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 4th 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 4th 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 4th 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