up bubbles, there is no inflation threat, and that its easy money policy will continue for years…  Yeah, right to all of that! The Fed has blowing the stock markets bubble since Big Al Greenspan, and they will not idly sit by too long as inflation rises…  I’m just saying…

And before I leave this discussion about inflation… This was on Reuters.com… “The world’s biggest central banks will happily live with higher inflation and investors now aggressively betting on a quicker end to monetary stimulus are all but certain to be proved wrong.

After a decade of underestimating inflation, central bankers in the United States, Europe and Japan have every reason keep money taps open and policymakers are even rewriting their own rules so they can let price growth overshoot their targets.

If anything, central banks are more likely to nudge up stimulus, particularly in the euro zone, keeping borrowing costs depressed and ignoring the inflation hawks at least until growth is back to pre-pandemic levels — and not just fleetingly.”   Chuck again.. OMG!

OK… let’s talk about something else, for that discussion was giving me a rash! Ok… I guess I don’t have anything else on my mind this morning, except inflation and how Central Banks around the world, including the Fed will ignore the rising inflation until it’s too late… It’s too late baby, now, it’s too late, thought we really did try to stop inflation…

How about some “news from the weird”…  I read on Bloomberg.com this morning that Air Jordon sneakers are now an Asset Class…  Wait, What? That can’t be, but this was the headline, “Sneakerheads Have Turned Jordans and Yeezys Into a Bona Fide Asset Class”…   Go figure, pretty soon this so-called asset class will be more valuable than Bitcoin!  HA! 

The U.S. Data Cupboard this morning is still lacking… What gives with this schedule for the data releases? I don’t get it… makes no logical sense to me, but… it is what it is, right?  So, the Data Cupboard today has the ADP Employment Report for February… This report is supposed to be a harbinger for the BLS Jobs Jamboree that will come this Friday… Last month the ADP reported 174,000 jobs created for January, and the BLS reported just 49,000 jobs created…  I’ve always said that the ADP report should be the jobs report that the markets use, because ADP has the paycheck systems for just about every business, and they would know when employees have been let go, or hired before the BLS gets around to calling in their surveys… 

To recap… The currencies and metals both rallied on Tuesday, but are back on the chopping blocks this morning, and overnight.  Chuck points out how inflation is rising everywhere… And how this could be the end-all for the financial system that we’ve all come to love…  Australia did something they hadn’t done in 60-years!  And there’s a new asset class folks… and you’ll never guess what it is, so you’ll have to go back and read that part to find out! HA! 

For What It’s Worth…  Well, I’ve talked a lot about Russia’s plan to de-dollarize through these past couple of years, and how they’ve recruited China to join them… Well, this article was featured on Ed Steer’s letter this morning, and so it qualifies as worthy of being a FWIW article! This is about how Russia could achieve their de-dollarization easily, and it can be found here: Russia could ditch dollar by lifting tax on gold purchases – economist — RT Business News

Or, here’s your snippet: “The Russian government could achieve its goal of de-dollarizing the economy by taking one simple step: dropping the tax it currently charges its citizens for the purchase of physical gold, an economist has said.

Russian citizens would get rid of their dollar savings to buy up gold bullion if the 20-percent value added tax (VAT) were eliminated, according to economics professor Valentin Katasonov, as cited by Russia’s business news agency Prime. He noted that the potential selloff would inevitably drag the greenback down.

However, the economist said that the country’s Ministry of Finance is likely to reject moves to lift the VAT as it would probably cause revenue shortfalls in the federal budget. 

According to Katasonov, Russians could stop hording U.S. dollars if investment in gold was more profitable. This could trigger a domino effect in many other countries that would welcome an opportunity to challenge the exclusive status of the greenback, he added.

But the expert sees this reason as a weak excuse, since the number of investment transactions in gold is so small that the loss would be insignificant in the overall context of the Russian budget.”

Chuck again…  Well, I like Ed Steer, had thought that this tax had been reported as removed a long time ago, but then I guess it apparently wasn’t!  This is scary stuff when you consider that a major country wouldn’t use dollars at all…  That could be a virus that spreads across the world… I’m just saying… 

Market  Prices 3/3/2021: American Style: A$ .7810,  kiwi .7276,  C$ .7918, euro 1.2062, sterling 1.3951, Swiss $1.0900, European Style: rand 14.9134, krone 8.4846, SEK 8.3929,  forint 301.52,  zloty 3.7586,   koruna 21.6706, RUB 74.08, yen 107.01, sing 1.3313, HKD 7.7568, INR 72.88, China 6.4694, peso 20.67, BRL 5.6606,  Dollar Index 90.93,  Oil $60.83,  10-year 1.44%, Silver $26.63, Platinum $1,206.00, Palladium $2,416.00, Copper $4.20, and Gold… $1,724.10

That’s it for today…  And unfortunately, tomorrow and this week too… I received confirmation yesterday that I am to report to the hospital for a blood test early in the morning… So, that pretty much puts the kyboshes on writing tomorrow morning… they sent me a QR code to access the testing area, strange ways we do things these days, eh?  It’s a game day again today!  My beloved Cardinals have 12 hits in two games this spring, and only one of them was a ringing extra base hit! But hey! the other teams have the same problem, as pitching is dominating right now… That will change as spring goes along… Hopefully!  The Blues come on at 9:30 tonight, so once again I’ll only be able to watch one period, before feeling sleepy!  Ok…  Clarence Carter takes us to the finish line today with his 70’s song: Slip Away…  I hope you have a Wonderful Wednesday, and will continue to Be Good To Yourself! 

Chuck Butler

 

 

 

 

March 2, 2021

* Currencies & metals continued to get sold on Monday… 

* What’s the 10-year Treasury yield’s tipping point? 

Good Day… And a Tom Terrific Tuesday to you! What a day yesterday! Simply beautiful and we didn’t do much but relax in the sun! We ended the day with a trip to the Palm Beach Ice Cream Co. I didn’t partake since I’m supposed to be watching my sugar intake…  But a fun day, Monday, was had by all! My St. Louis U. Billikens won their game last night, improving to 13-5… And the Blues played late last night out in Anaheim, so I had to check the score this morning…  And I see that they won 5-4…   The Blues have really hit a bump in the road recently, with a lot of injuries, and losses… But two consecutive wins for them now, maybe has turned things around… We will have to wait-n-see…  Johnny Rivers greets me this morning with his song: Summer Rain…. “Summer rain taps at my window… “

Well, another day of dollar strength yesterday, has me wondering what the heck are currency traders doing?  But it is what it is, and so, I won’t harp on and on about how the U.S. is going to print $1.9 Trillion in new dollars, and knowing that alone should have currency traders lining up to sell dollars… But Nooooo!  And so life goes on… But eventually this will all come crashing down on those dollar holders… I’m of the full mind and thought that this will happen…

Gold also couldn’t find a bid after it had gained $7.80 in the early trading, and found itself down $10.80 on the day to close at $1,525.80. Silver lost 17-cents on the day to close at $26.63…  That’s a two day losing streak for Gold, folks… But again, I’m not going to harp on and on about price manipulation today… We all know it’s there right before our eyes, and there’s nothing we can do about it, except buy physical Gold by the truck load and make the short position holders of Gold feel the hurt…  That would make my day, week, month, year, decade… 

The price of Oil also took a shot to the midsection yesterday, and lost $2 or so…. The 10-year Treasury bond saw some buying yesterday, and the yield dropped 3 BPS on the day…  I don’t know if you read the FWIW article yesterday, but it was a very important article to make you aware of the funding problem the U.S. is experiencing…  Fed Chairman Powell, says that demand for Treasuries is strong… But I beg to differ with him on that… If that’s so, I would like to call him on that, and ask him why then are Treasury yields rising?  You see, as bonds are bought, the price rises, and that causes the yield to drop..  So, if the demand is so strong, why are yields rising, Mr. Chairman?

In the overnight markets, the dollar buying has continued, but not as damaging as the previous two days…  The Dollar Index yesterday morning was 91.06, and this morning it is 91.15, so, not much movement but some dollar buying nonetheless…  Gold is up $4.60 in the early morning trading today, but since it couldn’t hold yesterday’s early morning gain, this doesn’t look promising to me…  Silver is down 21-cents this morning, so the two kissin’ cousins are going in opposite directions today… 

OK… here’s something that scares the bejeebers our of me…  According to zerohedge.com “27% Of All Household Income In The US Now Comes From The Government.” Wait! What? Yes…  going further into the article on zerohedge.com, “Following today’s release of the latest Personal Income and Spending data, Wall Street was predictably focused on the changes in these two key series, which showed a surge in personal income (to be expected in the month when the $900BN December 2020 stimulus hit), coupled with a far more modest increase in personal spending.

But while the change in the headline data was notable, what was far more remarkable was data showing just how reliant on the US government the population has become.

We are referring, of course, to Personal Current Transfer payments which are essentially government sourced income such as unemployment benefits, welfare checks, and so on. In January, this number was $5.781 trillion annualized, which was not only up by nearly $2 trillion from the $3.8 trillion in December it was also $2 trillion above the pre-Covid trend where transfer receipts were approximately $3.2 trillion.”

Chuck again… Ok, simple question, tough answer… What happens when the Gov’t’s transfer payments dry up? So, spend those Gov’t dollars while you can, spend, spend, spend… not only will you help inflation rise, but also run you dry… And once you’ve been run dry, there’s no more rain / dollars falling from the sky… That is until they implement Universal Basic Income!   And that thought sends shudders down my spine!

So, let me take you back in time… not too far back, just to September 2019, months before anyone in the world had contracted the Covid-19 virus… Remember me ranting and stomping my feet that the Fed was bailing out the banks that participated in the Repo Market?  There was a total of $9 Trillion dollars that were applied to allow the repo market participants to continue to borrow funds at cheap rates.  I kept pointing out that this was not a good thing, and that someone needed to explain to the public why the repo markets needed these funds, and to whom was receiving them… 

Yesterday, Pam & Russ Martens of Wallstreetonparade.com brought September 2019 back to everyone’s,  that reads their letters, minds… Their point was that no one in Congress is of mind to investigate where the $9 Trillion went… And so it’s just gone… flittered off into the wind…  We have 20 Million people without jobs, collecting unemployment, we have a large number of businesses that have closed since September 2019, and people that have lost their wills to carry on, and somehow the members of Congress don’t feel it’s worth their time to investigate where the $9 Trillion went…  But they have time for other nonsense… I’m just saying… 

Doesn’t that kind of stuff just make your skin crawl? It does mine, and longtime readers will recall me stating over and over again back in 4th QTR of 2019 that there were problems with the banking industry then, otherwise they wouldn’t need the Fed to intervene in the repo market.  Yes, we are 18 months removed from that time, and the banks are still operating… So, maybe it doesn’t matter?  NOT!  This just means that they have papered over their problems, and moved on down the line, but when the paper begins to get pulled back… Uh-Oh….  

There was a surprise in the U.S. Data Cupboard yesterday, when the ISM Manufacturing Index rose higher than expected and went from 58.7% to 60.8%…  Well, that’s all good and such, but what it should do in my humble opinion, is really ramp up the inflation fears… 

Speaking of inflation fears… You know all the while, Gold & Silver are seeing the price manipulators showing up at the COMEX with arms full of short contracts in Gold & Sliver, that the base metal, Copper, keeps pushing the inflation meter higher… Copper is up to $4.18, and trades each day with a strong bid…  I’m telling you now, so maybe you’ll listen to me later, that Copper rising in price is telling us that inflation is on its way, if not already here… 

The U.S. Data Cupboard only has Motor Vehicle Sales for February today, and that’s not anything that’s going to move the markets, so we’ll just move along for these are not the droids we’re looking for!

To recap… More dollar buying yesterday and overnight, has the currencies & metals  down on the canvas and the Referee is beginning his 10-count! Chuck talks about a problem with 27% of U.S. Household Income comes from the Government… Yes, that’s a growing problem folks… One that needs to be addressed by Congress… Another thing that needs to be addressed by Congress is what happened to the $9 Trillion dollars that the Fed gave to the banks participating in the repo market in Sept, 2019? 

For What It’s Worth…  Yes, with the two snippets above I could have had 3 FWIW articles for today…  But this is the one that gets the flood lights shined on it… I’ve spent some time recently talking about the rising Treasury yields, and when I saw this on zerohedge.com I thought this is interesting, as it’s about the tipping point for Treasuries, and it can be found here: BofA: 1.75% Is The “Tipping Point” For Bonds | ZeroHedge

Or, here’s your snippet: “Almost two months ago, Nomura correctly predicted that once the 10Y breaches 1.50%, stocks would freak out and sure enough that’s precisely what happened (with Nomura’s forecast becoming self-fulfilling and sparking a stop loss cascade one the 10Y hit 1.50% last Thursday, sending the 10Y as high as 1.61% in a matter of seconds following last week’s dismal 7Y auction).

So now that 1.50% is yesterday’s news, Wall Street is scrambling to define the next critical level for 10Ys beyond which there will be blood. As a reminder, yesterday Goldman hinted that 2.10% is what traders should be looking at, but that seems a lot, especially with many far more accurate forecasters saying that the Fed will have to engage YCC around 2.0%, and for that to happen stocks would need to crash first. Therefore, the next critical level is likely one between 1.50% and 2.0%.

One such level was proposed by BofA’s chief equity strategist, Savita Subramanian who today writes that “history suggests that 1.75% on the 10-yr (the house forecast and ~25bp above current levels) is the tipping point at which asset allocators begin to shift back to bonds” and thus sell stocks in the next wave of aggressive liquidations.

Why 1.75%? Because that yield on the 10Y is decisively above the S&P’s dividend yield, and where according to BofA “there is an alternative to stocks”. 

So after last week’s fireworks, will bonds continue to rise from the current level of 1.43%, and how fast until they reach the new “tipping point”? 

Nomura estimated

“that the 10yr UST yield is currently about 30bp above the fair-value yield implied by trend-following strategies. Short-covering by CTAs and other speculators for the sake of locking in profits may serve the purpose of reeling the 10yr UST yield back in.”

Chuck again…  Lot’s of talk about how the yield of the 10-year Treasury has about topped out, I believe can be misleading…  But, we’ll have to wait-n-see, now won’t we? 

Market prices 3/2/21: American Style:  A$ .7801,  kiwi .7264,  C$ .7906, euro 1.2034, sterling 1.3912, Swiss $1.0905, European Style: rand 15.0352, krone 8.5030, SEK 8.4243,  forint 302.26,  zloty 3.7692,  koruna 21.7258, RUB 74.18, yen 106.93, sing 1.3307, HKD 7.7570, INR 73.43, China 6.4638, peso 20.64, BRL 5.5994,  Dollar Index 91.15,  Oil $60.65,  10-year 1.44%, Silver $26.42, Platinum $1,191.00, Palladium $2,416.00, Copper $4.18, and Gold…  1,730.40

That’s it for today…  Well, we’re supposed to see some rain today, but no biggie, that will bring another cold front through, and our highs for the next few days will be in the high 70’s…  Again, still warm, and sunny!  The weather should be great for youngest son Alex’s visit this weekend… Alex has not visited down here since we moved to the 3rd Floor 3 years ago… As I look out the glass I see the ocean, and it looks like a lake today, with no chop or strong waves…  That means the wind has died down…  Once the rain goes through, should be another fun day!  3 Dog Night takes us to the finish line today with their song: Easy To Be Hard…  This is the live version from an album I had as a teenager, that I played over and over again, until it wouldn’t play any longer!   UGH!   I hope you have a Tom Terrific Tuesday, and please Be Good To Yourself!

Chuck Butler

 

 

 

March 1, 2021

*Dollar buying is strong once again… 

* The markets say no-mas on Treasuries! 

Good Day, and a Marvelous Monday to you!  And Welcome to March! Well, I attended my first spring training game of 2021 yesterday, and my beloved Cardinals tied the game 4-4. In spring training they don’t play extra innings…  I don’t want to jinx my beloved Cardinals, and I know it was only the first game of the year, but… It’s the same old thing with this team.. They can’t hit with runners on base…  There! I said it out loud I sure hope they prove me wrong on that! It’s been a fun weekend with our guests here… Lots of good conversation and laughs to go all around!  Los Bravos greet me this morning with their song: Black and Black…  “I want my baby back… It’s grey it’s grey, since she went away,”

A great 60’s song no doubt!  OK… well Friday was a very nasty day for the currencies and metals…  Gold lost $34 and the Dollar Index rose to 90.76 from a low of 89.90 on Thursday.  What the heck happened?  Can you say, Manipulation? I thought you could…  Not that you wanted to , for you know that any manipulation is bad for your non-dollar investment portfolio holdings…

It all began with some stronger than expected data and that got the price manipulators thinking that this would be a great time to lay it on…  So, let’s get to the stronger than expected data…  First of all the Weekly Initial Jobless Claims for the previous week saw a drop from 841,000 to 730,000.. and you could hear the spin doctors screaming from the roof tops that this was a great number!  I even hear a dolt on the TV say, this drop represents a huge improvement in the jobs picture…  Really?  Ahem, let me point out that the previous week was short one day, due to the President’s Day holiday… And that, alone was probably responsible for the drop in the figure…  But the reporter that was telling us that it was a great number, failed to report the fact that the numbers were a day short! No, he decided that the numbers being one day short wasn’t important!   What a dolt!

Then on Friday, Personal Income soared in January soared higher by 10%… Really? Because if that’s really what happened, then there was reason to celebrate!  And Personal Spending also soared in the month by 2.4%…   What a bunch of B.S.!   December was negative Consumer Spending, and the gov’t is telling me that it rebounded in January?  I’m not buying this data on iota!

So, the data got the dollar Traders to get all lathered up and buy boat loads of dollars, when just last week they were willing and ready to sell dollars by the boat loads…  But it is what it is… and just because I don’t’ agree with it, doesn’t mean it didn’t happen!  So, as I said above, Gold last $34 dollars on Friday to close the week at $1,736.60… And Silver lost 73-cents to close at $26.80…  And the euro which last Thursday was pushing higher lost a ton of ground and closed the week at 1.2080… It was all about the data on Friday…  with no one looking ahead to the weekend…

For on this past weekend the long awaited $1.9 Trillion stimulus bill was passed by the House and therefore it is ready to go forward, which means you can expect your stimmy checks soon… And the Gov’t will soon be printing another Trillion dollars out of the blue! But nooooooooo, currency traders couldn’t be looking ahead to what was going on this past weekend, and not get all entangled with the data from Friday!

In the overnight markets the currencies continue to get whacked, but Gold is up $7.80 in the early trading this morning, so we have that going for us, eh?  Remember last week when I told you that currency traders wanted to sell dollars, but were fearful of the PPT and their ability to dump large sums of money in the markets and buy dollars to protect the dollar from a steep fall?   Well, that’s exactly what happened last week, and now the fear of the PPT is fresh on every currency trader’s collective minds…  

And so now the currencies have to pick them selves up by the boot straps, and try to build some momentum that would put the Dollar Index back to sub-90, where it stood on Thursday morning last week… The Dollar Index is stronger again this morning from the currency selling overnight, and the Index sits at 91.06…  Even the 3 currencies that had been kicking the dollar’s tail and taking names later, (sterling, kiwi, and A$’s) got whacked and will have to get up off the canvas and fight back… 

I get part of the idea behind the dollar buying… It’s due to the idea that the stimulus bill will invigorate the U.S. economy… But I’m not buying that idea one iota… The previous 2 stimmy checks didn’t do the job, what makes them think that this one will?  

The U.S. Data Cupboard is a non-event again this week, with only a few scattered about data prints that move markets, like today’s ISM (manufacturing index). We will end the week with the BLS’s Jobs Jamboree for January…  This will be an important data print, but it won’t be correct, as you can bet your sweet bippie that the BLS will add tens of thousands of jobs from thin air, because well, they think the stimulus money is going to get businesses to hire people…  As a reminder, December’s Jobs numbers were just 49,000 jobs created that month… And with the deep freeze, snow, and ice that presided over most of the country during January, I don’t see the 210,000 jobs created that the so-called experts are calling for…  

To recap…  The currencies and metals got whacked with a large switch to end last week, and in the overnight markets there’s more dollar buying pushing the currencies even lower… Gold is up $7 in the early trading, but after Friday’s $34 loss, $7 looks like a pittance of a recovery…   Chuck thinks that it was the PPT protecting the dollar from a steep fall… And the strong Personal Income and Spending data for January is really suspect in Chuck’s eye… 

Before I head to the Big Finish today, I wanted to talk about something and that is all these bubbles that exist today in the markets… And it includes residential real estate… The Fed has pushed the bubble machine to the edge of a cliff, if you ask me… This last Stimulus check and I don’t mean the “last one ever” I mean the latest one, I believe will be the straw that breaks the camel’s back, meaning the dollar… the stock market bubble, the real estate bubble, the bond bubble, I could come up with other bubbles but these are the major ones…  I find that these bubbles are inexcusable for a country like the U.S. with all the propeller heads we have you would think that someone would have stood up and questioned the Fed’s moves to blow more air in the bubbles… But NOOOOOOOOO!   I’m just saying… 

For What It’s Worth…  Well… I just mentioned that I thought the new stimulus bill would be the straw that breaks the camel’s back, and in bonds especially…  Here’s the deal.. you are the Fed and Treasury, and you flood the markets with your Treasury bonds, right? Well, there comes a time that the markets become unsaturated with these bonds, right?  Well, that time could be now, and that’s the article this morning that talks about this scenario, and it can be found here: Wall Street Sends a Message to the Fed: We Have Run Out of Places to Stuff Your Treasuries (wallstreetonparade.com)

Or, here’s your snippet: “The action in the U.S. Treasury market yesterday reminded us of the classic “I Love Lucy” episode at the chocolate factory. As the conveyor belt churns out chocolate balls faster than Lucy and Ethel can handle them, they resort to stuffing them in their mouths, their hats, and their shirts. Lucy remarks: “I think we’re fighting a losing game.”

That was the scene in the Treasury market yesterday – too much supply and no where to stuff it, causing a sharp spike in yields which set off a stock market selloff that left the Dow down 559.8 points or 1.75 percent on the day, while the tech-heavy NASDAQ fared far worse, losing 478.5 points or 3.52 percent.

That the Treasury market is now projectile vomiting T-notes should come as a surprise to no one. As the chart above indicates, yields on the 10-year note have been rising sharply since early August, with the yield more than tripling from 0.50 percent to an intraday spike yesterday of 1.61 percent. The 10-year note opened this morning at 1.52 percent.

The sharp and persistent rise in yields have left those who bought the T-notes at dramatically lower yields licking their wounds from heavy losses. (Prices of notes and bonds move inversely to their yields.) That has also dramatically lessened the appetite to buy more Treasuries at the current yields when the supply is expected to continue to increase as a result of rising government deficits and stimulus spending.

Another catalyst for yesterday’s selloff in Treasuries was a very sloppy Treasury auction where the government attempted to stuff $62 billion of a 7-year Treasury note into an already over-supplied market.”

Chuck again… you see… when the markets can’t take anymore of an asset, they demand a higher yield to stretch their holdings… And that’s what’s been going on in bonds, as the yield on the 10-year Treasury has gone from .50 to 1.43% Almost a tripling of the yield in a matter of months… Well, if bond yields keep rising, the end of the bond rally will be nigh… I’m just saying…

Market Prices March 1, 2021: American Style: A$ .7726, kiwi .7233,C$ .7876,euro 1.2044, sterling 13954, Swiss $1.0957, European Style: rand 15.0269, krone 8.6441, SEK 8.4885, forint 301.48, zloty 3.7571, koruna 21.6732, RUB 74.52, yen 106.70, sing 1.3316, HKD 7.7570,  INR 573.55, China 6.4760, peso 20.86, BRL 5.5974, Dollar Index 91.06, Oil $62.06, 10-year 1.43%, Silver $26.91, Platinum $1,216.00, Palladium $2,401.00, Copper $4.17, and Gold… $1,744.32

That’s it for today… shorter than usual, but I wasn’t on my laptop all weekend reading and making notes…  I’m of the belief that this week’s letters will all be of the shorter variety… I’m busy! HA! Well, my St. Louis U. Billikens won their game yesterday, which should put them in good standing with the NCAA selection committee… At least I would hope so! No baseball for me today, and none until Wednesday… Yesterday, was full sun and heat to start the game, but eventually there was some cloud cover and a pleasant breeze that made the day even more enjoyable…  Well, it’s Happy Birthday to Dianne Schuette, who’s here with us for a few days! March is my second fave month…  And don’t forget that I’ll be on my annual spring vacation in a two weeks…  Seals & Crofts take us to the finish line today with their song: Summer Breeze…    I hope you have a Marvelous Monday, and please Be Good To Yourself! 

Chuck Butler

February 25, 2021

* Currencies have another nothing day on Wednesday

* Gold stages a huge comeback on Wed. & will have to do another today… 

Good Day… And a Tub Thumpin’ Thursday to you! It’s been quite a week for yours truly, and I’ll finish it with a bang, as I’m grilling steak tonight for a dinner with friends, and then tomorrow friends from St. Louis will be arriving… An old drinking buddy, Gus and his beautiful bride will be with us for a few days, which includes going to the baseball games… I was going down some steps yesterday, and noticed a sharp pain in my right knee… when I got to the deck I looked down and my knee was swollen big time! I has surgery on that knee about 18 years ago…  I’m hoping that’s not required once again! One of my fave Steely Dan songs greets me this morning.. The song?   FM…   “Give her some funked up muzak, she treats you nice… Feed her some hungry reggae, she’ll love you twice”

Well, Wednesday was another nothing day for the currencies…  The Dollar Index was 90.10 yesterday morning, and at the end of the day it was 90.11…  That marked two consecutive days when currency traders couldn’t decide which way to go with the dollar… Like I’ve said before, I know that in their heart of hearts the currency traders want to sell dollars… But are fearful of the PPT ruining their positions…

Gold traded down immediately yesterday, and at one point in the day it was down $17…  But… at the end of the day it only down $1.70, to close at $1,805.80, completing a nice strong comeback for the day… Silver was in positive territory from the get-go yesterday, and ended up 30-cents to close at $28.05…  I have to say that there are so many pundits out there singing the praises of Silver, that their singing alone should be enough oomph Silver would need to move higher in price VS the dollar..

In the overnight markets… the dollar has gotten ambushed! The Dollar Index is 89.80, down form 90.11 at the close yesterday.  I want to point out that the two currencies that outperformed all other currencies in the last weak dollar trend, The Aussie dollar (A$) and New Zealand dollar (kiwi) are doing it again… These two currencies have been very stealthlike, but not to me! I see what you’re doing… for I see all! HAHAHAHA! 

Gold, on the other hand is not participating in the ambush on the dollar overnight. In the early trading this morning Gold is down $19… Why? Because that’s what the price manipulators deem Gold to be…  So, will Gold stage another comeback today? Now THAT would be something, wouldn’t it?  We can only hope…  Silver is basically flat this morning as it is down 2-cents, so basically flat in my book… 

The price of Oil has climbed another buck and this morning trades with a $63 handle…  And Treasuries got whacked good yesterday, with the yield on the 10-year Treasury rising to 1.44%… (remember in bonds, as the yield rises the price of the bond goes down)  The Bond Boys keep throwing us bones (hints) and the markets are ignoring them… 

Maybe it’s built up frustration by the currency traders overseas last night, as they’ve been wanting to sell dollars badly, and just decided to hell with it and go for it! 

OK… well, longtime readers will recall me going the full nine yards a few months ago, when I talked about what I saw coming for the U.S. citizens… Spoiler alert for those that don’t recall or are new to class… I talked about the folding currency/ dollar, being replaced by digits… And everything you buy, sell or steal, would be on record, and eventually someone in power would be dictating to you how to spend your money, and could get so bad that they deny the withdrawal of the digits to pay for something that you want…  I know, I know, I’ll take my tin foil hat off now…

Or… maybe I won’t…  Yesterday, Cartel, I mean Fed Chairman, Powell talked to Congress, and well, I’ll let the Business Insider tell you the rest. “Federal Reserve Chairman Jerome Powell told Congress on Tuesday that the Fed is “looking carefully” at whether it should issue a digital US dollar.”

“A digital currency developed by the fed is a “high priority project for us,” Powell told Congress, but he added that there are “significant technical and policy questions” related to a digital US dollar.”

“We are committed to solving the technology problems, and consulting very broadly with the public and very transparently with all interested constituencies as to whether we should do this,” Powell said.”

Chuck again…  Ok, remember earlier this week when I offered to be a writer for Janet Yellen and finished her statement? Well, here I am, ready, willing and able to do the same for Mr. Powell… So here goes… “ basically we don’t care what the constituencies say, we’re going ahead with this digital currency, so you all had better get ready for the digits to show up in your bank account one day in the near future… “

I don’t know about you, but I’m the kind of person that absolutely loves having a pocket full of folding currency / dollars… I started my first job while I was in 7^th grade… I went door to door selling subscriptions to the now defunct Globe Democrat newspaper… I was so good at it, I won a trip to Daytona Beach all expenses paid!  Any way… what I was getting at, was at an early age, I leaned about having money in my pocket, and I’ve held that thing of having money in my pocket in my mind ever since…  And I will be so lost when the day comes that we no longer can have folding currency/ dollars in my pocket…

And I don’t believe it will do you any good, to bury some folding currency / dollars, in your back yard, or stuff them in coffee cans… That is unless there’s a black market that deals in folding currency…

Did you know that China’s version of a digital currency has already been tested in 3 different Chinese markets/ cities?  Well, it has and I would think that the Chinese will be ready to issue it nationally soon…  Nearly every Central Bank in the World is working on or have already worked on the development of a digital currency… So for now, I’ll keep my tin foil hat on top of my bald head! 

OK, let’s talk about something else as that discussion was really depressing me…  Let’s talk about Going Big… There’s a new TV show called the Go Big Show and I’m wondering if Treasury Sec. Janet Yellen is auditioning for the show?  Let’s listen in to here latest thoughts…

“Janet Yellen, the economist picked by Joe Biden to run the US Treasury, has said America needs to “act big” to revive its flagging economy and protect itself against long-term scarring with a major stimulus package.”

Chuck again… Yeah, let’s just keep going bigger all the time, Janet…  That is until you cause hyperinflation that wrecks the remaining value of the dollar!

It’s all a mystery to me, how traders can hear this stuff, and that stuff about stimmy checks, and the daily reminders of the rot on the economy’s vine, and not sell dollars until the cows come home! What on earth are they waiting for?  Are they waiting for confirmation that hyperinflation is among us?  You know, we may not ever really reach the 50% inflation rate rise in one month, that would qualify as hyperinflation, but what difference would it make if we only got to 35%?   

Just for grins… In 1919 the German mark was 48 marks per dollar, and inflation was rising rapidly, six month later the mark traded at 320 marks per dollar…  And with inflation rapidly increasing, the mark fell to 7,400 marks per dollar by Dec. 1922…  And the cost-of-living index, for Germany was 41 in June 1922 and 685 in December, a nearly 17-fold increase.

The strategy that Germany had been using to pay war reparations was the mass printing of bank notes to buy foreign currency, which was then used to pay reparations, but this strategy greatly exacerbated the inflation of the paper mark.. Sound familiar?

And the key here is that there is no Ronald Reagan and Paul Volcker to fight the rising inflation this time… All we have are some knuckleheads who think that you just print your problems away…  Inflation will weaken a currency, strong inflation will hurt a currency, and hyperinflation will render the currency worthless… As it did in Germany 100 years ago…

The U.S. Data Cupboard will finally get its act together, and have some real economic data for us to view today, starting with, The Weekly Initial Jobless Claims for last week… The thing to keep in mind here is that last week was one day shorter due to the holiday on Monday, so the numbers might be lower, but you’ll know why…  In addition to the jobless claims, we’ll also see the color of  January Durable Goods and Capital Goods Orders…  And finally today, there will be a 1^st revision of 4^th QTR GDP….  Remember what I told you when the original GDP figure of 4% showed up… That if you took out Government spending, the number would be very low…

I used to have friendly arguments with an economics professor who would explain that when consumer spending weakens, the Gov’t’ spending needs to ramp up to fill the void…  And I would argue, why does the Gov’t spending need to be a part of GDP?   Even more so now it gets ridiculous with all gov’t’s printing presses working overtime, and their new Magic Money Tree, they could make GDP be whatever number they wished for!  Want 10% GDP?  Well, it will be gotten in the future, if those in power begin to use the Magic Money Tree like an ATM…  I’m just saying…

To recap… it was another nothing day for the currencies, and Chuck still believes that traders want to sell dollars, but are afraid of the PPT…  Gold had a nice comeback on Wednesday, after falling by $17 it ended the day only down $1.70… Silver climbed back above the $28 handle…  In the overnight markets the dollar has gotten ambushed, and the Dollar Index is trading this morning at 89.80…  And there was no data to speak of Wednesday, with Jerome Powell telling Congress about the digital currency the Cartel, I mean the Fed heads are working on… And Chuck gives us something to think about regarding inflation…

For What’ It’s Worth…. Well, I’ve been talking about Russia’s desire to dedollarize and how they’ve recruited China to join them for some time, but this morning I found this on Bloomberg.com and it stuck out like a man with a hatchet in his forehead, that this should be today’s FWIW… And so it is..  And it can be found here: Russia Must ‘Barricade’ Itself Vs. Dollar, Senior Diplomat Says – Bloomberg

Or, here’s your snippet: “Russia must take urgent steps to cut its use of the dollar to a minimum as the new U.S. administration of Joe Biden signals it will ramp up sanctions, a top diplomat said.

“We need to barricade ourselves against the U.S. financial and economic system to eliminate dependence on this toxic source of permanent hostile actions,” Deputy Foreign Minister Sergei Ryabkov said in an interview today in Moscow. “We need to cut back the role of the dollar in any operations.”

Russia is bracing itself for the latest U.S. punitive measures over the nerve-agent poisoning and imprisonment of opposition leader Alexey Navalny. In a speech to the Munich security conference last week, Biden said that addressing “Russian recklessness and hacking into computer networks in the United States and across Europe and the world has become critical to protecting our collective security.”

The U.S. has imposed more than 90 rounds of sanctions in recent years targeting state banks and corporations, the oil and gas sector, top officials, and business tycoons and is likely to add more restrictive measures, Ryabkov said.

Chuck Again… I have an idea for you Mr. Deputy Foreign Minister, please whisper in Mr. Putin’s ear that he should be using the selling of dollars to buy more physical Gold…   

Market Prices  2/25/21: American Style: A$ .7984,  kiwi .7455,  C$ .8013, euro 1.2232, sterling 1.4149, Swiss $1.1035, European Style: rand 14.7578, krone 8.3423, SEK 8.2217,  forint 294.30,  zloty 3.6870,  koruna 21.3299, RUB 73.74, yen 106.12, sing 1.3181, HKD 7.7539, INR 72.49, China 6.4547, peso 20.65, BRL 5.4281,  Dollar Index 89.80,  Oil $63.42,  10-year 1.44%, Silver $28.03, Platinum $1,255.00, Palladium $2,454.00, Copper $4.19, and Gold… $1,786.80

That’s it for today and this week… It’s a froggy morning here, but a truly expect it to burn off soon to reveal another beautiful day…  So, spring training games will begin this weekend! I really don’t like the new way tickets are dispersed. They show up on your smart phone, no more saving ticket stubs from memorable games!  And, I’m not even your last choice for a tech-savvy person, so there’s that…   The great Al Stewart takes us to the finish line this morning with his song: The Year of The Cat…  I just love the melodic music that he plays…  Ok… I hope you have a Tub Thumpin’ Thursday, and a Fantastico Friday tomorrow, and will promise to Be Good To Yourself all weekend long! 

Chuck Butler

February 23, 2021

* Currencies see little to no movement on Tuesday

* Chuck brings The 5 to the Pfennig… 

Good day… And a Wonderful Wednesday to you! Well, I spent another afternoon out on the deck reading with the sun coming down on me, and blue umbrella skies above… The beach restoration that has been going on for a month here is completed, and I have to say that this is the best I’ve seen the beach look here in the over 12 years we’ve been coming here… Chuck & Kathy sat out on the balcony a couple of nights ago, watching the beach restoration team work under the lights!  I have to knock on wood before I say this last piece…  Man, have I been feeling pretty good lately! Stronger, and not as fatigued as usual… This is when something happens that sets me back usually… So, let’s hope that isn’t in the cards this time!  The late great, Otis Redding greets me this morning with his song: Can’t Turn You Loose…  It’s from his recording at the Whiskey A-Go-Go back in the day…  Many years later I met some dealers from New Zealand in the Whiskey A-Go-Go and kept thinking that this was the place that Otis Redding performed…

Talk about a nothing day in the currencies! The Dollar Index yesterday morning was 90.10, and at the end of the day it was still 90.10…  One of the currencies not included in the basket of currencies that make up the Dollar Index, the Aussie dollar (A$) has very quietly, and stealthlike, moved higher nearly every day… The A$ yesterday morning was .7907, and at the end of the day it was .7945… So, moving higher day by day… And it gets me wondering what this is all about… Back in the day, you could count on a nice interest rate differential between the U.S., euro, or yen and the A$… With the A$ holding the advantage, and attracting investments all over the world… But in today’s world of zero interest rates, the interest rate differential for the A$, just isn’t there… So… What is it that is garnering such interest to the A$ these days?

The Aussie have the front seat to the economic growth in China…  And for that, I believe they are being rewarded with a stronger currency…  See? It’s not often that you get the answer to your question so quickly! HA!

Gold & Silver didn’t fare as well as they did the previous day… Gold lost $4 to close at $1,807.50, and Silver lost 46-cents to close at $27.75… And I was just commenting yesterday that the $28 handle that Silver had risen to looked good… And then the $28 handle was lost! Don’t worry, for it is my belief that because of the shortage of Silver supply, and the demand for physical Silver, that it won’t take long for Silver to regain the $28 handle and as Buzz Lightyear says, “to infinity and beyond!”

And just like Silver, the price of Oil couldn’t hold its newly found $62 handle yesterday… Back and forth the price of Oil goes… Have you experienced gas price shock?   The price of regular gas has moved steadily higher as the Texas freeze plays a part of that… Refineries were shut down and no oil has been refined to gas in over a week, so even with the demand still not what it once was, it is still stronger than 6-months ago, and with supply problems… voila! Gas price shock!

When you have to shell out more each week for gas than you used to have to shell out, that increase in gas prices reduces your overall disposable income…

In the overnight markets… There was a definite quiet to the overnight markets as if they didn’t want to wake anyone up! The Dollar Index is trading at 90.09, so there’s been little movement in the currencies overnight.  Gold & Silver are trying to erase the bad taste of yesterday’s selling, and are up marginally in the early trading today.  The Price of Oil is back above $62, and the 10-year Treasury’s yield is steady Eddie at 1.36%

And nothing seems to standing in the way of the rise in the price in Copper these days…  Copper is a good inflation indicator folks… And the base metal is trading with $4.16 price per pound this morning…  

I had a dear reader send me a note yesterday, after the FWIW article with Michael Burry talking about hyperinflation, and asked me to go deeper into how  investors can protect themselves from such hyperinflation… And that got me thinking… Hadn’t I already told you dear readers over and over again that having up to 20% of your investment portfolio allocated to Gold & Silver to hedge against dollar weakness and inflation?   And apparently Copper should be added to the portfolio allocation…  So, there you have it! 

In Agora’s 5 Minute Focus or The Five, yesterday, editor Greg Gonigam, featured some thoughts from James Rickards about the issuance of SDR’s (Special Drawing Rights)… This is very important folks, and so I’m going to borrow some of The Five and bring it to you here…

“But whatever the source of the panic, we know this: “The next panic will be bigger than the central banks’ ability to put out the fire,” as Jim explained here in 2015. “The only source of bailout cash will be the SDR.”

Result?

“The SDR has the power to reduce the dollar to the status of a local currency no different than the Mexican peso.”

Again, you and I will still use dollars. But they’ll no longer be the world’s go-to currency. That will be the SDR’s function in the aftermath of the present crisis — whatever it is.

The genius of the scheme is that SDRs would create inflation… but everyday folks would have no idea SDRs were the cause.

“Any inflation caused by massive SDR issuance would not be immediately apparent to citizens,” Jim wrote. “The inflation would show up eventually in dollars, yen and euros at the gas pump or the grocery, but national central banks could deny responsibility with ease and point a finger at the IMF.”

Chuck again… Thank you Dave for allowing me to share the 5 with my readers…  The other thing that this would do is devalue the dollar… And you can refer to my Pfennig yesterday, when I explained how the dollar didn’t have value any longer… A devaluation of the dollar would be the end game for the dollar, in my opinion…

OK… Well that’s a lot to take in on a morning with your coffee… So, I’ll move along here for now…  But you, dear reader, know all too well, that I won’t allow that discussion to end there, and there will be more on that in the future!

Before I go on… Got Gold?

The U.S. Data Cupboard is still lacking today, with only Jerome Powell, Cartel, I mean Fed Chairman testimony on the docket…  We’ll have to wait until tomorrow for any real economic data, which will come our way on Thursday with the Weekly Initial Jobless Claims, Durable and Capital Goods Orders will print for our review…

To recap… The Currencies basically traded in the same clothes as Monday, with the Dollar Index not changing on the day at 90.10…   Gold lost $4, and Silver lost 46-cents  on the day, with Silver losing the $28 handle. Chuck doesn’t believe that it will be lost too long…  In the overnight markets there was little movement in the currencies, and Gold & Silver are trying to remove the bad taste of yesterday’s trading this morning… And Chuck brings the Five Minute Forecast to the Pfennig this morning…

For What It’s Worth… OK, the good folks at GATA sent me the link to this article about how to achieve price discovery again in Silver… And it can be found here: A Modest Proposal For Price Discovery In The Silver Market | Investment Research Dynamics

Or, here’s your snippet: “Price discovery is the process by which a free market uses price to balance supply and demand. But price discovery has been absent from the gold and silver markets for decades. This is why a shortage in physical gold developed in March 2020 and why an even more severe shortage in silver has developed currently.

I believe a push to impose price discovery on the entire market will come from the authorized purchasers pushing the various mints to raise significantly the price the mints will pay the refiners for silver.

Refiners can then turn around and give purchase orders to mining companies at much higher prices. This will require a very aggressive push from the APs to hammer on the mints. Perhaps even cc:’ing the refiners in the effort to make refiners aware that the market will bear a much higher price for silver.

If mints offer refiners considerably more than the current “market” price, refiners will divert production to the higher bidding mints and away from selling production of bars to the Comex and LBMA. This will force the players on each exchange to at least match the new market price for silver.

At the very least, the current holders of silver will sell some or all of their holdings if the price rises enough to induce selling. Proper price discovery will find the level that creates enough supply to fill demand.”

Chuck again… Now wouldn’t it be nice to see price discovery return to the markets?  (Bet you thought I would break into the lyrics of the Beach Boys song Wouldn’t it be nice)

Market  prices 2/24/21: American Style: A$ .7930, Kiwi .7390,  C$ .7965, euro 1.2165, sterling 1.4138, Swiss $1.1020, European Style: rand 14.4634, krone 8.4239, SEK 8.2919,  forint 295.59,  zloty 3.7143,   koruna 21.3283, RUB 74.06, yen 105.80, sing 1.3201, HKD 7.7545, INR 72.31, China 6.4616, peso 20.38,  BRL 5.4531,  Dollar Index 90.09,  Oil $62.23,  10-year 1.36%, Silver $27.88, Platinum $1,267.00, Palladium $2,402.00, Copper $4.16, and Gold… $1,809.60

That’s it for today… I was looking at the calendar yesterday, and realized I had not given any notice that I’ll be taking my traditional spring vacation starting March 18, and returning March 30^th…  And then it will be time to get ready to head home for Easter! Only 5 more days until my first baseball game of the year… I’m psyched! And  we’ll have guests this weekend too! YAHOO! Man, did my St. Louis U. Billikens get homered last night at VCU! That was an absolute homer call at the end of the game that cost the Billikens a chance at the win…  I was very disgusted with the refs last night… My beloved Mizzou Tigers also played last night,  and the outcome of that game was not any better, as the Tigers couldn’t keep from turning the ball over… They didn’t “value the ball”!  The NCAA Tournament, that hopefully won’t be cancelled this year, will have their Selection Sunday March 14, and then the March Madness begins!  Paul Revere and the Raiders take us to the finish line today with their song: Kicks…   “Kicks just keep gettin’ harder to find. And all your kicks ain’t bringin’ you peace of mind.”  I hope you have a Wonderful Wednesday, and please Be Good to Yourself!  

Chuck Butler

 

February 23, 2021

* Currencies & metals rally on Monday… 

* Chuck talks about “valuing the ball”… 

Good Day… And a Tom Terrific Tuesday to you! What a day yesterday! I sat out on the deck that overlooks the beach/ ocean, and read for nearly 3 hours! I wore a baseball cap most of the time out there in the sun, as my bald head has gotten enough sun this winter already! The “thaw” has arrived back home in St. Louis, and now they’ll have a couple of warmer days, followed by more cold, etc. That’s February in the Mid West! But down here in S. Florida? Well, how does sunny and 80 sound until the end of the month? I’m amped up for that! Our Blues can’t win when they wear those red jerseys… I’m just saying…  James Taylor greets me this morning with his song: Shower The People… “Shower the people you love with love, show them the way that you feel”…

Well, the currencies and metals did see some follow up of their Friday gains yesterday, as the dollar bugs have crawled back into the wall boards where they came from, and that allowed the currencies the freedom to move about the country!  The Dollar Index, which yesterday morning was 90.25, ended the day at 90.00. A few weeks ago the Dollar Index was below 90, and it appeared that it would fall further from there, and then along came a reversal of sentiment that lasted 10 days, and now the currencies are back to pushing the Dollar Index back below 90.

Gold was back on everyone’s minds yesterday, and for once in a blue moon, which we will see this Saturday! But back to Gold for a moment before I show my expertise in Blue Moons… Gold gained $25.90 yesterday to close at $1,810.50, and Silver rose 84-cents to close at $28.20…  Now that looks better than a $26 handle, doesn’t for Silver?  And Copper is kicking tail and taking names later these days… Apparently there is a current shortage in Copper to meet the demand, and thus the price rises…  And this is where I tell you something that I’ve told you 100 times during the life of the Pfennig, and that is my dad taught me this… There’s no such thing as a shortage of something, it’s merely a case of a price adjustment needed for that something…  And Copper is proving that right now!

In the overnight markets…   there’s been a little slippage in the currencies, as the Dollar Index is 90.10 this morning.  Gold & Silver are mixed in the early trading with Gold up 60-cents and Silver down 16-cents…      Well, after sliding backward one day, the price of Oil surges higher on Monday, returning to the $62 handle in doing so…  The 10-year Treasury’s yield slipped a tiny bit, on the day, but no biggie…

The Petrol Currencies aren’t feeling the love from the $62 price of Oil this morning… There’s something a little strange about this rise in the price of Oil, and I’m pretty sure the Petrol Currency traders are waiting to see if it can hold…   Since when are currency traders “patient”?  This whole relationship is interesting, and the rise in the price of Oil is very suspicious to me… I’m just saying… 

Ok, back to the Blue Moon…  There are actually two types of Blue Moons… The first is the one we’ll see this Saturday, and it will be a Blue Moon because it will be the 2^nd full moon of the month… The second type of Blue Moon comes when in an astronomical season (the period between an equinox, and solstice, or vice versa) that contains 4 full moons…  We’ll see this happen in August of this year…

Ever since we began to spend our winters down here and could watch the full moon rise out of the ocean each month, I’ve taken on educating myself about full moons, tides, etc. 

Ok, back to normal programming!  Well, you can count Janet Yellen along those that don’t appreciate Bitcoin…  Yesterday, in a speech to some folks at a virtual conference, Yellen dissed Bitcoin, saying, that, “Bitcoin is an extremely inefficient way of conducting transactions and the amount of energy that’s consumed in processing those transactions is staggering,” said Yellen.

“I don’t think that Bitcoin is widely used as a transaction mechanism,” she added.

OK, so here’s Chuck’s addition to what Yellen wanted to say, after dissing Bitcoin… “But our new government issued cryptocurrency will meet all requirements for ease of use in transactions, so get out of Bitcoin now while you still can, before there’s a mass exodus for the door.” 

Now, wouldn’t that have been better if Yellen just spoke the truth, and didn’t hold back?  But hey, she’s a Gov’t official, why would we expect better from her?

Oh, BTW, Bitcoin sold off by 17% but the Bitcoiners all believe that Yellen’s words didn’t have anything to do with the selloff… According to the Bitcoiners the virtual coin needed a correction, after a nonstop run up to $51,000…   Whatever… (did you get my exasperation there?)

Yesterday and today, Cartel, and I mean Fed Chairman, Powell, will speak to the House and Senate on different days… Yesterday, this is what Powell had to say , “There’s nothing more important to the economy right now than people getting vaccinated,” He went on to talk about how the Cartel, I mean the Fed has provided much needed fiscal policy… 

So, what’s holding up the 3^rd round of stimmy checks?  The Gov’t has proposed a $1.9 Trillion deficit spending program and it is dragging its proverbial feet before getting passed…  I wonder what the holdup could be? Could it be that some representatives are having second thoughts about the size of this relief package?  Nah…  These people are as cold hearted as the Grinch, before he meets Cindy Lou! I doubt they ever have second thoughts on their deficit spending!

And that in a nutshell should be the reason currency traders begin selling dollars…  On Friday last week, I was treated with a visit from a friend that lives down here about 45 minutes north of me. We take turns visiting each other, and this year, it was Walt’s turn to come to Juno Beach!  I had a long discussion with him that I’ve not had with you, so here goes…  better grab a new cup of coffee…

When I played basketball, the coach would always be yelling at us to “value the ball”… In other words, don’t turn it over, by making silly mistakes…  We had the responsibility of keeping the ball and valuing the possession.  These days, no one values the dollar…  Ok, stay with me on this…

If the dollar was valuable, we wouldn’t be printing it by the trillions to dilute the current outstanding stock, right?  If the dollar was valuable, it would have an interest rate that paid people for holding the currency… But if it pays no interest, apparently the powers that be don’t care if you hold the dollar or not, right? If the dollar was valuable, we wouldn’t give people loans that we know good and well they aren’t going to pay back, right?  Think about that one for a minute… Banks make loans, and give out dollars to borrowers, who may or many not pay it back, but the key here is that if the dollar were valuable, it would charge a higher rate on loans (you must be able to pay to receive this valuable currency)  and they wouldn’t give it out nilly willy to anyone that breaths or fogs a glass!

There are so many dollars floating around that everyone has a wad of them in their pockets (except millennials, they never have cash!) But there was a time when you would be the only one at the table that could pull out a Benjamin Franklin and pay the tab… Nowadays everyone can do that! That’s because dollars aren’t worth what they once were, and everyone has them!

And this is all a result of not valuing the dollar… need some more dollars? We’ll just fire up the printing press here and see!   Foreigners don’t covet owning dollars in their foreign exchange reserves like they once did, getting foreigners to show up at the Treasury Auction window is like getting people to show up for a root canal without Novocain!

Value the ball…  Because the dollar is the reserve currency of the world, we as its handlers, are supposed to value the currency, and preserve the value of the currency, and we don’t…  I could go on for hours on this, just ask Walt! HA!  But, I think you get the point I’m making… The dollar is valued any longer… 

The U.S. Data Cupboard today will see the second phase of Cartel, I mean Fed Chairman Powell’s testimony on the economy to Congress…  We’ll also see the stupid Consumer Confidence Index for this month…  I call this data “stupid” because in reality it’s nothing more than a pulse on what the stock market is doing…  I always kid, and say, “They never ask me if I’m confident!”

To recap… The currencies and Metals did follow up on their Friday gains on Monday, with the euro rising through the 1.21 handle, and Gold adding back $25.90, while Silver rose above $28…  There was some slippage in the currencies and metals overnight, but the move is small… Janet Yellen disses Bitcoin, and Chuck adds words to Yellen’s speech… And Chuck goes all descriptive on us and describes how he views that the dollar has no value any longer…

For What It’s Worth… Well, it’s been a while since I last featured a Wall Street On Parade article in the FWIW section, and that absence stops today! This is an article about how two watchdogs didn’t paint a pretty picture of what’s happening on Wall Street, and it can be found here: How Corrupt Is Wall Street? Two Watchdogs Weigh In (wallstreetonparade.com)

Or, here’s your snippet: “Better Markets and Public Citizen, two of the most informed Wall Street watchdogs, provided written testimony for last Thursday’s hearing before the House Financial Services Committee on the structure of Wall Street. And, to put it mildly, their assessment of the state of affairs on Wall Street does not align with what hedge fund titan Ken Griffin of Citadel told lawmakers at the same hearing. Griffin testified, under oath mind you, that: “The U.S. capital markets are the envy of the world. Our nation’s ability to allocate capital to its best and highest use cr­­­­­eates jobs, drives innovation and fuels our economy.”

In reality, foreign regulators have repeatedly filed enforcement actions against the largest banks on Wall Street for engaging in fraud and rigging markets. As for allocating capital “to its best and highest use, Better Markets describes what’s wrong…

“Market participants at the center of these events have for years taken advantage of market fragmentation, order routing schemes, questionable execution practices, and leveraged trading strategies. And even in the current saga, there are reports that some sophisticated participants made hundreds of millions of dollars momentum trading (exacerbating volatility both as the price went up and as it crashed). And yet, for years, the financial regulators have failed to fully and properly examine, much less remedy and responsibly limit, these questionable if not abusive, predatory or illegal practices.

“Furthermore, for years, a handful of Wall Street’s biggest banks have ‘danced while the music was playing.’ They have facilitated many of the trading practices at the center of the events and bent the rules of the markets to their advantage using their roles in the governance, operation, and resiliency of clearinghouses, exchanges and trading venues, data repositories, and more. Those banks also remain (a) the prime brokers for most sizable hedge funds, including those involved in the GameStop events; (b) the dominant derivatives dealers with 87.3% of U.S. derivatives exposures; and (c) significant lenders in various capacities, including as securities lenders.”

Chuck again… The Fixx sang: One Thing Leads To Another…. And that’s what I’m thinking this morning after reading this article, when it comes down to Wall Street…  I thank Pam & Russ Martens of Wall Street On Paarde.com  They do an awesome job of digging and prying, and uncovering the truth!

Market  Prices  2/23/21: American Style: A$ .7907,  kiwi .7331, C$ .7930, euro 1.2155, sterling 1.4089, Swiss $1.1111, European Style: rand 14.6659, krone 8.4906,  SEK 8.2877,  forint 295.17,  zloty 3.7083,  koruna 21.2931, RUB 74.33, yen 105.23, sing 1.3204, HKD 7.7534, INR 72.45, China 6.4650, peso 20.66, BRL 5.4267,  Dollar Index 90.10,  Oil $62.07,   10-year 1.36%, Silver $28.04, Platinum $1,262.00, Palladium $2,400.00, Copper $4.08, and Gold… $1,812.10

That’s it for today…  What on earth are the Blues management doing with these red jerseys for our Blues? I know that the team name is not a color, but they’ve worn Blue, White, and Gold since they were introduced as a new team in 1967!  I have a difficult time following them in those red jerseys! Come on! Ditch the red jerseys for the true Blues fans, and not the young kids that have jumped on the bandwagon after the Stanley Cup win 2 years ago!  I was reading about the Cardinals practice yesterday, and how Nolan Arenado, Paul Goldschmidt, and Yadi were in a hitting group. Now that’s something that I would have liked to witness in person! But this year, that’s a no-no…  darn pandemic! I know, I know this is not a 3rd world problem, just an inconvenience for Chuck!  Doucette takes us to the finish line today with his song: Mama Let Him Play…  Jerry Doucette really rocks on the guitar in this song…  I hope you have a Tom Terrific Tuesday, and please, pretty please with sugar on top, Be Good To Yourself! 

Chuck Butler

 

 

February 22, 2021   

* Currencies & metals are both back on the rally tracks!

* Sterling outperforming both euros and francs… strange days indeed! 

Good day… And a Marvelous Monday to you! Who’s sneaking around the streets of the city? Everyone knows is Windy…  And that’s what it was here yesterday, gale force winds blew from daylight to moonlight, and oh was the ocean angry yesterday!  The surfers loved it, but to me I look at when it gets all riled up like that and think, of being on a boat in the middle of that, and how I would be hanging on for dear life! It’s pitch dark outside right now, but I don’t believe I hear the wind howling like it was yesterday, so I’m good with that! Just like I was good with my beloved Missouri Tigers putting a halt to their 3-game losing streak on Saturday VS. S. Carolina. And this morning, I’m being treated to one of my all-time favorite Temptations song: I Wish It Would Rain…  “Sunshine, blue skies, please go away, my girl’s found another and gone away.”

Well… All the dollar buying in the last 10 days came to an abrupt halt on Friday… The questions about the dollar began on Thursday, when the Weekly Initial Jobless Claims rose to 861,000 the previous week… And when I last talked to you on Thursday morning, I said it would be interesting to see what the Import price data showed us for Jan. And just like I thought, the import prices rose 1.4% in Jan. VS 1% in Dec.  Recall that we had seen dollar weakness earlier this year, before the last 10 days had wiped out all the gains the currencies had booked against the dollar. 

This Import data is an important thing to look at because when there’s dollar weakness, your buying power goes to hell in a hand basket, and inflation is imported into our economy…  But, with the last 10 days of dollar strength, all was forgiven… Until… It wasn’t, and that was Friday…  Of course it would help non-dollar owners if there was follow up to Friday’s dollar selling…  I guess we’ll have to see, eh?

The Dollar Index on Thursday morning was 90.72, and Friday at the close the Index was 90.36 , and the euro had climbed back above 1.21….  I was beginning to think that traders had lost their collective minds, with all that dollar buying the previous 10 days before Friday… How on earth could they believe that will all the currency printing that the dollar’s value wasn’t going to be diluted?  This past weekend good friend Dennis Miller sent me a link to an article that explained that new U.S. Treasury Sec. Janet Yellen was gong to release back to the Fed a ton of cash that the Fed can then use in their programs, which simply means that there will be even more dollars on the streets, diluting the current stock of outstanding dollars…

Dennis asked me if it meant a big dollar selloff, or no? I responded to him, “this should result in dollar weakness, but we do live in an age of opposites, where right is wrong and wrong is right” In case you want to read that article here is the link: https://www.birchgold.com/news/yellen-challenges-powells-control/

Ok, Gold finally put an end to the daily selloffs on Friday too! The shiny metal was able to gain $9.30 to close at $1,785.60… Bitcoin buyers had really taken a bite out of Gold’s value, and the price manipulators piled on, which should be a penalty!  Silver has been the more favored metal in recent days, as I am told by my metals Guru, Tim Smith (1-800-926-4922) that demand for physical Silver is so strong right now, that dealers are having a tough time getting new supply…  Silver was up 27-cents on Friday, to close at $27.36.

In the overnight markets… There’s been more slippage in the Dollar Index, as it has dropped to 90.25, as I write… Gold is pushing higher, with an early morning gain of $13, and is now within spittin’ distance of $1,800 again… Silver is joining in with a gain of 15-cents early today.   Pound sterling has climbed to 1.40 this morning, and there doesn’t seem to be anything to stop this currency that’s rallying on a hopes…  It’s as if Elvis, I mean the dollar buyers have left the room… 

Pound sterling is currently trading with a 1.40 handle, and is outperforming the euro and Swiss franc. This is something that is seldom seen, and these three will normally rise and fall together, with the euro being the Bid Dog on the porch… But in this day of opposites…  I’m just saying. 

The price of Oil which last Friday had reached a price handle of $61, has slipped back down below $60, since that time, as the latest data last week sure didn’t give anyone thinking that the economy was recovering a warm and fuzzy…  And all that talk of inflation rising and so on, really has the yields on Treasuries waking up from their 30 year slumber.. This morning, the 10-year Treasury yield is 1.39%…  The Bond boys are telling the Cartel members to get off their duffs and do something about this rising systemic inflation…  I’m just saying… 

The IMF was full of good news (NOT!)… The IMF believes that we will experience “The Worst Downturn Since The Great Depression”…  So, I guess they aren’t buying the Kool-Aid that some Gov’t economists are pouring, that the U.S. will come roaring back as soon as the virus is contained… 

Of course they didn’t know about the polar vortex that came down on Texas last week… I read this week that vegetables that were growing have frozen in the ground, and that the grocery stores are out of food supplies… The temperature may have returned to normal yesterday (it was 70 in Houston), but the ill-effects of the vortex will last for weeks, thus slowing the economy of Texas… And in case you wonder if Texas is that Big of a Deal, the answer is yes!

So, last week I went on about the Chinese renminbi and how it needed to gain a wider distribution of the renminbi and open up its bond markets to move ahead with their plans to replace the dollar as the reserve currency of the world… And then this weekend I read a report on Bloomberg.com, that said the Chinese were getting ready to check of the first box, as in: “In London — the world’s center of foreign exchange — there’s more yuan changing hands than ever before. Options on the Chinese currency exceed those referencing the Japanese yen, and buying or selling the yuan is now as cheap as trading the British pound.”

And next to that article was one stating that income flows into India are really helping the rupee to higher ground VS the dollar…  And then another talked about the rally that I’ve been talking about in pound sterling…   In the U.K. apparently, they ARE buying the Kool-Aid and believe that their economy will come roaring back once the virus is contained….   As if!

Ok, there’s only so much good news I can give you each day! HA!  So, let’s go to the Data Cupboard and see what’s on the docket this week!

Well, it appears that we won’t spend a lot of time here, until later this week… Today’s Cupboard has the Leading Indicators for January, but it’s only economic data geeks like me that pay attention to this data set…  So, the currencies and metals are on their own today, if they want to follow up on Friday’s buying of these two asset classes.

To recap… The currencies and metals both rallied on Friday to end last week. In the overnight markets  there’s been more slippage in the Dollar Index, and Gold is up $13, and Silver is up 15-cents in the early trading, so it appears there will be follow up to Friday’s rally in both currencies and metals. Chuck is worried about the ill-effects of the polar vortex and how long they will last in Texas…  China is gaining a wider distribution of their renminbi, and investment flows into India are strong, thus supporting the rupee… And some economists are drinking the Kool-Aid in the U.K. and pushing pound sterling higher…

For What It’s Worth… So, how many of you have seen the movie “The Big Short”?  it was a movie that featured a trader by the name of Michael Burry, who shorted the housing markets back in 2007, and when everyone thought he had lost his mind, the housing market imploded, and he walked away with beau-coup bucks covering his shorts… Well, that “guy”, Michael Burry is back and he has some things to say about inflation… And that arricle can be found here: Michael Burry Warns Weimar Hyperinflation Is Coming – The Burning Platform

Or, here’s your snippet: “one day after the Weimar tweetstorm below, and shortly after our article came out, Burry tweeted the following:

People say I didn’t warn last time. I did, but no one listened. So I warn this time. And still, no one listens. But I will have proof I warned.

Indeed he will.

One week ago, Bank of America hinted at the unthinkable: the tsunami of monetary and fiscal stimulus, coupled with the upcoming surge in monetary velocity as the world’s economy emerges from lockdowns, would lead to unprecedented economic overheating… or rather precedented as BofA’s CIO Michael Hartnett reflected back on the post-WW1 Germany which he said was the “most epic, extreme analog of surging velocity and inflation following end of war psychology, pent-up savings, lost confidence in currency & authorities” and specifically the Reichsbank’s monetization of debt, and extrapolated that this is similar to what is going on now.

There is, of course, another name for that period: Weimar Germany, and because we all know what happened then, it is understandable why BofA does not want to mention that particular name.

Of course, others have been less shy – in 1974, Jens Parsson wrote a fascinating, in-depth historical analysis of the hyperinflationary collapse of Weimar Germany under the original money printer, Rudy von Havenstein, “Dying of Money: Lessons of the Great German and American Inflations” one which we periodically remind readers is absolutely critical reading in preparation for what comes next.

Then overnight none other than the Big Short, Michael Burry, who has been rather busy making waves within the financial community with his hot takes (most recently, his slam of Robinhood and his bullish view on Uranium), picked up on the theme of Weimar Germany and specifically its hyperinflation, as the blueprint for what comes next in a lengthy tweetstorm cribbing generously from Parsson’s seminal work. And while the details are familiar to most monetary historians, the fact is that now none other than the man who was made famous in the Big Short is calling for Weimar-style hyperinflation in the US. Below is an easily digestible repost of Burry’s lengthy Saturday tweetstorm, which shows just how similar our world is to that prevalent in the years just before Weimar Germany saw the most explosive hyperinflation in history.

The US government is inviting inflation with its MMT-tinged policies. Brisk Debt/GDP, M2 increases while retail sales, PMI stage V recovery. Trillions more stimulus & re-opening to boost demand as employee and supply chain costs skyrocket. #ParadigmShift”

Chuck Again…  You know… people didn’t listen to him in 2007… Will they listen to him now?  I doubt it, because people just don’t want to believe that the Gov’t would lead them down the road of runaway inflation…  But those of us that have hedged our investment portfolios with Gold & Silver, see and get what he’s saying… And speaking of inflation fears… don’t look now, but Copper is trading above $4.00 this morning…  hint, hint… 

Market Prices 2/22/21: American Style:  A$ .7885,  kiwi .7314,  C$ .7918, euro 1.2136, sterling 1.4018, Swiss $1.1137, European Style: rand 14.8392, krone 8.4912, SEK 8.2639,  forint 295.67,  zloty 3.7046,   koruna 21.3467, RUB 73.99, yen 105.58, sing 1.3228, HKD 7.7533, INR 72.42, China 6.4859, peso 20.66,  BRL 5.3806, Dollar Index 90.25,  Oil $59.69,   10-year 1.39%, Silver $27.52, Platinum $1,273.00, Palladium $2,414.00, Copper $4.01, and Gold… $1,798.40

That’s it for today…  Well today’s is Washington’s Birthday…  When I was in elementary school we celebrated Washington’s birthday, but years later they decided to bundle all presidents together, and call it president’s Day…  Well, the full team reports for Spring Training this week. When I first started coming to Spring Training down here in Jupiter, you could go around to the back and watch the team go through fielding and hitting drills… I could sit there on a bleachers bench, watching my beloved Cardinals practice on 3 different fields… But not this year! No one can watch practice… UGH!  Next Monday, I’ll have seen my first game of the spring… And this weekend we will be having guests… YAHOO! I told my friend, that it was good he was coming so that Kathy would stop yelling at me! HA! Our Blues split a pair of games with the Sharks this past weekend, and start a new pair of games tonight VS the Kings…  Let’s Go Blues!  And with that, one of my fave bands will take us to the finish line today, as Poco sings: Just For You And Me…  I hope you have a Marvelous Monday, and please… Be Good To Yourself!

Chuck Butler

 

 

February 18, 2021

* Currencies & metals continued to get sold on Wed.

* Since the PPI print yesterday, the dollar is getting sold… 

Good day.. And a Tub Thumpin’ Thursday to you! With no games for me to want to watch last night, I began a hunt for something in my email archives…  Believe it don’t, but I’ve been asked by the folks at Asset Strategy International to be on a virtual panel that they host quarterly… And of course I said “yes, I would be honored to be on that panel”  When it gets close, I’ll be sure to give you all the link to watch it. I’ll be on with my publishers, and good friends, Mary Anne, and Pamela Aden.  Kind of reminds me of when I used to get requests to speak all the time…  Any way, they wanted a picture of me and a bio! Wait! What? I haven’t written a bio in 15 years!  Well, I did find what I was looking for after an extensive search, through my archives…  An old bio…  I updated it, made some changes, and doctored it up as best I could, and sent it off with a dated picture of me, but I don’t think that matters… The only difference in the picture and now is that now I’m completely bald, and wear different glasses…  The Guess Who greet me this morning with their song: Undone… “She climbed a mountain that was far too high, and when she found out she couldn’t fly, it was too late”…

I know that I’ve expressed my adoration for the singing voice of Burton Cummings the lead singer for the Guess Who, in the past, but in case you missed class that day, now you know!

Well, there was more selling of Gold yesterday, the markets were not kind to the shiny metal, but… There’s always a silver lining, right? And in Gold’s corner, there was a late day rally that brought the downward movement in Gold, which at one point in the day was negative $25, to a negative $17.60, to close at $1,776.90…  Silver which is enjoying this renewed interest in the metal, and causing major supply problems, gained on the day, -13 cents, to close at $27.45…

In yesterday’s Data Cupboard, there was the January PPI (wholesale index)  or Producers Price Index, which would indicate the early stages of inflation down the line as measure by CPI (consumer inflation)

Well… PPI has been benign for quite a few years now, as deflation as gripped the economy, and brought non-existent pricing pressures…  Well, yesterday, that all changed… And PPI posted a gain of 1.3% in January… This is the largest 1 month move in PPI since…. the government changed the way the inflation metric is calculated in December 2009!!! 

Now, remember me telling you that inflation fears at the consumer level, were rising, and helping to push the yields of Treasuries higher? Well, I did… Any way, this huge jump higher in PPI will eventually spill over the CPI, and when it does…  I wouldn’t want to be the guy that signs the stimulus bill!

I say that because…. Drum roll please….  Most economists that are smarter than the average bear, have said that the $1.9 Trillion Stimulus bill would cause inflation to rise…..  Well, it’s already rising and that’s before the Gov’t prints the $1.9 Trillion in new currency!

So, I believe that this surprise in PPI was the reason that Gold finally found a bid later yesterday, and is up in the early trading this morning…  Oh, and another surprise in yesterday’s Data Cupboard saw January Retail Sales soar 5.3%!!!!!  After 3 months of wallowing in the mud, this data set finally made a move higher, and taken with the increase of PPI, things are looking like CPI will be quite high when it prints next Tuesday 2/23…

Currency printing alone won’t move the inflation needle too much… But supply chain problems causing wholesale price increases that carry down to consumer price increases, will move the inflation needle…  About a week or so ago, I wrote about the two ways that inflation can arise…  I think it would behoove me to repeat that explanation, provided by Bill Bonner…

“Either the economy heats up (cyclical inflation)… and businesses need more labor and raw materials to keep up with the demand. Shortages then arise. Everyone tries to keep up with the whirlwind of getting and spending, leading to higher prices…

Or… the other possibility (systemic inflation) is that the economy cools down. Fake money, false price signals, regulation, bubbles, giveaways, and COVID-19 shutdowns could simply cause a cutback in buyable output… while the supply of available money continues to rise.”

Yes, the latter of the two ways is what we’re seeing these days… And that, my friends is the reason I think the recent bout of Gold selling has been about… These traders all know that when inflation does start to rise here in the U.S. that Gold will rise alongside it… Or at least historically it has done that, so they knocked the price of Gold down so that it starts its rise from a lower base….  I know, I know, you have to stick with me through the end of that discussion to get what I’m talking about, but you did it, and you get a Gold star for doing so! HA!

Oh, and a funny thing happened on the way to the Forum…  The Cartel’s Meeting Minutes from the last meeting were printed yesterday, and guess what the Cartel members had to say about inflation fears…. “they were not concerned about inflation, with “most” officials saying that inflation risks were weighted towards too low”  Hmmm… I wonder if anyone showed them the PPI print yesterday?  These guys and gals can’t find pin for a room full of bubbles, how would they know if they saw inflation rising? …   I’m just saying…

The Currencies yesterday, floundered about like a fish on the dock…But in the end, they gave back a bit more in value to the dollar bugs… The Dollar Index, which yesterday morning was 90.84, ended the day at 90.91… Obviously not as large an increase in the Dollar Index as the day before when it rose 84 bps…  But a day that the currencies aren’t proud of, for sure! 

In the overnight markets there’s been some dollar selling, as the currencies are a little higher VS the dollar this morning. Gold is up $3.70 in the early trading, while Silver is down -28 cents…  A reversal of the recent trend for these two metals. Pound sterling continues to rise, as does the price of Oil, which added another whole figure to its price in the past 24 hours, and now trades with a $61 handle… 

Yesterday, I made a BIG Deal out of the fact that China passed the U.S. as Europe’s top trading partner in 2020…  And that got me thinking about something that I had written a couple of years ago, when then President Trump announced the trade tariffs on China…  I said that no good would come of that, and asked him to reconsider the tariffs…  Remember? These tariffs were supposed to narrow the Trade Deficit that the U.S. had built over the years…   Well here are the facts on that… “The US last year posted its biggest annual trade deficit since 2008 as the global health crisis depressed export markets for American companies.

The gap in trade of goods and services widened to US$678.7 billion in 2020 from US$576.9 billion in 2019, according to Commerce Department data.”

Look who was right…. Neener, neener, neener!  The dollar was too strong for the past 6 years, and that has weighed heavily on our inability to make inroads in overseas exports… I read a report last year that made the hair on the back of my neck stand up…  (I really don’t have hair on the back of my neck, but if I did, it would have been standing up!)  The report was written by an economist who said that the Trade Deficit was not important… OK, smarty pants, what happens when you need to import a particular item from a country that you desperately need (like face masks), and through the years you have racked up a very sizeable trade deficit with this country… And the Country balks at giving you any more credit?  Well, in the old days, those would be fightin’ words… But in today’s world, everyone major country has the capability of wiping out the other countries, so it’s a Mexican Standoff, if you will when it comes to wars…

Then comes the scary part…  What happens IF the leader of the country in debt, decides that the only way out of this is by waging war?  Uh-Oh…

I rest my case…  And besides, what’s another $678 Billion in red ink?  It all comes from the Magic Money Tree, right?  I shake my head in disgust that these things are even thought of this way by some people….

The U.S. Data Cupboard yesterday had more than the data prints we’ve already talked about this morning… In addition, to retail sales, & PPI,  we also saw Jan. Industrial Production, which was positive .9%, but down from Dec’s 1.3% figure… And Capacity Utilization surprised with an upward move to 75.6 from 74.9…   That one is quite interesting, but one print doesn’t make a rally, for businesses, so we’ll circle back in March when February CAPU prints…

Today’s Data Cupboard has the Weekly Initial Jobless Claims,  and while we’re talking about inflation fears and trade problems, the Import Prices data will print today too…

To recap…  The currencies and metals got sold again on Wednesday, this time the selling wasn’t as harsh as Tuesday’s selling, but then it was still selling. Nonetheless….  In the overnight markets the dollar has gotten sold a little, so we’ll see if it carries over to today’s trading… Chuck talks at length about the rise in PPI, and points out the two ways inflation can rise. Chuck also spends some time talking about the U.S.’s trade problems… Chuck gloats about who was right about those tariffs!

For What It’s Worth… Ok, to end the week, I have a very long FWIW article for you today…  it’s title is in the link below…  this is a very important discussion folks, and that’s why I chose it for the FWIW article today, so grab a cup of coffee, and get comfortable…  And it can be found here: Who Bought the $4.5 Trillion Added in One Year to the Incredibly Spiking US National Debt, Now at $27.9 Trillion? | Wolf Street

Or, here’s your snippet: “Driven by stimulus and bailouts, and fired up by the tax cuts and by grease and pork, the Incredibly Spiking US National Debt has skyrocketed by $4.55 trillion in 12 months, to $27.86 trillion, after having already spiked by $1.4 trillion in the prior 12 months, which had been the Good Times. These trillions are all Treasury securities that form the US national debt, and someone had to buy every single one of these securities:     

Tuesday afternoon, the Treasury Department released the Treasury International Capital data through  December 31 which shows the foreign holders of the US debt. From the Fed’s balance sheet, we can see what the Fed bought. From the Federal Reserve Board of Governors bank balance-sheet data, we can see what the banks bought. And from the Treasury Department’s data on Treasury securities, we can see what US government entities bought.

Share of foreign holders falls to 25% for first time since 2007:

In the fourth quarter, foreign central banks, foreign government entities, and foreign private-sector entities such as companies, banks, bond funds, and individuals, reduced their holdings by $35 billion from the third quarter, to $7.04 trillion. This was still up from a year ago by $192 billion (blue line, right scale in the chart below). But their share of the Incredibly Spiking US National Debt fell to 25.4%, the lowest since 2007.

The Fed added $253 billion to its Treasury holdings in Q4, bringing the pile to $4.7 trillion by the end of December, a record share of 17.5% of the Incredibly Spiking US National Debt . Over the 12-month period, the Fed added $2.37 trillion in Treasuries to its holdings, more than doubling its pile:

Chuck Again…  I can’t get all of the article here so you’ll have to go to the link to read it all… It’s quite interesting seeing the distribution of Treasuries, and the increase that the Cartel, I mean the Fed, has taken on, which to me is nothing more than demonetizing the debt…  For which if the markets ever woke up and realized what the Fed was doing, would not be good for the dollar… 

Market Prices  2/18/21:  American Style:  A$ .7771,  kiwi .7206,  C$ .7880, euro 1.2064, sterling 1.3932, Swiss $1.1140, European Style: rand 14.5860, krone 8.4696, SEK 8.3170,  forint 297.25,   zloty 3.7202,   koruna 21.4186, RUB 73.77, yen 105.75, sing 1.3274, HKD 7.7425, INR 72.56, China 6.4561, peso 20.21,  BRL 5.3827,   Dollar Index 90.72,  Oil $61.38,  10-year 1.29%, Silver $27.16, Platinum $1,263.00, Palladium $2,400.00, Copper $3.88, and Gold… $1,780.60

That’s it for today… and of course this week…  Remember last winter, when I had to make 2 trips a week an hour north of where I stay, to the wound center in Port St. Lucie?  And this year, no such trips!  Tomorrow I’m going to be getting a visitor!  My good friend, Walt is coming to visit me. He says he needs a dose of Chuck’s thoughts… I said, “buy me lunch and I’ll talk all day!”   Tomorrow is also the day when I’ll be ordering my spring training baseball game tickets!  YAHOO… Pitchers and Catchers reported to Jupiter yesterday, so it’s all systems go, right now, subject to change at any time!  Feb. 28 is the first game for me… I’m already as excited about going to the stadium as a kid at Christmas! And with the Cardinal’s new 3^rd Baseman, Nolan Arenado, the lineup will have a different look to it this year, which was badly needed for a bland offense last year… I don’t think I’ve missed any birthdays this week, so I’ll see what’s playing to take us to the finish line today… Ahh, it’s Brewer & Shipley with their rock classic song: One Toke Over The Line… Now there’s an oldie for you! And with that, I hope you have a Tub Thumpin’ Thursday, and will Be Good To Yourself!

Chuck Butler

 

 

February 17, 2021

* A U-Turn in the Currencies & metals on Tuesday

* Chuck has a great 4-minute video for you to watch today… 

Good day… And a Wonderful Wednesday to you!… What has happened to my beloved Missouri Tigers Basketball team?… 10 days ago, they had moved up in the national standings to #10… And since that time they have lost three straight games, including their loss last night to Georgia… A team that they had beaten pretty handily earlier this season… My St. Louis U. Billikens played last night too, and they had little difficulty winning VS LaSalle.. We had a nice dinner last night with friends here, as two of them are headed back home today…  Why? Why would anyone go back to those cold, frigid, frozen tundras, covered with snow?  Me? I would rather build sandcastles on the beach, than snowmen in my front yard… I’m just saying…  Earth, Wind & Fire greets me this morning with their song: After The Love Is Gone…  “Oh, after the love has gone. What used to be right is wrong, Can love that’s lost be found?”

What used to be right is wrong…  Man, could those lyrics be any more truer today?  Oh well, I don’t want to start the day ticking everyone off with my thoughts on that, so I’ll stick to what I know best…

Baseball…  HA!  Just kidding I wouldn’t do that to you, right out of the starter’s blocks this morning! So, let’s turn to the currencies, which yesterday morning, were pushing the dollar down, but that didn’t last long in the U.S. trading hours, and soon the euro was trading below the 1.21 handle, after climbing to 1.2166 in the overnight markets Sunday night… What caused this major U-Turn?  Well, it wasn’t data that caused it, and it wasn’t any Cartel heads speaking that caused it…  So before we come to the conclusion as to what caused this dollar buying, let’s look at what Gold & Silver did yesterday…

Gold lost $24.90, on the day and closed below $1,800 at $1,794.50… Silver lost 34-cents to close at $27.32…  And don’t think for one minute that the rise in Treasury yields has caused this sell off of Gold & Silver… Because, as we have seen , with the recent increases in Treasury Yields, that they can be short lived…  All it takes is some Cartel buying to drive up the price and reduce the yield…  I haven’t looked at Ed Steer’s letter yet this morning, but I will go out on a limb and say that I think this attack on Gold & Silver, carried over to an attack on the currencies, and all of it benefitted the dollar. … So, adding 1+1 you get 2 (I don’t care what math teachers say about that these days!)  And the 2 here would indicate to me that it is represented by the price manipulators, and the PPT…  A deadly duo for non dollar assets…

The good folks at GATA sent me a quote from Craig Hemke of Sprott Metals, and he had this to say: “The fight against the criminal forces that control the precious metal pricing scheme continues, and it is still far from over. However, if we can continue to apply pressure to the banks through physical metal acquisition, a forced deleverage is coming. When that finally happens, you can be certain that the price discovered through a system that is more based in physical reality will not be $27 per ounce.”

Sounds a lot like me through the years, doesn’t it? I’ve always contended that to break the short sellers is to have loads and loads of physical metals bought and stood for delivery…  And that’s why I continue to harp on anyone that reads this letter that they need to buy physical metals…

And just to finish this off.. I have, for you, a link to a 4 minute video that the Reddit folks put together that’s a play on the movie: Downfall…  that the folks at GATA sent me…  And it’s titled: The Downfall of the Silver Cabal…  so check this out, it would be funny if….  Well, here’s the link: Downfall of the silver cabal : Wallstreetsilver (reddit.com)

Oh, and one more thing on Silver before we move along…  Dave Kranzler, of Investment Research Dynamics, and a constant contributor to the GATA folks, had this to say yesterday, “The iShares silver ‘trust’ SLV is likely a fraud.” 

In The over night markets… There was more dollar buying throughout the night, and this morning the Dollar Index is trading at 90.84, which is 70 points higher than yesterday morning’s 90.14… Gold & Silver didn’t fare any better than the currencies, and Chuck believes that the metals manipulators and the PPT combined forces to bring the non-dollar Assets down…  Chuck also includes a good link to a 4 minute video that you should watch for the fun of it… 

There’s a report out in the Eurozone that says that China has passed the U.S. as Europe’s main trading partner… Wait! What?  Yes, here’s a sample of the report… “Recent data from the European Union’s statistics office, Eurostat (pdf), show that China dethroned the US as Europe’s top trade partner in 2020. EU exports to China grew by 2.2% to €202.5 billion ($245 billion) and imports from China increased 5.6% to €383.5 billion in 2020, while EU exports to the US fell by 8.2% and EU imports from the US dropped 13.2%.” 

Yes, that makes sense given that China’s economy grew last year, while the other major trading countries saw their economies contract.  But when I read the article, I kept saying to myself: Say it Ain’t So Joe! 

The price of Oil has climbed to a $60 handle in the past 24 hours..  Seems the frigid temps have shut down refineries in Texas, as the cold front has dipped into the southern part of the U.S.  So is this a lasting rally in Oil, or is it a short timer?  I just think that it’s pretty interesting to see Oil trading with a $60 handle, for what’s it been  2 years since we last saw this? 

As I mentioned above, Treasury yields continue to climb higher, and the 10-year Treasury’s yield is at 1.29% this morning…  This rise has been quick and to the point which has me worried…  but like I said above, all it would take is for a boat load of buying from the Cartel to bring yields back down, but after they have risen so much, how much could they really be brought down? I guess we’ll have to wait-n-see, eh? 

Ok, here’s something that I want to get off my chest…  it risks being political in a sense, but that’s not my goal here… My goal is to point out that food supplies are dwindling, and that will cause huge spikes in the price of food…  You, me, and the guy down the street that washes his car with his shirt off, will all feel the pain of higher food prices… Didn’t I tell you last week that my wife has already reported to me that groceries are much more expensive these days? 

What’ causing these dwindling food supplies?  Well, the burningplatform.com had an article this past weekend that I’m going to give you three paragraphs from… Ready?  Yes, I’m ready…

“One of those presidential actions envisions the conservation of 30 percent of the nation’s lands and waters over the next decade. Where will all of that protected land come from? Perhaps from Bill Gates, who now owns the deed to most of the farmland in the nation? Doubtful.

The answer is from small, independent farmers, whose agricultural activities, the Democrats say, are responsible for 10 percent of the manmade greenhouse emissions purportedly frying up the planet.

Indeed, what seems to be happening in the United States is that the local farmers are being squeezed out of business, or paid not to grow food, while Big Agriculture is more concerned with exporting its supplies than keeping domestic food stocks safe and affordable. That seems to be a reckless policy at the best of times; at the peak of a pandemic, however, it is simply a recipe for disaster.”

OMG! What are we doing? Well… I guess the answer is in the desire of the Gov’t, and their Cartel, and Treasury that we as a country generate inflation…    All I’m going to say here is that we, as a country, need to be careful what we wish for… Because, you see, I don’t see a gentle rise in inflation… I see it getting away from us so fast that it would make your head spin…  And then the only way to get it under control is to raise rates.. And with all the debt that we have to service, higher rates is NOT advised…  Candidate Trump back in 2015, said that if Interest rates got to 5% “We were screwed”… Sorry about the language, just wanted to make the quote correct…

Ok, well the U.S. Data Cupboard today finally gets off its rear end and off the couch, where it was relaxing and eating chocolate bon-bons last week, and will give us some real economic prints today… First on the docket is Jan. Retail Sales… Refresher.. Retail Sales in December were negative -0.7%… I don’t believe the BHI (Butler Household Index) indicated that Retail Sales will be strong in January… They may not be negative, but they won’t be strong…

In addition, we’ll also see Industrial Production and Capacity Utilization for January…  Don’t look for any miracles here folks… The rot on the economy’s vine is being exposed daily…  The economic prints should be like the Paul Simon song: Oh, Cecelia you’re shaking my confidence daily…

To recap…  It was an ugly day yesterday, after seeing things change in the overnight markets, the price manipulators and the PPT went to work to support the dollar… Gold lost $24, and the euro lost about 1-cent on the day… Ugly, ugly, ugly… That’s for sure… Chuck talks about inflation again, and also talks about food shortages causing rising prices… The games people play now.. every night and every day now, never saying what they mean, now, never meaning what they say… (Joe South)  And to that, Chuck talks about Silver a lot today…

For What It’s Worth… Ok, well, since I talked a bit above about the rise in the Treasury yields, I thought it would best to follow it up with an article about it in the FWIW section today… And so… That’s what we have. A zerohedge.com article about the rise in Treasury yields, and it can be found here: 1.25% 10Y Yields: Now What? | ZeroHedge

Or, here’s your snippet: “10-year yields broke through 1.25% during the overnight session on what can best be described as pressing a crowded trade. We’re certainly onboard with a challenge of 1.25% and 1.273% (March 19th peak) beyond there, if for no other reason than late-Friday’s selloff has created more questions than answers – suggesting the underlying momentum evident during the overnight session must run its course before any retracement is in the offing.   

Moreover, the lack of an immediate bearish trigger also implies the recent bout of weakness has taken on a different character than had the march toward higher yields been accompanied by a fundamental data event or an influx of Treasury supply. In fact, the relatively smooth takedown of the February refunding left investors with the impression the supply concession in place prior to the auctions themselves would be sufficient. It’s the reemergence of the bearish trend in the absence of an identifiable catalyst that makes the selloff particularly notable.

Given the fact rates are edging higher on a combination of bearish underpinnings as opposed to a distinct driver, the technical landscape is useful in gauging the extent to which any repricing may extend. Beyond 1.273%, there is little support for 10s until an opening gap from 1.431%-1.471% that was established in late-February. 1.50% also holds obvious significance, however a 25 bp selloff driven by a series of already known bearish factors is difficult to envision, leaving us to anticipate dip-buying will emerge long before the overhead opening gap with an eye on anything >1.30% as sufficient incentive for any demand not sated by last week’s auction of $41 bn 10s at 1.155%.

To be fair, there are plenty of factors supporting a durable repricing toward higher Treasury yields;

1. inflation expectations as evidenced by 10-year breakevens at 224 bp overnight,
2. elevated energy prices as the front-month WTI nears $61/barrel,
3. progress toward Biden’s stimulus deal expected by month’s end now that the impeachment trial has been concluded,
4. massive Treasury issuance needs and, of course,
5. record high equity prices yet again.

We’d be remiss to argue against the intrinsic bearishness of these factors, rather the challenge is gauging the extent to which any repricing can sustainably press before running up against the bullish concerns.

Chief among the influences expected to keep yields from returning to an environment in which 2-handle 10s are back on the table is the overhang of slack in the labor-market resulting from the initial hit to the front-line service sector. 

Chuck Again… See what I mean? There are arguments on both sides of the table regarding whether these higher yields can be added to or subtracted from… 

Market Prices  2/17/21… American Style:  A$ .7738,  kiwi .7181,  C$ .7870, euro 1.2060, sterling 1.3858, Swiss $1.1164, European Style: rand 14.7652, krone 8.4782, SEK 8.3318,  forint 297.68,  zloty 3.7334,   koruna 21.4340, RUB 73.46, yen 106.04, sing 1.3293, HKD 7.7523, INR 72.82, China 6.4560, peso 20.31, BRL 5.3686,  Dollar Index 90.84,  Oil $60.74,  10-year 1.29%, Silver $27.22, Platinum $1,239.00, Palladium $2,400.00, Copper $3.82, and Gold $1,791.80

That’s it for today… Well, yesterday was Fat Tuesday, although, there were no Mardi Gras celebrations on the streets in New Orleans, or St. Louis… It would have been too cold in St. Louis, but the pandemic put the kyboshes on that! My Billikens have won 4 games in a row, and are looking like they did before they had the Covid breakout on the team and had to shut down for three weeks, and miss 10 games! Yesterday was a day of rain here… With all the sun you’ve got to have a little rain sometime… right? It was still warmer than 48 other states!   I hit the wall yesterday, and without any sun to sit out in, I began reading my new book, and fell asleep in my recliner… Waking up in time to go to dinner! The sun has returned this morning, so hopefully I can stay awake to enjoy it! HA!  Heartsfield takes us to the finish line today with their rock classic song: Shine On…  I sure hope you have a Wonderful Wednesday, and continue to Be Good To Yourself!

Chuck Butler