Dollar Buying Abates…

Rocktober 13, 2022

* Currencies trade flat on Wednesday… 

* A record increase for COLA? 

Good Day… And a Tub Thumpin’ Thursday to one and all… Another day in paradise yesterday, without the rain the weather app said was going to come down on us during the day… YAHOO! We did some exploring of the region yesterday, for the benefit of one our guests, who hadn’t been here before. The Divisional Series in baseball continued last night with both teams that had lost the previous night, reversing the outcome… So, both series are tied 1-1… Man, I’m really dragging the line this morning… I have no idea how long the letter will be this morning due to me dragging the line… The great Al Stewart greets me this morning with his song: On The Border…

Well, bust my buttons! I really led you down a bad rabbit hole yesterday, when I reported that the price of Oil had dropped to $80… I swear on a stack of bibles, that is what I saw when I pulled up my Oil price page on the internet, only to see it at $88 an hour later!  So…that’s my mea culpa for today…

The dollar buying abated yesterday, and for the day, the BBDXY was flat at 1,346… So, that meant that the currencies are trading in the same clothes as they had on yesterday at this time.. Sure there are some different numbers, but the changes are so small that there’s no sense in trying to pick out a rallying currency… 

I do want to point out how weak the Swiss franc has been recently…This morning, the franc is teetering on the edge of parity with the dollar… I don’t believe I’ve ever seen the franc this weak… I’m just saying

Gold found a way to carve out a $7 gain yesterday without any interference. Silver lost 12-cents on the day, so it wasn’t a total good day for the metals… Gold closed the day at $1,674.90, and Silver closed at $19.10…  The price of Oil slid by a buck and ended the day with a $87 handle, and bonds got bought yesterday with the yield on the 10-year Treasury dropping to 3.88%, from the 3.95% to start the day.

In the overnight markets last night… The dollar is still drifting, and BBDXY index is flat again at 1,346… Have the dollar buyers run out of steam? It sure appears that way, but I doubt it… The dollar is the king currency now, and will continue to be as long as the Fed Heads remain vigilant about hiking rates. There! I said it… of course there’s no guarantee that the Fed Heads will remain vigilant, in the face of an ongoing recession in the U.S. economy. Recall that I told you months ago when the Fed Heads began to hike rates that no central bank has ever hiked rates during a recession… So, this experiment is going to get a test to see if it works… I’m thinking that it won’t, because of the Fed Heads’ track record…

Well, here’s some good news for retirees… On Thursday, the U.S. government is set to announce how big a percentage increase Social Security beneficiaries will see in monthly payments this upcoming year. It’s virtually certain to be the largest in four decades. The increase is estimated to be 8.7%, the largest since 1981 Now, in recent times, whenever the COLA increased for social security payments, the premiums for Medicare increased too… But apparently a 3% cut in Medicare premiums has already been announced… So, overall this is good new for retirees…

In news that’s not good for anyone, the St. Louis Post Dispatch reported last night that Spire, the natural gas company in our region, is requesting a 10% increase in the price of natural gas… YIKES!

I mentioned above that the Swiss franc is trading very near to parity with the dollar… The Japanese yen is at 25 years lows, the euro is trading at multi-year lows, and the pound sterling is hanging on by a thread… All of these currencies are considered to be “Major Currencies” and all could be traded as offsets to the dollar at one time or another, with the euro the current offset to the dollar.  The yen and franc used to be considered as “safe haven currencies” … Not any longer…

I’m still reeling from the news that Big Ben Bernanke won a Nobel Prize for Economics…  Aren’t you? I mean if this man that brought on ZIRP (zero interest rate policy) and Quantitative Easing won a prize then that beats all.  Here’s a man who said he studied the great depression and that he knew what caused it and how to get out of it… All I’m saying here is that his policies have grown to hurt the U.S. economy, balance sheet, and future…

The U.S. Data Cupboard today has the stupid CPI (consumer inflation) for Sept. There’s really no comparison to how inflation is computed these days VS the tried-and-true way of doing it like it was done before 1990… The current CPI is 8.5%, while the shadowstats.com inflation rate is more an 16%… But the markets get all lathered up over the stupid CPI, and there’s no explanation as to why? The markets have to know that the CPI is weighted, substituted for, and massaged each month, but they continue to follow it religiously…

Yesterday’s Data Cupboard has the Sept. PPI (whole sale inflation)  And it showed that: “Wholesale prices rose more than expected in September despite Federal Reserve efforts to control inflation, according to a report Wednesday from the Bureau of Labor Statistics.

The producer price index, a measure of prices that U.S. businesses get for the goods and services they produce, increased 0.4% for the month, compared with the Dow Jones estimate for a 0.2% gain. On a 12-month basis, PPI rose 8.5%, which was a slight deceleration from the 8.7% in August.

Inflation has been the economy’s biggest issue over the past year as the cost of living is running near its highest level in more than 40 years.

The Fed has responded by raising rates five times this year for a total of 3 percentage points and is widely expected to implement a fourth consecutive 0.75 percentage point increase when it meets again in three weeks.”   – CNBC.com

To recap… There’s not much going on in the markets, the dollar was flat all day yesterday and overnight, Gold carved out a $7 gain yesterday, but is flat this morning. Silver lost 12-cents yesterday, but is up 8-cents this morning.  The Social Security payments could be getting a record increase that will be announced later today… And Chuck finally gives in and says the dollar is the king currency…

For What It’s Worth… Well, with the markets on hiatus there’s little in the way of FWIW worthy news articles out there, but I did find this one that refers to something I mentioned above this morning, and that is can the Fed Heads remain vigilant with their rate hikes?  The article can be found here: Analysis: As markets fret, Fed officials reject idea of rising financial stability risks | Reuters

Or, here’s your snippet: “Federal Reserve officials are pushing back on investors’ mounting concerns that the U.S. central bank’s aggressive campaign to counter high inflation is setting the stage for a market crack-up.

Central bankers’ confidence is countered by wide-ranging fears among market participants who see bond market liquidity strains, damaging asset price declines as well as a range of problems in markets abroad. Some see this landscape as dire enough to call for the Fed to slow or even consider stopping its interest rate increases, something officials have so far shown no appetite for as they contend with the worst inflation surge in 40 years.

“We have to be monitoring things in the financial markets, and we have to be looking for vulnerabilities as you’re increasing rates,” Cleveland Fed President Loretta Mester told reporters on Tuesday, especially in an environment where all the world’s major central bankers are moving in the same direction toward tighter monetary policy.

“That’s when these vulnerabilities that you don’t necessarily see in normal times, and you’re not changing rates, can come out,” Mester said. But as things now stand, “I don’t see hidden big pending risks out there” and “there’s no evidence disorderly market functioning is going on at present.”

Chuck again… And she wouldn’t see any disorderly market until it was too late! But the crybabies on Wall Street don’t care about the fact they have to pay more for their steak dinner, and bottle of Dom Perignon… They only care about the Fed feeding the markets with zero rates and liquidity, so the Fed Heads’ work is cut out for them here…

Market Prices 10/13/2022: American Style: A$ .6282, kiwi .5619, C$ .7241, euro .9723, sterling 1.1149, Swiss $1.001, European Style: rand 18.2626, krone 10.6905, SEK 11.3281, forint 444.68, zloty 4.9864, koruna 25.2900, RUB 63.53, yen 146.81, sing 1.4389, HKD 7.8495, INR 82.35, China 7.1881, peso 19.97, BRL 5.3039, BBDXY 1,346.57, Dollar Index 112.74, Oil $87.25, 10-year 3.88%, Silver $19.18, Platinum $887.00, Palladium $2,147.00, Copper $3.46, and Gold… $1,674.89

That’s it for today and this week… It’s been an interesting week of writing, and I’m sure next week will be even more interesting, as these things all seem to coming to a head faster and faster… My beloved Mizzou Tigers have a bye this week… When I was a young man if we wanted to put down a team badly, we would say that they “couldn’t beat bye”… HA! Our Blues start their season Saturday night… Hockey is a long season, and there’s reason to get all lathered up for early season games, but…having said that, there’s a lot to be said for getting a good start!  So, Let’s Go Blues!  The Beatles takes us to the finish line today with their song: When I’m 64… “will you still need me, will you still feed me, when I’m 64?”  yeah, that song… I hope you have a Tub Thumpin’ Thursday today, and a Fantastico Friday tomorrow… And don’t forget to Be Good To Yourself!

 

Chuck Butler