Rocktober 19, 2022
* Currencies & metals get sold in the overnight markets
* 15 Million barrels of Oil to be released from our reserve…
Good Day… And a Wonderful Wednesday to you! The air outside yesterday was so cold, that I gave up trying to eat my lunch outside, as I usually do, and then read for some time, while being outside, enjoying the sunshine and scenery… Oh, well, this happens every year, we turn the warm days over to cold days… I was surprised I didn’t tick somebody off with my rant yesterday, and trip down the rabbit hole… I guess, all my dear readers have grown accustomed to me and my rants… Maybe? I’m never looking for 100% agreement with what I have to say, just civil responses is all I ask for.. Congrats to the Yankees who moved on to play the Astros in the ALCS… Robert Plant greets me this morning with his solo effort: In the Mood…
Well, when I left you yesterday morning, I was upbeat about the prospects for a good day in the currencies and metals, but those prospects were thrown out with the bathwater, as the dollar got bought throughout the day… So, when the dust settled on the trading day it showed that the BBDXY had lost just 1 index point on the day, and Gold had only gained $2.90 to close the day at $1,653.40, and Silver, which had started the day up 5-cents was only allowed to gain 18-cents on the day and close at $18.83… I’m not going to go all postal on the price manipulators today for yesterday’s limiting of the metals’ gains. You, me, and the guy down the street, know they exist, and there’s nothing we can do about it, because the Gov’t is behind it all…I’m just saying…
The price of Oil lost a buck yesterday and ended the day with a $84 handle… , and the 10-year added 2 bips onto its yield to end the day at 4.02%,,, I mentioned yesterday the rumor going around that Saudi Arabia is going to join the BRICS… And there was nothing yesterday out there to dispel that rumor, so far it’s a go on that thought…
Speaking of Oil… Mom! He’s doing it again! The POTUS announced yesterday that he will release 15 Million barrels of Oil from the U.S. Oil reserve… This is the third time he’s done this, and each time he says that he believes that this will give citizens a break at the gas pump… Ok, the previous times didn’t move the needle, and I doubt this time will move it either… You know what they say about doing something over and over again thinking that you’ll get a different outcome proves? Insanity… Not that I’m calling the POTUS insane, I’m just pointing what the old saying says…
In the overnight markets last night…Well the streak of 2 nights with dollar selling came to abrupt end last night with the dollar getting bought like there’s no tomorrow! The BBDXY has gained 7 index points overnight, and Gold is down $20 to start the day… There’s no rhyme or reason for this sudden surge in the dollar, folks… The price of Oil has slipped again and trades this morning with a $83 handle, and the 10-year Treasury’s yield bumped higher again and trades this morning with 4.08% yield…
Well, a couple of weeks ago, the pound sterling was on the cliff, looking over it and saw its future was going to much like Wiley Coyote’s when he realizes there is no ground underneath him… And now two weeks later the pound is back to gaining VS the dollar… Here’s Bloomberg.com with an explanation on this: “One-year risk reversals in cable, a barometer of market positioning and sentiment, rallied on Monday in favor of calls by the most since June 2016, implying bearish sentiment haunting the currency retreated almost as fast as the government’s decision to scrap plans for vast unfunded fiscal stimulus.”
So, the rally in the pound has been mostly short covering… Hmmm… That’s not the stuff that rallies are made of, but given where the pound was two weeks ago, I’m sure the Bank of England is happy as a lark!
Well I can’t wait for the Nov 1, 2 FOMC meeting, when all those traders out there still holding out hope for a Fed Head Pivot, get their hats handed to them once and for all! A few months ago, I too thought the Fed Heads didn’t have the guts to carry out the dirty deed, but they proved me wrong, and ever since then I can’t believe that there are still those traders out there that still are holding out hope for a PIVOT…
The Swiss franc has been going back and forth around the $1.00 figure, and today it’s below the figure. I told you the other day that I hadn’t remembered seeing the franc this weak before… I mean when it was first cut loose to trade on the open market, the franc was only around 25-cents… But I was in high school in 1971, and didn’t even know that Swiss franc existed! The Bank of Switzerland (BOS) took their internal rate out of negative territory in their last meeting, and that that should have carried some weight for the franc, but realistically, the franc is still a very low yielding currency…
But being a low yielding currency hasn’t hurt the franc before all this negative rates and stuff that’s been going on these last few years. I’m sure you already did the math on this, but since the franc was cut loose, it has gained 75-cents… the chart for francs/ dollars looks like a long downward slope… So, don’t get discouraged here with the franc, that’s all I’m trying to impart to you…
All righty then, what comes next? I’m reading quite a few articles that are talking about how they believe that Gold is ready to explode higher in price… And there premise is that the whole shootin’ match here in the U.S. is circling the bowl right now, and when it’s all said and done, each individual’s wealth will be counted in ounces, not dollars, euros, or yen… Now that’s a strong statement, and one that caught my eye for sure!
Remember what I’ve said and told you before, and that is that all this debt around the world is going to come home to roost, and someone, somewhere is going to be the first to default on their debt, then seeing that it didn’t bring the world to a stop, another country will default, and so on, and when it comes to the U.S., it’s when the Gov’t will announce that dollars are no longer your medium of trade and exchange, and from now on it’s the use of digital dollars…
Well, when that happens, I think the statement of counting your wealth in ounces, will become reality… I’m just saying…
The Congressional Budget Office announced late last week that the U.S. booked a $2.77 Trillion deficit in 2021… And $1.4 Trillion in 2022… These Budge Deficits, when unpaid, become part of the national debt, which is currently $31 Trillion.. Our GDP is around 23 Trillion… That’s not a good thing, and hasn’t been for some time… A Dear reader sent me a copy of a Pfennig that I wrote in 2008, and I was harping about the Federal Budget then when it was $10 Trillion! I said then that the trend in building this debt was not going to be sustainable… Well, I was wrong about that, we, as a country have slugged on building more than $20 Trillion more in the last 14 years… Sure our GDP stinks, and has for over 10 years now, and that is because it takes more and more tax revenues to for deficit spending, and that takes away from spending in other areas of the economy that need help…
I don’t like to use scare tactics in my writing… But all this debt should scare you somewhat, and what or how will the Gov’t choose to deal with it when push comes to shove… That’s the $64 question… All I know is to ask: Got Gold?
Of course when I say “Got Gold”, I’m using Gold as the poster for all precious metals, including Silver, and Copper, and Platinum and Palladium…
The Fed Heads interest rate hikes have begun to have negative effects on the Housing Market… There was a report yesterday that Home sellers are slashing their asking prices at a record clip as surging mortgage rates drive a downturn in the U.S. housing market, according to a recent report from real estate firm Redfin.
Well, it had to be done.. trees don’t grow to the moon, and home prices shouldn’t either! Ultra-low mortgage rates and easy credit fueled the home price surge, and now those props have been removed…
The U.S. Data Cupboard yesterday saw Industrial Production for Sept rise .4%, which was quite surprising, given the rot on the manufacturing in the country, but there’s been quite a bit of fishy data reports lately, along with pushing down the price of Oil, and metals… Ed Steer said something this morning that I agree with wholeheartedly… here’s Ed, “Gold and silver are still being forced to languish below any moving average that matters…as is palladium. Why platinum is allowed to be an outlier is a mystery me, as it’s still sitting in no-man’s land between its 50 and 200-day moving averages.
Copper was closed down another nickel yesterday at $3.36/pound — and also far below any moving average that matters.
Natural gas [chart included] took another big hit yesterday, down 25 cents/4.23%…closing at $5.74/1,000 cubic feet – and now miles below any moving average that matters. Ditto for WTIC, as it was closed lower by $2.46 — and finished the day at $82.07/barrel — and also below below any moving average that matters.
With the U.S. mid-terms now less than three weeks away — and as I mentioned yesterday, I’m getting a whiff of price interference for political purposes.” -Ed Steer at www.edsteergoldsilver.com
To recap… The dollar didn’t move much yesterday, but in the overnight markets it got bought like there’s no tomorrow. Gold is getting sols this morning once again… The POTUS is releasing 15 Million barrels of Oil, his third such release… The Swiss franc has seen better days, but it has also seen worst days, and Chuck tells readers to not be discouraged by the franc’s current prices…
For What It’s Worth… Since I spend so much time on debt and interest rates this morning, it only made sense to pull this out of the Bill Bonner archives… Bill’s take on all this can be found at his website: Bonner Private Research | Substack
Or, here’s your snippet: “”As interest rates rise, fewer people borrow, and more existing credits are cancelled or go bad. Our monetary system is based on credit; a decline in the amount of credit outstanding is the same as a contraction in the money supply….
….so, a decline in the bond market tells us that the tide of credit, on which the whole economy – real and fake – floats, is going out.
Already, the Dow boats are down 15%. The 10-year Treasury bond yield has more than quadrupled from its 2020 low. And mortgage rates have doubled.
But these are, so far, just mild corrections. If this is the Primary Trend we think it is, it may take us all the way down to where the last one began – in 1980. If so….
The Dow will keep dropping…down below 20,000.
Bonds will be crushed. Low coupon bonds will be regarded as ‘certificates of guaranteed confiscation’ as they were in the ’70s.
Mortgage rates will shoot up to more than 18%.
And the US – economically and politically – will turn into a quivering jelly of confusion and despair.
A Bonner dictum: the force of a correction is equal and opposite to the claptrap that preceded it. By that alone, the developing Primary Trend should be one for the record books.”
Chuck again… Ahhh, yes, I can always depend on Bill to set things right in my mind!
Market Prices 10/19/2022: American Style: A$ .6318, kiwi .5698, C$ .7260, euro .9781, sterling 1.1255, Swiss $.9961, European Style: rand 18.1904, krone 10.6275, SEK 11.1936, forint 422.76, zloty 4.9013, koruna 25.0984, RUB 61.69, yen 149.64, sing 1.4239, HKD 7.8500, INR 83.02, China 7.2259, peso 20.07, BRL 5.2413, BBDXY 1,346.29, Dollar Index 112.68, Oil $83.95, 10-year 4.08%, Silver $18.32, Platinum $891.00, Palladium $1,976.00, Copper $3.40, and Gold… $1,632.45
That’s it for today… I have no idea where the time went this morning, I got up at my usual time, and now that I’m getting ready to end the letter, it’s late! UGH! Oh well, that just means I have to wait extra time before I have my first cup of coffee this morning! Hey! Did I tell you that I get to go to the Mizzou homecoming game this Saturday? Oh, of course I did! I’m just so excited about going to the game, that I can’t get it out of my mind! Like a kid at Christmas! I have some major plans for the new year, so all that can wait… Journey takes us to the finish line today with their song: Only the Young.. I hope you have a Wonderful Wednesday today, and please Be Good To Yourself!
Chuck Butler