May 24, 2022
* Currencies continue to push against the dollar
* Bullard talks tough…
Good day.. And a Tom Terrific Tuesday to you! Well… I found a different laptop in my closet yesterday, only the shadow knows how long this one will last, or how outdated it is, but for now, it works much better than my old one! I spent most of the day yesterday setting up the new laptop… It’s crazy, and I’m not even your last choice for a techie… But I soldiered through, and got my email set up, so that was a victory in itself! I mentioned in yesterday’s brief letter that I had a good doctor visit last week… The doc said, “Your blood sugar is great, your BP is great, your Blood oxygen is great, your weight is down, and your legs aren’t swollen, keep doing whatever it is you’re doing”! I left his office smiling like the Cheshire Cat! Buddy Miles greets me this morning with his version of the song: Down By The River
Well… there was more selling of the dollar after I sent out my letter yesterday, and the BBDXY closed the day at 1,231.97, down 9 index points in all, on the day… I suspect that the PPT will be in soon to help the dollar out, with their Exchange Stabilization Fund… But if the dollar is really on the tenterhooks, then the PPT will only be able to stem the tide… But if the dollar was only going through a correction to all the overbought positions, then it will recover… Only the Shadow Knows which way it will go… In my younger years, I would be bold and go out on a big fat limb, and make a call on which way the dollar was going… But that was back in the day, when fundamentals ruled the roost, and it was not that difficult to see, as long as you followed the fundamentals like i did!
So, Gold ended the day giving back some of its gains once again in the intraday trading, and Gold was only allowed to gain $6.80, to close at $1,854.50, and Silver couldn’t hold its gains ending the day down 1-cent, to close at $21.87… I have to say that while I would rather see Gold hold its intraday gains throughout the trading sessions, I can’t complain too much given that each day Gold shows gains, albeit, small ones, but gains nevertheless…
Here’s a snippet from Ed Steer this morning: “But volumes were exceedingly light in the precious metals on Monday, so those with in an interest in pushing their respective price around, had no problems doing so. Gold closed above its 200-day moving average for the third day in a row, but not by a significant amount — and with ultra-low volume it’s not really possible to tell how aggressively the Managed Money traders, or others, might have been covering short positions. I’d guess, not much.”
Chuck again… The price of Oil was steady Eddie throughout the day, ending the day trading with a 110 handle. Bonds got sold, for the first time in about 10-days, with the 10-year Treasury yield rising to 2.85%…
In the overnight markets last night… Well, before I went to bed last night, I looked at what the currencies were doing overseas, and saw, at that time, that the dollar had wrapped a tourniquet around its recent bleeding, and was up a bit… But, as the night wore on, the dollar got sold again, and starts today a little less in value than what it ended the day yesterday. Gold is up $4 in the early trading, and Silver is up 14-cents to start the day. The price of Oil remains steady at $110, and bonds got bought again last night, by someone, or some country, to bring the yield on the 10-year to 2.81%…
Yesterday, I had this quote from James Bullard, St. Louis Fed President, all lined up and in the letter, when it played a disappearing act with me, so here you go… “Fed’s Bullard says retailers who don’t understand that consumers are stretched thin by inflation are going to get ‘punched in the face’” I guess he doesn’t realize that retailers have seen their finished goods prices rise every month, and in April, they were up 15%! But then… what else do we expect from a Fed Head? They never saw inflation coming and now it’s the retailers fault that people are getting pinched…
OK… Fed Heads never say what they mean, and never mean what they say… (Joe South) And here’s more proof of that… Remember when Fed/ Cabal/ Cartel Chairman, Jerome Powell, said the Fed would deliver a “soft landing”? Well, not so fast there Tim! He now says that no one can predict a soft landing, and that inflation is stronger than he first realized….
I wouldn’t touch whatever it is a Fed Head is saying with someone else’ ten foot pole!
The Russian ruble continues to gain VS the dollar, and it has gained over 30% from its low last month, VS the dollar… You know, I’ve told you on more than one occasion that I own Russian rubles, and therefore I’ve done my due diligence… I’ve said since the beginning of the time when the old EverBank World Markets began offering ruble deposits, that the ruble was strictly an Oil play, that and the fact that they had high interest rates… Russian doesn’t have debt up to their eyeballs like most countries of the world, and they only black mark is that they invaded a sovereign nation, in Ukraine…
Is your spider sense tingling, because mine is… Yesterday the headlines said that “Biden vows to protect Taiwan should China invade the country”… Uh-Oh! Please tell me that someone with a cooler head will talk him out of that move, please tell me! And this is not a political statement, it’s just the deep state are war mongers, and they certainly seem to have the POTUS’s ear right now… I’m just saying…
What would get people’s collective minds off of rising inflation, and the 10% stealth tax that inflation represents? A war… So, please, let’s all take a step back, and think about this first…
OK… Well, European Central Bank President, Christine LaGarde told reporters yesterday that the negative rates in the Eurozone will end in September. And a first look at interest rate futures for the Eurozone shows that the markets believe that the Eurozone internal rate will be 1.10% by year-end… Not that 1.1% rates will excite everyone, but at least they will have moved off of negative, which was beginning to feel like they were going to last forever, and a day! Euro bulls are now predicting a return to 1.10 for the euro before year-end…
Longtime readers my recall me telling them many moons ago, that 1.10 is probably a fair and reasonable level for the euro VS the dollar. With the euro currently trading with a 1.06 handle, it’s still undervalued, hint, hint…
Commodity Currencies in Aussie dollars and kiwi, were ratcheting up some nice gains VS the green/peachback dollar, until yesterday. So even with the dollar losing ground yesterday, A$’s and kiwi lost ground too… It must have been some profit taking by large corporations, etc. because the drops were quick and large…
I have a good friend, Mike, that always makes fun of me talking about how a 1-cent gain in a currency is noteworthy… I always come to my own defense and explain that the currency market is the largest market in the world, and that large positions, multi-million like, take place every day, and when dealing with say $5 Million trade, a small gain is worth it to the position holder… So, now you know too!
OK.. The U.S. Data Cupboard is back on the data prints track today, with the S&P Manufacturing Index, that I talked about yesterday… And new home sales will also print… Last week, existing home sales saw a HUGE drop in April, which was the first month with a rate hike… I can’t even begin to think about how affected the housing market will be once the Fed hikes rates two more times…
I’ve refrained from calling what’s coming a recession… But, I do believe things are going to get really ugly, especially in housing, and house prices.. This could be 2008 all over again and I’m dead serious about that… I told you how ridiculous rents have become in Florida, right? Memo to condo and apartment owners, better get those commitments for next winter booked, and contracts signed, before the floor caves in… I’m just saying…
To recap… The dollar lost more ground yesterday, with the total loss in the BBDXY 9 points… Bullard is talking tough, and Powell is talking out of both sides of his mouth. LaGarde says that the Eurozone’s negative rates will end by Sept, and euro bulls have the euro pegged to go to 1.10 by year-end. The Russian ruble is now 30% higher VS the dollar, from the ruble’s low last month… Given the high interest rates in rubles, that’s quite a nice move, eh?
For What It’s Worth… This one is leftover from yesterday, when again, my letter did a disappearing act, and I tried to reconstruct what took me 2 hours to write, and didn’t get much done… UGH! This is a scary story of what could happen this summer, folks… and it can be found here:
Or, here’s your snippet: “Tens of millions of Americans could be thrown into a summer of hell as a megadrought, heatwaves, and reduced power generation could trigger widespread rolling electricity blackouts from the Great Lakes to the West Coast, according to Bloomberg, citing a new report from the North American Electric Reliability Corporation (NERC), a regulatory body that manages grid stability.
NERC warned power supplies in the Western US could be strained this summer as a historic drought reduces hydroelectric power generation due to falling reservoir levels and what’s expected to be an unseasonably hot summer. Compound the hellacious weather backdrop with grids decommissioning fossil fuel power plants to fight climate change and their inability to bring on new green power generation, such as solar, wind, and batteries, in time, is a perfect storm waiting to happen that will produce electricity deficits that may force power companies into rolling blackouts for stability purposes.
The regulatory body pointed out that supply-chain woes are delaying major Southwest solar projects, while some coal plants have trouble procuring supplies because of increased exports. They said there’s also an increasing threat of cyber attacks from Russia.
By region, the Midwest power grid will be extremely tight. Across the Western US, power generation capacity has declined 2.3% since last summer, even as demand is expected to increase. Grids in the region may have to source power from neighboring grids as extreme heat will cause people to crank up their air conditioners. A situation of low wind speeds could trigger blackouts, according to NERC. They outlined how the Midwest could face power shortfalls due to the removal of power capacity from retiring fossil fuel power plants.
NERC issued a similar warning last year, stating power grids that serve 40% of the US population were at risk of blackouts. One year later, there was only one notable blackout last June during a heatwave in the Pacific Northwest that left 9,000 customers without power. But with reduced electricity generation capacity outpacing new green power sources, the risks of blackouts are increasing this year.”
Chuck again… Just because they got it wrong last year, doesn’t mean they’ll be wrong again this year, I’m just saying…
Market Prices 5/24/2022: American Style: A$ .7068, kiwi .6430, C$ .7832, euro 1.0708,
sterling 1.2505, Swiss $1.0356, European Stye: rand 15.6727, krone 9.6200, SEK 9.8041, forint 358.51, zloty 4.3001, koruna 23.0329, RUB 56.01, yen 127.49, sing 1.3743,
HKD 7.8495, INR 77.56, China 6.6696, peso 19.84, BRL 4.8130, BBDXY 1,231.57, Dollar Index 102.04, Oil $110.57, 10-year 2.81%, Silver $21.95, Platinum $961.00,
Palladium $2,005.00, Copper $4.29, and Gold… $1,868.27
That’s it for today… in my effort to get something out yesterday, after writing for 2 hours and having it disappear, I forgot to mention that it was my grandson’s birthday! Happy Birthday Braden! Man these years go by fast… My darling granddaughter, Delaney Grace, will start high school this fall! My beloved Cardinals won their game VS the Blue Jays in the bottom of the ninth with a grand slam! But sad news for our Blues… They led 1-0 at the end of the first period, and then the flood gates opened and Colorado scored 4 second period goals… Ugh… I went to bed after the second period ended 4-3… And the Blues lost 6-3…Oldest son Andrew, Rachel, and Braden went to the hockey game for Braden’s birthday last night, and little Evie stayed with us, she’s really talking now, and quite bossy! But she knows she can’t boss me, I say NO! HA! As if! Elton John takes us to the finish line today with his great 70’s song: Levon… I hope you have a Tom Terrific Tuesday today, and please Be Good To Yourself!
Chuck Butler