December 16, 2021
* Currencies get sold on Wednesday…
* What on earth is Powell smoking?
Good Day… And a Tub Thumpin’ Thursday to one and all! Well, I had some technical difficulties with the letter yesterday, like, the FWIW article didn’t show up on your letter, I’ll try it again today… And there were other obstacles… But I carried on… So, I read T’was The Night Before Christmas to my darling daughter, Dawn’s kindergarten class yesterday… I had a blast doing it, as I do every year. (except when I didn’t get to read to them last year) The little girls sat right in front and their focus was rapt on me and the book… The little boys… well, not so much! HA! I forget to tell you about the spots on my head yesterday… Sorry… Turns out they aren’t cancerous yet, and I was given some cream to apply on them… No burning, no cutting… YAHOO! Yesterday, I told you how the night before I hadn’t slept but an hour or two… Well, I made up for that yesterday afternoon! I was out like a light for hours! Jack Jezzro is playing his guitar to the song: Home For The Holidays to greet me this morning…
OK, before we get going into the markets, economies and dolts this morning, I wanted to share this thought with you… This was in Tom Woods letter yesterday that can be found at www.tomwoods.com , here’s Tom…. “The “You Can’t Make This Stuff Up” Department is going to need to open a five-story annex at this point, but get this:
Moderna just announced that it’s withdrawing from the upcoming J.P. Morgan Healthcare Conference because of — get this — COVID concerns.
You heard that right. The same people whose vaccine was described as extraordinarily effective are afraid to attend a conference full of vaccinated people in a city that requires proof of vaccination to enter a huge array of indoor venues.” – Tom Woods
I read Tom Woods every day, he’s a libertarian and that’s just fine and dandy with me!
Ok… Well… The slippage in the dollar buying that we say in the overnight markets the previous night and reported on yesterday morning, faded into the woodwork, and the dollar buying was back! The BBDXY, which started the day at 1,1867, closed the day at 1,188.09… The euro remained below 1.13, and there was little movement in the other currencies on the day. Even after the FOMC left rates unchanged, and in the press conference after the meeting, Chairman Jerome Powell, told the markets exactly what I told you he would say! He basically told the audience and the markets that the Fed/ Cabal/ Cartel is going to step up their tapering effort, and will most like hike rates 3 times in 2022… Chuck says… “Good Luck with that, J”
And in an effort to throw the scent of rate hike needs to combat inflation, he went on to say this: “Fed Chairman Jerome Powell on Wednesday cited asset valuations as one of four key areas the central bank looks at when assessing financial stability risk.
“I would say, asset valuations … are somewhat elevated,” Powell said.
He also said households are in strong financial shape, but that businesses have a lot of debt”
OMG! Are you kidding me? Asset Valuations are “somewhat elevated”? I guess he’s right on that if the word “somewhat” has a different meaning! And households are in good financial shape? Does he not read the reports on consumer finances that points out that many don’t have any retirement savings, or have any rainy day savings, or that credit card debt is high, as well as margin debt? Dimwittery… and What’s he smoking? That’s all I can say about that…
Gold AND Silver were allowed to gain on the day, with Gold adding $6.10 and closing at $1,777.30, and Silver adding 14-cents to climb back over the $22 and close at $22.17… And they should have been much greater gains if the metals were allowed to trade free of manipulation… And yesterday was a good illustration of that… With the Wholesale Inflation (PPI) rising 9.6% year to year, that would lead to much higher Consumer inflation… Here’s something I read in the Bill Bonner’s letter yesterday, that Dave Stockman calculates that wholesale prices actually rose 13.6%…
Going back to the 70’s… What a great decade for rock music, but that’s not what I’m here to talk about… Back in the 70’s consumer inflation rose to 13.9%, and then Fed Chairman Volcker hiked interest rates to 20%, to bring that soaring inflation back to earth… So, let’s say, the Fed does hike rates 3 times in 2022… They would still be under 1%… How’s that going to stomp out inflation that’s running at 14%? (according to shadowstats.com)
In the overnight markets last night… The Bank of England (BOE) surprised the markets with their first rate hike since the plandemic started… The rate hike was just 15 Basis Points, which left their internal rate at 25 Basis Points… Now, what are 15 Basis Points going to do to snuff out soaring inflation in the U.K.? More Dimwittery!
Don’t forget the European Central Bank (ECB) is meeting while my fat fingers fly across the keyboard! But first, we had the dollar getting sold overnight. The downward move wasn’t huge in any way, the euro climbed back above 1.13, and the BBDXY fell to 1,185, from the 1, 188 figure that it closed at last night…
Gold AND Silver are rallying this morning in the early trading, with Gold up $6, and Silver up 6-cents so far today, which should be a good day for the metals as everyone tries to digest the staggering news that PPI was up so strong, and that the BOE has hiked rates in the U.K. Apparently this inflation thing is real, eh? Welcome aboard the inflation train, BOE! Don’t you wish you would have acknowledged inflation existing before now?
In the past 24 hours the price of Oil has risen again and trades this morning with a $71 handle… Bond traders are lost, and in need of someone to lead them out of the woods… And no, I’m not volunteering!
OK, so Jerome Powell, thinks household finances are in good shape, eh? Well, let’s see, it’s Christmas shopping time, and November Retail Sales were only up 0.3%… Down significantly from Rocktober’s 1.8% gain… Let me explain this phenomenon to you once again folks… We’re Americans, and as Americans our nature is to spend money, whether we have got it or not, we spend, spend, spend… Until the creditors say, no mas…. So, I find this Retail Sales report to be quite interesting, in that during a time when spending should be over the wall in left field, it wasn’t, and to me this lack of spending reflects on household finances…. I’m just saying…
I was also sad to learn yesterday that Bill Bonner’s daily letter is going to a paid subscription service, leaving me and Dennis Miller the only ones still writing for free… Bill said yesterday that he basically invented the newsletter blog business… Ahem… Bill, I love you dearly, but… I was doing a financial blog before that! I’m not saying I invented it, just saying there were Vikings before the Pilgrims….
OK, back to the markets… What does the BOE think that 15 Basis Points are going to do for them? Dimwittery… I really like my new word, dimwittery, it so applies to just about everything that goes on in the markets these days, don’t you agree? Oh, of course you do… that’s why you read this letter, because I tell it like it is, and don’t hold back any punches…
Speaking of punches… when do you think the Fed/ Cabal/ Cartel will pull away the punch bowl? I’m betting that free undercoat that they’ll be dragging their feet to the altar…
The U.S. Data Cupboard today has the usual Tub Thumpin’ Thursday fare, of the Initial Weekly Jobless Claims… In addition, we’ll also see the color of the Industrial Production and Capacity Utilization reports for November… Given the majority of the November reports that have already printed have been weak, I would suspect these two to also be weak this morning… And tomorrow’s cupboard is bare… Next week’s cupboard will also lack any depth, or interesting data, as we head into the Christmas holiday…
To recap… The slippage we saw in the overnight markets Tuesday night, faded into the woodwork yesterday, and it was back to buying dollars, even in the face of what had to be a very disappointing FOMC meeting press conference, where Chairman Powell, basically told everyong what I said he would tell them… Accelerating Tapering, and moving rate hikes up timewise in 2022… Chuck says, “good luck with that”! David Stockman says real finished goods increased 13.9%, not the 9.6% the BLS reported… And then Chuck takes us back to the 70’s…
For What It’s Worth… I think I started the week with an article from Mathew Piepenburg, of Gold Switzerland, and I’ll finish the week with another of his excellent articles… This one is about the coming illiquid dollar… I know, difficult to believe, but he explains how, and that can be found here: Dollar Illiquidity — The Ironic Yet Ignored Spark for the Next Crisis – Matterhorn – GoldSwitzerland
Or, here’s your snippet:” n October of 2019, I began writing/warning of the ignored yet ominous signals coming out of the repo and Eurodollar markets and what the illiquidity (i.e., lack of availability) of U.S. Dollars portended for our markets in the coming years.
Well, those years have since arrived.
Such dollar illiquidity may seem hard to imagine in a world otherwise awash in printed currencies and expanding money supplies.
But what I warned then is no different than what is happening now: The Fed is gonna need to print a lot more dollars.
In other words, today’s hawks will once again become tomorrow’s doves.
Why?
Because there were and are just not enough liquid dollars today to meet the fantastic array of nuanced and complex dollar demand in both U.S. and global markets.
As Egon von Greyerz and I have said many times, the first overt signs of this danger in the cash-poor (i.e., illiquid) repo market which reared its “repo head” in September of 2019.
This was a neon-flashing signal of long-term trouble ahead. And it had nothing to do with COVID…
Informed investors in the autumn of 2019 had sifted through all the confusing minutia and noise behind the September panic in the otherwise open-fraud scheme that is the U.S. repo market (i.e., private banks levering GSE deposits for guaranteed payouts from Uncle Sam which the U.S. taxpayer funds).
Despite all this noise, and despite being completely ignored (and deliberately downplayed) by an otherwise teenage-savvy mainstream financial media, the entire repo story simply boiled down to this: There weren’t enough available dollars to keep it (and the banks) going.
As a result, the 2019 Fed printed more dollars and immediately dumped a $1.5 trillion rollover facility into the repo pits.”
Chuck again… I know, another long snippet, but you’ve got to click on the link above and read the whole article for a complete understanding of what Matthew is telling us.
Market Prices 12/16/2021: American Style: A$ .7213, kiwi .6820, C$ .7824, euro 1.1315, sterling 1.3353, Swiss $1.0833, European Style: rand 15.9517, krone 8.9771, SEK 9.0543, forint 326.37, zloty 4.0904, koruna 22.3497, RUB 73.83, yen 114.15, sing 1.3637, HKD 7.8915, INR 76.09, China 6.3642, peso 20.96, BRL 5.6902, BBDXY 1,185.96, Dollar Index 96.12, Oil $71.17, 10-year 1.46%, Silver $22.23, Platinum $939.00, Palladium $1,752.00, Copper $4.30, and Gold… $1,784.80
That’s it for today… And… until 12/27… Oh, the humanity! How will we ever get by each day without words from Chuck! HA! No worries, I’ll be back in the space again before you know it, and in between with my annual Christmas Pfennig… So, that was good news on Tuesday about those spots on my head… I guess my days of sitting out in the sun to read, have come to an end, unless I start wearing a hat outside! I love the warm feeling of the S. Florida sun in the wintertime on my bald head… Oh well, I received my warning, and I must change… I got a kick out of the kindergarten kids yesterday, they guessed that I was Dawn’s brother! HAHAHA! And then Grandpa? HAHAHA… and her Uncle? They never did guess that I was her dad! I don’t want to speak badly of the kids, but I doubt there are any candidates for rocket scientist school in her class! They were sweet though, and wanted to show me how many missing teeth they have… I even got a few hugs from the kids after I finished reading to them… Tomorrow is my former colleagues, Jen McClain and Ty Keough’s birthday, at least that’s how I remember! So happy birthday both of you, hope your day is grand! Yesterday, while I was driving, I heard a Christmas song, sung by someone I never expected to hear singing it… Bob Seeger was singing Little Drummer Boy… Now, that’s the spirit people look for at this time of year… I have a long story about the Christmas spirit, that I’ll share with you some day… Until then… I hope you have a Tub Thumpin’ Thursday, and a very Merry, and Blessed Christmas next week… And Please… Be Good To Yourself!
Chuck Butler