February 23, 2021
* Currencies see little to no movement on Tuesday
* Chuck brings The 5 to the Pfennig…
Good day… And a Wonderful Wednesday to you! Well, I spent another afternoon out on the deck reading with the sun coming down on me, and blue umbrella skies above… The beach restoration that has been going on for a month here is completed, and I have to say that this is the best I’ve seen the beach look here in the over 12 years we’ve been coming here… Chuck & Kathy sat out on the balcony a couple of nights ago, watching the beach restoration team work under the lights! I have to knock on wood before I say this last piece… Man, have I been feeling pretty good lately! Stronger, and not as fatigued as usual… This is when something happens that sets me back usually… So, let’s hope that isn’t in the cards this time! The late great, Otis Redding greets me this morning with his song: Can’t Turn You Loose… It’s from his recording at the Whiskey A-Go-Go back in the day… Many years later I met some dealers from New Zealand in the Whiskey A-Go-Go and kept thinking that this was the place that Otis Redding performed…
Talk about a nothing day in the currencies! The Dollar Index yesterday morning was 90.10, and at the end of the day it was still 90.10… One of the currencies not included in the basket of currencies that make up the Dollar Index, the Aussie dollar (A$) has very quietly, and stealthlike, moved higher nearly every day… The A$ yesterday morning was .7907, and at the end of the day it was .7945… So, moving higher day by day… And it gets me wondering what this is all about… Back in the day, you could count on a nice interest rate differential between the U.S., euro, or yen and the A$… With the A$ holding the advantage, and attracting investments all over the world… But in today’s world of zero interest rates, the interest rate differential for the A$, just isn’t there… So… What is it that is garnering such interest to the A$ these days?
The Aussie have the front seat to the economic growth in China… And for that, I believe they are being rewarded with a stronger currency… See? It’s not often that you get the answer to your question so quickly! HA!
Gold & Silver didn’t fare as well as they did the previous day… Gold lost $4 to close at $1,807.50, and Silver lost 46-cents to close at $27.75… And I was just commenting yesterday that the $28 handle that Silver had risen to looked good… And then the $28 handle was lost! Don’t worry, for it is my belief that because of the shortage of Silver supply, and the demand for physical Silver, that it won’t take long for Silver to regain the $28 handle and as Buzz Lightyear says, “to infinity and beyond!”
And just like Silver, the price of Oil couldn’t hold its newly found $62 handle yesterday… Back and forth the price of Oil goes… Have you experienced gas price shock? The price of regular gas has moved steadily higher as the Texas freeze plays a part of that… Refineries were shut down and no oil has been refined to gas in over a week, so even with the demand still not what it once was, it is still stronger than 6-months ago, and with supply problems… voila! Gas price shock!
When you have to shell out more each week for gas than you used to have to shell out, that increase in gas prices reduces your overall disposable income…
In the overnight markets… There was a definite quiet to the overnight markets as if they didn’t want to wake anyone up! The Dollar Index is trading at 90.09, so there’s been little movement in the currencies overnight. Gold & Silver are trying to erase the bad taste of yesterday’s selling, and are up marginally in the early trading today. The Price of Oil is back above $62, and the 10-year Treasury’s yield is steady Eddie at 1.36%
And nothing seems to standing in the way of the rise in the price in Copper these days… Copper is a good inflation indicator folks… And the base metal is trading with $4.16 price per pound this morning…
I had a dear reader send me a note yesterday, after the FWIW article with Michael Burry talking about hyperinflation, and asked me to go deeper into how investors can protect themselves from such hyperinflation… And that got me thinking… Hadn’t I already told you dear readers over and over again that having up to 20% of your investment portfolio allocated to Gold & Silver to hedge against dollar weakness and inflation? And apparently Copper should be added to the portfolio allocation… So, there you have it!
In Agora’s 5 Minute Focus or The Five, yesterday, editor Greg Gonigam, featured some thoughts from James Rickards about the issuance of SDR’s (Special Drawing Rights)… This is very important folks, and so I’m going to borrow some of The Five and bring it to you here…
“But whatever the source of the panic, we know this: “The next panic will be bigger than the central banks’ ability to put out the fire,” as Jim explained here in 2015. “The only source of bailout cash will be the SDR.”
Result?
“The SDR has the power to reduce the dollar to the status of a local currency no different than the Mexican peso.”
Again, you and I will still use dollars. But they’ll no longer be the world’s go-to currency. That will be the SDR’s function in the aftermath of the present crisis — whatever it is.
The genius of the scheme is that SDRs would create inflation… but everyday folks would have no idea SDRs were the cause.
“Any inflation caused by massive SDR issuance would not be immediately apparent to citizens,” Jim wrote. “The inflation would show up eventually in dollars, yen and euros at the gas pump or the grocery, but national central banks could deny responsibility with ease and point a finger at the IMF.”
Chuck again… Thank you Dave for allowing me to share the 5 with my readers… The other thing that this would do is devalue the dollar… And you can refer to my Pfennig yesterday, when I explained how the dollar didn’t have value any longer… A devaluation of the dollar would be the end game for the dollar, in my opinion…
OK… Well that’s a lot to take in on a morning with your coffee… So, I’ll move along here for now… But you, dear reader, know all too well, that I won’t allow that discussion to end there, and there will be more on that in the future!
Before I go on… Got Gold?
The U.S. Data Cupboard is still lacking today, with only Jerome Powell, Cartel, I mean Fed Chairman testimony on the docket… We’ll have to wait until tomorrow for any real economic data, which will come our way on Thursday with the Weekly Initial Jobless Claims, Durable and Capital Goods Orders will print for our review…
To recap… The Currencies basically traded in the same clothes as Monday, with the Dollar Index not changing on the day at 90.10… Gold lost $4, and Silver lost 46-cents on the day, with Silver losing the $28 handle. Chuck doesn’t believe that it will be lost too long… In the overnight markets there was little movement in the currencies, and Gold & Silver are trying to remove the bad taste of yesterday’s trading this morning… And Chuck brings the Five Minute Forecast to the Pfennig this morning…
For What It’s Worth… OK, the good folks at GATA sent me the link to this article about how to achieve price discovery again in Silver… And it can be found here: A Modest Proposal For Price Discovery In The Silver Market | Investment Research Dynamics
Or, here’s your snippet: “Price discovery is the process by which a free market uses price to balance supply and demand. But price discovery has been absent from the gold and silver markets for decades. This is why a shortage in physical gold developed in March 2020 and why an even more severe shortage in silver has developed currently.
I believe a push to impose price discovery on the entire market will come from the authorized purchasers pushing the various mints to raise significantly the price the mints will pay the refiners for silver.
Refiners can then turn around and give purchase orders to mining companies at much higher prices. This will require a very aggressive push from the APs to hammer on the mints. Perhaps even cc:’ing the refiners in the effort to make refiners aware that the market will bear a much higher price for silver.
If mints offer refiners considerably more than the current “market” price, refiners will divert production to the higher bidding mints and away from selling production of bars to the Comex and LBMA. This will force the players on each exchange to at least match the new market price for silver.
At the very least, the current holders of silver will sell some or all of their holdings if the price rises enough to induce selling. Proper price discovery will find the level that creates enough supply to fill demand.”
Chuck again… Now wouldn’t it be nice to see price discovery return to the markets? (Bet you thought I would break into the lyrics of the Beach Boys song Wouldn’t it be nice)
Market prices 2/24/21: American Style: A$ .7930, Kiwi .7390, C$ .7965, euro 1.2165, sterling 1.4138, Swiss $1.1020, European Style: rand 14.4634, krone 8.4239, SEK 8.2919, forint 295.59, zloty 3.7143, koruna 21.3283, RUB 74.06, yen 105.80, sing 1.3201, HKD 7.7545, INR 72.31, China 6.4616, peso 20.38, BRL 5.4531, Dollar Index 90.09, Oil $62.23, 10-year 1.36%, Silver $27.88, Platinum $1,267.00, Palladium $2,402.00, Copper $4.16, and Gold… $1,809.60
That’s it for today… I was looking at the calendar yesterday, and realized I had not given any notice that I’ll be taking my traditional spring vacation starting March 18, and returning March 30th… And then it will be time to get ready to head home for Easter! Only 5 more days until my first baseball game of the year… I’m psyched! And we’ll have guests this weekend too! YAHOO! Man, did my St. Louis U. Billikens get homered last night at VCU! That was an absolute homer call at the end of the game that cost the Billikens a chance at the win… I was very disgusted with the refs last night… My beloved Mizzou Tigers also played last night, and the outcome of that game was not any better, as the Tigers couldn’t keep from turning the ball over… They didn’t “value the ball”! The NCAA Tournament, that hopefully won’t be cancelled this year, will have their Selection Sunday March 14, and then the March Madness begins! Paul Revere and the Raiders take us to the finish line today with their song: Kicks… “Kicks just keep gettin’ harder to find. And all your kicks ain’t bringin’ you peace of mind.” I hope you have a Wonderful Wednesday, and please Be Good to Yourself!
Chuck Butler