November 2, 2021
* currencies are stuck in the mud…
* But Gold gained $9.20 yesterday…
Good Day… And a Tom Terrific Tuesday to you! Well November is here, and so too are the days of dull, gray skies, bare trees (not yet but coming), and cold days and nights… I would think that we would have an Indian Summer eventually this month, at least of a couple of days, but that’s it! This Sunday we will “fall back”, and daylight savings time will end. I always detested this time because I would go to work in the dark, and come home in the dark… But now that I’m retired, it still bothers me that we mess with this changing the clocks twice a year…. Today is Election Day for many states… It was a year ago that… oh, never mind, that’s not what I want to talk about today… Paul McCartney and Wings greet meet me this morning with their song: My Love…
Well, talk about a nothing day in the currencies… The dollar buying ended but there was not reversal of all the dollar buying last Friday, pretty strange if you ask me… The BBDXY started the day yesterday at 1,160.69, and ended the day at 1,160.17… So, somewhere, a currency that’s part of the index had a good day, but every other currency traded in the same clothes as Friday… Monday was a dud, for currency movement… Gold on the other hand had a decent day gaining $9.20, to close at $1,794.60, and Silver gained 15-cents to close at $24.14… I do believe that Gold was higher during the trading day, but was capped at $1,795…
One thing to mention this morning… The Israeli shekel just reached a two decade high VS the dollar! The shekel is not a heavily traded currency which makes it illiquid… And you would have a difficult time attempting to find a dealer to sell you shekels… But I wanted to mention it because, it shows that the emerging currencies are showing some life VS the dollar… Hmmmm….
In the overnight markets last night… The trading overnight was a carbon copy of yesterday, dull, boring, and a dud… The BBDXY did rise a bit overnight and starts today at 1,160.89… The Reserve Bank of Australia (RBA) announced that they too were feeling the pinch of higher inflation and that they were ready to hike rates… It’s a shame that these Central Banks can’t just make a move without announcing their intentions… I liked it better when we would have a “Saturday Night Special”! In case you don’t know what I’m talking about… Back in the late 70’s early 80’s when inflation was running 13% here in the U.S. (before the hedonic adjustments were added) Paul Volcker raised interest rates on a Saturday night, out of meeting to combat the rising inflation… Now that was some Central Banking!
Gold is up $1.10 in the early trading this morning, and Silver is down 10-cents, the price of Oil is back on the rise and is within spittin’ distance of $84, at 83.93, while the 10-year Treasury yield is 1.55%… Again I ask, who among us are willing to take the bet that yields for the next 10 years wont’ rise? Just asking…
Ok… yesterday’s FWIW article was about how ECB President Christine LaGarde had looked past the rising inflation in the Eurozone, and left rates unchanged, and I criticized her for playing along with the Fed/ Cabal/ Cartel… So, then yesterday I came across this article on Reuters, that called her “Madame Inflation”, and the article first appeared in a major German paper… And that’s what I was referring to when I said, “Where’s Wim Duisenberg” when he’s needed now? Duisenberg was the first ECB President and while not being German, he was in tune with the German fear of inflation… I just don’t get these Central Bankers that keep looking past inflation… They sure aren’t very prudent are they?
While I’m on the subject of inflation and that the dolts that control interest rates around the world, just don’t seem to get the gist of their jobs… On Bloomberg.com yesterday there were 4 articles with the headings of: Priciest Wheat Since 2012 Threatens to Worsen Food Inflation, and Brent Crude Headed for $120 by End of June, BofA Says, and… Sugar Prices Soar as Energy Crisis Boosts Ethanol, and last but not least… PG&E Expects a $1.15 Billion Loss From the Dixie Fire.
All of these point to higher prices coming our way in everything! So, you can sit back and take it all in, and do nothing, or… you can look to hedge your investment portfolio with the tried and true combatant of inflation… Gold…
The Singapore Central Bank indicated yesterday that they are ready to hike rates… Let’s listen in from Bloomberg.com, ““Overall, I’d say the balance of risk has shifted toward inflation,” Ravi Menon, managing director of the Monetary Authority of Singapore, said in an interview with Bloomberg Television broadcast Tuesday. “We will be very watchful of any risk of escalation in prices, and we stand ready to act.”
So, that marks down the Bank of England , the Singapore Central Bank and the RBA as Central Banks that have acknowledged the rising inflation and have stated that they are prepared to hike rates… New Zealand, Norway, and Brazil have already taken the Nestea Plunge into hiking rates… Let’s hope that others follow soon, otherwise the countries that lag in their efforts to control inflation will only be allowing the countries that have hike rates to export their inflation to them… And that will make matters worse for the countries that lag in their efforts to control inflation…
There is one caveat here with these Central Banks talking about higher rates, they are simply trying to jawbone the inflation fears down… I don’t think it will happen, and they will have to take the Nestea Plunge into higher rates, no two doubts about it… If they don’t… the markets will punish their respective currencies.
The list of countries that are lagging is very long, but… the one we care about the most is the U.S. and it’s front and center on this list… Speaking of inflation… The Social Security COLA adjustment for this year will be 5.4%, imagine if you will, that no hedonic adjustments had been added to the calculation of CPI back in the 90’s… The COLA adjustment would be 13.9%!!!!!! I’m just saying…
Ok, on to other things… It was a slow markets news day yesterday, and so the Pfennig will be a little shorter today…
So, have you heard that the proposed $3.5 Trillion spendalooza bill has been pared back by $2 Trillion? And it’s still not ready for Prime Time! The folks (not naming names here) that proposed the $3.5 Trillion spendalooza, are not happy about having to cut $2 Trillion from the bill… I can hear them saying, “Aw shucks, we just wanted to spread around the wealth, and get people back to work” But a good journalist would call them on that and say, “please point out to me where the mom and pops were going to benefit from this bill”… That would shut them up!
Remember when I assigned the homework to you to read about what was in the $3.5 Trillion Bill? I’m surprised, that when it came to cutting the pork in this bill that they only came up with $2 Trillion!!!!
The U.S. Data Cupboard yesterday had the Rocktober ISM (manufacturing Index) and it dropped a bit in Rocktober from September’s number of 61.1, falling to 60.8… Minor tremors in the index didn’t really give or take value from the dollar… Today’s Data Cupboard only has the Homeowner percentage for the 3rd QTR… Not exactly market moving data… That will come tomorrow when the ADP’s Employment Report for Rocktober prints, and right now the so-called experts are calling for 395,000 jobs created in Rocktober… That sounds like a high number to me, but we’ll see tomorrow.. .
To recap… The currencies traded in the same clothes as they wore on Friday, yesterday, with very little movement to be found anywhere, except in a currency that’s not part of the BBDXY, the Israeli shekel, which hit a 25 year high VS the dollar yesterday… Gold was able to chisel out a $9.20 gain on the day, while Silver found a way to gain 15-cents, and bring it back above $24….
For What It’s Worth… Well, as I said above the markets news yesterday was a real downer, but there was this piece of news that I thought was FWIW worthy, and it comes to us from Kitco, and it’s about how this person doesn’t think much of the economy, and it can be found here: Q3 GDP missed expectations; ‘At some point, there will be a lot of turmoil’ – Peter Berezin | Kitco News
Or, here’s your snippet: “Real gross domestic product (GDP) increased 2.0% on an annual basis in the third quarter. Stagflation should now be a risk on investors’ minds, said Peter Berezin, chief global strategist at BCA Research.
“I wouldn’t bet on it being as bad as [the 1970s]. I think the Fed would try to cool down the economy by raising rates before we got to double-digit inflation. But having said that, I think the risk to inflation is on the upside and I think inflation will probably follow two steps up, one step down trajectory of higher highs, higher low. Right now, we’re probably at the top of those two steps,” Berezin told David Lin, anchor for Kitco News. “The next step for inflation will be to the downside because a lot of the inflation that we see today is concentrated in durable goods.”
Berezin noted that durable goods are the one area of the CPI index that usually falls over time, so it is not a source of sustained inflation.
“To get inflation to stay up, you need rapid wage growth and the labor market is certainly heating up,” he said.
To hedge against inflation, Berezin said that hard financial assets should be considered.
“Bitcoin is a risky hedge against inflation. I think there are safer hedges, and it’s not just gold. I think property, real estate in general, is a good hedge. If you think about what asset classes did best in the 1970s, it was farmland. So, go buy yourself a little farm, and if you’re worried about stagflation, you’ll be able to hedge that risk to some extent” he said.
On monetary policy, Berezin said that among the large central banks, the U.S. Federal Reserve is likely to lift rates first.
“Amongst the largest central banks, the Fed will probably move first to raise rates, most likely late next year. Even if the Fed raises rates, it’s not going to do it very quickly,” he said.
Chuck again… yes, I know the title of the article was the hype, and then the rest was meh… Oh well… things like this happen…
Market Prices 11/2/2021: American Style: A$.7468, kiwi .7151, C$ .8081, euro 1.1599, sterling 1.3640, Swiss $1.0967, European Style: rand 15.4500, krone 8.4291, SEK 8.5125, forint 310.48, zloty 3.9773, koruna 22.0334, RUB 71.15, yen 113.53, sing 1.3473, HKD 7.7822, INR 74.63, China 6.3971, peso 20.85, BRL 5.6529, BBDXY 1,160.89, Dollar Index 93.94, Oil $83.93, 10-year 1.55%, Silver $24.04, Platinum $1,063.00, Palladium $2,121.00, Copper $4.45, and Gold… $1,795.60
That’s it for today… Well for the next 18 days, I’ll be all by myself…. Don’t worry I’m not going to start signing the Eric Carmen song… I reminded my older kids on Sunday that they might want to check on me at least a couple of times while their mom was gone, and daughter Dawn said, “I thought you were going with her” to which I said, “I was not invited”… HA! We went to dinner last night at one of our fave restaurants for years, but hadn’t been back to since 2019… The restaurant wasn’t really busy, there were a ton of empty tables, but… our service was slooooooowwwww… Well, things couldn’t be any worse for my beloved Missouri Tigers, who have to go to Georgia this weekend, where the oddsmakers already have them as 39 point underdogs! 39-points! That’s a lot of points to give up if you’re betting on Georgia to win the game, but… with the awful defense that Mizzou plays, it might be a good bet… Earth, Wind & Fire take us to the finish line today with their song: Shining Star… “No matter who you are”… I hope you have a Tom Terrific Tuesday, and please… Be Good To Yourself!
Chuck Butler