January 19, 2022
* dollar gets bought on Tuesday, and sold overnight!
* Chuck takes us through the history of the CPI…
Good Day… And a Wonderful Wednesday to you! Well, wonders never cease, and I say that kiddingly, as my beloved Missouri Tigers won their baseketball game last night VS Ol Miss… On the road no less, thus putting an end to a 4-game winless record on the road. There was a rocket launch north of here in Cape Canaveral last night, but a lot fo the folks down here, went outside to see it from afar. The full moon was lighting up the ocean again last night, following an absolute Chamber of Commerce day here… The band, Missouri, greets me this morning with their one-hit wonder song: Movin’ On…
While the sun was shining here, the dollar was getting bought yesterday… I kind of had that feeling when I looked at the Data Cupboard for this week and saw no real economic data to print… Usually when that happens, the traders forget all about all the previous awful data for the U.S. economy, and buy dollars… I have no idea why they do that, but usually they do, and so it was yesterday, and probably today too… The BBDXY, which began the day at 1,170.44 ended the day at 1,173.16, so a strong move higher for the dollar. Gold lost $5.60, to close the day at $1,814.60, But… drum roll please… Silver gained 46-cents on the day to close at @23.55…
A nice day for Silver for sure! And all of the reasons that Silver should have been going up daily for some time now are still prevalent… Let’s count the things that should be pushing Silver higher every day… growing industrial demand for silver in the most important economic sectors like energy, healthcare, and technology. Solar energy expansion is increasing in the world, especially in India. And let’s not lose the fact that Silver is an excellent hedge VS inflation…
So, why did Silver rally and Gold falter yesterday? Good question, I thought of what Ed Steer would say about this, and he didn’t really spend any time on this scenario choosing instead to talk about how Silver traded through its 50 and 100-day moving averages… He did have this to say in his letter this morning that can be found here: www.edsteergoldsilver.com
“At its low, the gold price spent a bit of time below its 50-day moving average. Silver’s moon shot higher at the COMEX open also ran into the commercial traders of whatever stripe — and like in gold, they were there at the London close to limit the price damage. Silver was only allowed to close higher by 44.5 cents, but would have just as easily been up $44.50 or more if the short sellers of last resort hadn’t appeared.”
In the overnight markets last night… I can imagine the overseas traders were like, “Hey! the data was awful, why were the U.S. traders buying dollars? Well, we’re not going to fall for that trap” And so they sold dollars last night, and the BBDXY is back to 1,170 this morning… Same level as yesterday morning, go figure… Gold is up $5 in the early trading, and Silver, which seems to be on a rocket launch right now is up another 30-cents this morning…
And don’t look now but the price of Oil has bumped higher once again and trades with an $88 handle this morning… And the yield on the 10-year Treasury bumped higher too and is trading this morning with a 1.88% yield… And this is where I point out that you should thank your lucky starts that you didn’t buy the 10 -year Treasury months ago… Remember I told you not to because yields were going to go higher, and then you would be stuck with a yield of 1.38% or maybe even 1.50% for the next 10 years while yield rise… You’re welcome… HA!
So, longtime readers know that I call the CPI (consumer price index) stupid… And I aways refer to the “hedonic adjustments”… And I do believe I’ve told you the story of how CPI became so stupid, right? Well, I’m going to touch on that story once again, and then tell you how the stupid BLS is changing another calculation in the CPI…
In the mid-90’s, then President Clinton called Fed Chairman Alan Greenspan to the Oval Office, and asked him why interest rates were so high… Greenspan explained that interest rates were high because inflation was high.. You see Clinton wanted interest rates low so that everyone could afford a house… So, Clinton gave Greenspan an order to find a way to lower inflation… Greenspan hired the Boston Commission, who devised a way…. Change the way the basket of goods are priced each month, by allowing substitutions and change of weightings of items in the basket… These two things are what I refer to when I call them “hedonic adjustments”… So, immediately there was a drop in CPI, due to the changes, and from then on if a T-Bone steak became too costly, the substitution allowed for the T-Bone to be taken out and hamburger replace it, and so on… Or, if the item in the basket became too pricey, they could change the weighting applied to the item…
This, I contend is the root of the Housing Bubble that began to build with the lower rates, that were artificially low because of the stupid CPI…
This is why I make such a big deal out of www.shadowstats.com and its proprietor, John Williams, who was a Government accountant back before the changes to CPI were made, and he decided to continue to calculate CPI the was it was done before the adjustments of Clinton and Greenspan. For Instance, CPI says consumer inflation is 7%, while Shadowstats.com says inflation is at 15.2%… Do you now see how the hedonic adjustments reduce the actual inflation number?
Well, thanks to my good friend, Dennis Miller, who by the way is doing much better these days, but remains in the woods, sent me this link to the info I’m about to give to you. It’s about the BLS and a new adjustment they are making, but this one is different, in that it will calculate the price of a new car correctly… Here’s the skinny, from Wolfstreet.com
“The BLS is going to switch to transaction-based prices for new vehicles. It purchases the data from J.D. Power. I have been producing charts with J.D. Power’s Average Transaction Prices for a while. The BLS will abandon the old survey-based method of asking dealers about the prices of hypothetical vehicle configuration. It will also make changes in the way it calculates the CPI for new vehicles.
The coming version of the CPI new vehicles spiked by 15.9% in December from a year earlier (red line), compared to the current version’s 11.8%, which had already been the biggest spike since 1975 (purple line).”
Quite interesting, no? I thought so, for the question arises, who’s side are they on? For years they (BLS) have played the game with the Gov’t, in telling lies about inflation, and now they are going to come clean on the new cars? Now before you think they’ve gone full on with coming clean, they have no plans to remove the hedonic adjustments… They remain in honor of Clinton and Greenspan…
Hey! Recall me telling you months ago that by the time I was sitting in my seats at Roger Dean Stadium in March, that the 10-year Treasury’s yield would be 2%? Well, it was good to see someone jump on my bandwagon for 2%… Bloomberg.com was reporting that 2% 10-year looks like a done deal for March….
March is my fave month of the year, and this year it will bring about an end to the Fed/ Cabal/Cartel’s bond buying, and begin to hike rates… And of course I won’t be liking those events in March because they 1. Will have come too little too late, and 2. They won’t do anything to stop the runaway inflation that we have… Again, I will point out that while our illustrious Central Bank (NOT!) Has finally acknowledged inflation, they aren’t going to address it until March! That’s right, I said March… By then, inflation could be 10% according to the stupid CPI, and 17% on Shadowstats.com….
15.2% is higher than the inflation that was prevalent during the Carter years… That’s right, higher than the official 13% inflation reached in the 70’s… But don’t worry about any of that folks… the Fed/ Cabal/ Cartel has it all under control… And if you believe that, then I’ve got a bridge to sell you!
There’s really not much else to talk about today, other than inflation, folks… sorry… I know that all this talking and complaining about it won’t make it go away… So, that leaves us one thing to think about… Got Gold?
The U.S. Data Cupboard yesterday had the Empire State Manufacturing, which is a regional that I no longer report on because they never were a reliable indicator of what the National Manufacturing Index would print at… But yesterday’s print was interesting in that it printed negative for the current month at -.7%, falling from the previous month’s number of 31.9… Now that’s quite a fall! Interesting, but certainly not important…
Today’s Cupboard has more housing data that no one will take too much time thinking about. So, we’re stuck with another day of no real data, and dollar buying… That is unless the U.S. traders continue the dollar selling they did overnight… But that doesn’t usually take place, so I won’t get my hopes up…
To recap… The day with no data lead to a day of dollar buying yesterday, with the dollar taking liberties with all the currencies, and Gold losing $5, while Silver gained 46-cents… Don’t ask Chuck why that was, he has no idea! HA! And then Chuck goes into a long dissertation on inflation, and even has a new adjustment, albeit a good one this time, in the stupid CPI from the BLS… The overnight markets turned around the dollar buying in the U.S. and the BBDXY is right back to the same level it was yesterday morning, this morning… Treasury yields and the price of Oil continue to ratchet higher and higher with each passing day!
For What It’s Worth: Ok, this article came to me from the good folks at GATA, and it’s about how 2022 could be a return to sound money and it can be found here: Will 2022 Be “The Year of Sound Money” in the States? – Money Metals Exchange
Or, here’s your snippet: “In 2019, the Sound Money Defense League teamed up with sound money advocates in West Virginia to eliminate sales taxes on precious metals.
This year, Delegate Pritt has introduced House Bill 3135 to take things a step further by eliminating capital gains taxation on sound money and reaffirming gold and silver as money in the state.
A similar effort will be considered in Olympia, Washington.
Introduced last session by Rep. Chase, House Bill 1417 seeks to remove all forms of taxation on the metals. Rep. Chase wants to ensure the Evergreen State remains near the top of the Sound Money Index.
A capital gains tax on precious metals is often a tax on imaginary gains.
Under current law, a taxpayer who sells precious metals may end up with a capital “gain” in terms of Federal Reserve Notes. This capital “gain” is not necessarily a real gain, it’s often a nominal gain that results from the inflation created by the Federal Reserve and the attendant decline in the dollar’s purchasing power.
Yet this nominal gain is taxed at the federal level – and, because most states use federal adjusted gross income (AGI) as a starting point for income calculations, this nominal gain is taxed again by the state (in most cases).
Neutralizing punitive income tax treatment of the monetary metals would remove the last major disincentive that stands against the ownership and use of the monetary metals.
Of course, individual states cannot bring soundness to America’s monetary system on their own. The root of the problem is the Federal Reserve, U.S. Treasury, and Congress who have fully embraced fiat money and abandoned monetary restraint.
With the Consumer Price Index running at its highest rate in 40 years, inflation is becoming the most pressing economic issue of our time.
While federal policymakers are exacerbating the problem, some states are thankfully stepping up to give their citizens some tools to protect themselves.”
Chuck again… The article goes on to list all the states that have introduced legislature to remove the taxation of Gold sales… I find this to be a very good thing for Gold and just another in the list of reasons why to buy Gold… Remember it was JP Morgan who said that Gold was money… So therefore, with Gold as money, it shouldn’t be taxed, for you aren’t taxed for spending your dollars are you? (yes there are sales tax but not an explicit tax on the dollar being worth more today that it was yesterday, and that’s my point here…
Market prices 1/19/2022: American Style: A$ .7210, Kiwi .6790, C$ .8017, euro 1.1340, sterling 1.3633, Swiss $1.0913, European Style: rand 15.3495, krone 8.7697, SEK 9.1166, forint 313.98, zloty 3.9890, koruna 21.4160, RUB 76.48, yen 114.49, sing 1.3486, HKD 7.7911, INR 74.38, China 6.3484, peso 20.34, BRL 5.5321, BBDXY 1,170.42, Dollar Index 95.58, Oil $86.44, 10-year 1.88%, Silver $23.85, Platinum $1,004.00, Palladium $2,000.00, Copper $4.42, and Gold… $1,820.10
That’s it for today… Well, according to my Accu-Weather APP, we should be receiving another Chamber of Commerce day today and tomorrow, before rain moves in on Friday… That means I’ll be out on the deck reading, and soaking up that warm, but not hot, sun the next two days… I use that APP more than any other one that have on my iPhone… Hey! You can get your COVID home tests from the Gov now for free! Hand it to the Gov. to come up with something they can’t pay for, but deficit spend any way, and distribute it, after the virus has just about spread to everyone in the country! Oh, well… I had a somewhat scary thing happen last week, the lesion in my jaw must have gotten a wild hair, and the tumor began to grow again… But after a couple of days the tumor went back down, and it’s like it didn’t happen… Must have been some potent chemo pills or could have been the Good Lord reminding me that I still have cancer… And to be good! The Atlanta Rhythm Section take us to the finish line today with their song: Mixed Emotions… I hope you have a Tom Terrific Tuesday today, and Please Be Good To Yourself, and don’t forget, Be Positive, Test Negative!
Chuck Butler