10-year Treasury Yield Climbs Past 2.0%!

February 15, 2022

* Currencies rally in the overnight markets

* An apparent end of saber rattling has safe havens running for cover!

Good Day… And a Tom Terrific Tuesday to you!  Well, my Billikens basketball team can’t seem to figure out the St. Bonaventure Bonnies, losing to them twice in the last 5 days…  I have to give Billikens coach, Travis Ford, a lot of kudos, for his handling of the team that lost the pre-season, “player of the year” candidate, to a knee injury before the season started. OK. Travis, get them turned around here… For our Valentine’s Day Dinner last night, I took Kathy to her favorite pizza place, and let her order the pizza that she wanted… Canadian bacon and artichokes…  Yes, it took a lot of restraint on my part to not slip the waitress a note telling her to add some sausage, pepperoni and mushrooms to the pie! How was your Valentine’s Day? You know, I thank the Good Lord all the time that I found Kathy all those years ago…  Eric Clapton greets me this morning with his song: Blues Power…  This used to be the opening song for the band I played in…

Well… I have sad news to share with all of you who read and enjoyed the Great Mogambo Guru… He passed away on Friday night, peacefully, holding the hand of his beloved Mrs. Mogambo…

For those of you who didn’t know him, his real name was Richard Daughty.. I got to know him quite well through the years, and will miss him greatly. He always had nice things to say about my Pfennig, and I was the same with his writings.  He loved to play the banjo… And we had many conversations about music.  So, RIP Mogambo Guru, aka Richard Daughty… I will miss you greatly!

OK… well the dollar, which had gained a couple of points in the BBDXY yesterday morning, petered out and traded flat the rest of the day… The BBDXY started the day at 1,179.95, and ended the day at 1,179.90…  So the currencies were able to hold onto their gains they booked VS the dollar on Friday of last week…  The Big Mover of the day was the yield of the 10-year Treasury… The 10-year’s yield rose to 1.97%, from a starting point of 1.91% yesterday. As the 10-year moves toward 2.0%, I believe that  from there, there will be no looking back, until… The Fed / Cabal/ Cartel cries uncle, and begins to buy bonds again…

And the price of Oil bumped higher again yesterday and traded with a $94 handle last night…  And after a brief couple of days last week when Oil’s price was dropping, it appears that the next stop for Oil is $100…  I’m not happy about that, folks… But, as the bumper Sticker on my writing desk back home says” What would the Mogambo Guru buy?”  Gold, Silver & Oil… moron! As a holder of Oil contracts, you like to see a higher Oil price… For a citizen that has to fill their gas tank once a week or more, a high price of Oil is the last thing you want to see…

As I said, Gold gained $12.30 on the day to close at $1,872.30, and Silver gained 29-cents to close at $23.92… A good day for the metals yesterday, so let’s keep that going!

In the overnight markets last night… well that’s what I get for starting the letter this morning before checking what the overnight markets did… UGH! The dollar is getting sold as I write this morning, the BBDXY has fallen to 1,177 from yesterday’s close of 1,179.   In the overnight news, Russia President Putin claimed that Russia was pulling back some forces, and that news has shaken the safe havens to the core…  As I just told you the dollar is getting sold this morning, but so is Gold, which is down $20, Silver, which is down 59-cents, Oil which is down over $3, and bonds, with the 10-year’s yield moving higher than 2.0%…

Is this just a head fake by Putin? I wouldn’t put it past him, to get everyone thinking that the escalation of arms at the Ukraine border was nothing but a tempest in a teapot, and then when everyone is breaking for a vodka and scones, he hits them hard…  I hope that’s not the case, but one never knows when dealing with communists… 

So, today is starting out like a Turn-around Tuesday, but with the wrong direction for Gold, Silver, Oil, and bonds…  

When yesterday’s Pfennig hit my email box and I saw how long it was, I gasped, what was I thinking? Well, it was a product of having a rainy day on Sunday… And having lots of time on my hands before the Super Bowl Game, and I made a ton of notes about what I wanted to talk about on Monday… And before you knew it… the Pfennig was over 2,500 words! YIKES!

Ok, I promise you that today’s edition will be much shorter!

I had a long conversation with good friend, Dennis Miller, yesterday… He sent me an email asked me to comment on it… I think went into a tirade, and talked about how Congress was just like a small-time crook… The small-time crook pulls off some minor heists, and finds that he didn’t get caught and everything is fine, so he decides to go bigger, and still he doesn’t get caught, so he keeps on going bigger, until one day, it all comes crashing down around him, and he spends the rest of his life in jail…

Congress like the small-time crook, deficit spends a little one year, and finds that it really didn’t hurt things too much, so they decide to up the ante on the deficit spending the next year, and this goes on for years, and the deficits keep growing larger and larger, until one day, it all will come crashing down around them….  And the only difference here is that they will not spend the rest of their lives in jail… But they should for bankrupting the country!

I like that comparison, don’t you?  This has gone on too long, all this deficit spending that turns to Treasury issuance, and currency counterfeiting… And one day, mark my words on this folks, this is going to end up in tears…  And of course, it will be somebody else’s fault…  So, get ready for the finger pointing, and blaming aliens…

So, what did you think of my suggestion for a Fed/ Cabal / Cartel redo? If you’re scratching your head right now, and trying to recollect what I said, I direct you the Pfennig archives, where you can read yesterday’s Pfennig over again by clicking: www.dailypfennig.com

Well, I was thinking yesterday and wondering if Gold was finally free to move higher without interference?  Well, not completely void of interference but maybe less of it and on a rare occasion? I would take that in a NY minute! Wouldn’t you? The overnight markets have taught us that to even dream about such foolish things is a waste of time… 

I had a dear reader ask me one day why I talked about the price manipulators so much, while telling everyone they needed to have an allocation of Gold in their investment portfolio?  Well, that’s easy… 1. Gold has never gone to zero, 2. It has historically given an investment portfolio protection against a. dollar weakness, b. inflation. Gold is also a flight to safety investment when there are countries rattling their sabers…  So, to me, all those pros outweigh the con… 

The Petrol currencies of Russia, Norway, Brazil, U.K., and even Mexico are champing at the bit to move higher VS the dollar with the price of Oil soaring once again… The Russian ruble was being held hostage to the saber rattling between Russia and Ukraine, but the Norwegian krone is free and clear of any saber rattling, and if the euro can get going higher again, then the krone will have a double dose of medicine…  So… I would watch these Petrol Currencies if I were you and watch how they respond to the price of Oil’s rise. That is when Oil gets past this overnight drop… 

Today’s Data Cupboard will print January’s Producer Price Index (PPi) this is a check on the wholesale price increases during January… You may recall me talking about the HUGE jump in PPI a couple of months ago and telling you that these price increases here would filter through to consumer price increases, and voila! We have increased consumer prices!  So, January’s print, should give us another indication of what to expect a month or two down the road. Tomorrow’s Data Cupboard is stacked with data, so we have that to look forward to!

To recap… The dollar traded flat all day yesterday, but Gold gained $12, and the price of Oil bumped higher again, while the 10-year’s yield jumped higher too… Chuck had sad news to share with readers regarding the passing of the Great Mogambo Guru…  And then Chuck begins to compare Congress to small -time crooks, you have to read it to know what he’s talking about here… Not much in data other than PPI for Jan in today’s Data Cupboard. The overnight markets have knocked Gold, Silver, Oil and bonds off their perch, as the need for safe havens have supposedly lessened…  

For What It’s Worth… Yesterday, I pointed out the 40 year high for inflation in the U.S., and I truly believe that the mass media is just ignoring this report… But not everyone, and this is a report on the question of whether or not this high inflation will turn to a recession, and it can be found here: Inflation is at a four-decade high, could a recession be next? | Kitco News

Or, here’s your snippet: “Inflation is now at yet another four-decade high, with the headline consumer price index surpassing (CPI) December’s reading of 7% to reach 7.5% in January, according to the latest data release from the Bureau of Labor Statistics.

All eyes are now on the reaction of the Federal Reserve. Michelle Makori, editor-in-chief of Kitco News, discussed likely responses from the U.S. central bank, as well as the assets that will benefit most from a high inflationary environment, with Mike Lee, founder of Mike Lee Strategy, and David Nelson, chief strategist of Belpointe Asset Management LLC.

“I definitely think we’re going to get 50 basis points [of rate hikes] in March,” said Lee.

Nelson said that several rate hikes are now priced into the markets.

“Right now, what you’re seeing price in is 200 basis points by the end of the year,” he said.

However, raising the Fed Funds rate may not be enough to combat inflation Lee said.

“I don’t know what raising rates is actually going to do for inflation, other than home prices. It’s not going to affect rents, it’s not going to reduce a gallon of milk, it’s not going to make oil prices go down. You’re so far away from taking real liquidity out of the economy vis-à-vis the Fed Funds rate,” Lee said.

Lee added that inflation has likely already peaked.

“If we’re not at peak inflation now, we will be in the next couple of months, mostly because of the demand destruction and lower base effects,” Lee said. “If inflation continues to accelerate, you now are running into a real societal problem. Governments in countries like Argentina have been toppled because of this. 

My concerns of a recession are close to zero in the next couple of years. Recessions are caused by debt bubbles, we don’t have your classical debt bubble of a financial crisis…credit spreads have not blown out, high yield spreads have not blown out, and if you look at the Chicago Fed national liquidity index, you really haven’t seen meaningful tightening of financial conditions yet. All this can change in six months from now, a year from now,” Lee said.

That’s not to say that a recession is impossible, especially if the inflation problem exacerbates.

“I think we’re in a bit of no-man’s land, bouncing around, a lot of volatility. I think this inflation is bad”

Chuck again…  Well this is one of those articles that I put in every now and then to give you the other side of what I’m thinking, just to be fair!  You know me, I’m fair, and reasonable, and an overall nice guy, right? HAHAHAHA

Market Prices 2/15/2022: American Style: A$ .7136,  kiwi .6617, C$ .7860, euro 1.1345, sterling 1.3540, Swiss $1.0816, European Style: rand 15.1090, krone 8.8929, SEK 9.3155,  forint 313.08,  zloty 3.9762,  koruna 21.5353, RUB 75.53, yen 115.68, sing 1.3457, HKD 7.8034, INR 75.23, China 6.3484, peso 20.36, BRL 5.2191,  BBDXY 1,177.07, Dollar Index 96.05,  Oil $91.75, 10-year 2.03%, Silver $23.33, Platinum $1,026.00, Palladium $2,336.00, Copper $4.52, and Gold… $1,852.10

That’s it for today…  Good luck to the U.S. Woman’s Hockey Team who will play Canada for the Gold Medal… I watched their game yesterday VS Finland, which they won 4-1… And looked pretty good… The U.S. Men’s Curling team was on TV last night, but too late for me! It’s supposed to get warmer as each day goes by this week, ending the week at 86 on Friday! YAHOO! That means we’ll be able to have a happy hour out on the deck that overlooks the ocean on Friday!  Shoot Rudy, I’m already talking about Friday, and its only Tuesday! UGH!  The Great Otis Redding takes us to the finish line today with his song from Live at the Whiskey A-Go-GO: Can’t Turn You Loose… on one of my visits to NYC back in the day, I visited the Whiskey A GO-GO, and it was a very cool place, and I could hear (in my head) Otis Redding singing! I hope you have a Tom Terrific Tuesday, and Please Be Good To Yourself… Be Positive, Test Negative

Chuck Butler