April 3, 2023
* Currencies & metals rally in the overnight markets
* OPEC announces a surprise production cut!
Good Day… And a Marvelous Monday to you! Well after all the pomp and circumstance at Busch Stadium last Thursday for Opening Day, my beloved Cardinals laid an egg in the game and lost… The rest of the weekend games VS the Jays, went \the right way, and the Cardinals won the series 2-1… The Final Four took place on Saturday, with San Diego St. and UConn 5 as the final combatants for tonight’s Championship Game… Oh, and our new soccer team the Stl. City SC, is now 5-1. As they lost their first game 1-0… I’m waiting for reports from grandson Everett, and dad Jerry, on how the experience was at the game… I made it back home to my little river town late Saturday night, So, this morning, I’m back at my writing desk in the basement, and still trying to get used to being here instead of at my writing station in Florida, where I look straight out and see the ocean and the sunrise! Now, I look at my writing desk wall with tons of pictures, of which I added a new one to upon my return.. The band, Shooting Star greets me this morning with their rock classic song: Last Chance….
The dollar saw it getting sold on Thursday last week, and then getting bought on Friday… I don’t get it, the U.S. data was not THAT GOOD, that it got the dollar bugs all excited… But as I’ll point out later today, there’s some real numbskull thinking going on around the markets, and so I’ll leave it at that! The BBDXY dropped to 1,227 on Thursday last week, only to turn it around on Friday and gain 3 index points…
Friday last week, was the opposite of Thursday for Gold… Thursday saw Gold gain $15.90 to finish the day at $1,980.10… But on Friday, Gold lost $10.80 to close the week at $1,970.80… Silver didn’t see the up and down of Gold, gaining both days, with Thursday’s gain of 7-cents and Friday’s gain of 17-cents, Silver climbed over $24, and finished the week at $24.18…
To me, Gold has flirted with $2,000 a couple of times in the past 10 days, and each time the paper traders (Price manipulators), saw to it that the shiny metal didn’t gain further… But… this is like an asset that keeps bumping higher against a psychological level, and then finally does, and never looks back… I think that once Gold closes over $2,000 and opens the next day up, that we could be off to races… I’m just saying… So… use this dip in the price of Gold as your (as the song above says) Last Chance to get gold below $2,000…
The price of Oil ended the week trading with a $75 handle! That’s a nice turnaround for the anti-dollar price of Oil… I have to wonder how many bank deposits were withdrawn last week… The reason I say that I the 10-year Treasury saw it’s yield drop over 10 Basis Points to 3.47% to end the week… See, what I’m getting at there? I knew you would! ( in my best Mr. Rogers voice)
In the overnight markets last night…. Well, our friends (NOT!) at OPEC announced a surprise 1 Million barrels a day production cut yesterday… That was BIG news folks, for it pushed the price of Oil over $80, and it looks like it could be headed for even higher ground. The dollar has gotten sold in the overnight markets, with the BBDXY down 2 index points as we start the day. Gold is up $5 in the early trading, while Silver has run into a roadblock, and has dropped back below $24, with it down 20-cents this morning. The price of Oil is trading with an $80 handle this morning.. Chuck, you dolt, you already told people that! Why would you want to repeat it? Oh! Sorry! The 10-year Treasury is 3.49% this morning, there’s been some major buying of this bond… Can you say, The Fed/ Cabal/ Cartel? I knew you could!
The petrol currencies are up on the Oil production cut news, except the Russian ruble… it used to be the ruble as the only currency gaining VS the dollar, and now that the dollar is weakening, the ruble can’t find a bid… But the news did help the Canadian dollar/ loonie, the Mexican peso, Norwegian krone, and Brazilian real… So, they all had that going for them this morning…
Well, well, well, what have we here, a conundrum? A enigma? Or… just plain stupidity? Here’s the skinny, of what I’m talking about… It seems the stock jockeys last week were rejoicing and marking up stocks because they said, and I quote: “That the Banking Crisis is over, and The Fed won’t need to hike rates any more”… Wait! What? If the banking crisis is over, then that gives the FOMC the green light to get back to their work at hand, which is fighting inflation with a pea shooter… And vice versa… If the Banking crisis isn’t over, then we have a problem Houston! You can’t have your cake and eat it too, stock jockeys… I’m just saying… I want to thank long time friend, Dave Gonigam, at the 5 Minute Forecast for brining this craziness to my attention!
Remember years ago, when the U.S. had gone through the Financial meltdown that the numbskulls in Congress decided to write more rules for the banks? And I pointed out then, and will point out again now, that what the banks didn’t need was more rules, they just need good regulation over them to prevent them from going bad… Let’s see what James Rickards has to say about this latest call to put more rules on banks… here’s Jim “The White House is calling for “tougher rules for midsize banks,” as The Wall Street Journal But as Jim pointed out here on Tuesday, the existing rules were more than enough to prevent the failure of Silicon Valley Bank — if only the Fed and other agencies bothered to enforce them. So now, responsibly run banks will face costly and cumbersome new rules to cover up for the authorities’ failures.”
Crazy people do crazy things… those numbskulls in Congress are crazy! I’m just saying…
Well, the data last Friday, was interesting… Sometimes it takes a mathematical genius to get through all the caveats of a data print… Well… I don’t know if he’s a mathematical genius (probably is) but the economic genius, David Rosenberg, did have something to say about the GDP report last Friday… This is from his Twitter account: “No recession? Well, there sure is one in corporate profits, with today’s revised Q4 GDP report showing that pre-tax earnings collapsed at an -18% annual rate for the second straight quarter and contracting on a YoY basis for the first time since 2020 Q2.”
The U.S. Data Cupboard showed us that Personal Income was only up .3% VS .6% the previous month, and Personal Spending was only up .2% VS 1.8% the previous month… So, not the great gains in wages, and not a great gain in Spending… like I’ve said in recent days… The U.S. consumer is tapped out… The Weekly Initial Jobless Claims for last week saw a bump higher in the claims, for the first time in a month of Sundays… Could all the layoffs in the U.S. finally be showing up here? I guess we’ll see if that’s the case next week.
To recap… Can I get off this rollercoaster? When youngest son Alex was a lad, he loved Rollercoasters, and he would always ask the guy if he could go again, and I would be like, can I get off this rollercoaster? That’s what these last three days of trading have me feeling like… Up, down, up, of course if the powers that be would remove all manipulation of markets, and allow them to be traded based on fundamentals, things would be better for all of us… The dollar is getting sold to start the week, so let’s see how far this goes, before the price manipulators come to its rescue. OPEC announced a 1 Million barrel production cut yesterday, and that sent the price of Oil above $80, and the petrol currencies, sans rubles, all to higher ground VS the dollar.
For What It’s Worth…. This is an article from MarketWatch that the famous Nouriel Roubini was interviewed about the Banking Crisis… He seems to believe that we’re all in deep dookie, and it can be found here: Opinion: ‘Most U.S. banks are technically near insolvency, and hundreds are already fully insolvent,’ Roubini says – MarketWatch
Or, here’s your snippet: “‘Most U.S. banks are technically near insolvency, and hundreds are already fully insolvent,’ Roubini says, and he has more to say….
Higher inflation would lead to higher bond yields, which in turn would hurt stocks as the discount factor for dividends rose. But, at the same time, higher yields on “safe” bonds would imply a fall in their price, too, owing to the inverse relationship between yields and bond prices.
This basic principle — known as “duration risk” — seems to have been lost on many bankers, fixed-income investors, and bank regulators. As rising inflation in 2022 led to higher bond yields, 10-year Treasurys lost more value (-20%) than the S&P 500 SPX, +1.44% (-15%), and anyone with long-duration fixed-income assets denominated in U.S. dollars DX00, +0.10% or euros USDEUR, +0.57% was left holding the bag.
The consequences for these investors have been severe. By the end of 2022, U.S. banks’ unrealized losses on securities had reached $620 billion, about 28% of their total capital ($2.2 trillion).
Making matters worse, higher interest rates have reduced the market value of banks’ other assets as well. If you make a 10-year bank loan when long-term interest rates are 1%, and those rates then rise to 3.5%, the true value of that loan (what someone else in the market would pay you for it) will fall. Accounting for this implies that U.S. banks’ unrealized losses actually amount to $1.75 trillion, or 80% of their capital.
The “unrealized” nature of these losses is merely an artifact of the current regulatory regime, which allows banks to value securities and loans at their face value rather than at their true market value.
In fact, judging by the quality of their capital, most U.S. banks are technically near insolvency, and hundreds are already fully insolvent.”
Chuck again… I hold Nuriel Roubini at a high level of knowing what he’s talking about… And that plays nicely in the sand box with my thought that this banking crisis is not over….
Market Prices 4/3/ 2023: American Style: A$.6735, kiwi .6267, C$ 7429, euro 1.0865, sterling 1.2369, Swiss $1.0911, European Style: rand 17.8664, krone 10.3823, SEK 10.3622, forint 348.88, zloty 4.3050, koruna 21.5740, RUB 78.14, yen 133.30, sing 1.3308, HKD 7.8499, INR 82.33, China 6.8876, peso 17.97, BRL 5.0640, BBDXY 1,228.80, Dollar Index 102.42, Oil $80.39, 10-year 3.49%, Silver $23.98, Platinum $994.00, Palladium $1,471.00, Copper $4.05, and Gold… $1,975.57
That’s it for today… Well, welcome to April… and Pfennig tradition calls for my April joke… If April Showers bring May Flowers, what do May Flowers bring?…. . Pilgrims! HAHAHAHAHA! I can hear my darling granddaughter, Delaney Grace, saying: “Awe General! That’s silly!…. Delaney is going to be 16 this summer, and driving! Now that’s crazy! That Child loves to dance! I sure hope the craziness at the new soccer park has settled down a bit by the time I go to my first game on 4/15… Everyone else can stand for the entire game, just not the 10 rows in front of me! Last year, a Canadian friend of mine, and fellow baseball fan, started a wager with me on the Cardinals/ Jays games, and the loser owed Budweisers to the winner, so far, I’m down a 6-pack or more! UGH! Of course you’ll have to come to Jupiter Florida during Spring Training to collect, Craig! The Amazing Rhythm Aces take us to the finish line today with their 70’s song: Third Rate Romance…. Don’t know that one? One of my faves… just YOUTUBE it… I hope you have a Marvelous Monday today, and will continue to Be Good To Yourself!
Chuck Butler