February 1, 2021
* Currencies have drifted since last Thursday..
* Will WSB go after the silver short sellers?
Good day… And a Marvelous Monday to you! And Welcome to February! Well, I spent the weekend, basically in my recliner, as I was sick with stomach problems since Friday. Yesterday, I finally got brave and went out to the deck for a couple of hours to read. Thank goodness for that, as I hadn’t been in the sun for two days! It was a good weekend sports wise, as my beloved Missouri Tigers won their basketball game on Saturday, and the Blues won back-to-back, belly-to-belly games in Anaheim… Since I slept most of yesterday, it was no problem staying up to watch the hockey game last night! The moon was full this past weekend, and I love to watch it rise, in what appears to be, out of the ocean, as a big orange ball, and then rise to the sky and reflect a white beam of light on the ocean.. .I guess for some people this would be a romantic scene… But not for me, for I was here alone! Poor, poor pitiful me! HA! The great Van Morrison greets me this morning with his song: And It Stoned Me…
Ok… what a week it was, last week for the Wall Street Bets (WSB) folks… They took on Wall Street, and won! That doesn’t happen much, but it did last week, and guess who the WSB folks are thinking of going after now? The Silver shorts… I mean just the thought that this could happen helped Silver really push higher on Thursday and Friday. I have two thoughts on this whole shorting stuff…
First of all, the almighty hedge funds had shorted more GameStop shares than there were existing… THAT IS ILLEGAL! When you short a stock, you borrow the stock from a brokerage that has the stock long in margin accounts. When you buy on margin, you sign a margin agreement that gives the firm the right to use your stock, not all of it, for borrowing purposes… In the old days when I ran a margin dept. we would get the call from the cashier that we needed to get more stock pledged to the bank. So, I digress here…. Since you need to be able to borrow the stock to sell it short, you obviously can’t sell more than there is available… But the hedge funds did just that! Where’s the SEC? I’m furious about this, rules are rules, and if you can’t enforce them, why have them?
The second thought on this is that I’m somewhat skeptical that the WSB folks will go at the Silver shorts like they did GameStop… But let’s review the status of this Silver short… There are more ounces of Silver sold short on contracts than is available above ground… Now, if you aren’t supposed to be able to sell more stock than is available, shouldn’t it also be the same for a metal? The answer in my mind is yes… But again I digress… it would currently take more than 180 days of Silver production to equal the short ounces on contracts… Now, haven’t I always contended that the way to drive the short sellers away is to have truckloads of physical Silver bought and need to be delivered? So, how would the WSB folks go after the short sellers? I would imagine since they all like to buy stocks on their phones, that they would buy paper contracts, or maybe Silver ETFs… And that might drive the price of Silver higher, but unless there’s a required delivery at the end, then I don’t think they’ll get much traction on getting the short sellers to go away.. But, it’s worth the old college try?, eh?
Ok.. a lot to talk about at the get-go this morning, and I’m not finished! But… first we’ll talk about what happened in the currencies and metals on Thursday and Friday last week… For the currencies it was two days of nothing… absolutely nothing, say it again! The currencies for the most part drifted along and didn’t gain much, didn’t lose much, to end the week… They begin the week wearing the same clothes as last Friday… Gold & Silver rallied both days late last week, and begins the week on a flyer.. Gold closed on Friday at $1,849.10, and Silver at $27.08 ….
This will be a very interesting week, IF the WSB folks are going to go after the Silver short sellers, because with Silver trading above $27, at the close on Friday, this would normally be about the time for the short sellers to show up at the COMEX with their arms full of short Silver paper trades… I hope there is a meeting of the two forces to see who wins…
If anything, the WSB folks have given the JPMorgans, etal, the thought that there could be some resistance to their selling Silver & Gold short…
In the overnight markets things have begun to get shook up… The euro is rising, taking most of the currencies along for the ride. But the focus this morning is on Silver… Silver is up $2 in the early trading and is trading at $30.33 as I write… this has been a long time coming, and it’s going to be a long time gone (CSN)… Gold is also rising this morning, up $18 in the early trading… So, the pressure on the short sellers of the metals is already showing up..
Last week I went all upset on the idea that the markets look forward… Saying that it appeared to be a think of the past… And then I began to read report after report talking about how the U.S. economy is gong to rebound big time in the 2nd half of this year… And here’s where I’m going to go off track again and let ‘er rip! But before I start, I want to make it perfectly clear that I don’t want to see these things happen in our economy, but what I want to see and what I do see, are two different things…
I’ve done a lot of thinking lately about all the calls you hear from economists and people that should know better, or maybe not, that once the vaccines are administered to everyone, that the economy will return to normal… Really? Here’s the thing to think about… All the things that people think will get back to normal, just isn’t going to happen overnight… Ok, so you missed getting haircuts once a month, are you going to go out and get 2 per month to start to make up the deficit? You used to get a manicure/ pedicure once a month, are you now going to get one per week? The answer is no.. . The thing that really gets me is that we were a services economy, right? And we shut down non-essential services, right? How does that work out? So, we open up the non-essential services, and what do we find out? We find out that during the plandemic, most people learned how to fix things, repair things, create things, make things, etc. and will no longer need a lot of those returning non-essential services… I began to think about all this stuff when I heard an economist say that there is pent up demand and that in the 2nd half of this year we will see a very strong economic recovery, and therefore that’s why the markets are so strong, and the dollar is recovering, because they are looking forward to the soaring economy in the 2nd half of this year…
And the other thing to think about with regards to all this, is that the U.S. Consumer has gone about repairing their balance sheet during the plandemic… The savings rate is up 10% in the past year… Credit card debt is down big time, so kudos to U.S. Consumers, and I really do believe that the mindset of people is to make sure they are prepared financially for another shutdown, should one every come again… And so, who’s going to go out and spend this pent up demand when the all clear horn sounds? And the other thought that you need to think about is that during the plandemic people bought the big items they wanted / needed instead of spending money on eating out, and traveling. Those big items aren’t going to be needed to be bought again are they? No… So, while the spending on eating out and traveling goes up, the spending on the big items goes down… The great economist, David Rosenberg, calls this pent down demand…
I reckon this is very similar to your grandparents, who lived through the depression, or your parents, either one… We’re they all scared that another one could happen, and that savings were the most important thing in wealth accumulation? And not having debt! I know from personal experience that both cars at our house are 10 years old… But I’m not going to get something newer now… Those cars will have to go until they don’t! And maybe by then, things will be clearer financially in this country…
But… I don’t think all this will become apparent until the we get to the 2nd half of this year, and all the goodness people are expecting just isn’t there, then the light bulb over the collective heads of traders will come on and they’ll say… “That Chuck guy was right!” HA!
Well, I’ve certainly had a lot to say today, eh? Oh, and I’m not finished!
The U.S. Data Cupboard late last week had some not so good data, that should have put some pressure on the dollar, but it didn’t… Go figure, right? Let’s pick it up with the Leading Indicators that fell to .3% from .7%, last month… The Initial Weekly Jobless Claims fell back to 845,000 after two weeks of rising claims… There’s still 18.3 Million people on continuing claims… And the 845,000 while down is still larger than the highs in the great recession of 07-08… The 4th QTR GDP printed at 4% growth, which to me seems way too high, but even with this number it wasn’t enough to pull the annual rate of GDP for 202 out of the red… The 2020 GDP printed a negative 3.5%, the largest drop in 74 years… Yes, not since 1946, had we seen GDP drop by this much…
Of course the plandemic had a major share of the cause for this drop… But it’s not like can say, “if the plandemic didn’t happen”… Because it did happen, and is still happening! Now , we have to see just how we dig out from this deep hole… and remember what I told you last Thursday, that the 4th QTR GDP would have 3 more revisions before set in stone… And I would bet a shiny quarter that there will be 3 downward revisions…
On Friday, we saw Person Income & Spending… Personal Income was up .6% in December… Interesting because Personal Spending was down .2%, which put the final 3 months of 2020’s Personal Spending down 10%… And they expect me to believe that the same period of time GDP was up 4%? Hey U.S. Gov’t! I WAS BORN… I Just wasn’t born yesterday!
To recap… The end of the week last week saw no movement in the currencies, and we’ve begun the week with bot currencies & metals on the rise VS the dollar. Gold & Silver saw some gains to end the week, with Silver outperforming Gold, as there were words being spoken about the WSB folks turning their attention to the short sellers in Silver.. And Silver really has gone on a flyer this morning! Chuck goes Professor Charlie Butler in today’s letter with explanations of short sales, pent up demand, and other things on his mind… You won’t want to have missed that, so go back now, and read it! HA!
For What It’s Worth… Longtime readers know I’m no stock jockey, and I rarely talk about stocks, with today’s rant about short sellers the exception… But this article came to me from a dear reader, that after spending all that time talking about the WSB folks above, I thought this would play nicely in the sandbox. And it’s about the Robinhood crowd running into a roadblock… BIG TIME And it can be found here: Robinhood Caps Maximum Holdings In 36 Stocks To Just One Share | ZeroHedge
Or, here’s your snippet: “Something bad is about to go down at Robinhood.
One day after the company drew down on its bank lines and obtain a $1 billion rescue capital investment, the company found itself in lockdown mode, allowing just a handful of shares to be bought at a time, effectively shutting down in all but name (it couldn’t risk another day of furious public outcry and massive client departures if it blocked trading completely).
However, just before the close, things got downright surreal when in a blog post the broker – which should probably change its name from Robinhood to Suit – made a shocking announcement: going forward, customers will be subject to maximum aggregate limits in 51 securities of which 14 are capped at position limits of just 5 shares, while allowing total holdings in 36 securities to be just one share!
In other words, as of this moment, no client is allowed to one more than 1 share in many others. Even boring, low vol names are limited to just one share.
Panicked clients who are wondering if this means that their current holdings which exceed 1 laughable share will be forcefully liquidated can breathe for now: the company said that “outside of our standard margin-related sellouts or options assignment procedures, your positions will not be sold for the sole reason that you are currently over the limit. However, you will not be able to open more positions of each of these securities unless you sell enough of your holdings such that you are below the respective limit.” (we expect that to change on Monday, if the company is still around.)
In other words, virtually nobody can buy any new securities.”
Chuck Again… with some help from Golden Earring… Help I’m steppin’ into the twilight zone
The place is a madhouse, Feels like being cloned
My beacon’s been moved under moon and star Where am I to go, now that I’ve gone too far?
Soon you will come to know When the bullet hits the bone” That’s how I feel after witnessing the hedge funds getting taken to the cleaners last week, and the Robinhood crowd getting basically shutdown… The Twilight Zone for sure!
Market Prices 2/1/2021: American Style: A$ .7640, kiwi .7180, C$ .7812, euro 1.2085, sterling 1.3720, Swiss $1.1177, European Style: rand 15.0038, krone 8.5848, SEK 8.3997, forint 294.68, zloty 3.7250, koruna 21.4957, RUB 75.91, yen 104.80, sing 1.3312, HKD 7.7528, INR 73.15, China 6.4267, peso 20.30, BRL 5.4615, Dollar Index 90.84, Oil $52.69, 10-year 1.07%, Silver $30.33, Platinum $1,127.00, Palladium $2,352.00, Copper $3.52, and Gold.. $1,867.10
That’s it for today… Well, we start the week and month with some major stories waiting for answers and that should make for an interesting week, eh? Tomorrow morning will be Groundhog Day, which is also the title of one of my fave movies! And no, it’s not just because Andie McDowell plays a lead! But it does play a big part of it! HA! Well, I’ve been all by myself, for 10 days, this being the 11th day… I’m kind of glad Kathy wasn’t here for my 3 days of sickness. I don’t like for people to see me sick. I have my reasons that I won’t get into now… When I was out on the deck yesterday, a woman from the condo came out and we talked like we normally do. Her name is Annette, and she asked me where my cooler of beer was? I then explained why it wasn’t there, and then told her, to not feel bad about asking! Another beautiful moon rise last night… in the words of Moon Man Mike Shannon, It’s a beautiful full moon here tonight, I hope it’s a full moon wherever you are” The Marshall Tucker Band takes us to the finish line today with their song: Searchin’ For A Rainbow… “and if the wind ever shows me where to go, you’d be waiting at the end and I know, I’d see the hill with that pot of gold.” I hope that song remains in your head all day, now, for I love me some Marshall Tucker Band! I hope a Marvelous Monday is in your day, and Please Be Good To Yourself!