June 7, 2022
* dollar buying is strong in the overnight markets
* Hedge Fund sues the LME, for market manipulation…
Good Day… And a Tom Terrific Tuesday to you! I plum forgot to tell you the results of my scans last Thursday… My oncologist sent me a note Thursday night, that said, “ Scans are clean, no new sign of cancer, keep up the good work, see you next week” Which reminds me that on Wednesday, tomorrow, there will be no Pfennig, as I’ll be at the oncologist to get poked for blood, and go over the details of the scans… No Cardinals baseball last night, so I had all kinds of time to read articles… And I failed miserably! Instead, I got out my 1935 Martin guitar, and tried to recall anything I could! A friendly neighbor urged me to get back to playing, at the graduation party on Sunday, and so… Now, we’ll see if I keep it up… I recall the first time I ever picked up a guitar, I wanted to learn how to play songs on it so badly, I played until my fingers bled… And then I couldn’t play it again for a week! UGH! I always loved playing my guitar, and singing along, but these days, my voice has gone through the gauntlet of radiation, and years of medicines… One of the artists I used play all his songs, Neil Young, greets me this morning with his song: Only Love Can Break Your Heart
We began the day and week yesterday morning having seen the selling of the dollar in the overnight markets, only then to see the dollar’s loss erased in the U.S. session… Hmmm, and just yesterday, I was talking about the ESF (Exchange Stabilization Fund) and it appears to me as though it was put to use in good fashion, as the BBDXY gained 5 index points on the day! The euro slipped back below the 1.07 handle. Gold couldn’t hold its early gains either, and ended up losing $9.90 on the day to close at $1,842.20, while Silver was able to hold onto a small piece of its early gains (+44-cents), and ended the day up 13-cents, to close at $22.13… The price of Oil gained a buck, and the 10-year’s yield rose to 3.04%…
Some might say that the Treasury’s gains in yield is what got the dollar bought, and Gold sold… I say baloney! The markets are supposed to forward looking, not current reactions based, and if they were forward looking, they would be staring right down the barrel of a sawed off shotgun! And if the markets really think the Treasury’s 3.04% yield is the cat’s meow, they need to look at the yield VS inflation, and tell me again why people buy negative yielding bonds! Oh, and if inflation isn’t bad enough, our friends (NOT!( at Saudi Arabia, announced that they were upping the price for their Oil… Which, if you read my tirade last week about how the Gov’t has shut down U.S. production, and we have to rely on terrorists for our Oil… Don’t get me started again on that subject!
In the overnight markets last night…. the dollar has been bought as if there is a blue light special on dollars… The BBDXY has gained another 2 index points and trades this morning at 1,234… The dollar reminds me of a star that’s about to burn out, for it will burn the brightest right before it does burn out… Gold is up in the early morning trading by $7, and Silver is flat, as we start our day… The price of Oil trades with a $118 handle again today, and appears to be waiting for the next shoe to drop before moving any higher. And bonds are also flat this morning trading with a 3.03% yield in the 10-year Treasury…
The good folks at GATA sent me this note that they pulled from Reuters: “U.S. hedge fund Elliott Associates is suing the London Metal Exchange (LME) for $456 million for cancelling nickel trades after chaotic trading in March that forced the exchange to suspend its nickel market, the LME said today.
The legal action piles more pressure on the exchange, which is being probed by regulators and is struggling to restore trust and volumes in its nickel market.
Elliott said the LME should not have halted trading and erased deals after prices more than doubled to over $100,000 a tonne in a matter of hours on March 8.”
Chuck again, well it’s about time somebody started suing these exchanges for their blatant disregard for clients’ losses… Now, if someone with some deep pockets would file a lawsuit against the COMEX… We might get somewhere! Or, even better the commodity regulators for allowing such blatant trading to harm clients!
And that ties in so well with this… In Ed Steer’s Saturday letter, he always highlights the “days to cover chart”.. This chart tells us the number of days of production it would take to cover the short positions… And that chart told us on Saturday that it would take 164 days of production in Silver to cover the short positions, and 44 days of production in Gold to cover the short positions… I find that shorting something before it’s even taken out of the ground, like metals, is different than shorting green beans or corn… There’s always a chance that weather or other mother nature tricks could play hell with yields of beans or corn…
I’ve said this before so listen to me this time… I believe that it should be unlawful for any entity to short more metal than they hold in their trading accounts… Enact that law, and watch the metals soar! Write your representative, and you can even call it “Chuck’s law”!
OK, moving on to other things this morning… In yesterday’s 5 Minute Forecast, editor, David Gonigam, quoted me from yesterday’s Pfennig, regarding the fall of the dollar’s use by international countries… I read the 5 Minute Forecast, daily, for David does a great job and writes excellently!
The rot on the Japanese yen is being exposed, as the yen drops to a two decade low VS the dollar. Long ago, in a galaxy far away, I wrote in the Pfennig about how the over two decade muck of deflation and no economic growth could use some inflation, and to to achieve that, the Bank of Japan (BOJ) should allow the yen to weaken to allow it import other countries inflation… Not a lot of inflation would do the trick, not the runaway stuff we’re seeing here now…
Well, the yen is dropping like a rock again, and the calls for intervention from the BOJ are being heard loud and clear, but the rest of the world is playing deaf, and blind to Japan’s problem… So the yen is trading this morning at a two decade low of 132, and is probably just the beginning of the rot being exposed on the yen’s vine.. I’m just saying…
Over this last weekend I came across an article that caught my eye… This was the headline in USA Today: “’I exhausted my savings’: Inflation has Americans turning to loans, credit cards to cope. Does it pose big risks?
Some Americans are relying on credit cards to make ends meet.” – USA Today
Chuck again… We will begin to see the damage done here to consumer credit lines when the next data print that encircles that item prints… When we last saw Consumer Credit (read debt) the first quarter showed that it had increase 1.7 Trillion dollars since the last quarter of 2019, and it stood at $15.84 Trillion… So, it does appear to me that the rot is already showing on the Consumers’ Balance Sheet vine… And that can’t be a good thing going into a period of high inflation, and a slower economy…
Oh, and guess what prints today? Yepper, Consumer Credit for April will print, so we’ll get to see the color of the latest report… I’m guessing here that it won’t be pretty…
Well, the good folks at GATA also sent me a couple of notes this past weekend about how India’s imports of Gold surged in the month of May, and so too did other countries… Buying physical Gold instead of dollars, apparently… Gold in just about every other currency on earth is at all time highs, it’s just that here in the U.S. with the ESF propping up the dollar, Gold lags…
In my best Andy Rooney voice, “Did you ever wonder, how the CFTC (commodities regulator) never found price manipulation in Silver?” Because they never looked! They said they did, but who was there to call them on it? No one… And since the price manipulation is so blatantly obvious, they would have to have been blind, not to find it… I rest my case..
The U.S. Data Cupboard yesterday was bare, and today, we’ll get the aforementioned Consumer Credit report, this one will be for April… The data prints this week will come straggling in and probably smell like a wet dog… Tomorrow’s Cupboard, has nothing for us… Well, actually it does have a print, but it’s something we don’t care about, or I don’t care about, so it’s nothing to me! Don’t forget that on Friday this week, the latest stupid CPI (consumer inflation) will print for May… You won’t want to miss that, just so you can throw darts or tomatoes at the folks that put together this report…
To recap… The dollar’s selling overnight the previous night was shut down during the U.S. session and the dollar index gained 5 index points, thus pushing the euro back below the 1.07 handle. Gold couldn’t hold its early morning gain, and Silver nearly gave back all of its early morning gain. Are consumers using their credit cards for everyday purchases now? And hedge fund Elliot Assoc. is suing the LME for cancelling their orders in nickel… It’s about time someone took action against these clearing houses or regulators, for allowing clients to lose money…
For What It’s Worth… this article really just rehashes all the things I’ve talked about, yelled about, whined about and so on, but I think it’s important to hear these things from other voices, so you don’t think I’m just a cranky old man… This article can be found here: What happens when the “experts” are wrong? | ZeroHedge
Or, here’s your snippet: “Think about it– inflation has been raging for more than a year. Yet they’ve changed almost nothing.
Most notably there’s the Chairman of the Federal Reserve, Jerome Powell, under whose leadership the United States has experienced its worst inflation in 40 years.
His approach so far has been nothing short of extraordinary. It started in February last year when he denied inflation was even a problem, insisting that “inflation is just very, very low”.
A few weeks later he started singing the ‘inflation is transitory’ chorus. By June 2021 he doubled down, saying that higher inflation would soon wane. That’s also when he projected a 2021 inflation rate of just 3.4%.
By December, his 3.4% inflation projection proved hilariously wrong; 2021 inflation came in at 7%. And yet the Fed still hadn’t yet lifted a finger to stop it.
He even gave a press conference late in the year saying, “I don’t think that we’re behind the curve. . . I do think it’s premature to raise rates today. I don’t think that’s controversial, certainly, I don’t know anyone arguing for that today.”
Seriously? Out of hundreds of millions of people across the country suffering higher prices, he literally didn’t know a single person who thought the Fed should be doing more to fight inflation? What a joke.
But this comedy of errors gets better.
Home prices across the US had surged 20% by December 2021. And yet, the Fed was still printing tens of BILLIONS of dollars per month to ‘support the housing market’. This is more ridiculous than Kanye West receiving millions of dollars in PPP loans (which really happened).
Apparently the Fed didn’t think that a 20% surge in home prices was reason to change anything about their approach.
This is the larger point– everything was broken. Powell’s Fed printed trillions of dollars and helped engineer inflation. Yet they failed to predict it. They rejected it. They downplayed it. They continued fueling it. And they did absolutely nothing to stop it.
In any rational organization this person would have been fired long ago. And yet, two weeks ago, he was sworn in for his second, five-year term as Fed Chairman.
It’s the same story with Janet Yellen– Powell’s predecessor as Fed Chair who is now the US Treasury Secretary.
Similarly, Yellen failed to see how keeping interest rates near zero for years and years could possibly lead to inflation. She also failed to see how trillions of dollars in government spending could possibly lead to inflation. And she has failed to do anything about it.
Yellen at least had the stones to admit she made a mistake; last week she told reporters that she was wrong when she called inflation “small and manageable” back in 2021.
Like Jerome Powell, though, she’s still in her job.
The list goes on and on. Nobel Prize winning economist Paul Krugman also recently acknowledged that he “called inflation wrong last year” when he insisted that government spending would not cause inflation.
(Krugman is the same guy who went on CNN years ago suggesting the government should lie about a phony alien invasion as an excuse to spend more money.)
It’s extraordinary how some of the most prominent ‘experts’ have been so wrong. And yet they’re all still in their same positions.
I’m not trying to be cruel; we’re all human, and we all make mistakes. But it’s silly to pretend that these experts are flawless and infallible.
They’re not flawless. They’re not infallible. Nothing is.
Chuck again… the article was written by Simon Black, who is very good at pointing out things, and expounding on them… I enjoy reading his stuff!
Market Prices 6/7/2022: American Style: A$ .7175, kiwi .6437, C$ .7944, euro 1.0668, sterling 1.2496, Swiss $1.0235, European Style: rand 15.3607, krone 9.5313, SEK 9.8399, forint 365.57, zloty 4.2966, koruna 23.1933, RUB 61.16, yen 132.80, sing 1.3767, HKD 7.8458, INR 77.71, China 6.6704, peso 19.53, BRL 4.7943, BBDXY 1,234.54, Dollar Index 102.61, Oil $118.31, 10-year 3.03%, Silver $22.06, Platinum $1,012.00, Palladium $2,017.00, Copper $4.36, and Gold… $1,848.47
That’s it for today, and tomorrow, but I’ll be back on Thursday… I was telling my good friend, Dennis Miller, about the problems I’ve having recently with my stomach acting up… I think the chemo is beginning to wear on my digestive system… But as I told him, “if that’s the price I have to pay to have clean scans, then so be it”… Well, I’m still all by myself here, until late Thursday night… I was just informed that Kathy will be heading back to Florida on the 25th, to be with her old teaching friends… then I’ll be all by myself once again for a week…The late great, Marvin Gaye takes us to the finish line today with his song: What’s Going On? I hope you have a Tom Terrific Tuesday today, and please remember to Be Good To Yourself!
Chuck Butler