Jan 31, 2023
* currencies and metals get sold on Monday…
* There’s been a warning shot across the dollar’s bow…
Good day… And a Tom Terrific Tuesday to you! Yesterday, I had a lot to talk about, and completely forgot to mention my congratulations to the Eagles and Chiefs, this year’s Super Bowl Contestants…. And believe it or not, I was bang on with my belief that yesterday was my little Christine’s Birthday! See, my brain is working just fine… no damage… At least no Additional damage than what was already there! HA! Last week was also my younger sister’s birthday. I hope your day was grand Joanie! When I went to bed last night my Blues were winning 2-0… But ended up losing 4-2, giving up 4 goals in the 3rd period! UGH Jackson Browne greets me this morning with his song, that I quote lyrics from all the time: These Days…
Well, I apologize for returning… While I was gone, the dollar got sold nearly daily, and Gold rallied… Since I’ve been back in the saddle, the dollar has rallied, and Gold has gotten sold… The move yesterday, was not anything to write home to mom about, but… The BBDXY Gained 3 index points, and Gold lost $4 on the day… I really don’t get why all traders are rushing to the exit sign to sell dollars, given the news I talked about yesterday… Granted, the newsis, and media aren’t really taking Saudi’s announcement that they will accept payment for Oil in currencies, other than the dollar, seriously… And until the stark reality of the fact that the dollar has lost its “Petrodollar Title”, and that all the countries in the world that need to import oil from the Mid East, will no longer need to buy treasuries to have on hand to sell when they need to deliver dollars, I guess they’ll just walk around blindfolded, and whistling Dixie…
You did realize that the scenario that I just talked about is reality didn’t you? Yes, rather than just buying dollars to have on hand, these countries have used their dollars to buy Treasury Bills, most likely, and since Treasuries are liquid, they can be sold for next day delivery and payment, these countries buy Treasuries, and hold them earning interest, until they are needed to be sold for payment on their Oil purchase…
So, not only will the dollar suffer through this changing of the guard, Treasuries, too will suffer, and we’ll see yields rise, since there will be diminished buyers… Or… maybe none of this comes to fruition, if the Saudi’s are playing a game of chicken with the U.S. Hmmm, I hadn’t though of that until just now, but I seriously, don’t see the Saudi’s as game players…
Ok, in other markets… Gold got sold by $4.60 yesterday and ended the day at $1,923.90, and Silver lost 2-cents, to close at $23.68… The price of Oil slipped another buck, and trades this morning with a $78 handle… And bond, remain stuck in the mud…
In the overnight markets last night… I guess the overseas traders aren’t thinking like their U.S. counterparts, as the bought dollars hand over fist, and sold Gold overnight, thinking that the Fed will indeed hike rates higher tomorrow. The BBDXY gained 3 index points overnight, the euro fell lower in the 1.08 handle, after getting within spittin’ distance of 1.09 on Monday. Gold is getting whacked this morning, and I’m not buying the rhetoric that it’s all about the Fed/ Cabal/ Cartel hiking rates… That fact has been known for sometime, as Gold ignored it and rallied, so this has got to be another engineered takedown, under the cover of a rate hike… Gold is down $25 to start the day, and Silver has lost $48-cents!
The markets are supposed to be “forward looking”… That seems to be the case in bonds, as the bond boys just don’t want to go higher with yields, thinking that sooner or later the tide will turn with interest rates… But the currency and metals guys, can’t see the forest from the trees… But it is what it is, and one day, they’ll all be fronted with losses, and that will be their bed they laid in!
The price of Oil has lost a bit more and is barely holding on to the $77 handle this morning, while bonds remain stuck in the mud…
I had someone ask me the other day while sitting around the pool, where he could put a wad of cash, that he had come into… I said, if you want to keep it liquid, and want to earn 4.7% on it, why not just buy a 1-year T-Bill? Seems like a simple thing to do, don’t you agree? No, I don’t want to go out on the yield curve and lend the U.S. money out there, but a 1-year T-Bill, what can that hurt? I’m just saying…
Yesterday, in Bill Bonner’s Private Research letter he had this to say about the dying U.S. Empire…
“The process is well documented by the connoisseurs of decline – such as Gibbon, Tainter, Spengler and Sir John Glubb. It was Glubb who calculated the average lifespan of an empire; from ashes to ashes, he figured, it was about 250 years.
Glubb, known as Glubb Pasha, outlined the stages of empire as follows:
- The age of outburst (or pioneers).
- The age of conquests.
- The age of commerce.
- The age of affluence.
- The age of intellect.
- The age of decadence.
- The age of decline and collapse.
Which, of course, raises the question: where are we?
Chuck again… Hmmm, I would say that we’re in the final stage of the Empire, the Age of Decline and collapse… Boy, I’m sure in an upbeat mood this morning, aren’t I?
So… if things for the dollar and U.S. economy play out the way I believe they will play out, what currencies should people be looking to buy and hold instead of dollars? Well, what have I been preaching to you for years, about what the offset currency to the dollar is? The euro… But from there, I would be looking at the commodity producing countries like: Australia, New Zealand, Norway, Canada, Brazil, Russia, and you could even throw in the U.K. and Mexico… So, does that narrow it down for you? HA!
One thing that I meant to point out yesterday was that the Euro-Wannabes, you know the 3 currencies that were within a whisker of joining the euro a dozen years or so ago… Hungary, Czech Republic, and Poland… And what have I taught you about these three? That when they begin to rally hard VS the dollar, the dollar is in trouble… Well, Hungarian forints and Czech Rep koruna have begun to rally hard VS the dollar, and Polish zlotys are lagging right now… So, in my mind, the dollar isn’t in dire straits just yet, but it’s on the cliff looking over it!
Man I would have to get out the calculator to accurately count the number of pundits out there saying that 2023 is the year that Gold soars… And every one of them highlight the same reasons they are calling for Gold to soar… These guys are naysayers to the Fed’s Jerome Powell, who keeps saying that the Fed/Cabal/ Cartel will continue to hike rates until inflation reduces to 2%, they all believe that the next major default, collapse, etc. will see the FOMC pivot and start cutting rates again… The loss of Fed Credibility is among their reasons for Gold to soar… And the problems the dollar is facing is another of those reasons… I guess we’ll have to wait-n-see, eh? But won’t you feel foolish next year, if Gold did soar this year, and you weren’t a part of it?
Well get out the game boards, now who didn’t put Battleship back in the box right the last time we had 2-day FOMC meetings? Like I said yesterday, the FOMC Meeting announcement on Wednesday, is the dominant data event this week. We will see the Employment Cost Index for the 4th QTR, in addition, we will see the Case/Shiller Home Price Index for November, and finally the stupid Consumer Confidence will print for this month… I can say that I doubt that the folks that took part of the Consumer Confidence poll, hadn’t heard about the dollar losing its Petrol dollar status!
To recap… I’m telling you once again, if you all want to pass the hat and pay me to go away, I will, for whenever I go away, the dollar gets sold, and Gold rallies… Chuck explains how the U.S. could lose its Petrol Dollar Status… Bill Bonner tells us about how were in the late states of a decline of the Empire, And Chuck points out what currencies to look to when the dollar does lose its Petrol Dollar status…
For What It’s Worth… Well, Bill Bonner reported the other day that the cost of the inflation per person in the U.S. has been $7,400… Well, that doesn’t seem to be much, but C’mon… it is! And this article tells as story about how the loss of disposable income is carrying over to car loans and the people that are finding that they can’t make them. This article can be found here: “It’s The Perfect Storm”: More Americans Can’t Afford Their Car Payments Than During The Peak Of Financial Crisis | ZeroHedge
Or, here’s your snippet: “For over a year, we have been dutifully tracking several key datasets within the auto sector to find the critical inflection point in this perhaps most leading of economic indicators which will presage not only a crushing auto loan crisis, but also signal the arrival of a full-blown recession, one which even the NBER won’t be able to ignore, as the US consumers are once again tapped out. A month ago we said that in our view “that moment has now arrived”; the latest data from Fitch confirms as much.
But first, for those readers who are unfamiliar with the space, we urge you to read some of our recent articles on the topic of car prices – which alongside housing, has been the biggest driver of inflation in the past 18 months – and more specifically how these are funded by the US middle class, i.e., car loans, and last but not least, the interest rate paid for said loans. Here are a few places to start:
Are We Headed For An “Auto Loan Crisis” As Delinquencies Begin To Rise? – July 7
A Flood Of Repossessed Vehicles Poised To Hit The Used-Car Market – July 25
American Drivers Go Deeper Into Debt As Inflation Pushes Car Loans To Record Highs – Aug 29
Credit Card Rates Just Hit A Record As The Average Car Loan Rises To Fresh All Time High – Oct 9
New-Car Loan-Rates Set To Hit 14-Year High As Affordability Crisis Worsens – Nov 3
Perfect Storm Arrives: “Massive Wave” Of Car Repossessions And Loan Defaults To Trigger Auto Market Disaster, Cripple US Economy – Dec 18
So while the big picture is clear – Americans are using ever more debt to fund record new car prices – fast-forwarding to today, we have observed two ominous new developments: the latest consumer credit report from the Fed revealed a dramatic spike in the amount of new car loans, which increased by more than $2,000 in one quarter, from just over $38,000 (a record), to $40,155 (a new record).
Consider the following: as we first reported a month ago, a soaring number of consumers are falling behind on their car payments – a trend which will only accelerate – in a sign of the strain soaring car prices and prolonged inflation are having on household budgets.
Citing a NBC report, we reported that whereas repossessions tumbled at the start of the pandemic when Americans got a boost from stimulus checks and lenders were more willing to accommodate those behind on their payments, in recent months, the number of people behind on their car payments has been approaching prepandemic levels, and for the lowest-income consumers, the rate of loan defaults is now exceeding where it was in 2019, according to a recent report from Fitch.
Fast forward to today, when a newer report from Fitch has laid out an even more startling milestone: more Americans are falling behind on their car payments than during the financial crisis. As Bloomberg first observed after skimming the Fitch note, in December the percentage of subprime auto borrowers who were at least 60 days late on their bills rose to 5.67%, up from a seven-year low of 2.58% in April 2021. That compares to 5.04% in January 2009, the peak during the Great Recession, and just a few weeks before the Fed was about to start QE1.”
Chuck again… Yes, these defaults usually start with the small stuff, and then one day, Whack! I Big Boy defaults, and then the dominoes begin to fall… I’m just saying…
Market Prices 1/31/ 2023: American Style: A$ .6995, kiwi .6426, C$ .7431, euro 1.0831, sterling 1.2320, Swiss 1.0778, European Style: rand 17.4586, krone 10.0608, SEK 10.4583, forint 359.63, zloty 4.3463, koruna 21.9869, RUB 70.64, yen 130.39, sing 1.3175, HKD 7.8372, INR 81.92, China 6.7566, peso 18.82, BRL 5.1211, BBDXY 1,227.99, Dollar Index 102.47, Oil $77.01, 10-year 3.53%, Silver $23.12, Platinum $997.00, Palladium $1,614.00, Copper $4.17, and Gold… $1,903.61
That’s it for today… This past weekend saw my beloved Mizzou Tigers win VS Iowa St., and the St. Louis Univ. Billikens win VS Davidson… The Billikens have a HUGE game coming up this Friday night VS VCU… nothing like a rollicking rowdy crowd on a Friday night at Chaifetz! They have a 6-game win streak going, no reason to not make it 7! An absolute dandy of a day here yesterday, and another one is expected today… Back home they had an ice-storm… And that reminded me of the time I ended up, upside down in a creek in my car that didn’t negotiate the black ice in the parking lot of the bank… THAT, was not a good way to start the day! I have treat playing right now… Herb Albert and the Tijuana Brass take us to the finish line with their song: This Guy’s In Love With You… Whenever I hear this song playing, my mind goes back to a time in my youth, at my uncle Kenny’s house, he had this Herb Albert album, and he would play it over and over again (probably because it was the only album he had!) Ok… I hope you have a Tom Terrific Tuesday today, and will promise to Be Good To Yourself!
Chuck Butler