November 14, 2022
* currencies & metals soar on Thursday & Friday
* Consumer Debts begin to pile up…
Good Day… And a Marvelous Monday to you! Man, it got cold here this past weekend… Have I told you lately how much I abhor cold weather? I don’t like winter coats, scarfs, gloves, etc. while it never got above 40 here, it was 80 in S. Florida, where my wife is… Why on earth am I still here, I asked myself? Our Blues have seemed to have righted the ship, and have won two games in a row… That was a tough time to be a Blues fan, during their 8-game losing streak… My beloved Mizzou Tigers hung with the highly rated Tennessee team until late on Saturday, when the Vols decided to run up the score on the Tigers… We’ll just put that in our memory bank, and it will come back to them one day… The Stephan Kummer Trio greets me this morning with their version of the song: My Favorite Things…
Well, bust my buttons! The dollar sure went into a free fall last week… After range trading for the fist part of the week, the BBDXY saw the index number begin to pile up in a negative way, once the stupid CPI printed on Thursday morning. So, let’s talk about this right here and now… The stupid CPI showed that inflation had dropped from 8.2% to 7.7%, and you would have thought that it had dropped to 2%, by the way traders and investors reacted! Stocks soared, Gold Soared, and the dollar got sold. I’m not buying into the frame of mind going through the markets right now, that inflation is on its way down, and all will be right in the U.S. I know these people don’t read the Pfennig, otherwise they would know that the stupid CPI is just that… Stupid!
So, the BBDXY lost 26 index points on Thursday, and then followed that up with 17 index points lost on Friday, totaling 43 index points to close the week that the index lost, closing on Friday at 1,275.89. With the dollar getting sold like funnel cakes at a State Fair, Gold was the beneficiary… Gold gained $49 on Thursday and followed that up with a gain of $15 on Friday. Silver got into the fray, with a gain of 63-cents on Thursday, and then just 3-cents on Friday. I’m sure there were tons of shot Silver futures contracts/ paper trades to deal with on Friday…
The currencies saw some love thrown their way for the first time in a month of Sundays… The euro rallied to trade at $1.03… The Aussie & Kiwi dollars really got bought, because of their interest rates structures compared to the rest of the world, and so it was, that they were sought out by traders and investors. So, is this the end of the strong dollar trend? Well, I think that this week will tell us if that’s to be… If we continue to see dollar selling this week, after the dust has settled on the stupid CPI from last week, then we can be somewhat assured that this is a new trend, if we don’t see more dollar selling this week, then we can be somewhat assured that either 1. The PPT has stepped in to protect the dollar, or 2. Calmer heads have stepped in, and don’t believe inflation is tamed, etc.
You see… that IF the Fed were to take the bait and cast their line into the “no more rate hikes pond”, it would allow inflation to grow even faster, and then when the Fed realized their mistake they would have to recover quickly, and aggressively… The markets at that point would be so through with the Fed, that they would take it out on the dollar… I really do think that these “inflation is tamed so the Fed won’t need to hike rates further” folks, are going to get their rear ends handed to them…
The price of Oil gained $1 on Thursday and $2 on Friday, to end the week with an $88 handle… And it was never so clear or illustrated so well, that traders believe inflation is tamed, and that the Fed won’t be hiking rates again, than the trading of bonds… The 10-year’s yield dropped to 3.81%… That’s a ton of buying, folks… trust me on that, I used to sit on the bond Trading desk at Mark Twain Bank, and would watch the movements in Bonds… It takes a lot of buying or selling to move yields like that…
So, to me, if the traders and investors want to think that inflation is tamed, go ahead… I’ll be sure to point out how wrong you were, at some time in the future…
In the overnight markets last night, the selling of the dollar ended, with the BBDXY gaining 5 index points last night. But 5 index points aren’t going to move the currencies off their newfound levels. Gold is seeing some selling in the early morning trading, with Gold down $12, and Silver down 28-cents… There had to be some profit taking going on, and I think that this will iron itself out, as we go along… I’m sure the Fed Heads that will be out speaking in the coming days will be talking about how inflation pressures are slow to move, and that they will remain vigilant in their attempt to bring inflation back to 2%… At least that’s what I would be doing if I were in their shoes… No, wait! There’s no way I would be in their shoes! I would be shunned by the other Fed Heads, for being the rebel rouser, always voting opposite of the way they vote… Well, come to think of it, that may be fun… I’ll have to think on this some more…
OK… I know that most of your dear readers are of the same thoughts that I have that we’re doomed, to face a change of our monetary system, as we have beaten and destroyed this one to beyond recognition… But I look around and people are still spending money on gee gaws, and tchotchkes, and everything else that’s out there, and I wonder, “how in the world do they have that kind of disposable income, after paying for food, energy, housing, and cell phones?” And then I see this data from the Federal Reserve Bank of St. Louis (FRED)… During the second quarter of 2022, credit card debt in the US rocketed to $887 Billion outstanding, up a whopping 13% since the same period last year. All in, total household debt is up 2% from Q2, 2021, an increase of $312 Billion to $16.5 Trillion.
Mortgage balances, too, were up $207 Billion over the same period, totaling $11.4 Trillion as of the end of June.
In case you didn’t notice That’s a Billion and a Trillion with capital B & T! And I know what’s on the mind of these folks running up their credit card accounts… At some point, the amount of credit will be so large that and underwater that the Gov’t will have to bail them out… I wouldn’t be hanging my hat on that happening any time soon, and in the meantime, these folks will be paying 19% interest on their debit balances… I don’t see how this ends without tears… I’m just saying…
Speaking of getting what you deserve… Nah, I don’t want to go here… I was going to talk about how the young folks voted, but I decided not to…let’s move on, here for these are not the droids we’re looking for…
Well, the news from La-La land last week was not good… Facebook, I mean Meta laid off 11,000 workers, and Twitter’s new boss handed out a lot of pink slips, and then there was this bit of news that really should be shaking the foundations of a strong economy… As FreightWaves reports, truck brokerage giant C.H. Robinson Worldwide Inc. is laying off between 1,000 and 1,200 employees, most of whom are at the vice president and general manager level, according to sources familiar with the situation. I’m sure there are many more to report here, but just the fact that Twitter, et al were axing people, should tell you where this is going…
OK… longtime readers know that I have a special place in my heart for the Canadian Loonie… Well, that is, did have a place… I learned this week something that I know I heard about back in the day, but didn’t think too much about, and that is that Canada sold all of its Gold holding back in the early 2000’s… This is from the website The record.com, but you have to subscribe to read it, so it’s onto what I could pull…
“Canada sold all of its gold holdings over the past 20 years, mostly at rock bottom prices in the early 2000s, much to the astonishment of the “hard-money” crowd and almost anyone who has read a book on economic history.
In a May 2022 interview with Kitco news, former Bank of Canada (BoC) Gov. David Dodge explained the reasoning behind the bank’s decision to off-load its gold holdings. “The issue is quite clear, that it costs to hold gold, whereas holding U.S. or Chinese or Euro bonds yields you a return,” said Dodge. “That was a strong view. And a view that our international monetary system was in a place that was sufficiently robust that holding this antique instrument of stability called gold really didn’t make any sense.”
To suggest he was flat out wrong would be kind. While storage costs are a factor in holding gold, it should be noted that since 2000, gold has gone up six-fold and outperformed numerous assets, including the S&P 500. And worse still, the bond returns Dodge was referring to have hovered close to zero since Canada dumped its gold.”
Chuck again, Yeah, about that statement, I can hear Mr. Dodge saying right now, “Did I say that out loud?”
That was some news about FTX eh? It is being reported that between $1 and $2 Billion in client funds are missing… Uh-Oh… The firm filed for bankruptcy last week… What on earth will the baseball umpires wear on their shirts now? See? That’s how strangely my mind goes from one thing to another!
The U.S. Data Cupboard will only have one day this week, where it yields real economic data, and that day is Wednesday, when Rocktober prints of Retail Sales, Industrial Production, and Capacity Utilization come to life… Well, with the news I reported above about credit card balances going through the roof, I could see Retail Sales seeing a nice gain in Rocktober… The BHI is indicating that too…
To recap… The dollar got whacked and whacked badly on Thursday after the softer, stupid CPI printed and showed inflation had dropped in Rocktober… And Friday the dollar got sold again, and each day saw Gold put in nice gains, along with the currencies like the euro, A$ and kiwi. Oil gained, bonds rallied, and stocks, well, they skyrocketed… FTX has a problem, Houston… And consumers are piling up their credit card debts… Uh-Oh…
For What It’s Worth… Since I made Big Deal out of consumer debts this morning, this article from zerohedge.com plays well in the sand with it… This is about auto loans and it can be found here: https://www.zerohedge.com/personal-finance/auto-loan-delinquencies-hit-10-year-highs
Or, here’s your snippet: With prices rising and real wages falling, many Americans are struggling to make ends meet. They are increasingly turning to credit cards and other debt to fill the gap. But that creates other problems. Debt has to be repaid and a growing number of Americans are struggling to keep up with payments.
“TransUnion tracks more than 81 million auto loans in the United States. According to the consumer credit reporting agency, 1.65% of auto loans were at least 60 days delinquent in the third quarter. That is the highest rate for 60-day-plus delinquencies in more than a decade.
TransUnion senior vice-president Satyan Merchant told CNBC inflation was making it difficult for people to keep up with their car payments.
Consumers still want to stay current as best that they can. It’s just this inflationary environment is making it challenging. It leaves fewer dollars in their pocket to make the auto loan payment, because they’ve got to pay more for eggs and milk and other things.”
Unsurprisingly, subprime borrowers are having the most difficult time keeping up with their payments.
With loan-accommodation programs implemented during the pandemic, some borrowers managed to avoid delinquency. As those programs have ended, delinquencies have spiked. Merchant told CNBC that these programs pushed some delinquencies into the future.
According to TransUnion, 200,000 borrowers who took advantage of the pandemic-era auto loan accommodation programs are now listed as 60 days delinquent.
Like mortgage rates, auto loan rates have increased significantly since the Fed started pushing up rates to battle inflation. The average interest rate on new-vehicle loans rose to 5.2% in Q3. Interest rates on used vehicle loans average 9.7%. Combined with the rising cost of both new and used vehicles, along with rising fuel prices, the cost of owning a car continues to rise dramatically.”
Chuck again… I’ll say this one more… Debt is slavery… I’ll say nothing more…
Market Prices 11/14/2022: American Style: A$.6685, kiwi .6082, C$ .7525, euro 1.0317, sterling 1.1800, Swiss $1.0580, European Style: rand 17.2817, krone 9.9962, SEK 10.4328, forint 394.60, zloty 4.5454, koruna 23.5384, RUB 60.46, yen 140.33, sing 1.3739, HKD 7.8352, INR 81.26, China 7.0650, peso 19.47, BRL 5.2905, BBDXY 1,280.45, Dollar Index 106.78, Oil $87.78, 10-year 3.88%, Silver $21.52, Platinum $1,009.00, Palladium $2,008.00, Copper $3.75, and Gold… $1,760.24
That’s it for today… Well, I’ve come down with something… it feels like a head cold, but I don’t feel sick, real strange, although I am sleeping longer each day now… That’s my body telling me I need the rest… 10-days to 2 weeks, and it’ll be gone… Just in time for Thanksgiving! I’m all alone by myself here again, that means I can turn up the volume on the music that I play in the morning! HA! All by myself, don’t wanna be all by myself, any more… (Eric Carmen) And I didn’t call Pizza Man Pizza once this past weekend! I see where we might get some snow on Tuesday this week… that would top of my dislike of November even more! Oh, well, I’ll be in S. Florida by year end, so I’ll just have to be patient! Beegie Adair takes us to the finish line today with her version of the song: Home For the Holidays… I hope you have a Marvelous Monday today… And Please Be Good To Yourself!
Chuck Butler